Cherry SE (C3RY) Earnings Call Transcript & Summary

Dear ladies and gentlemen, the analysts, investors, welcome to our Q3 and 9 months 2025 earnings call, and thank you for joining us today. You have just watched our new product video announcing the launch of the new CHERRY STREAM ULTIMATE series, a new wireless mouse and keyboard in the office category. With this launch, we are also introducing CHERRY ProScroll, which is our new electromagnetic technology that allows you to fully customize the feel and behavior of your scroll wheel to fit your work tasks and preferences. This video is part of our new marketing strategy, which you will learn more about later. As usual, today's call is being recorded. [Operator Instructions] Joining me today are Oliver Kaltner, our Chief Executive Officer; Jurjen Jongma, our Chief Financial Officer; and Dr. Udo Streller, Chief Operating Officer of the company. Before we begin, let me briefly walk you through today's agenda. Oliver will start with a summary of our year-to-date results and then take you through some major milestones of the past quarter. Jurjen will then present the key financial metrics for both 9 months and Q3 2025 and walk you through the segments as well as extraordinary and adjustment positions and through the highlights of Cherry's inventory development. Following that, Udo will continue with the restructuring update, thereby focusing on the transformation of our Auerbach facility to a central development, logistics and service hub. The presentation will conclude with our outlook presented by Oliver. Afterwards, we will open the floor for questions. [Operator Instructions] Let's begin the presentation and over to you, Oliver.

Ladies and gentlemen, dear analysts and capital market experts, dear shareholders, dear participants, dear CHERRY enthusiasts. I would like to welcome you to our company's Q3 2025 earning call. According to the relevant rules and regulations, we would like to give you a detailed insight into our preliminary 9-month and Q3 2025 landing figures and the measures we have taken for further reshaping our business across the major 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. The last 3 years have been a very stressful period for everyone involved. The company has had to go through a consistent period of reorganization and restructuring. The past quarter is particularly central for this process and through this process as we have achieved a foundation upon which we can consistently build and leverage the company's true substance. This may not yet be reflected in all financial parameters, but on the management side, the team has taken a major step in the right direction. Some aspects worth highlighting and considered a significant reduction of inventory in our own warehouse and in our distribution channels, substantial increase in our street prices so that they are higher than the purchase price of our distribution partners now. A reduction of distribution partnerships from 17 contracts to one general contract in the German-speaking region. Identification of the necessary partner structure for Europe, adjustment of our terms and conditions to industry standards with increased base margins for our partners and for CHERRY. Active cash collection, a continuous liquidity management, a continuous review of all sales and partner activities between management and the Board of Directors. CHERRY go 6, it's a reduction of the number of legal entities from 13 to only 6 by the end of this calendar year. These measures result in reshaping of peripherals based on industry standards. CHERRY is clearly the #2 in the market based on GFK data, an increased demand for CHERRY input devices. Also, it strictly expanding our market position in digital health, and we are currently in a strong voice in politics to further and more clearly advance the digitization of the medical sector. In total, these are positive developments in our core business segments that we see for 2025 in total and beyond. However, we are self-critical enough to know that we still have to improve some key metrics and performance indicators. While Jurjen will discuss our financial performance in granular detail, let me take the opportunity now to walk you through our key financial metrics for the first 9 months of this calendar year 2025. Revenue came in at close to EUR 71 million, reflecting a 16% decline year-over-year after the 25% decline as of H1. The lower revenue figure 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 reduction in sell-in volumes in peripherals Europe. However, this decline was also caused by continuously weak demand on the Components segment and again, an unsatisfactory performance in CHERRY Americas. Our adjusted EBITDA margin stands at minus 6.9%, driven down year-on-year by restructuring effects and the lower fixed cost contribution from the revenue side. On a more positive note, cash on hand was nearly flat versus last quarter, standing at EUR 7.5 million. As I said, Jurjen will guide you through the numbers in much more detail. Let me now draw your attention to four milestones that have been achieved in the third quarter. The AGM confirmed CHERRY's strategic realignment. In-person AGM on the 22nd of July 2025 in Munich, shareholder approval for our transformational course. Jurjen Jongma, new CFO as of 1st of September. With this, the Management Board expanded to three members again, and I kind of would like to welcome again JJ being here part of that mission at CHERRY SE. Third, TI-Messenger provider approval. CHERRY Digital Health obviously received the Telematic Infrastructure messenger provider approval from gematik and TI-M enables communication among all health care stakeholders. And fourth, further inventory reduction achieved. The group inventories is at EUR 37.8 million, down by more than EUR 5 million quarter-by-quarter. And active office SKUs reduced by around 40% versus January 2025. Ladies and gentlemen, with this, I hand over to our CFO, Jurjen Jongma.

