Earnings call transcript: HelloFresh sees revenue dip, plans strategic shift in Q4 2024

HelloFresh SE, the meal kit delivery service currently valued at $1.55 billion, reported its financial results for the fourth quarter of 2024, showing a slight decline in revenue but a strong performance in adjusted EBITDA. The company also outlined its strategic focus on expanding into new product categories and improving operational efficiency. Despite a challenging market environment, HelloFresh remains a leader in the meal kit segment and is poised for growth in its Ready to Eat (RTE) offerings. According to InvestingPro analysis, the company’s shares are currently trading near their 52-week low, potentially presenting an opportunity for investors. InvestingPro offers 8 additional key insights about HelloFresh’s market position and future prospects.

Key Takeaways

• Full Year 2024 revenue grew 0.9% in constant currency, while Q4 revenue declined 3%.
• Adjusted EBITDA for Q4 increased by 45% year-on-year to €164 million.
• HelloFresh completed a €150 million share buyback and launched a new €75 million program.
• The company plans to expand into pet food, premium butchery, and health supplements.
• 2025 revenue guidance indicates a decline, with growth anticipated in RTE offerings.

Company Performance

HelloFresh’s overall performance in 2024 was marked by modest revenue growth of 0.9% in constant currency terms, with trailing twelve-month revenue reaching $8.59 billion. The fourth quarter saw a 3% decline in revenue, reflecting challenges in the consumer market. Despite these headwinds, the company achieved a significant increase in adjusted EBITDA, reaching €164 million, up 45% from the previous year. This improvement highlights the company’s focus on operational efficiencies and cost management, maintaining a healthy gross profit margin of 62.74%.

Financial Highlights

• Full Year 2024 Revenue: 0.9% growth in constant currency
• Q4 Revenue: 3% decline group-wide
• Full Year 2024 EBITDA: At the upper end of guidance
• Q4 Adjusted EBITDA: €164 million, up 45% year-on-year
• Free Cash Flow per Diluted Share: €0.42

Outlook & Guidance

Looking ahead, HelloFresh expects a 3-8% decline in revenue for 2025 in constant currency terms. The Meal Kits segment is projected to decline by over 10%, while the RTE segment is expected to grow in the low to mid-teens. The company aims to achieve an adjusted EBIT of €200-250 million and an adjusted EBITDA of €450-500 million. Additionally, HelloFresh plans to more than double its free cash flow per diluted share, building on its current free cash flow yield of 7%. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with comprehensive valuation metrics and detailed analysis available in the Pro Research Report, part of the coverage of 1,400+ top stocks.

Executive Commentary

CEO Dominik Christa emphasized the company’s strategic shift, stating, "We deliberately chose to win over fewer new customers for the last six months." This approach reflects HelloFresh’s focus on acquiring higher-value customers and improving unit economics. CFO Christian highlighted efforts to expand contribution margins by approximately 100 basis points in 2025, underscoring the company’s commitment to enhancing profitability.

Risks and Challenges

• Softening U.S. consumer market could impact revenue growth.
• Potential supply chain disruptions may affect product availability.
• Market saturation in the Meal Kits segment could limit expansion opportunities.
• Macroeconomic pressures, such as inflation, could increase operational costs.
• Competition from other meal kit and food delivery services remains intense.

Q&A

During the earnings call, analysts inquired about the company’s RTE growth strategy, which focuses on sustainable, predictable expansion. Executives also clarified the significant reduction in marketing spend and discussed plans to launch RTE products in the European market, highlighting future improvements in this segment.

Full transcript - Hilton Food Group (HFG) Q4 2024:

Conference Moderator: Good morning, ladies and gentlemen, and welcome to the HelloFresh SE Conference Call.

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 Dominic Christa.

Dominik Christa, CEO, HelloFresh SE: Good morning, everyone. Thanks for making the time on short notice and your interest in learning more about our Q4 results as well as the strategy and outlook for 2025. Our mission is and always has been to change the way people eat forever. For the first eight years, we pursued our mission exclusively through our activities in pioneering, scaling and winning in the large market for home cooking with our to date still largest and most profitable business line, Meal Kits. But food consumption comes in many different shapes and forms, among them many that do not rely on home cooking.

