Cherry reports first quarter results and confirms forecast for fiscal year 2022
/ Key word(s): Quarterly / Interim Statement
Cherry reports first quarter results and confirms forecast for fiscal year 2022
Munich, May 11, 2022 – Cherry AG [ISIN: DE000A3CRRN9] today published its unaudited condensed consolidated financial statements as of March 31, 2022 (first quarter) and confirmed its forecast for the full year 2022.
"Our double-digit growth in the PROFESSIONAL business area was fueled by our successful e-commerce business and digital health activities," said Rolf Unterberger, CEO of Cherry AG, commenting on Cherry's business performance in the first quarter of the 2022 fiscal year. "Therefore, our strategic positioning proofs once again successful. Despite supply chain disruptions, lower demand for switches, and various lockdowns in China, we were able to increase our Group revenue by 18.6% compared to Q1 2020 on a two-year basis. Our medium- and long-term global growth will continue to be driven by major trends in gaming, mobile working, and the digitalization of healthcare."
The current challenging market environment also impacted the stability of the Company’s own process chains, ranging from procurement to delivery. Business activities were significantly affected by lockdowns in China.
In the GAMING business area, Cherry continued developing the new version of the globally unique ULP switches and the market launch is scheduled for the second quarter. The distinguishing feature of this innovation is that it does not produce an acoustic "click feedback". This version of the switch is also suitable for use in office applications. In addition, the Company pushed ahead with the development of a new switch featuring a customizable functionality, which will be available for marketing as of the third quarter this year. With its innovative switching technology, this new switch will give competitive gamers in particular a new gaming experience. Cherry is also equipping various gaming keyboards with the new Advanced Wireless technology, which ensures an optimized in-game response time for gamers and, with this technology, still has the advantages of being "untethered" during use compared to a conventional, hardwired product. As a further highlight, in line with the current market trend new, smaller keyboards with a reduced number of keys (e.g. 60% of a conventional keyboard layout) are under development that will be launched in the second half of the year.
Revenue from third parties in the GAMING business area decreased by 36.9% to EUR 11.9 million (Q1/2021*: EUR 18.8 million). The lower figure was primarily attributable to fluctuating demand in the consumer market for gaming keyboards, the limited availability of certain keyboard controllers (ICs), customer-related delays in launching new products, and various lockdowns in China and Hong Kong. The adjusted EBITDA margin in this business area came in at 7.4% for the period under report (Q1/2021*: 34.1%), due in particular to reduced fixed cost coverage in view of lower revenue.
In the PROFESSIONAL business area, the Company continues to make good progress with the sustainable expansion of our e-commerce sales channels. In addition to Europe, Cherry is now also placing the focus on the USA as a further online sales market for the popular peripherals. The new KW X ULP Wireless Mechanical Keyboard will be officially launched in the fourth quarter of the current fiscal year. Apart from our high-quality mechanical switches, which are unique worldwide, this keyboard will stand out in particular due to its distinctive design and extra-flat profile. The state-of-the-art e-health card terminals put Cherry in an excellent position to benefit from both the current and the future requirements of gematik GmbH in terms of digital infrastructure for the healthcare sector. "Telematics Infrastructure 2.0" is currently being designed and a schedule drawn up, thus establishing the basis for continuing to develop own products with the aim of tapping into new software- and service-based revenue streams with the next generation of telematics infrastructure (expected as of 2025).
At EUR 21.1 million (Q1/2021*: EUR 18.9 million), revenue generated with third parties in the PROFESSIONAL business area rose by 11.6% compared with the same quarter one year earlier. The pace of growth in this business area was mainly driven by the steadily improving level of Digital Health business, following the start of sales of the e-health card terminals in the prior-year quarter. The adjusted EBITDA margin for this business area stood at 16.7% for the period under report (Q1/2021*: 24.0%), primarily due to higher purchasing prices for raw materials, the expansion of marketing activities, and the corresponding increase in personnel required to implement Cherry's organic growth strategy.