Yes. Thanks a lot, Oliver, and thanks all for taking interest in our Q3 results release. Before I dive deeper into the quarterly performance, let me give you a brief update on the ad hoc announcement that went out on September 11 regarding the fact that our equity value in CHERRY SE had fallen to a level lower than 50% of the nominal value. While there was a slight positive impact on the back of our sales of treasury shares to Argand in October, the equity value in CHERRY SE continues to be below 50% of the nominal value. I'll now continue with our preliminary Q3 and 9 months 2025 figures. Following a difficult first half, the third quarter of 2025 was also challenging for CHERRY. Notwithstanding the fact that we slightly outperformed compared with Q3 of last year, we anticipated for the negative margin effects of clearing inventories to have less of an impact. At EUR 70.7 million, CHERRY's consolidated revenue for the first 3 quarters of 2025 was approximately 16% lower than the prior year revenue of EUR 84.2 million. Third quarter revenue came in at EUR 24.7 million, up against the Q3 2024 revenue of EUR 22.6 million and also against the previous quarter figure of EUR 20.7 million. As I mentioned earlier, continuing clearance of inventories has a negative effect on gross margins. At the same time, we see that the group's effort in reducing costs had a EUR 2.4 million positive impact comparing Q3 of 2024. Negative impacts on margins, combined with this positive impact, yielded an adjusted EBITDA margin of minus 10.6% for the third quarter of 2025. Now if we move on and looking at our performance by segment, just let me highlight in this slide that the Components segment is shown in light gray. The Gaming and Office Peripheral Segment is in red and the Digital Health & Solutions sector is in dark gray and the Central segment in black. I will focus in my comments on year-to-date results reflected in the first chart for sales or revenue and the third chart for adjusted EBITDA. External revenue of the Components segment amounted to EUR 3.9 million against EUR 5.2 million in the same period in 2024. At a minus EUR 4 million, adjusted EBITDA was EUR 4 million below the previous year level where it was 0, corresponding to an adjusted EBITDA margin of minus 61.7%, 0% in Q1 -- Q3 2024. The decline in the Components segment is further testimony of the decision to discontinue manufacturing in Auerbach, outsourcing assembly to China and reorganizing the Auerbach site to a logistics center. Restructuring costs and relocation costs, to a large extent, drive the negative EBITDA performance of the segment. In the 9 months ending September 30, 2025, the Gaming and Office Peripheral segment recorded revenues of EUR 50.3 million, a decline of 10.8% compared to 2024, where it was EUR 56.4 million. On the back of negative margin impacts following our actions to clear inventories, gross margin too at 21.1% is materially lower than in the same period of '24, where it was 30%. The fact that restructuring efforts are starting to bear fruit, operating expenses in the Gaming and Peripheral segment came in EUR 1.8 million lower than in the same period in 2024. And the impact of lower margin could only be partly compensated for by this lower cost base, resulting in an adjusted EBITDA margin of 0.4% compared to 6.7% in year-to-date Q3 2024. When it comes to regional performance, macroeconomic circumstances were instrumental in driving growth in China to the tune of 4.5% and decline of minus 17% in Europe and 16% in the Americas. With regards to restoring the Gaming and Office Peripheral segment, it is important to point out the following key points: one, shifting our focus from sell-in to -- from a sell-in focus to a sell-out focus, keeping a clear eye on the inventories that sit in our channels. Consequent. Two, consequent reduction of inventories throughout the chain on which I will elaborate later on in the presentation. And then thirdly, obviously, restructuring our organization. In the 9 months ending September 30, 2025, the Digital Health & Solutions segment achieved consolidated revenues of EUR 16.5 million, down EUR 6.1 million from the same period in 2024. Adjusted EBITDA amounted to EUR 11.6 million positive, corresponding to an adjusted EBITDA margin of 70.3% against 37.7% in the same period in 2024. This brings me to an important element that I will raise now, and I will elaborate further upon in the next slide. Unfortunately, the adjusted Digital Health & Solutions segment results include the net results of the Active Keys divestment earlier this year. Again, I will make this clear in the next slide, but it's important to highlight that the results mentioned -- that I mentioned earlier cannot be regarded without taking into account the fact that the 2024 financials include the results of the Active Keys business, which was sold to the Danish peripheral device manufacturer, Contour Design in the first half of 2025. On a like-for-like basis, Digital Health recorded EUR 16.8 million of revenues against