And so over the last four years, we’ve successfully established a market leader in the Ready to Eat Meals product group scaling our brands by about 20x over this time period, while achieving EBITDA profitability and massively improving our underlying unit economics. In addition, we’ve also made good progress in further diversifying our TAM and revenues with our still early stage forays into pet food, premium butchery services and most recently into health supplements. While these are still comparably small, we’re excited about these markets and the growth opportunities they offer to develop HelloFresh into a much more diversified digital native FMCG company over the next decade. Right now, we’re in the middle of a transition phase that started last summer and that we flagged back then for the first time. After two years of profit erosion, we’ve started to pursue a strategy to deliberately prioritize profits over volume growth.

In line with that strategy, for 2025, we are primarily focused on two major objectives. First, to deliver against the efficiency program that successfully started in H2 twenty twenty four and to create a step change in our customer offering for both Mere Kits and RTE to eventually return to growth in Mere Kits at superior margins and underlying cash flow generation. You will see us pursuing an ambitious roadmap to elevate the customer experience very meaningfully with investments into menu choice, better value for customers and improved service levels, probably the biggest step change for customers we have ever made. The TAM a business operates in is always determined by its current offering. And if we want to grow beyond our current TAM, we need to change our product materially and find ways to meet customer expectations beyond our current core product, both to reach new customers and to retain a much higher share of customers for longer.

Executing on our efficiency program is equally critical for short term profitability and to create the underlying cash flows and profit pool to invest for long term success. The short term focus on EBIT and free cash flow will allow us to invest in a much improved customer offering, expanding our TAM and eventually return to growth. In 2025, specifically, we will turn around EBIT and EBITDA performance by improving our unit economics as well as our customer level success metrics and return to best in class profitability and cash flow generation. This gives us the funds to invest in meaningfully improving the customer experience and eventually start scaling again with a then much improved product and better unit economics. Successful execution of our efficiency program will make any future growth more profitable.

It also allows us to make these investments entirely self financed through the strong underlying cash generation in our business. Our efficiency program itself touches several areas of the business, which in aggregate should allow us to create a stronger financial profile with double digit EBITDA margins in new kits in the short term. We are confident in the success of the program given the early results we have observed in the second half twenty twenty four, when we started taking the medicine. Specifically, we have initiated higher ROI threshold on our marketing spend, choosing deliberately to win over fewer, but ultimately much more profitable customers and nurture existing customer relationships better. On the direct cost side, we have seen productivity improvements across our sites and see more and more of our new DCs hit their productivity targets reliably week in, week out.

We’ve also scaled back our CapEx levels to what we feel is more in line with the long term targets we have in mind. And in addition are in the process of rightsizing our network to align with the future demand outlook. On the G and A side, we have simplified leadership structures, merged different regional teams and achieved headcount efficiencies. Taken together, these measures will improve unit costs, lower our fixed cost burden and have already led to a strong margin trajectory in the second half twenty twenty four with more to come over the course of 2025 and 2026. At the same time, this will free up the funds to drive our ambitious customer experience roadmap.

Let’s now turn the attention to our Q4 and full year results. And let me quickly start by sharing some of the highlights of our recent quarter. We started to see some great early results from our efficiency reset that we communicated last summer and which touches several areas of the business. There’s a lot more to come and ultimately work its way through the P and L, but all major work streams have been kicked off and are in execution mode. Revenue growth for 2025 came in at 0.9% in constant currency with strong growth for RTE making up for the decline in meal kits.

We’ve seen continued strong progress around fixing our contribution margin, driven by the fifth consecutive quarter in which we improved our productivity metrics. Equally important, we took the medicine and implemented a major change in marketing strategy to target higher ROI thresholds, which led to marketing coming down both in absolute and relative terms in H2 twenty twenty four very significantly for Mere Kits. This has led to strong EBITDA for both Mere Kits and RTE. Full year EBITDA margin for Mere Kits reached 9.8%, very close to our 10% mid term goal that we communicated last year. RTE had 1.6% EBITDA margin, somewhat held back by high costs during the first half of twenty twenty four when we were in full ramp up mode for the new facility.

