Cheffelo AB

Welcome to Cefelo Q3 2026 conference call. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. If you have any written questions, you can use the form below. Now I will hand the conference over to the speakers, CEO Walker Kinman and CFO Erik Bergman. Please go ahead.

Good morning everyone joining us. Thank you for your interest in Schefflo and welcome to this presentation of our third quarter results. My name is Walker Kinman, CEO of Schefflo. I'm joined by Erik Bergman, our CFO. We'll take a few minutes to give you a short intro on the company and then walk you through our prepared remarks on the third quarter development before Erik takes you through the financials. We will then take your questions. So let's start with a little bit about Schefflo. Every evening families across the Nordics face the same question. What's for dinner? Scheffalo solves that daily moment for tens of thousands of households every week, and our ambition is to do it better than anyone else. We've been pioneers in the meal kit category for more than two decades, we've run a proven, profitable, dividend-paying business, and we operate trusted local brands in each market. Rotlavert in Norway, Linus Motkassi in Sweden, Ratnemt in Denmark, and we have recently launched under the Scheffalo name in the Finnish market. At the heart of our service is a simple value proposition. We provide meals that unite families. By removing the stress of planning, shopping, and deciding what to cook, we make it easier to put nutritious, well-balanced, and great tasting food on the table. With the widest range of recipes in the meal kit category, tailored to different preferences and dietary needs, we keep customers engaged over time. And because this whole experience is powered by our own tech platform and data, we can keep improving, turning everyday dinners into recurring revenue, strong loyalty and attractive unit economics for our investors. Our business is built on a demand-driven subscription model for meal kits. Customers choose their recipes in advance, which let us plan purchasing tightly, keep inventories low and significantly reduce food waste. One of our key competitive advantages is personalization at scale. We offer the widest recipe selection in our markets with flexible portion sizes from two to six persons and recipes tailored to different needs and preferences. Our goal is to give customers the right selection, not endless scrolling, so they find what works for their household without being overwhelmed by choice. This is enabled by our in-house technology platform and deep data analytics capabilities. We use custom-built advanced algorithms and machine learning models to pre-select and recommend recipes, forecast demand, and plan production, allowing us to run a highly personalized service with efficiency and discipline. Every order is produced individually in our own fulfillment centers using tech-enabled processes and supported by a strong, scalable Nordic supply chain. Together, this creates a business model that is difficult to copy, structurally efficient, and well-positioned to continue delivering profitable growth. So let's turn to slide six where we'll talk about some of the key figures for the quarter. The elephant in the room is the growth rate of 3.6% in local currency that we delivered in Q3 on a 9% drop in active customers. Well, we signaled lower second half growth in the Q2 report. I think it is fair to say the slowdown was steeper than most expected. I'll spend most of my comments walking you through some of the customer cohort dynamics that were amplified in the third quarter, as well as some of the lessons learned and where we currently are at and what we are prioritizing. I'll get back to this on the next slide, but here we can comment that our two main markets, Norway and Sweden, slowed to just over 4% growth in local currency, while in Denmark we saw a slight contraction in the quarter. The silver lining in Q3, which is both meaningful and hopefully gives you a good indication of how we're managing the business, was the first positive Q3 EBIT in Shefflo's two decades of operations. Q3 is always a soft quarter with a combination of lower sales in the summer vacation period combined with higher sales and marketing and discount costs. Contribution margin was up 2.3 percentage points, which was a decisive factor in reaching a positive operating profit in the quarter. You might remember that we had a softer contribution margin last year on higher input costs. This was not the fact of this year. Also of significance was the successful pilot launch in Finland. We have now been able to validate our ability to reliably produce and deliver across border. We're not in a volume ramp phase yet, so the numbers are not material in revenue or cost, but the feedback loop is excellent and we are calibrating product fit, customer experience and marketing messages as we prepare for the next phase. So let's break down the actual development by each market on slide 7. Norway, which saw the highest growth last year on a surge of new customer acquisitions, was the hardest hit by the same reversed dynamic with growth decelerating the most. The strong knock meant that net sales in SEC grew by 13.6% in the quarter, but in local currency this was only 4.2% versus 39% last year. We can also see some signals of the broader macro conditions in Norway slowing down as interest rates have returned to the peak level we saw during all of 2024 and general inflation is weighing heavily on consumer sentiment. In Sweden the deceleration was less pronounced but ended with a growth rate very similar to Norway at 4.1% which was down from 18% last year. Most of the deceleration in Sweden is also related to lower customer acquisition rate versus Q3 last year, which also meant that growth for the quarter came in below the Swedish online grocery index of 7.7%. Swedish consumer sentiment rose in Q3, but has dipped lower in October. In Denmark, we saw a contraction of 3.2% in local currency versus growth of 8.6% last year. The deceleration was also mostly related to lower customer acquisitions. The Danish market has been the most pessimistic with a persistent negative consumer sentiment over the last several years. In August, we raised prices across all markets by roughly 3% on average. The increase was highest in Denmark based on a pricing study we did