Shelly Group SE (SLYG) Earnings Call Transcript

Welcome, ladies and gentlemen, to the earnings call of Shelly Group SA regarding the H1 figures of 2026. I would like to welcome the company's CEO, Wolfgang Kirsch; CEO, Dimitar Dimitrov; and CFO, Iliyana Krushkova, who will guide you through the presentation in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Mr. Kirsch.

Yes. Thank you very much, and good morning, everyone. Today, we are here in Sofia, Ilana and myself. Dimitar is traveling abroad, and that's why he's joining separately. But we are all three together with a bit more place as we had the last time. So I start with the typical chart, and I want to add something here to the normal start that we are a smart home company and building automation company because last meetings showed that we are more understood as a building management company, especially with the new products that we are launching, that we already launched and the software solutions that we added. That is much wider than the typical normal understood smart home market that makes one apartment smart. We have more and more solutions that go much wider, and that opens a much bigger market for us for the next year. So that's something important to note that we are more and more building management, energy management and not that much the smaller things that everyone is selling some smart plugs and other things. That's an important change and development. I will run you through some highlights and at the end, some operational topics. Iliyana will talk about the financials, and Dimitar has a couple of charts about product development and road map updates. That leads to the highlights. In the first half of the year, we have reached our internal targets for EBIT and for revenue. Our gross profit is a little bit over the target, and that helps us, of course, as well with the bottom line with the EBIT. Mainly this is driven by a very good optimization of supply chain. We have shipped a lot of our products, not as in the future via airplanes, but on trains and ships, and that is optimizing gross profit a little bit 1 to 2 percentage points, quite visible and gives us a little bit of more room to move as well in the second half of the year. Our installer network, you know that this is one of our key KPIs is growing quite strongly. We come to some numbers in a minute. Amazon business was a bit an issue in the last 12 months. We are back on track with Amazon, but we are selling indirect now to Amazon, which gives us a better control over the prices that Amazon is using, and we have calmed down the price situation in the market a lot since we made that move, and we see that we are back on a growing track. We have signed an important new contract with a pan-European broadline distributors. There are 3 big ones in Europe. And one is we're really focusing more and more on building management products, and we signed with this company for all European countries. And in the DACH region, especially, we have onboarded a new distributor specialized in do-it-yourself chains because we see that there is a lot of room to move in do-it-yourself, especially in the German market because the market is still very fragmented. It's not only OB, [indiscernible] there are 5, 6 other players, and we want to onboard with all of them. And for this, we need someone who has already contracts and is in those channels. Our customer base continues to grow. Cloud users continues to grow. That gives us a lot of opportunities for long-term monetization. And we are growing as well in the premium app. We think in the second half of the year with the launch of cameras, this will grow faster. And our installer base is very important to strengthen our Pro business. The important thing here is not only onboarding them, we now have to activate, and we are planning a lot of activities to train them and to motivate them more to use Shelly devices as well in their bigger projects. So that's about -- sorry, I have one more. All key indicators like household number of cloud users, premium app users in the last 12 months grew above 30%. The important number here, we have now by the end of June, 8,600 installers in our installer portal visible on our website, so visible for customers as well. That's in the last 12 months, an increase of 237% and that's a huge accomplishment by all the teams. And as I said, now, we start more and more activating them, training them on different levels. And as well, we have some nice developments in our application like MaaS integration of products that is very helpful for installers and helps them to make -- to integrate Shelly products more in their big projects. That leads to the highlights and to Iliyana.