At EUR 33.0 million, Group revenue in the first quarter 2022 was 12.6% down on the same period one year earlier (Q1/2021*: EUR 37.7 million). The decrease was mainly attributable to the above-mentioned factors affecting our business with switches. However, compared to the first quarter 2020 at the onset of the COVID-19 pandemic, quarterly revenue was up by 18.6%. Cost of sales went up by 4.1% to EUR 23.1 million during the three-month period under report (Q1/2021*: EUR 22.2 million), mainly due to higher purchasing prices for materials. These factors resulted in a gross profit of EUR 9.8 million (Q1/2021*: EUR 15.5 million), which corresponds to a gross profit margin of 29.9% (Q1/2021*: 41.1%).
Following the expansion of business activities in line with Cherry's organic growth strategy, marketing and selling expenses were 29.4% higher year on year at EUR 4.3 million (Q1/2021*: EUR 3.3 million), while research and development expenses increased by 56.0% to EUR 2.0 million (Q1/2021*: EUR 1.3 million), due to the development of new products for targeted portfolio expansion on the one hand and the continuous improvement of existing products on the other. By contrast, administrative expenses decreased by 21.3% to EUR 3.1 million (Q1/2021*: EUR 3.9 million), mainly due to the preparations made for Cherry's IPO and share-based remuneration payments in the previous year. Taking into account the virtually unchanged level of other operating income and expenses, earnings before interest and taxes (EBIT) for the quarter under report were break-even at EUR 0.0 million (Q1/2021*: EUR 6.7 million), corresponding to an EBIT margin of 0.0% (Q1/2021: 17.7%). Adjusted EBITDA amounted to EUR 4.4 million (Q1/2021*: EUR 11.0 million).
"Against the background of the first quarter results, we confirm our forecast for the full fiscal year 2022," added Bernd Wagner, CFO of Cherry AG.
For the GAMING business area, the Management Board expects revenue growth in the mid-single-digit percentage range for the current fiscal year with a slightly lower (adjusted) EBITDA margin due to macroeconomic developments as well as temporary increases in material prices, shipping costs, and non-recurring marketing expenses for expansion in the Asia-Pacific region.
For the PROFESSIONAL business area, the Management Board expects revenue growth in the low double-digit percentage range for the current fiscal year. In addition to the targeted further expansion of the product portfolio in the Peripherals business unit, growth will be driven primarily by the selective expansion of sales channels, particularly the e-commerce business via major online marketplaces in Europe in the second half of the year. The (adjusted) EBITDA margin in this business area will be impacted by increased investments in new products, software, personnel, and marketing expenses designed to drive future growth in the e-commerce business and expansion in the Asia-Pacific region and is also likely to be slightly lower.
Taking these factors into account, the Management Board expects Group revenue in the region of EUR 170 million to EUR 190 million for the 2022 fiscal year with an adjusted EBITDA margin of 23% to 26%. Beyond 2022, the Management Board anticipates double-digit revenue growth and an improved adjusted EBITDA margin.
*) Basis: Unaudited condensed consolidated interim financial statements of Cherry AcquiCo GmbH (now Cherry AG), as of March 31, 2021, prepared in accordance with IFRS on interim financial reporting (IAS 34).
The Condensed Consolidated Interim Report for the first quarter 2022 is available on the Cherry website at https://ir.cherry.de.
Cherry AG [ISIN: DE000A3CRRN9] is a global manufacturer of high-end mechanical keyboard switches and computer input devices. The business focus is on mechanical keyboard switches for gaming keyboards as well as various computer input devices, which are used in a wide range of applications – especially in the areas of gaming, office, industry and cybersecurity as well as solutions for the healthcare industry. Since its founding in 1953, Cherry, with its two business areas Gaming and Professional, has stood for innovative and high-quality products that are developed specifically to meet the needs of its customers.
Cherry has its operational headquarters in Auerbach in Germany's Upper Palatinate region and employs over 500 people in production facilities in Auerbach, Zhuhai (China) and Vienna (Austria) as well as in several sales offices in Auerbach (Germany), Paris, Kenosha (USA), Taipei and Hong Kong.
More information is available online at: www.cherry.de
Dr. Kai Holtmann
11.05.2022 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG.
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