Shelly Group SE (SLYG) Earnings Call Transcript & Summary

Well then, good morning, ladies and gentlemen, and a warm welcome to today's earnings call of the Shelly Group SE following the figures of Q1 2025 and giving a business update. I am delighted to welcome the co-CEOs, Dimitar Dimitrov and Wolfgang Kirsch, who will speak in a moment and guide us through the presentations and the results. After the presentation, we will move on to a Q&A session in which you will be allowed to place your question directly to the management. So let's jump straight into the trading update Q1. Mr. Kirsch, the stage is yours.

Yes. Thank you very much. Good morning from our side as well, and thank you for joining our Q1 earnings call. And as usual, we have a couple of good news. This is the typical agenda. So I will start with some highlights. Dimitar will lead through the product session, a little bit different this time with some more information than you had before. And then I will come back with financial details. And then at the very end, we are open for questions, of course. This is a typical reminder what we are doing. For those who are new to our call, we are a smart home company, a smart connectivity, smart building, energy optimization, however you want to call it, whatever happens in your home is done by us with our help. And you will see during the presentation that this is taking different levels. Some highlights. We have sold since the start of Shelly, that was in 2018, now more than 23 million devices. In the last 12 months, we have sold more than 9 million devices. We are in more than 4.5 million households, and we added 1.5 million households in the last 12 months. If I say households, let's maybe better call this installations because there are some industrial installations as well. And we have -- by the end of March, we have more than 2 million cloud users, and we added 700,000 -- more than 700,000 in the last 12 months. That's all quite impressive numbers. Some other highlights. Our revenue and our EBIT is above budget and above the guidance. You remember that in the last call, we said we expect a growth rate of 25%. We were a bit above. We are growing in all markets above the average of the market. It's always complicated to get exact numbers because market research data is not available. But if we talk to competitors, if we make our own estimation, some regions are suffering. We are everywhere above the market. We have increased significantly our premium user app number. You will see that at the end. We have successfully enlarged distribution channels in DIY and as well in Pro in all of our countries and regions. We have a significant growth of addressable customer ownership coming, of course, with the cloud users where we have contact data, and most of them we are allowed to contact, and we are contacting them with data every day, if you want. We have sold the first units of our new smart lock product line with a very good success. It was only a small number of pieces, like 1,000, but they were sold out in no time. And we started 1 year ago our installer network, and we have now more than 1,200 participants in less than 1 year, and that's as well quite nice. So that's just a picture with a lot of logos on this just to show you who joined as a distributor and retailer in DIY and in Professional in 2024 and in 2025. For '25, this is signed contracts or close to signing contracts. So we are continuing to add more retailers in regions, especially as well outside of the DACH region, where we are already strong in Nordics, in Southern Europe, and we have a quite high demand on this side as well. That's very promising for the future. It always takes a little bit of ramp-up time to see real big numbers, but it's quite positive. On our installer network side or installer program side, I said already at the beginning, we started at Light + Building in March 2024 with zero installers on our website. Now we have 1,200. Officially, the program is live in the DACH region and the Nordics, but you see that it's already spreading around, and we have a couple of hundreds in the waiting line. So it will be significantly more over the next quarters. And we have agreed on starting Phase 2. Phase 2 means we will localize that. We will have the trainings in local language. We will do this with an automized program, where as well the installers at the end will have to run a small questionnaire, a small test. And we see that having this in local language, as we did in Denmark and in other Nordic regions, really helps to increase because most of the installers are not very good in English, but the demand line queue is already very long for that. We have just -- we had last week, so that's not from first quarter, but last week, we had Intersolar in Munich, the biggest or one of the biggest European tradeshows for solar business. And we already knew that the companies you see here with the logos that they use Shelly devices, that they have integrated Shelly devices in their solutions. That's very good. But what we saw at Intersolar is that almost every company in the solar business offers, of course, their own energy management system or Shelly. So at 30 or 40 of the booths of solar producers, you saw the typical sign, we have our Huawei Energy Management System or you use Shelly, and our devices were as well displayed at 30 or 40 other booths than our own. Very positive feedback as well from the installers. All of them, really all of them said we have a very good product, very good to integrate it, and we are far beyond the past in 2018-'19, where we were considered as a