earlier this year. While a price increase will always trigger a certain level of churn, the effect was more than we anticipated in Denmark and further contributed to a softer third quarter. This slide shows you mostly the accounting view and what the result was in the corner. Let's try to explain in more detail what is behind the slower second half and also where we can do better. About a year ago at our last capital markets event, I presented customer retention curves by cohort year, and you will see this again on the left chart that's updated. What this shows is whether a customer has placed at least one order in a given month. It's important to talk about this behavior because this is a long tail business. We absolutely need a new flow of customers to replace customers that fall away as their needs change. But many new customers are not even with us after one or two months, while others are customers for many years. The effect of this is that net sales and active customer figures will always be amplified by variation in the inflow of new customers. A surge like we saw last year is certainly welcome, and as you can see, the curve for 2025 is very stable despite a significant increase in acquisitions during that year. But if the inflow rate varies either up or down, it will also drive near-term volatility in the growth rate. The one scenario that we cannot build a sustainable subscription model on in a finite market is the assumption that the rate of customer acquisition will always continuously increase. Looking at the right hand chart, this puts into perspective the numbers we're talking about on a relative basis. A big jump in new customer inflow not only affects the immediate period, but also subsequent periods, even if at a diminishing rate over time. In some ways, the new customer acquisitions we're experiencing in 2026 feels quite normal from our experience in the Nordics. However, we certainly have ambitions to be better than normal, and there are also some lessons to be learned in Q3 as well. Looking beyond cohort behavior and relative flow on acquisitions, let's start to look at why these were lower versus last year on the next slide. Two things coincided and stood out for us in Q3 last year that gave us a short-term boost. In August last year, we launched the partnership with SAS Eurobonus. This has been a successful partnership, and like many new things, the initial effect at launch is the largest. We have not had any new partnerships that have had a comparable effect in 2026. While partnerships are performing well, the volume coming in on this channel has decreased by 20%. Due to new technology and some great work by the teams working with logistics, we also opened new distribution areas last year. These were predominantly in Norway due to some unique aspects of how postcodes are mapped in the country. New distribution areas gave it about 20% of the increase in sign-up growth last year at a rate almost three times what an established postcode area produced in Norway. As with new partnerships though, once the launch effect fades, it's back to business as usual. So even though these areas are still open and generating new customer acquisitions, about 10% of the decline in new signups year on year comes from the fact that they are no longer new distribution areas. These two changes were opportunistic and will happen from time to time, but are hard to repeat systematically. Let's turn to our number one priority right now as we address a conversion rate challenge that we faced in Q3 on slide 10. I'm very thankful to be part of an organization that has no problem challenging the status quo, and we are fiercely proud of what we do. This also means from time to time we will make mistakes and then spend some time working our tails off to fix them. We had a conversion rate challenge in Q3, largely because we made several significant changes at once. We refreshed the brand across three markets with significant technical and design changes to many surfaces and customer touchpoints. We implemented new checkout and payment processes and infrastructure in all markets. Because of sequencing with the Finland launch, we chose a big bang rollout for these changes that coincided with a peak sales cycle and conversion rates were lower in the quarter. It is fair criticism to say that we probably could have done it differently. However, traffic to our sites has not been a problem and is generally increasing. We're also making adjustments with stronger sales messaging on marketing materials. And as we move into November, we're seeing new customer acquisitions now trending closer to last year. The early readings on the brand refresh are positive. Aided preference and unaided ad awareness have increased, and we now have one visual expression and tone of voice with strong local presence. Shared brand assets will continue to improve marketing efficiency. On the checkout and payment side, we now have a platform that gives us better flexibility and testing capabilities. We have a new payment reservation flow and have eliminated the legacy invoice payment method, meaning fewer unpaid orders, less bad debt and less administration. Finally, the new infrastructure has also allowed us to introduce Apple Pay, Google Pay and payment links. Hopefully with this, you have some more insight into Q3 and what is behind the bumpy growth. Before I hand it over to Erik to take a closer look at the financial result, let me reiterate our financial targets. Our financial targets have not changed since the last adjustment was announced in September last year. We are on track to deliver on our growth target in 2026, as well as exceeding 1.5 billion SEC in 2028. The lower acquisitions in Q3 versus last year will weigh on growth for a few quarters, which follows the customer cohort curve, but the effect diminishes each quarter. We expect the 2027 growth target to be on track, but naturally a bit more back heavy given how 2026 has developed. On the profitability side, we are on track to deliver on our EBIT financial target range already in 2026. Contribution margins is expected at or above 31% on a rolling 12-month basis next year as well, despite the higher logistics expenses that we talked about in the report. We expect economies of scale to further lift EBIT margin. With that, I'll now hand it over to Erik to take us through the financial results.