Q4 results show these trends even better. We achieved a near record EBITDA margin for Meerkats at over 14% EBITDA margin and RTE came in at over 5% EBITDA margin. That is a year on year increase of three points in Mere Kits and 10 points in RTE respectively. This has also resulted in free cash flow per diluted share of EUR 0.42, largely in line with what we achieved last year, but significantly up for the second half of twenty twenty four versus the second half for 2023. Finally, we have completed our EUR 150,000,000 share buyback program and launched a new buyback program of EUR 75,000,000 recently.

Fully diluted share count is now actually down over a five year time frame, still excluding the new share buyback program. We delivered 140,000,000 orders in 2024. That’s down about 4% from 2023, as we focus on higher value customers over volume growth. This focus has been more material in Q4, when the implementation of our marketing strategy change kicked in and led to a decline in orders of about 7%. The decline in Q4 was more pronounced in North America, which was 10% down then in International, which was 5% down.

Encouragingly, this was exclusively due to fewer new customers following the change in marketing strategy, existing customers continue to show very robust ordering patterns. The positive year on year revenue growth was majorly driven by the increase in AOV over that period, offsetting the weaker order numbers. Both full year and Q4 AOV were up by almost 5%. Geographically, The U. S, North America specifically saw higher AOV increase with about 6% year on year given the presence of a higher AOVRTE share in the mix.

International increased its AOV by about 3% year on year. Both segments benefited from lower discounts and a higher take rate in our HelloFresh and Factor marketplaces. North America, in addition to the higher priced RTE meals, lifting AOV higher than in international, where RTE is still a small share of the overall order mix. Taken together, revenue growth for full year 2024 came in at 0.9% in constant currency. In Q4 specifically, revenue declined by 3% group wide with North America posting a decline of 4% and international of 1% year over year, as we saw better opportunities to bank efficiencies than to invest in new customer acquisition against a seasonally weak quarter.

By product group, Meerkats saw negative revenue growth of 9% in 2024, while RTE still grew over 40% for the full year 2024. We expect the Q4 trends to largely continue into Q1 as our efficiency program continues and rests on decreasing marketing spend chasing higher ROI thresholds and prioritizing profitability over volume growth. For RTE specifically, we aim to find the right growth formula that allows us to predictably and sustainably grow both top line and bottom line for many years to come. There were lots of lessons learned in new kits and that we aim to avoid in RTE. So the focus in RTE is to sustainably build our brand, continue to improve the customer offering and focus on diversifying our channel strategy, so that we can achieve predictable and sustainable multi year growth.

With that, I’ll hand over to Christian to comment on the cost side of the business.

Christian, CFO, HelloFresh SE: Thanks, Dominik. Let me start as usual with the development of our contribution margin. We are on track with the consistent expansion of our contribution margin every quarter. In Q4, with a contribution margin of 27, we have effectively caught up with the level achieved in the prior year. Key drivers for the sequential margin expansion are: Number one, continued direct labor productivity in North American ready to eat.

And then secondly, continued increase in direct labor productivity in North American milk kits. This is partly offset by overall milk kit volume deleverage and an initial margin drag in international from continued fulfillment center ramp up in Germany and The UK as that reflect a few times to you previously. For 2025, we are on track to continue to expand our contribution margin by another 100 basis points. Key levers for that are are further direct labor productivity improvements and secondly, a more streamlined fulfillment center network. To that latter point, we have in 2024 taken non cash one off asset impairment charges of EUR 182,000,000, of which EUR 133,000,000 circa landed in Q4.

The related site closures have partly already been executed in 2024. The rest will largely be actioned in 2025. Let me now turn to the development of our marketing expenses. Our marketing expenses in Q4 are down meaningfully year on year, both on a relative and absolute basis, as I previewed to you already on our Q3 earnings call. In Q4, we have decreased our marketing spend by a substantial three ten basis points of revenue versus last year.

Now this is a consequence of the strategy articulated earlier by Dominik and as we’ve already described on our last two earnings calls. Namely, we apply strong ROI discipline to our marketing spend, which means we acquire fewer, but on average higher value new customers. By product group, you should expect a similar trend in 2025 as you’ve seen in 2024, I. E. New kits, absolute euros spent on marketing as well as a percentage of revenue will again be down year on year in 2025.

