Shelly Group SE (SLYG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. And on behalf of Montega, a warm welcome to today's earnings call of Shelly Group AD following the publication of the preliminary financial figures for 2023. The Co-CEO, Dimitar Dimitrov and Co-CEO, Wolfgang Kirsch will speak in a moment and guide us through the presentation and the results. After the presentation we will move on with our Q&A session, in which you will be allowed to ask your questions directly to them. So having said this, Wolfgang, let's jump straight into the numbers and the highlights. So please, the stage is yours.

Thank you very much, and good morning, and thank you for joining our earnings call for 2023. Today, as usual, Dimitar and myself, we will lead you through the numbers and some general updates and some product updates. And as usual, we have a lot of good news. So just a reminder for those who do not know us that is good, we make smart building solutions. We are in business to save energy and to make life of our customers easier. We say that we are -- sorry, I have to change that one here. We are a leading platform for building automation. Leading does not mean that we are the biggest one, but we are the one that grows the fastest from our knowledge. We are the one that has the best technology because others are not able to come close to what we are offering. We have sold since 2018, 13 million devices. That means in the last 12 months alone, we sold 5 million devices, which is another proof for our fast growth. We have 1.25 million cloud users, that's people that are using our cloud solution. We are not forcing people into our cloud solution. This has grown by 573,000 in the last 12 months. And the households, it's usually an estimation because we know approximately how many devices are used per cloud user. And from this, we make estimations how many households use our devices. We are around 3 million households by the end of the year, which means we added 900,000 households in the last 12 months. Some other highlights from 2023. We have reached all KPIs, and we have met the guidance or we have overreached our guidance. Revenue grew in all relevant markets and regions. We have enlarged our distribution channels. I will come to all of this in a second in a bit more detail. We have a significant growth, as you have just seen, in addressable customers because we can address the customers directly, that use our cloud. We are widening our product portfolio. Dimitar will give some insights on that. And we think we have a perfect product lineup for further growth, and we will further enlarge this assortment. The revenue grew in the last year by 57.3% to a level of EUR 74.9 million, which is exactly the number that we published already beginning of the year. The EBIT, and that's the number that we published yesterday evening, reached a level of EUR 19.1 million and grew by 83.5%. That means EBIT is growing much faster than the revenue and the EBIT margin reached 25.5%, which is above the number that we promised for 2026. The cash, and I will comment on it a bit later to some details here, increased by EUR 1.3 million. That's just the cash on our bank account end of the year 2023 to EUR 15.7 million, despite the fact that we paid a dividend, that we made an acquisition in the last year and that we have a bit higher working capital by the end of the year as well. I'll come to this at the end of the presentation to give you more insights to this number as well. We made a lot of market -- capital market activities in '22 and in '23, and we saw that in '23, it finally paid back. We have a very nice share price development, and I hope that all of you are as well happy with that. And we see that now we are on a level that is acceptable. If we compare ourselves in the multiples with some of our competitors, there's still room to grow. And we will as well continue 2024 with market activities, will be present on conferences, organized road shows, maybe a little bit less than last year because it's quite time-consuming and we have to spend some time to reach our operational targets as well. But we are quite happy with this development. If we look to distribution platforms, please keep in mind that we are a do-it-yourself first brand. That's what we always said. We grow into the professional market. But our customer base is 70%, 80%, I would say, do-it-yourself customers. We have enlarged our distribution platforms. We changed in '22 already in the second half of the year, from Amazon Marketplace business to be a direct vendor on Amazon. Amazon is one of the biggest channels for do-it-yourself for smart home products worldwide, so very important, but not over dominant in our company. We rolled out last year to France, Italy, Spain and Benelux, and we will roll out Amazon Vendor business to United States this year and to Australia. And we made a lot of other important steps to be more visible in the market and to grow as well our revenues. Our category in do-it-yourself is very strong online, but we are making the steps now to be present in do-it-yourself chains and electronic chains in a lot of countries in Europe as well in the physical stores and not only in their online stores. Hornbach, Germany and in Austria has already done this move, we are in contact with other do-it-yourself chains, they are planning to do exactly the same. Euronics in Italy, Leroy Merlin, Spain, some companies in the Nordics and many others are in the pipeline for this year, which gives us more visibility in the physical retail and will as well contribute to our planned revenue growth. On the professional side, we made very good progress last year as well. We have signed contracts with a couple of wholesalers and that's completely different companies that you know from a do-it-yourself business. That specialized companies that serve the electricians that make the installations, that's a completely different business. The big players here are Rexel. You have a lot of local players, regional players like [ ZANDER-GRUPPE ], FEGIME in Germany, ALLNET is a very important partner. We are in specialized wholesalers for photovoltaic business, solar business, like BayWa. And here as well, Amazon business and ManoManoPro play important roles because that's the modern way of doing wholesale with the electricians. We have trained more than 4,000 installers in DACH and the Nordic regions. And in those regions in Germany, especially in the Nordics, we are present in 90 schools that train the future installers, and we are rolling this continuously out. So with this, we prepare the next generation of installers to be ready to install Shelly products. Very important for us is our community. The community is growing. And we are -- if we count all our different Facebook channels, we have more than 100,000 fans on Facebook. We have more than 150,000 members in different support groups that we have, not only the German one. And we measured end of the year that we had with the last social posts we made, we had a reach of 2.2 million people, and that's really strong and growing, and the reach has doubled in the last 12 months. So as well this growth of the community, how many fans do we have, how many followers do we have is a very important number for us that we are following that we try to widen as well. Now some news about the products from my colleague, Dimitar.

