HelloFresh Aktie

Good morning, ladies and gentlemen, and welcome to the HelloFresh H1 2026 Results Call. The conference will be recorded. [Operator Instructions]

Let me now turn the floor over to your host, Dominik Richter.

Good morning, ladies and gentlemen. Thank you for joining our Q2 2026 earnings call. I'm joined today by our CFO, Fabien Simon, and I'm going to spend my time on the strategic picture, why we're making the choices we're making and why we remain convinced they're right for this business over the long run. Our CFO will then walk you through the numbers in detail, and we'll open the floor for questions after that.

We've also published our H1 2026 shareholder letter this morning alongside this presentation. It covers a lot of what I'm about to say in more depth, and I encourage you to read it alongside today's remarks.

I want to start where we always start because it's the frame for everything else that we're talking about today. Our mission is to change the way people eat forever. Our vision is to become the world's leading digital native CPG company. Every decision I'll describe today, including the ones that show up as pressure in this quarter's numbers is in service of that longer-term vision, not in spite of it. What you're looking at right now is a phase to rebuild, not a single quarter story.

Phase 1 was all about fixing our cost base. Phase 2, the one we're in right now, is reinvesting those savings into a genuinely better product. Phase 3 will be turning that better product back into growth on our terms once the numbers tells us it's the right thing to lean in. We're firmly in Phase 2, better products, better customer metrics and a top line that's still catching up to both.

I want to cover 3 things today. First, why our structural position in this category gives us the room to be patient rather than reactive. Second, what our efficiency program has actually funded on the product side in H1. And third, what the resulting customer data tells us about whether any of this is working.

Let me start with our structural moats because it's easy to lose sight of them during the quarter-to-quarter reporting cadence. HelloFresh has built real advantages against both CPG manufacturers and food retailers in the overall food ecosystem. We run a constant feedback loop with our customers, millions of ratings, swaps, reorders and cancellations every week, which lets us get ahead of what people will want before they can articulate it themselves. That feedback loop sits inside a deeply rooted culture of data and experimentation, which derisks every product bet before we scale it company-wide.

Our customer base skews towards the top 40% of the income distribution, which gives us pricing power and margin resilience. We occupy the right corner of the food market. Convenience, health, personalization and sustainability are the megatrends that everyone is seeing and traditional food companies struggle to meet. We've built a well-oiled D2C marketing flywheel that plans around where the shopping experience is heading, not where it's been.

And our purpose-built vertically integrated operations from our own fulfillment centers, our own last-mile logistics to our own procurement allows us to push innovation and iterate at a rate that is impossible for CPG or food retailers. Individually, none of these show up in a month or half-year P&L. Collectively, that's the reason we can make deliberate patient decisions instead of reactive ones, and thereby, we have strong conviction in the strategy we pursue.

The patience is exactly what our efficiency program has brought us. We're now roughly 85% through our initially communicated EUR 300 million program as of the end of H1, with the remaining approximately 15% planned for completion in H2. These are permanent structural changes to our cost base, not one-off savings we will need to refine next year, and they are the direct funding source for the entire product agenda I'm about to walk you through.

While H1 has seen a number of adverse external factors such as heavy winter storms, spiking fuel prices, we have nonetheless seen good underlying progress in the factors we control. Meal kits has already seen a convergence to our target low to mid-teen adjusted EBITDA margins over the course of the last 18 months. Ready-to-eat is where we are focusing a lot this year on the bottom line to also bring it to full-year adjusted EBITDA profitability. We remain on track for that, and margins are already up a full point year-over-year in H1, even after absorbing material ramp-up costs of our new Factor Europe facility and the disruption of the aforementioned winter storms, increasingly driven by a larger share of revenues coming from a more tenured customer base.

Getting the rest of the way there in H2 comes down to 3 things for RTE: improving our contribution margins again after the initial ramp-up phase; second, continuing to calibrate our marketing spend to where returns are strongest; and thirdly, scaling our emerging RTE geographies into profitable volume growth. We're doing all of that in that sequence for a reason. Margin discipline first, upgrading the customer experience second and only then leaning back into growth.

We are now about 12 months into what we call the Refresh, our stage-gated product investment program. We test in a handful of markets, measure rigorously against preset metrics and only roll out globally once we see the evidence. Early results out of the Nordics and the U.S. gave us the confidence to keep widening it in this half. The logic behind it is simple. With a limited number of meals and a narrow choice of cuisines, there are only so many long-term customers a business like ours can reach. So every dollar we put into broadening that selection is a dollar spent growing our addressable market, not just serving the customers we already have.

Let me give you some very concrete examples. In factor, we've broadened our collection of GLP-1 friendly recipes for customers managing their nutrition around that medication, an area where demand has been real and where almost nobody else in the market has a credible answer yet. In meal kits, we've introduced low-lift dinners for the nights when a customer wants HelloFresh quality without the full cook time with precut vegetables or premarinated proteins allowing for a significant reduction of cooking time.

We've also expanded protein variety, introducing new SKUs such as barramundi, Chilean sea bass or deer to our menus regularly. All 3 add more SKUs, more sourcing relationships and more variability in our kitchens. All 3 cost a bit more before we scale the volume behind them. We have accepted that ramp-up cost deliberately because it's temporary and the retention benefit behind it isn't. Each of these is a small change on its own. Together, they're what more plate -- more value per plate looks like in practice, and they're exactly the kind of investments that widens the pool of customers this business can serve over time.

We are pairing the investment in food with digital features that make the product smarter around the edges, which is also how we think about becoming a genuinely digital native CPG company rather than just a meal kit company with an app attached to it. Our upgraded personalization engine uses onboarding quizzes and each customer's ordering history to build a food profile that recommends the best fitting meals from a now much larger menu.

We've broadly introduced other product personalization features as well, such as a wide range of swaps in the weekly menu, which now lets customers change an ingredient, for example, tofu for chicken with one tap chef-tested, so the swap never cost them on taste.

And we've built out personalized menu merchandising capabilities, for example, options to include the fussy eaters of the family, kids into the weekly dinner routine with an exciting collection of meals built around that use case.

We've also launched our HelloFresh CookBook this year, which lets customers save any recipe they spot on social media or anywhere else online into a HelloFresh style recipe card with full step-by-step instructions, free, no subscription required.

Customers have already saved more than 3 million recipes since launch, which tells us there's a real appetite for us to be useful to customers well beyond the meals we ship them. It also gives us a live read on trends and preferences.

With these features, we increasingly embed ourselves into customers' lives and make our app useful for active, lapsed and prospective customers. So where does all of this actually show up? In meal kits specifically, constant currency average order value is up 5.7% year-over-year in H1, and order rate is up 4.1%. Customers who are with us today are ordering more often and spending more per order than they were a year ago. What you won't see yet is that translating into top line growth. And I want to be direct about why, because I know it's going to be a question on this call.

We pulled back marketing spend significantly again in H1 on top of an already large step down a year earlier. As a deeply data-driven business, we hold every dollar of marketing to a strict return threshold. And that threshold only works when we can forecast our cost base with great confidence. In H1, we had less of that confidence than usual.

Given the heaviest winter storms in 75 years, Europe had its own run of severe weather, and the war in Iran pushed fuel surcharges and fertilizer prices up across our supply chain. Spending aggressively into that kind of cost uncertainty means buying customers at a price we can't properly underwrite. And unlike in past times, we've chosen not to do that, even though it costs us in this half's top line. That's a deliberate trade-off to build sustainably for the long term.

Where we don't yet have the long-run data to justify, we're staying patient rather than assuming it will work out. We're going to reassess our investment levels as we now move into back-to-school season when we typically get a much clearer read on demand elasticity and our cost base for the second half of the year. That discipline is the whole point of a phased approach, where right now, we're focusing predominantly on making the product significantly better for consumers. That brings me to how we're thinking about the rest of the year.

Our focus for H2 remains on efficiency with select opportunities for investment where the data actually supports it. Specifically, we're focused on 4 things. We're recalibrating product investment levels based on what H1 actually told us works rather than scaling every initiative uniformly and globally. We're keeping marketing spend disciplined, and we'll let early results from back-to-school, one of the most important demand signals in the year, set the pace of any incremental investments from there.

And after a period of initial inefficiency while driving a lot of innovation in H1, we're now targeting contribution margin expansion for the group again because that margin is what keeps funding everything else on the list.

And finally, we're scaling factor outside the U.S. with our EU center ready for growth and into new channels. For example, after a successful trial in H1, we're broadening our access to retail shelves for our RTE product, which gives us a second channel and diversifies our revenue line.

I want to close the strategic part of this call with one of the charts I find most convincing because it speaks to revenue quality rather than revenue quantity, and quality is what this whole strategy and Phase 3 build has been optimizing for.

Look at meal kits first on the top of the page. Revenue from customers who've been with us more than 4 years now make up 34% of H1 net revenue, up from just 7% in H1 2023. That tenured revenue has kept growing, which tells you this growth is coming from customers staying longer and spending more once they're in, not from throwing more money at acquisition. Ready-to-eat on the bottom chart is earlier in that curve. Tenured revenue there is growing significantly, too.

Revenue from customers that have been with us for over 2 years stand at 20% today, having grown considerably over the past 3 years, but the category is younger. So revenue is still a lot more sensitive to the volume of new customers we acquire in any given period. That's simply where RTE sits in its maturity relative to meal kits and tells you about the story of revenue decline in RTE in H1.

To recap before I hand over, H1 has seen us continue to execute the multiyear strategy we've been deliberately pursuing. Strong innovation, tight ROI thresholds in an uncertain environment and good progress towards a return to positive full-year RTE bottom line. These trends are compounding in the right direction. It's a multiyear trend, not a quarter blip, and we're not managing this business quarter-to-quarter. The product is improving strongly and the customer reception proves it every single week. Growth, when we lean back into it, will be a choice we make with conviction backed by data we trust, not a target we chase into a cost environment we can't see clearly yet.

With that, let me hand it over to our CFO, who will take you through the quarter's financials.

Thank you, Dominik. Good morning, everyone. Thank you for joining us for our Q2 earnings presentation. Before I walk through the quarter, I want to flag a change in how we are presenting our results. At the full-year results and through the various interactions with investors, I made a commitment to enhance the transparency of our disclosure and to update our reporting framework.

Beginning this quarter, we are staying true to our words, and we are disclosing full P&L in reported and constant currency by product category, meal kit, ready-to-eat and others separately as a deliberate step towards more comprehensive reporting because each category has distinct economics and a distinct trajectory. We believe investors are better served by seeing them clearly and separately rather than through a consolidated view. So all the details can be found in our H1 report, including 2025 comparison.

Additionally, what you would have seen in Dominik's sections and we will continue to see in the coming pages is also further transparency on cohort revenues. Again, this is something that we said we would do, as we believe this will give the market a better view of a more solid foundation and dynamic that we have in our business than sometimes understood. And this come on top of a greater focus on cash flow and the updated metrics of free cash flow plus lease repayment that I commented already during the year-end results.

With that, let me now start by walking you through the key themes of the quarter before we look at each line item in detail. In Q2 2026, we delivered what we said we would deliver, as we continue to execute against our strategic priorities. Revenue of EUR 1.5 billion reflects a decline of 7.8% in constant currency for the group. Both the meal kit and ready-to-eat segment came broadly in line with our internal expectation, which I had communicated to the market last quarter.

The other segment, that is a new venture in specialty meat and in pet food is up 36% in constant currency for the quarter. I want to draw your attention to 2 dynamics that I believe tell you more about the underlying quality of the business. The first is our tenured customer cohort. Those customers who have built HelloFresh in their weekly routine, continue to show stable, and in fact, improving behaviors in Q2 with order rates increasing year-on-year. This is true for the group and individually for each of the product categories. The second dynamic is average order value, which increased 6.5% in constant currency to EUR 71, driven by higher add-on contribution, a greater share of premium recipes and some price increases.

On the operational side, 85% of our planned EUR 300 million efficiency measures were implemented before the end of June. Progress on the cost side was, however, largely offset by the deliberate front-loaded product investment that was communicated 12 to 18 months ago. This is reflected in the group contribution margin of 25.2%, down 2.1 percentage points year-on-year, and I will address that in detail on the contribution margin slide. But note that Dominik already mentioned that efficiency remains our priority for the rest of the year, and we will be disciplined with marketing and product investment.

Q2 group adjusted EBITDA was EUR 100.6 million (sic) [ EUR 120.6 million ] with meal kit at 15.1% adjusted EBITDA margin, broadly the same as last year in percentage terms. Ready-to-eat margin was 3% in Q2 and better in percentage terms in H1 versus H1 last year. We continue to work on our goal of turning ready-to-eat adjusted EBITDA margin positive this year. And in fact, for H1, the U.S. market, ready-to-eat there was almost reaching breakeven at the adjusted EBITDA level, and we expect positive margin for H2.

Finally, it is worth sharing that in July, we successfully completed the pricing and issuance of our inaugural EUR 350 million bond with a coupon of 5.5% maturing in 2031, which strengthened our capital structure and extends our maturity profile. The adjusted EBITDA outlook is reconfirmed for the full year. For our constant currency revenue growth, we see it trending towards the bottom end of the full-year range, and we will gain further visibility following the back-to-school campaign.

Moving to the slide on revenue. So group revenue of EUR 1.5 billion in Q2 declined 7.8% in constant currency. And as I mentioned, this was in line with our expectations. Meal kit declined 8.9% in constant currency. Sequentially, this compares to a decline of 8.5% in Q1, including the effect of Spain and Italy, which has now ceased to operate, so practically flat sequentially.