In Ready to Eat, absolute and relative marketing spend will be up year on year as we continue to build out the brand, scale our customer base and further drive internationalization of this product group. On the next page, I would like to illustrate to you the meaningful extent of marketing savings we have actions in new kits over the last three quarters. Now this is also important to understand the midterm growth differential between our two segments. In both geographic segments, we have reduced marketing spend for mill kits very meaningfully over the last quarters. However, our cuts are more pronounced in North American mill kits.

Here we have started earlier already in Q1 twenty twenty four and implemented in more severe cuts each quarter since with year on year reductions in Q4 twenty twenty four amounting to 35%. Drivers for this in our North America segment, we are allocating significant marketing spend to the growth of our Factor brand and its customer base. And international contains some earlier stage markets where we can allocate gross spend a very attractive ROI, France being the most important case for that. Let’s now have a look at our adjusted EBITDA. We have executed on what we promised to you before, I.

E, we maintained our marketing discipline in Q4. We further improved our direct labor efficiency in our production and we started to implement overhead efficiency measures. As a result, full year 2024 EBITDA is at the very upper end of guidance and above consensus with million. Q4 adjusted EBITDA of EUR 164,000,000 is up meaningfully year on year across all operating segments and all product groups. North America adjusted EBITDA is up 55%.

International adjusted EBITDA is up 16%, which means group adjusted EBITDA is up 45 with an EBITDA margin of 9.1% in Q4. The Me Kits product group delivered adjusted EBITDA that is up 9% and achieved a margin of 14% in Q4. Ready to Eat adjusted EBITDA has turned from negative $16,000,000 in Q4 twenty twenty three to positive $26,000,000 in Q4 twenty twenty four. Our strong adjusted EBITDA uplift has also translated into a strong adjusted EBIT increase in the same quarter. We almost doubled our adjusted EBIT in Q4 year on year to $95,000,000 taking the full year adjusted EBIT to $136,000,000 Now quickly diving into our two product categories and starting with new kits.

We have achieved a higher year on year adjusted EBIT margin for the full year 2024 with 6.6%. In Q4, we further accelerated our year on year adjusted EBIT margin expansion, achieving an adjusted EBIT margin of north of 10%, but also increasing absolute adjusted EBIT in this product group. This is primarily driven by a focus on marketing ROI, but also direct labor productivity improvements in North America have helped to stabilize contribution margin. Let’s now talk about the Ready to Eat product group. Ready to Eat for the full year is breakeven from adjusted EBIT perspective with Q4 being the second quarter in a row better than the prior year period.

The significant 10 percentage points year on year margin improvement achieved in Q4 represents the biggest driver of our year on year profitability improvement for the group. Meaningful improvement in direct labor productivity versus last year is here the key driver, while marketing expenses for Ready to Eat remain elevated given our investment into our brands, our rapid customer acquisition and our internationalization. Let’s now have a look at free cash flow. For the full year 2024, free cash flow is broadly stable to the prior year with NOK 73,000,000. We achieved this despite adjusted EBITDA being down by almost NOK 50,000,000 on year and despite cash outflow from working capital towards the end of the year.

Key driver to get there has been our tight CapEx discipline, where we further tightened our spend to €166,000,000 for the full year. This is a level we plan to maintain in 2025 before bringing it down further to below $150,000,000 in 2026. I would now like to move to our 2025 full year guidance. We are entirely focused on executing well on our ongoing efficiency program, whilst investing meaningfully into our product. With our CMD in ten days, I actually want to spend some time walking you through the key building blocks of our efficiency program and the resulting targeted savings.

The implication of our efficiency program is that we are accepting a temporary period of negative top line growth to fundamentally reset our margin and free cash flow profile beyond what is currently expected by consensus estimates. Now this is important also after having seen some of the notes that came out overnight. We can sustainably lift earnings and free cash flow upwards for years to come, also at a lower revenue level. In fact, it’s natural that revenue will be temporarily down during the period where we’re focusing on implementing those efficiency measures. Now for 2025, this means concretely, we are targeting a decrease in constant currency revenue by 3% to 8% for the full year.

We expect Q1 to sit around the wide end of this range. We expect our Me Kit product group to see constant currency revenue decrease by more than 10% negatively annually, where growth in Q1 is expected to be around mid teens negative. We expect our Ready to Eat product group to grow by a low to mid teens percentage for the full year, where we expect Q1 to be at slightly below 10%. Driven by the implementation of our efficiency measures, we are targeting to expand contribution margin by circa 100 basis points in 2025 and reduce relative marketing spend, indicative by 50 to 100 basis points. This, together with the implementation of overhead related efficiency measures, allows us to target adjusted EBIT before impairment of EUR 200,000,000 to EUR $250,000,000 for 2025, circa 65% increase to 2024 at the midpoint.

