HelloFresh SE (HFG) Earnings Call Transcript & Summary

Good morning, everyone. Good morning, ladies and gentlemen. Also a warm welcome to those of you joining us on screen virtually today. You're missing out on a gray and a pretty rainy day in Berlin. But hopefully, some of the presentation context will make you a bit warmer here. Before I start digging into the content, let me just quickly run you through some of the logistics. I'm not going to read out the disclaimer, but I'm going to start off in a couple of minutes with a strategic update, walking you through our plans for 2023 and beyond and focusing specifically on a number of different business units that we have under the HelloFresh umbrella. I'm going to hand over to my colleagues, Uwe, our U.S. CEO; and Joanna, our SVP Operations for the U.S. We're going to tell you more about our journey toward operational excellence and what margin progression you can expect from us over the next couple of years. At our group, COO here to my left is going to talk more about marketing excellence and how we're thinking about LTV to CAC in the current environment as well as about all the unique capabilities that we've built to really drive growth at scale. We then break for 30 minutes. For those of you who haven't had the chance to consume or test some of our Factor meals or especially Factor snacks. There are going to be some around here. So please try to find them and try to convince yourself of the great quality of products that we have with Factor. We're also going to have a small culinary show by one of our colleagues here from Berlin, who works in our recipe development and menu architecture and he's also open to answering some of the questions you might have in that domain. I'll then hand over to Christian, who is going to connect all the dots of what we've been telling you about strategic operational and marketing excellence and how that actually translates into the financials and into the plan that we have in the next couple of years. We then have our Q&A session, and we please ask you that because Christian will try to connect all the dots between the different sections and how that translates into financials. Please hold your questions until the Q&A session. And if you're joining virtually, then you'll also have an opportunity to ask questions, please send them via e-mail to [email protected], and we'll try to answer as many as possible. Last thing, there is our IR team, is around the whole day. So if you want -- if you have additional questions, if you want to schedule further meetings or future meetings, please reach out to them. They're very happy to help and hopefully, can build a robust and deep relationship with all of you. All right. With that, let me start with the first part, which is the strategic update. I know that some of you have been following HelloFresh for a number of years. Others are maybe a bit newer to the story. And so what we're trying to do today is, on the one hand side, in some context, try to describe on more conceptual terms how to think about a direct-to-consumer Food Solutions business like ours, but then also give you a lot of data and evidence, which underlines our confidence into the future growth of HelloFresh and how we actually aim to get there. Over the last 11 years since we started building HelloFresh, I think we've always been focused on one of the largest consumer categories out there, which is food at home. Within food at home, most of the budget actually goes towards dinner. And I think both with meal kits as well as with RTE, we have built the leading direct-to-consumer player that really goes after that massive TAM, that food at home and especially dinner at home provides. During that entire time, we've not only seen a pretty insane growth momentum, but we've also perfected our meal kit or direct-to-consumer playbook, and we do think that this will come in handy as over time, we're also producing more and more of our revenues outside meal kits only. If you think back to 2017 when we IPO-ed the business. And you look at consensus and research reports in 2017, 2018, 2020, even 2021, I think we have a track record and history of handily to beat sort of like overall revenue and also profitability targets over longer periods of time. We've obviously been in a very interesting period over the last 3 years, and that's also something that I wanted to start with. So over that entire 11-year period, we've always stayed true to the mission that we actually articulated very early on in the company's lifetime, which is to change the way people eat forever. For the first 8 years of starting HelloFresh, we've been a meal kit only company. And we still do believe that there is a great opportunity to continue to grow our meal kit penetration in existing markets and new geographies over time. Back in the day, when we pioneered meal kits, we really were looking at this massive food at home TAM, and came up with a pretty innovative solution. It's one of the most frequently asked questions in every household, which is what's for dinner tonight? But the vision over the last 11 years has become much, much broader, and it reads today, we want to build the world's leading fully integrated food solutions group. If you think about our foray into ready-to-eat over the last 2 years, you can already see that we have diversified our revenue mix quite significantly. During that entire period, we've been profitable since 2019 on a group level and in a lot of our different geographies since 2016. So very long track record of consistent profitability in those markets where we have operated for a long time. It took us about EUR 350 million in cumulative cash burn to get the whole group to profitability. And since then, we've invested a lot into extending our growth runway into going after additional total addressable market, but have financed all of that from our internally generated cash flows. So if you look at that strong financial profile, coupled with a culture here that we pride ourselves on, which is about execution excellence, which is about detailed orientedness and cost consciousness, then you'll see why we continue to be bullish about the long-term opportunity. We're definitely a very different company today than we were in 2019. And a couple of those charts show you some of the progress we have made over that period. On the top left, you'll see our group revenues who have expanded from EUR 1.8 billion in 2019, and more than 4x to EUR 7.6 billion in fiscal 2022. Just to put things into perspective, it took us 8 years to grow to the first EUR 1.8 billion in revenue. And last year alone, we added about in broad terms, the same amount of revenue on top after a massive COVID uplift in 2020 and 2021. During that same 3-year period, we've also almost quadrupled the number of meals that we ship through our supply chains, which was about EUR 1 billion by 2022 and just around EUR 280 million by 2019. That's a pretty insane scaling challenge. If you think that we have a time-critical perishable and very sensitive product that needs to go through our supply chains all across the world. During that time, especially during 2020 and 2021, we've made a number of conscious decisions to actually deliver orders at lower profitability and lower margin than we did pre-pandemic. Because we wanted to be in a position to capture as much of that latent demand that was provided during COVID. And every single order was very, very profitable. Nonetheless, as we're now basically rightsizing the network, investing into procurement and fulfillment productivity. There's a huge opportunity to actually expand our margins again. And Uwe and Joanna will walk you through some of that in the section later. Aside from scaling up the number of meals that we've shipped through our supply chain, we've also invested significantly into the customer experience. And as a result, the average order rates that you can see at the bottom left here, has actually increased by about 14% over that period. And one of the biggest drivers of that order rate increase has been the fact that we've been investing into bringing a lot more meals to the menu per week. So the weekly available recipes that the customer can choose from are actually up over 70%. So a customer in 2022 had about 70% more choice than a customer in 2019. This has resulted in our customers being happier than ever. And I think we have the data to prove that. So outside of the strong increase in order rates, customers today are also adding more meals to each order that they make with HelloFresh. So the number of meals per order is up by about 11% and has been rising pretty consistently since 2019, a result of customers having more choice within the menu. Our group cancellation rate has also come down significantly from 2019 levels. It follows very much the same seasonal pattern that you've also seen in 2019, but customers are canceling less today than they did in 2019. So if you take together higher order rates, larger number of meals per order, and also a lower cancellation rate, you can actually see that customers are happier and that we're also monetizing each single customer better today than we did over the last couple of years. That improved customer experience has also translated into very strong market share gains. In the U.S., we're up about 11 points since 2019 to about 75% of the meal kit market today. In international, from a slightly higher baseline we expanded our lead by about 9 points and are trading currently around 80% overall market share in our international markets. At the same time, as we went into RTE, we've really been able to capitalize on the great meals that the Factor team has perfected over the last 6, 7 years that they've been in business. And put the full weight of our direct-to-consumer growth engine and fulfillment engine behind it to grow market share in U.S. direct-to-consumer RTE by 52 points over that same period to about 60% today. And over that period, since we've acquired Factor. Factor was according to our knowledge, the fastest-growing direct-to-consumer brand in North America, outside of the Chinese fast fashion company, Shein, which I think grew even faster than we did. And you basically get Factor as part of the HelloFresh Group, you get exposure to Factor pretty much for free as part of HelloFresh. Now looking at how a better customer experience, higher order rates, lower cancellation rates and the higher number of meals actually translates into our net revenue retention, is what I'd like to show you here. This is one of the things that we get asked the most, and I think we've transparently published that for our last Capital Markets Day already as well. And it shows you, number one, that our net revenue cohorts are very stable, are very predictable and very sticky. And if you look at the cohorts from 2015, 2016 or 2017, you can see that long-term revenue retention converges to meaningfully above 30% of the first year spent in year 7, which I think is really best-in-class for e-commerce or marketplace businesses. If you look at more recent cohorts, such as the 2018, 2019 or 2020 cohort. You can actually see that with the increase in order rates, lower cancellation rates, higher prices, we're actually monetizing customers even better. And we expect that those cohorts will actually by year 5, 6, 7 settle at higher net revenue retention than our 2015, '16 or '17 cohorts did. It's also a great reminder of the predictability of revenues that we have from our existing base. So the difference between the different cohorts is actually not that large. Which gives us high confidence about future revenues that we can generate with the customers that we already have today. I think in private markets, this was always sort of like the most powerful thing that we showed to private investors. It's obviously been, I think, a huge debate, and we know there have been a lot of questions on that over the years. Much to our surprise, we wanted to very transparently show where we stand today and also how improved customer experience should help lift long-term revenue retention, even over the levels of where it is today, which we feel is best-in-class for e-commerce or marketplace businesses and their cohort of buyers. During the last 3 years, we've also generated a lot of free cash flow in the business from operations. So outside of very resilient revenue retention, I think the strong cash flow generation inside of our business is really one of the most prominent features of the business model. Over the 3-year cumulative period, 2020, 2021 and 2022, we generated around EUR 1.4 billion in revenue from internally generated cash flows. We used the bulk of that to reinvest it back into the business to extend our growth runway, and become active in a number of very exciting verticals, which we think will drive long-term value. We've expanded our meal kit brands, HelloFresh, Green Chef and EveryPlate into more countries. HelloFresh over that period into 5 new countries, 6 new countries, if you count Japan, which we have exited since. We brought Green Chef to the U.K. and also to Benelux and we've brought EveryPlate, our value brand, to Australia. At the same time, we launched our RTE business by acquiring Factor in the U.S. in late 2020 and Youfoodz in late 2021. If you take point one and point two together here, I think, massive additional TAM that is open to penetrate in the future, and that should give us a lot of growth runway. But at the same time, over the last 3 years, this has consumed both AEBITDA as well as cash because they're very early in their life cycle. But given some of the underlying customer KPIs and metrics, we have high confidence that over time, they convert to the profitability levels where our more advanced markets are today. And where, frankly speaking, at this point in time, they were much below profitability levels where these markets are today. On top of that, we put around about EUR 800 million into expanding our fulfillment network over the last 3 years to be able to capture that significant upside in demand that we've seen during COVID and also after COVID. We're now nearing the end of that CapEx investment cycle, which really should be completed over the course of the first half of 2023. And which then gives us sufficient capacity to grow to beyond EUR 10 billion in revenue as a company. It will also mean that in the second half of the year, we should start to produce free cash flow again, given that a lot of that cash flow at the moment has been invested back into expanding our fulfillment center network. And finally, we've conducted our first share buyback in early 2022. In the rearview mirror, probably slightly ill-timed, but at the same time, I think the objective of that was to offset dilution for shareholders that comes from share-based compensation. And as a matter of fact, over that entire a 3-year period, share count is actually broadly stable to down over that 3-year period, much unlike other e-commerce or marketplace companies, technology companies that dilute shareholders every year by 10% or more. Another importance that I don't want to forget to mention are our efforts around sustainability. We've worked hard to improve both our sustainability standing, as well as our ESG profile over the last 3 years. And we've left things better than we actually found them at the beginning of the pandemic. For example, we've decreased food waste per euro of revenue, in our view, the best metric to track through the supply chain. How much you're actually reducing food waste by over 40% between 2019 and 2022. We've also decreased plastics and mixed packaging per meal by more than 30% from 2020 to 2022. And I think this has resulted in our ESG ratings improving, and we got recognized for a lot of those and other initiatives by improved ratings from ESG providers. So after this extreme 3-year period, which was a massive scale up in 2020 and 2021, 2022, then obviously, through a whole set of different challenges at us, most of them due to exogenous macro factors. So 2020 and 2021, all about scaling, all about capturing demand, all about scaling up in a fashion that very few other businesses have done before. And then in 2022, all of a sudden, a rapidly changing environment, which we haven't had in about 4 decades, and we certainly none of the team members here has any experience operating in. I think the team overall responded very well to that, and I think they adapted very rapidly to this very different context. And if you look at the numbers that we posted for 2022, I think they are evidence that we've pushed hard to control costs in that environment and still posted significant revenue growth for the year. When we issued our 2022 initial guidance, in November 2021, inflation was basically meant to be transitory. Consumer confidence was very high. Energy prices were very stable, there was no war in the Ukraine. And so obviously, against a very different macroeconomic context, we issued the guidance back then. Nonetheless, I think after all of those changes, we still came in short by about 2 points on revenue while growing at 18% year-over-year. And we missed our initial AEBITDA guidance by about EUR 30 million in the face of rampaging inflation throughout our supply chain, and really targeting and tackling each and every single cost line in our supply chain. H1 2023 will still have a challenging benchmark attached to it. I think not so much and some of it because some of these effects obviously persist. So we continue to have ingredient inflation, not at the level that we had last year. We continue to have fairly weak consumer confidence, but I think the biggest point why H1 2023 has a tough benchmark, is because last year at that time, we had a pretty extraordinary and outsized quarter. So it might seem like in the distant past, but last year, at this point in time, COVID search volume on Google was at all-time highs. You had Omicron rampaging throughout the world. Most offices, including this office here were basically standing empty, and all of our consumers working from home and spending more time at home. And we actually had a number of governments trying to mandate sort of like vaccinations on their entire populations at this point last year. So I think that contributed to a pretty outsized quarter in Q1 last year. We're still going to beat that quarter this year but it's going to be a very tough benchmark and hence our year-over-year growth will not be double digit in the first half of the year. As those COVID comps then lapse towards the second quarter, we think that we will return to double-digit growth in H2 for the business and we very strongly believe in the long-term opportunity that meal kits and RTE still provide, given the TAM penetration of those at the moment. If you think about a top-down view on the TAM penetration, we're operating in one of the largest consumer categories in food at home, which is at over EUR 7 billion globally. It's about the size that apparel, furniture, online food delivery and media had in aggregate together, while at the same time, being at much, much lower online penetration of about 6%. If you actually look at the geographies that we're active in, most of those geographies have less than 5% online penetration. So I think the big opportunity for both meal kits as well as RTE is to capture a much larger part of that off-line to online transition in the food at home space and get over time towards levels where, for example, online food delivery is today. But the TAM penetration upside from a top-down perspective is much, much larger than in a number of other prominent categories out there. Over the last 11 years, we've built one of the biggest direct to consumer companies, not only in the food space, but overall, very few other companies that come up with their products, manufacture their products and sell it directly to consumers that trade at similar revenue or profitability levels like we actually do. During that time, I think we've developed a number of really very large moats that make us very resilient in the markets that we're in today, and also provide us with a great launchpad to go into other D2C verticals in the future. If you think about new categories, then usually at the beginning that categories emerge, there is a level playing field because nobody has strong defensibility, nobody has competitive moats. But after 11 years in, I think there are a number of moats that we have developed in the business that are very applicable to meal kits, ready-to-eat and also other direct-to-consumer verticals. And just to point out a few, I think we've created one of the largest direct-to-consumer growth engines, very technology and science driven that allows us to deploy large advertising budgets at scale and with customized advertising solutions. We've also invested a lot into our pricing engines which give us a near real-term view on price elasticities, and have very short feedback loops. And we've invested billions and 10 years into actually building some of the most recognized and most loved food brands around the world. I think all of these things are very hard to copy and very hard to imitate and hence provide very strong defensibility for our current market leadership position, and also as we look towards going into more direct-to-consumer verticals in the future. The same applies also for the supply chain side, where things like algorithmic menu planning, where we're working with a lot of science to actually understand what are customers' preferences, how do we actually match cost and quality to get to a great experience to customers, are really unmatched by our competitors at the moment. We've invested in a lot of sort of like infrastructure, such as building out our strong supplier relationships, a couple of thousand suppliers that we're deeply integrating with these days that give us lower unit cost to serve than any other meal kit business or RTE business. Same for our fulfillment center network, where we invested over EUR 1 billion into it over the last 11 years. And which allows us to actually not only deal with much bigger complexity than anybody else, but also to have lower unit cost to serve as we scale up those businesses. And finally, over the last years, we've also actually invested in our own last-mile capabilities. So as of today, about 25% of the meals. So if you think back 1 billion meals shipped around 250 million meals are actually shipped by our in-house fleet directly to customer stores, also an asset when it comes to cost, quality and price competitiveness. Over time, I think those modes will only grow larger, and it's very hard to imagine a world where somebody would be able to compete with us either in meal kits or also in ready-to-eat. And hence, in our view, very strong competitive moats and a great unfair advantage for any other direct-to-consumer verticals, we're actually going to set our eyes on in the future. So after taking you back and sort of like describing in more broad terms where we've came to the place that we are in today, I want to focus the next couple of minutes describing our 2023 strategy. And for that purpose, we want to show you a number of different business units that we have under the HelloFresh umbrella. Because HelloFresh, as of today consists of about 30 different business units at very different stages of maturity. And so sometimes, the underlying profitability of some of those business units is masked by the fact that we've always been investing aggressively into new opportunities. So first of all, we have our group of businesses that we've been operating since pre-IPO. Those are markets like Germany, like the U.S., Canada, Benelux, U.K. or Australia, basically, the whole set of business units that we had pre-IPO. Those were responsible for around about 73% of our 2022 revenues. They grew high single digits in 2022 and for the last 3 years, they've consistently been posting adjusted AEBITDA margins significantly above 10%. The second group that I want to spend some time on are underpenetrated meal kit markets. So those are meal kit markets or new brands that we launched between 2018 and 2021, and which now on being on average around 3 to 4 years into their life cycle already contribute about 15% of overall HelloFresh revenues. This group grew last year with double digits and had high negative single AEBITDA margins. As you might remember from previous conversations, it usually takes us for every business unit around 5 years to get it to profitability and then post very consistent profitability thereafter. Given that, on average, this group of businesses is 3 to 4 years old, they had -- they were responsible for 15% of revenues, but posted high single-digit negative AEBITDA last year as a group. We then have our ready-to-eat vertical, consisting of Factor and Youfoodz. Factor and Youfoodz together last year were responsible for about 12% of group revenues. They more than doubled the business over the course of 2022. And they were operating for the whole year at around breakeven, AEBITDA negative in the first half of the year and then turning positive in the second half of the year. And then finally, we have a number of business units and new verticals that are at the very initial stages of their life. So those are brands that we launched in the