The performance is increasingly supported by 2 structural pillars. The resilience of our tenured subscriber base whose order rates are growing year-on-year and a continued improvement in net average order value, which reached EUR 64.5 in Q2, up 7.1% in constant currency for meal kit. What we need to see in order to witness an inflection in meal kit revenue growth is a step-up in conversions at our tighter ROI levels and in our ability to keep those conversions. We did not see that in Q1, an important acquisition quarter, which is having an effect on the rest of the year. The next natural point in time to assess our conversion momentum will be the back-to-school campaign, which starts very shortly.

On ready-to-eat, the category declined 8.4% in constant currency in Q2, which represents a sequential deceleration compared to Q1. Ready-to-eat has a greater structural reliance on new customer conversion than meal kit. It is a younger category with a less deep-tenured subscriber base. Our disciplined application of marketing ROI threshold, therefore, has a proportionately larger near-term impact on ready-to-eat top line than the meal kit.

The structural positive within the segment is that tenured ready-to-eat customers continue to expand their net revenue double digits year-on-year in Q2, which speaks to the quality momentum of the retained base. Q2 AOV was up 1.1%. Given how important conversions are for ready-to-eat and the fact that we communicated already that we entered the year with a low level of active customer base, we should not expect ready-to-eat to recover in Q3 and are instead looking at the level of exit rate for the year.

I would also highlight our other segment, which includes our new ventures, growing at 36.1% in constant currency year-on-year. It's a continuation of the strong momentum that we have described in prior quarters.

On Slide 13, I want to put the meal kit revenue trajectory in the context of H1 as a whole. So while Q2 showed a modest sequential decelerations, negligible on a like-for-like basis when you account for the discontinuation of Italy and Spain, the H1 pictures continued to support the direction of travel. The rate of decline has been narrowing consistently, and importantly, that improvement is happening as we tighten our marketing ROI standards.

Turning to Slide 14. This is another very clear example of us providing the transparency around cohorts that you have been asking for. In this slide, I present in more detail the behavior of our customers across the different tenure pools by comparing the revenue growth evolution in constant currency from H1 2025 with H1 2026.

So let me walk you through the chart from left to right. On the very left, you see the growth rate of the revenue in H1 generated by customers that were acquired within the preceding 12 months. The growth rate for this cohort remains negative in H1 2026 year-on-year, which is expected. Performance marketing, the primary driver of new customer acquisition also declined. But what matters is the rate of improvement. The year-on-year decline in new customer revenue growth in H1 2026 is about 1/3 of what we recorded in H1 2025. The trajectory is therefore improving.

A similar dynamic, and in fact, a more pronounced one is visible for reactivation. The revenue growth rate from reactivated customers has improved meaningfully with approximately half of the decline recorded in H1 2025 having been erased by H1 2026. And this is consistent with the early signals we are seeing from lapsed customers responding to the improved product proposition.

Finally, tenured customers. The revenue growth rate in H1 2026 is similar to H1 2025, which is, I want to note, a meaningful result in itself. Every month, we are bringing in fewer new customers who have the potential to become tenured over time, and yet, this cohort continues to grow at a stable rate. These customers are showing increasing order rate across the market and lower churn in the market where our product investment cycle is most advanced. This is the customer base we are building for. And it is a customer base that give us structural confidence in the trajectory of the business, even as the overall top line continues to reflect the managed transition toward a more loyal, higher-quality subscriber composition.

Q2 2026 contribution margin came in at 25.2%, a decrease of 2.1 percentage points year-on-year when you exclude the impact of share-based compensation and impairments. And I want to address this directly because it has a lot of moving parts. The decline in contribution margin is not a reversal of our underlying efficiency progress. It is a deliberate consequence of the front-loaded product investment strategy we communicated at the start of the year. We said we would invest in H1 in the product quality, in the menu, in the experience ahead of the back-to-school period, and that is precisely what the margin reflects.

Let me give you now the segmental breakdown. Meal kit contribution margin was 28.2%, a decrease of only 0.2 percentage points year-on-year, which I think is a meaningful signal in itself. The efficiency reset is largely holding the meal kit margin in place even as we absorb product investment on that line as well as volume-led operational deleverage.

Ready-to-eat contribution margin was 21.6%, a decrease of 5.2 percentage points year-on-year. The larger impact in Ready-to-eat reflects both the product investment, which we are also being rolled out in the ready-to-eat category, and the mix effect from expansions into new international markets, which are not operating yet at the efficiency level of our core geographies.

On the cost line breakdown, procurement and cooking costs increased by 2.4 percentage points year-on-year. In meal kit, the figure is 1.8 points, which will moderate in H2 as our procurement and fulfillment teams get better at navigating the initial phase of inefficiency that you typically see when launching a meaningful product innovation cycle, for example, around operational waste. We are on track to meet our previously mentioned target of 150 basis points.

In Ready-to-eat, the cost increased by 3.6 percentage points, half of which is product investment, which will also moderate towards 150 basis point target in H2 and half of which is a ramp-up of our European kitchen, which in ready-to-eat shows up in this line.

Fulfillment costs decreased by 0.3 percentage points with efficiency program savings partially offsetting the impact of the volume-led operational deleverage and fuel cost inflations. So the direction of travel and the underlying cost structure is intact. The back-to-school campaign will give us the first evidence on whether the consumer response to the improved product justifies the level of investment.

Turning to the marketing spending. Q2 2023 (sic) [ 2026 ] group marketing declined 16.3% year-on-year in absolute terms, now representing 14.9% of group revenue, a reduction of 1.4 percentage points compared to Q2 2025. Marketing declined faster than revenue in both segments, which is the intended dynamic. The continued reduction in marketing is the ongoing execution of the structurally differentiated approach to customer acquisition, which is anchored on stringent return on investment threshold rather than volume.

In meal kit, marketing spend reached 11.6% of revenue in Q2 2026, down EUR 23.4 million in absolute terms year-on-year. But, in H1 2026, marketing to revenue for meal kit was broadly stable at 14.8% compared to H1 2025, which reflects consistent and disciplined application of our ROI criteria and some incremental marketing spend in countries where we see product cycle is more advanced, such as in the Nordics.

In ready-to-eat, marketing spend reached 19.2% of revenue in Q2 2026, down 23% year-on-year. The higher relative level of ready-to-eat marketing compared to meal kit reflects the fact that it is a younger category with a greater reliance on new customer conversion. At the same time, the year-on-year decline in ready-to-eat marketing in percentage terms was actually steeper than in meal kit, which is a direct consequence of the disciplined focus on higher ROI customers and channels that we have applied with equal rigor to both segments as well as a reduction in the very high brand marketing spend incurred in H1 2025. I would flag that marketing efficiency during the back-to-school period will be an important input, both to our assessment of the conversion trajectory and to the marketing spend profile we will carry into the remainder of the year.

Turning to Slide 17 on the adjusted EBITDA summary for Q2 and for H1. Q2 2026 group adjusted EBITDA was EUR 120.6 million, representing a margin of 7.8%. So let me walk through the segments. Meal kit delivered EUR 167 million in Q2 at an adjusted EBITDA margin of 15.1%. This compared to EUR 184.8 million and 15.2% in Q2 2025, a margin that is broadly stable year-on-year despite the product investment being made in the category. The resilience of the margin is a direct function of the structural improvement in the meal kit cost base even as there is some volume-led operational deleverage.

For H1 2026, meal kit was EUR 271 million adjusted EBITDA at 11.7% margin compared to EUR 334.6 million and 12.8% in H1 2025. That H1 comparison reflects the front-loaded investment profile, which is weighted to the first half of the year and the winter storm impact we witnessed in Q1 of this year.

Ready-to-eat delivered EUR 13.1 million in adjusted EBITDA in Q2 at a 3% margin compared to EUR 17 million and 3.5% in Q2 2025. For H1, Ready-to-eat adjusted EBITDA improved to negative EUR 13.6 million from negative EUR 26.4 million in H1 2025. As mentioned earlier, the U.S. ready-to-eat business was not too far off from breaking even in H1 2026. The year-on-year H1 improvement is meaningful, and it is directionally consistent with our goal of modest full year profitability in this segment.

Holding costs at EUR 53.8 million in Q2 were higher than Q2 of last year, reflecting primarily some IT service cost inflation, including those related to AI and some salary adjustments that had to be made as the share-based compensation program is reduced, but not, of course, on a one-for-one basis.

On cash flow, H1 2026 free cash flow was positive at EUR 49.4 million. This represents a decrease of EUR 107 million compared to H1 of last year. But H1 of last year included a one-off tax refund, which I communicated at the beginning of the year. Excluding that nonrecurring item, the year-on-year free cash flow decline narrows to about EUR 69 million. So the remaining decline is principally driven by the adjusted EBITDA development, which, as I have described, reflects the front-loaded product investment and winter storm impact in this half.

CapEx in H1 2026 was EUR 76.7 million, up from EUR 66 million in H1 2025. This step-up has a specific composition. So investment in Factor EU infrastructure as we scale the European ready-to-eat business and CapEx directly related to automation in support of our menu expansion and product investment program. But it is important to note that at the midpoint of our adjusted EBITDA guidance range for 2026, we expect free cash flow to remain positive for the full year, with H2 expected to be materially more favorable than H2 2025. That expected improvement is supported by a stronger H2 2022 -- 2026, sorry, adjusted EBITDA profile by normalizing lease liabilities relative to the one-off termination payment made in 2025 and by a working capital profile that is expected to be more favorable than last year.

So before we go into the last slide on our capital structure and then open up the call to your questions, let me bring together our outlook. As mentioned at the beginning, the adjusted EBITDA outlook is reconfirmed in full. This means that at present and with the visibility we have, the range remains within reach. On constant currency revenue, our view is trending towards the bottom end of the full range, and we will gain further visibility following the back-to-school campaign.

So I want to be clear about why these 2 statements can coexist. The strength of the efficiency program and the improving unit economics of our customer base give us the confidence to reaffirm adjusted EBITDA even as the revenue picture trend to the lower end of the range. And again, the back-to-school campaign is the next meaningful read on conversion and marketing efficiency, and we will share those findings with you as soon as we have them.

On Slide 19, I want to address the bond transactions we completed in July and specifically the rationale behind it. So in July, HelloFresh SE priced its inaugural EUR 350 million bond with a coupon of 5.5% and a maturity in 2031. The notes carry a BB+ rating from S&P, which is consistent with our issuer rating and stable outlook. This transaction is primarily about extending our debt maturity profile and diversifying our sources of funding. The proceeds are being applied to general corporate purposes, including the refinancing of existing term loan debt, which reduces near-term maturity concentrations and gives the business a more durable and balanced financial foundations. And I want to be equally clear that this transaction does not change our capital allocation policy, which prioritize investment in organic growth opportunities and maintaining our adequate level of leverage as communicated before.

With that, I open it up for questions.

[Operator Instructions] So let's start with the first question. This one is from Andrew Ross from Barclays.

I guess, inevitably, it's to come back on meal kit declines in Q2 and when you're thinking into H2. And the first thing I want to understand is exactly why the meal kit declines didn't improve in Q2 versus Q1. You obviously spoke about that on the Q1 call, it played out. But back at Q1, it sounded as though that you had a specific market where maybe customer acquisition had been softer in April. Now to me, it sounds like the tone is that it's a broader-based factor across markets with kind of lower ROI you're getting on your marketing spend. So I'd love to understand kind of what you've seen in terms of the cohort behavior in more detail in Q2 in meal kits.

And I guess that feeds into a follow-up, when we kind of think about the implied improvement in H2 for meal kit to get to the low end of your full-year guidance range. What gives you confidence that you can do that? Do you have kind of any visibility into that back-to-school period that the ROI versus CAC math could have improved? Anything you can give to give us some comfort that growth is going to get better would be helpful.

Thanks for your question. In general, I think it's important just to kind of like think back to the phased rebuilds that we're going through, right? So really, our focus for H1 was making sure that we genuinely improve the product and broaden the TAM that we're going after before we then kind of like try to lean back into growth. In Q2, I think overall, like very much according to our expectations, very much according to the expectations that we communicated in Q1. So I think this was actually nothing like a super special that happened between what we communicated on the Q1 call and now in Q2, very much in line with our expectations.

And I think on the product side, we've also like really done a lot of what we wanted to bring to customers and generally like have seen strong reception, which is reflected in the customer metrics. I think the more interesting question is the second one, the implied improvements. Obviously, on the cost side, it's very much that we're going to drive contribution margin expansion again. We talked about some of the known inefficiencies that we took on board during the first half of the year, which is generally normal when you try to do a lot of new things. I think with the lessons learned and applying those, we'll see some contribution margin expansion into the second half of the year.

Efficiency program, more things will come through in the second half of the year. And then on top line, it's really a function of, number one, the improving order rates that we've seen among -- and AOVs among our customer base, which obviously also play out for all the customers that we've acquired in H1, which compared to 1 year earlier, will deliver more revenue per customer in the second half of the year. And secondly, then it's a function of how much we're leaning into growth and marketing in the second half of the year, which is, on the one hand side, something that obviously we control, but where we also are very much looking at the overall cost environment. It's definitely been a situation in the first half of the year where it was not fully clear to us how input costs would develop over the next 6 months. And that generally then, I think, as a rational operator, leads to applying higher ROI thresholds to your future investments. So it's really those 2 things.

The question is from Joseph Barnet-Lamb from UBS.

