Dear ladies and gentlemen, welcome to our h one twenty twenty five earnings call, and thank you for joining us today. Please note that this call is being recorded. During the presentation portion and until we open the floor for questions, all participants will be in listen only mode. Joining me in the room today are Oliver Kaltner, our chief executive officer Volga Krist, EVP, global finance and IT and doctor Philip Grote, managing director of Cherry Digital Health. My name is Nicole Schillinger, and I'm responsible for investor relations.
Before we begin, let me briefly walk you through today's agenda. Oliver will start with our investment highlights, provide a summary of our h one twenty twenty five results, and then take you through the key achievements of our restructuring efforts. He will also outline how we have enhanced our capital allocation efficiency. Volker will then present the key financial metrics for both h one and q two twenty twenty five. Following that, Philip will offer more detailed view into the opportunities with our digital health and solutions segment.
The presentation will conclude with our outlook presented by Oliver. Afterwards, we will open the q and a session. If you would like to ask a question, click the raise click the raise your hand button. Or if you are dialed in by phone, press 9 to raise your virtual hand, followed by 6 to unmute your phone. Let's begin the presentation, and over to you, Oliver.
Thank you, Nicole. Ladies and gentlemen, dear investors, dear analysts, and capital market experts, dear participants, I also would like to welcome you to our company's h one earning call. According to the relevant rules and regulations, we would like to give you a detailed insight into our preliminary h one and q two twenty twenty five landing figures and the measures we have taken for reshaping our business across all business lines. We will go into detail about the actions we have already taken and those that will follow in order to achieve a sustained change, of course. Please be informed that our COO, doctor Udo Schrella, cannot join today's session as he is with an important partner to further lay out a master distribution plan for Thierry Europe that is also consisting of some aspects of operations, logistics, and product development.
As we see an ongoing growth momentum in digital health and solutions, we think that this is the right moment to give Philip Roth some room in the earning call to get, a, introduced to you and, b, speak about the very positive development in that business segment that we see for 2025 in total and beyond. Dero, let me walk you through our key financial metrics for the 2025. Revenue came in at €46,000,000, reflecting a 25% decline year over year. This decline is part of our cleaning up process in peripherals, especially in Europe, and therefore, a direct result of the consistent execution of our strategic realignment and is preliminary attributable to the deliberate restructuring reduction in sell in volumes in peripherals Europe. However, this decline was also caused by continuously weak demand in the component segment and an unsatisfactory performance in Cherry Americas.
Our adjusted EBITDA margin stands at minus five dot o percent, driven down year on year by restructuring effects and the lower sales contribution. On a more positive note, cash on hand increased to 7 dot €1,000,000 versus last quarter, reflecting the sale of the hygiene peripherals business known as ActiveKey. Managing liquidity remains a top operational priority. We have consistently reduced our inventory levels for gaming and office peripherals. We have also significantly reduced inventory volumes at our distribution partners.
In doing so, we used as as little cash as possible. With this measure, along with targeted cash collection, we were able to secure and optimize our liquidity. Our equity ratio is at 45 dot 6%, showing a moderate decline of two dot one percentage points compared to the previous quarter, which still indicates a robust capital structure. As mentioned, a key element of our financial strategy is to ensure robust liquidity. In this context, we informed you on April 22 that we had reached an agreement with UniCredit to extend our financing until 12/31/2027.
A real milestone indeed. The total loan amount was only slightly reduced from euro 25,000,000 to euro 23,000,000. Importantly, the interest rate remains unchanged at Euribor plus three dot seven dot 5%, which we see as a clear boat of confidence from our financing partner in our restructuring path, our executional and overall financial discipline. Second, on 05/28/2025, we completed the sale of our hygiene peripherals business unit for a total target purchase price of €21,000,000. An initial payment of 10 dot €4,000,000 was received at closing after customary networking capital adjustments.
The remaining amount is structured as an earnout tied to the achievement of specific performance targets through December 2027. Let me now turn to our third pillar of our capital control, the progress on inventory reduction, a key lever in improving capital efficiency, and strengthening our liquidity position. Since the peak in summer twenty twenty three, we have successfully halved our group wide inventory levels from euro 28,000,000 down to 43,000,000 as of q two twenty twenty five. We have peaked once at a level of €84,000,000 back there. This is a significant achievement that demonstrates discipline, strategic alignment, and an operational ex execution.
