Analysts and investor earnings call for the 1st half and 2nd quarter of 2023. Today, we will have our CEO, Oliver Kaltner, and our CFO, Mathias Dähn, presenting. As in previous sessions, all board members, including our COO, Udo Streller, will be available for any questions you may have during the Q&A session following this presentation. Now, the presentation supporting this call was also uploaded to the investor relations section of our website, as well as the unaudited condensed consolidated financial statements, which are included in our half-year report. However, if you're not online or have access to the files at this time, you should still be able to follow the call. Ladies and gentlemen, today's presentation contains forward-looking statements regarding future developments, which are based on the information currently available to the company.
As a result of risks and uncertainties, actual outcomes may differ from the forward-looking statements made in this presentation. Cherry does not intend to update these forward-looking statements. Financial figures in this presentation may not add up due to rounding. Please take notice that this call will be recorded, and a replay will be made available in the investor relations section of our website shortly. I hand over to our CEO, Oliver Kaltner. Oliver, please go ahead.
Thank you, Kai. Dear shareholders, dear analysts, and dear participants in this call, on behalf of Cherry SE, I would like to welcome you to the Quarter 2 H1 2023 call. To underpin, the executive board of Cherry SE is fully represented in this call. With this, obviously, a warm welcome to my colleagues, Mathias Dähn, CFO, and Udo Streller, COO, which are both in the same room. Obviously, both will be available to answer any questions in the later Q&A session. Dear all, at the annual general meeting in May 2023, we presented the new executive team to you. At the same time, we shared our commitment to operational excellence and transparency with you. In this connection, I can report that we again put a clear focus on our process and performance optimization and are seeing good results in the 2nd quarter.
Overall, in the second quarter, 2023, we made significant progress in our efforts to also transform the Cherry Group. This progress relates both to the ongoing strategic development of the markets in which Cherry operates and to the implementation of various measures to further boost operating efficiency and performance. While we keep building the crown for future success, some of the actions will take full effect in the second half of the year. In addition to practicing concrete cost management and implementing concrete plans to reduce inventories, these actions include merging the Gaming Devices and Office Peripherals business units to form a single peripherals business unit, the strategic adaptation of the group's core orientation, and various changes in management positions.
On the one hand, our efforts to consistently continue internationalization, our entire computer peripherals product portfolio across three continents and 30 national state markets, was a key factor driving the group's revenue growth of around 13.6% in the 2nd quarter, compared with the previous three-month period. On the other hand, the increasing political statements from the German Federal Minister of Health, Mr. Karl Lauterbach, to introduce e-prescriptions across the board from July 2023 onwards, which we had expected, was a major driver of the Digital Health & Solutions business unit good 2nd quarter performance. I would like to give you a bit more context. The e-prescription is set to be made mandatory from January 1st, 2024, and thus established as a fully digital standard in the provision of medicines going forward.
According to legislation announced for this year, the digitalization of the German healthcare market will be significantly expedited in future, and new Digital Health applications will be brought closer to the point of care. There's nothing else than a medical standard for all service providers in the medical sector. The move will create a huge demand for diverse cloud-based application software, combined with certified hardware in future. In order to leverage this tremendous market potential with recurrent revenue sources based on additional SaaS, Software as a Service business model, we updated our M&A strategy accordingly in the second quarter. In our M&A search, we focus very specifically on companies that offer these digital services. Financial achievements in Q2 and H1.
With a revenue of EUR 32.6 million and Adjusted EBITDA of EUR 4.5 million, the Adjusted EBITDA margin reached 13.8% in the second quarter, largely driven by business with peripherals, for gaming and also for office applications and the Digital Health & Solutions business unit. We were therefore able to finish the first half of the year with group revenue of around EUR 61.3 million and an Adjusted EBITDA margin of 5.2% in an unchanged, challenging market environment, thus returning Cherry to operating profit as early as the second quarter as planned. The turnaround was primarily achieved on the back of positive margin effects, resulting from a change in the group's product mix compared with the previous quarter.