do-it-yourself brand with a couple of small hiccups, maybe that geeks like, but the professionals not. We are way beyond that step, and that is a super positive feedback and opens a lot of roads and doors into the next future. And if we consider a solar business as one of the verticals because that's a very specialized business and an entrance store for us in the home automation. And we are now talking, especially in the DACH region to other companies. So companies that produce motors for garage doors, for shading systems, for roller shutters. Of course, you can always include a Shelly afterwards, but if this is compatible from the very beginning, that opens new markets and increases the number of households and users. We are talking to the first insurance companies. They could possibly use our Flood to detect water leakage to avoid big damages; smoke detectors; water valves or other products and include this in their insurances. There are businesses like this in some countries in Europe. We have first contacts, not only here in Bulgaria, but as well in Germany to some of the insurance companies. That will take time. It's nothing that will happen from one day to another, but it's more things that will pay back in '26 and in '27. And on the security side, we are in certification process. Some of the processes are already finished with the worldwide big companies like Alarm.com, Resideo, Ring, ADT and a couple of others. They are offering typically the high-end security systems with professional support. And they are all trying to get as well a position in the smart home business because if the installer is there and installing the alarm systems, he could as well install relays and roller shutter, steering and other devices. That is potentially another vertical, and we have much more different verticals in our mind that we will address in the next years. But one thing after the other, it's as well a question of resources. In January, as in every January or February, we ran our customer survey. So we ask Shelly customers about what they like about the products, what they use the product for, what is the advantage of Shelly from their point of view, would they recommend Shelly devices to their friends and partners. And this year, we had a record number of participants, 52,233 -- 52,234 to be exact. That is amazing. If you have some information about market research, usually, you have numbers like 1,000, 2,000, 3,000 people that you asked. So we asked more, of course, but 52,000 participated. So that's very, very reliable numbers. I would just want to point out 2 important things. We have an NPS score. So if you ask the people, are you -- will you recommend Shelly System and Shelly devices to your friends? The NPS score is 55 and went up 5 points versus last year. That is very good. We think that we can still increase that, and we will increase that over the years, but that is a very good bases. The second thing is our application. The Shelly app last year was rated, let's say, okay-ish. And we grew within 12 months only 21 points in NPS to 23. That is still not breathtaking, but compared to competitors in the market, we are well-positioned. And if you make a double check with the app stores of Google and of Apple, you see that our rating now is above 4 stars, whereas it was 1.8 or so a year ago, and it's well above most of our competitors. On top of this, a very important information, 20% of our customers are considering a premium upgrade. That's something that leads to recurring revenues and Software-as-a-Services and that's quite promising as well. Now we all know from asking a customer, are you willing or are you considering to move to a paid service, and then actually, to move them, that's a very long way. And usually, you lose 50% or more of them on that way, but 20% or even if it would be 10% or 5%, that's a very, very impressive number and looks quite promising for the future. Now to the hard facts. We grew in the first quarter 29% in revenue to EUR 26.5 million. That is above the guidance because we said we want to grow 25%, that is as well above all our internal targets, and that's quite positive. We think this is a good and solid basis for the next quarters. But we see this as well as a reserve because we will not know in the current circumstances in the market how the next quarters will deliver, but we will come back to this at the end. Our EBIT grew as well, 23% to EUR 6.7 million. We have an EBIT margin in Q1 of 25.2%. And this for me was as well a very positive development because with only growing 25% or 29%, so that's below the planned average for this year. We expected that the EBIT will be a little bit lower. So as well, this is very promising that EBIT margin is above 25%. And we improved as well our cash position versus one year ago, and you will see as well versus end of the year in the later chart by 11.9%. So the first steps that we took to improve our working capital show the first results. We are at the very beginning with that. But we have as well secured with a bank an overdraft that we can use if needed, currently we don't need it, of up to EUR 20 million at very good conditions. And as you know, a bank line is only paid or a very small proportion is paid to have it available and only -- more is only paid if we actually need it. So we hope that we don't need it or we don't need much from that, but that gives us a lot of security for the coming months and years because if cash is a limit for growth, we will have the possibility to take some of this money. So all promising. And now we have some information about products from Dimitar.

