Yes. Thank you very much. Good morning, everyone. Welcome to our Trading Update for the 9 months '24.
We have a big group today, so more than 120 people. That's what Franziska just told us. So, that's great. Thank you for the high interest. We have the usual sharing of parts in this presentation. I will do the introduction, some highlights and at the end the financial details. Dimitar will talk about products, and there are a lot of interesting things that we shared already 1 week ago on our first German Capital Markets Day, where we as well had a very high interest. We have a special setting today.
Normally, we are sitting next to each other in Sofia. This time it's a bit changed. Dimitar is in Munich. I'm in Sofia because there is a trade show where we show Shelly X products to a bigger audience and to the target group. That's why Dimitar has to be in Munich, but happy that he joins the call as well before he goes to the show and hopefully, gets a lot of customers motivated to use the Shelly X solution in the future.
I usually start with telling you that we are basically a smart home company -- sorry, not a smart -- we are a smart home company, of course. We are a software company. We are doing smart home products based on our software solutions. And the only reason why we have as well very good hardware is when we started this, we did not find hardware that can serve the needs of our software. So, we are coming from the software angle, having hardware products as well. Why am I stressing this? It's easy to copy hardware. It's not so easy to copy software, or almost impossible to copy all the things that we have built in our products.
And why is Shelly an interesting case for investments? We are in a positive market. We talked a lot about that last week on our Capital Markets Day. We have a recognized brand. Our technology is way ahead of what competition can offer. We have the right scale in the meantime, and that starts to grow. That gives us a lot of potentials for getting economies of scale. We have upside potential with new ideas, software models, working towards recurring revenues. We have strong financials. We have a strong management team, not only Dimitar and myself. We have a very strong group around us. And ESG, everyone is talking about that. A couple of companies are a bit scared. We help them to fulfill their ESG goals, and ESG helps us as well to fulfill our goals because we have a lot of products that enable reporting and reducing energy consumptions.
So, some of the highlights of the 9 months. We have sold now 18 million devices since we started and sold the first Shelly device in 2018, an impressive number, 8 million in the last 12 months. So, you see that this is growing significantly month-over-month and we expect to break through the 20 million line soon in the next couple of weeks or months. We have Shelly devices in 3.6 million households. That's usually an estimation because not every household is connected to our cloud, or every device is connected to our cloud. We have 1.6 -- close to 1.7 million users of our cloud solution, and this grew by 570,000 in the last 12 months. All this shows the success of Shelly.
Our revenue is growing way above the market, I have to say, in all regions. We received -- and I always say that it's a bit complicated to get clear market numbers. We had a meeting with a very big customer yesterday who is usually having very good market numbers. They are talking about market growth in smart home that is around 10%. If you see our growth rates as usual, we are outperforming the market, although the market is a little bit complicated. And we know that a lot of our competitors are complaining, suffering. We are continuing to grow.
We have successfully enlarged our distribution channel number. I will come to this in a second with 2, 3 very important moves. We have launched around Light + Building. In March this year, we have launched our Installer Finder. So, a customer that is not able to install the devices himself will now find already 710, or more than 710 installers on our website in different countries. This was growing by 240 in the last 3 months. So at the beginning, it was a bit tough and slow, but now it's really taking off. We will have above 1,000 for sure by the end of the year.
In Q3 alone, we were present on 6 trade shows, mainly smaller ones in small countries in Europe and in Asia. We have a significant growth of addressable customer ownership with our cloud users. We have phased out a couple of older product generations. This has a slight effect on the EBIT, as you might have seen yesterday already, but not significant. And we have quite a complicated year because currently, we are working on bringing the Generation 4 in 2025 to the market. So, we have to make the first preparations. We have just launched Generation 3. We still have Generation 2 in the market. We have some products from Generation 1 that we will move directly to Gen 4 in the next year. So, that's quite complex and that generates a little bit stress on some product generations, but we have successfully managed that so far.
Our cash level, that's an important information, is on the level -- on the same level or a little bit better than by the 30th of June this year. That's something that we promised that we will work on that and we started. Our SAP integration is nearly completed, so that we will have a much easier life and much better reporting next year. And we launched a new Shelly website that shows some successful results, much better customer satisfaction that is more around use cases to address as well customers that are new to the smart home environment.
Now to the numbers. We grew in the first 9 months of this year 47.2% to a revenue level of EUR 65 million. Once again, information that we get from the market, the market is growing like 10%. Let's be optimistic and let's say, the market is growing 15%, then we outperformed the market times 3, maybe even times 4 in this year. So that's quite impressive. The EBIT grew a bit under proportionally with 29.2% to EUR 15.4 million. We have an EBIT margin in the 9 months of 23.6%, which is still perfectly on track to the 25% mid-term target that we are promising.
And as I said, there were a couple of one-time effects that will not come back every quarter, and we are 100% sure that we will reach the 25% in the 12-month period. And our cash is on a level of EUR 11.4 million end of September, which is EUR 900,000 better than it has been on the 30th of June, which is 37% below the level of 1 year ago, but you will see later in more details where the money is going. It goes 100% in the working capital, more or less 100% in working capital, where we have some significant increasement of stock. So, we are very well prepared for Black Friday and for a successful Christmas season.
