Ladies and gentlemen, welcome to Cherry SE's Analyst Conference and Q1 2026 earnings call, and thank you for joining. You have just seen the video of CHERRY XTRFY's launch of a new compact magnetic switch keyboard. The key component of this new gaming keyboard is tunnel magnetoresistance, TMR technology, which is considered the next evolutionary step in magnetic switches. For gamers, this technology translates to noticeably higher sensitivity and shorter response time. Combined with an ultra-fast TMR performance, the K5V2 Compact TMR is the ultimate tool for ambitious gamers who demand uncompromising precision, speed, and comfort. Today's call is being recorded. During the presentation, you will be in listen-only mode until we open the floor for Q&A.
Joining me in the room today are Rogier Volmer, Chief Executive Officer, Jurjen Jongma, Chief Financial Officer, and our working student, Tim, and we have Dr. Udo Streller, our Chief Operating Officer, dialing in from Auerbach. Let me briefly outline today's agenda. Rogier will open with his investment highlights and lay the foundation, reflecting on his first four months as CEO and the key strategic conclusions he has drawn so far. Jurjen will then walk you through our Q1 2026 financial performance, covering underlying revenue and margin development, as well as free cash flow progress. He will then explain our financing strategies, including implications of the proposed reverse share split. Rogier is then going to present the strategic outlook and main aspects of our new transformation program, Project Blossom. After the presentation, we will open the Q&A session. With that, let me hand it over to Rogier.
Thanks, Nicole. Good afternoon, everyone, and thank you for joining the Cherry's Analyst Conference and Q1 2026 results call. Today, we will first go through our Q1 results and then explain how we want to move the company forward. Let me start first with my observations, which will lead to how we want to move forward and a few key milestones of the previous quarter. Cherry has a strong foundation. We have a trusted global brand built on strong engineering, and we have solid positions in office, gaming, and security peripherals or input devices. We have super committed and engaged people, and people that are super proud of our products. This is a real strength and a strong base to work from. We also need to improve. Our organization is too complex, and we need to be faster and more focused.
Our goal is to simplify our organization with more focus and execute with discipline. In the past months, I have spent time with our teams and reviewed the business in detail. From this, we defined our priorities, what we will focus on, and where we will invest. Later in the presentation, I will explain this in more detail through Project Blossom, our plan to strengthen the peripheral business and return Cherry to sustainable profitability. Before we move to the Q1 financials and earnings, let me highlight some of the key milestones from the first three months of 2026. We saw some first signals of encouraging progress in Q1 when it comes to our financial performance. Our EBITDA margin improved by more than 5 percentage points year-over-year, and this shows that cost control is working.
We also had a positive free cash flow of EUR 1.1 million, which is around EUR 10 million better than last year. Our Digital Health business performed and is performing very well. The revenue tripled on a comparable base versus last year, and Jurjen will explain this more in detail in the finance part. We also announced the EGM, the extraordinary general meeting on May 22nd, where we will propose a 4: 1 reverse share split. This is an important step to improve our capitalized position and support potential future financing. With Project Blossom, we now have a very clear plan targeting to be EBITDA breakeven in 2027 through a combination of rightsizing the company and growth initiatives. As I mentioned, more on this after financials that Jurjen will now present in detail.
Yeah. Thanks a lot, Rogier, and ladies and gentlemen, a very good afternoon. Let me take you through our Q1 2026 financial performance. First, on revenue, you will find that it is a bit of a mixed bag, and I think the performance in Q1 needs a bit of background color. So group revenue came in at EUR 20.8 million, which is approximately 18% below Q1 2025 revenue of EUR 25.3 million. Unfortunately, there is a number of effects that makes comparing Q1 2026 with Q1 2025 difficult. For this, we inserted the smaller graph at the top right of the visual for easy reference. The effects relate to, first of all, in Digital Health & Solutions, there is EUR 1.1 million of Active Key sales in Q1 2025.
That obviously was digested in the course of Q2 2025, and then in Peripherals, there is EUR 2.7 million of sales included in Q1 2025 that relate to SKUs that were sold in a transaction with our shareholder in Q4 2025, and we hence did not sell in Q1 2026. In addition, there is approximately EUR 700K of currency effects that negatively impacted Q1 2026 in comparison with Q1 2025. As Rogier pointed out, on a like-for-like basis, sales in the DH&S segment more than tripled to a level of EUR 5.2 million in Q1 2026. At the same time, the trend in our component segment continues to decline, reflecting the commoditization of the components business in general.