In the Gaming Devices Business Unit, we were able to speed up the integration of the Swedish esports specialist, Xtrfy, which we acquired in January 2023 and have already achieved some initial success with the new premium brand, CHERRY XTRFY, with innovative products such as the elegant CHERRY MX 8.2 TKL Wireless professional gaming keyboard. The kickoff event for implementing the internationalization strategy, held on May 26th, 2023, at XPERION Cologne, the gaming location for esports event in Germany, was celebrated by more than 130 invited international guests from the world of industry, media, esports teams, and also influencers. A very positive note is that the former Xtrfy team is already fully integrated into the peripherals business unit team.
We have also given the Xtrfy talent some extended tasks, so that we also have a positive impact on our Office Peripherals business and promote the individual talent as much as possible. Another milestone in Q2, the further expansion of our e-commerce business also enabled us to additionally accelerate our market penetration in the field of Office Peripherals. The market launch of an Xtrfy KW X ULP in April, the group's first own mechanical high-end office keyboard with its ultra-flat ULP switches, was also a resounding success. Respect for this outstanding performance. Talk about ULP, ULP and MX2, two promising innovations from Cherry. In June, we installed a second automated assembly machine for Cherry and next ULP switches at the Auerbach site. Its improved architecture will significantly boost production capacity from the second half of the year and have a positive impact on manufacturing costs in the component business unit.
Moreover, the first switches of the new MX2 switch generation have already been produced, and global marketing is scheduled to begin in the third quarter. Our sales strategy, which we adjusted in the second quarter to include a strong focus on direct long-term OEM partnerships, will enable us to rapidly enter additional market segments, such as high-end notebooks and premium office keyboards as we move forward in order to once again increase sales volumes to the component unit, component business unit on a sustained basis. We clearly make a statement with regard to the relevance and the importance of people, because we truly believe that people make a difference.
With the significant strengthening of our management team and the creation of new positions in key operational functions, we are also continuing to strengthen the group's corporate culture, building on Cherry's legacy on the one hand, while also taking into account the key elements of a modern, cosmopolitan, corporate management in a hybrid working world on the other. Some key hires worth being mentioned: Anna Wolschner, General Counsel; Andreas Zacher, Senior Vice President, Business Development and Sales for Strategic Partners, OEM, ODM, and Software; and Hans-Peter Ripper, Senior Director, Business Steering and Optimization. We have changed the name of our human resource unit to People and Culture in order to make this cultural development visible to the internal team and obviously also the outside world as well.
Referring to page three of today's call presentation, and as an operational excellence or mantra, let me summarize our key action items in H1 2023 for you. On B2B2C, it was about re-refinement of partner bonus and incentive program for T1 and T2. It was about strong focus on synchronized sales steering across all channels. Controlled inventory management, both in own warehouses and in all institution partner channels. Full availability of all product lines in all countries, especially gaming finished goods in Americas and office products in APAC. On B2C, we had a strong focus on sales steering and inventory management, a successful integration of Xtrfy into Gaming and Office Peripherals business unit, an extension of product reach due to sponsorships and internationalization.
We also had an expansion of our e-commerce business, both in breadth and depth, full availability of new microphone product series, a market introduction of a new high-end office keyboard with ULP switches, and in China, an introduction of Pokémon series products. On the B2B side, worth to get mentioned, rigorous reduction of production overhead, switch production adjusted to current market situation. That means, like, really based on build to order and latest demands, the start of the MX2 production and the Digital Health, the launch of CHERRY eHealth-PIN-Pad. Now, what are the key targets for the second half of 2023? Very clear, it's about further establish our Cherry professional sales management. That means like, it's the expansion of our international sales and partner network in Europe, Asia, and Americas.
It's about the implementation of the required operational and process-related measures to enhance performance and efficiency, and a strategic concept-driven expansion of our portfolio of products and services. In OEM, it's a transformation of the components business into an OEM-led business. That means like we are going into landing the first OEM agreement deal in Q3, generate first revenue contributions from the MX2 generation of switches, and increasing share of revenue from ULP switches. In Digital Health & Solutions, it's the sales and M&A focus. By taking advantage from political programs to increase the installed base prior to launching new services, and obviously, it's about the acquisition of a cloud service asset. Overall, it's the identification of margin and inventory management and cash conversion. For explanation, the buildup of inventory peaked in the second quarter. It's technically securing the additional corporate growth plan for the second six-month period.