We are growing our number of distributors in the do-it-yourself side, mainly in the professional side. And I want to highlight here 2 new onboarded distributors. One is Ahlsell in Sweden, Norway, Finland, Denmark. It's the biggest electric wholesaler in the Nordics region, market leader by far in Sweden. Sweden is a market that is important for us, where we have a big competitor, and we have signed a contract with them for all Nordics. We'll start now in Sweden. And NetXL is a company from the United Kingdom. U.K. is one of our key markets for 2025, 2026. We have some very successful meetings with them. They are very much committed to Shelly products, to the Shelly development. We see some first very good results, growth month-over-month that looks very promising and opens new doors to the biggest market for smart home products in Europe.
A couple of words to the Installer Finder. I mentioned that we changed the layout a little bit. If you have been previously on our website, you saw maybe the old one. Now, we have to go in regions so that you see how many installers we have online in a region. Then you click on it, then you see how many is this in my city. If you type in your postal code, you see that who is closest to you and what level of qualification do they already have. And after starting in Germany, we have rolled out to Austria, Switzerland, Denmark with a very good success, Finland, Sweden only 2, in Luxembourg, 2. We have even 1 -- I didn't know that we have one on Palma de Mallorca, maybe because there are some of you guys having houses there or maybe it's because our Chairman lives there from time to time. But we have one installer onboarded on Mallorca for the -- I think for the German community, quite a useful thing. So, that's the introduction.
And now Dimitar, a couple of words about what's new on the product side and what makes us special on the product side.
Okay. Thank you, Wolfgang. First, good morning from Munich.
I want to share some information about the exhibition here. It's incredible interest to our booth, even the booth is not so big. It's not so, let's say, interesting. There is lots of visitors and everybody knows about the Shelly. Everybody is showing his phone, his application, and see, I'm using Shelly in my house. For us, this is a very important sign because this is the professional exhibition. electronica is for the professionals, which is doing the electronics, any kind of the electronic components and wiring and everything, which is related not only for the smart home, but for the industry, electronic industry itself. And you are very surprised that at the moment, almost everybody know about the Shelly and everybody is interested to participating and to working with us.
Some reasons in these slides. So, I can start with that. It's very important that we are one of the brands which is providing end-to-end solution. There is not just -- not just the heating control, not just the lighting control, which many other competitors do that. We are everywhere. And with our devices, we can automate every single corner and every single appliances in the houses, something which gives the customers just with single choice, single brand to make their buildings and home smarter. And not only this one, because the mindset of the company, how we build it and open the API, open the access to our devices to third parties, we are one of the brands, which is covered from many, many other platforms.
At the moment, I think it's close to 400 different platforms is supporting the Shelly devices. And the partners now is the much bigger and popular name in the world. As you see that's in Porsche, Audi or Harman Kardon on top of the standard one, which is the Amazon Alexa and Google, which everybody support them and they are -- and can work with them. But there is many partners. And I can say that every month we have at least 10 to 15 more companies, which is interested to using and to integrate our devices a part of their own solution. And this is -- because of this one and everything, we've seen that the Shelly X reached a significant interest for the appliance manufacturers because they know that the appliances with the built-in Shelly devices, Shelly model inside could reach such huge number of the integration and could be part of this ecosystem, which we built last few years. Yes.
Something which make us completely different from any other brands that -- this is from the very beginning is the community-driven products. And community, I can say that this is the community-driven company because we are very close to our community. Some information which I want to share, just 2 weeks ago, we acquired the biggest German for the Shelly products. And basically, this is the biggest one for IoT products in Germany. And now we have additional reach for 100,000 customers, which is our customers. But they are also using some other solutions like that. Especially for the DACH region, we can cover them with the special localized support to help them to improve their skills. This is the -- some which is not in presentation because not a part of the Q3. But anyhow at the moment, the Shelly brand is covered from the social media very well.
There is a -- I think maybe we reach 10,000 videos in YouTube from the our customers, which they sharing their experience and they sharing their -- acknowledge how our device can be integrated to almost every needs in one smart home and building. We have a huge reach as you can see. This is when we make a poster when we release the new products. There's over a million people see it in a very short time, which is very important. Everything is viral. It doesn't spend additional money to present the products because this is coming month-to-month between the community and people will start sharing immediately their opinion and start sharing and showing how they can use the devices.
On top of that, for our customers, for everything which we doesn't want to implement because we don't want to complicate -- make complications for the regular customers deeper. We have this user-driven scripting and now we're very popular between the developers, not only do-it-yourself electricians, but also developers because they're using our devices and they make additional programming and developing on top of our software, which give the device additional features, specialized features. For example, special kind of the TV controls, special kind of the other appliances control, features which is not for everybody, but for very specialized and including industrial usage. This is important for -- that they could have it.