I was going to build off the sort of second part of Andrew's question and your response, Dominik. I mean, at the midpoint of your adjusted EBITDA guide, you need to do, I think, plus 24% year-on-year for adjusted EBITDA in H2, having just done minus 33% in 1H. Now, I think you sort of alluded to some of this. You said efficiency savings -- you have done more efficiency savings in H2. And also, you said expanding contribution margin. Can you quantify either of them to help us? Because it just seems like an absolutely enormous gulf that you're expecting to deliver in H2 year-on-year versus what you did in H1. So if you can quantify that or flesh out a bit more, that would be really helpful.

This is Fabien. I will try to help you on that one. So indeed, there is a meaningful improvement that we are expecting in H2, but first, I want to remind that the decline we are seeing in H1 is -- I mean, close to half of it is coming from a one-off event we have had with winter storm. So if you exclude that, the step-up looks less dramatic overall. And indeed, for us to deliver on our adjusted EBITDA ranges, we need to have, I would say, at a minimum EUR 24 million adjusted EBITDA improvement year-on-year in H2, which is like EUR 10 million to EUR 12 million minimum per quarter.

And why we are confident about it? If we look at what we expect for Q3, I always like to give how we see the coming quarter coming. On top line, we can't because it's going to rely a lot on the back-to-school season and the conversion. But on bottom line, we have a pretty good visibility. We see this, I would say, EUR 10 million to EUR 20 million improvement coming already in Q3. And we believe that in Q4, there is really the possibility with a good campaign coming to achieve the same level. So we feel confident that both quality of conversions, continued discipline on marketing ROI, which will continue, but as well a lower impact of product investment, which we started that in H2 of last year, and we continued in H1 of this year is going to have a lower year-on-year effect than what we have seen for the first part of the year.

And the next question is from Giles Thorne from Jefferies.

If you get into the back-to-school window and see a similar cost environment that you saw in Q2 and you decide to keep the marketing ROI thresholds at the same level as Q2, where do you think you'll land on the full-year overall group revenue decline? Is it the bottom end of the range? Or is the bottom end of the range requiring a change in the marketing threshold, so you would actually land below the bottom end of the range?

I think it's a bit of a difficult question because I think ROI on marketing is not something which is linear throughout the year. It's very different month on month and by season. And of course, the mix always change. What we would say is maybe to bring some perspective on what we have done in the past. If we look at the progress we have been making last year between our H2 and our H1 and assuming we will deliver the similar improvement between H2 and H1 of this year, we would be at the bottom end of the range. But what we are keen to commit is as soon as we have visibility on the back-to-school, which may be well before our Q3 earnings, we will communicate to the market what we have been seeing and if there is a need for readjustment or not. But so far, we are planning for a success for the back-to-school campaign.

And if the -- so you're planning for success, but if the back-to-school campaign goes worse than you're anticipating, does that require a move down in the EBITDA guidance, too?

I don't think so at this stage. I think we expect the biggest differences to be mostly on the top line. And we will need to assess why do we think it would have been the case, is it because consumers have a higher propensity in a more stressed environment to look at value, so we may have to adjust our product, or is it because we have not been powerful enough in awareness for new consumer, and we may have to change back then in that case, a bit our marketing approach. But we believe it's going to be much more a top line potential change than the bottom line one.

The next question is from Sven Sauer from Kepler Cheuvreux.

The average order rate and the average order volume improved and increased. But on the one slide, you showed that the revenue coming from meal kit customers that have been customers for more than 1 year decelerated in the first half. It was still positive, but it decelerated compared to last year. I'm just wondering how that can be with average order value and average order rate improving.

Yes. I would like to, because, as you know, it's really a new level of transparency, which I really trust market appreciate. What makes net revenue of like a tenured cohort is a few things. So it's one, your existing customer, how long do they stay with you -- I mean, how is the churn evolving, then how much do they order, how much can you charge. But as well from the new conversions you have been having over the years, how much are becoming long-term tenured. And what we have seen in H1 first is not a decline. I think we talked about 0.1%, 0.2% difference on the revenue growth. I think maybe the scale on the chart, which is not helping us here. But let's say, we see stability of our revenue, but of course, as well on our profitability, which is very important because the bulk of our profitability is made there.

So your question is why AOV can go up and this pool of revenue be stable is simply because over, let's say, the accumulated level over the last 3 years, we have seen a lower conversion. That's why the overall meal kit business has been declining, as you have seen on the introductory slide from Dominik and that it's only the consequence of less new customers becoming tenured that explains why it is not growing at the pace of our average order rate and average order value, which we expect something which is going to transition. I think the worst in my view, would have been something different, would have been that you've seen the same decline in your conversions. You've seen a further decline on churn or same decline as before on churn and then that number will be negative, but which is not what we see, which proves that our products are becoming -- are touching well existing customers and notice the difference, and they are churning less and they are ordering more, which I think is a very encouraging sign.

Just to clarify, because I'm not sure I understood this. So the number of customers converting to these long-term 1-year customers is decreasing and offsetting the average -- the higher average order value and the higher average order rate?

Yes, correct. And this is, I would say, expected and natural. When you have lower conversions, you always have a bulk of your new conversions that become longer-tenured customers. And if you have less of that, of course, there is a consequence. That's why it's for us important to ensure we always have good campaigns to fuel back the conversion momentum to grow the tenured base.

The question is from Nizla Naizer from Deutsche Bank.

So my question is on the type of customer that ends up in that long-tenured customer base. You said that you target the 40% -- the top 40% of the income in each of your markets. How -- a, how are they behaving during an uncertain macro environment? Is there a change in any behavior that you're seeing over the last year? And also, who are these customers? Could you maybe give us some color on -- are they more women now, age? Are they young families? Any color that you can give us to maybe get a better understanding as to who values the product in that category?

Happy to take that question. So you can definitely see that those customers who stay with us longer, who become tenured customers tend to have a number of certain features. You referenced already 2 or 3 of those. So they tend to be part of the top 40% of the income brackets. They are very often sort of like living in a multi-person household, very often with kids. There's a somewhat overrepresentation of suburban areas versus urban or rural areas. So those are some of the dominant features of that customer group.

In general, I think they are certainly also, to a point, affected, especially in the U.S. and other markets where you have like very flexible rates on your credit, whether that's for housing, mortgage, your car, credit cards, et cetera, et cetera, but probably to a lesser degree than the bottom quartile or the bottom half of the income distribution. We feel, and we also get that from customer research that customers that have experienced the product, that use it or have used it on an ongoing basis and formed a habit tend to think that it provides like really good value, cuts waste, helps them discover new recipes, eating healthy. A lot of the features we've discussed in prior shareholder letters and prior presentations, I think those very much apply.

In a more uncertain consumer environment, I think what you tend to see is that those customers who haven't formed a habit kind of like tend to think twice about whether to start something new. And given that we've also walked back a lot of the initial incentives that we give to customers, I think it's definitely an environment where we have chosen to focus on the core of the customers that we have, making the product really, really good for them and expanding the addressable TAM of the product that we have by introducing a lot of new cuisines, new features, more meals for different people rather than chasing new customers at all growth before the product is in the place that we really intended to have. That was maybe a little bit of a longer answer than to your initial question, but I think it's very good to think about it that way.

As we don't have any more time, we're going to be wrapping up. Thank you very much, everybody, for participating. Have a great day ahead.

Good morning, ladies and gentlemen, and welcome to the HelloFresh SE Q1 2026 Results. [Operator Instructions]. 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, Fabien, takes you through our detailed financials, I want to spend a few minutes addressing our current standing, the progress we've achieved over the past 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-offs, 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 while 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 Meal Kits Products segment. One year ago, meal-kit 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 EUR 62 million to about 21.8% of revenue. That's not a onetime 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 U.S. 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 EUR 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 materialize more forcefully in our P&L.

I also want to address ready-to-eat and specifically factor U.S. directly. Again, our primary goal for 2026 is to return the RTE product segment 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 U.S. 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 EUR 18 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 the unit economics and a more disciplined marketing investment approach.

The remaining challenge now is rebuilding the active customer base, which reduced in the last 9 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 touch points 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 U.S., our RTE businesses in Australia and Canada continued 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 road maps, which should help to drive positive outcomes with regard 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 EUR 1.7 billion, a 7.7% decline in constant currency, which was in line with our expectations. Meal kit revenue trends improved for a fifth consecutive quarter in a row, while RTE revenue trend showed a stable trend versus what we saw in Q4. Adjusted EBITDA came in at about EUR 24 million. To put this in context, severe winter storms in the U.S. and Europe, including a once in 75 years event in the U.S., disrupted our logistics and impacted adjusted EBITDA by approximately EUR 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 EUR 49 million. This gives a much more accurate read of where the business structurally sits today. Fabien 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 EUR 49 million in positive free cash flow, our fourth consecutive quarter of positive free cash flow despite the EUR 25 million impact from the adverse 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 EUR 375 million to EUR 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. We're 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, Dominik, 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 Dominik just described are showing up in our financials.

So starting with revenue. The group net revenue was EUR 1.68 billion 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. But 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. Meal kits delivered close to EUR 1.2 billion in revenue, 8.5% lower than last year in constant currency. As Dominik noted, this is the fifth consecutive quarter of sequential improvement in constant currency rates. The makeup of this number is defined by the trajectory of orders and of AOV.

Order growth in meal kits, while still negative, also improved sequentially for the fifth consecutive quarter. What we are seeing today is our tenured customer base ordering more on a per 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 tenure 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 mix.

Ready-to-eat delivered EUR 466 million, which is lower than last year in constant currency by 6.9%. This is made up 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 9 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 conversion, and we optimize our channel, our product and our marketing messages. Nevertheless, the tenured 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 conversions still represent an outside part of the revenue dynamics. So the takeaway on revenue is that the direction of travel on Meal 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 impairment and share-based compensation was 25.6%, down 1.4 percentage points 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. EUR 25 million of nonrecurring disruptions that hit primarily in North America. I mean, I don't need to remind anyone, certainly not our U.S. listeners that the winter storm front in the U.S. was widely reported to be the heaviest winter storm in 75 years. This event affected ingredient delivery, wastage, increased credit and refund cost and disrupted last mile delivery operation. This is a weather event that has no bearing on the underlying structural margin trajectory. The second factor is deliberate. We have accelerated product investment ahead of the revenue curve, investment in higher quality protein, expanded meal choice significantly or onboarding of new ingredients have been rolled out across countries.

Just to give an example, our customer in the Nordics can have 100 different recipes in their weekly menu, roughly doubling the size of the menu in 6 months. But these are recipes that now, for the most part, have a minimum of 200 grams of vegetables and fruits and better quality and better variety in their protein source. These investments increased gross cost in the near term. The returns come through higher retention, better frequency of orders and larger basket, i.e. better customer lifetime in subsequent period, especially as some of this investment compound and turn HelloFresh meals into being perceived as a higher value options.

In this particular case of Nordics, I explained before, we registered a very encouraging positive total revenue growth in Q1 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 continued to deliver. Fulfillment costs declined 0.8 percentage points of the share of revenue when we exclude the impact of impairment and share-based compensation. This is a direct output of the network optimization and productivity improvements we 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 EUR 62 million with only an 8% reduction in relative term 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 meal kit product category, where absolute spend was down only slightly year-on-year and as roughly flat as a percentage of revenue. What is critical now from a marketing perspective is that the value of the product investment land well. This is not an overnight type of occurrence as word of mouth, public reviews, top of funnel and performance marketing, all need to work in unison to crystallize those advantages and become top of mind for new consumers.

On ready-to-eat, spend was down. And it was down substantially year-on-year in both absolute and relative terms and this reflects 2 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 foundation. 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 Ready-To-Eat back to sustainable profitability and establish the right foundation for long-term profitable growth.

Group EBITDA was EUR 23.6 million absorbing, as I mentioned, EUR 25 million of weather-related disruption. [indiscernible] that, nonrecurring item, the underlying group adjusted EBITDA run rate was EUR 49 million.

By product category, Meal Kit adjusted EBITDA was EUR 105 million, representing a margin of 9%. This reflects the weather impact, which fell disproportionately on North America and the front-loaded product investment cost. The weather adjusted Meal Kit 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 Dominik said, that is a 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 EUR 27.6 million from EUR 45.9 million in Q1 2025. I mean this is a EUR 18 million 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. All-in costs of EUR 48 million are up modestly year-on-year, reflecting continued investment in IT and tech inflations, while personnel expenses has gone down. Free cash flow for Q1 was EUR 49 million. It reduced by EUR 18.8 million year-on-year, which is entirely explained by 2 items: Lower adjusted EBITDA, primarily weather-driven; and higher CapEx. Q1 CapEx was EUR 44 million, up from EUR 34 million a year ago.

The majority of that increase reflects the Factor Europe facility investment in Germany. I mean this is a growth CapEx with a clearly identified strategic return. And 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 EUR 30 million better than last year, of which 1/3 is structural and 2/3 is, phasing and therefore will be unwinds for you.

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 in constant currency of EUR 375 million to EUR 425 million. I also acknowledge that if you take into consideration the result 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 2 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 impacted -- 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 EUR 30 million to EUR 40 million below Q2 2025. This is driven by primarily the fact that investment in product has 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 hit the guidance for 2026.

With that, I will open the line for questions. Thank you.

[Operator Instructions] We have the first question coming from Joseph Barnet-Lamb from UBS.

A couple of questions from me, please. You referenced pricing a few times in the release. I'm interested if you could give us some more color on what's driving the uptick in pricing? Is it just reduced discounting, pricing up as a response to inflation or some form of pivot in underlying approach to pricing?

