Hellofresh Se Ord

Good morning, ladies and gentlemen, and welcome to the HelloFresh SPQ1-2026 results. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Dominik Richter, CEO of HelloFresh.

Good morning, ladies and gentlemen. Thank you for joining our Q1 2026 earnings call. Before my colleague Fabian takes you through our detailed financials, I want to spend a few minutes addressing our current standing, the progress we've achieved over the last 12 months, and what this first quarter reveals about our trajectory for the remainder of the year. To be direct, we are in the midst of a deliberate transformation of the business. This process involves clear trade, which are visible in our reported results today, but constitute a conscious choice to allow the business to be set up for long-term success. Over the past year, we've fundamentally overhauled our customer acquisition strategy, marketing spend, and product proposition. We've made the conscious choice to walk away from unprofitable volume, tightened our marketing ROI thresholds, and redirected capital from acquisition into product quality by restructuring our fixed cost base. None of this was accidental. It was a sequenced effort to fix the foundation, even if it comes with a near-term trade-off to reported growth. but will allow for better revenue quality in the long run. The central question is whether this logic is working. I believe the evidence is clear that it is, and we've seen success in those metrics that are most associated with the long-term health of the business. First, let's take a look at our Meerkits product segment. One year ago, Meerkat revenue was declining at roughly 14.5% in constant currency in Q1. In Q1 2026, that decline narrowed to 8.5%, marking our fifth consecutive quarter of sequential improvement. The trajectory is moving clearly in the right direction. On efficiency, we have delivered structural improvements. Fulfillment costs as a percentage of revenue improved by 0.8 percentage points year over year. We reduced absolute marketing spend by 62 million to about 21.8% of revenue. That's not a one-time squeeze, but a permanent shift in our operating cost discipline. Regarding the product, we've executed the most significant investment cycle in our history. Under the refresh, we have substantially broadened menu choice, doubling the recipes we offer in markets like the US or the Nordics, while upgrading ingredient quality and expanding protein variety across all geographies. The sum of these investments leads to a materially better product value proposition, which will only compound from here as more and more initiatives come to life. That's the backbone of our strategy to drive higher customer lifetime value. Crucially, this means the quality of our revenue has improved. Our tenured customers are ordering more frequently, and they're ordering higher baskets. Group-level average order value rose 4.2 in constant currency, with meal kits specifically up 4.5%. Revenue retention and thus customer lifetime values of our tenured cohorts have been improving and trend at the best levels ever seen in the business. These are not temporary effects but rather the response of a healthy customer base to a fundamentally better product and a stronger value proposition. The sum total of these changes have to date most positively affected our tenured customers which was clearly our primary focus area. However, it's not yet been enough to fully offset the impact of front-loaded product investments, inflation, and the volume-led operational deleveraging. We expect the trend improvement for meal kits to continue going forward, and also to see more proof of a return to eventual revenue growth by H2, when we will have the benefits of our product investments and the outstanding parts of the efficiency program materialized more forcefully in our P&L. I also want to address ready-to-eat and specifically factory US directly. Again, our primary goal for 2026 is to return the RTE product segments to full-year profitability on the basis of product excellence and strong operations. We are on a good trajectory to achieve this. The operational setbacks we faced in the US last year, which impacted customer experience and retention, are now fully resolved. The underlying indicators have turned strongly. NPS is now trending at the highest level since 2023. Our tenured active customers grew double digits in Q1. a direct consequence of better product excitement among them and validation of our strategy to add more variety into the menus. RTE adjusted EBITDA losses also narrowed by about 80 million in Q1. That's a 40% improvement year over year. This represents a very encouraging trend line in our P&L and is the result of improving both unit economics and a more disciplined marketing investment approach. The remaining challenge now is rebuilding the active customer base, which reduced in the last nine months due to those earlier mentioned operational issues and our subsequent response to not invest aggressively behind a product and supply chain that needed fixing. While conversions are improving, switching the acquisition engine back on does not happen overnight. It rather requires multiple touchpoints with consumers. New customer volume in Q1 was not yet enough to fully offset the gap in active customers accumulated over the past 12 months, which has come as a result of the aforementioned weaker retention and reduced new customer volume. However, we are now restarting the growth engine on top of operational confidence and strong ROI discipline. Outside the US, our RTE businesses in Australia and Canada continue to post healthy double digit growth. Furthermore, our new production facility in Germany has opened and will soon be fully operational, providing the dedicated capacity needed to scale factor also in Europe in the second half of the year. In addition, we are excited about our product and menu expansion roadmaps, which has helped to drive positive outcomes with regards to retention and order frequency of our tenured RTE customer base. We expect the combination of all of these improvements to flow through our P&L more visibly in the second half of the year. With that, let me come to the highlights of Q1. Revenue for the quarter was approximately 1.7 billion, a 7.7 decline in constant currency, which was in line with our expectations. Market revenue trends improved for a fifth consecutive quarter in a row, while RTE revenue trends showed a stable trend versus what we saw in Q4. Adjusted EBITDA came in at about 24 million. To put