EUR 17.8 million in the same period of 2024, representing a decline of 5.2%. This decline is largely attributable to supply constraints limiting the production of terminal units. Similarly, on a comparable basis and for the 9 months ending September 30, gross margin sits at 44.6% and it declined from 52.6% a year earlier. This is largely due to an increase in material costs and ramping up production capacity for terminals. Investments in mainly research and development costs drive adjusted EBITDA to a level of 25.3%, down from 37.3% a year earlier. So I already mentioned that the way we look at adjusted cost is a difficult exercise in CHERRY. And with this, I wanted us to have a closer look at group performance from a purely operational point of view. Now I realize that this is a complicated slide. So let me take some time to go through this in granular detail. The bars on this chart are a graphical representation of our P&L. Starting with the bar on the left, you see our reported numbers for revenue, the material component of cost of goods sold for gross profit one or gross margin, for operational cost and then lastly, for EBITDA. The second bar highlights the adjustments we have made year-to-date to arrive at adjusted EBITDA, a positive effect, bringing adjusted EBITDA to the minus EUR 4.9 million I alluded to earlier. Unfortunately, in the second quarter, we erroneously adjusted for nonrecurring elements of the Active Keys divestment, resulting in an adjusted EBITDA that does not reflect true operational performance of the group. And this is why we modeled the third bar where we basically adjusted out all nonrecurring elements so that a true operational view on performance will remain. While revenue and gross margin are largely unaffected by this, it has a negative effect on adjusted EBITDA of approximately EUR 6 million. Now that we have a clear and transparent view on our operational P&L, the third bar, like I said, we can see what needs to be done to ensure that going forward, we get to a sustainable financial performance. First, we looked at gross margin. With our main activities in gaming and office peripherals, where midpoint gross margins are at a minimum level of 45% and our digital health business generating margins well over 50%, we conservatively estimate our entitlement margin range to be between 45% and 50%. This yields between EUR 4.2 million and EUR 7.8 million of additional margin in comparison with where we are today. Next, we took a good look at the cost opportunities that are also reflective of the S6 business review, and this on an annualized basis, yields between EUR 6.3 million and EUR 8.7 million of cost savings. Calculating this back to the 9 months that we have so far, then it yields between EUR 5.5 million and EUR 6.5 million of cost savings. Adding those together, and you see the fourth bar and in the fifth bar with the same level of revenue, EUR 71.1 million, it brings us to an improvement opportunity that lies between EUR 9.7 million and EUR 14.3 million, bringing true operational EBITDA to an initially acceptable level. These ranges you see reflected, like I said, in the fourth and the fifth bar on this graph. What I just explained to you, of course, begs a number of questions, and I understand that. We'll have the opportunity to dive a little bit deeper into that during Q&A, but let me address some questions that I'm certain you will have. First and foremost, how will we reflect operational performance going forward? We have decided that we will continue to report as is for 2025 and restate 2025 in the beginning of 2026 to ensure backwards and forwards comparability. Obviously, we will ensure that for the fourth quarter and for the full year 2025, we will update this slide and keep you abreast of actual operational performance. And the second question would be, when is it that you will achieve this more sustainable performance? We believe that we have reached the end of our measures to clear in-channel stock. While some effects may still impact margins in the Components segment and the Gaming and Office Peripheral segment in the fourth quarter, these margin must be achievable in 2026. On the cost side, we have to be a little bit more cautious as our cash situation prevents us from pursuing restructuring as fast as we would like. I hope that this overview gives you more insight in our path to recovery. And with that, I move on to my last slide for today. Now Oliver already alluded to that. But since March 2023, the group has consistently managed inventories down from EUR 75 million in March 2023 to EUR 38 million by the end of September 2025. In and of itself, this, of course, is good news. From reducing inventories alone, the company has created EUR 37 million of liquidity. And similarly important, the company has cleared a lot of what I call debt weight in the channel. However, this has not gone without pain. It went at the expense of margins and profits, and this clearly is visible in the P&L. Let me now hand over to Udo for the operational update.