last 18 months. Markets like Spain, Ireland or Italy, and also new direct-to-consumer verticals like Pets Table and Good Chop, which, in total, accounted for less than 1% of our group revenues, been growing triple digits from a very low base in 2022 as they're trying to find product market fit. And they've been highly adjusted AEBITDA negative and also cash burn negative, a multiple of the revenues that they actually generated as you have first upfront investments before you actually get those businesses going. We believe, especially with the last one that they can actually take a similar growth trajectory like our underpenetrated markets did in the last 3 to 5 years, and over time, grow from less than 1% revenue to about 10% plus of group revenues. Now let's focus on the first group. The group of business units that is highly profitable, cash generative and actually responsible for vastly more than 100% of our group adjusted AEBITDA. For 2023, we want to focus on further improving the unit economics of all of those businesses. A lot of them have seen margins coming down slightly during COVID as they were trying to capture as much of the latent demand as possible. We want to work very hard on improving further the customer proposition because that not only helps to drive up further unit economics, but also allows us to more deeply penetrate those total addressable markets. And we have a very large and meaningful reengagement opportunity as we build out the customer proposition. We can much better reengage the pool of formers brand awareness being very high and actually bringing them back to the model with a much improved product compared to when they stopped ordering at some point in the past. First of all, even within our advanced markets, we have some markets that are much more penetrated than others. If you look at the chart here to my right, you can see our most penetrated market. And next to that, the penetration of other advanced markets, including the penetration in North America. If you assume that we can grow all of those advanced markets to roughly the same penetration where our most penetrated market is today, that would be an additional revenue opportunity of around EUR 8 billion. Now you obviously might debate whether we can capture that full opportunity or whether they will settle at somewhat lower points than where our most penetrated market is today. But I think the key message here is no matter what sort of like discount factor you apply, there is still a significant growth opportunity even in our most advanced markets that we will be going after by improving the customer proposition and making the product better. Speaking of making the product better, one thing that has proven very positive over the last couple of years and always yielded positive results is actually giving customers more choice in the menu. We've grown the choice on the menu by about 31% last year alone and about 71% over the last 3 years. That was the initial stats that I showed you. As we were coming out of COVID and normalizing sort of like -- and capacity was normalizing over the course of 2022, this is really when we started investing a lot into broadening choice for consumers and making our product better. Why do we think that is so important? Because as I've shown you on some of my initial slides before, in a broader menu, customers, on average, take more meals per order. They have lower cancellation rates driving up the order rates that they have. And it's also a great tool to actually reach out to new audiences, unlocking new audiences or reengaging formers. That's why really investing into the product that we have, and we are a food company. Customers are coming to us for the quality of the foods and for the great range of different food options that we have will be one of the most important strategies to also significantly elevate TAM penetration in our most advanced markets. The other dimension to make our menu more attractive is to actually increase the share of customizable meals on the menu. Same graph that I showed you on the page before, but this time overlaid with a number of customizable options that are within that range of recipes that we offer. We went from 9% of customizable meals towards the end of 2021 to today being at roughly 43% of customizable meals and with the goal to be by the end of the year at about 60% of our entire menu being customizable by customers. Customization plays a very similar role to a normal menu expansion. It leads to customers ordering more, finding more value in the menu, adding an additional meal to their basket. So very much the same playbook, but not just by merely expanding the number of meals on the menu, but giving customers more flexibility on what exactly they want to do. And some examples of that is that you can add a double side dish to one of your meals that, for example, if you don't eat pork, but one of the pork dishes looks great that you actually swap it out for chicken or for salmon. There are different options to upgrade the meat quality or the protein amounts that we have in there. So lots of different options that now that we have much more capacity in our fulfillment centers, we can really go after and deliver much more value in our overall portfolio to consumers. Another dimension that will help us drive up AOV is our HelloFresh Marketplace. For those of you who are not familiar to what the HelloFresh Marketplace is, at this stage, we have between 100 and 500 additional items that upon checking out with your weekly meals we basically ask you to browse our HelloFresh Marketplace. We have special offers in there. We have weekly specials in there, lots of different unique products that all have a sort of solutions character in common. So not products that you find in every supermarket but more products that are really unique that either complement the meals that you're ordering anyway from us or that actually are for other meal occasions that we don't cover the meals we have in our menu, such as breakfast, brunch, lunch, desserts or snacks. We've piloted that in the last 2 years in Benelux and in the U.S. And we've brought it more recently towards the end of 2022 to Germany, Canada and Australia and will be rolling out HelloFresh market to more countries over the course of 2023. As we have actually optimized some of the assortments in our pilot markets and also invested into broadening that assortment every year since launch, we've been able to grow the revenue per customer order from HelloFresh Marketplace by over 20%. And so when we launch new markets now, such as what we did in Q4 here in Germany, for example, we start with a very small range. And then over time, over the first 12 to 24 months, expand that range and that should allow us to drive up AOV meaningfully, both in those markets that are in the bucket of advanced markets, as well as in some of the underpenetrated markets that will get HelloFresh market towards the end of 2023. With that, let's focus on the second bucket, I wanted to introduce and share more details on today, which are the underpenetrated markets, those that we started in the last 3 to 4 years. As a reminder, they were responsible for about 15% of group revenues, still adjusted AEBITDA negative for 2022, but actually showing great promise to get to the same growth curves and same revenue trajectory, like some of our advanced markets did back in the day. For 2023, we want to focus on closing the feature gap to advanced markets. And I'm going to tell you about that feature gap in a moment. That will allow us to drive up the unit economics in all of those underpenetrated markets, and get the ROI more towards the levels that we already see today in our advanced markets and then kind of like bring them much, much closer to AEBITDA profitability in the next 18 months. This will also allow us to further penetrate the meaningful TAM penetration upside that we see in those markets because at the moment, in terms of TAM penetration, this group of business units is at about 1/3 of where our advanced markets are. When we talk about closing the feature gap, we talk about executing a proven playbook that we have executed many times before in our different advanced markets. So in markets like Germany, the U.S. or Canada. If you compare our advanced market service levels and product portfolio to those of underpenetrated markets, you see there is a lot of upside and actually making a lot of things better, which should help drive additional TAM penetration. Just a few examples here on that slide. In advanced markets, we deliver on 5 to 7 days per week, whereas in underpenetrated markets, we only deliver on 3 to 5 days per week. Whenever we open up additional delivery days, that's usually met with great enthusiasm by customers because very often, if you only offer 3 delivery days, there is a certain part of your customer base where these days are not convenient and hence, they choose not to actually order or buy with you. When you think about weekly recipes, we have, on average, about 40 recipes on the menu in our advanced markets, whereas that number currently for our underpenetrated markets stands at about 23 recipes. So a difference of about more than 80% between the two. So 80% larger menu in advanced markets compared to underpenetrated markets. HelloFresh markets, is something that helps drive up the unit economics, but because it allows us to capture higher AOV and also has a positive impact on order rates. By the beginning of 2023, we have now HelloFresh market live in most of our advanced markets, but in none of our underpenetrated markets yet. This will come over the course of 2023 and should contribute to higher AOV that we can clip in those markets. And then finally, I think a very remarkable stat. If you look at aided brand awareness in our advanced markets, we've done a really great job over the last 11 years of really making HelloFresh a well-recognized brand all across the world. And in those advanced markets, our aided brand awareness actually stands at about 74%. In our underpenetrated markets, given that we're much earlier in the life cycle, we only stand at around 36% because customers obviously had about 6, 7 years less talking to their friends about the service that they're using, much less press coverage in those markets than in our more advanced markets and also a lot less advertising dollars spent in elevating brand awareness and brand consideration. So I think this year tells you that there should be significant TAM penetration upside in our underpenetrated markets. Let's come to ready-to-eat, which is one of the biggest growth drivers for the next couple of years and something that has really been a remarkable success story since we've started becoming active in that space about 2.5 years ago. Ready-to-eat is really sort of like after meal kits, the next frontier and direct-to-consumer food solutions and has a TAM that, in our view, is on par with meal kits. The growth curve that this vertical is going through is very much reminiscent of where meal kits were trading in 2016, 2017, when they really started taking off in a lot of our advanced markets, such as in North America. In 2023, we will focus much like in the underpenetrated markets on actually closing the feature gap that we still have with our RTE offerings. So investing in additional delivery days, investing in a broader menu and investing in elevating our brand awareness. We will unlock additional production capabilities and capacity by summer 2023. At the moment, we're capacity constrained and factor as we've gained so much market share. And despite the fact that we've been scaling production levels a lot were maxed out as of Q1 2023, but should be able to provide a strong growth tailwind for the second half of the year as we open up production facilities that will allow us to scale actually beyond double the revenue levels where we're trading today. And then finally, we first started internationalization of Factor going into Canada in early 2023, and towards the end of the year, latest in early 2024, we also want to bring Factor to Europe. Why do we believe in ready-to-eat so much outside of -- that it remembers us or reminds us a lot on the growth curve that we've been going through with meal kits is because it's a very large and growing TAM. Freshly prepared food is actually one of the fastest-growing segments in grocery. And I think the offering that we have plays very well to a couple of mega trends that have been driving the growth of that segment, such as an increased customer focus on health, on convenience and on quality. And if you think about ready-to-eat, please don't think about the ready-to-eat supermarket meals that some of you might know. But I do think that the Factor proposition is really a very different one and hence can actually scale into a total addressable market that is much bigger than what you currently typically know as the type of ready meals that you find in an average supermarket. We also have very limited competition in RTE, and this model has very strong defensibility. All of these things taken together make us very confident that from current levels, 2022 levels, we can more than double revenues by 2025 in our RTE segment. To just give you sort of like more confidence that we're still in the early innings of the RTE opportunity. You can see on the left-hand side, the revenue growth of Factor since we've taken over that business. And compared to that, the brand awareness that Factor has in the U.S. compared to HelloFresh. HelloFresh brand awareness actually stands in North America at about 66%, whereas aided brand awareness for Factor is only at 6% at the moment. Meal kits were at 6% in 2015 in the U.S. So just to basically give you an understanding of how early we are in that growth curve. One question we've been receiving a lot from you is actually how will Factor's long-term AEBITDA margins look like. And we have no reason to believe that they should look very different to meal kits margins where our advanced markets are trading today, i.e., significantly north of 10% adjusted AEBITDA margins. What will get us there? Number one, as we double volumes, we think there is a lot of room to further improve contribution margins with economies of scale. Secondly, at the moment, going through such a huge ramp-up curve, we're spending over 20% of our revenues on actually marketing and acquiring new customers. As our customer base matures and more and more orders are coming from our established base, that marketing spend will also converge and come much more in line to where our advanced markets are trading today, which will be one of the main drivers to get factored to above 10% AEBITDA margins. And finally, Factor already reached profitability or the whole RTE segment already reached profitability in the second half of last year. So while undergoing such a strong revenue growth curve, we're already at profitability and now going from profitability to plus 10% AEBITDA margin is mostly a function of scale and maturity on the markets that we're in. The moats that we have in RTE are arguably even stronger than the moats that we actually have in our meal kit business. And the reason for that is that lead times to actually build out capacity and the lead times to understand how to cook meals at scale are really long. When you look at our manufacturing footprint, by summer, we will be in a position to deliver meaningfully above EUR 2 billion in revenue from our RTE segment with the footprint that we have put in place by then. Just building out that footprint has taken a number of years, and there have been a number of other providers that have all failed to produce ready meals at scale and at this quality level. So we think this is one of the strongest moats we have in the ready-to-eat business as of today. Secondly, by being integrated with HelloFresh, we already today benefit from much lower logistics costs, lower procurement costs and lower fulfillment costs than any potential entrant in the space could actually have. Factor today has some of the economies already of a much larger business by being part of the overall HelloFresh Group. And then thirdly, when we actually became interested in the ready-to-eat segment, we diligenced sort of like the quality of meals of all of the different players in the space. We definitely felt the type of products that our now colleagues at Factor's have produced was much ahead of the type of quality of meals that we could see with any other of the players, and it's actually something that is very, very hard to do. When we've launched our new facility by summer, we will have 2 of the 3 biggest kitchens in the U.S. The only one fighting with us for the #1 spot is Disney World in Orlando, which has a similar output of freshly prepared meals per day, as we will then have in the 2 Factor facilities. So very hard to compete with that, I think. And finally, I think being part of a larger sort of like ecosystem being part and having shared customer bases across brands also allows us to drive down customer acquisition cost because a lot of potential Factor customers are already in the pool of meal kit customers or former meal kit customers, which we can activate at a fraction of the cost than acquiring a new customer. Some of those moats have already allowed us to increase market share very significantly to about 60% of RTE market share today. And it's very hard to see how potential future entrants into that space wants to compete with us, given those moats that we have in the business today. Now for the rest of 2023, full focus on capacity expansion in the U.S. to basically start growing from the levels that we're currently at again. Launching Canada and finding product market fit for Factor in Canada, hopefully not too different from the product market fit that we have in North America. In Australia, we just moved into a new facility with Youfoodz and should now also have plenty of opportunity to scale our capacity once we've ironed out some of the ramp-up difficulties that you always have with a new facility. And then by the end of the year, we actually also want to be present in Europe. And those things together should give you a lot of confidence that we can double revenues from where we are today over the next 2 to 3 years. With that, let me come to the fourth group that I introduced to you before. As a reminder, those are business units that we started in the last 18 months. All of them, just all about finding product market fit or improving the initial product market fit that they have. They were responsible for less than 1% of revenues in 2022, but had actually sort of like fairly significant losses in the grander context of their revenues, so losses higher than their revenues, overall limited and all following a very strict capital allocation framework. For 2023, we want to shorten the time to positive unit economics. We have launched about 8 new business units in the last 2 years. So we're not planning on expanding to a lot more geographies or a lot more business units in 2023, but really focus on the ones that we have launched and finding or improving product market fit for them. Finally, we'll also always have a very strict success framework attached to them. And also in the past, we have not been shy to actually exit markets that haven't been performing according to our expectation or when our investment framework changed and all of those have very clear success metrics in place that if they don't hit them, we're also not shy to exit those. Why do we invest in new business units and in new geographies. It's because that over extended periods of time, they have always provided for a lot of growth runway. And if you look at our revenue mix today, compared to 2017, 28% of our group revenues actually comes from stuff that we launched since. So while it might seem very small and it's less than 1% of revenues today, I think some of the things that were -- that we have launched in the last 2 years can in aggregate, also grow to EUR 1 billion plus in revenue over time. And that, I think, is something that is very attractive to build from scratch, because it has a much better return on invested capital than doing any type of M&A transactions or anything else, even though we obviously expense that through our group P&L. Which sometimes masks the underlying profitability that we have in some of the more advanced or higher penetrated business units. Overall, we only want to focus on opportunities that are sufficiently large. And by sufficiently large, we mean business units or new verticals that can provide a very credible path toward adding $500 million in equity value to HelloFresh. In piloting some of these new verticals, we exercised a very strict success framework. So we usually want to see positive unit economics by year 3. So that's basically positive contribution margin and positive return on marketing. We wanted to get them towards AEBITDA profitability by year 5. And we always make sure that they are the best use of capital at the group level. So always basically try to follow the same strict investment and capital allocation logic as is presented to us by other things such as share buybacks, M&A transactions, et cetera. Over the last couple of years, like I said, I think we have a pretty strong track record of making new TOs and new verticals work. I think in aggregate, we've launched about 35 different business units over the last 11 years. About 30 are still active. But that also means that we haven't been shy to pull the plug on things like back in the day, France as a geography in 2013, which we exited. Japan more recently, we had our own foray in ready-to-eat in 2018 under the GoReadyMade brand, where we learned how hard it is to produce great ready meals at scale, which we then exited in 2019. And we've also basically had a couple of other smaller verticals. So overall, I think about an 85% hit rate on new things, but very clear that we have a strict capital allocation framework in place and are not afraid to shut down things that are not complying with that framework. So after having walked you through the 2023 strategy for all of the different business units over the last 30 minutes, I want to actually bring back the conversation to some of the more longer-term trends. If you think about HelloFresh over time and how our revenue mix has developed, then by 2015, all of our revenues were basically in meal kits because for the first 8 years, we were known for meal kits only. By 2019, we have also started to add sort of like some new brands to the mix with small contribution. Since then, that contribution has grown quite a lot. And also, we have phased in ready-to-eat over the period of 2020 to 2022. So back of all the businesses that have been the business that has been present by 2017, 28% of revenues is actually coming from different business units today. Now as we look into the future and think back to the additional TAM penetration opportunities that we have in some of our advanced meal kit markets, we believe there is a big opportunity to continue to grow in our advanced meal kit markets, but more pedestrian than in the past. Underpenetrated meal kit markets have a big opportunity to get towards penetration levels of where advanced markets are today. So those 2 buckets being our meal kit business, I think, with significant runway in the future, but probably growing not as fast as ready-to-eat and some of our new geos and brands. So by 2025, whereas about 88% of our revenue today is from meal kit and 12% from ready-to-eat. I think by 2025, you will see a larger contribution to our revenue mix for RTE and also for new verticals. And as we think about new direct-to-consumer verticals in 2025 and beyond, I think that by 2030, a significant part of our overall revenues will be even more diversified with not only RTE and meal kits, but also other direct-to-consumer verticals being part of the Food Solutions group that we're building and have been building for the last couple of years. So just a very quick 1-minute summary. What is our strategy for 2023. Advanced markets continue to improve the customer proposition. That will improve unit economics, that will allow us to penetrate those markets more deeply as we lap an outsized Q1 2022 in the second half of this year. Underpenetrated markets, lots of TAM upside. We're going to work on closing the feature gap. It's a proven playbook. We've done many times in our advanced markets, have great confidence that we get to the same penetration levels as in advanced markets over time. RTE, huge opportunity, strong moats, strong defensibility, full focus is on unlocking additional capacity and then doubling revenues over the next 3 years. And new brands and geos will exercise very strict capital discipline. But we think the track record of all the businesses that we've launched in the last 5 years actually makes this a very compelling opportunity to also leverage a lot of the D2C capabilities that we've built in the business over the last 5 years. That's in a nutshell, the story for 2023 and beyond. After this 1-hour monologue, I think you're all looking forward to hearing from some other speakers. So I'm very happy to pass on the microphone to my colleagues, Uwe, U.S. CEO; and Joanna Hicks, our SVP Operations in the U.S.

