Hellofresh Se Unsp/Adr

Good morning, ladies and gentlemen. Thank you for joining our Q4 and full year 2025 earnings call. Alongside this presentation, we've also published our full year 2025 shareholder letter, which provides some additional strategic context on the year and on our outlook. We encourage everyone to read it in conjunction with today's remarks. With me today is also Fabien Simon, our group CFO who joined us about six months ago. The structure of today's call is as follows. I'll start by providing a strategic overview of where we are as a company and where we're headed. Fabienne will then walk you through the full year 2025 financial results and our 2026 guidance in detail. And after that, we'll open the floor for your questions. Before we do this, I'd like to give Fabien some time to introduce himself and his observations to date briefly.

Thank you, Dominique, and good morning to all of you. A few months ago, I shared with many of you on the call the reason for me joining HelloFresh. After 25 years in consumer goods, I projected myself into the future of the industry and towards what the consumer value more and more, which are First, affordable, healthy food that do well for the community, ideally with more local sourcing, more sustainable than existing alternatives. Second, when and where you do provide differentiated services beyond the job product. Here, I could refer to how to discover new recipes or just to deliver all ingredients at home and removing the pain of in-store shopping, for example. Third, a company with cutting-edge direct-to-consumer marketing engine, which is critical to interact with the consumer of today and likely even more with the consumer of tomorrow. And fourth, where in the end, the consumer feels valued and recognized with personalized solutions and not a one-size-fits-all product, which is kind of the model of most traditional CPGs. Back then, I believe that HelloFresh was the largest DTC food player globally, born with those characteristics, which are very difficult to replicate, and that do provide strong competitive advantage over time. So now, six months down the road, I do recognize in HelloFresh those characteristics, especially with data, infrastructures, technology, and last mile to a level that I have never experienced before. At the same time, I do see opportunities for HelloFresh to simplify the complexity that crept in over the years, to be more focused, and possibly to be more realistic and more disciplined sometimes. The company has great DNA, such as speed and agility, but sometimes stepping back and working before you run had some benefits. Overall, I would say that HelloFresh is a unique company in the industry landscape and is at a junction between an FMCG and a direct-to-consumer tech business. I'm glad I joined the team to learn many new things and hopefully as well to share some of my accumulated experience to support Dominique and the team in writing the next chapter of HelloFresh.