Dear ladies and gentlemen, also from my side, a very warm welcome to all of you today. In the next few minutes, I will present to you a more detailed operation and restructuring update. It covers the main factors that drive the underlying improvements in our business and sets the stage to achieve our long-term objectives. The most significant element of our restructure plan, as already mentioned by Oliver in the beginning, is the fundamental transformation of our German site in Auerbach. As previously announced, we have discontinued switch production in Auerbach and transferred the assembly to our established partners in China and Slovakia. This decision, while difficult, is essential to stress structural and cost disadvantages in the volume market. This operational shift includes a socially responsible headcount reduction in Germany that is executed in close consultation with the working council in Auerbach. This is crucial for securing the availability of our company. We are strategically repositioning our Auerbach site from a manufacturing heavy operation into a pivotal development, logistics and service hub for Europe, leveraging its core strengths for the benefit of the entire group. In logistics, Auerbach is becoming our new multifunction logistic hub, capitalizing on its excellent geographical location in the heart of Europe. This new structure supports the optimized regional logistics hub strategy, which also includes establishing a new tariff optimized setup in the U.S.A. to improve market delivery and cost efficiency in the key region. In development, we are implementing a centralized and integrated product and technology department structure to enhance the speed of innovation. We must acknowledge that the ULP productline had to be discontinued as it had reached its product life cycle end and became an excessive fixed cost burn. However, I want to emphasize that our core switch technology development will be continued in both Auerbach and Zhuhai to protect our technology edge in the region of terminals. Finally, in services, we are centralizing key management functions that are vital for the operational stability that includes central product and project management, along with the subcontractor management as the supply chain management. This holistic restructuring ensures that our operational setup is perfectly aligned with our global strategy, designed to enhance efficiency, streamline our cost base and drive our long-term competitiveness. Now let's also have a look a little bit more in detail on the execution itself. I'm pleased to report that the transformation of the Auerbach site into our central logistics and service hub is fully on track and in many areas, successfully completed even ahead of time. The logistics transformation has been completed on schedule, thus by doing so, ensuring the smooth operation and a more efficient handling across all our business units. The full transition of all CHERRY webshop logistics processes to Auerbach site is completed, and this is also a major operational achievement that consolidates our e-commerce distribution. On top of this, the contract with our previous external logistics partner will be terminated at the end of the year, which will lead also to a significant cost saving from 2026 onwards. As you can see on the picture, the serving units in the former production are already now and in operation and filled already according to the [ RISE ] accelerated time line within the Q4. Looking ahead, in summary, by end of Q4 of this year, all logistic tasks for Europe, including Amazon vendor business, the Landskrona in-house warehouse we have transferred and the external warehouse services will be all done and fully managed from the new hub in Auerbach. Let me conclude with my last slide with the main drivers for our development, technology and innovation outlook. While restructuring our operational footprint, we are simultaneously building a solid foundation for future profitable growth. We already have successfully established the foundation in a way that we have, as already mentioned, the integrated product and technology development structure aligned for our two focused businesses, means for Peripherals and the Digital Health & Solutions. A global PMO is driving crucial efficiency and project discipline across all new product introductions. With this foundation built, we are gaining significant innovation momentum. The centralized department is supported by a dynamic global innovation community spanning across all our sites in Sweden, Germany, Austria and in China, especially also in China. More importantly, we already finished our technology road map for 2026 and also established the innovation building blocks for 2026 and beyond. Looking ahead, our innovation pipeline is robust and clearly focused. Our teams are currently targeting around 30 technology road map projects across critical areas like hardware, the switch, the connectivity and software and applications. This extensive pipeline is completed -- complemented by defining approximately or defined already approximately 10 cross-field innovation building blocks designed to generate entirely new solutions opportunities. This clear focus on innovation, supported by a lean restructured operational setup is what gives us the confidence to look ahead to a brighter and more competitive future for CHERRY. With this, back to you, Oliver.