Thank you, Dominik. Welcome, everyone, also from my side. Uwe Voss, I'm the CEO for the U.S. And as Dominik mentioned, I'm happy to share with you an update on our efforts on operational excellence in our supply chains. I'll present that together with my colleague, Joanna Hicks, who runs our fulfillment network in the U.S. What we want to do in this chapter is really share with you 3 updates, or updates on 3 topics. The first is a quick recap on our recipe for operational excellence. So what do we mean by that? We mean by that, the most fundamental strategies that we apply in every one of our markets within our supply chains to generate attractive margins. That's, in a nutshell, the recipe for operational excellence. We'll recap that briefly here at the start of the session. Second topic we want to share with you is a quick recap on the priorities that we had to work through in our supply chains over the last 3 years. It's no surprise probably to most of you that will talk a lot about capacity expansion there and also navigating challenges in the external environment. And then thirdly, we want to look forward to 2025 where we talk about the priorities that lie ahead of us, and those will be quite different from the recap from what we had to work through over the last 3 years. So those are the 3 main topics that we want to share with you in the next roughly 30 minutes. And yes, without further ado, let's jump into the first one. A recap of our recipe for operational excellence. And so again, here we talk about fundamental strategies, how we have set up our supply chain, how we have set up our business model such that we can generate very attractive margins well in excess of what you're used to from, for instance, grocery competitors in the market. We have 2 slides. The first one will talk about upstream. So strategies that we apply in product, service design, and then procurement. And so I'll walk you through those one by one. First one, we have a make-to-order business model. So we build our orders only when we have a confirmed paid-for customer order, we don't build to stock. We use forecasts a lot in the process, in our supply chains, but the final order is only fulfilled once we know there is demand from a customer that gets us very high visibility at the end, especially at the last week leading up to that order on demand, and it allows us to really adjust our resource levels, procurement, but also staffing levels in the distribution centers through the final demand and drives waste down, number one. Number two, a near just-in-time delivery model. So if you think about our supply chain, for instance, in the U.S. You have on one end of the supply chain, a supplier, especially for perishable products, if you think about a farm, a producer of produce. On the other hand of the supply chain you have the customer. And really in between there's only one touch point which is our distribution center. So the product travels directly from the farm to our distribution centers get turned very quickly on average in 2 days and then travels onwards to the supply. So it's very direct, very, very fast, just-in-time supply chain, which brings inventory levels way down and enables negative working capital for us as a group. It also, by the way, increases speed and with that freshness of perishable products. So the product that you will receive, the produce that you will receive in a HelloFresh box will be having a much lower short life and much more freshness than in the grocery store. Third, algorithm-based menu planning. We heard about it a bit earlier. How does the process work on how we set the weekly menu? So the selection that you, as a customer, have of recipes in a week. There is a stockpile of recipes. We call it the recipe database in every local market, and then an algorithm, a data tool is actually selecting which recipes we offer to you in any given week, and that gets us basically 2 main benefits. One, from a customer perspective, you get a lot of variety. 40 to 50 choices every week and various recipes in each week that provide broad culinary and convenience variety. Also variety week-on-week if you compare this week's menu with last week's menu, with the future weeks menus, they will have nothing in common. So there's a lot of variety for our customers that keep the product fresh. That's if you look at it from a customer level. If you look at the meta KPIs, underneath: customer satisfaction, recipe score, quality and also cost, they will be very consistent. So we basically are able to create a very high degree of variety for our customers and their experience. But a very high degree of consistency in performance on the meta level of every single menu that we service our customers in every week in every market. And that's only possible through a data-driven approach. No human can do this, short of magic, not quite, but short of it. And then backward integration, so really what we talk about here is in-sourcing as we grow, as we mature from time to time, we take a step back and see what are areas along the value chain that we could own that we currently don't own where we currently rely on suppliers that we actually could do ourselves. There's a few things that we're already doing. If you think about some of the packaging material that we are doing and another opportunity, especially upstream for our product is insourcing, shelf-stable items, grocery items, and that enables us to capture some of the margin that currently sits with suppliers further upstream. Upstream ingredients of our recipe for operational excellence. Let's switch to downstream ingredients. And the first one I want to highlight is commonality of orders. So again, what do we mean by commonality of orders. Again, if you look at our menu, 40 to 50 recipe choices, market items, modularity options, many options to customize your offering. If every customer's choice would be independent of each other, every box would look completely different. There would be no one box in a week that looks exactly the same. The selection would be completely unique for every customer. That's the theoretical answer. The practical answer, the real-life answer, there is commonality in those orders. There's a long share of volume, the vast majority of volume where every order really is unique and no customer has the same selection like any other customer, but there is a [indiscernible]. There is some volume that is actually common that several customers choose. It's typically smaller boxes, simpler boxes, customers that only choose recipes, don't choose market items. And that insight enables us to target how we fulfill those orders. The simpler orders, there is a simpler, more nimble way, a more cost-efficient way to fulfill them versus the more complex long tail of orders. And so that ultimately drives fulfillment costs down by tailoring our approach to how complex the actual customer order is. So we leverage the commonality to drive efficiency and fulfillment. Distribution center automation, I think that's pretty self-explanatory. As we grow, as the processes mature, we invest more and more there. And you'll hear about that from Joanna a little bit later in the presentation. End-to-end visibility. We really want to have perfect transparency. Again, from farm to the consumer every step along the way to our distribution centers, within our distribution centers and then on the way to the customer. That enables 2 things. One, it enables us to see where are we losing time? Where are there blockers? Where are things physically sitting in our supply chain too long? And we can streamline those and further bring down inventory and increase speed in the supply chain. The other thing is we can pick up is errors. So if they're in a just-in-time model is a problem with the delivery to our distribution center, we want to pick that up before it's too late. We want to pick that up and then correct for that error, so we can maintain service to our customers. Similarly, if there is a problem from our distribution center to the customer, we want to pick that up and not have the customer tell us about it. We want to pick that up before the customer and inform the customer and correct the error, and that's why visibility in our business model is so important why we're investing there. And then finally, final mile, so you heard about it from Dominik similarly to going backwards on the value chain. We're also going forward in the value chain and have built out a final mile network in most of our markets, many of our mature markets and are delivering a large share of orders ourselves that drives down cost, but also helps us own the customer experience and drive down error rates in those markets. So I tried to make this really brief. A lot of this, I think many of you have heard before, but a quick recap of our recipe of operational excellence, all of the ingredients that ultimately drive an attractive margin profile and superior performance in our supply chains. Topic 1. Topic 2, let's now recap what has happened over the last 3 years in the world of supply chain and HelloFresh. And for that, I'll hand it over to my colleague, Joanna.

Hi, everyone. So again, as introduced before, I'm Joanna Hicks. I get to be the SVP of U.S. fulfillment here at HelloFresh. So me and approximately 10,000 of my peers or my employees fulfill orders every day to customers, direct to customer. Our goal is on time with great quality within a budgeted cost. So before we talk about 2025 goals, let's do a look back over the last 3 years and the transformational growth that HelloFresh has been through, specifically within the supply chain. So in the last 3 years, we experienced explosive growth, which I think many companies either saw or didn't see. We were fortunate, and we grew exponentially in the 3 years. So what does that mean? That means we had to massively upscale our supply chain. So to put that into numbers, if you look at the screen, our fulfillment network more than tripled in those 3 years. Our suppliers doubled in those 3 years also in an effort to meet the needs of our customers. So what we also did was to create a better experience for our customers. We built out globally our final mile delivery, including our HelloFresh delivery network in the U.S. Why did we do this? We did this, number one, so we have capacity because capacity was at a premium during COVID; and two, it also created a better customer experience for our customers. Also, if you go back and look at our recipe count more than doubled during that time. We added marketplace, and as referenced earlier, we added modularity. What does that mean? That means if you have a recipe that has rice, for example, you could substitute cauliflower rice as a healthier option. Or if it has potatoes, you can go to a sweet potato instead. So all of these advancements and changes created complexity and operations. But most notably, over the last 3 years, we forcefully entered the ready-to-eat market by acquiring Factor in late 2020. And so during a very fast 3 years, we expanded our production by 5x. And as mentioned previously, we're going to double that again this year in an effort to meet the needs of our customers. We also acquired Youfoodz in 2021 and have more than doubled its capacity since acquiring it. So what is so great about ready-to-eat and why is Factor the way to go? So these are not the TV dinners of the '80s and '90s you might be familiar with. So we are still convenient, and we can be ready in 2.5 minutes. So we're fast and convenient. But we have fresh restaurant quality ingredients that provide healthy options. So with a weekly rotating menu, we meet the varieties that all of our customers demand from us. So when you take the knowledge that we acquired by entering into the Factor market, the ready-to-eat market that Factor gave us, take their knowledge and our proven ability to scale at HelloFresh through up and down the supply chain, like this is a recipe for success for us. So within the picture, you'll see a tilt braiser. This is just an example of equipment that we use in the Factor facilities. And this -- some examples that we use, we make our sauces, we ground -- we cook our ground beef in it. What that does for us is it allows us a consistency that can be provided over and over and week over week. So if you order the recipe -- I prefer the keto poblano meal -- if I order that 1 week and 2 weeks later, I order it, I get the exact same quality with the exact same goodness that I had 2 weeks ago. And I saw that some of you tried the pressed juices. Try the beet apple, it's my favorite. I like that one the best. All right. So passing it back over to Uwe.