Good morning from me as well. I will start with the financial headline. Our H1 performance was pretty strong in terms of revenue. It came in at EUR 68.3 million, which was a 26% growth year-on-year. And in terms of operating profit, which is our EBIT here, it was EUR 17.7 million with a year-on-year growth of 46%. The EBIT margin also improved, and it was 26%, which was also an improvement from last year when it was 22.6%. In terms of cash, our liquidity position also improved substantially. We had almost EUR 32 million of cash at the end of Q2, which was a 72% improvement year-on-year, and it also added a net cash inflow of approximately EUR 18 million since the beginning of the year. So in summary, all the three key indicators, revenue, operating profit and cash moved nicely together in the first half of the year. Breaking down into the quarterly developments, revenue consistently grew in both quarters since the beginning of 2026. In the first quarter, we booked EUR 33.3 million, which was 26% growth year-on-year. And in Q2, it was slightly higher at EUR 35 million with a year-on-year growth of 26%. Both quarters were higher than 25% growth. And also the 2-year compound growth rate was also running in the high 20s, which is also supporting our guidance for revenue, and it is also a testament to the consistent delivery model that is now successful and it is supported by the same drivers that we've been discussing, the growth of the installer base, the consistent channel execution and also the growth of the professional installers network. The EBIT quarterly developments were also positive. First quarter EBIT was EUR 8.6 million, a 29% year-on-year growth in the second quarter, it was slightly better, EUR 9.1 million, which was a notable improvement of 65% compared to the comparative period of last year. Both quarters above our midterm target of 25%. So we are comfortable that we have the proper foundations to the year-end guidance on operating profit level as well. The profit margin that is stable around 26% also show pretty good operating leverage, meaning that we are growing the revenues, but the additional investments on the operating cost side are substantially covered by the positive gross profit movement. I will now go over the cash flow development before I go back to some additional P&L comments. On the cash flow side, it was also a pretty positive first half of the year for us. We started the year with a cash position of EUR 13.7 million, and we managed to realize operating cash flow of EUR 22.3 million, which was much better than the same period last year. It was triple the operating cash flow of the same period of last year. We had substantial investments related to our new production facilities in Bulgaria. And also, we continue to intensively invest in our R&D operations. So you see here an investment flow of EUR 3.2 million. We also had a modest outflow in terms of financing, which was related to scheduled repayments for leases and existing loan facilities. As a result, the debt increase at the end of H1 was EUR 18.2 million, and our cash position once again almost reached EUR 32 million, which is very close to the bottom of our year-end target for cash, which was EUR 35 million to EUR 45 million at the end of December. It is a pretty good and pretty stable balance sheet as our equity ratio exceeded 80% in the first half of the year, meaning that we are in a good position to further support investments on the R&D side and also the most recent dividend distribution in July. One note maybe additionally on collections behind the operating cash flow, we managed to collect approximately EUR 73.5 million from clients, which was 57% better than the previous -- the same period of previous year. And our receivables actually improved very well compared to December. So in terms of receivables, they decreased -- the total receivables decreased by 16% compared to December, and they were EUR 66 million at the end of June. Breaking down the receivables between the clients' receivables and the advances, they both decreased by 12% and by 38%, respectively. Both of them releasing cash to support the operating cash flow in the first half of the year. At the same time, our inventory increased to EUR 24 million from EUR 19.5 million at the end of December, which is also an anticipated buildup in line with the preparation for the second half launches and the generally stronger second half in terms of sales. So in terms of days sales outstanding, they fell by additional 21% in Q2, and now they reached 147, which is a cumulative improvement of 45 days compared to last year. And in general, the cash conversion reached 255 days which is also a good improvement compared to Q1 when it was 267 days. And this indicator is also progressing well towards our year-end target that is in the range of 220 and 240 days. Going back to the overview of the P&L. Once again, revenues increased 26% year-on-year to EUR 68.3 million. Gross profit increased slightly faster by 39% year-on-year, which is a 5% improvement in terms of gross profit compared to the same period last year. This improvement in gross profit allowed us to cover our intensive spend in terms of sales and marketing and also administration costs. You will see that sales and marketing increased by 50% and administrative costs increased by 52% year-on-year. On the sales and marketing side, we should note that there is a substantial variable component to that, and it is directly related to revenue, and these are our marketing development funds, which increased substantially this year compared to last year. So if we take this out of the calculation, then the sales and marketing would have increased only by 11% year-on-year. In terms of administration, we continue to see here a steep increase compared to previous year. This was also the situation in Q1. And it is expected to remain in similar levels until the end of the year until it levels out because the international expansion and our investments in administration of this expansion started only at the end of 2025 and most intensively in the beginning of 2026. So now comparing to the previous period, it's a very different situation, and it will take at least a couple of more quarters until it goes down to more efficient and sustainable ratios to revenue. Despite the increased marketing spend and the international expansion, our EBIT margin remained stable at 26% throughout the first 2 quarters of the year. And its net income also increased by 51% year-on-year to EUR 15.4 million with the net income margin improving from 18.9% to 22.6% year-on-year. And the earnings per share came in at EUR 0.85 in the first half of 2026 compared to EUR 0.56 last year, also a pretty good improvement in earnings per share. In summary, growth is visible on the top line, but it is also supported by sustainable profitability and cash is also looking good and working capital going back to normalized level. So a pretty good first half of the year on the financial side. I'm passing back to Wolfgang.