Good morning. Nice to see you there. Let's talk about the products and what happened inside the Q1 and what is next. The first one what we're going to show, this is the new products update for '25. We have 5 product updates, which is coming this year, and 7 completely new products. And just for first 3 months, I think we completely fall in the same pattern as a year ago. And now we're still planning, and this is -- in the pipeline is 40 to 60 new products. It depends, some products are a little bit complicated, some of the products need a bit more, let's say, long-term certification process. But anyhow, we're completely positive that we will be -- we can use around 50 products to enter in the end of the year. At the same time, we started discontinuing the old products, the very old product. This is the Gen1 products, partially Gen2 products. On the market, it's mainly is coming the newest new releases and new products and new updates, which we make a year ago. As you see, this is our target for '25, then during the Q1, we already released our products as a double screen, dimmers, our DALI controller, which is available on the market and everything which we promised a few months ago. In the Q2, which is already ongoing, you can see that we already -- our first -- our generation 4 of our devices, which is amazing, by the way, everybody is excited because nobody until now make devices working in the all kind of the most important protocols, meaning the Wi-Fi, Bluetooth, Zigbee, Matter built-in into the same device and the customers can choose what kind of technology for -- connectivity technology to use and what kind of the protocol. And not only the Shelly 1L and 2L for first time worldwide, there is the double relay power using the Wi-Fi network, doesn't need any kind of the hub with matter enabled, it's something which we released on the market last month. And this is -- this we expect to drive our revenue and our results much better. And then the Q3 is coming, where we see that if the Q2 is the mostly update the Gen 4 devices and do-it-yourself products, then on the Q3, where we'll be focusing on the plug-and-play products for the customers. And as you see in the picture, there is a power strip that also will be power strip with USB charger. There will be a very special Presence Sensor, will be very fancy features. And in Q3, we will be preparing and targeting -- and we'll be preparing to target the customers for the Black Friday and for the last quarter where most customers and customer, which is not so tech-savvy will start looking for the smart products. And the Q4 is still in line where we're planning our new walk system, where we're looking for the first camera to be released on the market. And by the way, there is a very good exciting news about the cameras because development is going very well, and we have a very strong partner, which help us to bring the camera really professional and very high quality level. Something also which is interesting, many people ask us what between the generation, how the people switching between the generation, how the revenues related to this generation. We can show here that in the last 4 years, we have 4 different generations of the devices. And you can see that 2022, our main sales is coming from generation 1, which is '23, our revenue started coming from the generation 2 devices. And a year ago, we're -- we still have a little bit more from generation 1, mostly generation 2, but then the generation 3 is on the way. And this year, everything is repeating, which means that margins is related with the new generation, with the new products, which we developed with our new products we can reach because this is not the same clients, which they are switching between the generations. Still the clients using the Gen1 devices are our first client. But this means that our new products is able to reach the new people, new customers, new markets, because we make our products widely compatible and much more functional than 4 or 6 years ago when we started with this one. And now we prepare a little bit product comparison to see because there's many questions why Shelly. There is many other brands, why Shelly? And the first one, something, which are #1 worldwide, this is the smallest Mini Relays, which for most of the people, one of the -- our most important market is the retrofit market, where the people doesn't need to change anything in the electrical installation, but they want to make it their houses and building smarter. And then the size is matter. Smaller size, they can do more, they can fit everywhere. And as you see here, the closest competitor to us, which is the SONOFF, of size closest competitors. As you've seen, our size is smaller than their one, the Relay is smaller than their one, in the most of the dimensions, it is the most important is fit. And also, the SONOFF one is something which is not the Wi-Fi-operated. Our one, the one which you see, the Gen4, is Wi-Fi, Bluetooth, Zigbee and everything, with power measurement, with everything built-in, the relay, with much more functionality in much smaller form factor. And there is a benchmark for the Mini Relays. We compare 3 products, but not only by the features. As you've seen, there is -- still with the Gen4, which is supporting Wi-Fi 6 on the top of everything, the most wide using the technology for connectivity right now in the customer homes. But also when we walk about the features, you can see how many -- how rich of the features is our device compared with others. It's not only this one. We're also comparing the pool series with our competitors. And from what we can see, there is lots of brands there and the only one which is comparable to our size is Bosch, which is, by the way, maybe 3, 4, 5x expensive than us and still not -- and still, for us, this is the only relay, which needs controller, which needs the hub, which cannot decide -- which cannot take a decision by itself. I mean it cannot be programmed as our devices with everything which we build-in. And this is a simple comparison between us and every -- almost every other similar area in the market. As you've seen, there is cheaper devices, not so much, a single one. We're in the middle of the price range. But at the same time, if you compare the features which we're providing compared with everything, everyone else, it's -- we are far away from our competition. And we're still working to make these differences much -- a lot of much -- lots of differences to add some more features and to go far ahead from our competitors also in the next month, years. And now back to Wolfgang, yes, with financial details.