Thank you, Udo, and special thanks, obviously, to the operations team to make all these changes happen. Really great to see how we have converted the place in Auerbach from manufacturing to logistics and on time and with the right kind of effort. Ladies and gentlemen, quite frankly, the investment in CHERRY is a tough test for all shareholders. We are not the only tech stock to have experienced a rapid decline since our IPO in 2021. But what gives us confidence and optimism -- in almost 75 years, the company has built a remarkable legacy and a universally respected and valued brand. We still hold a relevant market position in terms of technology, innovation, design and relevance. Purchasing decision-makers as well as our distribution and trading partners see CHERRY as a necessary #2 in the market. Due to the shortcomings in the components business, the peripherals business was negatively impacted. This penalty is now almost complete after 2 years of consistent implementation of our restructuring plan. In the wake of these activities, we were also able to substantially advance the expansion of our digital health business despite investment restrictions. Here, we achieved a leading market position and managed profitability hand-in-hand with revenue growth. Digital health is finally getting the attention this business and the digital health team deserve. We continue to consistently pursue our strategic goal of transforming CHERRY into an international provider of agnostic digital ecosystems with a strong focus on our Digital Health and Solutions segment. In our DHS division, we continue to see strong demand for an ongoing high market share of our terminal solutions, reflecting the trust of our customers placed in CHERRY technology. But beyond that, we are undergoing a fundamental paradigm shift, moving from a hardware-centric model to a platform-driven business. At the center of this transformation is the TI-Messenger, which is key for our new identity as a platform provider. This shift allows us to transition from project-based hardware sales toward predictable and recurring software revenue streams, which significantly enhances visibility and profitability. Our [indiscernible] SIS offering plays a critical role here. We project that these revenues will surpass revenues with physical terminals by 2029, marking a major milestone in our digital transformation journey. Turning to our Peripheral segment. We have taken decisive steps to reshape and streamline our organization. We've simplified Office Peripheral structures and focus on attracting highly qualified talent to strengthen our capabilities. In the gaming segment, targeted marketing initiatives are helping us enhance the visibility of our CHERRY EXO5 brand, driving stronger market recognition. I will also comment on our reshaped marketing division in a second. At the same time, our components business has become deemphasized but as a value strategic add-on. Regionally, our EMEA recovery is on track and APAC continues to perform as a best-in-class region for CHERRY. In the Americas, we've initiated a strategic reset as we are still not satisfied yet with its performance. Let me now turn to the challenges of our environment that we are actively navigating. After 2 years of recession, Germany remains in stagnant growth and clearly lagging behind the dynamics of its European peers. This continues to weigh overall consumer sentiment and discretionary spending. Most realistically, 2025 will become the third year of recession, which is a negative record in the economy history of the Federal Republic of Germany. We already have achieved a lot in terms of improving and strengthening our structures, processes, workflows, forecasting discipline and data accuracy, more there is still -- more to go and to achieve even better results, as you can imagine. The German government has submitted an amendment to the Bureaucracy Relief Act for nursing care. It proposes postponing the deadline for the IT connection of medical and providers to October 1, 2027, instead of January 2026. Like many other small- and medium-sized enterprises, CHERRY has already made massive investments in implementing the original plans in accordance with gematik specification. Such a move undermines the credibility of government regulations and bears negative consequences for patients as well as health care providers. The reasoning behind the delayed EHYO is shortsighted and ignores the independent immediate benefits of TI connectivity. We have submitted an official opinion document to politicians to hold this process and continue to provide support to German SMEs in the digitization of the medical sector. Policy sets the framework for the economy, business plans develops and implements. We have followed precisely this principle. Now politicians cannot change the rules and conditions after the fact, leaving SMEs with their investments in services in the alert. In APAC, we see rapid growth and innovation, but also extremely short product life cycles, new local brands popping up shortly, causing a lot of friction in the market, pricing pressure as well as FX headwinds, which altogether require continuous agility in development and supply chain management. Cash constraints limit the ability to pursue growth opportunities. And lastly, we work hard on further transforming our distribution and general structure