This also implies a meaningful increase to our adjusted EBITDA outlook to EUR $450,000,000 to EUR 500,000,000 in 2025. This increase in adjusted EBIT, combination with a broadly stable interest expense and at most flat tax payments and the broadly flat CapEx number 2025 should also enable us to achieve a meaningful increase in free cash flow this year. To achieve the midpoint of this outlook, we on average need to be every quarter around about $15,000,000 to $20,000,000 better in terms of adjusted EBIT and adjusted EBITDA in the same period last year. For Q1 twenty twenty five, we should be on track for that. Now on this page here, I would like to illustrate further the significant increase in profitability and cash flow targeted by us.

We are targeting for 2025 an increase in adjusted EBITDA of circa 12% to 25%, which by itself is higher than current capital markets expectations. This should disproportionately boost adjusted EBIT growth to circa 45% to 80% this year and allow us to more than double free cash flow per diluted share from currently EUR 0.42. We are convinced the long term adjusted EBIT growth and free cash flow per diluted share growth drives our value for our shareholders. The disciplined execution of our efficiency program, our much higher capital discipline introduced since 2024 and the fact that we will not grow diluted number of shares from the currently so at 171,000,000 level should enable us to grow both adjusted EBIT and free cash flow per diluted share meaningfully for the years to come well beyond 2025. With that, we look forward to your questions.

Conference Moderator: And the first question comes from Sven Zauer, Kepler Cheuvreux. Please go ahead with your question.

Sven Zauer, Analyst, Kepler Cheuvreux: Hello. Thank you. My question is regarding the RTE outlook in 2025. I mean, you explained the deleveraging that you are planning with the meal kits, but I struggle to understand why the growth in RTE is expected to be so low in 2025. Maybe you could provide some more color on that.

Thanks.

Dominik Christa, CEO, HelloFresh SE: Good morning. So first of all, I think you need to put it into context. We’ve grown RTE revenue 20x over the last four years. We’ve stretched a lot our fulfillment network and the network that we had to build while flying the plane. And, I think there’s some lessons that we want to avoid that we’ve actually learned the hard way in Mirkits.

So what we’re trying to do is find the right multi year growth formula that allows us to both predictably and sustainably grow both top line and bottom line. And at the same time, this involves making a lot of deliberate investments into building our brand, into improving the customer offering not overspending in marketing, but basically growing the TAM in line with our customer growth. And we think that a low to mid teens is sort of like the right level to target for the 2025 period.

Conference Moderator: So the next question comes from Nisz, Deutsche Bank. Please go ahead with your question.

Isla, Analyst, Deutsche Bank: Great. I think my first question is on the scale of the cost savings that you’re planning over the next couple of years. I’m not sure if you want to dive into this at the CMD, but some color would be great on how large each of these measures are expected to be over the next couple of years. Do you have a number in mind that you’re working towards? Some color there would be great.

And if you think

Luke Holbrook, Analyst, Morgan Stanley: you’re going to dive into that

Isla, Analyst, Deutsche Bank: at the CMD, I’m happy to ask another question as well. But just wanted to check that to start off with.

Christian, CFO, HelloFresh SE: And Isla, it’s Christian. Yes, indeed. I would love to take you through that at the CMD in ten days. So bear with me. We just don’t want to steal Alzheimer, given that this will be one of the key building blocks.

But we have a number in mind, and I’m actually very much looking forward to take you through that the building blocks and also some of the timelines involved.

Isla, Analyst, Deutsche Bank: Great. And then maybe Christian, I

Luke Holbrook, Analyst, Morgan Stanley: can ask you another relevant question related to

Isla, Analyst, Deutsche Bank: the release last night where you had made a statement that the consumer in The U. S. Is seeing some softening and that might be affecting your outlook as well. Could you give us some color there as to what you’re really seeing? How that would impact sort of Q1 maybe?

And is it just related to meal kits? Are you seeing it in RTE as well? Some color there would be great. Thank you.