And something together with that, we are accelerating the number of the products, which we released. At the moment, as you've seen this year, compared with the other tools, we are going with the biggest numbers. A big part of the products is ready, to be entered in the mass production. But the first official release of these products will be in CES beginning of January in Las Vegas. But yes, the team -- the R&D team is growing. We accelerating more and more the new products and the ranges, and updating the products with the newest technology. We believe from the very beginning that the innovations and the thinking about the future is much important. And this drive our success in the business, which we are doing.
And very short in the history and there we leak a little bit more about the future. Now, we're in the Generation 3. From the very beginning, we start with, let's say, compare with now with the limited feature that the devices could be used only the WiFi connection and then MQTT protocol to connect to the third party and also using the websocket to our cloud. Then in Generation 2, we're adding the Bluetooth technology to all of the Shelly devices and they can be able to control, to using the Bluetooth sensors and they communicate to each other between the Bluetooth. They can be [ provisioned ] over the Bluetooth, which give additional functionality for devices.
Now, we're going to Gen 3 and these devices on top of everything which we do. Now, we have a Z-wave [ line ]. We're supporting KNX. We have a first device, which is directly competing the DALI competitors, the manufacturers because we're offering the solution for the lighting, especially for the lighting using the DALI protocol. The KNX, which is most popular protocol in, let's say, in Europe, I can say not only in Europe, but also in the world. For automation, our device can be part of the KNX system. And the matter is there for the very -- for the customers, which doesn't want to bother with all kind of this technology, just want to connect these devices and plug-and-play to start controlling them, there is a Matter. And our Gen 3 devices is supporting or on the way because on the certification to support the Matter, which with this one, our ranges from the regular customers, which don't so much take savings, but want to use the devices and to make his wife easier to the very deep professional, which looking for the everything, including industry usage for our devices.
And -- what next? When we reach the Gen 3 and we started that, we are also working in the Gen 4. And as you see in the Gen 4, the main reason for the Gen 4 and the main approach for the Gen 4 is to integrate into devices LoRa, Zigbee and Z-Wave 4 Long-Range technology. And this is very important for us because like this, if at the moment, you are very strong in the smart home and smart buildings, now we're looking for the smart cities. We're looking for the smart factories. We're looking for the real industrial automation using these protocols. Some of them are devices to communicate between each other in 5 kilometers. In our test, we make a chain of the devices and the measure device, which can communicate between over 100 kilometers and something, which really extends the devices in many other areas, [Technical Difficulty] for example, and others where the coverage is not so good. And this is some of our targets for the Gen 4, which we're planning to be released in the next year. Yes, that's -- I think this is something, which at the moment nobody do that.
And now back to Wolfgang to share with you some financial details.
Yes. Thank you.
So the future looks bright. At the very beginning, I said one of our strengths is that we are ahead of competition with our features that is coming mainly from software development. We have the right hardware for that. And with everything that we have in the pipeline for '25 and '26, we are sure that we will increase the advantage that we have to competition and not let it shrink so that they catch up because they see what we are doing. We are well ahead. And we do this in a typical Shelly way at reasonable prices with a very high quality. So, that gives a very positive outlook for '25 and as well for '26.
So coming back to the numbers. You have seen this chart before. Just as a reminder, revenue growing 47%. EBIT on around about 30%, a little bit under proportional, but still on 23.6% EBIT margin, which is an outstanding level in the industry and the cash is on a solid level as well. That is something that is very important for us as well.
If we look to the bit more detailed revenue development quarter-over-quarter, you see a similar picture. So in the Q1 '22 to '24, we had a CAGR of 53%, of course, always with some ups and downs between the different quarters. In the Q2, we grew an average 49.3% and in the Q3, 43.3%. And Q3 is not the strongest quarter, although last year, we had very high revenue level with EUR 16.1 million already compared to the year before, a nice jump as well. But that's -- so everything goes in the right direction. Once again, don't forget, we are in a positive market. But if the market is 10% or 15%, we are outperforming the market times 3. Even if the market would be, which is not 20%, we are growing twice as fast as the market. So, we are increasing as well the gap to competition in the speed of growing, and there is a lot of market to grab for us.
On the EBIT side, as I said a couple of times, in Q3, the EBIT was a little bit stressed by some sell-out activities, one-time activities. So, we have 20% EBIT margin in Q3. That reduces the EBIT in the full year to the 23 -- sorry, that's 23.7%, it should be 23.6%. We made a couple of stock clearance activities. That comes a little bit from the chart that Dimitar showed before, moving from the different generations in a very high speed. That has an effect on working capital on the one hand side and on some things that we decided to clear out to clean the stock before we go into Black Friday.
We have some of the things we can use perfectly for Black Friday activities. So, we will sell out some of the Generation 2 products that are higher sellers, make the market free then for the Generation 3 products. But we are not expecting such an effect on the EBIT margin in Q4, so that we are sure that we will catch up to the 25% that we promised in the mid-term as an EBIT margin. We are well prepared for Q4 for Black Friday and Christmas with enough stock and a clean stock. So, we don't have any burdens anymore there. We had some old devices with some older chips that we had to sell out. So everything fine. And the feedback that I got yesterday and in the last days from the sales team is as well that the distributors say that the sell-out is working quite well. Everything is good prepared for Black Friday and Christmas. You never know how good Black Friday finally will be, but we are looking forward to Q4 that should be as expected, quite strong. So, we are confirming once again our numbers for the year and see no problem on the EBIT or on the revenue side.