A central tribe of this improvement was the comprehensive two year cleanup process within our gaming and office peripheral segment. We proactively realigned our partner network, prioritized viable distribution channels, and significantly reduced SKUs. As a result, we achieved a 72% sellout rate for q two twenty twenty five, a clear indicator of market absorption and demand alignment. In addition, our Asia Pacific operations deserve special mention for their exemplary inventory discipline and agility throughout the period. In components, we responded decisively to market shifts and repositioned the business more realistically.
This included a targeted and necessary inventory adjustment, alignment with our strategic redefinition of the segment's role and potential. And finally, in our digital health and solutions segment, we maintained full control over inventory. Thanks to strong coordination between forecasting, go to market, and sales operations, we avoided any stock related risk and set a benchmark for operational integration across the group. As part of our strategic realignment, we are discontinuing switch production at our German site in Auerbach, Germany and transferring it to established partners over in China and Slovakia. This step is essential to address structural cost disadvantages in a volume market dominated by Asian competitors.
The ultra low profile ULP switch, which failed to gain sufficient traction, will be phased out accordingly. At the same time, Auerbach is being repositioned as our European logistic development and service hub. Its central location and infrastructure make it ideally suited to support future growth. The site already manages all logistics from our ELs terminals. Socially responsible personal adjustments will be made in close coordination with the works council, and the reconciliation of interest and the social plan have been concluded.
These measures are necessary to enhance operational efficiency, streamline our cost base, and strengthen Cherry's long term competitiveness. In Shanghai, our high performing sales and marketing team ensures proximity to both key customers and the influencer ecosystem, right in the world's second largest peripherals market. Our Zhuhai site is a critical innovation hub with a skilled local r and d and project management team backed by deep manufacturing and logistics know how. Located in Zhendong, Zhuhai gives us direct access to the full value chain from component manufacturing to cutting edge electronics and firmware development. All activities are embedded in a broader transformation, particularly the streamlined product and project management setup under the COO organization. With this, I hand over to Falker.
Thank you, Oliver. Ladies and gentlemen, thank you for your interest in Cherry's h one webcast. I'll now continue with our preliminary q two and half year one re results before potential impairments. Following a difficult financial year in 2024, the 2025 was also challenging for CherrySE as expected. At €46,000,000, CherrySE's consolidated revenue for the 2025 was approximately 25% lower than the prior year revenue of €61,600,000.
Second quarter revenue came in at 20,700,000.0, trading around 34 behind the quarter two twenty twenty four revenue of €31,300,000. This decline is driven by a challenging macroeconomic environment in key European markets, particularly in Germany, combined with our strategic realignment efforts, which also include a deliberate reduction in sell in volumes to clean up channel inventories and stabilize street prices. In addition, we faced a disappointing performance in The Americas and also in our components business. As a result of this, profitability also fell short of the prior year levels. In the 2025, Cherry SE recorded an adjusted EBITDA margin of minus 5%, which was in the 2024 plus 4%.
The adjusted EBITDA margin for q two twenty twenty five came in at minus 1.3%, which is well below the prior year's figure of plus 5%. However, it represents an improvement compared to the adjusted EBITDA margin of minus 8% for quarter one in 2025. Let's now have a look on how the segments performed. The gaming and office peripheral segment was particularly hard hit by the continued local economic downturn given its strong dependence on the German market. Additionally, our previously mentioned efforts to channel inventories and to stabilize street prices led to lower revenue.
In addition, Cherry Americas underperformed in the first half of the year. As such, the segment's revenue in the 2025 came in at around €33,600,000, a drop of 19.5% compared to previous year's figures of €41,700,000. The adjusted EBITDA margin amounted to 0.1% compared to 12.6% in the previous year. The component segment continued to face significant challenges due to competition and competitive pressure from China. Segment revenue amounted to €4,300,000, which was in the half year the 2024 around €6,000,000, of which 1,900,000.0 was attributable to intra group deliveries and revenue.