Existing stocks now have sufficient breadth and depth to meet demand in the 2nd half of the fiscal year. Ladies and gentlemen, before I hand over to our CFO, Mathias Dähn, for more detail on the Q2 H1 financial performance, I would like to take the opportunity to explicitly thank the entire Cherry team, all our partners, our suppliers, for their outstanding personal commitment during the 1st six months of the year, and extend a warm welcome to our new colleagues. We know that we are dealing in challenging markets, and as we are facing a further business upside in H2, we know that H1 is nothing but a solid ground to take the next step in landing a good 2023. However, it is a good and solid ground. The Cherry team will ensure to remain humble, focused, and operational to fulfill this year's mission.
With this, dear Mathias, the stage is yours.
Yes, many thanks, hello from my side as well. I'm on page four now. What happened in the 1st half year and the 2nd quarter, we achieved a revenue of EUR 61.3 million, with a strong growth momentum in Q2. That's, as Oliver Kaltner mentioned before, 13.6%, up from 223. EBITDA margin adjusted is now at 5.2% due to a quite strong Q2 with a 13.8% EBITDA adjusted margin. Employees, more or less on the same level as last quarter. Operating cash, I will come to that in a minute. -EUR 26.6 million. There are only -EUR 8.7 million in the 2nd quarter, we are making some progress here.
Net debt at minus EUR 8.7 million. Oliver already mentioned the negotiations with potential targets in M&A. On page five, key financial indicators. We had a Q2 that clearly supports the full year 2023 target revenue with EUR 32.6 million gross profit margin up to 36.6%. EBITDA margin, as I've mentioned before, EBITDA adjusted margin, as I've mentioned before, 13.8%. The group revenue managed to revise from potential growth in Q2 in Digital Health & Solutions, as well as Office Peripherals and Gaming Devices, thereby obviously further gaining market share and focus. Market, obviously, Xtrfy included in Gaming Devices in H1 2023. Our gross profit margin is mainly impacted by the positive product mix effect.
Also maybe worth mentioning that we in the cost of sales, we were below the 2-point average in terms of cost of sales. EBITDA, obviously, clearly driven by a higher gross profit margin in Q2 2023. Inventories, I reported that, we reported, I have to say, quite good revenue and also EBITDA, which was positive. We also have to say that we have to work much more on the cash conversion, and here, inventory is a key focus. We mentioned before that, though inventory clearly safeguards the targeted revenue in H2 2023, we also are happy to report that we have now inventory level peaked in Q2 2023, and we'll see a downward trend from here.
We have integrated in our, in our target range, in our midterm targets now, an inventory target range where we still want to be at between 25% and 30% of full year sales. In anticipation of, you know, this year's year end will not be within that bracket, but slightly above, as you can see on the 4th bullet here on that, slide number six. The MX2 switch production that Oliver mentioned, launched in H1, so now ready for market introduction in H2, resulting in a mild inventory pickup or uptick in components. The initial software for Gaming Devices was reached in May around the gaming Go Global event or gaming internationalization event, and was already reduced in June.
We have seen severely or significantly reduced the cap, the inflow of goods in peripherals, while at the same time having safeguarded the second half of the demand that we expect in peripherals in the second half of the business year. As I've said, we were not happy with the inventories in the past. We have now introduced inventory targets, and we will be, as I've said, still above the 37 threshold that I've mentioned here at the upper end of the target bracket. In cash flow, although we improved in Q2 2023, clearly with the negative net result and with a strong build-up in inventories that I've just mentioned for peripherals, we have...
achieved an operating cash flow of minus EUR 26.6 million. That again, was clearly influenced by both inventory buildup, just as well as a quite high amount of trade receivables, which were driven by high sales in May and June, with payment terms of up to 90 days. That will smooth out in the third quarter and the remaining business year. Investing cash flow mainly having gone into the purchase price for Xtrfy Gaming, EUR 3.5 million, and in an increase in capitalized heat spend.
In financing cash flow, the majority of the financing cash flow clearly stems from the acquisition of treasury shares in H1 as part of the share buyback program, which ended in June. On page eight, we confirm, based on a solid H1, we confirm our outlook for our guidance for 2023. Even though it's a year of transition and consolidation, revenue will reach between EUR 135 million and EUR 165 million in revenue as our margin adjusted will be between 10% and 14%. We've given ourselves a couple of midterm targets. One of them I've mentioned already, inventory target range between 25% and 30% of group revenue.