Yes. Just one more remark to the pricing and the price comparison. If you go 2 years back, you saw -- you can check in the old presentations, we always had a pyramid saying that our prices are twice as high as the prices of cheap Chinese competitors like SONOFF. And now you see that this gap is shrinking. So SONOFF is coming closer. They increased the prices a couple of times. We are relatively stable. We have increased the Gen4 a little bit. Gen3 is our -- will be in the future our fighter model. Today, we still have Gen2 in the markets. So this gap is shrinking and not increasing. The gap to the top guys is increasing as well. We have always been half the price of Bosch, now it's like 2.5, 3x or of other big competitors. So that shows that our price positioning is not deteriorating. It is getting more aggressive. And as Dimitar said, we are fighting for keeping that. And whatever will happen in the future with Chinese competitors. So even if they are more aggressive and they come back to the old position, we will -- in worst case, if you want, we will be as we have been 2 years ago and where we started conquering the market. So we are very well positioned and still we are making good results. So coming back to the boring numbers compared to our nice products. And you have seen this chart, so I don't want to repeat everything. All the numbers are going in the right direction. And if we go into the regions, you see that we have different developments in the regions. In all regions, we are growing. In all regions, we are growing above the market. The DACH region grew only, if you want, 19%. Now, as I said, it's complicated to say how was the market in DACH, was it growing by 10%. I would doubt it because with all the economic situation that we see in Germany, especially, I think we are more than twice as fast as the market. And especially in the DACH region, we have one small issue with a very famous online distributor, without putting any names here, that is trying to force us into something that we don't like. So we could make much more -- sorry, much more revenue in DACH than we currently do because we are not saying yes to everything that the distributors are asking and especially with consequences on price visibility, price wars that we want to avoid. We are on an excellent way here. And you see that we are more than able to compensate what we might lose in one channel that is not as it could be. But we could do much more if we want. So if needed, if we want to accelerate, we can accelerate, but we are planning more in the midterm and in the long future. As well for the future, rest of Europe grew 41%, mainly driven by Italy and Nordics. And I told you in the last meetings that Italy is our second biggest country. We see a similar momentum has happened in DACH, just in this country. And in Nordics, we see a very good development in the pro market. So all this is quite promising for the future because the size of DACH, it's our biggest region, biggest country with Germany, but the others have to catch up and have to develop faster, and that's happening quite fast. Rest of the world, still on a low level with 34% growth, as well quite promising. I have to say something here, if you compare the numbers from last year to what we presented a year ago, there are some very small changes because we had to make some adaptions in distributed revenues, and we did this retroactive for the last year so that numbers are comparable, but on a very small level, nothing significant. So that all looks quite good. If we look to the regions, everywhere growing, everywhere growing above the market. If the market is 10%, 5% or 20%, we don't exactly know. We will find out, but we feel very comfortable with this. We are working, as you know, on our cash position, on the cash flow. And from operations, we have gained EUR 4.1 million more than one year ago. It's quite promising. We have reduced our stock. We have, on the other hand, increased our prepayments to suppliers, to Chinese suppliers and to chip manufacturers. So that there are a lot of products in the pipeline that will come, and we hope that we can balance that out over the year. We had a VAT return, and we have more incoming money from customers. Of course, we made more revenue last year. And the other things are small adaptions. The important thing here is, we have increased our equity ratio to 86.2%. That's an impressive number. So we are really in a very healthy state, and our balance sheet is very healthy. And if -- once again, if we need more cash, we have the possibility to take part of the bank line that we have secured now, up to EUR 20 million. So we are financially on a very safe side. That's just a very small update. We are continually working on working capital improvement and margin measures. As you know, we have implemented a procurement department at the beginning of the year. That starts to pay back in a lot of small steps. It will still take more time to have significant improvements here. This will minimum take 9 to maybe 12 months or even a little bit more. But constantly, we see already now that this pays back and it was the right decision to do so. Some details I will not go into all the numbers, but as you know and as we already presented middle of February, we have changed some distributor contracts, and with this as well, some accounting rules. So we have allocated some bonuses and marketing funds in a different way. The effect is -- one effect on the gross profit that goes a little bit down because more of this money is now booked against the gross profit and less against the sales and marketing costs, especially marketing costs. So that's why you see that in the -- on the marketing cost side, we are even a little bit below last year. This is coming partially from this effect, and it's coming as well partially from 1 big tradeshow less in Q1 2025. Last year, we had a Light + Building, very big. One of our 3 big tradeshows, and this year, this did not happen. It's only every second year. That's the second effect. On the other hand, it has as well an effect on the revenue. So if we would have booked everything like-for-like as a year ago, our revenue would -- revenue growth would even be 3% higher, round about 3% to 4% but we feel more comfortable booking it this way and that does not change at all, all the other numbers that we have planned for this year and for next year. Premium App. Here we have an increase from Q1 2024 of 134%. So we see that still on a low level. If you compare this with 20% of customers are willing to move, that would be completely different numbers that we might see in the coming years, but we are still very careful pushing this too much, but 134% more is very promising. We have changed our accounting to an accounting that is typical for Software-as-a-Service in this regard. That's why you do not see the financial effect yet. Most of our customers are choosing the annual payment, EUR 35, and not the monthly payment. And the annual payment, we are now changing to book it, not when the money comes, but we distribute this over 12 months. So the effect will come back during this year and especially in 2025 and 2026. If this continues growing in this speed, we are quite confident that we make a good move and a good step in recurring revenues, and that's one of our strategic targets for the future. So Dimitar talked already about the roadmap. I don't want to talk too much about products. But this chart I showed you in the call middle of February. We plan to grow 25% in Q1. We actually grew 29%. We plan to grow 30%, 40% and 50% in the coming quarters. We will keep that number, so we do not say that, oh, now with 5% or 4% more growth, we increased the numbers for the full year or for the next quarters. We feel comfortable having a small buffer if something surprising happens, if some products are delayed or the economic situation deteriorates more, but we feel quite comfortable still with all these developments. And with the products coming, we see that we can confirm this plan for the future. Dimitar said already that the new generation of products has a slightly higher margin than the old ones that as well helps, of course. And with some of the products that are -- that arrived in Q2 already, typically in very small quantities, and will have bigger quantities in Q3 and Q4 that explains this ramp-up of the revenue curve. So then we are already with the summary. So revenue is over target and over the internal plan with 29% versus 25%. All regions are growing, and we are growing especially outside of DACH. So that shows that our products work in other regions of Europe and not only in our old core region. And the Q1 EBIT with 25.2% above our target for the Q and as well above our midterm ambition. And you know that in Q3 last year and in Q4 last year, we were a little bit below the 25%. So we are perfectly back on track. Cash level improved, and we have secured bank line on top of this. The regional expansion will continue. We have just announced 1 or 2 weeks ago that we have opened our Polish subsidiary. The colleagues are here to have the onboarding week. We have a full team on board there. This as well will take some time to show first results, but we are quite optimistic that we have a very good and very professional team with Adam on the top with a huge experience in that market. We are continuing to grow in the professional market, but we are as well adding channels in the do-it-yourself market. So we do not want to lose our strong basis in the do-it-yourself market, but it looks very promising as well, all the feedback that we get from Intersolar and others that this strategy to grow in the professional market pays back as well. We will have a wider product range, and we will have change of products not adding up to 200 products. At the end, we will keep this level of a bit more than 100 number of app subscribers above target. So all this is promising, and we confirm our guidance for '25, EUR 145 million to EUR 155 million and for '26 as well EUR 200 million or above. We have started measures for working capital improvement. And the first effects are visible. We expect that this continues over the year, but we will not sacrifice revenue for having low stock or optimizing this too much. So we are very careful. The real effects will come in 9 to 12 or 15 months. And I already said that new product categories will support our growth. And there might be 1 or 2 surprises during the year if Dimitar's team continues to deliver as they did in the past. So that's all. If you want to subscribe to our newsletter, here is the QR code if you did not yet, I think most of you are. And to download the presentation, scan here or go to our Investor Relations website or to the Airtime website. And with this, we are open for your questions. Thank you very much.