Thanks, Joanna. So capacity expansion factor. No recap of the last 3 years would be complete without at least talking briefly about challenges in the external environment. There's been several, the one we highlight here is high levels of inflation. What you see is the inflation levels that really our customers are -- have been faced with, fuel, food, some of the drivers, obviously, that drive these inflation levels up for our customers also hit our own business, our own cost. And so that posed 2 challenges or 2 questions to us. The first one is how do we avoid passing on food price inflation level, price increases to our customers? And as you see on the right-hand side, we've been able to do that. We've increased our prices much lower than overall food price inflation. And with that, we strengthened the relative affordability of our product. The second challenge or the second question is, how do we do this without deteriorating our margins and keeping an attractive margin profile? And as you see later in the presentation, we've also done a good job of that in H2 actually improving our margins in the context of really, really, really high inflation by applying our recipe for operational excellence, but also executing very, very diligently and capturing opportunities big and small along the way to really drive costs down. That's the recap. I think as we talked through some of these topics, I think it becomes clear that many of them are moving further and further into the rearview mirror. And so before we talk about the future, we just want to drive the point that what has been our priorities or primary priorities in the supply chains across the globe at HelloFresh over the last 3 years are no longer the primary priorities going forward. So if you look at the first 2 buckets on this chart, they really talk about the primary challenges in our distribution centers, as you've heard, the last 3 years were a lot about building up new distribution centers, expanding distribution centers, hiring hourly employees to fulfill orders, really scaling up. That process is largely done. Going forward, our primary priorities for our distribution centers are to drive productivity, to optimize the network, as a core lever in that, bring folks in-house, convert them to our own hourly employees, drive attrition down to really drive productivity. In our supply base, we needed to scale throughput that we receive from our suppliers, diversify our supply bases in every local market. Again, that process is largely done. Now we want to capitalize on this asset. We have a broader, better supply base in every geography, and we want to leverage that to get better prices by consolidating spend towards the best suppliers that we have in every geography as well as building out here and there new capabilities where we leverage our scale, such as insourcing certain items that we would have in the past sourced from suppliers. And then finally, as you've heard from Dominik, we did invest a lot in our product. We expanded the selection of recipes. We launched marketplace, but we did all of that in a very overall constrained environment, right, where we were battling lots of challenges in parallel. Going forward, those challenges, those constraints are gone, and we really want to move to a world where we move backwards from the customers' needs, especially our existing customers and really fulfill them as good as we can, keeping the innovation pace high and maybe even increasing it beyond what you've been able to see over the last 3 years. So innovation, you've heard from Dominik, and you hear about our marketing approach from Ed in a little bit. For the rest of the session, we want to really focus on the left-hand side of this chart, our path forward and how we want to drive efficiency and cost savings across our networks. And so as we move forward, as we look forward to 2025, we have a clear path to improve our PC2 margin on a group basis by 3 or more percentage points. We will get there by improving procurement efficiencies by 1 point, fulfillment efficiencies, productivity by 2 points. If you put this just in a historical context, how aggressive is this target? This is really just getting us back to PC2 margins that we had pre-COVID. We have, since 2019, improved our procurement efficiencies by about 1 point. So this means what we've been able to accomplish over the last very stressful 3 years, we need to do that again until 2025. If you follow us much longer, we have a track record that goes way past that of improving procurement efficiencies almost every single year. So 1% over 3 years, very achievable, and fulfillment efficiencies really is just 2 points is really just walking back some of the added cost that we had to add over the last 3 years if you compare 2019 to 2022. So we believe this is highly achievable very confident in this plan. How do we get there? Just to highlight a few levers. Procurement, it is by more rigorously applying data and every sourcing decision that we have really end-to-end, setting the menu, commanding the best prices from our suppliers, setting order volumes exactly right to eliminate waste and just eliminating waste all throughout the supply chain. We have an opportunity to organize differently against the sourcing decisions. Still many sourcing decisions happen in local countries. And we have an opportunity to basically elevate that to geographical clusters. With that, we expose every single country to the best suppliers, not in the country, but in the geographic region. So we'll get better prices. And we also generate scale by consolidating scale or add additional leverage. And then we talked about backward integration. We talked about in-sourcing already. On the fulfillment side, it's really all about improving productivity. So we have a lot of new distribution centers that have been popping up all over the globe very quickly over the last 3 years. They are surfing down a learning curve and with added maturity will become more productive over time given the rapid growth of our network and expansion of our network, you can imagine that there's still opportunities to further standardize and roll out best practices across this now very rapidly growing network. And then finally, again, there's automation as an opportunity to drive productivity as well. So those are some of the key levers. Again, overall, 3%, we're very confident in that path until 2025. Additional confidence, I think we get -- if you just look at recent performance, this is second half of 2022. Left-hand side, you see our procurement expenses. And you see that although we were operating in an environment of really, really high inflation, we were keeping those flat. On the right-hand side, we were actually over that same period, able to improve our fulfillment productivity quite significant. So we're already on the path to achieving these targets that we set for 2025 and H2 of last year is an early indicator that I think this is very achievable, and we have a high level of confidence to get that. I want to highlight with the majority of the remaining time, some of these examples. So again, and by the way, before we go into the examples, we do all of this while maintaining customer quality. So I think that's an important point. This is not an exercise in corner cutting and taking value out of the product experience and adding that to the bottom line. Those will go hand-in-hand. We will improve the product experience over the next 3 years significantly, and we will become more efficient, both at the same time. Again, you see this here on this chart throughout this entire period, recipe scores, one of the key drivers of customer satisfaction, very, very consistent quality in the leading geography is very consistent and even improving in some of the lagging geography. So the one level you will not see here is cut corners and take value out of the product. We don't do that. We go after real efficiencies. And so we want to share some of those examples with you in the remainder of this section. Starting with the procurement measures. So we talked about data. So the first big driver is data. Starting again with the menu. So we talked about menu planning, what is menu engineering? Think about menu engineering as a sort of continuous improvement process to make menu planning more efficient and better over time. What are the drivers? One driver is to have a better recipe database. The more choice we have, the more potent our recipe database is, the more we qualify individual recipes in that database, the better the algorithm can perform, the better the performance that the algorithm can generate for us. Similarly, as we learn more about our customers and understand really what they value and what they not value, we can take out things out of our menu that our customers simply don't value, but we still pay for. And so this is basically the continuous improvement process as we plan menus this week, next month, next year, the menus will get better and better over time. That's the process that we call menu engineering, and it's also going to help us improve procurement margins. Second bucket, those are the 2 examples in the middle on this chart is how do we command best prices from our suppliers by applying data. So one is for the appropriate commodities applying a tool code index best pricing, think of packaging, very, very straightforward commodities. Seasonal initiatives. If you think about produce, we want to source that when it's most abundant. And when you -- so you can command the best prices in the market also gets you a seasonally appropriate menu for our customers. There's many other tools that we apply, yield-based pricing for proteins, just simple benchmarking, RFPs and so on and so forth. All of those are already happening given the rapid growth of the last 3 years. They're not all happening with the same level of rigor in every single market. And so basically, just level setting this across the globe in every single market across our entire spend will provide additional sourcing opportunities. And then finally, waste reduction. A lot of that has to do with ordering just as much as you need, but not more. So the key input to that is our forecast. And as you see, our forecasting accuracy is actually improving over time as you would hope as we feed more data into our algorithms as we fine-tune our algorithms, again, continuous improvement over time, they get more accurate which gives us even better visibility and how much to order, how much to staff in our distribution centers and take waste out of our supply chain. So first, strategy and procurement is data. I've mentioned briefly before, organizing slightly differently than in the past against some of the sourcing decisions. Some of this was already happening, but also still a lot of sourcing decisions happen in individual geographical markets. And again, as we elevate the sourcing to a geographical level. So we buy for Europe as opposed to just for Germany, the German market will get better prices from the best suppliers in the geography in Europe, not the best suppliers only in Germany. And we generate scale, which provides us additional leverage. There's other benefits here if you think about innovating a product, if you think about inventory management as well. And then finally, insourcing. So I'll skip over this quickly, those are some of the salient examples that we are working on right now. It's mostly about grocery items, dry goods, spices, sauces these types of things. We're doing a little bit of that. We're going to do much more of that going forward. And with that, capture margins from upstream suppliers. Let's switch over to some examples on how we're going to drive productivity. So over to you, Joanna.

Great. Thank you, Uwe. So the DCs in the U.S. are maturing and processing through the learning curve. So what does that mean? That means in 2019, we had 6 fulfillment centers, and we had a high maturity. We had a high maturity because we haven't added, we didn't need capacity, and then we experienced explosive growth over the next 3 years. So what does that mean I did? I added more buildings. I hired more people. I paid for training. I added additional carrier routes. All of those things cost money, not only to open but to expand and get to capacity. So as we hit 2021 and we were able to stop opening buildings, we also evaluated our current DC network to determine if the DCs we had would be able to hit that complexity of the orders that we were experiencing. During that journey, we did decide to close one distribution center in the United States. And so as you can see, coming out of 2021, our maturity level is going back up. So what does that mean? That means that we're able to provide additional resources and where they need to be at the time they need to be. So when we're looking at our capital projects for the remainder of 2023, we're really focused on customer proposition and utilizing the existing network that we have today beyond the ready-to-eat, which we've already committed to doubling in 2023. So on the next slide, it says, okay, Joanna, you have your network, and you have your capacity. What are you going to do with it? So basically, what I'm going to do with it is that I'm going to execute through benchmarking and standardization across all regions and geographies. So how do I do that? I lock in the best-in-class. Those that are doing it the best should be emulated. And then from there, we look at where the variation occurs. And some of the areas that we're looking at are safety, quality, productivity and attendance. All of those things are essential to the success of an organization. The last thing I want to touch base on is I think most people know that in the last 3 years in an effort to operate safely in a COVID environment where we brought thousands of people to a building every day, we had to have some additional expenses that we needed to incur. Some of those items will remain. So for example, we have some air purification in the distribution centers in the U.S. that will remain, but some of the items we have either walked back or will continue to walk back this year to include social distancing, dividers and COVID pay. All right. So on the next slide, we're going to talk about -- and Uwe mentioned it several times, and it's really about data and the uniqueness about our just-in-time concept to our customers because of the perishable items that we ship. So if you look at the way that we want to focus on the data for 2023, really, I bucketed it into 3 areas. So it's how do I plan my labor, what building gets it and what carrier delivers it to our customers in super simple terms. So let me focus on labor first. So the way that we used to look at labor and the data that was available to us just a few short years ago was by the week. At the end of the week, I'd know my labor, and I know what I used, how value-added is that in operations. Not very agile. So then we got it to the day. Okay, we felt like we were winning. Now I have it within minutes. So I'm able to make real-time decisions in the moment if I'm making good operational decisions on the floor. So let me give you an example. So my team and I, we surgically take our labor planning data, and we overlay it to our demand curve, which is extremely steep, okay? And our goal is to say, how do I plan not just to the day, to the shift, but all the way down to the department? And I'm doing that today, which Uwe showed in some improvements that we've had in the last year. So how do we refine that? We take that data, and we take it down to one more filter. I'll give you an example so that it makes sense. So assembly is the area with which we create a customer shipment, and we put all the items in the box. But within assembly, there are many different process paths. We have people who pick, people who make boxes, people who palletize, people who replan. So let's use replan as the example. So if I have replenishment and I need to know how many units do I need to replenish and how many people do I need to replenish those units, if you go back to that steep point of demand, on a Sunday morning, it's a completely different answer than a Tuesday PM shift. So our goal in 2023 is to refine it down so we can precisely know exactly how many people we need in each specific function throughout the shift. All right. So then if we take it to -- basically, network alignment says, again, to go back a few years, we were very rigid. We said these ZIP codes go to these distribution centers, and this is how we operate. Since then, and in the last 3 years, we've become very agile. We can seamlessly now move volume from DC to DC. Why would I do that? Well, I would do that for cost. I could do it for quality, ingredient availability. But let me give you a real example that happened this year. I actually live in the Dallas-Fort Worth area. And due to weather, we were unable to fully operate for about 7 shifts. So what do we do for our customers in that moment? Those of us that lived in the Dallas-Fort Worth area knew that we weren't going to get our box. I still got mine, by the way, but most people didn't because of the condition of the roads. So -- but people outside of that metropolitan area did not know, nor cared that we were having issues in our supply chain. So seamlessly, we took the deliveries in other states. We transitioned them to the other DCs within our network, and we met our customers' expectations. All right. And then on the last one -- so for carrier allocation, high level, we basically say we have this many buildings. We need to go to this many ZIP codes, and we're going to look at cost. So if we transition to the next slide, I'm just going to show you an example that makes it way simple to understand. So in any given week, the output of the shipments that are available to our customers equals about just over 5 million solutions, okay? So our internal algorithm takes all the data and the constraints, and it spits out today based off of carrier cost, here is who should do what in my network. So what do we want to do differently? What we want to do differently because what I just explained to you is the chart that says business as usual. We want to hit our goal of 2%, and that goal will be achieved by adding in granular data. Let me provide you an example so it makes sense. So shipping a box from Texas to Kansas could also come from Georgia to Kansas, okay, because they have a facility in both of those locations. The most carrier cost-effective method is likely coming out of Texas, okay? So in business as usual, that box will come out of my Texas, Irving facility shipped to Kansas. But in the new system, it will say, yes, but that carrier has a lot of concessions to customers because they have late deliveries or hot boxes or for whatever reason, that's still not the right method. So we may choose to ship at a higher cost out of Georgia with an overall better good guy for the organization. So that's the goal for 2023 for logistics. All right. So now for the fun stuff. Okay. So I get to show you some super cool slides about some automation that we're doing. But first, I will explain where we're at before I tell you where we are. So how did we get here? So to explain how we -- and a few people have seen this. So previously, the way that we operated is, I would start a box, I would push it to Uwe, but Uwe may not have a pick. That is a non-value-added cost step. And our job is to be the most cost effective. Remember, when I gave you my summary, I need to hit budget. To hit budget, I need to take out cost. So how do I make sure I only pass a box to a person who actually has a pick? So in the first 2 videos, we're going to show you -- the first one is assembly line, it's called auto lines. So auto lines. And the way that it works is a box gets erected. It gets transported to an area. Uwe and I are now in 2 completely different sections. We are not standing by each other. And if a box needs to pick in my area, it will divert to me, but it will not divert to Uwe's area because he doesn't have a pick. So we have now saved the value of the cost that we previously had. So the second one that I'm going to show you is a goods-to-person solution. It's actually our auto store in our Texas, Irving facility. Same concept, the box gets erected. It gets transported around. The only difference is, is that when the box is beside me, the goods-to-person system, which is a bin that presents, will only present items that I need to pick. There'll be no items in the bin that I don't need to pick. Now I may have a lot of recipe ones and only pick one unit of it, but everything in there is a recipe one. So let's show you the first 2 videos that are super cool, and I'll take a step out of the way. [Presentation] I hope you guys are as excited as I am because this is so much fun, okay? All right. So the last video is actually of our ship sorter. So let me explain what we did before. So before in this line that Uwe and I are on, at the end of it, the boxes would come down, and we would have a pallet for every carrier routing that we needed. For everybody that understands operations, we don't use one carrier. We have a ZIP code range, and every ZIP code range has a different selection. So you can have 1 pallet, 6 pallets, 10 pallets, whatever it is. And at the end of the line, the person would look at it. They're going to scan it, and then they're going to find the pallet to put it on. I'm going to put it here. So what the ship sorter does for us is it allows us to more efficiently put orders through a process. We don't care who the carrier is anymore. It goes up to the ship sorter. By the way, I get that ship sorters are super common, but really excited to have them. And they'll come out, and they'll sort out down to a specific carrier lane, which is then palletized directly there, and then loaded on to a trailer. Okay. So to summarize my -- what I'm talking about here for automation is that as we increase complexity for customers to increase the customer proposition, these solutions help absorb the complexity in operations. All right, Uwe, back to you.