R&D spends between 3% and 4.5% of group revenue, and selling marketing expense ratio between 10% and 12.5% target ratio. We will give our best to come close to those targets soonest, but, you know, in the meantime, we confirm the offer for this year, and I'll give back to Oliver to give you a little bit of more flavor for the outlook for 2023.
When we're talking about operational excellence, it's very clear that we're talking about really key management measures to really have this kind of continued growth momentum, and to really support the overall business performance plan for H2. In the segment of Gaming and Office Peripherals, obviously, it's very much about keep going with the more international approach here, ensuring that we have the right level of penetration of our products in the European and U.S. market, and obviously also in specifically in China, where we see a great momentum. We know that we have all the seasonal peaks, the natural seasonal peaks in demand in both B2C and B2B ahead of us, where we're talking about Amazon's Black Friday, we're talking about the Cyber Monday, we're talking about the holiday season, back to school, and obviously, Christmas season.
This is a very natural way to really ensure that we have the right level of product in stock to really fulfill all the demand on the different types of expectations in the 30 markets. We have some various product launches ahead of us and also some kind of updates, so that we see also kind of an increasing opportunity to collaborate with influencers, esports organizations. To hear from a pure marketing perspective, obviously, we see that this plan is nicely matching, obviously, with the same plan that we have in place. In terms of the current legislative project, establishing the e-prescription as a digital standard, and it's really just like one service out of many digital standards in the future.
We really look into the situation to fulfill the market demand before, obviously, the official start is going to hit the market in January 1st, 2024. Obviously, it's very much about ensuring that we have now the ULP switches as well as the MX2 switch generation out there in the market to really liaise with all the bigger players to ensure that obviously, the next two generations that are full of relevance and innovation, obviously, hit the market in the right space. Overall, obviously, you can see that we know that we have some kind of opportunities ahead of us, obviously, some kind of challenges.
I can really say and underpin that the way we're doing the business right now already led to some nice successes in the H1, and it's our clear commitment and our conviction that we're going to really translate that into a successful H2 as well. With this, I'm going to hand back to Kai Holtzmann, and then, obviously, we're going to start the Q&A session.
Yes, thank you. Please, the operator, start the Q&A session.
We have the first question comes from Tim Wunderlich from HAIB.
Yeah, hi, good afternoon. Thanks for taking my question. It's a question about the Adjusted EBITDA margin. I mean, this metric rebounded significantly from Q1 to Q2 2023, so they sequentially a major improvement. This, I, I think it is, you know, 13 something %. Should we take this as the new run rate going into the second half? When we're looking, looking at Q3 and Q4, or do you see even potentially upside to this, to this Adjusted EBITDA margin, given the higher revenue rate? Thank you.
Well, as we, as we said, it was a positive mixed effect in Q1. Obviously, sorry, in Q2, you've seen that, we commented on Digital Health kicking in more in the second quarter than in the first quarter. It's, I think, fair to assume that, with the remaining business year, we will strive to be at the margin level that we have seen now. You should be more optimistic than that, and I think we just want to maintain the business structure as you see it right now.
To underpin, obviously, one thing here, we're going through all the business lines. We're looking into any kind of special deal opportunity to evaluate that, not only from a revenue market share perspective, but also from a margin perspective. This new way of kind of sales planning and sales steering, including obviously, finance controlling, helped a lot, obviously, to really manage up the business in Q2, and we're going to really keep that method ongoing, as this is a kind of a standard requirement.
Okay, thank you. A question on M&A. I mean, you guys are obviously looking at, at large companies for the Digital Health. Maybe I missed it in the call, but could you give us an update on the, on the pipeline and any progress here? I mean, can we expect something to happen in, in the course of the second half? Thank you.
Basically, what we also have mentioned in the course of the AGM this year, that the D igital Health and solution part is obviously the key focus area for M&A. We are already working in the pipeline, obviously, working on the pipeline, and we're already kind of in closest with some kind of assets, but nothing to disclose at this stage. As you can imagine, M&A can also take some time, but we have a good conviction that we are, as a company, absolutely relevant for these type of assets because they're really looking after SMB companies that already have kind of an established Digital Health business, in which they also can obviously get this own business, their own assets, obviously, carved in.