Lastly, in the Peripherals segment, in addition to softness in the sell-in, which is caused by high channel inventories at our distribution partners, it is important to highlight that in North America, like I said, Q1 2025 includes sales of SKUs that were sold to Argand Partners in the third quarter. This effect explains a further decline in sales in Q1 to the tune of EUR 2.7 million. And like I said, negative currency effects further impacted our sales to the tune of EUR 700,000. So on a like-for-like basis, the segment sales developed as follows: an increase of EUR 3.6 million in DH&S, and a decline of EUR 3 million in the Peripheral segment. And then lastly, a decline of EUR 700,000 in the component segment, where we managed on the quality of contribution margin only. Moving on to the next slide, where I dive a little bit deeper in the quality of our earnings.
First of all, EBITDA. Q1 Group adjusted EBITDA came in at minus EUR 600,000, a meaningful improvement versus the EUR 2 million negative in Q1 of 2025. Adjusted EBITDA margin improved by more than 5 percentage points year-over-year. The improved results are a direct consequence from two elements which are important to highlight. First of all, and I come back on this a little bit later, but margin management. Great performance in the DH&S domain, especially driven by very healthy contribution margins, stabilization of operational contribution margins in the peripherals domain, and clear focus on positive contribution margin in the component segment, albeit that the segment is small in absolute terms. Again, I will elaborate more on margins in the next slide. Secondly, cost management. Operational costs reduced by EUR 4.6 million in Q1, and even by EUR 5.5 million on an adjusted basis.
It shows that our restructuring to date is paying off, and that we have a clear focus on spending less with a keen eye on liquidity and cash flow. At the same time, we also must be clear. We are not yet there where we need to be. Our cost base must be tuned to a level where we can also sustain lower levels of revenue. Rogier will come back on this later in the presentation, but it is good to see that the trajectory is positive and the drivers are structural and not driven by incidental effects. Let me end this financial section with some key trends on the next slide. I have elaborated on our revenue picture quite extensively, and when we turn our focus on growth margin, we see that the trend, unfortunately, is too erratic.
While DH&S performs at a very good level, we are still not at the level where we need to be in the peripherals and component segments. In these segments, we strive for an average contribution margin of around 44%. You can see this at the bottom of the slide. We are getting close, but there remains work to be done. I am very pleased with our free cash flow performance, but it must be very clear that eventually, free cash flow must come from operational business, of course, in addition to minimizing working capital. Let me now spend two slides on the announcement we published a couple of weeks back. We sent out an invitation to our shareholders for an EGM taking place on May 22nd and announced a reverse share split. Let me share some more details with you and explain the strategic rationale and the technicalities.
As Rogier mentioned, we are proposing a 4:1 reverse share split for approval at the EGM on May 22nd. Technically, it means that four existing shares will be consolidated into one new share. The share capital will be reduced from EUR 24.3 million to EUR 6.1 million, and in parallel, we are proposing a simplified capital reduction to offset the accumulated losses on Cherry's balance sheets. This is purely a nominal capital adjustment. There is no cash impact. Economic ownership ratios remain unchanged, and existing shareholders retain the same proportional stake in Cherry. The strategic rationale is clear. The reverse split restores Cherry's capital market eligibility, and it creates the structural basis we need for potential future financing transactions. It is a prerequisite and not a goal by itself. We are building a foundation from which future steps can be taken.
We'll provide more details on our overall financing approach as appropriate once the EGM has taken place. Now, let me walk you through the three pillars that frame our current financing situation and the strategic versatility we have. On the left, you'll see the key corporate action from November 2025. We announced potential sales of one of our business segments, and the rationale is straightforward. Proceeds from the sales will directly reduce liabilities and free up capital to fund growth in the remaining higher quality business. At the same time, like I said, it will strengthen our balance sheet. In the middle column, we want to highlight our Peripherals division continues to be a strong market player. Rogier will elaborate on this further on in the presentation.
We've identified complete opportunities to improve the cost base within the division, and additional capital would meaningfully accelerate the pace of restructuring we have underway. On the right, lastly, the financing status quo, which is actually a positive or relative stability. Our EUR 23 million UniCredit facility does not mature until the end of 2027, which gives us clear runway. We closed Q1 2026 with 3.5 million cash on hand, and importantly, the reverse stock split, which is the headline of this slide, enhances our opportunity for capital market solutions. A higher share price typically broadens the institutional investor base we can access and improves the conditions for any future equity-related transaction. In summary, we've defined the path. Monetize on DH&S, improve cost efficiency and Peripherals, and preserve strategic flexibility through the capital market measures we've announced.
We're confident in our ability to execute, and with that, let me hand over to Rogier to guide you through this. Thank you.