The regional growth, the DACH region is still the strongest region with 51.4% total revenue share, growing 47.4% on a very high level already. And this is -- and we showed a little bit more details on the Capital Market Day. By the way, the video is online. The presentation is online. You can download it in case you have not been there, or you want to check something in more details. How did we develop after we put the DACH organization in Munich in place? We see an acceleration of growth. That's as well the reason why we will do similar things in other countries.
Italy is our second strongest country. It's not reported separately, but I can say that Italy is the second fastest-growing country or region after country -- after the DACH region. And we have as well some positive developments, very positive developments in Iberia and in Spain and in Portugal. In the U.K., we are at the very beginning. But with all the meetings we had, we look forward to a very strong 2025 and 2026. The U.K. market is size-wise, bigger than DACH. So, bigger than Germany, Austria and Switzerland together or on a similar level at least, which means if you see the revenue numbers you have here, that is something that we are targeting in the U.K. This will not come from 1 year to another. But in the next 3 years, we should be on a level as we have it today in the DACH region. So, that is one of the focus countries where we are open to invest in people, in marketing activities, visibilities, and we have found good partners already.
Rest of the world is growing still on a small level, but it's growing nice. And we have some surprisingly positive, again, on a very small level, feedback from Asia, some demand coming from regions where we are not present, but Japan, Korea is asking why we are not pushing Shelly more. We cannot do everything at the same time. We are not magicians that can be everywhere at more than one place at the same time. So, we are careful with doing too much, not growing everywhere. And of course, for these countries, we need additional certifications, which are possible to get. So, we don't have to make big product changes, but it all needs effort. It all needs work in the R&D team and in other teams. But we have more than one leg we can stand on, and that is as well a quite positive news.
On the premium app side, we have reached EUR 300,000 revenue in the 9-month period with the premium app. We are targeting EUR 700,000 this year. This can be a bit too much, so it might be that we are a bit below because we always have 3 months delay. The first 3 months are free for the customer. But on the user side, which shows the future revenue, we already reached 18,000 in the 9 months '24. Our target was 20,000 by the end of 2024. And I think that we will reach the 20,000 before. So maybe even this month, we are quite close to reaching it. So, that is something that is quite positive and will have an effect that is then visible in the first quarter 2025. So the other numbers target stays as it is, even though there is a small risk that we will not reach the EUR 700,000 revenue in this year, but we will not fail it with a -- in a big proportion.
Cash flow. That's a very interesting chart for us because we are more or less loan free. We have sold our office building. We have paid back the loan that we had to pay for that. We still have an equity ratio of 88.7%, and we have EUR 11.4 million cash on the bank account end of September. That gives us enough air to breathe, to buy the products that we need for the Christmas season. Most of them are there already and as well to have enough stock end of the year because you know that Chinese New Year is a period where factories are closed. So for the first quarter, we have to be prepared as well, and that gives us enough financial firepower to do so.
The big thing that's what I said at the very beginning, most of our cash is going into the working capital. So the inventory increased by EUR 12.7 million. We have a total inventory now of EUR 22 million. And that's something that we will work on next year. This year -- this is additionally stressed by the different product generations that we have to prepare. We have to buy the chips for Gen 4. We had to buy them 6 months ago already. We have still chips for Gen 2 and Gen 3 that we will sell-out by now. So, all this stresses the inventory a little bit, but we are able to manage that.
On top of this, beginning of the year, we increased our shares in Shelly Tech. That's Qubino, former Qubino company in Czech Republic. And Shelly Asia, that was an investment of EUR 1.1 million, roundabout. We have R&D investments in these 9 months of EUR 1.9 million. We sold assets at a value of around about EUR 3 million. Big proportion is coming from our office building. We repaid the loan. We have paid a dividend of EUR 2.3 million middle of the year. And as I already said, we have an equity ratio of 88.7%. And I think that is something that only a few company can report about themselves.
Last time, I showed you this chart because working capital and of course, margin level is something that we are working on. We want to keep the high margin levels. And this is something that I prepared last time, telling you what are we doing in 2025. We started the activities already, and here is just with these small bubbles an update where we are. I already said at the beginning that SAP implementation is almost done. So, we will be through by the end of the year. And we see that we have better reports that it makes our life easier in a lot of -- or will make it easier in a lot of areas, will save some costs as well, although you know that SAP is never stopping. So, we will constantly improve that.
Next year, we will work on the reduction of stock. We have 4 months, 5 months of stock now. We want to go down to 3 months to 4 months. We have implemented the first things. One thing is a dedicated procurement department. We have the first people on board. We have decided to have a Chief Procurement Officer. We have found a person for that. That's not yet public, but we will share as soon as we can. And that will definitely improve the quality of planning, as well as the quality of negotiating with Chinese and U.S. suppliers, so to reduce the cost of goods to improve the gross margin or keep the gross margin stable.