Yes. Thank you very much for your presentation and the numbers. We will now move on to the Q&A session. [Operator Instructions] And otherwise, we just received a few questions in our chat box, and we'll start with the first one. Well, yes, congratulations for a successful and impressive quarter. And the question is, on the Shelly installer finder, there are less installers in the U.K. compared to countries such as France, which don't have any localized teams. Can you speak to how the expansion into the U.K. is proceeding and especially with professional installers?

Yes. So in the U.K., we currently have only 1 salesperson. We are looking for the country manager, and we have -- we had a lot of interviews, but we did not find the right profile now. And if we don't have the right profile, we will not start hiring more people because we expect the new country manager to build his team around himself. Nevertheless, we have 2 very good distributors. We are present on tradeshows, and we see that step by step, we are more visible in not only in the do-it-yourself market, as well in the professional market. This is a little bit delayed to what we internally planned. On the other hand, we had the opportunity with Poland. So it's always a mix of where do you want to be and where do you find the right people. And to the installer finder, yes, we have less in the U.K., and we have more in France. We have already a French localized website for 2 years. That, of course, pays back. But both of the countries, we did not actively promote our installer finder. So we just promoted it in the DACH region, German-speaking region, and in Nordics, where we offer trainings, localized trainings as well, and we had a couple of trainings in English language. This is more or less by coincidence. At the beginning, I mentioned that we have a long waiting line, so we have a lot of installers waiting for training in Italy, in other regions. And during this year, this is what I meant with Phase 2 of the installer program is, we will localize that, and we'll offer trainings in England, in the U.K., in France, in Spain, in Italy and in other regions -- and in Poland, of course, and in other regions of Europe. So that will come. Currently, whatever we have outside of DACH and Nordics is just happening because people subscribe, but it's nothing that we have planned with. So we are overwhelmed with the long waiting line and the high interest in other regions.

And a follow-up on what you already said in the presentation is, how big is the percentage of do-it-yourself versus professional in this quarter?

Yes. That's -- we did not check this number. I would guess it is -- it's still 70-30 because it's really complicated to get a hard number. We cannot just go to accounting or controlling and see what did we charge to or invoice to do-it-yourself retailers or online retailers because there is a blurred market.

Can I add something, which is important, okay? But number of devices is definitely 70-30, maybe, even more for the do-it-yourself. But when we talk about the revenue, this is quite different, it is 50-50, probably what I expect without looking directly at the numbers out there. Why? Because all of these solar PV manufacturers, battery manufacturers. All of them, they start ordering from us the most expensive devices. This is the Shelly [indiscernible], any kind of the energy matters, which is compared with our do-it-yourself relay. They are 5, sometimes 10x more expensive. And then this is the difference, by number of the installations and number of devices is still do-it-yourself, but the revenue is maybe is almost equal between the professional -- devices for professional installation and installed to the partners and professional would compare with the do-it-yourself.