And then maybe a second question, you sort of referenced no improvement in underlying trends year-on-year in Q2. I'm interested as to why that's the case? I mean you referenced that the benefits of investment will kick in more in H2 than in H1. But regardless of investment, if you didn't have investment, comps are getting easier, would you not expect the underlying trend to be improving regardless of the timing and benefits of your investment program? I'm just interested as to why things are not getting better in Q2 versus Q1?

[indiscernible] one and Dominik maybe can answer on pricing, or otherwise, I will. So on Q2. So I understand your question was more what is the fabric of our Q2 year-on-year? What I would say is most of what I've been describing for Q2 is something that we have been already anticipated where we gave the guide -- guidance for the full year. So it's not totally a surprise.

What you see year-on-year is, I would say, 3 key components. You have the [indiscernible] as we expected, which we see impact on the P&L. And on the other side, you will see investment in products to increase the value propositions to our customers, which is hitting the P&L as we have been scaling that up from H2 to H1, which, of course, is giving a negative comparison to last year. But we still have the operational leverage, especially on meal kit. And I would say, last year, we were having a very meaningful reduction of marketing to offset that, which we don't want to do this year. And it is a choice we have been looking for supporting long-term growth.

As a reminder, total company last year, we have been reducing marketing spend by more than EUR 200 million with an increase in ready-to-eat. So you can imagine the magnitude of the reductions we have had in meal kit, which is not happening this year, which is why you have an uptick of a lower EBITDA.

But on a like-for-like basis, it is roughly where we expect it to be, which means that from Q3 already, we are expecting year-on-year improvement on our adjusted EBITDA trajectory. But what's important to notice as well, despite the numbers that we have just been talking about, we are expecting in Q2 on ready-to-eat most likely to be already on a positive trajectory as we continue to improve, and we will keep on a very solid double-digit adjusted EBITDA margin.

Other question was on pricing. So the way I would be -- so on pricing, I wouldn't say there's a massive shift in strategy. There's 2 things that I would like to call out. Number one, yes, we have reduced some of the incentives. So that is then coming through in higher net AOVs. And secondly, we've taken sort of like some pricing action, but mostly in line with inflation, sometimes a little bit over inflation, but also giving more value to customers. So you see the net impact in our COGS line, but the gross impact of investments has actually been higher than what you in the COGS line because we've also got some pricing changes, but not across all geographies, et cetera. So that's not the hugest impact of what you see. The incentives definitely play a part here.

And if I can have a quick follow-up, Fabien, on your point about Q2. You were breaking up a little bit, but it sounded to me like you were basically saying that it's due to sort of like a progressive reduction in marketing, leading to a compounding effect on your cohorts effectively. But firstly, is that what you were saying?

And then secondarily, given the product investment, I would imagine that your lifetime value of your customers would be going up. And as such, I'm not entirely sure why marketing continues to reduce. Is it because you're seeing CACs trending up and as such, you're progressively reducing marketing further to compensate for that to get your CAC versus LTV lining up? Or is there another driver behind that, that I'm not quite understanding.

I was maybe -- sorry, maybe I apologize if I was not clear on breaking up on my earlier comment. I was referring to still the dynamic of operational deleverage we still have on meal kit because we are still on negative order year-on-year. But last year, some of these declines were offset by a very meaningful reduction of our marketing spend. I was reminding how much we reduced overall marketing spend last year by about EUR 200 million and even more than that if we take meal kit alone, which do not have this year because we want to ensure we can support long-term conversion momentum.

And on product investment, we -- it is clear that today, what we see is already a positive trajectory on tenured customers, which are ordering more than before, which is a very good news. What we don't see yet is the impact on ability to drive new conversions because we know this will take time. And that's why we believe that we probably need a still few quarters to be able to show that in the P&L and it's what we have anticipated from Q3 onward.

And the next question comes from Nizla Naizer from Deutsche Bank.

Great. I have 2 questions as well, please. First, just to clarify Dominik, did you mention in your comments that you would expect a return to overall revenue growth for meal kits in H2 based on the trends you all are seeing? Or just would that still be more for 2027 type of outlook? Any color on that return to growth trajectory based on the trends you all are seeing, whether it was for meal kit or for the group in H2 would be great?

And second, one of the questions we're getting is on the health of the consumer, particularly in the U.S. with the worries around energy prices and cost of living going up. So just wanted to understand how you all are seeing an impact on that, whether you're offsetting it by other means? And if all of this is now baked into the outlook that you reconfirmed today, some color on that would be great.

Sure, Nizla. So let me be clear. What I said is that in H2, you should see evidence more clearly for an eventual return to growth, also in line with Fabien's answer just now. So given sort of like the massive year-over-year reduction in marketing in Q1, some of that carries over into Q2, so where you don't see sort of like the revenue growth inflecting in Q2, but you should see more evidence for an eventual return to growth in the second half of the year. That's what I was referencing.

On your question with regards to consumer health in U.S., I would say it's definitely not the sort of like best environment that we've been in. There's obviously definitely also on the part of consumers like a lot of fear of inflation coming back and other things. That's also why we want to be very strict in our ROI thresholds that we target with new customers and not overshoot, especially when a lot of the impact of our strategy is basically for consumers to order more over time. We want to make sure that as we switch back on the acquisition engine that we are cautious and do not invest aggressively into a consumer sentiment that is very much weakening when a lot of the return should come from better lifetime retention, better frequency, higher AOVs, et cetera.

So I would say we don't see it massively right now, but we definitely see some of the indicators. We see a lot of the research et cetera, coming, and we want to be cautious in that environment.

And the next question Comes from Andrew Ross from Barclays.

A couple for me, please. So first 1 is to come back on the Q2 guidance where, to be clear, I think you're guiding to revenue declining in constant FX, similar to what it did in Q1. And to be clear, are you saying that meal kits should also decline at a similar cadence in Q2, like we did in Q1? If that is the case, can you just remind us again why has been no sequential improvement in meal kits in Q2? I hear you in terms of having had less marketing last year, maybe that's flowing through in cohorts. But historically, you've always pointed to each quarter about year-on-year trajectory meal kits gets a couple of points better. And you'd always kind of point to that continuing sequentially throughout this year. So why is meal kits not improving in Q2 is my question?

And then the follow-up to that is, you said on the Q2 guidance that most of the softer outlook was anticipated when you reported for Q4. What was not anticipated? And can you give us some sense as to what's happening in April?

Andrew, on the outlook -- so you had 2 questions was more around top line, the other one more around the bottom line. I think on the bottom line, I've answered already the question, which is we are expecting, as I've said, a double-digit adjusted EBITDA for meal kit, but lower than last year because of the phasing of product investment and the operational leverage where we don't have a similar level of marketing reductions than last year. I think it's pretty simple.

On the top line, indeed, we are expecting a similar rate than what we have seen in Q1. With meal kit, and it's probably similar across the category with meal kits around same level, maybe slightly better because if you strip out the fact that we are going to stop delivering to Italy and Spain in Q2. They were still in our Q1 number, but they will not be in Q2. So if you factor on that we might have another slight improvement, which, of course, we would like because then we'll be able to say 6 consecutive quarters of improvement. But it's not always completely linear by quarter, but it's what we are expecting for Q2, while on ready-to-eat, we know it's going to take a bit more time, as Dominik described, and we think Q3, Q4 will be more defining trajectory for our ready-to-eat segment.

Okay. That's helpful. And then on the second question in terms of what you had not anticipated in terms of the Q2 outlook when you reported the Q4 results?

So I think I was answering to Nizla's question before. Obviously, since we've reported that, everything going on in the Middle East sort of like inflation, customer sentiment, those are things that I think at this time, we're not sort of like as clear, I think there's still obviously, a lot of distribution of outcomes over the course of the year. But those are definitely things that let us also take somewhat more conservative stance and making sure that we only invest behind strict ROI discipline as we restart the acquisition engine.

So you are seeing some softening in trends on the back of Middle East conflict, or it's more in anticipation, but you could see some softening?

That's not something that we see right now. But in anticipation, also in anticipation, obviously, if sort of like inflationary pressures kick in or not, I think if you have sort of like any more uncertainty, then obviously, it's the prudent approach to take a more conservative stance even though right now in the business, I don't really see it. I do see it as leading indicators from consumer research, et cetera. I don't see it in the data right now. But against that environment, we feel it's prudent to have a strict and disciplined ROI approach.

Okay, cool. And one more follow-up, I really do apologize. But just on this Q2 outlook for meal kits not being better Q1. I hear you on the impact of shutting down Italy and Spain, but didn't Q1 also have a negative impact from weather? I appreciate those not necessarily the same magnitude, but I still would have expected that Q2 would improve. In this is obviously a very important number for investors who are looking for stabilization in trends in the meal kits, but it's not continuing to improve. I guess, is a big focus. I just want to make sure we're 100% clear on this.

Yes. So let's be clear on meal kits. We are expecting further improvement as the year pass, but of course, the improvement is not always linear, and I don't want to come to too much detail, but sometimes you have a big quarter [indiscernible] where you have not fully on the same month as mostly go. There we are on track with what we were expecting. And that's for me the most important message.

That concludes our Q&A session, and I will hand back to Dominik Richter for some closing words.

Thank you so much for attending our call. I think to sum up, we feel that the primary objectives that we're focused on making sure that our tenured customers are happy that they're ordering more that we can basically price better with them because they get better value in the product. I think all of those metrics are pointing in the right direction. We obviously still need to work hard now to get the acquisition engine back on. We will do that in a -- with a strict ROI focus, especially within the environments that we're in and some of the uncertainty over the course of the year when it comes to macroeconomic environment, consumer sentiment, et cetera. But we do feel that those are metrics that we're focused on that are the defining metrics for a long-term, healthy business are very much trending in the right direction and we look forward to updating you in August about the progress that we will achieve in Q2.

Thanks a lot.

Good morning, ladies and gentlemen, and welcome to the HelloFresh SE FY 2025 Results Call. [Operator Instructions]

Let me now turn the floor over to your host, Dominik Richter.

Good morning, ladies and gentlemen. Thank you for joining our Q4 and full year 2025 earnings call. Alongside this presentation, we've also published our full year 2025 shareholder letter, which provides some additional strategic context on the year and on our outlook. We encourage everyone to read it in conjunction with today's remarks. With me today is also Fabien Simon, our Group CFO, who joined us about 6 months ago.

The structure of today's call is as follows. Starts by providing a strategic overview of where we are as a company and where we're headed. Fabien will then walk you through the full year 2025 financial results and our 2026 guidance in detail. And after that, we'll open the floor for your questions.

Before we do this, I'd like to give Fabien some time to introduce himself and his observations today briefly.

Thank you, Dominik, and good morning to all of you. Few months ago, I shared with many of you on the call the reason for me joining HelloFresh. After 25 years in consumer goods, I projected myself into the future of the industry and towards what the consumer value more and more, which are first, affordable, healthy food that do well for the community, ideally with more local sourcing, more sustainable than existing alternatives.

Second, when and where you do provide differentiated services beyond the other product. Here, I could refer to help to discover new recipes or just to deliver all ingredients at home and removing the pain of in-store shopping, for example. Third, a company with cutting-edge direct-to-consumer marketing engine, which is critical to interact with the consumer of today and likely even more with the consumer of tomorrow. And fourth, where in the end, the consumer feels valued and recognized with personalized solutions and not a one-size-fits-all product, which is kind of the model of most traditional CPG.

Back then, I believe that HelloFresh was the largest DTC food player globally, born with those characteristics, which are very difficult to replicate and that do provide strong competitive advantage over time. So now 6 months down the road, I do recognize in HelloFresh those characteristics, especially with data, infrastructure, technology and last mile to a level that I have never experienced before. At the same time, I do see opportunities for HelloFresh to simplify the complexity that kept it over the years to be more focused and possibly to be more realistic and more disciplined sometimes. The company has great DNA such as speed and agility, but sometimes stepping back and working before you run had some benefits.

Overall, I would say that HelloFresh is a unique company in the industry landscape and is at a junction between an FMCG and a direct-to-consumer tech business. I'm glad I joined the team to learn many new things and hopefully as well to share some of my accumulated experience to support Dominik and the team in writing the next chapter of HelloFresh.

Thank you, Fabien. Very fortunate to have you at HelloFresh. I want to use my time today to cover three things. First, where we stand on the strategic reset we began in summer 2024. Second, an honest assessment of where our growth trajectory is heading across both meal kits and ready-to-eat, including what went well and what didn't. And third, how we're thinking about 2026, including potential headwinds, investments and the choices we are making to position the company for durable value creation. Our shareholder letter, which we published this morning, covers this in depth. I won't repeat it, but I want to give you the strategic frame that should guide how you interpret the numbers that we will share as part of this earnings call.

In summer 2024, we made a deliberate choice. Before we could credibly invest in growth, we needed to fix the foundation of the business by improving unit economics and cutting fixed costs. We outlined a EUR 300 million efficiency reset program and sequenced it ahead of everything else. The logic was pretty straightforward. Efficiency creates margin room, margin room funds product reinvestment, better product drives retention and retention is what ultimately unlocks sustainable and profitable growth.

This program was predominantly fixated on fixing our meal kits business, which had grown insanely fast, but accumulated a cost structure that was not in line any longer with the volume outlook of the business. At the time of creating this efficiency program, we expect that our RTE product category to continue its path of double-digit growth and correspondingly post higher absolute AEBITDA and expanding margins for 2025 and 2026.

Two years in, we're very much in line with our original plan in meal kits, in fact, somewhat ahead in terms of meal kit profitability, but have faced operational setbacks in RTE we hadn't planned for. On the efficiency side, roughly 80% of the program's initiatives were implemented by year-end 2025. The P&L impact in 2025 alone was approximately EUR 160 million with another roughly EUR 140 million expected to flow through in 2026 as the remaining initiatives take full effect and we benefit from run rate savings.