We are already much more restrictive with customer payment terms. That is something that we started in the last quarter, and we see the results. So, we are on the same level with customer receivables, although we have more customers asking for longer payment terms. That's quite nice. We have checked as well options for factoring if we need more cash. We are not using this right now, but we are ready if we need to or almost ready. We will use in the next year whenever we can air freight -- sorry, sea freight instead of air freight that gives a huge improvement in costs and in the gross margin.
Price negotiations have started with some first effects, but it's not on the level as we expect for next year and the year after and stock control, so avoiding older products in stock, avoiding situations where we have to sell-out some things is as well something that is important. We started to put the things in place, not yet well executed. It's at the very beginning, but we will see the effects in 2025.
If you look to the P&L, here, you see the reason for the stress on the reduced EBIT. It comes from sell-out activities from distributors and our activities that are booked as marketing expenses because they are doing -- they are invoicing us their marketing efforts, and that's why it's booked in that line. We will, of course, re-discuss it if this is right here or should be somewhere else. But this will not change the total picture. That is where the 1-point-something percent lower EBIT comes from.
As I said, one-time effects and of course, as well visibility effect, that's the positive side. Dimitar is on a trade show in Munich. We have been on 6 trade shows, smaller ones in this quarter only. We had 3 big ones this year with CES, Light + Building and IFA. And these 3 together is an investment in our visibility of more than EUR 1 million. And the rest of the G&A, we have perfectly under control. We are growing under proportionally, although we are hiring a lot of people, especially in R&D, and we will continue hiring people because we have a lot of product ideas that need resources. And in the other departments, we are more or less okay with the level. So, EBIT margin, 23.6%.
Net income on a proportionally higher level of 21.2%. That comes from the -- mainly from the effect of selling our old owned office building. We are now moving, or we moved into the new building that is rented. That gives us more flexibility. And the sales of the office building is not in the EBIT. It's below the EBIT line, goes into the net income. And that's why you see that this is almost on the level as the year before.
Some words about where are we on the way to achieve our EUR 105 million target. We reached 61.3% by the end of September this year. Last year, we were at 58.9%. So proportionally, we are closer to reaching the 105% than last year. I told you that feedback from the market are positive. Feedback from the sales team are positive. So we are very confident that we will reach that target. Maybe it can be a little bit more, but I want to be very careful with overpromising. So, we are on a good way reaching this target. Compared to the other years, everything is perfectly as planned.
So the summary, we are a bit above targets, our internal targets after 9 months. The EBIT in Q4 is lower than the average due to some one-time effects in marketing and some sell-out activities. And we will stabilize the EBIT on the promised level of 25% in Q4, or in the total year with the Q4. All regions are growing above the market. That is a very important thing for us that we continue outperforming the market times 2, 3 or even above that.
Our regional expansion continues. That's one strong source for revenue. We are progressing very strong in going from do-it-yourself to the professional market. We now have roundabout a share of 30% in the professional market. In regions like the Nordics, we are above 40% already. And that is the bigger market that we are addressing. We want to do that without losing a millimeter of space in the do-it-yourself market. That is very important for us as well. And we have signed some important contracts, as I said, with companies in the Nordics about listing us for the installers, and we are close to signing contracts in other big regions with these players as well. So, that will continue.
We have a wider product range. Dimitar talked about that. That will continue, and we will have a stronger product selection for '25 and '26 that will increase the gap to competition. Our cloud service and premium app starts to deliver as promised. We confirm the guidance for 2024, EUR 105 million revenue and EUR 26 million EBIT. 2026 goal stays as well unchanged, plus EUR 200 million and plus EUR 50 million EBIT. That's something we confirmed as well on the Capital Markets Day last week. And beyond that, we are not talking about concrete numbers that would not be serious. But if you are interested and you could not join the last week's meeting, then please check the presentation. You will see what are our ideas beyond 2026 and how do we expect the market and our company to develop. Measures to optimize working capital are on the way. That has started. We have started some projects. We have started to form a new department that will work on that and will deliver in 2025 the needed results. And that's it.
Thank you very much. Open for questions. As usual, you can download the presentation scanning this QR code. You can subscribe to our Newsletter, if you not have done it already, scanning the other QR code. And now, I give back to Franziska and open the stage for questions.
Yes. Thank you so much, Wolfgang, and also Dimitar for the insightful presentation and congrats to the numbers.
[Operator Instructions] And we have the first question from Bastian.
So, 2 questions for Wolfgang. The first one is on the gross margin. I noticed the Q3 gross margin was exceptionally high with over 60%. Was it also because of the sell-out of old products? Or what was the reason for this higher gross margin?
And the second one. Could you split maybe only indicatively the marketing expenses into trade shows, paid marketing and the partner promotions you told us about?