Thanks, Joanna. So we're almost there, 2 more final points before we close the session on operational excellence. First one is about sustainability. Sustainability and supply chain has a lot to do with being resource efficient. And so the governing thought that we want to leave here with you is that often in our business model, in supply chain, doing the right thing for the environment and doing the right thing for your pocketbook, for your cost position are actually exactly the same thing, which is being resource efficient. So if you think about food waste, for instance, in the U.S., about 40% of all food produced ends up in landfill. It doesn't get eaten, ends up in landfill. The biggest contributor to landfills is a matter contributor to CO2 emission. By the way, everybody pays for that as you go to the grocery store. The waste that is being generated is priced in there as well. It's a highly inefficient system that adds a lot of cost, but also adds a lot of stress to the environment. Our supply chain -- our direct and very quick supply chain preportioned ingredients made-to-order business model, our amount of food waste is minimal, just a fraction of the overall 40% that you see in the overall food system. Another fact is about electrifying our delivery fleet for final mile sourcing, renewable energy sources, as you remember. Last year, this has really helped us keep cost of energy down. The example that we're highlighting here a little bit is about packaging. So again, how are we resource efficient in our packaging? What really drives the packaging consumption? One is the amount of boxes or how many customers do we ship. We want that to grow. But then how much packaging do we use for every individual box? And so the size of the box really drives how much packaging you're using. It also then drives other insulation materials, but really everything is linked to the size of the box. And so it's an exercise to, out of the portfolio of boxes that we have from small to extra large, come up with the best possible allocation that minimizes the overall box size that is needed. It sounds like a very trivial task. But if you look at our product, there's now recipes for 2 persons, recipes for 3 persons, recipes for 4 persons, all sorts of market items, all of them come in very different shapes and sizes. And it's not always trivial to look at the order that a customer has placed and say, this is a small box, this is a medium box, this is a large box. Again, something that a human, by just looking at the order list, cannot do justice anymore. And so we built an algorithm to really optimize on a volumetric basis, which order we assign, which container. Overall, the size of the containers came down. Packaging came down. We are more sustainable business forward, but we also save packaging cost in the process. And so sustainability and cost efficiency very many times go hand-in-hand, and we really try to bring that to life in our supply chain. First thought. Second thought, I want to make a pitch for cost savings as a driver of growth. We'll hear more about growth from Ed in a second. But certainly, cost savings have a part to play as well. There's really 2 ways to think about it. The P&L view -- and we talked about our targets for 2025. 3% higher PC2 margin. That's the P&L view of the business. If you think about the core view of the business, if you think about CCV over CAC, then obviously cause savings drive CCV up. They also enable us to invest into more product improvements into higher selection. Ultimately, that drives a better customer experience, better retention and gives us more leverage in marketing. So it is also an important point that we drive these efficiencies because it's also going to help us to grow into the future, especially in our advanced meal kit businesses as well. In recap, we have a unique best-in-class recipe for operational excellence in our business that really drives high-quality performance -- high-quality product performance as well as attractive margins, well above grocery stores in all of our markets. Two, we've been busy over the last 3 years building out capacity, scaling our supply chains, never giving various challenges in the external environment. That phase is coming to an end. And going forward, we're going to focus on 2 things: improve our product while simultaneously improving the efficiency of our supply chain. And we believe we have a key path to improve PC2 by 2025 by at least 3%. With that, thank you very much. And in the next session, we'll talk about our efforts on marketing, and I'm going to hand it over to Ed.

Thank you, Uwe. Okay. So one more session before you get to stretch your legs. Hopefully, it's going to be a fun one. So my name is Ed. I'm Chief Commercial Officer at HelloFresh. I have the pleasure of taking you through an update on our marketing performance over the last couple of years and going forward. Now I know that this is one of the hotly debated topics around HelloFresh today. So hopefully, with some of the data that we share, we can help to resolve some of those debates. I wanted to start, though, by just taking a moment to contextualize our marketing investment. Now we operate in a totally new channel, the direct-to-consumer channel, which is still very much in its infancy. The direct-to-consumer channel has been actually, I think, criticized over the last 2 years on account of having very high marketing costs, but we think that represents a fundamental misunderstanding of the role of marketing in a direct-to-consumer business. And I want to illustrate that by comparing a direct-to-consumer food business like HelloFresh with an FMCG food business. So when you think about getting a product into the hands of a consumer, an FMCG food company needs to invest in 2 elements. On the one hand side, they need to spend some money on marketing that typically represents about 5% of the retail price at the consumer base, but they also need to give a significant margin to a retailer. And what that retailer is ultimately doing is driving footfall to the products of that FMCG company. Now when you consider marketing in a direct-to-consumer food company, the spend is actually doing both of those jobs. So we're generating brand awareness. We're generating brand consideration, but the spend also needs to drive traffic footfall to our website. There is no middleman. So when we look at it from that perspective, in our view, one of the benefits of the direct-to-consumer channel is that this is a fundamentally more efficient way to reach consumers. Another really important difference between direct-to-consumer and FMCG, especially when you think about subscription models like HelloFresh, is the time in which that spend is generated. For a direct-to-consumer model, we spend the majority of our marketing investment upfront on the first transaction the customer makes. The majority of transactions after that come with very little marketing spend. FMCG, on the other hand, needs to pay this retail margin on every single transaction. So when you think about a direct-to-consumer business growing in the early stages, has lots of new customers in its pool of total users, typically, marketing spend is much higher. But then over time, as it matures and scales its customer base, it ends up in a much more efficient place than the legacy FMCG retail landscape. Why is it more efficient? I think there are 3 reasons that we think are really important. Firstly, in a direct-to-consumer company, you own the customer journey end-to-end. Not only does that mean that you strip out the middleman who's operating lots of stores with heavy fixed costs associated, but you also have significantly more data on the customer and every single touch point that, that customer has with you as a business. That data allows you to be significantly more segmented and personalized in how you go after that consumer. We know what someone wants. We know when they want it. We can serve them the right ad, maybe the right incentives to get them to ultimately converse. We can make much better decisions as a result of having visibility of the full customer journey. The granularity of data also allows us to make much more agile investment decisions. And if you think about a traditional FMCG company, it's typically planning its budgets on an annual basis. Retailers are delisting SKUs on a very infrequent basis. On the other hand, with a direct-to-consumer company, you have the opportunity to constantly shape your investment, and that allows you to make better decisions and eliminate waste from how you go after consumers. Within this, we think fundamentally more efficient channel, HelloFresh has emerged as, in our view, the strongest operator globally when it comes to direct-to-consumer food. And I think there's a couple of key proof points there. Firstly, on the right-hand side of the slide, our market share. In every single market that we've operated, we've consistently grown market share over the long term, including the most competitive market that we've been in and now our largest market, the U.S. business, which continues to grow in market share today. That down to a lot of factors. I think Joanna and Uwe shared some really important points that led to that outcome. But for sure, one of the key things driving that market share evolution is the fact that we've been able to grow the customer base in a very efficient way, much more efficient than any of our competitors. What's really exciting is it seems that those capabilities have driven success in the meal kit space are just as powerful outside the meal kit space. So when we acquired Factor and we shared this statistic in last year's Capital Markets Day, we massively reduced our customer acquisition costs. So customer acquisition costs came down by 50%. That was the single biggest thing that changed in the unit economics of Factor post acquisition, and it's led to us being able to massively grow market share in that business. That's the same story in every single acquisition that we've done over the years. HelloFresh's marketing platform is incredibly powerful and has had massive impact even outside of our core business. So when we think about the long-term picture that Dominik shared thinking about expanding into other attractive direct-to-consumer food verticals, it's this platform that we think gives us one of the biggest edges to be successful in a much broader range of categories. Now let's take a look at some of our recent financial performance when it comes to marketing. And so these are numbers that you will be familiar with seeing from our earnings reports, marketing spend as a percentage of revenue. And we've consistently communicated the target to get marketing spend as a percentage of revenue down to around 15% to 16% in the midterm as businesses in our portfolio mature. And you can see that over a very long time horizon, we've consistently trended towards this level. What you can also see from this chart is that nice steady decline was interrupted by the pandemic. So 2020, 2021, we had a sudden drop in marketing spend as a percentage of revenue. And I think it's really important to understand the different drivers that led to that outcome. So you can gain confidence that we can continue to bring marketing spend down from this new baseline over the next few years. So during the pandemic, a few things happened. Firstly, in some of our markets, order volume from existing customers became so high in peak lockdown that we have no capacity for new customers. So we completely switched off marketing. This was when we were in peak lockdown, people couldn't find toilet roll, hand sanitizer. People were really panic buying. And in several markets where we were close to our capacity, we had no marketing spend whatsoever for several weeks or even months. In the markets where we did have capacity, we saw that media prices were significantly lower during that period. Why were media prices significantly lower? Ultimately, you had more people at home, more eyeballs online. That means online advertising supply goes up. On the other hand, big advertisers were pulling back marketing spend. So demand goes down. So media prices significantly reduced during the pandemic. Those 2 factors drove down marketing spend. On the other hand, we had one factor, which drove up revenue. So amongst our most loyal users, typically, they order on a very frequent basis. But in the pandemic, that frequency became even higher. Because they were no longer pausing their boxes to go on holiday because they had a business trip, maybe they were coming to a Capital Markets Day. So those pauses dropped out of the revenue base. And as a result, revenue went up, marketing spend came down. We reached this new artificial level. So in the last couple of years, we've trended back now to a more normal level, but we're still very confident that we're going to get towards the 15% to 16% in the future. Now our teams internally are not primarily focused on marketing spend as a percentage of revenue, but they're really looking at return on investment, which I'm sure many of you have heard the KPI framework LTV to CAC. We call it customer profitability internally. That's really the core focus of our marketing investment decisions at HelloFresh. LTV is a function of the average order value of a box, the contribution margin that we flip on each box and then the number of orders that a customer makes over their lifetime with HelloFresh. And that's divided by customer acquisition costs to show the return on investment. With that return on investment, we've been able to sustain payback periods on our customer acquisition costs that are really at the top, top end of our industry, not just the meal kit space, but also the broader portfolio of e-commerce and marketplace businesses that you might look at. Before the pandemic, we were trading at payback on marketing investment within 6 months. We're now still at that level. In the peak of the pandemic, it became even shorter than that. And so just to give you some comfort around these numbers because I know it's been a big topic of discussion over the last few quarters. We want to share some data on how these KPIs have trended over the last 5 years. So here, you see 2 lines. The top line is our net revenue per conversion 1 year after a customer joins HelloFresh on a group level in euros. The bottom line is customer acquisition cost. For that group of customers who started in that period. I want to spend some time just kind of telling you about all of the undulations of these charts over the years, so you really understand the picture that we see here. Maybe starting with net revenue per conversion. Now in the run-up to the pandemic, we actually saw a slight positive increase in net revenue per conversion. That was mostly as a result of the fact that our U.S. business was growing market share massively during that period. Our U.S. business has higher average order value than our international markets. And so that resulted in net revenue per conversion gradually trending upwards. You then see in the pandemic a sudden increase in net revenue per conversion. Again, this represented the panic buying period. People running out of toilet roll, essentials, people who are lucky enough to be able to order HelloFresh, in some cases, adding as many meals to their boxes as they could possibly order. So net revenue per conversion really spiked up due to average order value. As the harshest lockdowns started to recede, we then saw a normalization, albeit on a higher level. And now coming out of the COVID period, you see that we've been actually able to get net revenue per conversion to land on an even higher level, and that's largely as a result of structural improvements that we've made to the customer proposition. So a few key drivers there. Firstly, we sell more meals per box. Dominik mentioned that in his presentation. So customers are signing up to higher order values. We've had a shift towards higher average order value business units. Factor, one of our highest average order value businesses globally, is making up more and more of our new customer acquisition. We've also increased prices, which is something which has contributed here, but obviously, we've increased prices much less than food price inflation. So in value terms, we've actually become more valuable to consumers, and we think that's played a roll in stabilizing retention rates at a level that's even higher than before the pandemic. So we end up with very, very strong net revenue per conversion. Customer acquisition costs, again, was actually coming down in the run-up to the pandemic. A couple of drivers for that. One, again, the U.S. competitive environment was really working in our favor in that period. We were gaining a lot of market share, generating a lot of traction in the U.S. business. Some of our competitors were struggling with their fulfillment center network, and we really capitalized on that. And then we've also invested in lower prices in the U.S. in the back half of 2018. So that helps customer acquisition costs to come on a good trajectory before the pandemic. We then saw costs go even further down to extremely low levels at the peak of the pandemic. And then over the last few quarters, you've seen a normalization of customer acquisition costs to a level, which is, in Q4 2022, marginally higher than we were seeing in 2018. But obviously, now that customer acquisition cost is generating significantly higher value customers. So we're generating equal or better return on our marketing investment than we were seeing before the pandemic. Now in the second half of last year, we saw marketing spend as a percentage of revenue increasing year-over-year. So I'd like to just explain the drivers and also give you a bit of color on how those drivers might trend in 2023. There are 3 negative drivers or headwinds that we faced. The first one, we've already spoken about a reversion of CAC tailwinds that we experienced in the pandemic. Going forward, we expect that to still impact us negatively in the first half of the year. As Dominik mentioned, Omicron was raging through populations in Q1 last year. So we expect CAC to remain year-over-year elevated in the first half of the year before easing in the second half of the year from a comps perspective. Likewise, this effect of customers during the pandemic being less likely to pause because they travel less, they leave their home less. That's another factor that was influencing us positively last Q1. Going forward, it's the same story as customer acquisition costs, will have a negative impact in the first half of the year but will ease up in the second half of the year. And then the third negative driver is the fact that we've been investing in higher-value customers. That means customer acquisition costs is higher when you acquire that customer, but that actually becomes a positive effect going forward because the revenue base starts building up with higher value customers. So that's something that will be a positive effect going forward now. So those 3 factors together probably contributed an equal share of our year-over-year increase in marketing spend. They're offset by one positive factor, which is the fact that every year that goes on, we expect to have a more and more mature customer base. That was the case in 2022 versus 2021. More existing customer orders that come with limited marketing investment is a positive factor, and that's a continued tailwind that will continue to give us support in driving down marketing costs in the years to come. Good. So that's an overview of our financial performance when it comes to marketing. I'd like to spend the next half of the presentation talking you through the strengths that we see in HelloFresh's marketing platform and why we're so unique. And there are really 3 key strengths that we believe set us apart both in the meal kit space and also the broader direct-to-consumer industry. The first one is the massive investments that we've made in technology and data science over the years that allow us to make every single touch point with a customer more efficient. Second one is the level of diversification that we have both within our marketing strategy and how we spend marketing dollars, but also across the business units that we have. We believe that we're the most diversified direct-to-consumer company out there globally, and that really allows us to invest money in a more efficient way. And then finally, our large and growing audience of inactive customers who exhibit a significant propensity to reorder from HelloFresh or one of our other brands over time. So first, let's talk about technology and data science, and I'm actually going to start on the data science side. You've probably all seen lots of companies getting funding for machine learning and AI applications over the years, lots of bigger businesses trying to leverage machine learning in their company, and that's something that's actually been a big focus for HelloFresh over the last couple of years. And I just want to share a couple of examples where machine learning models are already having a big impact on our overall marketing efficiency. Starting with attraction. So we need to go out and find customers who might be relevant for one of our brands. We've built a model -- we call it dynamic bidding model. That model allows us to predict the potential value of a customer. And then on the algorithms of online businesses like Google meta, we can really bid the right amount for the right customer. That results in us bidding more for high-value customers, less for low-value customers. And over time, our return improves on that spend. Once we've attracted a customer, we need to try and convert that customer. Hopefully, the customer will convert on the website, but there's a big chunk of customers who aren't going to be persuaded the first time around. And then we need to go and retarget those users. Again, based on data that we collect along the customer journey, we can put a really good data point on the potential value of a customer, and that then informs our retargeting strategy. So how aggressively do we then pursue that customer? With which brands do we pursue that customer? With which creative do we pursue that customer? And over time, that increases value. When we have a customer, we hope they're going to be really happy at HelloFresh and recommend their friends, it's actually one of our biggest customer acquisition channels. And interestingly, within that channel, you see that people recommend friends that are very similar to themselves. It's a bit depressing actually. People hang out with people like themselves. And so we've built models to really understand the value of a customer who will be referred based on the value of the referrer, and that allows us to invest more in the incentive to power the viral loop of more valuable customers. So over time, we increase the number of referrals we get from the most valuable HelloFresh customers. When they're active with us, we hope they're going to buy lots of other products and services, and we have various models in place to upsell customers, find the right product for them. But here, I actually want to give an example, which focuses on a less happy case for a customer payment sales. So as a subscription business, handling failed payments is an incredibly important driver of performance. And as a perishable subscription business, we need to react really quickly when a payment fails. We need to get a customer to update their payment details within 24 hours to be able to ship in the box. So now what we do is when that doesn't happen, which unfortunately is the case for a bunch of customers every week, based on the value of the customers, we actually then ship some boxes to customers without them having paid for the products and then recover that funding over time. And again, it's only the presence of machine learning models that allows us to then capture this revenue. And then finally, if a customer does cancel their accounts, we're investing heavily in reactivation. A few years ago, the way that customers were reactivated, they get some e-mails from HelloFresh telling them what's new. We might give them an offer to come back. That offer would be very much one-size-fits-all. We then move to a more segmented approach where we put customers into large buckets. Now we've got to an even more granular and personalized approach where we have a model that ingests a wide number of different incentives. We then overlay customers onto that model, and the model predicts which incentive will generate the highest propensity and the highest value of an individual customer. So every individual customer is getting a different offer to come back based on this model. So these are just a few examples. Many more across the organization. And I think what gets us really excited about this lever is, one, we have the opportunity still to go deeper here. There's many more parts of our customer journey where we're yet to build machine learning models. But two, every model becomes better and better performing over time. And especially given our scale and footprint as a business, this is a big advantage compared to any other company that's trying to get into the space or compete with us. Now on to technology. So you see here the same steps of the HelloFresh funnel and a few examples of the customer experience that you might see as an active HelloFresh user. Now when you land on to one of these properties, it's likely that the screen that you're exposed to has been tested, and it's one of hundreds or thousands of screens that we've optimized over time. Because of our scale and because of the breadth of the number of business units we have, we're able to experiment on each of our touch points to a much greater degree than any other companies. Just taking one example this time, reactivation. Last year, we've done 50 experiments on our reactivation journey. 70% of those experiments were successful. So that means there are 35 improvements just to our reactivation journey in a given year. That's something that a company without our scale, without our breadth of business units just wouldn't be able to manage. And so over time, all of these growth funnels become better and better performing. And our team has become better at figuring out how to take them to the next level. So that's data and technology. Now let's talk about diversification. So a typical direct-to-consumer business is likely to focus its marketing investment on just a handful of channels. And what you see here probably represents the archetypal direct-to-consumer business, a lot of spend on Meta, a lot of spend on Google, maybe some organics and partnerships. HelloFresh, on the other hand, has been far more diversified really from the genesis of the company. So we've consciously built diversification into our marketing strategy, and that's something that's actually very, very hard to do well. Most companies are lucky to master 2 or 3 great growth channels. To have 20 to 30 channels really operating, generating good ROI is something that puts us in a very strong position. What that means is when performance goes in the wrong direction in a given channel, we can very easily redistribute spend across our network. So maybe taking an example that you might have heard from other companies. Meta has suffered with iOS 14 over the last 18 months, resulting in companies with a heavy Meta exposure, seeing higher customer acquisition costs. That's actually something that had a very, very limited impact on HelloFresh. The total amount that we invest in Meta is limited. And when we see performance degradating, which we did during that period, we then redistributed spend to other channels. And the overall impact on the group was very limited. So this channel level diversification is really powerful. The other side to the diversification story is our business unit diversification. So now we have almost 30 business units across the group. And we definitely see that return on investment might change in a given business unit in a given time period. That might be driven by internal factors. It might be driven by external factors. Internal factors, it might be that we've launched a new product. That product increases average order value, which results in a higher customer value. That means we want to invest more in that geography. On the other hand, if we're transitioning to a new facility, we might see that gross margin temporarily comes down. So we don't want to invest our spend into that area. Likewise, on the external side, Joanna mentioned -- was it flooding in Dallas? Flooding in Dallas would lead us to diverting spend away from that region. We might also see CPM price trends vary by business unit. So all of these factors ultimately go into a process where spend is reallocated across business units on a very agile basis, hourly in some cases and then weekly across the whole portfolio. Good. And so the final strength of our marketing platform is this large audience of inactive customers. And I think this has been a really important topic for investors and analysts over the last couple of years. So I want to spend some time talking about how we think about reactivations. Maybe starting with a personal anecdote. I've participated in focus groups with HelloFresh customers over the years where you kind of stand behind the screen, the customers can't see you, and then you observe what they say. I remember one focus group in Chicago a few years ago and really resonated with me that we had a group of active HelloFresh customers come in and talk about their experience. Then we had a group of canceled customers talk about their experience. We thought that, that was going to give us tons of insights on things we could do better to keep customers active for longer. But actually, the biggest realization was that the canceled customers were just as positive about HelloFresh as the active customers. And they didn't see themselves as canceled customers. They still saw themselves as HelloFresh customers, but they just had a temporarily dormant account for whatever reason. It might be that they like using HelloFresh when the kids are home from university. But when the kids aren't at university, it doesn't fit their plans. It might be that 1/2 of the couple is on a diet, and that means they temporarily stop using the product. But people really dip in and out of HelloFresh. And the product is designed to operate like that. We're not a hard subscription with heavy switching costs, with heavy onboarding costs. That mean once you cancel, you never think about coming back. This is a natural behavior that's part of our business model. And we can see that in the numbers now. It's actually becoming a very, very important driver of our revenue base in the most tenured markets that we have. So here, we have the share of reactivations as a percentage of total conversions in our day 1 markets. They're markets that we launched in 2012. We showed the same chart last year. And you can see that, that cluster as a whole is almost at 40% share of reactivations. And in the most advanced markets, that's even more like 50% now. So basically, half of our new revenue coming from reactivations. That's driven mostly by the fact that the share of traffic coming to our site from people who have used HelloFresh in the past, is increasing over time, but we're also getting more and more effective at getting those users to convert. So someone who comes back to our website, who has used HelloFresh before is 2 or 3x more likely to sign up than someone who would be using HelloFresh for the first time. Part of that is driven by the fact that we know more about that user, so we can make the checkout journey more seamless but it's also driven by the fact that there are more qualified customers who know how good our food is, who know how great it is to be part of HelloFresh. What we also see, because those customers are more qualified is their retention level. So the number of boxes they order when they reactivate is higher than customers who order for the first time. So they're more qualified users, they actually result in even more revenue than just the share of conversions. We're also getting better at how we treat that audience over time, both from a volume and a quality perspective. So if you look at the same group of customers in Q4 2022 compared to Q4 2021 who canceled their HelloFresh account. In Q4 last year, they were 11% more likely to come back 10 weeks after leaving HelloFresh. So we're getting better at winning those customers back. And then when the customers come back in 2022, they're ordering more boxes than the customers in 2021. And that ultimately comes down to a few things. On the volume side, we're broadening how we communicate with those customers, employing a wider range of reactivation channels. We're also segmenting those customers so they have the right incentives, the right messaging to come back and really working on customer communication. Obviously, what goes across all of this is the fact that as our product continues to improve, the likelihood of someone coming back to HelloFresh gets higher and higher. And then finally, 1 thing that we're also really excited about is thinking about ways we can use this large inactive audience in our advanced markets to power some of the new businesses that we've been starting both for our active customer base at HelloFresh but also the inactive customers. On the active customer side, this is actually a sneak preview of a couple of launches that we have planned in the next few months, we plan to sell small bundles of Factor meals and good chop meat and fish cuts as part of HelloFresh market. Not only will that allow us to monetize HelloFresh customers with a really high value, high margin, good products, but we also hope it will lead to some of those customers becoming subscribers to those brands alongside their HelloFresh subscription at very low marketing cost. And then probably an even more important factor is across our business units, really thinking about ways that we can activate customers who've previously been part of one HelloFresh brand on to one of our other brand properties. And here, you see the share of Factor activations who've previously used 1 of our other brands in the U.S., and that's been constantly increasing over the last couple of years and is now a material part of our Factor customer acquisition. I think one thing important to emphasize, these numbers aren't part of all of the other numbers that we looked at in terms of reactivations. So when you think about how much we can generate in terms of revenue and profitability, from the audience of customers who've tried HelloFresh at some point over the years, that's actually even higher than the numbers we showed in the previous few slides. Good. And now just to wrap things up, I just want to tie it back to the business unit clusters that Dominik introduced earlier. How will we apply these marketing capabilities across our portfolio of markets? In advanced markets, it's all about leveraging the fact that we have high volume in these markets to increasingly personalize the experience and drive more efficiency. And it's also about capitalizing on the huge opportunity that we have in reactivations. In underpenetrated markets, it's really about continuing to grow penetration, using the playbook that's been so successful in our advanced markets and then also starting to cross-sell to inactive HelloFresh customers where we have a new brand in a new market, Green Chef in the U.K., for example. RTE, we have new capacity coming online in the second half of the year for Factor in the U.S., Youfoodz has just opened up a new facility. In those markets, we really see a strong opportunity to scale the customer base, and that's going to be the core focus. And then we'll also be establishing Factor in a couple of new regions. And then finally, for the new brands, geographies, verticals, it's about finding product market fit, figuring out where we need to adapt our playbook based on the nuances in a given market and then also starting to work on the cross-selling strategies that we pursue for underpenetrated meal kit markets. Good. That's everything I've got for you. Now you have the pleasure of a 30-minute break. We're also actually going to be hosting a little cook along over there with our colleague, Leo, who's waving over there. So feel free to get some snacks and refreshments and get refueled for a great finance section led by Christian next. Thank you. [Break]