Dimitar. This is about the product line and how we're doing with the R&D. First, thanks for everybody, and welcome on our quarterly call. In the first year -- in the first half of the year, we released the big portion of the products we have something which is targeting the first customers, the entry customers with our game, which is a very affordable price in the market in the price point under [ EUR 10 ]. But also on the same time, we're targeting the professionals and the professional customers as you see presented that our close to 9,000 electricians is already part of our network. And this is exactly the target for the circuit breakers for the fully automated and smart circuit breakers, which we launched first half of the year. We've seen the significant demand for them, and we continue developing in this one also another, as we say, the smart protected solution, which will continue and more products will be released end of the year. So this is not the only released product, but this is the main product which we released. The camera, you know the camera is postponed based on some chip shortage and the price increase beginning of the year, we rebuilt the camera and will be -- and it is not launched in the first half of the year, but it's ready to be launched. It's in the mass production now. And soon we will on the market to reflect the results in the Q3 and Q4 end of the year. And also as we talked about R&D, there is a new mini circuit breakers, which is completely capable to replace the existing breakers without additional room into the breaker box. This is our next product into the professional line. The outdoor camera, which is ongoing project, we're targeting this camera to be released end of the year, end of the Q4. For the heating seasons, we have new choices, the new TV, which will be much more price efficient than the existing one. And we extend the range of the walks of the walks, yes. Based on this one, there is more than 20 different products, which will be released at the end of the year, but we cannot show them all of them here under the presentation. This is the key product which is not exist before in our portfolio. And about something which is interesting as we start counting our company, how exactly the AI affect the internal development. We know that currently, we are extensively working with the professionals to use the AI implementing our devices, integrating them to different solutions. And this is quite successful, and we've seen very high interest and adoption from them. But internally, the company is steadily using the AI. And as you can see, 70% of the cost at the moment is AI generated. Our developers is mainly concentrated to make a cost review to prove the AI work to train the AI to go better because we're targeting end of the year to reach at least 90% of the cost to be AI generated. And this, of course, this is coming with much more -- much better efficiency. We almost doubled the results and the speed of development as you see 50% faster reduction time for the products. All documentation is based on the AI is made by AI. And also, we're working with a local company about the prototyping and simulation of our future devices. And now this is happening 44% faster than before that because we doesn't need to do everything from scratch. We can use the AI to simulate the defined environment. We can use many things also from the AI to help us to improve the availability of the devices. So about the code review, it's interesting job because from one side, our developers make a code review the code generated for AI, but at the same time, AI helping all developers make in white code reviews and give to our developers and report to our developers some security possible issues and everything which need to be fixed after that. So we can say that a very big bunch of the agents is working into the company and to help us to speed up the development. And yes, that number, as you see, there's another model about the UI design at the moment and UX design very soon, we're targeting to have a completely new AI-generated application, but not only this one, currently, we develop more than different 10 portals for our customers and -- which is delivering to them the power solution for them based on the AI generated. And also, we successfully implement AI into the physical testing the devices. So this is our first priority, the physical AI, which physically testing the devices in the room in the different environment. And there is one big room is completely controlled by AI and all testing between the devices is happening inside in this room and everybody can see because the speed is in. Currently, we are on the early stage and only 26% because this is the physical AI insulting is completely new. But A working in the physical world, our device is working in the physical environment, and this is the best way to test our devices. And very short, this is for me only for the second quarter. Now go back to operations and to Wolfgang. Thank you very much.