Thank you, Walker, and good morning, everyone. Let's begin with net sales. In the third quarter, net sales grew by 8.1% to 288.6 million. With more than half of our net sales from Norway, the reported net sales continue to benefit from the strong Norwegian krona versus last year. Adjusted for currency, that was a growth of almost 4%. In our Q2 report, we said that we expect lower growth in the second half than we had seen in the first half. The growth in the third quarter was lower than we expected, The main reason for this is a lower inflow of new customers compared to last year. In the third quarter last year, we saw record acquisition levels with new customer increasing by 64%, contributing to a growth of almost 27% in the quarter. This year, we saw acquisition levels closer to those what we saw in 2024, which meant that the third quarter this year had 34% lower customer acquisitions than last year. The third quarter is the quarter where we depend the most on new customers. Volumes ramp up after the seasonal lower summer volumes and ramp up marketing activities drives a high customer influx towards the end of the quarter and as such the percentage of deliveries that comes from new customers are higher in the third quarter than in other quarters. The lower influx of new customers also affect other customer metrics. Active customers decreased by 9% in the third quarter but the lower share of new customers also contributed to the order frequency increased by almost 8%. Average order value increased by 5.5% adjusted for currency. The increase is explained by price adjustments in August which were slightly above 3% on average and also to some extent from the lower total cost for discounts this year. So to summarize net sales. Slower growth in the quarter, mainly explained by fewer new customers compared to a very strong third quarter last year. Let's move on to our contribution margin. Contribution margin improved by 2.3 percentage points to 29.4%. In absolute terms, contribution margin increased by 17% to almost 85 million. I am really pleased to see all the work that is put into being on top of our unit economics. This is something as a company I think that we are very good at. The improved contribution margin is mainly explained by relatively lower input goods, which was 47.5% of net sales and down 2.3% from last year. Last year, we also saw the temporarily higher food costs and higher discount from customer acquisition, which affected contribution margin negatively. Fulfillment costs as presented from net sales remained flat versus last year. We have seen increased fulfillment costs driven by high logistics costs, but this was offset by the price increases and economies of scale. Let's continue on profitability on the next slide. Although the revenue growth has slowed from high levels that we saw in the first half, I am very pleased to see the improved profitability. Although that is just a line in the sand, I am proud to say that we reported the first positive EBIT in the third quarter. EBIT increased 0.4 million SEK compared to a loss of 5.3 million SEK last year. The third quarter is typically our seasonally weakest quarter and historically it has not been profitable. This is due to lower volumes during summer and higher marketing spend towards the end of the quarter. So although that the number is small, this is a good result for a seasonal weak quarter. The improvement of almost 6 million was explained by the higher contributor margin, partly upset by higher sales and marketing expenses. This year, sales and marketing included investments in our brand refresh and the launch in Finland. Sales and marketing was 15.1% of net sales compared to 14.4% last year. Year to date, sales and marketing is at 11% of net sales compared to 12.2% last year. This relative reduction is due to economies of scale supported by the migration of Adams into Levert in Norway. Looking at the first nine months, EBIT was 80 million, which was more than double what we saw the same period last year. And a fun fact is that it is higher than the full year EBIT in 2025. So all in all, I am glad to see that despite the lower growth rate, we managed to deliver both a positive and an improved EBIT in a seasonal slow third quarter. So let's move on to have a look at the cash flow. In the third quarter, free cash flow amounted to 9.1 million. It was lower than last year, with the difference mostly explained by changes in networking capital, with a smaller increase in operating liabilities than what we saw last year. Over the first nine months, free cash flow increased by almost 20 million to 76 million. The increase was primarily explained by higher profit before tax, partly offset by higher income tax, paid and the lower cash flow from networking capital. We are expecting to see higher cash outflow related taxes as we continue to increase our profitability. At the end of the quarter, our cash position was almost 156 million SEK. That is 22 million higher than a year ago. This is what I consider a strong cash position, especially considering that we in the second quarter paid a dividend of almost 92 million compared to 42 million the year before. We don't have an external debt other than lease obligation under EFRS 16. In summary, CHEF will continue to generate cash, pay dividends and finance our operations without external debt excluding the EFRS 16 leases. Now let's move over and look at the coming periods. and let me start with reiterating our financial growth targets. We usually refer to bumpy sales as the short-term growth will go up and down. Our growth target remains that we see an average growth rate of 7-9% and we are confident we are on track to exceeding the 1.5 billion in net sales in 2028. The start of the fourth quarter does not signal an immediate return to double-digit quarterly growth. New customer acquisitions are currently trending closer to last year and we are steadily accelerating. This makes us confident we will deliver on our growth targets for 2027. On sales and marketing, last year we spent almost nothing in Adam's brand in the fourth quarter. This year we will spend more in absolute terms and we will also start to invest in Finland. For the full year we still expect sales and marketing to be below 11% of net sales. High logistic cost will put pressure on contribution margin by about 0.5 percentage points going forward. Still, we expect the full year contribution margin to be about 31%. In the report, we also included that we expect a one-off advisory fee of 3 to 4 million related to business development, including discharge. Our expectation is to finish the full year within our financial margin target range of 79%. and continue to expand EBIT margin throughout 2027 on higher net sales. With that, I would like to hand back to Walker for a quick summary.