All right. So I think the queue at the coffee machine has just cleared up. So we're ready to go for the last highlight of today, the financial update from myself. So for the ones -- there are a lot of familiar faces here, certainly on the ground here in Berlin, for the ones who don't know me, Christian Gaertner, CFO of HelloFresh. I'd like to touch on 4 topics with you today. Firstly, I'd like to go through our financial performance over a longer period of time. I think that is a good basis to highlight some of the upsides both from a top line perspective as well as from a profitability perspective for our business. Secondly, I'd like to double-click on the performance of our advanced markets as Dominik had called it in his presentation. Thirdly, I would like to touch upon our midterm financial targets. And then lastly, conclude with a discussion of our cash flows. Okay. With that, let's go into our financial performance. So we have grown over a longer period of time at a very high -- consistently high growth rate, close to 60% CAGR over the last 3 years. And we've grown very strongly, already pre-COVID. So 2019, we went into the whole thing with a growth rate substantially north of 40%, and we delivered a growth rate of 18% in '22, which was transitioning out of the COVID period already. So compared to most other e-commerce stocks that you probably are interacting with, we have done very well over that period. And drivers for that strong growth were really a number of factors, importantly, the consistently high growth of our order volume. But then also that we successfully expanded our average order value by around about 6% every year over the last 4 years. So that very high top line growth has enabled us to also expand our contribution profit very meaningfully. Before I get to that, let's have a quick look at the performance of our 2 segments. You see our North American segment, our International segment, both of them have grown effectively at a similar high growth rate as our group. So at around about 60% and both delivered a decent growth rate already in 2022. By the way, what I'm showing you here is already our new segment structure. So these are unaudited pro forma figures where Canada is allocated already to our North America segment, was previously in our international segment. So I hope that helps to recalibrate your models as well. So that's top line growth. Now let's come to contribution profit, which we took to close to EUR 2 billion in 2022. When you look at our key cost line items, our procurement expenses, we actually managed to decrease by a percentage point over the last 4 years, and we did that despite us encountering probably the highest inflationary period of the last 20-plus years over that period. You've heard it from Joanna and from Uwe before, that's not the end of the road. So there's another 100 basis points. We want to clip here over the next 2.5 years, and I'm going to come back to that in a second. Now what becomes interesting is when you look at our fulfillment expenses. So our fulfillment expenses over the last 4 years have actually gone up by around about 4 percentage points of revenue. Two key drivers for that. First one is basically COVID. Joanna had alluded to that. We had to introduce social distancing, had to fight with a much higher absenteeism among our colleagues, daily testing, all of that introduced quite a bit of inefficiencies in our production process. Number one. Secondly, we massively ramped up our production capacity in a very short order of time. Now is the time to roll that back quite a bit and we've gone in Joanna's section through some of the key initiatives that we're running here. So we think we can bring that down over the next around about 2 years by 200 basis points. Again, we can talk about that in a bit more detail in a second. But we were operating here already 4 percentage points better than where we are right now. In Q4 last year, you saw from us already that we -- the measures that we started to initiate were starting to bear fruit already. So Q4 last year compared to Q4 2021 was showing already 2 percentage points or 2.6 percentage points lower fulfillment expenses as a percentage of revenue. Okay. So let's talk now about our bottom line. As a group, we've turned profitable in early 2019, and since then, delivered consistently around about EUR 500 million of EBITDA every year. When you look at our key cost line items, below contribution profit, you see that with respect to marketing expenses, we brought those down by actually 6 points over the last 4 years to 17% in 2022. Now these expenses this year will trend up slightly before they will come down again. I'm going to -- I want to talk through that in a bit more detail in a second. And G&A as a percentage of revenue, we also brought down by around about 1.5 points over the last 4 years. Now on G&A, we are by now largely done in terms of the expansion of our tech teams, our data teams, certain central functions. So all of that is done now. Going forward, you should not expect that to increase from the around about 5% level of revenue where it is right now. In fact, actually, we've recently initiated a number of extra efficiency measures, which should clip already this year around about EUR 20 million of extra savings from EBITDA perspective versus the Q1 run rate that we are having. Now marketing is probably the area where we see the most questions from quite a few of you here in the audience recently. So I would like to drill into that in a bit more detail. And for that, we thought it's helpful to show you effectively for selected markets out of this group of advanced markets that we're discussing now throughout that presentation, both marketing expenses as a percentage of revenues have done here over time. And this is really first that we show this to you, so I hope you appreciate that. Okay. With that, let's look at the data. So what I've selected here is effectively are 3 of our most important markets out of this group of advanced markets. Starting with our U.S. core business, for the U.S. HelloFresh business. I've seen that out here, given that this is the biggest single business that we have within the group. For our HelloFresh U.S. brand, we have reduced our marketing expenses by a full 10 percentage points over the last 4 years. But also when you look at 2 of our biggest markets within our international segment, you see that for each of them, we've reduced our marketing expenses as a percentage of revenue quite meaningfully. We call it geography A by 8% and in geography B by 3 percentage points. Now keep in mind, that effectively in that group of under -- what we call underpenetrated younger meal kit markets effectively are targeting the same ROI on our marketing spend, unit economics, customer profitability as we do for our advanced markets. So this means, over time, our younger brands should move to exactly the same territory. And I think what we've got here is actually showing quite reasonable part. So first, they would go towards where the U.S. sits right now. That's the probably youngest market out of these 3 markets we've got on a page, but already sits at 16% marketing as a percentage of revenue, so around about 1 point below where the group is at the moment. Then towards geography A, which sits at 15%. That's the by population size, biggest market within our international segment. Still quite decent penetration potential in that market. So that's a market that will continue to grow quite decently for the next couple of years. I already said at 15%. And in geography B is a sizable market out of our international segment, which is already reasonably penetrated. So that market in 2022 still showed positive growth, relatively modest positive growth. But in combination with marketing expenses as a percentage of revenue of just 10%. So here, you really see the impact of a sizable existing customer base, which is relatively mature, which we don't have to target through performance marketing anymore what that does from our relative marketing expenses. And on top of that, we've got a meaningful pool of inactive customers from which we can reactivate them again. Okay. So let's take this one step further. I've shown you selected advanced markets. As a next step, I would like to show you this whole group of advanced markets, how that has developed from a revenue perspective as well as from EBITDA perspective over the last 4 years. You see here that, that group of advanced markets has shown very decent growth over the last 4 years, including positive growth in 2022 when a lot of other e-commerce stocks or businesses effectively showed 0 to no growth. On top of that, that group of businesses has generated consistently double-digit EBITDA margins over the last 3 years. So in 2022 alone, that group of businesses has generated north of EUR 700 million of EBITDA. Now what I show you on this page is effectively cutting it 2 ways. One is basically the EBITDA that, that group of businesses has generated. And then if you were to mentally deduct their pro rata share of negative holding EBITDA, that would still yield to north of EUR 600 million EBITDA. So this is effectively how HelloFresh would look like today if we would have done nothing from a strategic perspective since IPO. So no new market launches, no branching out into Ready-To-Eat, no new vertical launches. That's how we would look like effectively from a P&L perspective. From a balance sheet perspective, we would probably have EUR 600 million, EUR 700 million more of cash on our balance sheet. So if you take a step back and assume, I don't know, so far, you've been covering traditional FMCG companies then get lucky enough to get a mandate to now also look at HelloFresh. You look for the first time with us and see this type of profile, yes? So that revenue growth. A business that delivers consistently double-digit EBITDA margins in each of its markets has a market share of 70% to 90%. Is that a business that you would value at 4x EBITDA, yes? So I don't think so, but that's effectively what it gets with HelloFresh at the moment and not just that, you also get the globally leading Ready-To-Eat business. So a business that is going to do meaningfully north of EUR 1 billion of revenues this year that has grown tenfold over the last 4 years that is profitable already and effectively is the by far #1 player in a TAM that is as sizable as our meal kit business or as our meal kit TAM. Then lastly, you get on top of that, what we call here our underpenetrated meal kit markets and new verticals, which by themselves already got to north of EUR 1 billion, year revenue number, fast-growing are striving for exactly the same marketing ROI, as you've seen from me for the advanced markets on the prior slide. So these businesses are well on track to fast forward a couple of years to show exactly the same margin profile as you've seen for those advanced markets. Okay. So I think now it's a good time to talk about our midterm targets. And we understandably, given the macro environment, the fact that we're currently in this transition year out of COVID, got a lot of questions by you. Are we still standing behind our midterm targets? The answer is, yes. So we still stand behind those targets. Let's look at those together. To get to our EUR 10 billion revenue target by 2025, means we effectively have to grow our business in '24, '25 by roughly 11% to 12%. So historically, we've grown the business over the last 3 years at a CAGR of 60% over the last 5 years at a CAGR of north of 50%. Once we are through that transition period out of COVID or to put it differently once COVID is not in a comparative period anymore, we think that what we call here advanced markets, we can grow their revenues by at least mid- to high-single digits, i.e., starting from second half of this year onwards. Our underpenetrated meal kit markets at very healthy double-digit rates. Our Ready-To-Eat business will continue for years to come to grow at very meaningfully north of 20% CAGR, and then our new verticals, obviously, over a small base but are growing at triple digits at the moment, yes? So bottom line here is we think that EUR 10 billion target is still achievable, and we're confident that we will achieve it. Now let's talk about our EBITDA target by 2025. We're targeting EUR 1 billion of EBITDA by '25. To achieve that, we effectively would need to increase our EBITDA margin from currently just above 6% to around about 10% by 2025. On the next page, I'd like to go through the bridge how we want to get there. So firstly, from a contribution margin perspective, we want to expand that over the next 2.5 years by around about 3 points. The easy job for me is Uwe and Joanna have explained how we want to get there already much more articulated than I can do that here. But just to recap, on the procurement side, we basically see 100 basis points at least of further potential. On the fulfillment side, 200 basis points, which is a combination of us bringing those new fulfillment centers we've put on stream now to target productivity to then also use that strategic optionality that we have to take some of our least efficient, oldest, least suited fulfillment centers, off-line basically and further introduce more standardization, better process optimization across our network. So this will get us to the 3 points margin improvements on the contribution margin side. And again, remember, this is the level that we've operated at in 2019 already, so before going into the whole COVID period. Then from marketing expenses as a percentage of revenue perspective. We want to dial that back by 1 to 2 points by 2025. A meaningful driver of that is really is, let's say, trivial as it sounds, passage of time, yes. So on average, more mature customer base that we have by that point in time. So that also linked to the share of reactivations, which is creeping up already as Ed has taken you through, will basically also be higher at around that time. And that by itself not assuming any meaningful improvement on the CAC side or anything else, will get us to saving around about 2 points on the marketing side. Okay. So these are our midterm targets. Last topic I want to discuss with you today is our cash flow, because the cash flow generation capacity that we have at HelloFresh, we feel is 1 of the least appreciated features at the moment. So let's talk about that over the next couple of minutes. We have generated over the last 4 years, EUR 1.4 billion of operating cash flow. So that means we've created by ourselves enough to fund that multi-CapEx -- multi-year CapEx program that we've embarked on. We did not do what we've seen from a lot of other e-commerce companies, i.e., either lever up our balance sheet and/or issue dilutive instruments, equity or equity linked. In fact, when you look at our share count, it's flat over the last 3 years, yes? So including any stock-based compensation, no dilution here. And when you look at the leverage of HelloFresh, our net leverage is quasi zero. So net debt to EBITDA is close to 0. So a very healthy balance sheet. No dilution for our stockholders, and we funded that multi-year CapEx program. I want to drill into CapEx in a bit more detail. So what was the purpose for us to put down basically all the CapEx that we've invested so far? First one, we wanted to create, given that surge in demand that we've seen, sufficient meal kit capacity to address demand of EUR 10 billion, you can put a check next to that, yes? So we're done with that. Secondly, and linked to that, we wanted to create flexibility on our sites to retire effectively older, less suited fulfillment centers. We've seen the first step in that direction, Q4 last year. Some of you probably have seen that when we retired a smaller older fulfillment center in Richmond, California. There are similar steps that we are analyzing and those pay very directly into the contribution margin expansion that we had discussed before, yes? So you can put a checkmark next to that as well. Third one is for some of these underpenetrated fast-growing meal kit markets. We want to make sure we've got the right production capacity there as well. Two most important ones here are France and Nordics. France, we're going to ramp up -- start to ramp up our new fulfillment center within the next couple of weeks. Nordics, we've done that a short while ago. So again, we're substantially done here. And then lastly, but importantly, for Ready-To-Eat, our biggest single growth driver over the next couple of years. We want to make sure we've got the capacity to back up our growth plans. And also here, we made a very strong progress. So Joanna spoke about that earlier today. The biggest exercise there was to put in Arizona, a new big facility in place that will go live in Q3 this year. On top of that, we put for Youfoodz in Australia, a highly automated new fulfillment center or production plant in place that is being ramped up right now as we speak, and we launched Factor in Canada with its own production site. So that's a long buildup to the key message, which is when you look at those core strategic projects, which all have a quite long lead time, we are substantially done on those now by around about mid this year. And when you look at what's coming in terms of CapEx, that is much less in terms of absolute volume, yes? So this will primarily comprise selective fill-ins on the technology side. We spoke technology and automation. I spoke to some of you in the break on that. Then Ready-To-Eat rollout in Europe, which in terms of absolute euro spend that we put down for that will be a fraction of what we just invested in the U.S. and just business as usual maintenance and replacement. So that means when you put that together, so rapidly decreasing CapEx over the next 2, 3 years, together with our EBITDA target of EUR 1 billion means we are on track and target to generate very healthy free cash flows going forward. So take 2025, where we're targeting EUR 1 billion of EBITDA. That means in terms of free cash flow after taxes, interest, whatever you have, free cash flow of meaningfully north of EUR 600 million that we want to generate by then and a very healthy double-digit free cash flow yield. Okay, very last point on CapEx, and I'm going to be quick on that, but we get a lot of questions on what exactly we're spending on this year. So let me browse through that. Quarter of the spend this year goes to RTE, effectively the projects I just outlined, 1/3 of it to the finalization of our meal kits build-out. Again, most of this was centered around first half of this year. 14% young markets. Biggest items of that are France and Nordics that I just discussed. And then just under 20% into self-developed software. So this is the CapEx spend for this year. Okay. So I know this was quite dense content at the end of a very long session. I also know that these benches are not the most comfortable ones. So thanks a lot for bearing with me. And allow me to summarize our messages here from a financial perspective to conclude the session. So number one, we've grown at a very healthy CAGR of 60% over the last couple of years. And we continue to be confident to deliver our EUR 10 billion revenues by 2025. We have a clear plan to expand both our contribution margin and bring down marketing expenses by 2025, and therefore, also are firmly on track to deliver the EUR 1 billion EBITDA to you by that time. Keep in mind, our advanced markets have delivered already in 2022, which was not an easy year for e-commerce, e-commerce have delivered already EUR 700 million of EBITDA in that year. And they are a decent proxy where our younger markets will migrate to over time from a margin perspective. And then lastly, what we just discussed on the free cash flow side, there is a very attractive cash flow profile, not pretty much around the corner, yes? So in a not-too-distant future that we are very focused on realizing and that basically will create a lot of attractive opportunities to think about what we could do with that cash, whether it's share buybacks or anything else. Some of you had some suggestions during the coffee break already. Yes. So thank you very much. We here as the management team are very excited about the business, have never felt as good about the strength of our business. I hope some of you feel the same, yes? So for the ones who do, we definitely can promise you, we do our utmost and put our full energy behind it to deliver on the plans that we outlined in the session today, and we look forward to questions now. Thank you.