this in context, severe winter storms in the US and Europe including a once in 75 years event in the US, disrupted our logistics and impacted adjusted EBITDA by approximately €25 million. This is a one-off event that does not change the underlying trajectory of the operating model. Excluding this weather impact, our underlying adjusted EBITDA run rate was closer to €49 million. This gives a much more accurate read of where the business structurally sits today. Fabian will bridge these numbers in more detail. Contribution margin for Q1 sat at 25.6%. We saw strong operational improvements on the fulfillment side, which were offset by our investments into better product value for consumers. That's a deliberate strategy, which will help us to divest from marketing and improve customer retention and order frequency in future quarters. Critically, we generated 49 million in positive free cash flow, our fourth consecutive quarter of positive free cash flow, despite the 25 million euro impact from the AdWords weather events. Finally, we're reconfirming our full year 2026 guidance, constant currency revenue decline of 3% to 6%, and an adjusted EBITDA in the range of 375 to 425 million. The delivery will be second-half weighted. We front-loaded the refresh investments because we saw clear evidence that they were working. These costs hit the P&L now, by the revenue benefits compound as retention and order frequency improve. In H2, the investment drag will moderate and structural savings from our efficiency program will flow through more fully. There are also variables we do not fully control, such as consumer sentiment in North America and inflationary pressures. However, the leading indicators we track about the health of the business and our customer base such as the customer order patterns I referenced and cohort retention all point in the right direction. 15 years in, our mission to change the way people eat is more relevant than ever. By focusing on product quality, customer loyalty, and cost discipline, we're building a business that creates lasting value. We're not only optimizing for the next quarter, for building a company that earns its place on the dinner table every single week. Thank you. I will hand over to Fabien now.

Thank you Dominique and good morning everyone. Let me take you through the financial details of the quarter before we open for questions. You would have noticed that we have only a handful of slides this quarter. but I will make sure that I bring the necessary level of detail to understand how the trends that Dominique just described are showing up in our financials. So, starting with revenue. Group net revenue was 1.68 billion euros in Q1, a 7.7% decrease in constant currency. If you recall, in the previous quarter, Q4 2025, That figure was 9% negative in constant currency. So definitely this represents another step in the right direction as we anticipated. As of next quarter, we will start reporting a full P&L split by product category. So allow me to already discuss with you the drivers for each of our key product categories now. Mill kits delivered close to 1.2 billion euros in revenue, 8.5% lower than last year in constant currency. As Dominique noted, this is the fifth consecutive quarter of sequential improvement in constant currency rates. The make of this number is defined by the trajectory of orders and of AOV. Order growth in mill kits, while still negative, also improves sequentially for the fifth consecutive quarter. What we are seeing today is our tenured customer base ordering more on upper customer basis. On the other side, the cumulative impact of the marketing reduction over the past 18 months means that orders from recent customers are still down comparatively and more than offsetting the resilience in our tenured base. Average order value for meal kit was up 4.5% in constant currency supported by fewer discounts and some marginal price increase and some positive news. Ready2it delivered 466 million euros, which is lower than last year in constant currency by 6.9%. This is made of average order value up by 1.4% in constant currency and lower order by about 8%. So let's pause for a second to understand the underlying drivers of order decline, which I believe is not necessarily fully understood by the market. First, and most importantly, the cumulative impact of the preceding nine months of operational issues precluded us from acquiring as many new customers as we would have liked, while we were fixing those issues. Second, some underperformance in conversion in Q1 this year, as we start to ramp up quality conversions and we optimize our channel, our product, and our marketing messages. Nevertheless, the 10-year customer for ready-to-eat in Q1 displayed double-digit revenue growth, which is a great trajectory. But basically, because the category is in early stage, the conversion still represents an outside part of the revenue dynamic. So, the takeaway on revenue is that the direction of travel on wheel kits is improving as anticipated. On ready-to-eat, the slope of improvement is not yet visible in the revenue because the customer base entering this year was smaller than a year ago. The improvement will materialize progressively through the second half of the year as we rebuild the customer base on top of improving profitability. For contribution margin now, the contribution margin excluding interment and share-based compensation was 25.6% down 1.4% point year-on-year. I want to be specific about what drove that decline because the composition matters to understand how our strategy is being implemented. The first factor is the severe winter storms. 