So first question, we are -- and that's an effect that I mentioned in the -- when I showed the P&L chart. So, we could discuss is the allocation of relatively high marketing -- third-party marketing expenses that comes from our distributors, should they go against the gross margin or in the marketing spending. So, that's something. So, we are not touching the invoice prices. That's why the gross margin is quite high. And if they invoice us for some e-mail marketing, some trade shows that they are organizing that goes into the other line. So, that's something that we need to re-discuss internally and as well with the auditors, has no effect on the EBIT, 0. The gross margin, I think, is a little bit too high because we were planning with a gross margin a bit above 50% and not 60%. And that has an effect with one big customer that I cannot go in detail, unfortunately, because that would wake up a couple of questions on their side. But this is something that we have to look at.
On the split, I don't have the split in concrete numbers, but a very small proportion is paid online marketing. So, we are not spending a lot of money on Google or Facebook paid advertising. That's a very small amount of money. Trade shows are, of course, much more than last year, especially because we have one big trade show more and a lot of small trade shows more. I can only guess that this is maybe EUR 1 million more, EUR 1.5 million, something in this direction. I can check the numbers and can deliver them afterwards. The big proportion comes from sell-out activities. That started already the whole year when we are giving money to our distributors so that they can stimulate the markets, they can go to their retailers, they can buy places in the stores or visibility in a web store that goes to Amazon for visibility on the Amazon web shop. They have an automatic system, and we have as well a manual system.
And then on top of this, we have the sell-out activities. And all this is, I would say, it's a little bit too much. And if I want to see something positive in that, we have clear visibility about the numbers now that is coming from SAP and from our controlling department. So, we can immediately steer against that, and that is something that with all negative points that I can find there because I'm not happy about losing 1.5% or 2% EBIT, even though it's on a very high level. The positive thing is that we have seen that. We changed already the methodology. We will have countermeasures, and it will not be a miracle to come back to the 25%. That's all fine. So, there is never something only bad. There is something positive in that as well, and that's what I want to take from there.
And we have another question from [ Veeran Kirilov ].
Now, we have another question from Alexandre Desprez.
I have a question regarding the clearance sales. Do you expect it to occur like every 4 years or something going forward? Or it's just like both Gen 1 and Gen 2 and then it's okay?
Very clear one-time effect.
Mr. Kirilov, you should be able to speak now.
Can you hear me?
Yes.
I have a question to both of you, to Mr. Dimitar and Mr. Wolfgang. And I listened to 5th of November presentation. It was amazing. And since then, I'm thinking because the world is changing. You mentioned you want to go in U.K. You mentioned Scandinavia is a big target also. Trump came now and the world is changing. Is it not a good time to get a Co-CEO from America, which helps Mr. Wolfgang? And because of terms that we also will try to conquer Tuya on selling chips. And you know the Americans, they are like aggressive types, and there will be problems probably with the economic in Europe.
The question is to Mr. Wolfgang and to Mr. Dimitar, both of you.
Can I start the question first? I didn't think that we need many other Co-CEOs or something. If you find the proper person in the United States, which could help us to -- for faster market reach and a partnership, maybe we can do that. But it's not only because when -- now, United States is a different market. It is more expensive market mainly. And just imagine now there is some questions regarding the EBIT, everything. Just imagine if you want to spend some kind of the marketing activity, money for marketing activity in the United States. This could be -- then we can show maybe the negative numbers if you want to be much more faster than others.
From another side, something which you say, yes, the Trump maybe will change a little bit the world or significantly, nobody knows. But I think this is in our favor. First, something which is behind the scene, which we doesn't share because it's not part of the Q3, but we're working to move the production of the devices for the United States from China to Bulgaria. The reason for that is that we're expecting that there will be some import taxes, will be increasing significantly. And if you move this one, we believe keep our products to be competitive, competitive not only -- to be much more competitive than the original, I mean, the Made in China, the Chinese product, which will give us the additional advantage. This is good for us.
Currently, we're investigating partnership -- possible partnership with a few factories in Bulgaria, which one of them can do this job for us. We're also looking for the solution, can be partially producing the devices by ourselves. But in our short-term plan is, let's say, Q1 next year, we partially or fully move the production from United States here in Europe, especially for Bulgaria. If we found another location, that will be also good for us.
When I talk about the economy in Europe, I still think that is in our favor because the old -- let's say, the old approach to the market give us a high-end user prices, a huge discount for the electricians, the huge discount for the wholesaler, which then the end users pays them. It will not work anymore. And not only, there will be significant -- we've seen that more and more professionals is looking for alternatives. And what they can found now, they can find there is a European product. There is a Shelly, which offer them the high-quality, high-wearability, a local -- the full GDPR compliance, the full European Cyber Act compliance and everything, and this is in the much more achievable price.
Of course, maybe they will not have -- let's say, the distributors will not have 50% discount in their -- to put price in their pocket. They need to leave with just 25% or 30%. But the end benefit of this -- the beneficent of this is end customer. And for what we've seen, our approach is better than the approach, which is until now is, let's say, the usual one for the such kind of the smart home or smart buildings, smart cities devices. And for us, let's say, both of what you say for us is in our favor. I think this could help us to take a bigger and biggest market share from the competitors.
Regarding the Co-CEO, I really don't want to discuss at all. If Wolfgang wants to, but I don't want to discuss this.