Thank you, Jurjen. All right. Before I speak about the peripheral outlook in detail, let me start by addressing our Digital Health & Solutions business first. Digital Health is a strong business. It operates in a regulated market, and therefore it has high entry barriers and good visibility in the healthcare market. The rollout of the telematic infrastructure or TI continues to drive growth. Around 32,000 healthcare facilities still need to be connected. This is because the rollout for the users was more complex than expected, and this demand is now extending into 2026, and that is what we clearly see in our numbers. In Q1 2026, the eHealth terminal sales increased by 47% compared to Q4 2025. At the same time, we reached an important milestone. We received the final approval for TI-Messenger Pro after completing the certification process with gematik.
This means the product is now launched, and the rollout started in Q1 with the first users already on board. With the current state of the business and the strong momentum, we are very well-positioned in this business for continued growth. Then on the peripheral business. We start from a position of strength. Cherry is a premium brand with a long engineering history. That is also how we are being recognized and perceived in the markets that we operate. Our switch technology, combined with our hard and firmware knowledge, is well known and trusted by professionals, gamers, and partners in the industry. This is a strong base we can build on. We will build. At the same time, we are changing how we operate. We will move to a more asset-light model, reduce fixed costs, and improve efficiency.
We are also focusing on our core input device categories where we are strongest. We are simplifying our portfolio so we can move faster and execute better. We are building a leaner and more scalable business. This will help us to grow profitably with faster innovation, lower costs, and stronger margins and cash flow over time. Briefly about the market. The market that we operate in, the global peripherals market, is growing at a rate above inflation. Within this total market, both gaming and office peripherals are growing faster. The global gaming peripheral market is expected to reach about $12 billion by 2030, and the global office peripherals market should grow to around $60 billion. Our focus is to make sure that we capture our share of this growth. In 2025, we grew 13% in the Europe 3 markets. Europe 3 is Germany, U.K., and France.
This is for the corded keyboard segment, and with that, we grew faster than the market in the same period. Next to this, we also managed to increase our average price, bringing our prices closer to the market average, more in line with the Cherry brand positioning and the product quality. The results of 2025 are that in the corded keyboard market, in the largest three European markets, we are the leader with an increased market share of 42%, and in Germany, even 60%. However, having said that, we are aware that the cordless keyboards are growing stronger, and our ambition is to grow our market share stronger in this segment. We go to the next slide. As mentioned in the beginning, we have launched several strategic initiatives to reposition the peripheral business for profitable growth by focusing on four clear initiatives.
Driving revenue growth, investing where we can make a difference, right-sizing the organization, and optimizing our cost. These initiatives are captured in Project Blossom. So what you are going to see from the next slide is that Project Blossom is about bringing our peripheral business back to growth and profitability. I will share a little bit more in detail. There are two dimensions in Project Blossom. We have identified four growth initiatives and the rightsizing exercise. On the growth side, we are building a stronger B2B office business on the back of a strong market share in coded keyboards, starting in Germany and the U.S. We will further strengthen our e-commerce model for both office and gaming, with a focus on the U.S. and Western Europe. In APAC, with China as our dominant market, we will accelerate growth in gaming keyboards with a stronger China for China approach.
And finally, our security and industry input devices are from now on a strategic priority for Cherry Peripherals. I will elaborate more on that in the slide after next. On the rightsizing side, we are targeting at least an EUR 8 million reduction in non-material costs in the peripherals and component business on an annualized basis. This EUR 8 million comes on top of the EUR 10 million OPEX savings we announced for 2026 versus 2025 at our last earnings call in March. This will give us a clear path to EBITDA breakeven in 2027. Starting from the 2025 base and by the disciplined execution of Project Blossom, we see a path to revenue growth across office, gaming, and security, with the overall peripheral business growing to well above EUR 100 million by 2030.
These numbers are targets, not guarantees, but they are based on a concrete bottom-up plan, and our Q1 performance gives us the confidence that we are moving into the right direction. A little bit more in detail on the security and industry business, as I shared before. We see this security and industry business with security keyboards as an important growth opportunity for Cherry. This category fits very well with our in-house capabilities and with current market trends. For this category, we move to a more direct B2B approach, focusing on selected high-value customers, both the corporate end user as well as the value-added reseller. At the same time, we are building partnerships with key players where we already have relationships with, such as the German military, the U.S. Department of Defense, and others. We are also launching new products, including the next generation of security keyboards.