Guys. Hopefully, you can hear me. So yes, Andrew Gwynn from BNP Paribas Exane. 3 questions if I can. So I'll -- yes, I'll ask them all together as well. Firstly, can we just talk about the recent share transactions. Unfortunately, I've been asked a lot by investors about them. So can we just -- I know Thomas isn't here to talk about them, but could we just cover that off briefly? Second question, subscription. We estimate since the beginning of 2020, you've recruited something like 50 million consumers. Obviously, we've got about 8 million today. Is it time to move on from subscription model? You've got a very, very good brand awareness. So is that not part of the thinking? And then the final question, who are the people who are joining today? So if you think about it very simply, during the pandemic, we were stuck at home, nothing else to do. Today, what are the catalysts to get somebody to join HelloFresh?

Should I take the first one?

Okay. You bought shares.

That's right. So share transaction. I bought some stock, I don't know, a couple of days ago, end of last week or so. So whenever I have a bit of liquidity, I'm happy to plow that back into my highest conviction stock, which is HelloFresh. And then what you alluded to is a roll-forward collar transaction by Thomas, who sits with us on the management board, which is something that he has had in place for a while, which is on a very small piece of his total ownership within HelloFresh. He has a collar in place whenever that expires there is basically a roll-forward for that and that was that. On the active -- on the conversion number that you cited here the EUR 50 million, I think we should compare notes one-on-one that is...

It was a more conceptual point about moving on from subscription.

I think the conceptual point, you definitely -- so what we definitely see is that a large part of the customer base values the sort of like mental convenience of basically knowing that I get it every week, being able to schedule it multiple weeks in advance, et cetera. But you're absolutely right that there is a group of customers who uses the sort of like cancel button more as something that they do repeatedly over the course of the year, which is okay for us because when we look at that LTV to CAC, we look at all of the transactions that a customer did, and this is how we basically account for the profitability of that customer over time. For us, personally, whether you hit a pause for the next 6 weeks or whether you hit the cancel button and then come back in 6 weeks or in 8 weeks or in 10 weeks, that doesn't really make a difference. I agree that the focus on active customers is actually something that is definitely not helpful with the way that it has been defined back in the day when we IPO-ed and probably in the course of 2 long night sessions pre-IPO said those are our 3 KPIs that we want to report on and that makes the most sense. I do think that the customer base has changed a little bit in that and that you should rather track orders over time than active customers over time, that makes more sense to actually understand customer behavior. But I do still think that for like the bigger group of our customers, sort of like a membership or soft subscription model is more convenient than pay as you go.

The final question?

I forgot it. What was it?

What is the catalyst to join HelloFresh today?

Yes. I think different things, right? Every year, there's sort of like -- if you look at our primary customer group, it's usually people that sort of like start settling down. People that move in with their partner, people that start a family, et cetera. So every year, there's obviously like a new generation going through some of that. On the other hand, we today have a much better product than we had in early 2020. So a lot of people that maybe in early 2020 heard from their colleagues, heard from their friends about HelloFresh, browse the menu, browse the delivery options, et cetera, they actually were exposed to something that, in my view, was far inferior to what the product is today. So I think that in actually increasing customer value proposition, you're always starting to attract like new audiences, which might know of you already, but haven't actually converted before.

And just going back to the active customer point, would we -- should we expect you to drop that as a KPI going forward? I'm putting it out there.

We're not going to basically erase it over the next couple of quarters. But I think because we don't want to kind of like raise any red flags or anything like that. We're not going to do that. But I think long term, it's probably not the most -- not the best metric to track to understand the health of the business.

Nick Coulter from Citi. Maybe I'll grasp the marketing that's all. For a business group that's growing at 10% constant currency, what would be the kind of the normalized if such a thing existed, normalized level of marketing that you'd expect in the first quarter? I know, Christian, you've talked roughly about 20% as a figure, how should we -- how can we reconcile this first quarter to a quasi normalized level? Just to help us get comfort around the elevated level of marketing, please?

Yes, that's a good point. And it's something I think we need to keep in the back of our mind. There's a certain seasonality in our business and especially how we deploy our marketing spend. So -- and through COVID, all of that was a little bit distorted through other effects. But when you think back to 2019 and every period before, Q1 is our biggest marketing spend quarter. So pull back -- pull out the data for 2019 Q1 marketing as a percentage of revenue was 30%, 31%. So 10 points higher probably than where we will end up for Q1 this year. So Q1 is a big marketing spend quarter for us, that is the best quarter for us to bring new customer groups to the service, and that's why we're always in the over-index in terms of marketing spend over -- for the full year. So I think Q1 is not a good proxy for how marketing for the full year would then balance out.

I guess another way of asking would be what are the distortions then in that 20% for the first quarter? And sorry to press but it's a key point for ...

It's really that we -- that's especially when you think about the first 2 months of that quarter. That's where our biggest campaigns run in most of our countries. So that's the time to bring in a lot of new customers. That's when these campaigns fire off and that's why our marketing expenses basically are the highest throughout the year in those 2 months.

So a 20% number is about right for the first quarter for a business growing at constant currency underlying 10%?

Again, it's -- you're picking a [indiscernible].

It's a little bit the inverse of celebrating a restaurant that was closed during COVID for having -- for doubling the volume post-COVID.

I know, but that is the concern in the market, which is why I'm pressing the point, but I will cease and desist. For the record, I am a buyer of your stock. And just on the 200 basis points of fulfillment costs and the efficiencies that you're going after, is it possible to break that 200 basis points down into 2 or 3 buckets with quantum? Just again, give us reassurance in terms of the trajectory that you hope and expect to deliver?

The majority of those really come from basically a harmonization of processes, more standardization and the retiring of least efficient capacity, yes? So that's where the bulk of it comes from.

And that 2 points, right, is still higher than we were in 2019. So I actually also don't think this is the end of the road. It's very clearly what we want to do in the next 2, 3 years. But it's still at higher levels than where we were in 2019.

I was just trying to phrase the question positively. But I could have asked why isn't it 400, I guess, would be the other way of looking at it. Thank you.

We'll recover eventually. Don't worry.

It's Luke Holbrook from Morgan Stanley. Just a couple of questions, if I may. The first one is you're expanding Factor into Europe from the end of part of this year. Just wondering if that's an opportunity for you to begin to integrate some of it on the fulfillment side, maybe Factor being integrated in some of your existing fulfillment centers where you got spare capacity? Just interested to hear your thoughts there. And just the second one is on -- I think the last CMD, you talked about EUR 200 million being spent on automation. You put on the auto store slide today at the presentation. Just wondering why or what's stopping you accelerating that transition process from an automation curve perspective? That would be helpful.

So on the first point, Factor in Europe. If you think to sort of like cooking facilities for Factor that we've built in the U.S., those facilities look quite a bit different to our meal kit manufacturing facilities. So much heavier equipment, et cetera. So that needs to be a stand-alone site. But we do think that with the comparably sort of like longer shelf life, we can actually from 1 facility fulfill to multiple European countries and hence, get some good operating leverage on fulfillment cost, but we won't be able to do that from 1 of our meal kit sites.

And on your second question is on automation versus the EUR 200 million we had discussed a bit more than a year ago. I would say it's what we spent on automation-related CapEx is not too far off that. So across Ready-To-Eat and across our meal kit sites. It is a touch below, but also overall, as you know, we've dialed back CapEx somewhat in 2022. So versus the EUR 500 million we had discussed previously, we invested for '20 and roughly in a similar proportion also our automation spend step down.

Okay. Just following up on that. I mean, this year, you'll spend probably 1/3 of what you would have spent last year on automation. So although the slides that we see today on AutoStore and the capability that it has, I'm just trying to work out where the curve lands for you from an optimal standpoint, from a fixed versus variable cost base?