from sell-in to sell-out, but this takes somewhat time for reestablishment. A few weeks ago, we have implemented a strategic shift in marketing. We're going from B2B to B2C-driven marketing. Our communication must connect directly with end users. We move from partner-focused B2B messaging to consumer-driven storytelling. We shift from explaining what we sell to showing what it matters and why it matters. This change builds pull, not push. It creates demand through relevance emotion and credibility. Before, we focus on B2B channels, product data and trade events. Going forward, every product becomes the center of the story. The user is the audience. The experience is the message. And going forward, focus on what the product means for the user. Technology is secondary to experience, simplicity and emotion. Our content should feel like us, authentic, distinctive and unmistakably, it's CHERRY's. It is not about CHERRY history. It is about the legacy of this loved brand and what we create for the future. We are bringing more content creation and quality control in-house, building a strong marketing team with the skills to produce more of our own material and rely less on external agencies. This shift will strengthen our brand consistency, create a more unified tone across products and improve cost efficiency. And yes, this is correct. We're already taking advantage of AI. Going forward, every visual tells a story, lightning sound movement and environment will create desire in identity. Our goal is clear identity and unified appearance, where tone of voice, design and messaging aligned seamlessly. Ladies and gentlemen, regarding the outlook for peripherals in Europe, we clearly see two buckets of opportunity. Let me start with a quick update on the three major European markets. The European peripherals market remains under pressure with the EU3 reseller market, which is Germany, France and the U.K., declining by minus 8% in value year-to-date, driven by a significant contraction in the U.K., which is minus 22% and France, which is only minus 1%, only partly offset by plus 2% growth in Germany. The Consumer Retail segment, however, shows robust momentum with plus 10% growth, particularly in areas where CHERRY is not yet broadly distributed beyond Amazon and MediaMarkt Saturn. Germany continues to be the strongest market within the EU3, and CHERRY was able to increase market share by 1 percentage points year-on-year in Q3 calendar year 2025. More than 80% of the total EU3 keyboard market revenue is generated by cordless products, whereas CHERRY's mix remains 47% corded. This mix imbalance is directly impacting CHERRY's average selling price and margin potential. These are our strategic implementations. The massive consumer market growth by plus 10%, combined with CHERRY's low representation in retail and cordless categories confirms the need for the ongoing strategic portfolio differentiation between consumer and B2B. The new distribution setup and portfolio realignment will allow CHERRY to: a, increase presence and numerical distribution in consumer channels; b, improve category relevance in cordless products; c, strengthen margin structures across the channel; and d, align product pricing with the overall EU3 value market. The organizational realignment of sales and channel marketing initiated in September 2025 supports this shift, ensuring that CHERRY's resources, incentives and go-to-market folks are fully aligned with these growth and profitability drivers. In recent weeks and months, voices have grown louder that our largest shareholder, New York-based Argand Partners, should speak more clearly about the strategy. Well, it is entirely up to our shareholders to decide how, when and whether they want to comment on their own investment strategy. With the announcement on October 23, 2025, we were able to announce a deal with Argand Partners that conveys commitment, support and optimism. CHERRY SE and Argand have entered into the following agreements: Argand is acquiring two intragroup loan receivables of CHERRY SE from CHERRY Americas LLC and CHERRY Europe GmbH. CHERRY SE is selling its 1,100,284 treasury shares to Argand. Argand also undertakes to provide the company with additional funds amounting to EUR 3.5 million. If CHERRY makes use of these funds, CHERRY Americas LLC and Argand will conclude a purchase agreement for certain inventory of the U.S. subsidiary. As I stated in the news, Argand Partners as the largest shareholder of CHERRY SE is demonstrating a strong and concrete commitment to the Management Board's further strategic plan. The focus on the company's potential is supported by concrete financial measures to give management more leeway to implement the right measures in the areas of peripherals and digital health with sufficient consistency. With those investments, the CHERRY U.S. business remains unchanged in the hands of CHERRY. For sure, you agree that these are very positive signals for the company, the Management Board, the CHERRY team and of course, also the capital market. As usual, I complete our presentation with a comment on our financial forecast. As stated in our ad hoc release from the 20th of October, we are currently reviewing whether and to what extent our full year forecast requires adjustment. I will now hand it over to Nicole for the Q&A session, and I'm very much looking forward to it.