Christian, CFO, HelloFresh SE: Look, this channel macro, which is not exactly blue sky in The U. S. At the moment, is something that we are seeing that we are certainly seeing for some of our smaller competitors in that market as well and hearing from substantially all consumer companies and process in The U. S. So, yes, so we see it as well and that’s baked into the at least status quo is baked into the guidance that I’ve given to you.

Isla, Analyst, Deutsche Bank: Thank you.

Conference Moderator: And the next question is from Andrew Ross, Barclays. Please go ahead with your question.

Andrew Ross, Analyst, Barclays: Great. Good morning. Thanks for taking my question. I just wanted to kind of double click into the NILKit top line guidance in 2025, which is for a decline greater than has happened in 2024, just to make sure we’re completely clear as to why that’s happening. Am I right in saying that the behavior of existing customers has not changed at all and it’s kind of doing what you think?

And this is still all about adding fewer new customers into the funnel. And then just to understand why the meal kit declines are not moderating as you lap up against adding fewer new customers having dialed back in customer acquisition in 2024. Is that just because you’re going even harder on dialing back on customer acquisition into the back end of ’24 and into ’25 just to make sure I kind of fully understand the moving parts. And then in ’26, I appreciate you’re not going to guide, but directionally, things should then start to stabilize in the mill kit business as you work through this kind of dial back in marketing? Is that a good way to think about it?

Thank you.

Sven Zauer, Analyst, Kepler Cheuvreux: So

Dominik Christa, CEO, HelloFresh SE: top line growth is definitely like a function of our investment into marketing. I think we deliberately chose to win over fewer new customers for the last six months already. And obviously, this has an impact on the go forward growth as well. As you’ve heard Christian say, we anticipate a further step down in our marketing investment levels. And those two things taken together will lead to a temporary deceleration of MeerKIT revenue.

For us, the next larger customer acquisition period is the back to school period. By that time, we want to have a much improved customer offering on the market. And as you rightly said, we think that by having a much improved customer offering that serves a larger part of customers, a larger TAM, we will eventually have a much better product and better profitability levels so that we can return to growth. This I don’t want to give a sort of like a time line here, but I think the overall strategy is very clear and is very deliberate here. We’ve started to take down marketing massively over the last two quarters.

We’ve acquired fewer customer that extends now in a smaller but higher value customer pool with a higher number of orders. But obviously, you see that revenue impact in the beginning, the higher orders and the better value customers play out in the long run because they’re placing more orders over their lifetime. And this is what explains the further deceleration of our revenue.

Andrew Ross, Analyst, Barclays: Thanks.

Conference Moderator: And the next question is from Markus Stiebel, JPMorgan. Please go ahead with your question.

Markus Stiebel, Analyst, JPMorgan: Hi, everyone. Maybe following up on this. You highlighted clearly the reduced marketing spend in particular in The U. S. And you showed that the curves.

As a result, we’ve seen a 10% decline of revenues in North America and 5% in international. Could you just help us understand why international should sort of like face the same development, I. E, you cut marketing costs potentially harder, similar to The U. S. In early markets like The UK or Germany.

Are those markets from UOB just generally more resilient and the kind of like developments that we’ve seen in The U. S. Are not going to come in your view in those markets? Or is there a chance that they just come later? Thank you.

Christian, CFO, HelloFresh SE: Markus, So I would say a couple of things. One is it’s definitely helpful if you have a look at this page on differentiable in terms of marketing spend in the new kits area between the two operating segments that we on purpose put into that presentation that you have that, which is given new information. So what this shows is that we effectively took down marketing spend in The U. S. Earlier and harder.

This has an impact. This marketing spend otherwise would have been very unproductive if it wouldn’t have a differentiated impact. For international, as I tried to allude to a couple of minutes earlier, this is a composite of a number of markets, including a number of markets which are somewhat more early stage in the life cycle. The most important one there for us is France where we are deploying more marketing spend actually than we’ve done in the year before and very good ROIs. And therefore, the overall development of international is somewhat different than in North America because of these two reasons here.

I hope that’s clear. In terms of our marketing, our eye threshold that we apply, that is not different between the two segments. So we’re seeking the same return on investment on our marketing spend across the group.