I would love to have 5 more. That makes our life easier, and we can retire, Dimitar. No, seriously.
If they are so successful, okay?
Seriously, what we are doing is we are strengthening the management level below us with -- and we did with Germany, that I gave up my German position to concentrate fully on the job in the Shelly Group. We found a very good successor. We are looking for a similar strong person for other regions, for the U.K., for other regions in Europe. And I completely agree with what Dimitar just said. I think that the weakness in European economy or German economy helps us because we have the right price points, and we get more and more feedback from installers that they understand that with our devices, they can install more devices, make more money on the installation.
And just a nice side information that I received this morning. I read this in the French newspaper. There is a lawsuit against Schneider Electric, Legrand and the big 2 distributors in Europe, Rexel and Sonepar because they made illegal price agreements to keep the prices and the margins for everyone very high and the fine is EUR 470 million. So, this will be a small earthquake for those guys, although Schneider is a very big company and the others as well. But this is all in our favor because this will open some doors that maybe Schneider and Legrand try to keep close. Although we are such a small company, we know that they had some discussions with Rexel and Sonepar not to list us. So now they -- I think they have a very clear warning to stop that behavior.
And one last word about the United States. Dimitar said that one thing that we are doing, we are not depending or dependent on the United States. So worst case -- worst-case scenario, we withdraw from the United States. Trump is making some crazy things. We are not able to maintain that. We closed completely the United States, which we are not planning. That's just to make very clear what we are thinking about that. We will not change our 2026 target. It will still stay on EUR 200 million. We are not depending on the United States. We see some very good developments in Asia. That's what I said. This can be more important for us than the U.S. in the future.
And one more thing. We will -- we cannot be everywhere. We cannot do everything at the same time. This would not be good. So with all the opportunities and options we see and we presented in Frankfurt last week, we need to focus as well on specific product categories, on specific countries, one thing after the other, one thing at a time, and then we will continue growing in the speed that we expect. Just promising and then we do everything at the same time, Australia, Asia, United States, South America, all countries in Europe, we are not magicians. So, I don't have the magic wand of Harry Potter to do everything at the same time. We need good people, and we are hiring good people.
We have another question from the chat. When launching new generations of products, do you see an initial lower gross margin that improves through the product's lifespan?
Initially, we don't see lower gross margin. We see higher gross margins with new products. And usually, having different product lineups, so like we will have -- we will start with Gen 4 in 2025. We will keep the Gen 3 for the minimum for the full-year 2025, that gives us the possibility to have a stable product line with very high margins and a fighter line that we can use for Prime Days on Amazon, for Black Friday and for other activities. It just needs to be steered in a better way. That's where we need better planning, better procurement, better everything, and we are planning for that. And so that gives us more opportunity than risks.
Nevertheless, what always can happen, and we are not fail-free is that you find out that you have a bit too much from one product as well, this might have a negative effect short term on the margin. But in the long term, this might have as well a very positive effect because we are as well thinking about having some products, 2 or 3 products for everyone as fighter models. And fighter models means that's the first product that you have in your Shelly household. And then the Shelly flywheel kicks in. And the Shelly flywheel means we know that the average customer adds 2 devices per year. That means if we just take our 1.5 million easier to calculate, cloud users, that means in the next 12 months, we will sell 3 million devices to those customers. We know that.
And if the first product would be a very cheap one with a low margin, the next product will be product at a normal margin. So that is -- I don't see a risk there. That's just because we have a one-time effect on selling out some things. And as well there, we might have been a little bit too aggressive because we sold the products out in no time. Yes, maybe we were a little bit too aggressive. On the other hand, as I said, the payback will come with the products will buy -- the customers will buy the second, third, fourth, fifth product, and that is more than enough for payback.
[Operator Instructions] And we have another question.
Congratulations, first of all, for the excellent results. I have 3 questions. First, you seem quite confident in your U.K. market outlook, namely reaching par with the DACH in 3 years. Could you elaborate what you are -- what are the key factors behind the level of confidence?
Second question. How long is the trial period for premium subscriptions? The numbers indicated on your presentation indicate EUR 40 per subscriber annually. On a monthly basis, this appears quite low, probably diluted by trials. What will be the figure adjusted for that?
And the last question. The last question is, at what stage is the transformation into SE company, which was voted on the last GSM?
Okay. I'm not so young anymore. So, I have to try to remember 3 questions.
I'm going to help you, Wolfgang.
No, last one, SE transformation, we have the go from the shareholder assembly. We had an Extraordinary Shareholder assembly for that. The votes are there. We are now registering and registering if you think that Germany is a bureaucratic country. Bulgaria outcompetes that, outperforms that. So, we have registered. It will take some time. It's just a formal act, and then we will be the SE.
Second thing is the trial period is 3 months. And the monthly payment for a user is EUR 3.99. The yearly payment is EUR 35. Dimitar, numbers are right? Did I make a mistake? EUR 35 and EUR 3?
Yes.