Yes. So I think I do not have to repeat the H1 results. All numbers are going in the right direction, especially the cash development that has been a point of critic in -- at the end of the year, and we promised to work on that. We show that we deliver here against our promises. If we go to the regions, we see a quite balanced view on DACH versus rest of Europe. So rest of Europe is coming very close to the DACH numbers. We have made an adjustment here that I have to explain because if you remember in the last calls already, I said that we have more and more cross-border shipment. So we cannot really just take our numbers from accounting, what did we invoice to a country like Poland because some products are shipped directly back to Germany because distributors have their warehouses there and the invoice address there. So we made some adjustments to take at least the big movements out. For example, for the Amazon Marketplace, the proportion that is sold in Germany is not 100% invoiced to Germany because some of the warehouses are in other regions. But if we look at the picture that we see here, we are on a good way to balance DACH and the rest of Europe. Very important development is what we see in the rest of the world, especially in the United States. I mentioned in the last meetings that we are in contact with a distributor in the U.S. We still not onboarded him, but we have signed a contract now, and we expect the first orders in Q4. And we expect the ramp-up then in '27, but that looks all very positive. And in general, the U.S. is on an excellent way, still on a relatively low level, but developing in a nice speed. Otherwise, you would not reach the average growth in this region of above 60%. It's almost 3x the growth speed of the rest of the group. And I would say we accelerate this in 2027 even to a higher speed. So that these three regions at one point, end of '27, beginning of '28 should be completely balanced between DACH Rest of Europe and rest of the world to reduce the dependency on one of the regions. The Premium app is as well developing in a good speed above 30% more users and revenue grew above 70%. There's still a way to go to the end year numbers that we have planned with EUR 2 million. On the other hand, with the camera launch, the first cameras will be shipped in August. So in Q3, then we have a free trial period for cloud usage. And then we expect that at least part of the customers will not use local storage, they will use the cloud storage, and that should boost the revenue for our cloud services and premium services. So as well here, we feel on a good way. And with a wider portfolio of cameras with the outdoor camera coming end of the year, for the next years, we see that we are in a good direction about this. We already confirmed our guidance for revenue and EBIT. And for the first time, we have guided as well the cash position because of the comments from your side end of the year or beginning of this year. So we confirm where we are. We still have a way to go. But the way to go is similar than it has been in the last years. I have to come back to our big proportion of do-it-yourself business that is depending on Black Friday revenues, that is depending on Christmas business. For us, the fourth quarter accounts for as 2 quarters. So we typically think in 5 quarters. On top of this, we will see more effects from our country expansion and from the road map that Dimitar has already presented, we feel quite comfortable. We are a bit closer on the EBIT side. And I think I do not have to talk about the cash position anymore because we are almost there. I would not think that we make the next step already in Q3 because Q3 is balance a little bit with Black Friday preparations and some other things. But end of the year, we are very optimistic that we will reach what we have promised. So that all looks good. Once again, H2 is really heavy for us, and this is a very important half of the year as it has been in the last years. I already said in the last call, we don't really like that. We would have a more balanced view over the quarters that we would like much more because it's easier to anticipate, but the situation is as it is, and we have to manage that. And we hope that in '27 and '28, we will have less product launches that are pushed to Q4 and that everything balances a little bit better out because this is something that no one really likes. So that leads to the summary. Once again, revenue and EBIT on target. We have a very strong improvement in the working capital efficiency. We have onboarded more than 1,900 installers in only 1 quarter. In the first quarter, we already had a very good number with onboarding 1,400. So it really accelerates. And we are starting a lot of campaigns and a lot of initiatives to really not only onboard them and to have an address and the number and show them on the website, but to turn them in revenue generators. There are a lot of plans in all regions that started already. We have new distributors signed. That always causes some trouble, as you can imagine, especially in our biggest region in DACH because so far, we had one exclusive distributor for this region. Now we have three distributors for that region. So the big player, that's a company called IO, that's one of the top 3 online -- sorry, broadline distributors, plus a smaller company that is specialized on do-it-yourself business that causes some friction, but we see more positive effects than negative effects, especially if we look a little bit more in the midterm. And our expansion in new markets, there is some room to grow. Not all markets are performing excellent, but the balance is very positive, as you have seen in the rest of Europe development. So for the second half of the year, the guidance is confirmed. We continue to improve our cash flow, and we are on an excellent way there. Camera launch is ahead. Dimitar already said that the product is in mass production now, and we expect the first deliveries. The circuit breakers are in mass production now because the first batch has already been sold. the demand is quite good and other products will support our second half revenue development. The geographic expansion will continue and will as well contribute to the H2 delivery and the revenue. AI is -- Dimitar talked about what we do internally, but AI as well helps us with making our services much better for customers and opens a lot of doors, especially in building management, energy management, retail outlets. We have won first projects in big retail chains, not selling the products, but optimizing their energy consumption and monitoring their stores. And we think that with projects like this that we will soon communicate a lot more will come in the future. So positive outlook. That's the last point for the rest of the world. United States, finally, I would say we have more than just light at the end of the tunnel. It's on a very good way, and we expect, especially in '27 to accelerate the growth there because the foundation is done. And we see as well good development in Australia, still on a small level, but with a very good potential. So that's the end of our presentation. And now we have time for your questions.