The majority of these are not onetime savings. They're permanent structural improvements such as direct labor productivity gains, network rationalization, a fundamentally leaner overhead structure and a complete restructure of our equity compensation programs, which have reduced stock-based compensation expenses by over 30% year-over-year. The financial proof is very visible in our meal kits product category. Meal kit adjusted AEBITDA margin reached 13.5% for the full year 2025, the highest level since the pandemic and a nearly 4 percentage point improvement over 2024.

Contribution margin for the group expanded 1 full percentage point to 26.8% and both free cash flow and AEBITDA per order improved meaningfully year-over-year. In essence, this means that the structural earnings power of the group is significantly higher today than 18 months ago. While the size of our meal kit business declined in absolute terms, the revenue quality today is much higher. Tenured customers, that means those with more than 50 lifetime orders now represent 51% of all meal kit orders, up from 13% in 2022. The absolute number of orders we get from this cohort has remained highly stable even as the total volume declined, which tells you that the core of our customer base is healthy and engaged, and the volume decline has come from lower new customers joining. This is a deliberate outcome.

We've prioritized margin over volume, tightened marketing ROI thresholds and accepted a temporary reduction in the active customer base to structurally ensure that when we reaccelerate acquisition, it is on top of a better product and fundamentally healthier unit economic profile. Most important is not the margin expansion itself, it's what we do with it. In summer 2025, we launched our reinvestment program called The Refresh. It's the largest product investment cycle in HelloFresh. We expanded protein variety, introduced new cuisines, significantly broadened the number of unique SKUs on our menu and upgraded ingredient quality in key categories, including organic dairy and higher-welfare proteins.

In select markets, we increased portion sizes. Cumulatively, these investments have made a big difference to customer sentiment and our ability to monetize customers better over their lifetime. While it's hard to prove the individual impact of each change we're making, the cumulative impact of these to the customer experience has been extremely well received. This has been a stage-gated rollout. We piloted in the Nordics and the U.K. first, measured rigorously against pre-established KPIs and only expanded to additional markets like the U.S. once we saw clear evidence of the impact it has. The early results are encouraging.

Cumulative net revenue per conversion, which is the best proxy for customer lifetime value, is up 16% after 10 weeks and 21% after 20 weeks when comparing our H2 '25 cohorts to our H2 '24 cohorts. We've also seen some of the highest NPS ratings in years. And critically, customers perceive stronger value for money despite us having raised prices simultaneously. We're now investing with discipline, funding product investments from structural savings and continuously rolling out proven strategies to more markets globally. That is the flywheel working as designed.

Now let me be direct about where we are on the growth trajectory because it's a mixed picture overall. In meal kits, the trajectory is clear and the story pretty clean. It's moving in the right direction. Constant currency revenue declines narrowed in every single quarter of 2025 from negative 14.5% in Q1 to negative 13% in Q2, negative 12% in Q3 and negative 10% in Q4. That's 4 consecutive quarters of sequential improvement with international meal kits nearing a return to positive growth in 2025 already.

We expect this trend of sequential quarterly year-over-year revenue improvement to continue throughout 2026. In Ready-to-eat, the story is more complicated, which is why I want to address it head on. 2025 was a tale of two halves for RTE in the U.S. In H1, we absorbed the consequences of regulatory-driven food manufacturing challenges that cascaded into product quality issues and impacted customer experience at exactly the wrong time, while we were simultaneously spending on brand and performance marketing. The result was worse unit economics, lower marketing ROI and lower customer retention, resulting in a significant gap to our original plan.

Later in the year, we made a difficult but correct decision. We pulled back growth investments substantially, prioritized fixing the operational foundation and focused on restoring product quality and customer sentiment. That meant accepting a short-term decline in the active customer base, which is the position we find ourselves in entering 2026. But the underlying indicators have turned when you look at December exit rates. Customer retention has bounced back to levels we had seen before we were hit with the temporary operational setbacks.

Our full menu catalog has been unlocked for our customers again and meal reheat times are back to normal, which has contributed strongly to better quality taste and customer sentiment. Productivity in our cooking facility has also converged back to the long-term averages. As a result, NPS and Factor U.S. is up 400 basis points year-over-year. Cancellation rates are down approximately 16% across all customer maturities and net revenue per customer, the best early proxy for customer lifetime value is tracking meaningfully above prior year levels at every measurement interval.

For 2026, we will continue to build on top of this strong foundation of operational excellence. Our primary goal is to restore the bottom line profitability for the RTE product group back to the levels we saw in 2024 already. We are now also slowly turning our attention back to reigniting our growth strategy. This is the single biggest swing factor for 2026. We cut growth investments materially in H2 2025 as we focused on fixing the operational foundations and culinary excellence. Restarting the factor growth engine is the #1 operational priority for 2026 now that customer quality metrics as well as unit economics are in the right place again.

On the RTE business outside the U.S., in Canada, in Europe and in Australia, we were not affected by these issues and have continued to post healthy double-digit growth and improved profitability. We aim to continue on this strong growth trajectory also in 2026 and expect the overall RTE product group to show sequential improvements over the course of every quarter in 2026.

At the group level, the strong progress in meal kits was particularly -- was partially obscured by RTE underperformance. Meal kits are tracking ahead of our original AEBITDA plan outlined in summer 2024, while RTE is behind. This gap is real, and it has shaped our reported results, but it doesn't change the structural improvement we have achieved in the core business, and I want to make sure that, that distinction is clear to everyone. We are now entering the year with a set of headwinds that are partly within our control and partly not.

In Q1, severe winter storms across the U.S. and Europe caused significant operational disruption. Specifically, Winter Storm Fern in the U.S. was brutal and widely reported to be the heaviest winter storm in 75 years. Our employees were unable to reach distribution centers, inbound ingredients deliveries were delayed, orders stranded in our supply chain and had to be discarded and last-mile delivery failed across affected regions, leading to high customer credits and refunds. The estimated impact is approximately EUR 20 million on revenue and about EUR 25 million on adjusted AEBITDA. That's a one-off, but it's a meaningful one-off, and it will be visible in our Q1 results.

Second, Factor U.S. new customer volumes are down year-on-year versus the heavy spend quarter we had at the same time last year, given our primary focus on operational excellence and restoring profitability first. Against these two headwinds, we're still making a conscious choice to keep investing. Our mid-teen AEBITDA margins in meal kits give us the room to do so. We'll continue to expand the refresh program across more markets, broadening menu selection, upgrading ingredient quality and improving the consumer app experience. These investments have a time lag impact on the P&L. Case studies from our early markets give us confidence that the retention and lifetime value improvements are real and will compound over time. All in all, we try to be very deliberate about not making shortsighted decisions that would sacrifice the investments needed to return this business to durable growth in the face of the two headwinds I quoted.

I'll now hand over to Fabien, who will take you through the detailed financials and our 2026 guidance.

Thank you, Dominik. Let's now look at the key highlights for the year. Sorry. I will not spend too much time on all these points here as we will be talking about it in more detail further. We delivered a group revenue of EUR 6.8 billion, which represents a 9% decline in constant currency. While the headline figures reflects a deliberate pivot towards efficiency even at the expense of volume growth, I want to emphasize that order volumes from our loyal tenured customer base remain highly stable throughout the year, as Dominik presented earlier.

In our meal kit category, we saw a sequential narrowing of revenue declines in every single quarter of 2025. This shows that investment in variety, quality, portion sizes through the Hello Refresh initiative are resonating well with consumers. For Ready-to-Eat, while the recovery in the U.S. has paced below the initial expectations, the operational issues that held us back in 2025 are now fully resolved.

On the bottom line, our full year 2025 adjusted AEBITDA reached EUR 422.8 million, landing squarely within our guidance range and representing a 14% increase year-on-year in constant currency. The meal kit margin, in particular, reached 13.5% of net revenue, its highest level since the pandemic. Finally, we hit a major milestone by turning free cash flow positive post-leases and to its highest level since 2021 at EUR 18.9 million for the year 2025.

Moving to Page 13. We see that orders declined by about 12% for the full year 2025. This figure is made of meal kit orders, which are improving sequentially now for all quarters of the year and slightly ahead of expectations, while ready-to-eat orders lagged our internal expectations.

As I said in the introduction, despite the overall declines in order -- the overall decline, sorry, the absolute numbers of orders from our tenured customer in meal kit, those who have placed more than 50 orders with us has remained highly stable. This customer now represents 51% of our meal kit orders, up from 42% in the end of 2024. This shift is a direct result of our value over volume strategy. By focusing marketing on high-intent, high-quality customers, we are building a more predictable and profitable ecosystem.

On Page 14, you can see the continued expansion of our average order value. For the full year, AOV was up 3.4% in constant currency, and this was driven by two main factors: one by a higher contribution from add-on and recipe upgrades as higher quality customers engage more deeply with our menu. Second, by a reduction in price incentives for new customers as we focus on ROI-positive acquisitions. In Q4, specifically, both North America and International segment showed meaningful growth with international leading at 4.8% in constant currency.

Now turning to the overall revenue performance on Slide 15. So as mentioned, group revenue declined 9% in constant currency for both Q4 and for the full year and the divergence between our categories are very clear. Meal kit are on a steady path towards stabilization, narrowing the revenue gap for four consecutive quarters and is expected to continue this trend into 2026. Ready-to-eat, however, saw a 7.5% decline in Q4 given the impact of the U.S. operational challenges on conversion. For a business like ready-to-eat, conversion underperformance has a stronger negative impact in our P&L versus meal-kit given the lower maturity of the customer base. And we expect the Q4 trends to carry over into at least the first few quarters of 2026 for ready-to-eat.

Page 16, let's discuss our contribution margin for both the quarter and the full year. And here, I'm pleased to report that we delivered a full year 2025 contribution margin, excluding impairment of 26.8%, which represents a year-on-year improvement of 100 basis points, exactly as we guided. This expansion was structural and broad-based, driven by the efficiency measures we have described already on multiple occasions and with contribution margin growth achieved in both of our product categories.

Looking at Q4, the group contribution margin reached 28.3%, up 1.2 percentage points versus the previous year. And this was driven by a few factors. In meal kit, especially in North America, we saw significant margin expansion driven by continued productivity gain in our fulfillment centers. And in ready-to-eat, we saw a healthy recovery in margin, both sequentially and year-on-year as the operational issues that hampered our first half performance were successfully resolved.

On marketing spend now, in line with our commitment to prioritize efficiency, full year 2025 marketing spend declined meaningfully in both absolute and relative terms. For the full year, we reduced our marketing investment by over EUR 200 million. The primary driver here was on meal kit category, where we've remained highly disciplined in our agenda of high ROI, high-quality customer even that came at the expense of volume growth. and to illustrate the level of this discipline, the year-on-year percentage reduction in meal kit marketing spend was double the rate of our order decline there. This was particularly prevalent in the U.S. where meal kit saw their marketing spend in U.S. dollar declining more than 40% in 2025.

On the other side, marketing spend for ready-to-eat did increase during the year overall, partly due to brand and performance marketing investment in the first half, which did not have a corresponding impact on conversion given production issues. In H2, particularly in Q4, we scaled back our marketing spend while we fix the fundamentals. Now that these issues have been resolved, which were our first priority, we also turn our attention to reinvest but carefully into marketing and product during 2026 off a low base in Q4 to return to growth in ready-to-eat.

You can see now on Slide 18, our adjusted AEBITDA performance for the quarter and the full year. We delivered for the full year a group adjusted AEBITDA of EUR 422.8 million, landing squarely within our guidance range. Had it not been for ForEx impact, we would have landed well within the original guidance issued in March 2025. A key highlight of this result, again, is the profitability of our meal kit category. We achieved a full year adjusted AEBITDA margin for meal kit of 13.5%, the highest level we have seen since the pandemic, demonstrating again the power of focusing on the efficiency reset and better quality customers. Even if we reinvest part of that into the product in the short term, we still plan to maintain a double-digit margin for meal kit going forward.

Regarding ready-to-eat, while the full year margin was slightly negative at minus 1.2% due to the issue we already talked about in the U.S. the category returned to a positive 6.6% margin in Q4. This confirms that the operational fixes we implemented in the second half are taking root. Here, we want to provide a bridge of our meal kit profitability to show that the progress we've made is structural. We grew meal kit adjusted AEBIT from EUR 365 million in 2024 to EUR 486 million in 2025.

As you can see, the negative impact from volume price mix was more than offset by our pivot toward higher marketing ROI. Similarly, the realization of our efficiency program more than offset our investment in product for the year. These are self-funded product investments that create a sustainable midterm trajectory as our volume base stabilizes. And when we talk about guidance in a few slides, we can contextualize further how these buckets evolve in 2026 specifically. But in the midterm, as volume eventually turns positive for meal kit, we should expect a tailwind to adjusted AEBITDA with operational leverage from volume price mix.

Similarly, as we think further into the future about efficiency, we don't plan to spend more in product than what we structurally save by being a leaner organization. This means that we should see adjusted AEBITDA for meal kit in the medium term to grow from here in absolute euro. On free cash flow, we are very pleased to report that we returned to positive free cash flow in 2025 and to the highest level we have been since 2021. For the full year, we generated EUR 18.9 million in free cash flow on our new post-deal definition, which represents a significant EUR 42.5 million increase year-on-year. This milestone was mostly achieved through two drivers.