There's definitely one element that is very helpful, and that's the, the level of integration and the quality of the integration of Xtrfy, because this is also kind of making a kind of a good statement into the market that Cherry is really treating M&A assets with a lot of respect, and obviously, the way we're getting these companies really merged in is exactly the way we do it well. We're working on that. It's kind of a, it's kind of a very, very intense market, as you can imagine, but we have a, a pure optimism to really come up with something that is relevant for the business.
Okay, sounds good. A last question, on the OEM, on the direct OEM relationship. Did I understand this correctly? You're expecting to announce the first cooperation in the course of Q3?
It's our goal, obviously, to really get something done. The same with the M&A, obviously, this is going to take some time, but we have an optimistic outlook here. You can imagine that obviously, with the hire of Andreas Zacher, obviously, there is another momentum in that market. I don't want to overpromise here because it takes time, and it's not about kind of, getting something into an agreement just for the purpose of having an agreement. I would like to see that we have a kind of a basic general agreement that we also can use for other players. It's a lot of kind of general counsel work involved here.
Again, since we have already had a very, a kind of intensive talks in that range, and given the fact that now with MX2 and obviously, ULP, we have the right level of relevant innovation in our pocket, we have, we have also some kind of optimism here.
Okay, thank you very much. The next question comes from Jörg Philipp Frey, Warburg Research.
Hi, gentlemen. Couple of questions from my side. Actually, can you first of all, comment a bit on your underlying growth in the gaming peripherals in China, particular? It looks like it was slightly negative if you had exclude Xtrfy. Why sh-- Well, wasn't, wasn't that much better, given that the prior year, there was a substantial lockdown period in China? Secondly, on Digital Health, I think you've commented numerous times that you expect a sequential improvement throughout the year. How much visibility do you have now on the remainder of the year with product launches obviously coming up? Should we assume this to continue or how Q4 tilted or back-end loaded will this growth be?
Lastly, a bit nitty-gritty here. You mentioned in the quarterly report, some EUR 0.7 million reversal of impairment losses. First of all, why didn't you adjust this number? I, I didn't see that. Can you elaborate a bit on the background? Does this relate to Viola or anything specific that you can mention there?
Let me start and take the first question with regard to gaming in China. What we basically see across the world is obviously some kind of soft gaming market after a lot of tailwind we have seen in the year 2021 and 2022. With the integration, obviously, of Xtrfy, there's one thing that I would like to honestly know, that whenever you kind of have a kind of a close deal, obviously, you see that most of the assets, obviously, they have a bit of a kind of declining development curve. That's not the case with Xtrfy. Xtrfy is doing very nicely, and by the way, based on what we have planned, but you don't see all the Xtrfy single revenues anymore because they are completely kind of incorporated into the other product lines. That's one statement.
Second statement with regard to China, we see it both, by the way, in gaming, also, obviously, a lot of kind of local brands popping up there, brands that are kind of in the market only for six months, but they're grabbing some kind of market share and then they kind of disappear. With our product portfolio, obviously, we have a really nice and solid market position over in China, and the Chinese team, obviously, they always kind of deliver a bus punches, so we are fine. By the way, all the gaming handles is the office. It's very important that we look at the office and the gaming business as a consolidated type of business in these segments, because we're talking about the sales partners that are exactly the same. We're sharing the same kind of sales focus and stuff like that.
And this is the, this is the element where I also expect some kind of upside and uplift in the H2, also from the gaming perspective side. What was your second question before we then obviously go into the impairment question? The second one was.
Digital Health.
Digital Health.
Digital Health.
Yeah. As you know, that we, we have a very kind of, strong market position in Digital Health in the German-speaking market, which is good. What, what are our key requirements and key measures that we expect? Number one, it takes usually quite a time to convert a political statement and a political direction into real business. That's a little bit the nature of that business, because a lot of, companies are simply waiting to really get the purchase order in. We turn that right now and go more proactively and more kind of positive, aggressively into the market and let people know, specifically if they're on the second tier, third tier services and medical health, that they really need to really get ramped up right now.