Hello. Thank you for the stage, Wolfgang. As you know, the Shelly is moving from the innovation and new products, which we released on the market. And there, for the last year, we're doing really very well job because in 2023, we have 21 completely new products and 3 new product categories where we released them. And also, we update some more products. And this is something which is, this almost looks like 2 products per month. But we're also planning to speed up in the 2024, because just until now, we have 8 products, the old products, both refreshed, completely refreshed, and we released 15 new products, some of them just yesterday, which give us, at the moment, our [ shares ]. And also the visibility that we will reach our target to release between 40 and 60 new products at the end of the year. About the ranges and what we're covering now, this year, we -- 2023 opened the Bluetooth range of the products, which is significant for us because this is able to produce and to release in the market, very, power-efficient sensors using the Bluetooth technology. Also, we're going with the full speed in the Z-Wave technology acquiring Qubino, now [indiscernible] and the first product is on the market, which we also something which is important. We keep our promises to make the Z-Wave products with much affordable prices, and to be -- to keep them most as possible about half of the price of the competition. And also, this includes also the professional line of the Z-Wave products and retrofit line of Z-Wave products and something which we are working to continue to work on that. But this is the new ranges also with the Mini range, which make a possibility our device to be implemented in this small device worldwide which we develop, and they extend the possibility of the customers to build it in their installation. Something which is important, that last year, we released a premium application, the premium version of our application. We, at the moment, we doesn't share the results. They look really optimistic and very good. We have our first subscribers, but we prefer to share these results in the middle of the year when the results will be much stable and we can show the growth and we can -- we know more information about the future growing of the premium customers for application. Thank you very much. Now it's back to Wolfgang, for the financial results.