Next to this, we are exploring more use cases, for example, in defense and other high-security environments. Looking ahead, we see a strong potential here. We can combine our hardware with new technologies such as keystroke biometrics and password-less solutions. This also opens the door for subscription-based revenue. The market trends do support this opportunity. The defense spending is increasing, and there is more focus on secure European solutions. For now, keyboards are being seen more and more as a potential input security risk. Overall, and based on our knowledge and in-house technology, we are well-positioned to grow in this segment. Then on the management board. We have announced today that, after more than four years, our CEO, Udo Streller, will leave the company at the end of June. Under Udo's leadership, the Auerbach site was successfully developed into a modern European hub for development and logistics.
During his time with Cherry, he also played an important role in scaling the company's operational structure and capabilities, and we thank Udo for that. With this, we will now return to a two-member management board structure. Both Jurjen and I will cover the scope of operational responsibilities, supported by a strong functional leadership team. This leaner structure is better aligned with the size of the company we are building, and it will contribute to faster and clearer decision-making. Then at supervisory board level, we are proposing a rightsizing to four members at the upcoming EGM on May 22nd. Three of the current members will step down, and Steven Greenberg will continue to serve through his term. This adjustment reduces cost and creates a leaner and more efficient governance structure, better aligned with the current size and the scale of the company. Let me close with the summary.
The new scalable business model for peripherals will be leaner, focused on core input devices with a simplified portfolio, faster decision-making, and less complexity. Our trading in the first quarter of 2026 was in line with our underlying expectations, and the second quarter so far shows solid performance in peripherals and a strong momentum in DH&S. The M&A process is ongoing, and as mentioned, we expect that we will be in line with the early announced timeline. Given this, given the ongoing M&A process, at this moment, we do not believe that we can share a reliable outlook for the rest of the year at this stage. The expectation is that we can share this in more detail next quarter. Overall, our priorities are clear. Implementation of the Project Blossom, executing the financial steps, and restoring the confidence in Cherry as a company.
With that, I hand over to Nicole.
Thank you, Rogier. Ladies and gentlemen, we will now open the floor for questions. Please use the raise hand feature if you would like to participate. Participants dialing by phone can press star nine to signal a question. We look forward to the discussion. The first question comes from Bastian Brach, Montega. Bastian, please go ahead.
First question from me is on the DH&S segment, which had quite a good revenue increase year-on-year. Could you outline the drivers for that development? Was it exceptionally strong hardware demand or any other drivers you would highlight?
The question was about the growth of the Digital Health business?
Yeah.
I think, as I mentioned, we see the growth coming from the eHealth terminals. The growth versus Q1 last year was significant. As I said, it was more than triple. If you compare to Q4 2025, we grew 47% in the terminal business. Also on the back of the delayed rollout of the 32,000 healthcare facilities in Germany that still have to be connected. Part of the rollout that was expected in 2025, moved into 2026. That is the largest part of the growth that we have realized.
Okay. Any outlook for the quarters ahead, is it a sustainable level or will it come down because there were some extra effects in Q1?
Yeah, no, what I mentioned is that we had a strong Q1. What we see right now up until we are now first week of May, we see that the performance is still more than solid. I think as we said that solid performance of peripherals, but we continue on a good growth level with Digital Health, we expect also a good Q2.
Okay. Thank you. My second question is on the cost side. First of all, the central costs increased compared to previous years despite the cost management. What drove that and also, what are the costs you expect for Project Blossom? Yeah.
Yeah. Can you hear me well?
Yeah. Perfect.
Yeah. So, it is a good question and I pondered that as well. But it basically has to do with we are allocating costs out of the central section to let us say the operational units. And because especially in the peripherals domain, the revenue was so much lower, also less costs were allocated to the peripherals domain. So the EBITDA picture that I showed per segment is a little bit skewed, and that is why I focused on total cost reduction, which was the EUR 4.6 million on a reported basis and the EUR 5.5 million on an adjusted basis. Therefore we are focusing on cost for the total company as a whole.
Okay, thank you. And the costs for Project Blossom, for rightsizing the company, et cetera, do you have any indications on that?
We are still, of course, contemplating the cost effects to that. I think it is a two-edged sword, to be honest. One is ensuring that we have the right funds available to invest and to grow. The second is money that is needed for rightsizing. We are in the course of going through all of that in granular detail, so I cannot share this at this point in time. But again, it is a two-edged sword. One is making sure that we have the right capabilities and competencies and also resources in place to invest for growth. At the same time, optimizing cost, is a term that I prefer over rightsizing. But that certainly will also drive investments. But at this point in time, it is not exactly known how much.