Yes. As I said, it's complicated to say. We had a visit from a big do-it-yourself retailer here. They told us that their estimation as well is, it's a bit more than 30% Pro because in a do-it-yourself store, the professionals, especially the smaller ones, they go there in the morning, buy the devices that they need for the day. And that's why I said it's blurred. It's not very clear by channel because some of the people buy this in Hornbach, Obi or Bauhaus stores or Leroy Merlin. Some buy this in online channels. So it's really complicated to say. And we get some numbers from estimations from those channels. We get some numbers from asking our customers. It's definitely growing, the Pro share, and Dimitar is right, with all the feedback that, and as well numbers that we got from the installers for -- of solar panels that here we talk in hundreds and thousands of units that they buy and not in individual unit. So that's revenue-wise because the devices are more expensive as well. That is a clear change. We make this calculation every couple of months. So we are not following this every month. But we can put this in the next presentation as a quarterly feedback as well.

Well, thank you very much. Then we have from 2 participants questions concerning the Premium app. What is currently the churn on the Premium app? And can you roughly elaborate on the ratio between annual and monthly subscriptions?

Yes, I can tell. With Premium app, I think it is going very well. You know that we don't push the clients at all to switch to the premium because this is such a features and such, I would say, and -- also competitors like. It's not like the competitors, but our other companies like Amazon and Google, they don't offer premium subscription to control your smart home. Of course, we offer much more sophisticated and the good features in the application. But okay, first, if there is a customers, most of them make annual subscription, not monthly subscription, which is good for us.

80%.

Yes. About 80%, they choose our annual subscription, which is good for us. And the churn rate in this case is not so big, and I cannot take the -- give the right numbers because for most of them, the annual subscription is still not -- we're starting this one in September last year -- August-September, something in this period. And still the first year is not over. But if I look in the monthly subscription, the churn rate is significantly, significantly small. The number is significantly smaller compared with the customers which continue paying their monthly subscription.

Yes. So low single digit.

Yes. Yes. Absolutely. Low single digit is the churn rate, which means everything is going in the right direction. But really, we don't want to be a [Technical Difficulty]

Well, we just lost the connection and the video screen. [Operator Instructions] So hopefully, the connection to Airtime still is online so you can hear me in the audience. [Operator Instructions] I'll suggest that because we have some more questions in the chat, please feel free to contact Investor Relations directly with your questions. Well, then, so we have Dimitar Dimitrov back online, perfect guys. So I'll just -- yes, perfect.

Okay. The setup has stopped working. Can we just take one to see to continue and passed it on?

Well, yes. Perfect. To get on to this, well, then, okay, I will just follow up with the question and read them out for you. Well, then congrats to be back again and congrats for the strong quarter. And can you give us a bit more color on the expected margins for Shelly Smart Locks in 2025? And how they compare to the rest of the portfolio?

Yes, it looks like similar as the other products. So we will not have -- maybe they are of single-digit percentage lower, but have a very much higher revenue because of the high value of the products. And currently, we are keeping the selling prices, reducing them even a little bit because we see the first effects from bigger quantities and as well our other economies like better chip prices to bring the cost price a little bit down. So we expect the margin to be similar to the margin of our other products.

And then there's a question concerning the update on the new factory in Bulgaria. When you will announce and give us more information that you are building a new factory in Bulgaria?

I think right now it's too early, by the way, and we don't want to write the expectations. But new factory in Bulgaria, first, we make our first production for United States in Bulgaria, a test production this month, which is good. Now we start to make in the big quantities here in Bulgaria, especially for United States. And this could happen in the end of the June, beginning of July, we'll start the mass production. About the factory, we already entered the space. We're preparing the space. But by the way, we're expecting machines to be delivered end of the year. I mean, let's say, September, October, machines to be delivered, which means the factory will be live beginning of next year. January, February, we'll start working. And then we can have a much deeper update. We can have a tour, a video tour and everything about the factory. But yes, usually, the delivery time is about 6 months for such machines for what we expect to be -- need to be there end of the year.

And another question from one of the participants. Would you be able to share a bit more about how things are progressing with Shelly X? How many products do you expect to present over the course of the year?

Okay, about Shelly X and the products, right, I will take this one. Currently, there is 4 or 5 products in the market, still about 15 other is ongoing products, and we expect to be released in end of the Q2, beginning and also during the Q3. It's very dynamic because every day more and more companies start asking cooking for the Shelly X. These take a time. Probably to end of the year, we expect at least -- to have at least 20 to 30 products will be powered by Shelly products, which will be available through our website and also through our distributors and also by the manufacturers of these appliances. And yes, the -- it's just ongoing process, and we've seen a really huge interest, especially for the bulb producers, for the light manufacturers. But not only very soon -- I don't want to share some additional details because this is confidential, very soon, you'll see very -- some of the much bigger appliances than Shelly devices, which are using our technology -- connectivity technology.

Well, thank you very much. And well, yes, that's a pretty good question. For how many years do you think you can continue to expand above 30% a year?