Now I'm back with some more financial results and some more details on the results. So first, if you see our revenue growth and revenue development over the quarters in the last 3 years, you see that something that is typical for us, and that comes from the do-it-yourself business is the fact that the last quarter is almost as big as 2 normal quarters. So that's normal. And we had a lot of questions last year that after 6 months and 9 months, a lot of you asked questions, how will you reach the yearly guidance if you are only on 1/3 of the business right now? So once again, we proved this now over a couple of years. Black Friday period is very important. Christmas business is very important in do-it-yourself, especially. Over the next years, but this will take time. This will more or less reduce a little bit with a stronger effect in -- or stronger business in the professional part of -- with our pro -- sorry, professional part of our products, but this will take some time. So for the year 2024 we expect a similar distribution of revenues over the 4 quarters. The regional -- sorry, this one. This is the EBIT over the quarters. That's a bit similar. We are in a more stable situation EBIT-wise than we have been the years before. We had a couple of ups and downs, especially in '22 as well coming from some special effects. But in this year, we have a very solid development over the quarters and especially in Q2. We have similar EBIT margins in all the quarters, but in Q2 and in Q4, we close to doubled or more than doubled our EBIT to the year before because there we had the special effects, and we took them now out completely. So very solid development here as well. If we look to the regions, in the past, we reported 5 regions. We decided to put North and Southern Europe and Rest of Europe in 1 region for a very simple reason. It's really hard to make sure that products are not delivered to 1 country and then sold in another country. So to be too precise on this is really a very complicated thing. And we found out that some of our retailers are active in more than 1 country. That's easy if it's in DACH as, for example, Hornbach is buying in Germany, selling in Austria, and other Do-It-Yourself chains are doing this as well. Amazon is doing this. So that's why we reduced the regions. If you see this spread now, DACH is accounting for 49% of our revenues in the last year. Rest of Europe, 43.7%, and the Rest of the World, 7.3%. The DACH region after all the efforts we did in 2022 with implementing a different channel strategy we have. We have stopped business with our second biggest customer because we saw too much trouble there and opening a lot of channels as well. The first results from the professional business with some of the wholesalers. So DACH region is more than doubling the revenue in the last year. And other regions will catch up because DACH is kind of the blueprint for what we will do in other countries in Europe. Rest of Europe, 43.7%, 29% growth as well here above the market growth. And Rest of the World, 21%. So all regions are positive, all regions are growing. As far as we can judge the market above the market. And if we see the results of our competitors, we think that we are way ahead of the market. What happened in Germany, I already said this with channel policy, pricing policy, we will implement now step-by-step in other regions in Europe and then in the world. And then we hope to see similar results in those regions. This is the profit and loss in more details. I will skip that because you can read it. I mentioned all the numbers more or less. You just see that the developments are quite positive in all categories. Although we invested a lot in structures, in R&D, personnel as well as more in marketing than in the years before. We are present -- we were present 2 times -- sorry, beginning of '23 at CES in Las Vegas. We are at IFA, were at IFA, with a big booth for the first time, we are investing a lot in smaller exhibitions in other countries as well. That's the main spend for marketing but we see as well that this pays back in a very good way. So the cash flow. We have reduced our inventory from EUR 11.8 million to -- now I don't see the number, by EUR 2-point-something million. On the other hand, we have increased our prepayments to factories and to chip manufacturers in China by EUR 3.5 million. So we have a slightly negative effect coming from the inventory if you take both into account. Nevertheless, free cash flow from operations increased by EUR 7.7 million. And on top of this, you have to count that we have, by the end of the year, EUR 7 million higher customer receivables. With this high level of revenue in Q4, this is absolutely normal and as well with our customer structure that you have seen before because you can imagine that the do-it-yourself stores, Amazon and other big players require payment terms of 30, 40, sometimes -- 30, 60, sometimes 90 days during this period. So the money will be paid beginning of the year, and then we will see a much positive effect on the cash. On the investment side, these minus EUR 4.1 million are mainly due to the GOAP Qubino acquisition that we did January 2023. And the rest is coming from investments in R&D, where we are capitalizing some small things, some machines and some other things that we have to put into capitalization. The cash flow from financing is mainly driven by the payment of the dividend that we did in the middle of last year. The equity ratio with 85.8% is on a constantly very high level. So we are not depending on banks, and we do not plan to change that. So we will be very careful with our cash. But right now, we are in a good situation, and we expect this to increase during the year 2024 because of the payments of the customer receivables. But we have to be prepared that we need higher credit lines for customers in the Christmas season 2024. So what did we promise and what did we achieve? So coming back to the baseline 2022. In 2022, we realized a revenue of EUR 47.6 million. We promised EUR 72 million for 2023, and we reached actually EUR 74.9 million, very close to EUR 75 million. The year-over-year growth was guided with 51%. We achieved with the 74.9%, 57.4% revenue growth, which is similar to the level that we reached in 2022. The guidance was 51%. The EBIT after EUR 10 million, EUR 10.4 million, we promised that to be above EUR 17 million with EUR 19.1 million. We outperformed that as well. And on the EBIT margin, we promised to grow from 22% to 23% or above 23%, with 25.5%. We are as well above that level. So what do we expect for 2024? For 2024, we want to grow to EUR 105 million from the EUR 74.2 million, which is a growth rate of only 40.2%. A lot of you asked why are we so ambitious in growing 50% every year. Of course, we would be more than happy to grow 50% as well in this year, and we will not stop with EUR 105 million, but we are as well very careful with overpromising. So if we say we think we can reach EUR 105 million, we think we can reach EUR 105 million. And do not forget that as well, the basis of the start 74.9% is much higher and growing 40% on that level means that we have to make more revenue than we did in the whole year '21. The EBIT is planned with EUR 26 million, which is an EBIT margin of 25%. Why is this a little bit below the 25.5%? We promised 25% EBIT margin for '26. And we are very careful to go above. If it's too much above, we think we made a mistake because we did not invest enough in being aggressive in the market, in building the right structures, maybe have a little bit too high prices, and this would allow competitors to enter our market, which is technically not easy, but as well in a business with too high margins that is always an area where competitors think that they can enter easily. So that's why we prefer to stay on 25% and not overpromising here and go to 30% or whatever region you might imagine. So we see that we continue growing. 40% is something or EUR 30 million more is a huge step forward. With all the products that we have in the pipeline, we think this will happen. And with all the other things that we are planning for the next year, we think that we will make this happen for sure. So summary, 2023, we are continuing to grow strong and profitable. I think there is a small rounding issue with 57.3%, 57.4%, 57.3%. The EBIT grew by 83.5% faster than the revenue. We have a very solid financial situation with enough cash on the bank account and an equity ratio of 85.8%. In the last 12 months, we doubled our headcount in the whole company. We are around 200 people now or a little bit above even in all the regions together. We are planning a slower headcount because we cannot continue growing in this speed, but we will bring more people outside of Bulgaria on board. In Nordics, in France, in the U.K., we already did this. In Germany, already a year before. And now we are planning for other regions to onboard local sales teams because we see that this is really paying back. The Qubino acquisition is successfully completed. We have upgraded a full lineup of new products to the standard Z-Wave 800, which is the latest standard in the market, Dimitar mentioned that and which is something that our competitors cannot do. And we have as well managed to reduce the cost price of the product significantly so that we can get our market share in the Z-Wave segment. The new channel strategy is implemented in DACH and the Nordics, and we will roll out step by step as soon as we see that other regions are ready for that to bring as well those regions on a different level of revenue. So we have built our structure to continue growing, and we expect that this continues as planned. Forward-looking goals, 2024, 2026. No change in our long-term goal 2026. We want to grow to EUR 200 million, deliver an EBIT of plus EUR 50 million in 2026. We will address more regions with local sales teams. The next ones on our list are Italy, Poland, Benelux, Turkey. We will continue to build strong structures. We need different systems. We have implemented or we are in the final phase of implementing SAP to be better in reporting and to be better in planning and to be better in planning as well capacities for production and our stock levels. We want to develop, and this is mainly because of the premium app and a couple of other things like our module business that we did not talk specifically about today. We want to become or develop from a pure hardware and software brand towards a platform for IoT devices, which is the next big step that will take place in the next years. We have secured enough production capacities to be prepared for the growing demand and to be prepared for 2024 and beyond. Technically, we want to stay ahead of competition. We think and we mention this all the time that we are better than all the others. We are outperforming our competitors feature-wise by times 10. We are bringing this year most of our devices to generation 3 with our new Shelly chip. And for 2025, we plan generation 4 devices is another upgrade with more features that we will definitely talk about in one of the coming calls. But it's a bit too early, we don't want to wake up our competition too soon. So everything looks good. The look back to 2023 is very positive. The look forward to 2024 is very positive. We feel prepared for delivering our promises, and let's see how the year goes, hopefully, a little bit above as well. So thank you very much. We are ready for questions.

