HelloFresh ((DE:HFG)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for HelloFresh presented a mixed sentiment, highlighting both achievements and challenges. The company successfully scaled its Ready-to-Eat (RTE) market and maintained strong AEBITDA margins, supported by a successful marketing strategy and a share buyback program. However, the call also addressed significant challenges, such as a decline in meal kit revenue, expected revenue growth challenges, and asset impairment charges.
Successful Establishment in Ready-to-Eat (RTE) Market
HelloFresh has made significant strides in the Ready-to-Eat meals sector, scaling its product group by about 20 times over the past four years. This expansion has led to AEBITDA profitability and improved unit economics, marking a successful establishment in this market.
Efficiency Program and Profitability
The company’s efficiency program has been pivotal in driving profitability, achieving a 9.8% AEBITDA margin for meal kits and a 1.6% margin for RTE for the full year. This program has set a strong margin trajectory for the second half of 2024.
Strong Q4 AEBITDA Margins
In Q4, HelloFresh reported near-record AEBITDA margins, with meal kits achieving over 14% and RTE over 5%. This represents a year-on-year increase of 3 points in meal kits and 10 points in RTE, showcasing robust financial performance.
Marketing Strategy Success
The implementation of a new marketing strategy has been successful, reducing marketing expenses by 310 basis points in Q4. The focus on acquiring fewer but higher-value customers has proven effective.
Completion of Share Buyback Program
HelloFresh completed a EUR 150 million share buyback program and initiated a new EUR 75 million program. This move has reduced the fully diluted share count over a five-year timeframe, reflecting a commitment to shareholder value.
Decline in Meal Kit Revenue
Despite successes, HelloFresh faced a 9% negative revenue growth in meal kits for 2024, with North America experiencing a more pronounced decline of 10% compared to 5% internationally.
Revenue Growth Challenges
Looking ahead, HelloFresh anticipates a revenue growth decline of 3% to 8% for 2025. The company is prioritizing profitability over volume growth, which presents a challenge for future revenue expansion.
Asset Impairment Charges
The company incurred noncash one-off asset impairment charges totaling EUR 182 million in 2024, with EUR 133 million in Q4. These charges are primarily related to site closures.
Limited RTE Growth in 2025
RTE growth is expected to be in the low to mid-teens for 2025 as HelloFresh focuses on building a sustainable growth formula, balancing expansion with profitability.
Consumer Softening in the U.S.
The U.S. consumer market is showing signs of softening, which is affecting HelloFresh’s outlook, particularly in the meal kit segment.
Forward-Looking Guidance
HelloFresh outlined its strategic priorities for the coming years, emphasizing profitability over volume growth. The company targets an adjusted EBIT of EUR 200 million to EUR 250 million for 2025 and aims to boost AEBITDA to EUR 450 million to EUR 500 million. The efficiency program is expected to expand contribution margins and reduce marketing expenses, with a focus on higher-value customers.
In summary, HelloFresh’s earnings call reflected a mixed sentiment, with notable achievements in the RTE market and strong AEBITDA margins, countered by challenges in meal kit revenue and growth forecasts. The company’s strategic focus on profitability and efficiency suggests a cautious yet optimistic outlook for the future.