[Operator Instructions] We are -- we have already received two raised , one by Mr [indiscernible]

Some questions for me. The first one is on the indirect Amazon strategy. Is it correct that you sell your product to a third-party sellers, which then sell the items independently on Amazon?

That's right.

Okay. And do you plan on expanding that strategy, i.e., increasing the number of sellers or expand the revenue with the current third-party sellers you have? And do you control things like pricing and availability of these?

Yes. So first, we decided to move to Amazon Marketplace completely because the Amazon vendor account is -- was a very fast-growing account and a machine where you can easily push revenues. But the price is very high because Amazon is setting prices however they want, which anyhow, I mean, we have a legal situation to respect, which is their full right. But they reduce prices constantly and others are complaining and then they come back, and that's the worst point, they come back to us for margin compensation that we were not willing to pay. You all know this situation. That's why we decided to move to Amazon Marketplace. We have our own marketplace account that we are fully controlling and where we are as well able to fully control prices. And we have third-party sellers, 3, 4, 5 big ones that we are supporting, making the business on Amazon Marketplace. Here, we are not fully allowed to control prices because we cannot sell them what they -- how they have to sell on Amazon Marketplace. But let's say, we are in a good cooperation with these guys, and they cannot make crazy prices because simply they don't have enough margin to do so. So that is a very good step. What will happen next is that we have to optimize the way of how to handle Amazon Marketplace. And there are a couple of ideas. It's a bit too early to talk about that, how we could do that. Are we organizing this more by regions? Are we organizing this by product categories? That's something that we will still develop, and we are working with our Amazon team on the right strategy for that. That will be something that will be implemented in '27 and will give us a better control over this channel. That is a very important channel that we cannot neglect, but we somehow have to control what's going on there. And we are happy with the current development. As I said, we are back on track and price wars on the market stopped a little bit, and that is positive for everyone.

Okay. Great. My second question is on the products you launched in Q2. You already mentioned the circuit breakers being in mass production. How was the customer response on that and also on the launch of smart locks and [indiscernible]? And what is the estimated revenue impact you expect in H2 from all the new products you launched in H1 and also the ones who will come in the future?

I will start and Dimitar can add. Let me start, Dimitar. We are not disclosing revenues by product categories exactly because we do not want to wake up sleeping docks. But we are quite happy with all the launches, and Dimitar can talk about the breakers. We typically get small quantities at the beginning. We sell them via our web shop or with some selected distributors. Feedback was very positive. Our new flood centers, we have 2 different ones. They are selling like crazy. And customer feedback is extremely positive. And the door locks, that's a long-lasting thing. We sold some quantities. We still have to learn our lessons because the doors in Europe are different. The channels are a little bit different. That's not the typical electrician selling a door lock that's other channels. And Dimitar, you wanted to say something on that, please.

