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Cherry AG

Investor Presentation Mar 30, 2023

730_ip_2023-03-30_f3df4652-e53a-4850-af65-84c0f815f862.pdf

Investor Presentation

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FY 2022 INVESTOR PRESENTATION

MARCH 30, 2023

TODAY'S PRESENTERS – NEW CEO*

Oliver Kaltner - CEO

Bernd Wagner - CFO Dr. Udo Streller - COO

Oliver Kaltner brings in management experience from companies such as Leica Camera AG, Microsoft, Sony, and Electronic Arts, running global businesses with operations in EMEA, APAC and the Americas.

"Oliver Kaltner has a proven track record in highly successful global companies, with experience in operations, product innovation, marketing, sales, service, brand management, M&A and strategy. He is a change agent, having driven innovation and transformation for iconic brands along the value chain of hardware, software and cloud-services." Marcel Stolk, Chairman of the Supervisory Board

* With effect from January 1, 2023.

STRATEGIC OUTLOOK BY CEO OLIVER KALTNER

MARKET MANAGEMENT 2023 – PRODUCT
CHALLENGES ACTIONS A TRANSITION YEAR SEGMENTS
INTER
NATIONALIZATION
M & A PEOPLE & CULTURE

Confidence in the investment is the sum of confidence in the management, the business plan, and its implementation.

FINANCIALS FY 2022 OVERVIEW

Disappointing Fiscal year 2022 with low sales forecast visibility the whole year

in
€m/
as
indicated
FY 20* FY 21 FY 22
21/22
Q4/21 Q4/22
21/22
Revenue 130.2 168.5 132.5 -21
4%
45.1 34.5 -23
5%
Gross
profit
50.8 68.9 36.9 -46
5%
18.0 5.6 -68
8%
Gross
profit
margin
in %
39.0% 40.9% 27.8% -13
1pp
39.9% 16.3% -23.6pp.
OPEX -25.8 -41.3 -73.4 +77
9%
-10.5 -42.2 +302
6%
EBIT 25.0 27.6 -36.5 7.5 -36.6
Depreciation
& Amortization
10.3 15.2 15.3 +0
5%
4.2 3.7 -11
4%
Impairment
GW / Viola
- - 33.4 - 33.4
Adjustments 1.8 6.1 3.0 0%
-51
0.6 1.1 +73
0%
EBITDA
(adj.)
37.1 48.9 15.2 -68
9%
12.3 1.6 -87.2%
EBITDA margin (adj.)
in %
28.5% 29.0% 11.5% -17
5pp
27.3% 4.6% -22.7pp.

* Basis: Unaudited condensed consolidated interim financial statements of Cherry Holding GmbH

FINANCIAL PERFOMANCE OF BUSINESS AREAS

Cyclical downturn and changes in product mix impacted revenue and profitability

EBITDA ADJ. (IN €M)

MAIN IMPACTS ON REVENUE

GAMING (-50,2%)

Lower switch demand due to high customer inventory and minikeyboard trend

PROFESSIONAL (+6,5%)

Office sales grew by 10,8% to previous year fueled primarily by office and industry products and Security & PoS products

MAIN IMPACTS ON EBITDA (adj.)

  • Idle cost of lower switch production
  • Market development costs for entering the e-Commerce sales channels

* Basis: Unaudited condensed consolidated interim financial statements of Cherry Holding GmbH

PROFITABILITY OF BUSINESS AREAS

Profitability declined primarily due to macroeconomic headwinds, cyclical decline of switch sales and one-off impairment write-off

11.5% GROUP EBITDA MARGIN (adj.) DOWN 17,5 pts yoy

17.0% PROFESSIONAL EBITDA MARGIN (adj.) DOWN 5,9 pts yoy due to:

  • e-commerce expansion with higher marketing expenses and expansion of sales staff
  • Higher prices for materials & U\$ effects

-0.7% GAMING EBITDA margin (adj.) DOWN by 36,1 pts yoy due to:

  • Significant excess inventory at customers caused low demand and low prices due to inventory clearance
  • Trend to Mini Keyboards with 20-30% less switches