Adjusted EBITDA margin was also below the previous year's levels at minus 69% versus 10% 10.7% in 2024, particularly caused by a provision for restructuring in the amount of €1,800,000. The digital health and solutions segment generated revenue of €10,000,000 in the 2025, a decrease of 38.3 compared to the previous year's figures of 16.2. The decrease in revenue was driven by a natural cool off in demand for eHealth terminates following the surge from the introduction of the e prescription that started in q two twenty twenty four as well as a slowdown in the hygiene business, formerly the active key business due to the focus on the due diligence and contract negotiations related to its sale to the Danish company, Kontoor Design. However, sales levels have been trending up slightly in 2025 with revenues of 5,200,000.0 compared to €4,800,000 in 2024. The adjusted EBITDA margin for the first six months of the year came in at 98.7%, a significant improvement from prior year's margin of 38.9%.
The adjusted EBITDA margin includes the book gain realized to date from the sale of the hygiene business. Next, let's have a look at our inventory levels, how those have been developing. As already mentioned by Oliver, our strength efforts to reduce inventories across the group successfully lowered our inventory levels down to 43,100,000 in the first half year. This marks a reduction of almost 50% from the all time high 82,000,000 in 2023. It also represents a clear improvement compared to the 54,000,000 at year 2024 and 50,000,000 at the end of the first quarter of this year.
More detailed balance sheet KPIs can be also found on our website. With this, I wanna hand over to Philippe.
Thank you, Volker. Ladies and gentlemen, also from my side, a warm welcome to today's conference. Please allow me to present the performance and strategic outlook of our digital health and solutions business for the 2025. In the next few minutes, I will talk about regulatory tailwinds, market momentum, and the first signals of a platform breakthrough. Let's begin with our core business, the eHealth Terminals.
The market is structurally driven by mandatory telematics infrastructure, TI connectivity for elderly care, and other health care professions. The legal deadlines, July 2025 for elderly care and January 2026 for therapeutic professions, have been confirmed. And the impact is striking. SMCB card applications, a prerequisite for TI connectivity, are up by more than 500% year over year. This is not just a number.
It's the clearest leading indicator for future terminal demand. Our terminals are performing strongly in the market. In h one, terminal sales remained largely stable, providing a solid base. But now we see an inflection point. July orders alone already surpassed 50% of the entire first half year's volume.
At the same time, we've reduced return rates, so called RMAs, by 51% year over year. This has a direct margin impact amplified by rising sales of add on services like extended warranties. And demand for replacements from pre 2017 installations continue to provide steady volume. By midyear, only 30% of elderly care institutions were connected to TI. That leaves 70% of the market still to capture around 23,000 facilities in H 2 alone.
And this is just the beginning. In 2026, 50,000 additional therapeutic institutions will follow. From 2027 onwards, we expect a robust stream of recurring revenues driven by life cycle replacement and service subscriptions. One key milestone in April, we rolled out WireGuard VPN across our terminals. This enables remote qualified e signatures via Pinpad, for example, from physicians during video consultations.
It's a unique feature in the market, and it matters because doctors see Cherry at work and at home, and they like what they see. Let's now have a look at the software side. As we always speak about hardware, software and cloud service offer offer as a full size ecosystem provided by Cherry and its partners. In March, we achieved provider certification for Kartling, proving our ability to deliver regulated software products. But shortly thereafter, we made a clear strategic decision.
CardLink must be discontinued. Our full focus is now on the TI messenger. Why? First, technology. Kartlink is becoming legacy.
Second, market potential. Despite considerable marketing efforts also by competitors, Kartlink accounts for just 1% of e prescriptions in Germany. Revenue per token, 20¢. We've done the math, and it's no longer worth the effort. TI Messenger is a different story.
It's built for secure communication across practices, hospitals, care facilities, just like our terminals. The total addressable market, around 150 to 160 times larger. TI Messenger isn't just better tech. It's a platform move. With TI Messenger, we are shaping digital communication in health care.
For Cherry, this is not just the product. It's the gateway to a paradigm shift. The SaaS model with regulatory backing, strong market pull, and massive upside. Certification for version one one two of TI Messenger is expected in the next days. Next versions, TI Messenger Pro and TI Messenger Connect are already underway.
We're actively bidding in major public tenders in Berlin, Bavaria, and North Rhine, Australia, and in discussions with leading primary system providers. This is our platform play, and we intend to lead this market. Let's step back and look at the big picture. With our eHealth terminals and PIN pads, we have a market leading hardware foundation. It delivers revenue today and anchors us in the hardware foundation.