First, improved operating cash flow. Our cash flow from operating activity rose to EUR 297.4 million, up from roughly EUR 266 million in 2024, supported by our higher AEBITDA. Second, we significantly reduced our CapEx from EUR 166 million in 2024 to EUR 130 million in 2025. This reflects the ongoing success of our CapEx streamlining measures, even when accounting for some intentional deferrals into 2026. I should note as well that our 2025 lease liabilities were higher than typical at EUR 123.9 million. This was due to certain one-off lease termination payments we made in the third quarter as we optimize our footprint. For 2026, these lease liabilities are expected to normalize back to a level below EUR 100 million. And ultimately, this return to free cash flow positivity is a clear signal that our efficiency reset is translating into a self-funded growth engine.

So turning now to our guidance for 2026. And before we get to the number, I want to address transparently the specific internal and external drivers informing our outlook so far for the year. As we mentioned in our prerelease, meal kit performance continues to improve sequentially, while at the same time, we acknowledge that the ready-to-eat recovery in the U.S. is lagging behind our initial expectations. Just like it was the case in 2025, this will have an impact on our group level top line performance in 2026.

Furthermore, we faced, as Dominik highlighted, significant unexpected weather disruption in Q1 2026. A series of severe winter storms across the U.S. and part of Western Europe prevented employees from reaching our manufacturing facilities and disrupted both inbound logistics and last-mile delivery networks. We estimate the impact of these storms alone to be about EUR 20 million on revenue and about EUR 25 million on adjusted AEBITDA. These are truly one-off. Nevertheless, this will be reflected in the Q1 numbers.

So with that in mind, our 2026 guidance is as follows: for net revenue growth, we expect a range of minus 6% to minus 3% in constant currency. This includes the estimated slightly above 1% negative impact from the Q1 storm. On adjusted AEBITDA in constant currency, we are guiding to a range of EUR 375 million to EUR 425 million. But importantly, this account for a EUR 25 million weather-related in Q1, which would have otherwise meant that the midpoint of our guidance for 2026 would have been our 2025 adjusted AEBITDA level. The midpoint of our respective range includes the current top line development as we see them for meal kit and RTE, the expectation that our efficiency reset measures continue to progress and some stage-gated investment in the product, which should amount to about 1.5% of incremental COGS as a percentage of net revenue in 2026 versus 2025. This value is slightly lower for ready-to-eat and higher for meal kit, and it is presented net of the impact of price increases.

Now by product category, for meal kit, we expect to maintain a double-digit adjusted AEBITDA margin. While we anticipate some volume deleverage and incremental product investment, which means that meal kit adjusted AEBITDA in 2026 will temporarily come slightly below 2025, we believe the structural gains of 2025 are here to stay. For ready-to-eat, our focus is a return to full year adjusted AEBITDA profitability. We are leveraging our reserved operational baseline to reignite the growth towards the second half of the year, which we expect will more than offset the adjusted AEBITDA consumption of ramping up operations in Europe.

On Page 25, we are announcing an enhanced reporting framework to improve transparency for our investors. Going forward, we will focus on the same key metrics, adjusted AEBITDA and revenue growth, but we will guide on a constant currency basis for both aftermarket practices. Starting from Q2 2026, we will shift to full P&L reporting by product category, meal kit versus ready-to-eat instead of a geographical segment. And we believe this will provide a better understanding of the underlying dynamics of the business. Our primary cash flow metrics will now be free cash flow plus leases, in line with investor feedback. And going forward, and as we did already in January this year, we will endeavor to pre-release our full year high-level results in a scheduled matter.

Finally, on Page 26, now we have concluded our share buyback program in line with the AGM mandate, our capital allocation priorities are evolving. So on share buyback, we repurchased 20.3 million shares at an average price of EUR 7.5. We also canceled just shy of 14.2 million shares in 2025.

Looking ahead to 2026, our capital allocation priorities are: first, organic growth, investing behind the product improvements we've discussed today. Then leverage by maintaining a disciplined net debt to adjusted AEBITDA ratio of about 1.5x, then pursuing disciplined bolt-on or opportunistic acquisitions. And finally, tactical buyback. And there we will seek AGM authorization for the flexibility to execute further buybacks if market conditions warrant and in the order of the above priorities. On that, I will hand over the call to the operator for the Q&A session.

[Operator Instructions] And the first question comes from Luke Holbrook from Morgan Stanley.

It was just really thinking about the delta in the efficiencies that you're recognizing in 2026, but then with adjusted AEBITDA flat year-on-year when you strip out that Q1 weather impact. Can you just run us through a little bit more detail how that kind of EUR 140 million effectively gets down to 0?

I think what you are looking for is kind of understanding the bridge of our performance in 2026 on an adjusted level, if I hear well your question, Luke. So let me help you here. So here, I would distinguish again, what's very important going forward is meal kit versus RTE. On RTE, we are expecting a moderate increase as we have been presenting in a few slides ago. On our meal kit business, what we see is tailwind from continued efficiency progress.

And overall, we are expecting for the company EUR 140 million incremental savings to hit the P&L in 2026 above 2025. And part of this product -- of this savings, sorry, will be reinvested in product investment as we described. But we should acknowledge at the same time that for meal kit, as we are in steady recovery growth, we are still expecting to be in volume decline in 2026, which is leading to operational deleverage, which is the only reason why we see some lower absolute AEBITDA in our meal kit business for 2026.

Understood. I thought the [indiscernible]. Previously, you said that if you're churning through unprofitable, lower profitable customers that it will benefit profitability. But you're suggesting today that actually it's the deleveraging, the lower utilization impact that's essentially a net negative into 2026?

No, I think what you should -- the way I would look at the meal kit business, I would say, on top line and on bottom line. So I think first, if you look at the bottom line, I think we have re-earned the right to invest behind product because we are in a food company and providing a better quality solution to the consumer will work out. And we see that on top line, then we have to look at it step by step.

First, you have to reduce the churn of the customer base, make your existing customer ordering more product. And this is what we see today, which I think is a success. Then what we have to turn now is ensuring that this increasing consumer proposition will be well known and will attract higher new customer. And this is the agenda where we are now. But we do not see dilution of profitability on our existing customers. It is the opposite.

And the next question comes from Giles Thorne from Jefferies.

It was a single question for Dominik, please. It would be useful to hear the logic for the partnership with Target in the United States, given it represents, I think, a big departure on distribution channel, first time you've got retail and also a big departure on monetization model given it's, again, just a per meal sale. So any color around your thinking there? And also on the direction of travel, should we expect to see more of this type of thing?

Great question. As a matter of fact, we actually have a strong presence with our ready-to-eat meals in Australian retail already under our Youfoodz brand, we have a very healthy retail business established in Australia. And it was never the question if we are also choosing to offer our ready-to-eat meals in other distribution channels than direct-to-consumer, just when. And so what we did, and you're absolutely right there, is we ran a very successful pilot with Target, and we're now sort of like working through different ways how we can scale that further up also for the U.S. market. We definitely see that as one of the vectors of growth in the future to diversify sort of like our growth trajectory in RTE further.

We still very much believe in obviously, direct-to-consumer and we think the propositions, that's also what we see in Australia between retail and direct-to-consumer are slightly different, slightly different use cases, but we have high confidence that our product also works on such distribution channels well. And that's what we will now also increasingly focus on outside of Australia, where this is already an established business.

The next question comes from Joseph Barnet-Lamb from UBS.

It sounded, Dominik, like you were saying things at RTE have been bad, but they've bottomed. But in many ways, it feels like we've sort of heard that before. We have the Arizona issues, the regulatory issues, then we were expecting things to get better in late '25 and now they're sort of not. Has your fundamental view on RTE, either as a stand-alone business or specifically with you as owners and operators changed at all? Do you still think that you're the best owners of that asset? I'm just wondering if all of these issues make you question the big picture around RTE at all. And if I could just squeeze one other quick one in. You've guided to profitability on a constant currency basis. But at current spot FX, what would group adjusted AEBITDA guidance be?

Second one, while you reflect on the first part of the question. So I think if ForEx will stay where it is today, we see almost very, very marginal, no impact on our adjusted AEBITDA. I think we are talking about a single-digit million euro impact around EUR 5 million. So I don't see it's meaningful enough to have an impact on our guidance range.

And so on your question, whether we feel that we're the right owner for the RTE business, I very much -- the short answer is yes. So we continue to be excited about the business. We've obviously worked very, very hard after we run into the troubles in H1 2025 last year to restore the culinary excellence, to restore customer quality, et cetera. Some of the metrics I shared today, I think, are really pointing in the right direction, customer happiness, NPS, et cetera, strongly up. And I think we have actually proven them that we can operate this business well. We've obviously grown it very fast, and it is a very complex business. There's definitely stuff that we had to learn along the way. But my belief in the category long term is definitely unbroken. And I also think that as a matter of fact, the moats that we've now created in terms of food science, in terms of how to operate those facilities, in terms of dealing with those challenges and making sure that with the scar tissue that we have, we actually fix those things for good for the long term. I still think that we are very much the right owner of that business. And I do think that this business will be a lot bigger in a few years than what it is today.

The next question comes from Andrew Ross from Barclays.

My question is about the trajectory for meal kits. You kind of say that it's running a bit ahead of what you were hoping for a couple of years ago. But I guess the meal kit top line is still down 10% in local FX in Q4. Can you give us a bit more color on the path as to when you would expect stable year-on-year revenue growth for meal kits and the puts and takes behind that? And then I guess the follow-up is it kind of sounds like your tone is that the Q1 growth is going to be down maybe below the low end of your full year guidance range at the group. So what would need to happen to get close to the top end of your full year guidance range? And why wouldn't the lower end be more realistic?

I can start answering and then Dominik can build on. On the overall trajectory on growth, the way I would look at it is we are in food. And in food, you have to be disciplined, consistent and patient. And I believe we are doing the right things to be a more consumer-centric business. And you can see that we have now for four consecutive quarters, experienced improvement on our top line, and we expect it to be the case. And at the current trajectory of the recovery quarter-on-quarter, it doesn't seem unrealistic to believe that in the next 18 to 20 months, we would be returning to growth. And I would say the more dangerous things will be to change strategy because it's not going fast enough. It is paying off. We are doing the right things. We're seeing on orders from existing customers. We're seeing a lower churn on existing customer, and that will continue to improve year-on-year.

On your question on Q1, and I want maybe to very proactively share some numbers on how we see it now because we are really approaching to the end of the quarter now. We are expecting our top line to be around minus 8% in constant currency with, again, similar improvement in meal kit as we have seen before and stabilized performance in ready-to-eat versus Q4 of 2025. And on the adjusted AEBITDA line, we are expecting a level of about EUR 20 million which is low, but historically, Q1 is always a quarter with lower adjusted AEBITDA. And this month, it is very meaningfully impacted by the winter storm we talked about. And the remaining gap versus last year, if you look on a year-on-year basis, is mostly coming from the remaining operational deleverage that we are seeing in our segment.

That's helpful. If I could just follow up -- you're talking about meal kit getting back to stable revenue growth, let's say, kind of late 2027. How would that have compared to your internal expectations when you did the CMD a year ago or when you kind of relaunched the strategy prior to that?

So what we see is that we've performed better and is slightly ahead of our profitability targets in meal kits. So I think back then, we guided to meal kits achieving double-digit AEBITDA margins sustainably. We've now seen that shoot up by 4 points year-over-year in 2025. And I think some of that additional improvement over what we had shared back in summer 2024 is due to the fact that we pulled back very hard on marketing spend because we wanted to make sure we have the room to invest into the product, which has shown strong signs on consumer and customer metrics.

We're now sort of like reinvesting back both into the product and also in marketing strategies, et cetera. And so overall, I think on the profitability side, it's just very, very clear that we're ahead of where we were trending back at the CMD and also ahead of where we thought we were in summer 2024. On the top line side, this was sort of like slightly at the expense of top line recovery so that we really make sure we can restore profitability and fund the product investments that we want to make because this is what really drives durable and sustainable growth in the long run for any direct-to-consumer business.

That's sort of like the retention that you see in your existing customer base, and this is what we focus on, and this is what we're very bullish about going forward. So I think the strategy is working. And what Fabien said, I just want to emphasize again we're very convinced that this is the right strategy. And we don't want to basically divert from this strategy because we have a winter weather event one-off or we see something else coming up in the business. I think the indicators that we have in the business are very strong that this is the right strategy, and this is also why we want to deliberately invest behind that.

And the last question comes from Naizer from Deutsche Bank.

I have one question. Your decision to leave Spain and Italy, could you remind us how big these two markets are in terms of annual revenue? And what was the impact on AEBITDA? And are there any other markets that you would now consider sort of exiting as you think of rightsizing your operations? Some color there would be great.

The impact of Italy and Spain are not going to be significant. I think the level of AEBITDA consumption that both businesses represented were single digit in million euro and will not have similarly a very meaningful impact on top line. But I think what's important is more to share the reason why we've decided to cease the operations. I think we -- after being very disciplined over a bit more than 4 years, we realized that the structural economics at individual level were not sustainable and scale will not be what we will change it going forward. So we thought the best decision was to focus more on the remaining part of our business as well as avoiding to accumulate loss over the years in these two operations. Of course, we are very grateful and sad to make the decision, but grateful for the team who have been working very hard and sad to make this type of decision, but we believe it is the right thing to do going forward.