Next 10 years, at about. I don't know, 10, 20, I don't know, maybe some, but this could be more.

No, to have a serious answer, we are still a small player in that market. The smart home, smart building market is big, and we are growing nice. We are ahead of competition technology-wise, so we expect to grow faster than the market. And that's something we said on our Capital Market Day. The market is expected to grow 10% to 15%. And we historically, outperformed the market 3 or 4x. We think that this will go down to 2 or 3x. But there are enough regions where we just start. There are enough product categories where we are not in that we have so much -- so many projects that are just starting and that will pay back in '26, '27, '28. So until 2030, we think we will continue growing above the market. And now currently, the market in our biggest region is a bit suffering. So it's not that positive. But again, I don't really know how big is it, is it only growing 5% or 10%? But we think that 2 to 3x the market growth is that what we expect over the next 4, 5, 6, 7 years, 10 years, and there is no real limit. We have another a couple of billion euro to...

Maybe the question is, how many years we continue -- we want to continue with only with 30%.

Well, a related question maybe or a statement, can you expand on this question, although momentum eased somewhat due to ongoing macroeconomic headwinds?

Say it again.

Although momentum is somewhat, what is about the ongoing macroeconomic headwinds?

I mean, if we usually say that markets are Shelly markets because we have -- if the market is bad, negative, if people, end users and as well companies try to keep their money together, but they need to invest in energy management systems. They need to invest in home automation or building automation, office automation. They try to find solutions that are reliable and cheaper than the very high-end products on the market. And today, we showed price comparisons. Compared to some of the big players in the market, we have half the price or below half the price. And interesting enough that some of the big players are contacting us in some cases because what they want to do for big projects is they want to be visible in the central breaker box. So someone opens the big doors and sees a very famous brand. And then where it's not that visible, they themselves try -- start to offer Shelly devices because it reduces the total cost for the whole project. And that is something that is helping us. So we are -- technology-wise, we are well advanced. We are way better than a do-it-yourself brand or a Chinese brand. We are seen as a very reliable professional brand, now more and more, and this will increase with the next generations of products even more. So we are in a very good situation. And especially if the markets are a bit under pressure and people don't say, come on, I don't care if the relay cost EUR 100 or EUR 50 or EUR 30. It's only, I don't know, 50 relays that I need. So that starts to sum up to a big amount, and that's good for us, that helps us. On the other side, at the beginning of the presentation, I said we are seen as the standard in solar industry, and that has well helps. So if the standard is half the price of very big international and known brands, I don't want to say names, but that's something that is super positive for us and creates more pressure on the bigger brands than on us.

And then we have a question. Well, it's sent directly to Mr. Kirsch. Can you give us details about sales in different countries in South America?

No.

That's a short one and a good one. Well then let's move on.

Of course, I could, but it has a good reason that we are reporting in regions. Because if I once start to tell you how much revenue are we doing in Chile, in Brazil, then this question will come every time. And then we -- if one country is minus 5% instead of plus 10%, then another question comes. So we have a clear reporting. We stick to that, and we cannot disclose numbers beyond it. We are growing in South America in total. We are there on a small level, as it's part of Rest of the World. So it's not breathtaking. We see some demands. We see especially some professional demand coming as well. We have one cooperation with a very well-known switch manufacturer that is very strong in South America that can open some doors for the future. So that's all promising. But it's as well not one of our core market and key markets. We grow there. We take what we get, and it's -- for the time being, that's fine.

Thanks for the statement. And we have another participant. Well, he just begins his question or his statement with addressing the elephant in the room, U.S. tariffs. I know it's low share of revenue, but what is your assessment of the growth opportunity in this environment? You last mentioned in conversation during BSE Investor Day. You haven't been yet charged any tariffs so far. Has this changed? Assuming current lower 30% tariffs on China, say, what is your competitive position?

Which tariffs we talk about, tariffs some months ago, a week ago, 2 hours ago or 2 hours after? That's completely irrelevant. We have enough stock at the moment in the United States to continue selling, and let's say, to waiting what will happen finally with the tariffs. We don't care about this one. We have opportunity. Anyhow we're moving the U.S. production in Bulgaria. It's far away, not only about the tariffs. I see the general political situation is in our favor on one side because the Americans and also the Europeans start being much more careful about the data protection and who can exactly controlling the PV system measuring their houses, who can switch on and off. For me, it's a very interesting situation than when the Spain and Portugal in this part of the Europe, they have a huge power outage because something happens with the solar system. Don't forget that the current situation in that the 90% of the solar systems is reporting to the -- for example, the Asian quotes, let's see like that. And for them, it's very easy to operate and to switch something on and off if they want to do that. But this is coming to be a concern in the future, which means everything related to the -- in that direction, also must be read -- maybe in the future, the people will understand that it's most important to pay a little bit more, but to have a solution from the company, which is a transport company, European-based and something than the tariffs and how much they will pay or not to pay anything. But currently, what is special about the tariff is, it's completely unreliable. Nobody knows what exactly you will pay, in what time and something, and we just need to walk and move a little bit...