Markus Stiebel, Analyst, JPMorgan: Okay. But just specifically, if we exclude this mix effect, I understand that there are some markets where you recently launched, but if you just look at Germany and The UK, where I would argue these are sort of like older markets and a bit more comparable. Do you see similar effects potentially there or not?

Christian, CFO, HelloFresh SE: So we don’t necessarily discuss trends in individual markets. But what I would say overall in North America, we spend more in the private. Therefore, what we die back is somewhat more in relative terms. And that applies to Germany and The UK as well, I. E.

We spent less than in North America before and therefore the pullback is somewhat less pronounced.

Markus Stiebel, Analyst, JPMorgan: Okay. Thank you.

Conference Moderator: And the next question is from Christian Salas, Hakan Alfaisa. Please go ahead with your question.

Christian Salas, Analyst, Hakan Alfaisa: Hi, good morning, everyone. And I’ve got one question left actually, and this is around the European ready to eat product. Could you just give a little bit more color here on how satisfied are you with the market launch in Germany in RTE? And what was the initial customer feedback you received? And do you plan to make any changes to the product following the pilot launch?

And is the product any different to The U. S. Ready to eat product? Thank you.

Dominik Christa, CEO, HelloFresh SE: We’re quite happy with the consumer demand that we’re seeing. We’re actually like trying to throttle that a little bit and not go in too hard right now. There is definitely still a lot that we need to do around the product. If you compare our European RTE product versus our U. S.

RTE product, then the menu size is less than half of what we offer. Hence, also like we don’t offer all the dietary preferences that we actually offer in North America in RTE. And a big, big focus area for us over the course of 2025 is in sourcing large parts of our food manufacturing because right now we are very limited in terms of the product variety and the menu size that we can offer with our setup. So consumer demand, search volumes, generally like early satisfaction levels look quite promising. I think it’s early days.

I also wouldn’t sort of like interpret too much into it. But it definitely gives us the confidence that we want to build out our assortments, build out our menu choice. And that is something that goes hand in hand with doing large parts of the food manufacturing process ourselves. That’s what we’re investing in right now. And over the course of the year, we hopefully can upgrade the product meaningfully for our European RTE customers as well.

And then with a better offering kind of like continue scaling up and capturing more of the demand then hopefully at better unit economics and with a much improved customer offering that really makes customers retain for the long run and make has them place as many orders as possible.

Conference Moderator: All

Christian Salas, Analyst, Hakan Alfaisa: right. Thank you.

Conference Moderator: The last question comes from Luke Holbrook, Morgan Stanley. Please go ahead with your question.

Luke Holbrook, Analyst, Morgan Stanley: Yes. Good morning, everyone. I just want to have the clarification question on how you expect the North American mill kit to trend to stabilize? Because I think on the last earnings call you had indicated it could be the first half of twenty twenty six. So I just wanted to get clarification on that.

And then just wanted to question on the utilization of Bax’s facilities and whether that’s played into the way that you’re thinking about investing in demand this year? Thank you.

Dominik Christa, CEO, HelloFresh SE: Luc, I appreciate the question, but we don’t want to currently like give an exact date when we expect that. I think second half of this year, you will see a much improved customer offering. We’ve invested in higher value customers, which should continue to place more orders for longer. But we don’t want to give like a specific date right now. On your utilization question, so it’s not that we’re overutilized in RTE in North America, but there’s a quite complex network involved.

So, the vast majority of meals we produce ourselves, there are some meal types that are produced by Comans and other suppliers that we have structuring that network for best efficiency, how to assemble the different meals that are being cooked and manufactured in different buildings. That is certainly something that is a key consideration in how quickly we want to scale up. And we want to make sure that we scale up our supply chain at good margins that we improve the customer offering that we build the brand that we diversify our channels in lockstep and don’t get into the same situation that we had in meal kits where demand was running away very, very quickly and we didn’t invest as much into all those other things that you need to do to have a predictable and sustainable growth path. Thank you.

Conference Moderator: And as there are no more questions from the audience, I’ll hand back for closing remarks.

Dominik Christa, CEO, HelloFresh SE: Thank you for attending this preliminary earnings call for Q4 and full year. We aim to share a lot more information both on the improved customer offering as well as on our efficiency program at our Capital Markets Day in ten days. Hope to welcome and see as many of you as possible at that date. Thanks a lot and see you soon.

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