It and anchors us in the health care infrastructure. But the next wave of growth will come from software. Our terminal management software already contributes growing SaaS revenues while streamlining operations for our highly satisfied customers. With TI Messenger, we are entering an an even bigger arena, Secure, regulated, cross sector communication for all participants of the health care systems from patients to doctors and institutions. That's why DHS moves from product to platform.
The key pieces are in place. We're certified. We're integrating. We're bidding in large tenders. We are combining hardware reliability with software scalability, and we do so in one of the most regulated and thereby bad market segments in Germany.
That's our position and our advantage, and we will make full use of both. Thank you for your attention. With this being said, I will hand back to Oliver.
Thank you, Philip. It's really great to have you on board, and you really seize the moment as promising business line, and you take the next step month by month and quarter by quarter. Do your audience allow me one correction here in the context of the active key earn out phase. I mentioned that this earn out phase is going through until December 2027. This is to be corrected.
It's until December 2026. So let me conclude the presentation with an outlook for the 2025 financial year and beyond. We continue to consistently pursue our strategic goal in transforming Cherry in an international provider of agnostic digital ecosystems with a strong focus on our digital health and solutions segment as we just learned. And we see the momentum there, we see our strong position. So this is why we really put more effort into that segment.
E terminal sales are gaining momentum, driven by upcoming mandatory TI connectivity deadlines. While h one shipments match those of the prior period, we expect a clear acceleration now in h two of the year. Customer feedback remains highly positive, especially regarding design, value for money, and our service quality. Our return rate has dropped significantly, enabling strong service margin products such as warranty extensions. Demand for hardware replacements, free twenty twenty seventeen installations, also remains high.
Our SAS based terminal management software called TMS continues to scale with h one twenty twenty five revenues already surpassing full year 2024. The TI Messenger is more than a product. It's a strategic gateway into an a SaaS driven platform model with recurring revenues and regulatory protection. Certification is expected shortly with further rollouts like the TM Messenger Pro and the Connect already in development. We are building a value adding ecosystem that goes far beyond hardware and delivering on our mission to become a leading TI platform provider.
In gaming and office peripherals, Cherry is executing a focused strategy to strengthen its gaming market position through the Extrafile brand. The targeted marketing and distribution cleanup are helping restore price discipline and brand visibility. Sales through an office is up to 72% year on year, confirming the effectiveness of our actions. And, again, we did all of these necessary matters by balancing our cash position. Germany, so, remains in recession, and our dependency on the DACH region, Germany, Austria, and Switzerland, continues to weigh on performance.
We've had to reduce selling volumes, carefully manage channel inventory, and adjust street prices upward to stabilize margins. Pushing volume at this stage would only trigger returns and hurt cash. The reorganization of sales and marketing is nearly complete, enabling leaner execution and improved resource allocation. Liquidity is actively managed on a weekly basis. Cash is king has never been more relevant.
By August, the European peripherals cleanup will be finalized, setting the stage for profitable growth in a highly competitive market. Let me now turn to the challenges of our environment that we're actively navigating with focus and resilience. Germany remains in its third consecutive year of recession, which continues to weigh on overall consumer sentiment and discretionary spending. The German office peripherals market is still significantly overstocked with products from all relevant brands, a legacy of post pandemic forced revenues. In The US, we face a combination of softening demand and ongoing tariff related friction, which adds pressure to experts from the EU, but especially China.
And we noticed that this could change overnight. Having said that, Gerry Americas is undergoing a recalibration. Distribution must be even more tightly aligned to market demand going forward, supporting efficiency and working capital discipline. This topic is on my personal agenda to get fixed. And for sure, APAC compared to this is the blueprint version of an efficient organization.
In APAC, we see rapid growth and innovation, but also extremely short product life cycles, which require continuous agility in development and supply chain management. Lastly, gaming demand was finally normalized post COVID with Jerry well positioned, thanks to our brand, award recognition, and strong retail partnerships. Just a side note, but underpinning the challenging framework conditions for a lot of businesses these days. For several quarters now, we've been closely following now automotive OEMs, and their suppliers are struggling under increasing regulatory and economic pressure. Distress has already spilled over into adjacent sectors, pushing a number of companies into severe distress.