Now that we have availability, it can be also can call for an early, early, early fall and early deals. Second, obviously, that's the business that is still kind of project-driven. We also would like to ensure that obviously, managing a program that is based on project purchase also means like, we need to really activate that market. We simply take advantage from all the statements made by Mr. Lauterbach, and he clearly stated last week, or it was the year before last week, where he said, like, "We're now working on that program for digitalization in medical health since 20 years, and now we really need to speed up." I can really say, like, I could not more agree.
In this, obviously, so far, this looks all good, but at the same time, I always say that since I'm with the company, we need to obviously enrich the digital health business. The same with security business, not only on certified hardware and software, but also on cloud-based services, and that's why we put so much effort to ensure that we can really also deliver a cloud-based service as soon as possible.
overall for.
Yeah.
With the 0.7, nothing special to report, this is just ordinary course of business. We check our inventory all the time. That has been the case before I joined the company, and that is the case since I joined the company. Whenever we find reasons to depreciate and write off, inventory, we do that, and when we find the opposite, we do the same, and that's what happens here. We're not, you know, specifying the exact business, say, the product, but that is nothing really special to report here.
Okay. Yeah, hope you find more positive reasons. Thank you.
Sorry. That, that is a very nice comment, and I will see to that. I, I don't forget to answer that question properly all the time, every day. You can also, you know, turn that around into a positive, where we say we're simply chasing, you know, all the inventory that we're having. We're not looking at net inventory all the time, but rather at gross inventory, because I think, you know, in net, every depreciation is already made, but the, the, the goods still sit there, and therefore it's a, it's a, let's say, an effort of proper business conduct, that you look at your gross inventory and try to sell it out to the highest price. Yes.
Understood. Thank you.
You're welcome.
Pleasure. Thank you for the question.
The next question comes from Marie-Thérèse Grübner, HAIB.
Yes, good afternoon. I do have a couple of questions. I will ask them one by one, if you don't mind. First question relates to the gross profit margin Q2, very, very high at 36.6%. I understand the recovering house businesses help, but, what can we... I mean, is this a, is this a runway we can expect for the, for the remaining quarters?
I can, I can answer your question, but you're barely audible. I hope you can hear us all, well.
I can hear you well, yes.
The question, margin, and I hope that I answered that question already. Yes, you can.
Okay. That was the gross margin question. Secondly, I observed that you had slashed R&D levels, at least in the P&L. Can we expect the same volumes in euros in terms of R&D spend in the remaining quarters, or is there anything, anything new coming up?
Basically, that you can expect more or less the same. We clearly have to say that we want to intensify our R&D in a sense that we want to have, to have it, terms more relevant, to have more relevant, more relevant products, having shorter payback periods. With that, clearly, it's an it's a product offensive, as we can call it. Yes, for the second half of the year, you should be able to expect the same.
Marie-Therese, to add on that one here, clearly stated, both R&D and also sales and marketing investments are under investigation for the simple purpose that R&D costs have been increased significantly over the last years, same with the sales and marketing costs. We need to look into that one here. What we know is that in the component business, a lot of the R&D obviously is not converting into complete revenue, which is fine, but now we need to see what is on top of that. We know that a lot of kind of R&D in the peripherals business obviously also is not paying off, so we have a very fresh and a very kind of broad assortment there, which is also fine. In Digital Health, we know what is expected.
We simply need to ensure that the entire organization understands that whenever we initiate R&D, we expect sales and revenue back. This is most probably something where we put a little bit more internal effort on.
Okay. All right. My next question regards Digital Health. I know it's been asked by, by my colleague, Philip as well. Concretely, I mean, do we still expect a much stronger H2 after, you know, the first signs of a pickup in Q2? Or is this something where you have still a bit less visibility at this stage?
No, we have a lot of visibility here, and we still have a kind of a concrete plan with an upside in that business line in H2. You know that there are a lot of kind of discussion if there is certain kind of a hockey stick effect. Some of the hockey stick effect, obviously, we kind of balance it out, but very clearly, H2 should be a, a clear kind of, upside also on the Digital Health, as we need to have it, in order to have a, a, a very large, broad and deep install basis for the upcoming SIS and software services in the future. It's very clear that H2 is a Digital Health where that needs to really add the budget.