Thank you very much, Wolfgang, Dimitar for the presentation and congratulations to your results. So we will now move on to our Q&A session. [Operator Instructions] So we will now move on with the first question from Nils.

Perfect. Wolfgang and Dimitar, first of all, I have to admit it feels like a deja vu, but congratulations to the impressive numbers, especially profitable growth, it's incredible. And I do have a couple of questions, maybe the first in the direction to Wolfgang. First of all, marketing spend. You mentioned during the presentation that the investment in this field pays back last year. How will you approach this in 2024? Can we expect more growth in that position?

So we can expect a little bit more growth. So you mean higher spend in marketing, but not overproportionate or not huge because we have identified IFA and CES as our main exhibitions plus for the first time, we would be [indiscernible] and building to address the professional market with a big booth. So this will be something that is on top, but it's not an enormous amount of money. We as well started to spend some paid advertising in the social channels, very targeted. And this is something where you immediately see as well, bringing new customers to our website that are interested if they buy them on our website or of our customers' websites or in the stores, basically, we don't care. So we see that this is as well paying back very well. So this is increasing but not -- will not make huge steps as it did in the last year because we came from 0 and then went up to -- mainly to the 2 big exhibitions that are quite expensive. And now we have 3 of them.

Okay. Sounds good. Next question regarding the GOAP, Qubino transaction, specifically the purchase price. If I'm not mistaken, you initially expected a price for the remaining shares between EUR 0.7 million and EUR 3.5 million depending on the development of sales and EBITDA. And given that the second part of around 16% equals to EUR 0.8 million, would you still consider the upper corridor as realistic or because of faster growth due to the new product? Or -- what is your opinion on that?

Yes. So first of all, the second part, the KPIs for this part were number of products that are on the market in 2023. Already for mass production in 2023. This is -- this was a little bit overachieved, and that's why we executed the second part as well with the small premium on the buying price. This was in the contract from the very beginning. So the second step that we just executed was a number of products, and this is what the Qubino team, together with our R&D team delivered. The last part will be executed in 2025. And this is related to the revenue we do with the Qubino products and with the EBIT we do with the Qubino products. Now I can say, fortunately or unfortunately. Unfortunately, for the buying price, we have ambitious plans. So part of the additional revenue shall come from Qubino products. And that would mean that we are more on the upper range of the buying price for the last part of the shares. So let's see where we end up. So if we fulfill all the goals, it will be the top level of cost, which, at the same time, would mean that it's fully paid back already with the revenue and the EBIT. Did I answer the questions?

Yes, yes, yes. I would say it's fortunately. And last question to you regarding the inventory level. Last time -- well, on the last call, we spoke about the contingency plan of setting up production facilities if geopolitical risks will raise. How is your approach on that?

Well, we are -- maybe you can answer that. Do you want to answer that?

Yes. Build a factory.

We are -- I mean, I can do that. So we are -- as the last time, we are -- there's no change. So we said we are prepared to open a factory in a different country. In Vietnam, for example, as soon as we need. Our chips are produced, not by us, but by our partner in Vietnam already. We are as well thinking about -- but it's very [ vague ] plans and very far away, thinking about having a part of the production if it's automized here in Bulgaria. But right now, we see that there is no issue with China. And I already said in the last call, whenever something happens with China, we are not the only one with problems. And our advantage is that we have 4 to 5 months of stock. Physical stock, finished products in our warehouses in Europe and in the United States so that we can survive couple of months longer than our competition, and that gives us time to move the production as well.

I can add something here. Just optically to make a factory outside of China, this is not the right way because we will still be dependent and not only us, but for everybody, which produced out of the China because a big part of the raw materials or the -- not only the chip but components, they're coming from China. And there is no reason are you outside or in China in such a, let's say, the worsening political situation does affect everybody, no matter where is the factory. It's much important moment for us is just looking to see, to researching. We try to found the alternative channels. We make some calculation and we think that if we start using channels right now, the [ operative ] channels right now, that will increase the cost of the production between 30% and 40%. And yes, it's possible we can do that. But let's say that in one of the worst situation, if we -- the China, for example, the trading with Chinese is closed then there is another reason because the components, the volumes, which produced it from European and another company -- other country manufacturer, there will not be enough for no one. Not for us, but for no one. There will be a big fight for the components, which means that at the moment, even that we do something and not only for everybody, this is not -- it looks like that the risk is completely avoided. We will continue working on that. But at the moment, really, we've seen what is the opportunity. We see what is the possibility but just to increase the 1/3 of the cost of the production without benefits. This is no reason for us at that moment.

Okay. Maybe 3 smaller questions product-wise. The first one, did you receive first feedback from the market regarding the new launch Gen3 products? And how was it?

Yes. It's absolutely positive. The moment what we can say. The first product is when we implement the new chip and this the Gen3 [ Minis ]. And for what we can see at the moment, this is the product which will sell much better than others, let's say, maybe double it compared with the other products. Now we continue updating our existing products sold to then to go in to switch to the Generation 3. We'll give them additional flexibility and possibility for the customers. But yes, absolutely, we're seeing that.

Awesome. Sounds good. And during the presentation, your outlook product-wise, you mentioned 40 to 60 new products in 2024. The -- I will call them facelifts are included in that number, right?