Okay. Thank you. My last question, and I am afraid you will not answer that, but on the potential sale of a business unit, are there any more details you can share? Seems from your presentation that it is more centered at or around the DH&S segment. But yeah, any comments on potential buyers or anything you can share there?
No, yeah, I can confirm your fear. Indeed, we will not further elaborate on it. I think you should for the time being satisfy yourself with the remarks that we also make in the presentation. We believe that we are well on track on the timelines that we defined.
Okay, perfect. Then I will wait until the Q2 numbers. Thank you very much for the
Thank you. Thanks, Bastian.
Thank you, Bastian. The next question comes from Felix Ellmann, Warburg Bank . Felix, please go ahead.
Can you hear me?
Yes, we can hear you.
Wonderful. Elaborate on the fact that you made an interesting 1.1 positive cash flow in Q1, how you did that. Maybe you could say anything with regards to the selling process you mentioned of one or the other unit. Maybe yes, maybe no. These are my two questions.
Yeah. No. We have a bit of yes or no.
He's still in the meeting.
Okay. So, from a cash flow point of view, indeed, it is just working capital. At the end of the day, the only opportunity that we have in terms of cash flow is either operational performance or working capital. There is no further magic to it. I do think that you should bear in mind the comment that I made earlier. Even though the operational improvements in comparison with Q1 2025 is promising, and we are happy with it, of course, reporting a negative EBITDA result on an adjusted basis still means that on an average basis we burn cash to the tune of the level of the adjusted EBITDA. So, in this case, the positive cash flow stems from working capital management. As to the M&A process, I think I answered the question further or previously with Bastian.
All right. Thank you for questions. The next question comes from Ramon Huber. Ramon, the stage is yours.
Mr. Huber, you should be able to unmute yourself.
Can you hear me?
Yes, we can hear you.
Can you remind me on the timeline? You mentioned the timeline for the sale. What was the timeline?
Back in March, we announced that we expect to be able to announce something towards the end of the first half of this year.
Okay. Then you do the figures split and then talking about the possible capital increase. It is not really clear for me why you need more capital if you do the sale of DH&S.
Even though the timeline, as communicated just now by Rogier here, we just do not want to be in a position that any of the actions that we now want to start, either restructuring or pursuing both initiatives, is interrupted or that we have to pause that because we have not closed the sale of the CDH business unit. For us, timing is everything. I think there is no, let's say, secret around or difference of opinion around the fact that we are very cash constrained. Executing on restructuring, like I said, regardless whether it is investing into growth or whether it is investing into rightsizing the organization, costs money, and we don't want that process to stall. We want to keep all those options open.
Okay. Yeah, but I think you should get quite a lot of money from the DH&S. Does it make such a big difference you wait for a month or so?
Yeah. We also believe that the valuation of the CDH business is positive and helps us. It's not a clear cut defined page yet. We want to keep the options open, and if so necessary, we will execute on that capital raise that you mentioned.
Okay. Why the head of DH&S is not in the meeting? I think the path really working well, so would be interested to hear him also, what he's saying about the whole business.
Okay. I am not sure what we did in the past, but for this meeting, in March, we decided to have this meeting with the three management board members. That is the reason. Nothing else.
Okay. Perhaps a question to Mr. Streller. You are leaving the company. I think you have done quite a long or important job there. Your reasons to leave, and why you are not staying and seeing a success later on?
The reason for leave is the end of the second contract extension we have, and the leaving is on good terms on both sides. In the end, the reason mostly is already given, as explained by Rogier. It is down to adjusting to the company, to the size, and also the city management board with three. For the size of this company, it is not the right sizing and therefore also we suppose are fine that there is not another extension of the contract. It means they are not leaving, so it is just that the contract is not, again, then a third time extended.
Okay. Thank you.
Thank you, Ramon.
Thank you for your questions. If you want to ask a question, please use the raise your hand button. That doesn't seem to be the case. With no further questions, I will turn the call back to Rogier for some closing remarks.
Yeah. Thanks, Nicole. Let me, for our end, apologize for the technical interruption in the Q&A. Of course, we tested and tried it yesterday and today, and everything worked fine. Our apologies for that. To summarize, we're moving as a company. Our Q1 numbers show operational improvement, which is encouraging to see. We have a concrete plan now for peripherals with Project Blossom. We're taking some governance measures right now, as I mentioned. There's more work to do, for sure. The foundation is stronger, the direction is clear, and with all the work ahead of us, we're looking forward to updating you on our progress during the next meeting. Thank you for your time, thank you for your participation, thank you for your questions, and Nicole, I think this is the end.
Thank you. This concludes our earnings conference on Q1 2026 results call. Have a good day.
Thank you.
Have a good day.