INVESTING FOR GROWTH

Management will realign Cherry´s cost structure to our top line going forward

EXPENSES (IN €M.) & EXPENSE RATIOS (IN %)

We are investing in

Research and Development up 2.9 m€ yoy

Scaled expansion and innovation of product portfolio continued to create successful future products

Marketing and Selling up 2.4 m€ yoy

  • Further implementation costs of e-Commerce strategy (market ing, consulting and personnel costs)
  • Marketing & selling to support Gaming Goes Global in Q2/2023
  • Reclassification of MDF in 2022 to revenue deductions (EUR –1.9m)

Administration expenses

Digitalization of processes

Administration Marketing and Selling Research and Development

* Basis: Unaudited condensed consolidated interim financial statements of Cherry Holding GmbHc

STRONG FINANCIAL POSITION

Enables further organic and inorganic growth opportunities within the long-term secular trends

TOTAL GROUP ASSETS OF 379.1 m€

  • Strong cash position of 92.8 m€
  • Net cash is 29.9m€
  • Own shares 907.117 (6,8 m€) as of December 31, 2022, available for M&A
  • Net working capital* of 40.9m€
  • Inventory level of 65.0 m€ for e-Commerce enables future sales and cash generation
  • Strong Equity ratio of 66.4%

* Current assets (without cash and cash equivalents) less current liabilities (without financial liabilities)

INVENTORY

Target to adjust in 2023 the DIO to the normalized supply chain

CHERRY INVENTORY BY BU (IN €M)

STRONG FINANCIAL POSITION

Enables further organic and inorganic growth opportunities within the long-term secular trends

TOTAL GROUP ASSETS OF 379.1 m€

  • Strong cash position of 92.8 m€
  • Net cash is 29.9m€
  • Own shares 907.117 (6,8 m€) as of December 31, 2022, available for M&A
  • Net working capital* of 40.9m€
  • Inventory level of 65.0 m€ for e-Commerce enables future sales and cash generation
  • Strong Equity ratio of 66.4%

* Current assets (without cash and cash equivalents) less current liabilities (without financial liabilities)

CASH FLOW 2022

Positive Operating Cash Flow and improved Free Cash Flow

in
€m/
as
indicated
FY 22 FY 21 +/-
Net result -35.7 9.3 -45.0
Depreciation, amortization, impairment
(+) on fixed
assets
47.8 15.0 32.8
Increase
(-) / decrease
(+) in inventories, trade receivables
and other
assets
-19.6 -28.7 9,1
Increase
(+) / decrease
(-) in trade liabilities
and other
liabilities
14.6 3.8 10.8
Increase
(+) / decrease
(-) others
-1,3 8,4 -9,7
Operating Cash Flow 5.8 7.8 -2.0
Investment Cash Flow -11.3 -14,4 3.1
= Free Cash Flow -5.5 -6.6 1.1
Financing Cash Flow -11.2 92,4 -103,6
Cash at end of
year
92.8 109.7 -16,9

OPERATING CASH FLOW

  • Continue to generate positive Operating Cash Flow
  • Net loss mainly due to non-cash impairment of goodwill (29,9m€) and Viola switches (3,6m€)

INVESTING CASH FLOW

  • Capitalized development costs for scaling new products
  • Last installment for Active Key

FINANCING CASH FLOW

  • Share Buy Back program in 2022 (6,8 m€)
  • 2021 IPO proceeds

OUTLOOK FISCAL YEAR 2023 – A TRANSITION YEAR

Prudent forecast given low visibility – mid-term aim to return over 20% adj. EBITDA margin

IN €M/
AS INDICATED
FY 2022 FORECAST FY 2023 GAMING
Double-digit revenue growth and a slightly
higher adj. EBITDA margin (2022: -
0.7%)
Group revenue 132.5 135
165
-
PROFESSIONAL
EBITDA margin
(adj.)
11.5% 10
14%
-
Single-digit revenue growth and a slightly
lower adj. EBITDA margin (2022: 17.0%)

CURRENT FORECAST BASED 2023 ON:

  • Macro factors remain challenging in 2023 with high inflation, interest rates
  • Q1 sales expected to be low due to high inventory levels at customers
  • Xtrfy contributes to Gaming from January 2023
  • Q2 Cherry starts first in Q2 with "Gaming Goes Global"
  • HY2 E-health terminals and PinPad strong in H2 as regulatory constraints end
  • Expansion of e-commerce activities in the US market planned
  • Improved supply chain and no further lock-downs in China

Profitability will be impacted by:

  • Shift in product mix low switch sales assumed
  • Low capacity-utilization in switch production
  • 2nd ULP assembly machine will start in June
  • Strong cost / OPEX management

RELATIVE SHARE PERFORMANCE & CURRENT SHAREHOLDER STRUCTURE

RELATIVE SHARE PERFORMANCE

SHAREHOLDER STRUCTURE*

* Information is based on voting rights notifications pursuant to Art. 40, Para. 1 of the German Securities Trading Act (WpHG). ** Based on internal investor reporting to Cherry, not subject to disclosure. *** Includes 1.8% held directly and indirectly by the members of the Management Board.

CHERRY SHARE BUY BACK 2022

OVERVIEW

  • The Management Board has resolved on June 9, 2022, with the consent of the Supervisory Board, to launch a share buyback program using the AGM authorization of June 23, 2021.
  • Within the framework of the Share Buyback Program 2022, up to a total of 2,000,000 shares (corresponding to up to 8.2 % of the existing share capital of the Company) may be repurchased
  • from June 13, 2022, to June 30, 2023,
  • at a total purchase price (excluding incidental acquisition costs) of a maximum of EUR 25.0 million
  • up to a price cap of EUR 14.00 per share.

STATUS AS OF DECEMBER 31, 20222

Date No.
of
shares
purchased
Average
price
(in
€)
Purchased
volume
(in
€)
SUBTOTAL
Q2
215,318 9.0457 1,947,711.29
SUBTOTAL Q3 434,894 7.5458 3,281,642.40
SUBTOTAL Q4 256,905 6.1301 1,574,849.21
Cumulated 907,117 7.5001 6,620,594.03

FINANCIAL CALENDAR 2023

DATE EVENT
January 5/6 ODDO Forum
February 8 Hamburger Investorentag
(HIT)
March 2 Metzler Small-
and MicroCap
Days
March 10 ODDO TMT
March 30 Annual report / consolidated financial statements FY 2022
May 15 Interim report for Q1 2023
May 15 Equity Forum
May 17 Annual General Meeting
June 16 Warburg Highlights
August 14 Half-year report 2023
September 4/5 Equity Forum
September 18/19/20 Berenberg Flagship German Corporate Conference
November 15 Interim report for Q3/9M 2023
November 16 Münchner
Kapitalmarkt
Konferenz

FORWARD LOOKING STATEMENTS

Disclaimer

This presentation contains forward-looking statements. These statements are based on the current views, expectations and assumptions of the management of Cherry AG and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those described herein due to factors affecting Cherry AG such as, among other things, changes in the general economic and competitive environment, capital market risks, currency exchange rate fluctuations and competition from other companies, and changes in international and national laws and regulations, in particular with respect to tax laws and regulations. Cherry AG does not assume any obligation to update any forward-looking statements.

The information contained in this presentation is for background purposes only and does not purport to be full or complete. No reliance may be placed, for any purpose, on the information contained in this announcement or its accuracy or completeness. The information in this presentation is subject to change.

Market & Industry Data

This presentation also contains estimates and other statistical data made by independent parties and by the Company relating to the Company's industry, the Company's business and the market for the Company's products and its future growth. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions, and estimates of the Company's future performance and the future performance of the market for its products are necessarily subject to a high degree of uncertainty and risk.

General remark

Figures may not add up due to rounding.

THANK YOU FOR YOUR ATTENTION

Cherry SE Dr. Kai Holtmann │ Head of Investor Relations

Rosental 7 c/o Mindspace │ 80331 Munich, Germany

E-Mail Tel. [email protected] +49 175 1971503 Fax +49 9643 20 61 900 Internet https://ir.cherry.de

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