[Operator Instructions] First question comes from Bastian Brach, Montega AG.

So three questions for me. First two on DHS segment. So in Q2, you mentioned the good eHealth terminal traction and the outlook for H2 with delivery numbers more than doubling. Does this still holds true? You mentioned supply problems in your presentation. And yes, following that, what can we expect in 2026? Will the good traction also continue into next year?

I go straight into answering that question. So first of all, obviously, we're absolutely in line with the projections we have shared with you in Q2 call. Again, unfortunately, there is a bit of a kind of a distraction right now with some politicians moving out of that part of the business. But again, we are already approaching all the politicians. As we are the market leader in that segment, we have a certain kind of a voice -- so we still keep on the plan that we shared with you in Q2 for the rest of the year. And we see that our solutions are the best-in-class when it comes to hardware, software and cloud services that we have. With regard to the 2026 market, imagine there will be a little bit of a decline from the projection if that's the case. And obviously, we're not going to lose that business. So it's going to enrich 2026. And even the outlook to 2027, 2028 is very positively. One of the elements that we always should bear in mind is when we're talking about Germany and we're talking about digitization, we all know that we are not on a fast track mode in this country. Fortunately, this gives us a little bit more traction and a little bit more reach over the years. Second thing is, and that's something where we're going to look specifically into it. We're getting more and more kind of positive feedback on our solutions as they're purely agnostic from other countries. And with more focus on this opportunity, obviously, this will also enrich DHS. So from a sustainability perspective, sustainability in terms of long-term business, DHS is a very promising business line.

Okay. And could you also, for that segment, talk a little bit more about the TI-M rollout. So when could we expect first meaningful revenues? And then can you further elaborate on your comment that you expect software sales to be on the same level as hardware in, I think, 2029, it was what is needed in terms of like customer numbers or other milestone to reach this target?

Yes, very good question, Bastian. So basically, obviously, we already started having the first kind of signings. That means that we're already generating recurring revenue in this one here. We're going to have a strategic session on that with regard to the outlook 2026 up to 2028 in December. And this will the time when we're going to have a consolidation and the projection at the same time of our assumptions for the next 3 years, and that's something that we're going to share most probably in the first quarter next calendar year.

Okay. Okay. And then my last question is on the -- yes, quite complicated Page 9, the adjusted EBITDA bridge. The EUR 5.5 million or EUR 6.5 million in the optimistic case, are these cost savings you have already implemented? And which will be realized in 2026, so we can see that as an indication? Or what does that refer to? Is that -- yes, other cost measure implementations you will do in 2026 as well?

So as this slide looks a little bit complicated, first of all, I appreciate you coming up with the questions. Most probably you're not the only one on that call. The answer is pretty simple. And with this, I hand over to Jurjen.

As I already alluded to, I mean, these cost savings to a limited extent are reflected in -- we mentioned that our cost profile in the third quarter in 2025 is better that is lower than in the same quarter in 2024. But the vast majority of these costs and reductions are yet to come. And I just annualized, let's say, the total number and then pushed it back to 2025. So it's really a cost opportunity from the cost level where we are today.

Okay. So it's not implemented yet and shouldn't be seen as an indication for 2026, but like a general midterm outlook where the cost base could be?

If we -- yes, exactly. I mean that's the right way of formulating it. And as I said, our current tight liquidity management prevents us from doing this in a big bang.