Yes. Absolutely. It's included. Yes.

Perfect. And then the final question towards the Z-Wave products, of Qubino, I was wondering from -- which company or subsidiary is responsible for the product launch and the realized sales because can you somehow utilize carry or tax loss carryforwards there?

It's still Bulgaria. I mean the development in Slovenia. But for the cells, we're selling them through Bulgaria.

Perfect. Awesome. Then that was from my side. And yes, I would say, successful year 2023 and a highly promising outlook. I would say, good luck, fingers crossed and see you soon.

Thank you Nils for your questions. So now we will move on with the questions are by [ Vihren ].

I have one question to Mr. Dimitar and 3 questions to Mr. Wolfgang. Mr. Dimitar, Quebec, 6 years ago, we were at the shareholders meeting, and you share 1 of your dream, Shelly to become a unicorn in Europe. Since then, there were a few wars here and there, inflation, then we had COVID. So don't you think it's a good time to update your dream and to leave something more vulnerable to the world in terms of artificial intelligence and some more prestigious. What is your opinion on that?

But I think about it we're going well. I mean that we're going in that direction. We improve our results. It's not something today from tomorrow. It's a long way. And at the moment, it's -- we deliver the best as we can. And the rest is how you ask investors, the future investors, existing investors, they see in the future of the company, they trust us. Yes, that is, but it's what else? [ Artificial Intelligence ] or something is a different business, and we don't planning to change the business direction because where we are in [indiscernible] very stable and steady, what we're doing. Yes.

So in my part, in the summary, I said that we have some good product upgrades for 2025 in our mind. And this is another amazing step that will make sure that we are ahead of competition. And the rest depends on delivering the operational promises, continuing growing to our EUR 200 million ambition in 2026, keeping the EBIT on the right level and motivating investors to trust us and to invest in us and then the rest will come.

Okay. And a few small questions to Mr. Wolfgang. Mr. Wolfgang, do you plan to have a split of the share somewhere...

No.

No? Okay. Second thing is do you think it's a good time to sell MyKi as a brand?

Yes.

Soon. Okay.

You want to have it? If you pay the right price, I'm open.

Why not. Okay. Okay. And last one. What is your dream but not in terms of money and results with Shelly? Just what is your dream for Shelly, Mr. Wolf. Where do you want to see it in the next 3 or 4 years?

So you say, besides revenue and...

Besides revenues, beside numbers.

I want to see the organization becoming a European and global well-constructed team that is helping to produce products that makes the customers' life easier and save energy that might sound bold. And the first part is internal because we have a lot of homework to do that teams work better together to digest a growth rate of 50%, another 50%, now 40% that is not easy, bringing a lot of new people on board and make this global team working together in a perfect way. That's something that I would really wish. And we are on a good way with that, but that's every year a new challenge with new people and new products, new regions that's all making life more complicated. But so far, we are managing quite well.

Okay. And the last one, do you plan in April to release a forecast for 2027?

No, not yet. Maybe the -- we don't have concrete plans. Now we can -- of course, we can always say, "Oh, what do we want to go in '27, '28." So right now, that's what we launched last year is the target for 2026 with plus EUR 200 million. And I think that's an ambitious target still. So that sounds very easy, but it's almost 3x the revenue of last year. Don't forget it. Almost 3x, tripling until 2026 is very ambitious. And of course, we can always push the line a little bit beyond that and can say what are we going to do in 2027 or 2028, but let's first come closer to -- this year is EUR 105 million hopefully a bit more but EUR 105 million. And then if you just add up continuing with this speed of 40%, we are above EUR 200 million.

So now we will move on with the questions of [ Stefan ]. So please go ahead.

So congratulations, again, from my side as well, very impressive at all levels, really. I have 2 questions. They're really aiming in the same direction. One is how are you addressing the U.S. market going forward? It's still a small proportion, and so are there any changes to plan from what you've been doing for the last few years? And I also wonder in the U.S., if there is already somebody who's offering what you offer and the market is kind of taken by another player or whether it remains as sort of virgin territory and you just have to get your act together to sell more into the U.S. And so the second question is if you look at 40% growth in '24. What is going to drive this? So this is -- are they new customers buying your products? Do you expect existing customers to buy more products? So where is the 40% most likely coming from?

So why did I expect the first question from you [ Dr. Huber ].

I don't know.