So the assumption is that the average customer pays like EUR 40 a year. And now we could say, oh, that seems to be very low. We could go to EUR 10 per month. And then, definitely, people would not buy anymore. So there are not a lot of, if no, maybe successful smart home company with a paid version of the application. One big competitor in Germany is tado. They are making losses with their hardware, promising that one day they will make a lot of money with a paid version of their app. It is not working. So, we have to be very careful. We do not want to be too hungry and increase the prices too much. Maybe it would be even better to reduce the price and to get more premium customers. That is more our thinking.
The last question. Why am I confident about the U.K.? We started -- we have a person in the U.K. a salesman. We have a very good -- we had very good talks with a couple of distributors. We think that now we have found 2 very good distributors. One of them is NetXL. We had a meeting with the CEO and the sales representative this week here in Sofia with very, very positive feedback from their side. So, seeing at still on a low level, the development of revenue that they are doing with Shelly devices, the feedback they get from professional customers is super positive. We are close to sign with big distributors. I mean, do-it-yourself distributors. I don't want to say the names because I'm not allowed to. But that would be like a kick start in the U.K. market and would give us visibility like crazy. We are already on Amazon. We are on some other platforms. It develops very nice. And I do not expect miracles. I do not expect a huge million numbers in 2025, but 2026 should be very nice and visible. '27, I expect a big kick in the market.
We received another question from [ Peter ].
EBIT margin for Q2 was at 25.8%. Prior to Q3, were you expecting such a decline in operating margin due to the sell-out activities?
What was the question about?
Were you expecting such decline in operating margin due to the sell-out activities?
Yes. We expected a decline in the EBIT margin, not on that level. I expect it to be 1% less. Unfortunately, we are not able to have 25.0% every quarter. And someone who can do that, I will hire him tomorrow. You always have some ups and downs. And we are in a corridor. We were at -- we promised 25%, by the way, for 2026. So, this was our outlook. We reached the 25% earlier. Last week on our Capital Markets Day, I said as well that we and Dimitar and I are 100% aligned on that. We are willing to sacrifice EBIT percentages for more revenue. So if we would get the same euro amount for more revenue, we would be more than happy because that's a market gain business, and it's a euro business and not a percentage business.
So what does this mean? If we make -- in 2026, if we make EUR 50 million, not out of EUR 200 million revenue, but out of EUR 250 million revenue, I would be more than happy because that means we reach more customers, we have more opportunities for the future. It's not about percentage EBIT. It's about the total EBIT. We are in a very healthy situation. And once again, if someone is able to steer the company exactly on the point, I would start to be a bit suspicious to say, what, is everything fine? How are they doing this? It is impossible. You always have 1%, 2% up and down on this level of EBIT margin. I'm not talking about retail business where you have 2% total EBIT. We have 25% total EBIT. And now we have 23-point something, which is, for me, perfect.
The outlook for the future is increasing that a little bit. We were a bit too aggressive on sell-out. Afterwards, you always know better than before. And I think the positive thing is that sometimes you need to be -- if everything goes perfect, revenue growth, EBIT growth, everything fine, you might be a bit lazy. And this is a wake-up call exactly at the right time so that everyone in the company is that, oops, let's pay attention to get this 1% back and we will.
We have a follow-up question. Regarding supply chain and the U.S.A., what will be the advantage of choosing Bulgaria over countries like Mexico, for example?
Yes. Trump, if you pay attention, Trump said that he will increase the import duties from Mexico by 100% or something like that because he doesn't like Mexico. And so this is not an option. It might be one, if he is not increasing the import duties. He might increase the import duties from Europe as well, not on the level as he wants to do this from China. But Bulgaria has one advantage. We know that the labor costs here are low. We know that we could produce on a similar level as in China. The shipment costs for spare parts, materials from China to Bulgaria would be more expensive than shipping the final product. So, we would have some disadvantages. And on the other hand, we might have some support from the European Union to open a factory here that would help on the investment side.
Dimitar, do you want to add something?
Yes. Something -- also devices produced will have a E1 certificate, which also will help us for some countries they're looking for the products, which is made in EU. This will help us also to increase the sales in these countries, which are important. And also don't forget that this somehow is a training, if you want to move also partially production for European -- for devices for Europe because device is quite similar. When it is produced then for the United States, for us, it's very easy we can produce some numbers also for Europe customers. And basically, I think it's a good time to do that. Mexico, one more factory somewhere to control, to managing will not be easy and we are more, let's say, I think it's basically still under the radar of the new American -- yes, okay.
And we're coming now to an end to today's earnings call. I thank you so much for your attention. Should any further questions arise in the future, please do not hesitate to contact us or the Investor Relations management team.
And of course, I hand over now for some final remarks to the leadership team. Thank you so much, and have a good day.
Yes. So, thanks again for joining. And especially, thanks again for joining after so many people joined last week's Capital Markets Day. That shows the interest in Shelly, and we are really proud to have you on board as analysts or as investors already or maybe future investors. And we can promise that we will do the maximum to reach our targets and to keep our promises.
Thank you very much, and have a good rest of the week.
Thank you very much from my side, too.
Goodbye.