All right. Thank you for your attention and for joining today's earnings call. We hope you could provide some context as to how 2026 will shape up. I think bottom line is we think that our strategy in meal kits is working. We'll expect to see sequential and steady improvements in our meal kits business over the course of 2026, which should give everyone confidence that this is the right strategy to reinvest behind the product and make sure that we score points with consumers for durable long-term growth. In RTE, somewhat of a more mixed picture, but I think we've done our homework after this fallout in H1 last year. I think we've really restored customer quality metrics. We've restored productivity metrics. We've unlocked our full meal catalog again and we've also seen unit economics come back. We will restart the growth engine for RTE so that hopefully, we'll also see 2026 exiting with positive growth in RTE again. Thank you for your attention and speak to you in our next earnings call.

Good morning, ladies and gentlemen, and welcome to the HelloFresh SE Q3 2025 Results Call. [Operator Instructions]

Let me now turn the floor over to your host, Dominik Richter.

Good morning, everyone, and thank you all for joining our Q3 earnings call. At HelloFresh, we follow a powerful mission to change the way people eat forever. We've built the only scaled global player in both meal kits and ready-to-eat meals over the past 14 and 5 years, respectively. Our customers benefit from great tasting, healthy meals our wide-ranging variety of seasonal ingredients and global cuisines and the significant reduction of food waste, leading to a superior sustainability profile and lower CO2 emissions versus alternatives. The business is powered by our just-in-time supply chain, the largest of its kind in the world, and a data-driven marketing engine that allows us to reach and engage customers worldwide week in, week out.

Over the past 12 months, we've enacted quite drastic changes, emphasizing unit economics improvement, profitability and a much improved customer experience over revenue growth in the short term. Those changes are resonating with customers and multiple customer satisfaction metrics are trending at record highs, indicating that we're both deeply embedded in customers' lives and successful with regard to our mission to change the way they eat. While we're still squarely in our efficiency reset phase with more underlying cost savings making their way through the P&L in the coming quarters, we're now starting the path to unlock even more favorable changes to the customer experience to eventually return to growth.

Before I share more on this, let me start by introducing and welcoming our new CFO, Fabien Simon, who joined us about 6 weeks ago. Fabien has had an impressive career to date, most recently serving as the CEO of JDE Peet's, a leading CPG coffee and tea player. Prior to this, he was instrumental in building the JDE Peet's Group from the ground up as their CFO and partner of the investment holding JAB behind it, taking JDE Peet's public at the Amsterdam Stock Exchange.

Earlier in his career, he spent 14 years at Mars, where he served in multiple finance leadership roles around the globe, among others, as the CFO of their pet care division. We really couldn't be more excited for Fabien to join us and help us write the next chapter for HelloFresh.

At this stage, I also want to extend my gratitude and appreciation to Christian, who served as HelloFresh CFO for the past 10 years and has been instrumental in the growth of the company from about EUR 300 million in revenues when he joined to just shy of EUR 7 billion in revenues in 2025, while turning the business sustainably profitable. Christian's last day will be tomorrow. All the best, Christian, for your future endeavors.

With that, let's turn to the highlights for our most recent Q3 quarter now. We observed a stable revenue trend in Q3 versus prior quarters, a decline of about 9% in constant currency, driven by a double-digit decline in orders, somewhat offset by a 4% increase in AOV. In meal kits, we saw a continuation of the trends previously seen, a sequential deceleration of revenue decline for the third quarter in a row with September exit rates showing further momentum. A similarly encouraging trend in RTE, where we saw September exit rates at better levels than in July and August, and we expect both of these trends to continue into Q4.

Q3 adjusted EBITDA came in at EUR 40.3 million with the typical seasonality driven by marketing investment and ramp-up costs for our product launches in meal kits and RTE. Despite headwinds from FX rates and mix, we maintained a double-digit adjusted EBITDA margin in our seasonally weakest quarter in meal kits with both North America and also now International improving year-over-year. While Q3 net revenue performance in RTE suffered from lower order rates and customer retention seen in our H1 cohorts, we have turned a corner on many leading indicators, which are up sharply versus the lows seen in H1 this year. Similarly, we continue to be on track with our EUR 300 million efficiency program with about 70% of initiatives implemented, up from about 50% by the end of Q2. Free cash flow before leases has also been on a strong upward trajectory. Year-to-date, we have improved this metric by over EUR 140 million with 9-month year-to-date free cash flow at EUR 170.4 million.

In previous interactions, we emphasized two priorities for 2025, delivering our EUR 300 million efficiency program and reinvesting into the product to materially improve the customer experience. These two priorities, efficiency and product reinvestment are not isolated efforts, they are interconnected and deliberately sequenced. Let me give you an update where we stand on both of them. With regard to our efficiency program, we continue to make meaningful progress. By the end of September, we had implemented about 70% of the entire program with the remainder to come in the next quarters. As a result, we are on track to implement about 80% of our efficiency program projects by year-end.

Based on current run rate and the tight governance we have wrapped around the program, we feel confident that we will achieve the original EUR 300 million cost savings target or outperform it. The majority of these tailwinds will still work their full effect through the P&L and balance sheet in the coming quarters, given the lagged P&L effect of things like site closures, notice periods or software renewals. Crucially, though, the majority of these actions are permanent. They structurally lower our fixed cost base and improve margins on every order shipped in 2026 and beyond. Despite lower order volumes and significant product reinvestment undertakings year-to-date, these efforts resulted in structurally improved profit contribution margins, lower indirect costs and a leaner, faster organization already.

The results are clearly visible. Free cash flow year-to-date is up 4x year-over-year and free cash flow per share is up over 5x year-over-year due to the additional reduction of shares outstanding given the ongoing share buyback program. We are now starting to put that foundation to work via the ReFresh strategy that I introduced in the last call. The flywheel is clear. Cost discipline funds product innovation, a great product drives retention and lifetime value, and improved retention unlocks profitable growth at scale.

In Q3, we embarked on our most significant investments to date in the U.S.; in August for HelloFresh and in September for Factor. In meal kits specifically, we expanded to over 100 weekly options on the menu, up from about 60 at the beginning of the year and focused our menu expansion primarily on featuring new cuisines, additional ingredient varieties and many new never-before featured SKUs. We also invested in larger portion sizes and have upgraded the quality and aesthetics of our packaging, keeping our ingredients fresher for longer.

The response has been really positive, especially among our most loyal and also lapsed customers who are typically at the highest risk of becoming bored or feeling too much sameness week-over-week in a limited options menu. Sentiment on both social media and across our internal customer satisfaction metrics has been great, and gives us confidence that this is the way to improve long-term customer happiness, retention and ultimately customer lifetime values.

Our efforts to acquire fewer but higher-quality customers, combined with the recently launched ReFresh strategy have shown encouraging results across our active customer base year-to-date. Since embarking on our strategic pivot 12 months ago, we have improved average order rates materially versus 2023 and also in 2025 over the 2024 average. And we expect additional improvements on the back of the product investments we have launched in August going forward. This now starts to translate into a recovery of meal kit revenue, which we improved for the third quarter in a row in Q3, as you can see on the right-hand side of the page but even more forcefully when looking at September only, that's the very right-hand bar chart on that right-hand chart. We expect this trend to continue into Q4.

Now let's turn to our RTE product group. As indicated in the last earnings call for Q2, we've been hard at work to overcome the temporary operational setbacks we had seen earlier in the year. I'm happy to report that we've made strong progress on many dimensions. We have reworked a lot of our food manufacturing process path. And as a result, we've been able to revert the majority of our meal catalog back to optimal reheat times. We will continue to work through the remainder of the catalog in Q4.

We have also instituted and operationalized strict lab testing protocols for all of the new meals coming to our meal catalog. Consequently, we've been able to restore the week-over-week meal variety and menu retention in the earlier parts of Q3 as a first step. Based on this much better customer experience and more robust food manufacturing processes in place, we have then started to improve our meals and menus considerably from September onwards. This is what we call the Factor ReFresh.

Since early September, Factor U.S. customers now have over 100 weekly meal options on the menu, up from 40 options in the start of the year. We dedicated additional meals to increase the depth of our GLP-1 range, and we now feature more than 3x the number of seafood meals versus prior periods. The menu expansion is supported by quality investments such as overall larger portion sizes and vegetable quantities as well as higher chicken quality and beef SKUs.

We've also opened up additional regional zones for weekend deliveries, giving customers more choice around preferred delivery days and shortening the time from order to delivery of their meals. We've also launched a 4-meal plan to customers. This has been one of the most requested features and directly addresses the customer feedback that they feel overwhelmed by the minimum quantity of six meals per week that we previously had. We won't stop here though. In Q4, we will further continue to expand our menu by an additional 20% with a focus on a new salad range that we developed with a partner, introducing a new ready-to-eat format that does not require reheating per se.

For the remainder of Q4, we have also slotted the launch of a number of new, never-before featured premium proteins such as veal sausage and short rib, which have tested really well in customer panels to date. Within the much expanded menu, we will make it easier for customers to navigate the whole menu by rolling out an AI meal recommendation engine that continuously learns which meals customers like best and are most suited to their preferences. With all these things we have implemented on those which are just around the corner, we continue to make big progress on step changing the customer experience. These efforts to date have already shown strong improvements in all of the leading indicators we track.

The Net Promoter Score of new customers has trended up sharply since we fixed a lot of the operational issues in Q2 and early Q3. You can really see the sharp drop in Q1 and early Q2 and the continuous climb up since then on the left-hand chart on this page. In September, Net Promoter Score of new customers has been up by 18 points compared to the low point of the year observed in April. The predicted average order rate for new customers has similarly trended up by 12% in September since the lows observed in April and is now back above the historical averages. Finally, projected customer lifetime value has also improved in line with the improvements in AOR, although at a slightly smaller pace than AOR, given the associated extra costs we have absorbed in our margin while fixing all the operational issues throughout Q2 and Q3.

While we are confident that we've taken decisive action and can see the success of these actions across all leading indicators, the Q3 output metrics such as revenue and our EBITDA were still heavily impacted by the performance of customer groups we had acquired in H1. You can see the lower order rates of these cohorts in the chart in the middle of this page and extrapolate how those lower order rates from 6 months ago had a compounding negative effect on Q3 orders. The trends for both revenue and margin did, however, improve over the course of the quarter with September marking the best month on revenue, and we feel confident that we can sustain the overarching trend into Q4 now. In summary, we fixed a lot of the customer-facing problems and the customer experience is back in a place where we feel confident starting to invest behind the brand again.

Let's now take a look at our KPIs for the last quarter one by one, starting with orders. We've seen group orders at the same rate as we had in H1, down by about 13% year-over-year. In terms of product category, meal kits improved sequentially for the third quarter in a row. RTE worsened sequentially. As explained moments ago, this was primarily due to the low average order rate of new customers acquired during the first half of the year when we faced headwinds from all the food manufacturing-related changes, which drove down the customer satisfaction and early customer retention.

Group AOV continued to increase year-over-year by about 4%, driven by our loyal customer base in meal kits who make up a larger portion of the customer base and the strong improvement to the value proposition we have delivered. Both geographic segments actually increased by about 5% like-for-like, but mix effects and adverse FX rates led to a 4% group AOV increase. Specifically, we benefited from customers taking larger baskets in Q3 versus the same period last year, lower incentives given the maturing customer base and selected price increases towards the end of the quarter. Taken together, the decline in orders and the increase in AOV drove a 9% year-over-year revenue decline in Q3, a marginal sequential improvement for the group.

Geographically, North America revenues declined by 13% year-over-year, while International net revenues saw a 1.5% year-over-year decline. More interestingly, by product group, net revenues decelerated to a decline of 12% year-over-year, a third straight quarter of improvement. And again, we expect this trend to show up even more forcefully in Q4 for meal kits. For RTE, we saw revenue decline by about 5% year-over-year in constant currency, a result of the lower order numbers from the customers acquired 6 months ago. This was worse sequentially versus Q2. But as our leading indicators have improved sharply versus the lows in H1, we expect a clear reversal of that trend for Q4. Finally, we continue to grow our other segment by 44% year-over-year, while containing the adjusted EBITDA losses for that segment to the same level year-to-date than what we saw in 2024 and despite lapping much larger comparables.

With that, I'd like to hand over to Fabien to go through the cost side of the business and update you on our free cash flow, share buyback program and guidance. Thank you.

Thank you, Dominik. I'm very pleased to be here today presenting our Q3 results for the first time since joining HelloFresh a little over a month ago. We are at a pivoting time for HelloFresh. So I'm looking forward to joining Dominik and the rest of the team and to leveraging my previous experience to help HelloFresh successfully navigate this reset phase and beyond. Over the last month, I have already met some of you in the analyst and investor community, but I will, of course, be available after this quarter to discuss HelloFresh further.

Let's now turn to Page 15 to discuss our contribution margin for the quarter. In Q3, the contribution margin came out at 24.5% of revenue, excluding impairments and share-based compensation. This is a touch better as a percentage of revenue than the same quarter last year. Although down in absolute terms, I would qualify it as encouraging, especially in the context of the volume decline, product reinvestment, residual operational issues in ready-to-eat and finally, some increasing complexity that comes from the step-up in our menu choice and personalization.

The slight increase as a percentage of revenue had been possible, thanks to the efficiency program, which had been initiated by management. And that is on track to deliver what had been communicated earlier this year. If we look at it from a geographic lens, both North America and International have shown a degree of expansion in their contribution margin, which I understand is the first time in quite some quarter now where both improved at the same time. For the group, we remain on track to deliver the promised improvement of 100 basis points of contribution margin for full year 2025.