Because you asked it a couple of times already. It's -- but I can answer. So in the U.S., we have a change of strategy. And you are right, it's still on a small level. The country has much more potential -- and we made a mistake at the very beginning launching in the U.S. because we addressed immediately the bigger market, that's the professional installer market, but we address this market with do-it-yourself products, and it doesn't go together. And on top of this, convincing the wholesalers that I mentioned during my presentation and convincing the electricians to use a new brand, it takes a long time. And even in countries where we are well known like in Germany, Austria, Switzerland, it takes time. We see that now we make the first steps. We see that we have a good attention and people asking for that without that, we are pushing all the time. It takes a long time. So we changed that, and now we are addressing the Do-It-Yourself market first in the United States. In my presentation, I said that we expect to move from Amazon marketplace to Amazon vendor, which normally should increase the Amazon revenue by 3x to 5x, which is huge because it's a big proportion in the U.S. At the same time, we are on the -- in the web shop in the online shop of Home Depot now, very fresh. And if we make this successful, we have an agreement with them that we roll out step by step to the physical stores. So that's basically the -- we copy the successful strategy that started in Germany that we rolled out to other countries in Europe, and now we are rolling this out to the U.S. A complete change in target customers at the beginning. Of course, we want to a target there as well the professional installer channel. But doing this takes long and it will not be from one day to another. That's why the shortcut is do-it-yourself, that's where we are strong. And we have good feedback from CES especially and as well for the Z-Wave products because United States is traditionally a Z-Wave market. And we are the only brand right now with Z-Wave 800. And now there are some technical things that only Z-Wave can do. Z-Wave long range is possible with our products. There are chains in the U.S. and with chains, I mean, companies like Alarm.com and other security companies that are working on Z-Wave standard and that are interested in integrating our products in their portfolio. So there are a lot of small lights at the end of the tunnel, and we hope that this will work out. The second part of your question, where should the revenue come from? Now I cannot give you percentages but we expect from the new products, a nice proportion of additional growth. We expect -- it's just one example. We were short in our valve for radiators, for heating, the TRV. We did not have enough quantities not because we didn't want to, but our partner, Silicon Labs stopped the production of the chip. Now we have the new chip, and we will have this product back for the Christmas season, if my friend here delivers. And this is a product that is alone good for a couple of million euro additional revenue. It's a relatively expensive product, around EUR 50. We know what we sold in the past and what we could sell if we have that product. So there are a couple of key products that will come and that will contribute to a higher revenue. So then we expect that what we did in DACH with these different channels, opening more doors for customers like the Do-It-Yourself physical stores. That's something that will continue now in France, Italy, Spain and the U.K. In Portugal, we are already quite good on that. Having as well local people on board there that we see that this usually pays back. Not 100% immediately, but after a year or so it pays back. So that's the regional expansion and the channel expansion in the regions where we are already. And that's the main 2 drivers for revenue. Now as I said, I cannot give you percentages. I could say 20% coming from new products, 20% coming from growth in new countries and something should come from being more in the professional channels. That's something completely new in DACH region and the Nordics and maybe then with 1 year more delay in other regions of Europe as well. That should continue delivering growth. Does this somehow answer the question?

Perfect.

Thank you so much. So we will now move on with the questions of [ Georgi ]. [ Georgi ], can you hear us?

Sorry, I was muted. Sorry. Congratulations on the solid numbers this year. I wish you luck for this year and next year as well, hopefully. So I have a couple of questions. We touched some of them by now, but I would like to hear something more, and let's start with inventories. So we have seen the drop in inventory levels in 2023. And you touched the potential of geopolitical risk, but have you seen it also impact the Red Sea shipping crisis already on your supply of chips from China? And how do you manage that if there is any concern there at the moment?

I don't say that I think it's [ right version ], the price of the chips and transportation is going much lower compared with 2022. There is no -- no. I mean we just -- we just buy more chips and store them in our facility in China to be ready for the production. And this is part of that we have a separate chips, especially made for us, with our partners. And then if you want to be every time to have on stock, it's much better to have a high quantity in reserve. And from that is coming, but not the chip price. I think with what we are doing, we decreased the price of the main chip with at least 10% or 12%, if I'm not wrong, but it's going better. Also, about the transportation we're completely not affected from the sea situation of Red Sea because 90% -- over 90% of our stock is coming through the air. And this is -- yes, this is -- we just -- I'm not sure that in the last 6 months, we have a single delivery through the sea. Everything is coming over the air.

Yes. And we have optimized the delivery. We have hired a person for supply chain and pays back as well. So we have really besides the general market effects, we have reduced our cost for incoming and outgoing freights as we have optimized our customs clearing process, and that's something that is reflected in a better margin. We did not increase our prices in the last 1.5 years now, I think, or at least 1 year. So -- and still, our margin is increasing. So that's all on a quite good way. And don't forget, with the higher numbers of volumes that we buy, of course, we negotiate with suppliers and try to get the cost price down.

All right. Yes. Air shipping was enough of an answer.

So just let me just add this. The EUR 3.5 million lower inventory, if you make a simple calculation, EUR 72 million was our plan for this year, we made EUR 75 million, that's the EUR 3 million in between. So of course, the product reduced our stock by the end of the year, and we have reordered. That's what you see in the higher prepayment to China and the products are on the already or will arrive soon or some of them arrived already. So we are back on full firepower from our stock and the availability of product.

Sure. Okay. So moving on and building to that. Where do you see EBIT margin risks at the moment because you have guided the margin at 25%, which is quite sustainable. Where do you see the biggest risks at the moment for this number to be maintained? Is it on the material cost size? Is it on pricing power? Is it in terms of salary inflation? What are the biggest risks for the system are at the moment?

First, we do not see a risk on the production or the raw material cost. That's what we just elaborated on. As well as freight costs are not playing a role. Price-wise, we are very well positioned in the market, and we see that even cheaper Chinese manufacturers are losing market share in Europe, and we are winning. So we feel very well positioned in the market. We don't see a risk to reduce the price. We could increase the price even, but we are not doing this because we want to stay competitive. Yes, we have salary increases that are quite important and that we have to manage. On the other hand, I mentioned in the presentation that we will reduce the hire -- the number of people we hire additionally. With 40% more revenue, we will not hire 40% more people. The risk that I see here is -- and we are doing that is we need a very strict cost control. That's something that is complicated in -- that is growing so fast because usually, the growth and the gross margins and everything is -- that's a risk that you do not control the margin -- sorry, the costs. We are doing that. And now we hire more people in Western European countries, only a few people in the different regions for sales. And by nature, they are more expensive than people in Eastern Europe as well because of much higher tax that people have to pay and higher cost of living. But that is something that we -- if you want to find a risk, that could be a risk. So how are we managing salary increases, onboarding of new people, people in different territories? So it's something that we control every day. And that our finance department is in our back every day if something goes out of the budget. So basically, I don't see a big risk.