Yes. Just about the breakers, yes, that I can say that without -- because we don't talk about the quantities. But usually, we're doubling the quantity added slowly. We increased the quantities from -- what happens now, the production of the breakers until the end of the year is fully booked. So we are now working how to increase the production because the interest is it's coming faster. and it's quite big even compared to our expectations. It looks like this is the product the market is demanding for a very long time, and we should continue to work in that direction. But exact revenue, it's -- I think we really doesn't disclose it.

We're moving on to Mr. [indiscernible]

I have 3 additional ones. First, on the stocking for the important Black Friday week, call it. What are your impressions currently? We learned about some supply chain issues. Are you currently sure that you will have the quantities you desire for the, let's say, most important product categories? And what do you expect from the new distribution partners? Will they do, let's say, initial big stocking that could help you for Q3, Q4 revenues? Or do you expect, let's say, a soft stocking from the new names? The second one on your production plant in Plovdiv. How is that developing? Is the ramp-up developing accordingly to your plans? That would be interesting. And then for sure, the elephant in the room, the confirmed talks with Schneider Electric. Can you give us any information on what's going on here?

So maybe I'll start again. So the supply chain, I would say our key products, our bread-and-butter products that we -- that carried the revenue in the last years, we have already on stock or they are coming without any problems. That's existing products. For the new products, there is still a question how fast can we ramp up the camera development or camera production. So we will get the first 100,000 pieces in the next couple of days or weeks. And then we see how fast we can ramp up. There is always a small risk. But we think that as in the past, we can control that risk. On the breakers, Dimitar already said, demand is higher than what we can produce currently. But the problem always is if a product comes late, the ramp-up of production is -- it can be one of the issues. But we think that we feel that we are good with controlling that. We had similar issues in the last years. And so far, we as well were able to manage chip shortages and delivery problems and pricing. So far, we are fine. On the new distributors, they already ordered the first product. That will not be crazy high volumes because they will as well see how fast they can sell out and onboard new customers because the idea is not that they deliver to the same customers that we had before, so retailers or distributors that we had before that they open new doors. So that is -- I think this is a very positive impact. It can as well be a negative impact because if you open new doors, some other doors might close at least a little bit because someone is not happy with what we do here, and we need to balance that. We will be able to say more after IFA because IFA is very important as well for order taking for Black Friday, not only in DACH, all across Europe. So after IFA, we know how much do we have in the order books and how will not only the second quarter -- sorry, the third quarter, but as well the fourth quarter. And Dimitar about factory in Plovdiv Wolfgang has been with me in the factory. So maybe Wolfgang, you can confirm that the factory exists. Absolutely. And that the machines are there and they are warmed up and they are preparing production and now Dimitar can add something.

So yes, about the first point, just to the -- currently, the whole electronics market is under pressure. It's under pressure because the AI and because of the shortage of wafers for the chip, some components that the last year, for example, the main materials like Cooper aluminum and everything is increasing twice and sometimes 3x. This is make additional pressure. We're fighting with everything. We're working with everything. For some devices, we do replacement, something which is higher than we don't see. But really, we manage over 100 devices per year, something to be changed on top of what you see as a new development. So it's very extensive in the world there. It is going there. But it's -- if somebody tell -- okay, if somebody tell that it's absolutely completely sure that there will be no surprises for the supply chain, this is not true. or probably they doesn't produce so much and they get everything. For the companies like us, which have -- which produce millions, then the supply chain is challenging all the time. But we are sure that we can solve it. We're working on that. Surprises of course, could be expected at any time, but this is nothing new. This is for the last 5 years, 7 years is the same and now it's continuing like that. About the second manufactory in Poly is going well. We start -- our plan is to move all -- not only the modules, but also the all Z devices to be produced in Poly because these devices doesn't require work. It could be -- the production could be fully automated. It's -- at the moment, we make a trial production for each of these devices. So we expect -- we to move completely them from China to Bulgaria end of the year, beginning of next year. Of course, China will be all the time our backup if we need more quantity or if you have an issue with the production here, they could help us. But this is initially it's planned like that. So for me, it's going well and the production now we produce 10,000 pieces for each of the devices just to train the personnel, the people there and to see do we need some polishing the production procedures.