Thank you, Fabian. Very fortunate to have you at HelloFresh. I want to use my time today to cover three things. First, where we stand on the strategic reset we began in summer 2024. Second, an honest assessment of where our growth trajectory is heading across both meal kits and ready to eat, including what went well and what didn't. And third, how we're thinking about 2026, including potential headwinds, investments, and the choices we are making to position the company for durable value creation. Our shareholder letter, which we published this morning, covers this in depth. I won't repeat it. But I want to give you the strategic frame that should guide how you interpret the numbers that we will share as part of this earnings call. In summer 2024, we made a deliberate choice. Before we could credibly invest in growth, we needed to fix the foundation of the business by improving unit economics and cutting fixed costs. We outlined a 300 million efficiency reset program and sequenced it ahead of everything else. The logic was pretty straightforward. Efficiency creates margin room. Margin room funds product reinvestment. Better product drives retention. And retention is what ultimately unlocks sustainable and profitable growth. This program was predominantly fixated on fixing our meal kits business, which had grown insanely fast, but accumulated a cost structure that was not in line any longer with the volume outlook of the business. At the time of creating this efficiency program, we expected our RTE product category to continue its path of double digit growth and correspondingly post higher absolute EBITDA and expanding margins for 2025 and 2026. Two years in, we're very much in line with our original plan in Meerkat. In fact, somewhat ahead in terms of Meerkat profitability, but have faced operational setbacks in RTE we hadn't planned for. On the efficiency side, roughly 80% of the program's initiatives were implemented by year end 2025. The P&L impact in 2025 alone was approximately €160 million, with another roughly €140 million expected to flow through in 2026, as the remaining initiatives take full effect and we benefit from run rate savings. The majority of these are not one-time savings. They're permanent structural improvements such as direct labor productivity gains, network rationalization, a fundamentally leaner overhead structure, and a complete restructure of our equity compensation programs, which have reduced stock-based compensation expenses by over 30% year over year. The financial proof is very visible in our Meerkit's product category. Meerkit adjusted EBITDA margin reached 13.5% for the full year 2025, the highest level since the pandemic, and a nearly full percentage point improvement over 2024. Contribution margin for the group expanded one full percentage point to 26.8%, and both free cash flow and EBITDA per order improved meaningfully year over year. In essence, this means that the structural earnings power of the group is significantly higher today than 18 months ago. While the size of our meal kit business declined in absolute terms, the revenue quality today is much higher. Tenured customers, that means those with more than 50 lifetime orders, now represent 51% of all meal kit orders, up from 13% in 2022. The absolute number of orders we get from this forward has remained highly stable, even as the total volume declined. which tells you that the core of our customer base is healthy and engaged, and the volume decline has come from lower new customers joining. This is a deliberate outcome. We've prioritized margin over volume, tightened marketing ROI thresholds, and accepted a temporary reduction in the active customer base to structurally ensure that when we re-accelerate acquisition, it is on top of a better product and fundamentally healthier unit economic profile. Most important is not the margin expansion itself, it's what we do with it. In summer 2025, we launched our reinvestment program called the Refresh. It's the largest product investment cycle in HelloFresh. We expanded protein variety, introduced new cuisines, significantly broadened the number of unique skews on our menu, and upgraded ingredient quality in key categories, including organic dairy and higher welfare proteins. In select markets, we increased portion sizes. Cumulatively, these investments have made a big difference to customer sentiment and our ability to monetize customers better over their lifetime. While it's hard to prove the individual impact of each change we're making, the cumulative impact of these to the customer experience has been extremely well received. This has been a stage-gated rollout. We piloted in the Nordics and the UK first, measured rigorously against pre-established KPIs, and only expanded to additional markets like the US once we saw clear evidence of the impact it has. The early results are encouraging. Commutative net revenue per conversion, which is the best proxy for customer lifetime value, is up 16% after 10 weeks and 21% after 20 weeks when comparing our H225 cohorts to our H224 cohorts. We've also seen some of the highest NPS ratings in years. And critically, customers perceive stronger value for money despite us having raised prices simultaneously. We're now investing with discipline, funding product investments from structural savings, and continuously rolling out proven strategies to more markets globally. That is the flywheel working as designed. Now let me be direct about where we are on the growth trajectory, because it's a mixed picture overall. In Neal Kitts, the trajectory is clear and the story pretty clean. It's moving in the right direction. Constant currency revenue declines narrowed in every single quarter of 2025, from negative 14.5% in Q1 to negative 13% in Q2, negative 12% in Q3, and negative 10% in Q4. That's four consecutive quarters of sequential improvement, with international meal kits nearing a return to positive growth in 2025 already. We expect this trend of sequential quarterly year over year revenue improvement to continue throughout 2026. In ready to eat, the story is more complicated, which is why I want to address it head on. 2025 was a tale of two halves for RTE in the US. In H1, we absorbed the consequences of regulatory-driven food manufacturing challenges that cascaded into product quality issues and impacted customer experience at exactly the wrong time, while we were simultaneously spending on brand and performance marketing. The result was worse unit economics, lower marketing ROI, and lower customer retention, resulting in a significant gap to our original plan. Later in the year, we made a difficult but correct decision. We pulled back growth investments substantially, prioritized fixing the operational foundation, and focused on restoring product quality and customer sentiment. That meant accepting a short-term decline in the active customer base, which is the position we find ourselves in entering 2026. But the underlying indicators have turned when you look at December exit rates. Customer retention has bounced back to levels we had seen before we were hit with the temporary operational setbacks. Our full menu catalog has been unlocked for our customers again, and meal reheat times are back to normal. which has contributed strongly to better quality taste and customer sentiment. Productivity in our cooking facility has also converged back to the longer term averages. As a result, NPS and Factor US is up 400 basis points year over year. Cancellation rates are down approximately 16% across all customer maturities, and net revenue per customer The best early proxy for customer lifetime value is tracking meaningfully above prior year levels at every measurement interval. For 2026, we will continue to build on top of this strong foundation of operational excellence. Our primary goal is to restore the bottom line profitability for the RTE product group back to the levels we saw in 2024 already. We are now also slowly turning our attention back to reigniting our growth strategy. This is the single biggest swing factor for 2026. We cut growth investments materially in H2 2025 as we focused on fixing the operational foundations and culinary excellence. Restarting the factor growth engine is the number one operational priority for 2026, Now that customer quality metrics as well as unit economics are in the right place again. On the RTE business outside the US, in Canada, in Europe and in Australia, we were not affected by these issues and have continued to post healthy double digit growth and improve profitability. We aim to continue on this strong growth trajectory also in 2026. and expect the overall RTE product group to show sequential improvements over the course of every quarter in 2026. At the group level, the strong progress in meal kits was particularly partially obscured by RTE underperformance. Meal kits are tracking ahead of our original EBITDA plan outlined in summer 2024, while RTE is behind. This gap is real, and it has shaped our reported results. But it doesn't change the structural improvement we have achieved in the core business. And I want to make sure that that distinction is clear to everyone. We are now entering the year with a set of headwinds that are partly within our control and partly not. In Q1, severe winter storms across the US and Europe caused significant operational disruption. specifically winter storm Thurn in the U.S., was brutal and widely reported to be the heaviest winter storm in 75 years. Our employees were unable to reach distribution centers, inbound ingredients deliveries were delayed, orders stranded in our supply chain and had to be discarded, and last-mile delivery failed across affected regions, leading to high customer credits and refunds. The estimated impact is approximately $20 million on revenue and about $25 million on adjusted EBITDA. That's a one-off, but it's a meaningful one-off, and it will be visible in our Q1 results. Second, Factor US new customer volumes are down year on year versus the heavy spend quarter we had at the same time last year, given our primary focus on operational excellence and restoring profitability first. Against these two headwinds, we're still making a conscious choice to keep investing. Our mid-teen EBITDA margins and meal kits give us the room to do so. We'll continue to expand the Refresh program across more markets, broadening menu selection, upgrading ingredient quality, and improving the consumer app experience. These investments have a time-lapse impact on the P&L. Case studies from our early markets give us confidence that the retention and lifetime value improvements are real and will compound over time. All in all, we try to be very deliberate about not making short-sighted decisions that would sacrifice the investments needed to return this business to durable growth in the face of the two headwinds I quoted. I'll now hand over to Fabian, who will take you through the detailed financials and our 2026 guidance.