Hellofresh Se Ord

This conference will be recorded. Good morning, ladies and gentlemen, and welcome to the HelloFresh SE H1 2025 results call. At this time, all participants have been placed on Ellison-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Dominik Richter.

Ladies and gentlemen, thank you for joining our Q2 earnings call. The focus of today's call is on sharing color on our most recent quarter and also on providing an update on our efficiency program and on our product reinvestment strategy. Over the past 12 months, we've fixed a lot and done hard work on improving the underlying fundamentals of our business. fixing structured inefficiencies, rebuilding cost discipline, and simplifying our operating model. While we continue to be laser focused on that, we're now also starting to set our eyes toward a return to growth with some really exciting product launches and a comprehensive reinvestment strategy kicking off in H2. Before I share more on that, Let me start by quickly summarizing the highlights of our most recent quarter. We've made strong progress in executing our efficiency program, the major driver behind a significant expansion of adjusted EBITDA, adjusted EBIT and free cash flow. Much of that work, though not always visible externally to its full degree, was essential. It was not only cost cutting, but a structural reset of how we operate. The result in H1 and in Q2 specifically show that we are well on track with our strategy that temporarily emphasizes profits and margins over growth. Consequently, and in line with that strategy, revenues reduced by 9% year over year to 1.7 billion euro. Contribution margin, on the other hand, increased by 1.4 points to 27.3%, a multi-year high. This led to an adjusted EBITDA of €158 million for Q2 alone and notably a 15.8% adjusted EBITDA margin for our Meerkits product group. EBIT also grew by an impressive 20% year over year to over €100 million in Q2. The results of much improved profitability are also clearly visible in our free cash flow generation. which was up four times in H1 2025 versus the same period last year. Given that robust cash generation and the imminent completion of our 75 million euro share buyback program, we have announced an upsize of the program to 175 million euro. That means an incremental share buyback of 100 million euro. Based on strong underlying operating results, we are ahead of the midpoint of our initial EBITDA guidance and compiled consensus. This is despite ongoing product investments, tariff threats, and unprecedented inflation in red meat. Given the weakness of the US dollar and other currencies versus our Euro denominated reporting currency, we want to reflect this in the Euro EBITDA guidance. Suffice to say, The adjusted EBITDA and adjusted EBIT margins remain unchanged and in line with what was implied in our previous guidance. We also narrow our top line guidance from minus 3 to minus 8% to now minus 6 to minus 8% given H1 top line run rates, especially for our RTE business where we saw some temporary operational setbacks. Finally, and most exciting, we're in the middle of launching some of the biggest product investments in HelloFresh history with major product upgrades for HelloFresh US and Factory US, the first step in our refresh strategy that aims to provide a radically better food experience and pave the way for a return to growth for the company. In previous interactions, we've emphasized two priorities for 2025. delivering on our ambitious 300 million efficiency program and reinvesting into the product to materially improve the customer experience. It's really important to understand that these two priorities, efficiency and product reinvestment, are not isolated efforts. They are tightly interconnected and they are deliberately sequenced. We've made strong progress on our efficiency program, and we are now starting to put that foundation to work to return to growth. So let's start with an update on our efficiency program. As a reminder, we aim to take about 200 million euro of the 300 million efficiency program to our bottom line, while planning to reinvest over 100 million euro back into a much improved customer experience. Across our most important initiatives, we've made significant progress and are ahead of our original schedule. We improved direct labor productivity in our DCs and cooking operations considerably. A 19% year over year improvement in RTE and a 5% improvement in meal kits, which was a little bit held back by the ongoing ramp up of our automated sites in dark and the UK. We've made good progress in right-sizing our network and reduced the square meter footprint in our operations by about 19% year-over-year to align with the updated growth trajectory. We also took decisive steps to build a leaner and faster organization, which year-to-date resulted in annualized personal savings of €60 million and 31% lower share-based compensation expenses through a restructure of our equity program. In addition, we drove savings across many indirect cost lines, such as software licenses and ancillary spend, and pivoted our marketing toward higher ROI thresholds. As a result, we're on track to implement about 80% of our efficiency program projects by year end 2025. Of the planned 300 million in recurring annual cost savings by 2026, we have implemented measures corresponding to about 150 million Euro annually already. Additional initiatives worth about 90 million Euro will still be executed in H2. Another 60 million are scheduled for 2026. Based on current run rates and the tight governance we have wrapped around the program, we feel confident that we will achieve or outperform the original 300 million Euro cost savings target. Additional initiatives, especially stemming from our efforts of deploying generative AI into content production, menu planning, and workflow automation, may offer further upside to our 300 million euro efficiency program base case. The majority of these tailwinds will still work their full effect through the P&L and balance sheet in the coming quarters, given the timing of site closures, severance packages, and notice periods. Crucially, the maturity of these actions are permanent. They structurally lower our fixed cost base and improve margins on every order shipped in 2026 and beyond. Despite a lower top line and order volume in H1, these efforts resulted in significantly improved profit contribution margins, lower indirect cost, and a leaner, faster organization already. The results are quite visible already. Free cash flow per share in H1 2025 was up four times versus the same period last year. Now we're starting to put that foundation to work, not only through additional share buybacks, but also via the deployment of a multi-year strategy we call the refresh. And it's hard. It's a simple but powerful idea. leveraging our meaningfully improved costs.

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