HelloFresh Q2 Earnings Call Highlights

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HelloFresh (ETR:HFG) said its second-quarter revenue declined as the company maintained strict marketing-return thresholds and continued investing in product improvements, while reaffirming its full-year adjusted EBITDA outlook.

The company reported second-quarter revenue of EUR 1.5 billion, down 7.8% in constant currency from a year earlier. Meal Kit revenue fell 8.9% in constant currency and Ready-to-Eat revenue declined 8.4%, while the Other segment, which includes specialty meat and pet-food ventures, grew 36.1%.

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Management characterized the period as the second stage of a multiyear rebuild: following an effort to lower its structural cost base, HelloFresh is directing savings toward product upgrades before pursuing growth more aggressively. The company said it had implemented roughly 85% of its initially announced EUR 300 million efficiency program by the end of the first half, with the remaining measures planned for the second half.

Product investment and customer retention

HelloFresh said it is expanding menu choice and personalization through what it calls “the refresh,” a stage-gated product-investment program that tests initiatives in selected markets before broader rollout. The company cited additions including GLP-1-friendly Factor recipes, lower-preparation meal-kit options, new protein selections and expanded ingredient-swapping capabilities.

It also highlighted its HelloFresh Unboxed tool, which enables users to save recipes seen online into a HelloFresh-style recipe card without requiring a subscription. Customers have saved more than 3 million recipes since the feature launched, management said.

The company said the investment has increased costs initially but is intended to improve retention and expand its addressable market. In Meal Kits, constant-currency average order value rose 5.7% in the first half and order rate increased 4.1%. In the second quarter, group average order value increased 6.5% in constant currency to EUR 71, driven by add-ons, premium recipes and some pricing increases.

Revenue from Meal Kit customers who have been with the company for more than four years accounted for 34% of first-half net revenue, compared with 7% in the first half of 2023, according to management. In Ready-to-Eat, revenue from customers with more than two years of tenure represented 20% of revenue.

However, HelloFresh said lower customer acquisition in prior periods has reduced the number of newer customers progressing into long-tenured cohorts. CFO Fabien Simon said stable revenue from established customers reflects higher order rates and lower churn in markets where product investments are more advanced, but fewer new conversions have constrained overall growth.

Marketing discipline weighs on revenue

HelloFresh reduced marketing spending as it faced uncertainty around input costs, including the effects of severe winter storms, higher fuel prices and higher fertilizer prices across its supply chain. Management said it did not want to acquire customers at costs it could not confidently underwrite.

Second-quarter group marketing expense declined 16.3% year over year and represented 14.9% of revenue, down 1.4 percentage points from the prior-year period. Meal Kit marketing spending was 11.6% of revenue, while Ready-to-Eat marketing spending was 19.2% of revenue.

Simon said Ready-to-Eat is more dependent on new customer conversions because it has a younger customer base and a smaller pool of long-tenured subscribers. The company does not expect Ready-to-Eat revenue to recover in the third quarter and instead is focused on its exit rate for the year.

HelloFresh said the upcoming back-to-school period will be a key test of consumer demand, conversion momentum and marketing efficiency. Management plans to use results from that campaign to determine whether to increase investment later in the year.

Margins, profitability and outlook

Group contribution margin was 25.2% in the second quarter, down 2.1 percentage points year over year, excluding the effect of share-based compensation and impairment. Simon said the decline reflected deliberately front-loaded product investments rather than a reversal in cost-efficiency gains.

• Meal Kit contribution margin was 28.2%, down 0.2 percentage points year over year.
• Ready-to-Eat contribution margin was 21.6%, down 5.2 percentage points, reflecting product investment and the expansion of international operations that have not yet reached the efficiency of core markets.
• Procurement and cooking costs rose 2.4 percentage points year over year, though the company expects costs associated with product innovation to moderate in the second half.

Simon reported group adjusted EBITDA of EUR 120.6 million in the second quarter, representing a 7.8% margin. Meal Kits generated EUR 167 million in adjusted EBITDA, or a 15.1% margin, compared with a 15.2% margin a year earlier. Ready-to-Eat generated EUR 13.1 million in adjusted EBITDA, representing a 3% margin.

For the first half, Ready-to-Eat adjusted EBITDA improved to a loss of EUR 13.6 million from a loss of EUR 26.4 million a year earlier. The U.S. Ready-to-Eat business was close to breakeven during the period, Simon said, and the company expects the segment to post a positive margin in the second half as it works toward full-year adjusted EBITDA profitability.

First-half free cash flow was positive at EUR 49.4 million, down from the previous year partly because the prior period included a one-time tax refund. Capital expenditures rose to EUR 76.7 million from EUR 66 million, driven by Factor Europe infrastructure and automation investments.

HelloFresh reaffirmed its full-year adjusted EBITDA guidance. It said constant-currency revenue growth is trending toward the bottom end of its full-year range, with greater visibility expected after the back-to-school campaign. Simon said the company expects free cash flow to remain positive for the full year at the midpoint of its adjusted EBITDA guidance range.

In July, HelloFresh issued its inaugural EUR 350 million bond, carrying a 5.5% coupon and maturing in 2031. The company said proceeds will be used for general corporate purposes, including refinancing existing term loans, extending its debt-maturity profile and diversifying funding sources.

About HelloFresh (ETR:HFG)

HelloFresh SE, together with its subsidiaries, operates as meal kit provider for home industry. The company offers premium meals, protein swaps, double portions, and extra recipes, as well as add-ons, such as soups, snacks, fruit boxes, desserts, ready-to-eat meals, and seasonal boxes. It has operations in the United States, Canada, Australia, Austria, Belgium, Germany, Denmark, France, Luxembourg, the Netherlands, New Zealand, Switzerland, Sweden, Spain, Norway, Italy, and the United Kingdom. The company operates under the HelloFresh brand; and owns the Chefs Plate, Good Chop, The Pets Table, EveryPlate, Factor, Green Chef, and YouFoodz brand names.

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