All right. Super. My next question, next question pertains to components. MX2 is being produced through MP as well. The marketing is taking place in the second half. I understood that. The overall inventory level, in components, however, is flat compared to Q4 2022. Is it fair to assume that the mix of that inventory has simply changed and you got rid of the stuff you don't want to have and now have stuff that you're going to be able to sell well into the market? Is that how we should understand it?
Yeah, we have ramped up, obviously, MX2 and ULP in the, the same sense that I have to say MX1 obviously is facing challenges market as you can imagine, because there is a lot of inventory out there in that segment across the world. A lot of the big players, manufacturers of notebooks and obviously keyboards, are still very insistent that they might carry own inventory levels. We have to be very clear. That's a very challenging tough market for time being, but at the same time, we always said, like, we still have product in our inventory that is, A, very in, in, innovative and obviously new, and the MX1 is still relevant for the market. We are still not in kind of crazy sell-off mode, and we still look after deals that really kind of convert into some kind of proper business.
We're going to expect to see a decline on that, on that line as well over the upcoming weeks and months, as we are very close now in the negotiation with some of the parties. Again, we also need to raise the question to really get your businesses up also for the upcoming, upcoming calendar year, and that means, like, you also have to ramp up. This is a kind of it will remain a challenging segment, as we all know that it's a worldwide challenging segment, again, we, we have that, what I call, a pretty, pretty nice this year so far.
Okay. Then, MX2, MX2 and ULP, who, who are you selling to then, in, in, in H2? Can you, can you mention some of the, the main, the main clients?
We will definitely disclosure the main client the moment we can disclose that. That means like it needs to get also a second approval by the client. We will come up with the good news whenever we have two signatures on a piece of paper. Having said that, it's a real piece of paper.
Okay, got it. Got it. Then last, last question. What are you, what are you doing with the 1.1 million shares you bought and that you didn't give to Xtrfy founders? Are you keeping them on balance sheet and going to cancel them? Is there, is there a specific, specific action here we should expect?
We pretty much focused, to be quite frankly, Marie-Therese, we pretty much focused on delivering good H1 results, to be quite frank. That means, like, all our focus, specifically in the last six to eight weeks in the half year, obviously, was really very much on sales. We have that stock level, obviously, which is fine, and we always said that it's a fantastic opportunity also for upcoming M&A, as to most probably getting used for that one here. We're going to have more time now to really think about what we're doing with these types of shares, but for time being, it was really kind of our commitment to land at H1. That is kind of also fulfilling not only the need, but also the requirements from our investors.
Okay, great. Thanks a lot. These were my questions. Thank you very much.
Thank you much. Take care. Bye-bye.
Thank you very much. Right now, we have no more questions in the queue, so if you want to ask a question, this is last chance, nine and star on your keypad. Okay, no more questions. I hand over back to the hosts.
First of all, obviously, I would like to really thank my two colleagues. It's so important to have that team building and that team spirit, and it's something that we can really rely on each other, which I think honestly, it's a, it's a tremendous achievement in a, in a few months. I remember the first days of Mathias when he just started, and he was right in, he was right in the game. It was an amazing journey. Also, honestly, would like to underpin the fact that we really treat the investors' feedback we have received in many, many, many investors calls and meetings and conferences, very seriously, trying to observe everything that was reached out, that got reached out to us. I always can underpin, this is the year of transformation. This is the year of operational excellence.
This is the year where we have to be very nitpicky and detail about. It's important for the entire organization, it's important for the entire business, and we already see that we are kind of progressing very nicely in some of the market segments where other companies already say, like, "Oh, my gosh, we have a bit of a decline here." I want to really take and underpin that again, the opportunity to really say thank you to the entire team, thank you to all our investors and our shareholders, and also thanks to our supervisory board members, very active whenever we need a piece of advice, whenever we need to have a piece of support. It's been a very, very challenging journey. I'm not sure if everybody on that call ever was running a marathon. It's half time.
Now, you can grab a bit of a water and a banana, but it's still half time, and there is still the second half of this journey to reach across the finish line. We are committed to deliver.