Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HelloFresh SE (HLFFF, Financial) achieved a year-over-year AOV growth of 4.7% in constant currency.
- The company generated net revenues just shy of EUR2 billion, marking a 1% year-on-year growth rate.
- RTE (Ready-to-Eat) segment saw a net revenue growth rate of over 45% year over year.
- Adjusted EBITDA margins for meal kits stabilized at 12.2% in Q2.
- The company increased free cash flow year over year, reaching about EUR57 million in Q2 alone.
Negative Points
- Meal kit segment experienced a 10% year-over-year decline in Q2.
- Non-cash impairment charges of about EUR45 million in H1, with EUR32 million specifically in Q2.
- Fulfillment expenses were impacted by non-recurring non-cash impairment charges on certain US meal kit production facilities.
- Contribution margin decreased by 2.8 percentage points year on year.
- The company is trending towards the lower end of its top-line guidance for the full year 2024.
Q & A Highlights
Q: Can you elaborate on the strategic decisions behind reallocating marketing budgets from meal kits to RTE?
A: (Dominik Richter, CEO) The reallocation is driven by the higher ROI we currently see in RTE advertising. While meal kits have a strong existing customer base, RTE is experiencing rapid growth and presents significant opportunities for expansion, particularly in the US and Europe.
Q: What are the main factors contributing to the increase in Average Order Value (AOV)?
A: (Dominik Richter, CEO) The increase in AOV is primarily due to a shift towards more premium meal options, a broader assortment in the HelloFresh marketplace, and reduced price incentives. Additionally, RTE, which typically has higher AOVs, has seen increased revenue mix.
Q: How are you addressing the fixed cost base that does not match the current demand outlook?
A: (Dominik Richter, CEO) We are streamlining and optimizing costs in the short term. This includes making hard decisions around our operational footprint and triggering non-cash impairment charges. Our goal is to rebuild cash flows and profits in the meal kit segment and for the Group as a whole.
Q: Can you provide more details on the non-cash impairment charges taken in Q2?
A: (Christian Gartner, CFO) We took non-cash impairment charges of about EUR33 million in Q2 and EUR45 million for H1 overall. These charges are related to certain US meal kit production facilities given the more modest near-term volume outlook.
Q: What are the key drivers behind the 46% revenue growth in RTE?
A: (Dominik Richter, CEO) The growth in RTE is driven by scaling our cooking and fulfillment footprint to match the demand for convenient and tasty ready meals. Additionally, we are focusing on growing brand awareness for Factor in the US and expanding into more European countries.
Q: How are you managing procurement and cooking expenses, especially with the higher share of RTE?
A: (Christian Gartner, CFO) In North America, procurement and cooking expenses increased by 5 percentage points of revenue due to the higher share of RTE. We are investing in more choice, customizable areas, and high-value ingredients, and plan to offset these additional investments through equivalent cost savings.
Q: What are your expectations for marketing expenses in the upcoming quarters?
A: (Christian Gartner, CFO) Marketing expenses as a percentage of revenue are expected to increase during the back-to-school period in Q3. We anticipate a similar expansion as last year, around 3 percentage points of revenue.
Q: Can you discuss the outlook for EBITDA for the remainder of the year?
A: (Christian Gartner, CFO) We reiterate our full-year 2024 outlook of 2% to 8% constant currency revenue growth and an EBITDA range of EUR350 million to EUR400 million. Based on our H1 performance, we are trending towards the lower end of our top-line guidance but have somewhat derisked the lower half of our EBITDA outlook.
Q: How are you planning to improve productivity in your new fulfillment centers in Germany and the UK?
A: (Christian Gartner, CFO) We are focusing on ramping up productivity in these new centers. This includes streamlining our overall meal kit production capacity and reviewing overhead costs. We expect these improvements to be largely visible next year.
Q: What measures are you taking to maintain a strong balance sheet?
A: (Christian Gartner, CFO) We have streamlined our CapEx plans and successfully executed a new term loan facility of EUR190 million. This facility more than covers upcoming future refinancings and other corporate purposes, ensuring we maintain a strong balance sheet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