Thank you so much, [ Georgi ]. Now we have the last hand from [ Jean-Philippe ]. So please go ahead with your questions.

First of all, congrats on this extraordinary execution. Very, very pleased on that. I would like to ask you just a few questions very quickly, but one. If you can help me understand a little bit more the receivables. So we, of course, have huge sales in Q4, but we have an increase on inventory days. And we also have an increase higher on the receivables than in the sales. So how can we make sense completely of that? If you can help add a lot of context on it. And after that, if you can give a little update on the Shelly premium app, how you see it and the central listing as well. That would be all for me.

So first answer is it's as well a shift in customers. In the past, we made a lot of business with customers that paid upfront. Now we have reorganized our customer bases, our channels, and we have more customers with payment terms. Of course, we are controlling that. So we are not giving payment terms to anyone. But if you want to make business with Hornbach or Amazon, they have special requirements. We are at the lower end of the requirements, but we will not be able to afford it. But on the other hand, we are on the safe side that the risk that they are not able to pay is really low. But that's additionally to increasing the business in general. This is a shift into channels that require more payment terms, longer payment terms instead of, I don't want to say nonprofessional channels, but like people that are selling on marketplaces and that have to pay upfront by definition. So that's something that explains the higher level of receivables. But as I said, we have -- we don't see a risk there. The second part was -- let me finish with the last part. This was the Xetra question. We have a verbal confirmation from Sofia Stock Exchange and Frankfurt Stock Exchange. What you have to know is that for bringing us to Xetra, this will be a new segment in Sofia Stock Exchange and Frankfurt. That is enabling not only us but as well other customers -- sorry, other companies from Bulgaria to be listed, on Xetra. This was planned for February. Now February is almost over. It will not happen in February. And the reason for this, what is their explanation is that they have some IT issues to solve between Clearstream and Eurex Clearing. There are some last hiccups that should be solved, but we got another confirmation beginning of April is the due date. So cross fingers that this should happen in -- what is this? 5 weeks from now, 5, 6 weeks. And the premium app, that's Dimitar's thing.

Yes. I can tell that we're going very, very carefully with the premium app. We don't push customers. Because this is not usual. At the moment, there is not so many applications for the smart home would require additional payment or some additional premium features, but what we're seeing and also at the moment, we release it. We deliver more features for the premium customers. But now we're looking to extend these features and to give them more and more -- also some features based on the artificial intelligence, analysis of their bills, analysis how they can in some urgent situation with the temperature or some of their appliances to give them the warning, if something happens in their houses, but this is a long process. From what we've seen and what I can say at the moment, the premium -- the existing premium subscription, which we have, completely cover our cloud expenses, something which is our first target. But that's something which we really prefer to present in the middle of the year when they will be much more stable. Usually because at the moment, there is an annual subscription, there is a monthly subscription. We just stopped the old app, I think, last week. There is some outdated app. Some customers use them and they switched to the new one. When something like that happens immediately there is a jump for the customers is on trial period and then we switch from trial period to the paid version, which for us is going well. There is a very ambitious target in the middle of every year. It looks like we can achieve it, but it's really -- it's too early to present because we don't want just to tell some numbers, and after that, to excuse that they are not because of something.

Thank you very much for your question. So in view of the time and as we receive a lot of questions on our chat box, I tried to cluster them. So there is a follow-up question concerning the impairment of receivables from client and written off advantages. So the question is, I can see that in the receivables there is an impairment of receivables from client and written off advantages. Can you please talk about that a bit more? And a further question to that is what is the source?

Yes. So first, we are in the lucky situation that we can be very conservative in accounting, which means we impaired whatever we can. So if there is a small risk in receivables from customers, of course, we will continue collecting money if there are some overdue from the past. But we have a very conservative approach to that, and we write off what we can write off, which leaves some fantasy of -- yes, if you could make some calculations, we could. With a less conservative approach, we could show more EBIT. But we don't need to and we don't want to. And this brings our balance sheet to another level of healthiness. Let me put it like that.

Can I say some example, maybe that the all top 10 clients for us, the receivables from them is completely insured, which means all receivables which are seen, the future receivables, they are insured maybe over 90%, which we also -- this is much more comfortable situation for us.

But there are some other things. We have a new accounting system. We are switching to SAP now, and we use this to clean up some old things. But once again, this does not mean that the money is gone for all time. We will continue collecting it.

All right. Thank you so much. And for the question, I can see the company gave out a loan in June 2023 for a 1% interest rate. Can you talk about that?

Yes. From what we talk about, basically, it's some deal with the company, which we do in some way because, as you know, that this happens with one of our partners, which especially help us very strongly and work with us publishing to be present in Frankfurt. And then this is somehow -- some part of the partnership, which mean that I think in something which they do is much more as we expect. And really, they go in a very personal there to be listed in Frankfurt that work very close with us this listing to be really successful because this is basically, first successful listing of the Bulgarian company outside of the Bulgaria. And then this is somehow that another, let's say, from reference from us that we could help them in a situation and to give them the much better condition than usual from the market.