Yes. About the elephant in the room, first, I thought you talk about me. But I'm happy that you don't talk about me, although sometimes I feel like the elephant in the room. But seriously, you are all professionals, and you know that as a public listed company, we cannot comment on ongoing things. We have confirmed because there was -- there were rumors in the market. We have confirmed that we have contact to Schneider that they have an idea to exchange about a possible offer and something that lies on the side of the bidder, what he will finally do and how this process will continue. So we are not allowed to and able to comment on that point. Sorry for that.

Another hand raised by Mr. [indiscernible]

Alexander from [indiscernible] Europe. I have two questions, please. So the first one is on your change of methodology on the revenue geographic split. I just wanted to know what would have been the growth rate of rest of Europe without the change to know a bit how much cross-border sales are you making from the DACH region? And then the second one is on the energy costs. You were telling us, I think, last quarter that you were moving more and more from air freight to freight to reduce the cost. So is this transition going?

So first, cross-border, without this adjustment, rest of Europe sales would be higher. because currently, we see that products are via the distributors that are selling on Amazon Marketplace are delivered to Germany and sold on Amazon there. You know that in Europe, Amazon Germany is the biggest Amazon place. U.K. is the second biggest and all the other countries are way behind. So we have distributors that are not receiving the products in Germany, but selling them back to Germany, and that was the allocation that we made. So rest of Europe would be even higher if we show that in Germany a bit lower because of this significant thing. We always had some small adaptions because if you deliver to Amazon. Amazon has warehouses all across Europe and then shipping back to Germany as well. So we made some allocations because we got the exact numbers from Amazon, and we use this methodology for now as well. So that's to the cross-border sales and the adjustment. And the second question was about the supply chain. I cannot exactly tell you, we can prepare that for the next quarter. I think we have shipped around about 1/3, maybe 40% of our deliveries with ship or train in the first half of the year. And we have an increase of -- or a reduction of cost of goods that is around about 1% to 1.5%. Looking to Iliyana, does this make sense? Yes. So 1% to 1.5% improvement. That means if theoretically, we would ship everything with alternative methods, our calculation was it could increase the gross profit -- gross margin, sorry, by 2% to 3%. We will never be able to ship 100% with train or ship. So maybe 1.5%, 2% is what we can reach. But it depends as well as how fast do we need the product because we always prefer to make the revenue instead of having 1% higher margin.

Currently, what I can add, something which we do, we optimize our air freight prices because we doesn't deliver with such a -- not with the speed service, but with a little bit slow service. Then we chip definitely, currently, we doesn't do anything because time is too long. But we train, for example, the breakers, the EV chargers, the all big appliances, which is heavy is coming only with the train. For the small relays, we're still using the air freight, but on the optimized prices. So in the future, probably we can do something at beginning of next year. But I think now especially for the last quarter, the season of the high sales, this -- we will be still mainly used the air transportation.

Yes, especially with the new launch products because otherwise, we would not get them on time.

We have one more raising hand by Mr. [indiscernible]

Do you plan to manufacture smart devices for the military industry?

No. I don't know if Dimitar has something in his mind, but not to my knowledge.

No to smart devices the industry. Maybe they could use our door and window sensor for the tank or I don't know what. No, no plans.

So we're moving on to our chat box in which we have a couple of questions. The first one is, will there come 2030 targets?

No. I repeat what I said in the last call, we had -- for one time, we had a long-term guidance about 3 or 4 years. And now we will go to the practice that, to my knowledge, every bigger company is using. So not giving 2, 3, 4 years targets, but 1-year targets that we typically will announce at the beginning of the year. So once we know how '26 is finished, we will give our targets for '27.

All right. The next question, the H1 results remain strong. The collection period appears to have improved compared with previous periods. Is this mainly the result of changes in your customer mix, credit policy or internal working capital management? And do you expect this improvement to be sustainable?