25 million euros of non-recurring disruptions that hit primarily in North America. I don't need to remind anyone, certainly not our US listeners, that the winter storm firm in the US was widely reported to be the heaviest winter storm in 75 years. This event affected ingredient delivery, wastage, increased credit and refund costs, and disrupted last-mile delivery operations. This is a weather event that has no bearing on the underlying structural marketing trajectory. The second factor is deliberate. We have accelerated product investment ahead of the revenue curve. Investment in higher quality protein. Extended meal choice significantly or onboarding of new ingredients have been rolled out across countries. Just to give an example, Our customers in the Nordics can now have 100 different recipes in their weekly menu, roughly doubling the size of the menu in six months. But these are recipes that now, for the most part, have a minimum of 200 grams of vegetables or fruits, and better quality and better variety in their protein source. These investments increase growth costs in the near term. The returns come through higher retention, better frequency of orders, and larger baskets, i.e. better customer lifetime in subsequent periods, especially as some of these investments compound and turn HelloFresh meals into being perceived as higher value options. In this particular case of Nordics I explained before, we registered a very encouraging positive total revenue growth into one already. Overall, we still expect the impact of the product investment cycle in 2026 to take up approximately 150 basis points of gross margin, net of the impact of price increases. On the positive side, our efficiency program continues to deliver. fulfillment cost and decline 0.8% points as a share of revenue when you exclude the impact of impairment and initial base compensation. This is a direct output of the network optimizations and productivity improvements that have been embedded into the operating model. These savings are structural in nature. Marketing spend. came in at 21.8% of revenue in Q1, down 30 basis points year-on-year, with absolute spend reduced by 62 million euros, but only an 8% reduction in relative terms in constant currency. So the marketing efficiency model we established in mid-2024 with tighter ROI thresholds, the elimination of unprofitable acquisition channels and a more disciplined and product-led approach to acquiring high-quality customers is now the baseline and it is embedded in how we operate. We do not expect to revert to prior spending levels, but we also do not expect to reduce marketing in 2026 in the same way we did in 2025. And this dynamic is particularly clear when you look at the multi-product category where absolute spend was down only slightly earlier and as roughly flat as the percentage of revenue. What is critical now, from a marketing perspective, is that the value of the product investment learned well. This is not an overnight type of occurrence, as word of mouth, public reviews, top of the funnel and performance marketing all need to work in unison to crystallize those advantages and become top of the mind for new consumers. On Reddit tweet, spend was down. It was down substantially year on year in both absolute and relative terms. And this reflects two things. First, we are lapping an elevated Q1 2025 in terms of investment when we were running significant brand campaigns for Factor. Second, we have been deliberately conservative on acquisition spend while rebuilding the operational foundations. Now that the operational issues are behind and we were able to also invest in the product propositions, we will lean back into acquisitions progressively, but we will do so from a position of disciplined ROI, not volume at any cost. Remember, our primary goal for 2026 is to drive Ready2it back to sustainable profitability and establish the right foundations for long-term profitable growth. Group EBITDA was 23.6 million euros, absorbing, as I mentioned, 25 million euros of weather-related disruption. Fifth of that, non-recurring item, the underlying group adjusted EBITDA run rate was 49 million euros. By product category, muted adjusted EBITDA was 105 million euros, representing a margin of 9%. This reflects the weather impact, which fell disproportionately on North America, and the front-loaded product investment cost. A weather-adjusted multi-adjusted EBITDA margin would be closer to 10.3%, still below last year 11.4%, primarily due to the deliberate product investment pull forward and the impact of volume-led operational deleverage. And that, as Dominique said, that is the trade we have made. Q1 is typically the quarter with the lowest margin, so we are confident we can finish the year with double-digit adjusted EBITDA margin for this product category. On ready to eat, the adjusted EBITDA loss narrowed to 27.6 million euros from 45.9 million euros in Q1 2025. I mean, this is a 18 million euro improvement or a 40% reduction of the loss. This is, in my view, the most compelling trend in the P&L right now. And the improvement has come from marketing efficiency, operational cost recovery, and the resilient economics on the active customer base. and obviously we want to maintain this momentum in the subsequent quarters. Holding costs of 48 million euros are up modestly year on year, reflecting continued investments in IT and tech inflation, while personal expenses have gone down. Pre-cash flow for Q1 was 49 million euros. It reduced by 18.8 million euros year-on-year, which is entirely explained by two items. Lower adjusted EBITDA, primarily weather-driven, and higher CAPEX. Q1 CAPEX was 44 million euros, up from 34 million euros a year ago. The majority of that increase reflects the Factor Europe facility investment in Germany. This is a gross CAPEX with a clearly identified strategic return. Going forward, we expect CapEx to normalize within our full year guidance range as the year progresses. The free cash flow this quarter was also supported by the positive inflow of operating working capital, which was approximately 30 million better than last year, of which 1 third is structural and 2 thirds is phasing and therefore will be unwound over the year. On the outlook, I want to reconfirm what we had previously communicated for the group for 2026, which is constant currency revenue growth of minus 3 to minus 6%, adjusted EBITDA and constant currency of 3.75 to 4.25 million. I also acknowledge that if you take into consideration the results we are presenting today and the directional guidance I will communicate for Q2, we are looking at a second half weighted delivery and I will explain that Q2 still has two months to go obviously but for now we expect the top line for the group to remain relatively stable in terms of rate of decline driven by some underperformance in Q1 conversion which impact Q2 the impact of the product investment in top line is also expected to be more tangible in the second half of the year On the bottom line, we expect Q2 to be between 30 to 40 million euros below Q2 2025. This is driven primarily by the fact that investments in products have been accelerated between H2 2025 and H1 2026. With the data we are seeing in terms of how product investments are resonating with existing customers and the learning from the peak period, We are expecting to heed the guidance for 2026. With that, I will open the line for questions. Thank you.