Jerry has zero direct exposure to the automotive industry that insulation reduces our risk profile in the current environment. Recent market data clearly confirms both consumer both customer satisfaction and disciplined price execution. We increased our market share and value terms in Germany from 21 to 22% year over year, while unit share slightly declined, a clear indication of successful pricing discipline, positively impacting our revenues. We see a strong uptick in market share in key in key retail channels with office equipped resellers up to 10 percentage points and computer stores up to nine percentage points. Additionally, value share in mass merchants like Amazon rose by three percentage points.
As noted, customer satisfaction is also reflected externally. Jerry was awarded first place in the twenty twenty five, twenty six German customer satisfaction award for gaming peripherals. Dear all, during the annual general meeting, we had to announce that our highly valued colleague in EVP global finance and IT is having his last day at Gerry today. He urgently needs to focus on serious family matters. It's a bit of loss for us, but the family takes absolute priority.
Yeah. Volker, I would like to take this opportunity to thank you on behalf of the Cherry team, our partners, our shareholders, our supervisory board, and the executive board. It's been an honor working with you.
Thank you, Oliver. Likewise.
Dear all, the Cherry supervisory board has decided to appoint a CFO to the executive board again. The search process is well advanced, and we just made an announcement today. With this, I'm very pleased to have our new CFO starting his mandate effective 09/01/2025, Jujin Jong Ma, on this call, and I would like to call you, Jujin, to talk to our community just to introduce yourself and to let us know why you've taken over that mission.
Thanks a lot, Oliver, and, good day to you all. Good to be here today. As you can see on the slide also, I'm an economist by education. My working history is largely with Royal Philips where my last role was in the head of internal audit. Then I was sold, as they say, in a private sale to Hill House Investments and and became the CFO of the domestic appliances unit, which is now called Fresuni.
And then I made a change to a small cap electric bus manufacturer called in The Netherlands. I had great discussions both with, the supervisory board, and with, Cherry Management, not in the last place with, with Oliver himself. And and I think that, my experience in the b to b to c channel, combined with those, good and fruitful discussions, made me decide for, moving to Cherry. And I do think, as Oliver also highlighted in the presentation, that there is a number of key factors, that makes Cherry well positioned for success. The of course, the disposal of the active key business, is one of, the main items as well as, the refinancing.
And I do think, and I have plenty of experience in that, that, let's say, the rebalance focus from selling in, products to sell out, are, you know, one of the key cornerstones of, the transformation that Cherry is pursuing, and I'm very happy and excited to to be part of that story. So thanks a lot, Oliver, and back to you.
Absolutely pleased to have you, and, also, the team must be very pleased to have me as an interim CFO only for the upcoming four weeks. I'm waiting for it already, so they would definitely appreciate your starting day. Dior, before I keep going, obviously, I would like to have Volker having a personal note towards you.
So first of all, Jurgen, great decision. Welcome on board, and I'll ensure that you get a proper handover before I'm leaving. So my message to all of you is thank you for the trust. Thank you for the confidence. It has been great.
Eighteen months or one and a half years working together with Oliver's executive board, getting the trust of the supervisory board as well as with all the employees of Cherry. I think we did accomplish a lot, but I think we have a great journey in front of us, including turning Cherry really into a success story. So thank you all. Thank you, Oliver, and back to you.
Thank you very much. Dear all, on July 21, we slightly downgraded our full year guidance after recognizing disappointing revenues and margins for the second quarter. We have explained what we have done from a management perspective, and we're absolutely confident that we have done the right thing, obviously, to really have a better layout in the market across all the business lines and our partner landscape. We now expect 2025 group revenue of something between 100 to a 115,000,000 and adjusted EBITDA margin at around zero to 2% for the fiscal year 2025. The following measures, though, remain key priorities for the company.
Its inventory management, SKU assortment optimization, its cash flow management, and, of course, cash collection. Jerry's course for the year 2025 is clear, and we are convinced that we will succeed in defining the in in defying, obviously, the geopolitical challenges and finally returning to a growth path. While we know that we still have hard work ahead of us, we know what are exactly the measures that we need to get executed, and we know when we need to get them executed. So it will be a ongoing discipline to connect sales with finance, with operations, to deal with all our key metrics and to ensure that we are fully synced across all business segments and across all kind of business measures. I will now hand over to Nicole for the q and a session.