So they have a problem and we help. We don't want to go into the banking business in the future, and this is definitely an exception.

All right. Thank you. So for the question belongs to the Shelly chip. Just recently, Shelly revealed that it's already working on the Shelly chip 2.0 and [ Ricardo ] was wondering if you could provide more context on how the Shelly chip 1.0 performed on any context on why the company is already working on the next chip generation? Are there significant differences between 1 and 2?

Yes, there is. But let's say, while we don't share any information about that because this is something which you really don't want to rake up the competition, and they don't know what happens. Maybe I expect it maybe end of the year, September, in the last quarter of the year, we can start sharing more and more information. But now it's too early and really doesn't want to tell anything about a new one. It will be much more powerful, much more better. There will be some AI embedded in the chip. But really, we don't want to go in any details because that's not in company's interest.

All right. Thank you. So the question is, could you please tell us something more about the [indiscernible], the device for implementing in other devices to make them smart.

Yes. Something which is planning to be launched in March. We already show from the -- with some customers the first module based on the -- of the new chip. And there is impressively significant and very -- but there's 2 parts, 2 steps before the release. First, the March will be the presentation for the part of the customers and very specialized customers. Then we're planning in April to have our first customers, which will start selling powered by Shelly devices. And this is the 2 steps, which we're following. First is March, then it's April. At the moment, we cannot share anything from the first clients because there we need their approval. Some of this is the very popular and good name in the world online which we are not allowed to share before they release the product based upon our chip.

Thank you, Dimitar, for answering. So another question, what are the strongest challenges for the company to enter the French and British markets?

Well, that's a very long question. Do we have an hour?

Unfortunately, not.

It's a completely -- both markets are completely different. We think that we have some help, especially in the U.K. market because in the U.K., Amazon is a very strong player. And given our development and our results with Amazon, we are -- they said we are one of the fastest-growing brands they ever had on their platform. But still, we are not depending on them. That's something where we really pay attention. And Amazon is very strong in the U.K. And now we managed -- U.K. is not an E.U. country anymore. That's why it took a little bit longer. Now we managed to be very close to releasing our products on the Amazon platform in the U.K. And Amazon usually takes immediately all the customer feedbacks to this platform. And the customer feedbacks about our products, the reviews are excellent. So that's why we expect a good move, a good push from Amazon in the U.K. At the same time, we are in contact with a couple of retailers that are close to list our products. But Amazon usually creates at the same time a pull. In some other regions, like in Germany, we get phone calls from professional wholesalers telling us that they were called by their installers that have to buy the product on Amazon B2B, and they don't like it. So that's something that can help, but it's a completely new market. In France, is even more complicated. We have French-speaking people on board now. You need to know the right people to get contacts there. Otherwise, you are really lost in especially these 2 countries. But now we see, and we mentioned already that France, we made some good progress last year. As well with Amazon, we see some very good leads for this year. So we expect to be on a good level in France and U.K. to follow with the help of Amazon. And of course, other partners as well in the local market. But it's not easy because you start basically from scratch. And we are not a company that is investing huge amounts in above-the-line marketing. We are usually going to influencers. We are going to newspapers telling them about our product, and then we create a push on the market.

All right. Thank you, Wolfgang. And the last question, do you think [ channels ] are having more inventory and/or longer sales days on that growth in revenue is driven by more demand? What is the risk the channels are suffering?

Yes, I don't see...

If no one is making houses smart anymore, then that's a huge risk. But I don't see that because the trend just started. So making homes smart is no longer a product for geeks and for specialists, it's becoming a mass-market product. And that's driving the market. So if a channel -- if 1 channel is not working, we have others now. We are not depending on our own web shop. We are not depending on Amazon. We are not depending on do-it-yourself channels. We have multichannels that are in multi countries. So we are not depending only on DACH region anymore. So that gives us a quite solid position. If 1 region is suffering, others can equalize. If 1 channel is suffering, others can equalize.

And something which I can add, the possibility to install the products, the locations. We start for the smart home but now looking at more and more people using for the building automation, for the small and medium-sized offices. We've seen that there are some trials. At the very beginning, trials for some companies to make -- to go and integrate our product in -- for industrial usage, which will help them, support them in this direction. But it looks like the market is not just the retail. The market is going to be bigger and wider for us. And from what we've seen at the moment, there is no problem with inventory. Even if you double it, will not be enough. And they will not be a risk for us.

Great. Thank you so much for answering. So yes, having said this, this was the last question. So we will now come to the end of today's earnings call. Thank you, everyone, for joining and your highly shown interest and the dynamic conversation. Yes, from my side, thank you again. And thank you, Wolfgang and Dimitar, for the time you took to answer all these questions. So should further questions arise at a later time, please feel free to contact Investor Relations or us. And let me conclude from my side with a notice from the chat box, I have to say you guys are one of the best management teams in the world. So this is what a participant has written. So let me hand over again to you for some final remarks.

So whoever said this thank you very much. Thanks to all of you for your support. And we hope to see you in -- and we get a lot of positive feedback. And that really helps in -- it's positive if you grow so fast, but it has as well some challenges. And we hope to see you all back in the next call in 3 months with the next good news. Thank you very much.

Thank you very much.