On the next page, we show the evolution of our marketing spend for the third quarter of the year. With a marketing investment intensity around 20% of net revenue, the business is well invested. This percentage is slightly up versus the H1 trend, which is explained by the back-to-school seasonality, a moment when it makes sense to acquire customers when families are grappling with returning to a post-summer routine. Overall, the absolute amount spend reduced by about EUR 25 million in the quarter. But because it reduced less year-on-year than the revenue decline, the percentage increased versus last year.

I think this is a result of the strategy shared over the last few quarters to acquire less but higher quality customers with better product offering while pursuing a higher marketing ROI. This is noticeable on the meal kit P&L, where we continue to see a step down in marketing spend in both absolute and percentage of sales. Yet there's still a meaningful amount invested, which was leveraged to target existing and prospect customers on our Hello ReFresh product upgrade. For ready-to-eat, as it was discussed during the previous Capital Market Day, we are continuing to invest in brand equity building for Factor and the other RTE brands in order to support long-term quality growth where we note increase in awareness from the uninterrupted investment.

You can see the development of our adjusted EBITDA for the quarter as well as year-to-date on this page. Overall, the adjusted EBITDA went down by EUR 32 million in the quarter, which is in large majority driven by ready-to-eat, where we continued to invest in brand equity and products as shared just before. This is visible here on both product category level and as well at a geographic level in North America. On the positive side, you can note a stable absolute profitability in meal kit despite the tailwinds we referred earlier. And we managed to increase the adjusted EBITDA margin this quarter versus the same quarter a year ago.

Similarly, the International side of the group kept the same adjusted EBITDA margin in Q3 than last year with a contribution margin almost stable in absolute terms. So again, besides the adjusted EBITDA setback in ready-to-eat, the overall profitability dynamic in the quarter and in year-to-date has been positively supported by the efficiency reset program as well as a targeted attempt to be diligent in our marketing spend.

On to the next page now to review our free cash flow performance. So far, the free cash flow is presented excluding repayment of the lease liabilities, but expect it to be presented after those repayments going forward as it is, in my view, the true reflection of the cash flow generated from which we strategically decide to allocate capital. So with or without the repayment of this lease liability, there's a meaningful progress on free cash flow year-to-date by EUR 140 million on the existing definitions. This makes us on track to meet the guidance of more than doubling the free cash flow from last year.

I think it's probably a good time to update on the share buyback program. In the first 9 months of the year, we repurchased a total of 11.1 million shares for a total value of EUR 97.6 million. 6.2 million shares were canceled in July, and a further 7.9 million shares are currently in the process of being canceled. So accounting for the impact of our share buyback program, the free cash flow before repayment of lease liabilities per diluted share in the first 9 months of the year was EUR 1.03 compared to EUR 0.18 for the comparative period in 2024.

Looking now at the guidance. So with the benefits of 3 quarters of trading behind us, we can first confirm the latest commitment and as well take the opportunity to guide towards the most likely range. So first on top line. For Q4, as preempted in the previous slide, we are seeing sequential improvements for both ready-to-eat and meal kit in constant currency. Of course, we have to be mindful that a month does not make a quarter, but assuming that the current trend persists, meal kits are likely to post a high single-digit decline in Q4 from what had been so far a double-digit decline. Ready-to-eat should also see an improvement. However, with a slight delay in the recovery that we saw in Q3, the growth will likely remain negative in Q4 on a constant currency basis.

So with that in mind and somewhat dependent on the path of the recovery of RTE in the next couple of weeks, we would likely be at a mid- to high single-digit decline level in Q4 in constant currency. Which means that for the year, we are trending towards the bottom end of the latest constant currency growth guidance, so at around minus 8%. On the bottom line, for Q3 adjusted EBITDA, we should expect a similar level than last year in absolute euro terms. So extrapolating that for the full year, we should trend towards the bottom half of the latest adjusted EBITDA range of EUR 415 million to EUR 465 million.

Thank you. And with that, I'll hand over to the operator for the Q&A sessions.

[Operator Instructions] The first question is from Joseph Barnet-Lamb, UBS.

So in the deck, you show us on Slide 7 that meal kits only declined high single-digit constant currency in September, which is obviously incredibly encouraging. It's also a big customer acquisition month. So I guess there are two things related to that. Firstly, in order to obtain this performance, I assume you marketed harder. Can you just talk about the phasing of marketing within that quarter a little bit? And also what CAC looked like in September given the heightened spend? And secondly, related to it, I appreciate the month hasn't quite ended, but any indication you can give us on October would be helpful. I mean you've sort of given us some indication with regard to your guidance for Q4, but is it fair to assume that October has followed a similar path to September as well?

Thanks for your question. Let me take that and give Fabien some time to settle into our Q&A session here. So high level, I think it doesn't make sense to kind of like comment on every single month. I think for Q4, we definitely feel very confident that we'll see a recovery -- a further recovery in meal kits revenues as Fabien just laid out. Month-over-month, I think you will also see that these trends continue that we've seen in September. But overall, there's always like a lot of different holidays, other stuffs, et cetera, so that you shouldn't kind of like always just look at every single month. But I do think that the trends that we saw for Q3, both on RTE and on meal kits will definitely persist into Q4 and into the full Q4.

Now with regard to the first part of your question around marketing intensity and CACs, we're definitely still in the phase where we are -- especially for meal kits, I think, holding back a lot of spend. We don't comment on CACs generally because we think CACs are just one part of the overall equation. So what we try to optimize for is that for the -- every marketing dollar that we invest that we get the best return. We don't necessarily always get that by investing at the lowest CAC. You don't get it by investing at the highest CAC. You need to look at the customers that you acquire, what's the quality of them and how do you think they will trend over the next couple of quarters as they pay back the marketing investment.

So we always look at the equation end-to-end rather than at one single piece of it. But for sure, what we have seen is that the product -- the ReFresh launch in the U.S. has allowed us to first launch the product and then advertise it both on own channels and also on other advertising channels that we're in. But we haven't been massively, massively kind of like stepping up our investment levels, especially not compared to last year.

And the next question is from Luke Holbrook, Morgan Stanley.

I just got a question again on the RTE side, just to try and understand some of the challenges that you're facing that you're expecting declines in Q4 from growth before. How much of this do you think is more [Technical Difficulty]. Can you kind of just give us a bit more color on how we think about the EBIT margin being a bit weaker, but also growth too? Just break that down for us.

Look, we've had a hard time understanding your question. Maybe you can repeat.

I'm just trying to understand why some of the EBIT margin is weaker, but also the [Technical Difficulty] the RTE side. Is this attributable to more competition from community and others? Is this more from the macro conditions? Like what is that you have on why the revenues and EBIT margins are a little bit weaker on the [Technical Difficulty].

We continue to have a hard time understanding your question exactly. I picked up a couple of parts and maybe can try to answer what I inferred. So high level, we've reworked a lot of our meal catalog in RTE, right, with additional lab testing with a reformulation of a lot of the process path. We're throwing additional labor sort of like on some of those things to fix the customer experience first. This was our first order of priority, making sure that we fix the customer experience. And certainly, over the course of Q2 and also in Q3, we have definitely like carried some additional cost as a result of it.

I think now that the customer experience is restored, we can see positive momentum on lot of the leading indicators. We'll be focused a lot on Q4 and into the next quarters to basically be better on the unit economics and kind of like drive efficiency as much as possible. I hope that was going in the direction as I inferred from what I could hear from your question.

And perhaps [Technical Difficulty] just clarification then on the financial side. There's a EUR 20 million cash out on the working capital side [Technical Difficulty] what that was in Q3? And does that unwind in Q4 as well?

Luke, let me take this one. So I understood your question was related to the Q3 free cash flow. So in Q3, the free cash flow was negative, minus EUR 80 million comparing to EUR 44 million negative last year. So a difference of about EUR 36 million. But I will -- if you look at it, it's all coming from the difference in adjusted EBITDA, which was EUR 32 million. So you have EUR 1 million or EUR 2 million on working capital, EUR 1 million or EUR 2 million on CapEx. But I would say it's exactly the same dynamic.

So I would not overread a quarter of free cash flow in this business given the inherent seasonality. What is more critical is the year-to-date. And I'm very pleased with the significant improvement. But even more interestingly, if you look at the free cash flow after lease repayments, this year, it turned positive. Last year, it was negative EUR 36 million year-to-date. Now it's positive, a bit more than EUR 75 million, which is extremely encouraging. And in Q3, the free cash flow landed to the level where the management anticipated it to be, given the seasonality.

And the next question is from Nizla Naizer from Deutsche Bank.

So my question is around the ready-to-eat business as well. Could you remind us -- so if Q4 is going to be a quarter of declines again, when could the segment again return to growth? Would that be a Q1 '26 story or further out in the year as you continue to invest in the product? Some color there would be great. And maybe connected to that, how do you think of the shape of the group's growth when you look at 2026? Any sort of targets that you already have in mind that you can share with us? Because if this is a transition year, would next year then be the year of recovery and growth again? Some color would be great.

So we're very happy with what we've seen in the leading indicators in Q3 and how we have restored them from the lows in H1 in RTE. So we think this will definitely be a positive tailwind into Q4. Now are we going to land at flat? Are we going to land at slightly negative, et cetera? I think this is always like within sort of like the margin of error, but we're very confident that we'll see a sequential improvement in RTE. And then we're in the middle of planning for the next year. I think generally, if you think about the drivers of the business, I would expect that we have better order rates in the business next year than what we've seen this year.

If you think back to the lows that we've seen in H1, I think we should be able to stabilize our conversion volume. And so I think overall, if I look at the whole picture, I see no reason why we shouldn't be able to grow in RTE next year, but we go through the detailed bottom-up business planning over the next couple of weeks. And in the course of reporting our full year results, we'll also share more about the shape that next year will take.

And next, we have a follow-up from Joseph Barnet-Lamb with UBS.

Given I've managed to get to the front of the queue again, I might ask a couple, if that's okay. So firstly, on contribution margin, you saw a 0.2 percentage point increase year-on-year in the quarter. In Q2, you saw a 1 percentage point improvement. You mentioned the temporary RTE food manufacturer fixes weighing on this. Do we expect this to continue weighing in 4Q? Is it something that's fixed in sort of one go? Or is it something that's fixed progressively? That would be question one. Question two, there was a USDA recall relating to Listeria. That was in early October, so it wouldn't have impacted 3Q. What was the impact of this, both from a top line and cost perspective? And then -- well, maybe I'll stop there. I've got more.

So maybe I can take the second part of the question and giving time to Dominik to answer the first one. On the Listeria issue, yes, you have seen indeed the communications on an issue related to a third-party manufacturer. We have been taking very precautionary measures to immediately seize it. And actually, there has been some impact in our Q3 numbers because there has been some inventory write-off that we had at the end of Q3, we decided to book this quarter, which was at EUR 1.7 million. And we may expect a few credits to customers to come in this quarter, but it will be a negligible amount because the issue has been well contained.

On the contribution margin overall, I mean, there's always sort of like, obviously, Q3 is a seasonally weak quarter. So we absorb sort of like more of the fixed costs in Q3. Generally, there were definitely sort of like some additional costs in reworking some of the RTE manufacturing processes. I think overall, if you look at the substance of our improvement plan, at the substance of our efficiency program, then I think there's quite a bit more that we can clip on the contribution margin side over the next quarters.

What we also had in Q3 was the ramp-up. If you think about meal kits 60 to 100 meals in September for RTE then also towards 100 meal menu, this usually is in the first 2, 3, 4 weeks when we introduce it temporarily has somewhat higher costs. That's what we saw in meal kits that has settled back down after 3, 4 weeks when we had some more routine with those processes. So I think really structurally, if you look under the hood, I think a lot of the efficiency metrics are doing pretty well. And I would expect that this is not a sort of like a setback or that the sort of like improvements are now kind of like trending heavily backwards. But that actually the program that we have and a lot of the underlying efficiency metrics, if you net out like some of the one-off impacts that we had in Q3, that there is definitely still ample room to improve further.

Really helpful. If I can squeeze one more in. At the Capital Markets Day, you indicated that retention was 6% better at 10 weeks and 8.4% better at 20 weeks for your post-pivot cohort. With substantially more data behind you, can you now comment what happens beyond 20 weeks? I certainly don't expect you to give us any specific numbers, but at sort of 30 weeks or 40 weeks, is retention more than 8.4% better than the pre-pivot or less or similar? Any color on that you can give would be amazing.

So I don't have the exact numbers top of mind. I didn't bring them to this call. But I think what you tend to see is product investments have a particularly good impact on sort of like the outer parts of a cohort. This is really where it addresses sort of like some of the concerns that customers have when they say that the menu kind of like tastes too much the same after I have used it for a long time. These are the things that we're really addressing with a lot of the product reinvestment initiatives. And to date, a lot of the initiatives tested in isolation have shown exactly that impact. And what the aggregate impact of that is, I would have to look up. But generally, I think what we should expect that the bulk of the impact of a lot of our reinvestments comes in the outer quarters of a cohort.

And as we have no further questions in the queue, I will hand back for closing remarks.

Thank you all for attending our Q3 earnings call. I think when we think back to the start of the year and the plans and objectives that we've laid out back then, we feel very good about our efficiency program. We feel very good about a lot of the organizational and leadership changes that we've made. We feel definitely that the velocity of the organization increased materially. We are very much on track with our recovery plan in meal kits. But obviously, sort of like the curveball that we've had to deal with over the course of the year was around the RTE performance. Here, I think a lot of the leading indicators are pointing to the success of the efforts that we have initiated, but we'll need to work through this to kind of like get both business lines then eventually return to growth and provide sort of like the outcomes that we're all working towards.

Thanks a lot for attending our call and speak to you in the new year, most likely. Thank you. Bye-bye.