So besides unreliable, we are quite happy that the elephant in this room is not so big because the room is small. Because in this case, United States is not one of our core markets. So whatever happens there with tariffs, plus 100% plus 0, plus 300% has, first of all, in our business a very limited influence. Dimitar already said we have enough stock in the U.S. to live for a while. We have adapted our prices already before the tariffs came, and we see no negative impact on our revenue. And now if tariffs come, and let's say, the tariffs are 100% on smart home products, every smart home product is coming as well, the big U.S. companies, it's coming from China. So they have to pay 50 -- sorry, 100% import tax tariff on a $100 product, as we have to pay that on a $20 product. So the gap between the price points will increase and not shrink. So if there is an effect, it can even have a positive effect on us. But regardless, it's -- for us, it's not an issue. It's nothing we talk about every day. It's nothing that keeps us awake at night because the effect is very limited. And we still have the option to ship products from Europe because here is our main warehouse, and we do this anyhow. And we have different tariffs if we ship from here than we ship from China. So that's another option that we have. So the elephant is shrinking.

Well, then thank you for this strong and pretty clear statement. And I'll take one last question. I'll read it out. Are you currently able to compete with Tuya using your Shelly X? Or do you see a need to further develop your software support or hardware in order to do so? We would appreciate if you could elaborate further on this? And a quick follow-up, looking ahead, what proportion of your revenue do you expect and could eventually come from Shelly X?

Okay. First, we don't want -- we cannot and we don't want to compete with Tuya, because if you ask Tuya every -- if you see all Tuya devices and ask every consumer, manufacturer, distributors, Tuya is directly related to the cheap Chinese sheet, which somebody provided them the connectivity technology. This is the companies who are choosing the Tuya. Tuya give their technology to everyone which want it. For example, a 100-bulb producer or maybe a 10,000-bulb producer or manufacturers in China, and they give it the same technology to all of them. What happens on the end? They need to compete by pricing. In one moment, pricing is very low, then they start -- then the quality starts decreasing. And this is the circle, which is at the end, there is no good for nobody. And also, as you know, the last few years, Tuya was losing 100 million, 150 million easily on annual basis, which is not -- believe me, we don't want to compete with them at all. We want to provide our technology first to U.S. and European-based company, which is much more about the connectivity technology. And even that -- and if you're working with a Chinese one, we want to choose 1, 2, 3 bulb manufacturers and to offer only to them the technology, but this manufacturer will be proven as a high-quality manufacturers. And this is, let's say, there will be selective partners, which we're using our chips and which -- because we don't want to ruin the brand and don't want to ruin with somebody which is just playing the price game and are finding the customers. We are -- I have a huge respect to Tuya until we start testing the devices powered by Tuya. I have no idea how they work. I don't know how people like it because when they start working, we start -- first idea is very easy. This device is Tuya. We can make it shady. The manufacturer, I don't know what he's doing, let's just replace the module. And we found that working and good working is a completely different ways. Yes, the device is working, but customer is completely not satisfied, and we need to start with manufacturer to explain them why they need to improve the quality, why they need to have some kind of features, why they need to -- why these things is important, not just -- not the simple things, I don't know, but they need to make it more. And yes, I think we'll be -- let's say, maybe in the future we'll be driver for the Tuya team to improve also their own quality. But directly, I don't want -- we don't see that we will be direct competitors for everybody. We'll be much more important for the good brands, which want to use the technology. And we've seen that this interest is increasing.

Well, thank you very much. And as I said, that was the last question and your last answer for today. Thanks for joining. We come to the end of today's earnings call. Should any further questions arise at a later time, please feel free to contact Investor Relations. Thank you to you, you gentlemen, for the presentation and the time you took, the answers. And as well, I wish you all a lovely remaining week. And with this, I hand over for some famous last words to you, Mr. Dimitrov.

Okay. Okay. I have to say everything is going well. Everybody asking us how it's going. It's going well. A lots of challenges. Every day, daily challenges -- challenges with -- in the production because the quantity is quite -- is more different, challenges with suppliers because they need to deliver, and they have their own price, we need to handle it. But until now, we're showing that we can handle this one on the right way. The company is going in a very good way. And yes, everything which you are asking, can you answer for, we can stay behind that, we're going in that direction. And direction, may be in time, we need to change it, but for good and expecting. We don't want to show everything which we know, of course, because first, maybe we don't want to overestimate -- from your side what -- where we're going. And the second one, we also -- especially from the product side, we want to keep a little bit the most important devices and information hidden because we know that these calls also that there's competitors maybe who could watch it and there is information which will be shared and we don't want to. But yes, thank you very much for your support. Thank you very much for your participation. Maybe, Wolfgang...

Nothing to add. Thanks. See you in a few months.

Thank you. Bye-bye.

Bye-bye.