So you're saying we spent 1/3 of what?

So this year in 2023, it looks like from your guidance, roughly from what you put out, you might spend 1/3 of the EUR 200 million you spent last year, you might spend, let's say, on EUR 80 million, EUR 90 million this year on automation.

No, a bit more than that. So definitely quite a bit more than EUR 100 million. When you think about the quarter of that EUR 350 million is going to Ready-To-Eat. Quite a bit of that is basically automated equipment that is there. And then on what you had there for the 1/3 of meal kit sites. A fair share of that is automation related as well. So the spend is quite a bit above that.

William Woods from Bernstein. Just 2 questions on pricing. So the first one is -- obviously, today, you didn't really mention much about kind of affordability. Is that no longer a priority? Or do you need kind of further price increases to meet the margin targets? And then the second one is on the revenue retention side at the beginning, does that -- is that in constant terms or does that include the kind of 7% price increase from this year?

So pricing, I think what I tried to -- what I tried to share when we talked about sort of like some of the capabilities we have as one of the largest direct-to-consumer operators is definitely also around being very close to customers and being able to measure price elasticities quite well. If you think about the AOV CAGR that we had over the last 3 years, I think it was, on average, it was about 6%, if I'm not mistaken, 6%, so that's obviously like I think some of that through price increases, a lot of that actually through having customers add additional meals, et cetera. I think long term, we will basically grow AOV for our base case products, in line with inflation after we come out of this high inflation period and then sort of like additional AOV contribution coming from having customers add additional meals, et cetera. But I would definitely feel that there is a lot of opportunity for us to further grow AOV, especially through giving customers better value through other options on the menu rather than increasing prices like-for-like. Because strengthening relative affordability is certainly something that in the long run, we very much believe opens up like further room for TAM penetration and being very price competitive is definitely one of the biggest things that consumers care about. What was the second point?

Sorry, the second part was just on the revenue retention slide. Is that in constant terms or does that include the 7% price increase or the 6% AOV because that would obviously inflate the revenue retention metric right?

It's revenue yes. So yes, if we charge more on order, then that is included there.

So it's compared to the first year, right? So. Yes, it's in constant currency.

Sebastian from Jefferies. I've got 2 questions, please. Regarding achieving the 10% EBITDA margin in 2025, you mentioned some of the things that are in your power to increase margin by 400 basis points. Can you also discuss how easy it will be to back those efficiencies, please, if at all? And also, would you consider pushing a bit on the price lever in 2024 to achieve that EUR 1 billion EBITDA target, if necessary? That's the first question. Should I say the second?

Do you mind just on the first one, I'm not sure I [indiscernible]?

Sure. So the first one is, you mentioned some of the things that you need to do in order to get to achieve 400 basis points of efficiencies. Can you please discuss how easy it will be to bag those efficiencies? And how much is in your power to bag those efficiencies? Or does something have to happen in the market to bag those efficiencies? And also, would you consider pushing a bit on the price lever in 2024 to achieve that EUR 1 billion EBITDA target in 2025?

Got it. So nothing is easy in life, so nothing is on autopilot per se. So it requires focus and good execution. But those 300 basis points you've seen from us on the contribution margin side, these are all through initiatives in our own control. So we're not waiting on some miraculous improvement in pricing level per se or so on the [ ingredient ] side, but these are driven by active steps on our side so within our control. On the EUR 1 billion EBITDA side, would we change our pricing to get there on the pricing side? Our approach is, as we have discussed in the past. So we continuously run pricing tests across all of our markets. See what does it do if we reduce price by $1, increase it by $1 or shift it from headline into shipping or do something else? And what does that do effectively to upfront conversion rates, customer acquisition costs, to retention and to order rates. And from there, try to extrapolate, is it a sensible measure or not? If it is a sensible measure versus status quo, we would follow through. If not then, status quo is the thing to keep up. Now for the purpose of the guidance, that we've given you. We have not priced in a blanket price increase tool to get there. Does that make sense and answer your question?

It does. Thank you very much. May I please ask another one. Can you please develop a bit on your HelloFresh market strategy? Are you running it as a for-profit business or as a way to increase order frequency and retention? And also, can you please confirm that the 10% adjusted EBITDA margin for the advanced markets also include the marketplace -- HelloFresh Marketplace?

Yes. So it does include all the revenues that we do in those geographies and at the moment, every additional order that we create for HelloFresh market products actually is EBITDA accretive. So it's basically adding additional profit to that order. And this is also at the moment with the assortment that we have, depending on country, 100 to 400 products whenever a customer chooses to take some of those, then that's EBITDA accretive for us and contribution order profit accretive.

[indiscernible] Global Investors. Question on CapEx, please. You indicated it to come down to 2.5% of sales by 2025. Now given the growth indicators you have shown beyond 2025 and let's assume a high single digit, low double-digit growth environment. Can that stay in the 2% to 3% range? Or do you need to step up at some point in time?

So across the cycle, that's the right level from everything we see right now at 2.5%, there will be individual years where it will be a bit above or below, but across the cycle at the right level.

Unfortunately, the CapEx investment cycle doesn't follow calendar years. Otherwise, it would have been very nice to show that in 2020, lots of cash generated, lots of CapEx spend, but it always has some lag effect. And so there will be some periods where we generate a lot of cash, and other periods where we have some CapEx. But through the cycle, as Christian said, the 2% to 2.5% is something we feel very confident with.

Can I just continue? It's Andreas from ODDO BHF. On active customer penetration rates. I think you did show those numbers in the past. So my question would be, what is it for the group, the active customer penetration? And what is the level in the advanced markets group 1 that you usually call out?

So active customer penetration, I think, in some of our sort of like most highly penetrated markets, there is probably something like 30%, 40% of households that we think fall into the broader definition of being able to sort of like afford and be willing to spend at that level that have sort of like tried our products. But even within those advanced markets, right, that's the highest penetrated market, like most of the markets are like significantly below that still.

Okay. Thank you again for the very comprehensive presentation. I just have a couple of questions. The first is on Factor and the unit economics. Could you tell us what the gross margins are like for Factor versus the core meal kit? And was there an impact on that in the gross margin that we saw in 2022? And also, what are the retention rates like for a Factor customer versus a core meal kit customer? Any color there would be great. That's my first question.

So from memory, I don't think that the contribution margin profile -- so you're talking about gross profit or after food costs or after fulfillment costs?

I was just referring to the gross margin, I guess. Factor has more than just food there with the preparation in [indiscernible] some color there.

Exactly. So I think the ingredients that we buy tend to be sort of like slightly cheaper for Factor, but then you have a lot of labor that you add on top. On the other hand, then in your pick-and-pack exercise, it's much easier to just put like 6 different items into a box rather than 30 items like we have in our meal kits. So all in all, given the sort of like earlier maturity stage of Factor at the moment, they're slightly below to where we actually have our HelloFresh core brand, for example. But I do think that with some of the initiatives that we're driving now from the team of Joanna, Uwe and all the rest, will get to very similar contribution margin profile, slightly different mix between ingredient and fulfillment, but sort of like after all variable costs, I think it should converge to a very similar level than what we have at HelloFresh right now.

In terms of retention between the two?

Also fairly similar, I would say. At the moment, you still have like a little bit of a feature gap for Factor. So I think at the moment, we only deliver on 3 days per week.

In aggregate, it's less for every individual customer even compared to that.

Yes. So usually, as a customer, you have a choice between 2 delivery days per week. I think on the meals on the menu, we actually made a big push to have that in the mid-30s. Brand awareness, as we've shown you, is at only 6% versus 66% for HelloFresh. So I think retention at the moment is probably slightly below to where you have our sort of like HelloFresh brand but trending very much in line with some of the other brands that we have, like a GreenChef, like an EveryPlate and with a lot of additional room to grow going forward and go through that same sort of like growth journey or unit economic journey that we've been going through for all the other advanced markets.

My second question is on 2023 and basically, the shape of the customer base that -- any color that you can provide us on that going into the rest of the year because one of the biggest pushbacks we've been getting is that maybe the sequential declines in 2022, starting Q2 represent the fact that you've reached a saturation in the core meal kit base, et cetera. So I'd love to hear how you would address that comment, one? And two, maybe give us a bit more color on how 2023 would shape on the customer base?

So on the people who were worried about the sequential decline in 2022. I hope they are then as excited when they went -- we'll see the sequential increase now -- when we come out with our Q1 numbers. In terms of a year-on-year comparison, we guided to around about mid-single digit down in Q1, given that basically Q1 last year still had a quite fair share of COVID tailwinds in it in the comparative period, and this is going to normalize them relatively quickly as we walk throughout the year, yes? So Q2 versus Q2 will be close already and then especially when we talk about second half, should be in part then potentially above again, the more we get towards the end.

What gives us confidence? Top-down grocery TAM penetration and online penetration very low versus a lot of other categories where I think e-commerce has done even worse than we, but people talk a lot about the long-term growth opportunity. So I don't really understand that. And bottom up, if you look at our most penetrated markets versus our least-penetrated markets, there is in almost all of the markets just by getting to some of the same levels that we see in our most advanced markets, huge TAM penetration upside. So I think that's both the top-down and the bottom-up perspective, which I think should give you some credible path that we have a good chance to continue to grow our meal kit market for years to come.

It's Emily Johnson from Barclays here. I've got 3 questions, but maybe easier to take them one by one. The first one is more of a conceptual one, which is why is active customers the wrong KPI? I think when you refer to growing the penetration of your markets, that's in terms of the population, not just the wallet share. So why is it -- is it that we focus on it too much in isolation? Or is it the wrong metric overall?

So I don't want to open up a can of worms and basically sound defensive or anything like that, right? But the way that we've defined an active customer is someone who's placed an order in the last 3 months. So it's like we always -- at any point in time, we have customers that have not been active at the last of the quarter but already have placed the future order in a week or 2 after. So the question is, is that an active customer or not, according to our definition, no. According to probably a lot of other definitions of other companies that would be an active customer. Also if someone hasn't ordered in the last 3 months, but sort of like 4 months ago, most e-commerce businesses report their active customers or someone who has ordered in the last 12 months. So it's also obviously like a very different number and not a good number. But sort of like given that we look at the quarter, it just has a lot more volatility than if you smooth it out over a year or so. Like I said, we don't plan to sort of like open up that can of worms over the course of this year. But I think long term, we probably want to move away from that metric because especially as our customer base is more mature, more and more customers use it at certain times of the year, the less sort of like explanatory power does that number have on a quarter to quarter, especially some of the sequential numbers.

Got it. And my second question was you spoke about one of the challenges and also barriers of entry to the ready-to-eat business being that it takes time to scale capacity. Would you consider any other inorganic strategies to accelerate this as you've done in the past?

Specifically, ready-to-eat?

Not necessarily.

So I think generally, like as we go back to producing free cash flow, I think we'll always look at sort of like all of the different competing projects and try to prioritize them according to what we think provides the highest IRR in the next couple of years. And certainly, the experience that we've had with some of the M&A transactions in the past, will make us look sort of like very closely at some opportunities. But at the same time, I think there's also very good other uses of proceeds. So I'm not going to tell you we're going to do like 3 M&A transactions in the next 3 years. But I think it's certainly something that ranks fairly highly in terms of potential value creation.

And my third question was can you elaborate a bit on the other D2C channels that you would consider going into? How broad is the Food Solutions definition?

So there are 2, which we're currently piloting both of which we think have the ability to grow into at some point, business units that can generate EUR 500 million equity value. That's sort of like our internal -- or one of our internal hurdle rates for opportunities that we actually want to engage in. On the one hand side, we've launched about 15 months ago, a business called Good Chop in the U.S. It's premium meat and seafood subscription, sustainably sourced. I think at the moment, double-digit million revenue run rate, something that we feel sort of like has a good chance to actually make or actually take on like a large share of the at the moment about EUR 10 billion premium meat direct-to-consumer market that you have in the U.S., where we think that we can actually leverage like a lot of our direct-to-consumer capabilities, but then also our procurement relationships that we have. So that's one that we're excited about. Industry in the U.S. is about EUR 10 billion. I think there's a good chance that we can build a successful business there as well. Another one, which will be launching in a couple of weeks is Pet's Table, human-grade pet food, which I think has also been one of the fastest-growing direct-to-consumer verticals. Again, when it comes to acquiring customers, retaining customers, monetizing customers over time, the fulfillment side of it, we do feel that we have an unfair advantage also in that space. So that is something that will probably -- or that we will put some weight behind it and test that. And it's something that I think outside in, looks like a very attractive opportunity. If we find that it meets some of our success framework and some of our success thresholds, then I think that can also kind of like grow into like a fairly big business over time.

I can just read them out. So one question from Marcus Diebel at JPM. Do we see any meaningful cannibalization between Factor consumers and medical consumers?

That's a different question than we're reading here. So -- so I think there is certainly some overlap between Factor customers and HelloFresh customers. but I don't have any problem with cannibalization. Like I want to have customers in my ecosystem and at certain times of the year, they're going to order Factor. At other times of the year, they're going to order HelloFresh. In the end, I want to have them in my ecosystem and over time, make sure that as much of their overall grocery wallet share goes towards one of the groups in HelloFresh. And if it's not us doing the ready meals, then it's probably someone else or they're getting ready meals somewhere else. Sorry, I keep looking at you because you asked the question, you didn't ask the question. So I'm not concerned about cannibalization, whatsoever.

I'll ask one, if I may. Just on -- when you're thinking about vertical integration, what are your kind of hurdle rates there? Because obviously, there's quite a lot of opportunities with respect to bringing things in-house, but what sort of kind of cash payback do you look at? And what sort of opportunities do you see?

So on some of the concrete examples that Uwe had outlined before in terms of backward integration, doing our own sources, packaging of spices and stuff like that, payback is relatively quick. So I don't know, a machine like that, we can then operate for 10 years. Payback is within the first maximum 2, 2.5 years. So this is -- looks quite attractive from a financial perspective.

And then with respect to the last mile, how far do you think you can go there? And what are the economics in terms of Payback for that?

We're at the moment at about 25% of overall volumes. I think -- there are plans to grow that more towards 30% from the 25% that we are today. If I fast forward 5 years, I don't think that it will ever get to more than 50%. Is it 30%? Is it 40%? Is it 50%? I don't know. It depends a little bit like where is your demand and a couple of other considerations. It was definitely very helpful for us as a negotiation token during the pandemic. It was definitely very helpful for us to push other suppliers for better quality and for better cost. We don't necessarily need to do all of it ourselves. There are certainly like a lot of remote areas where we don't want to do it ourselves. I don't know what the final number is, but it should go slightly up from where it is today with the plans that we have in place today.

Where is your capacity utilization this year compared to where it was in 2019? And what level would you consider to be your optimum utilization?

So on the meal kit side, when you think about those high-level figures that I have given you also advanced markets, which mostly are substantially all our meal kits, that was EUR 5.5 billion of revenues. And then another billion of revenues for those younger meal kits market, so around about EUR 6.5 billion between the 2, or around about that, and that is versus a capacity of already north of EUR 10 billion. So around about a mid-60s capacity utilization where we sit right now on the meal kit side, which is a good level from our perspective. So typically, sweet spot for us is 60% to mid-80% beyond that, you then get negative economies of scale again. So we're happy with where we sit right now. On the ready-to-eat side, capacity utilization is much higher and that's why we are working full speed on putting that on a facility in place.

And in 2019, on the meal kit side, you were in?

2019, we were in the lower 60s. So not too different.

[indiscernible] Capital. I was wondering, you were looking at marketing costs as distinct from the discounts that you are giving but wouldn't there be some justification to view them in conjunction? The more discounts you give, the cheaper your marketing is, the lower your customer acquisition costs would be, the less discount you give, the higher the customer acquisition costs are. So it seems like 2 sides of the same coin. And is this -- are you looking at these 2 things completely distinctly inside your company? Or is this something that you are viewing in conjunction with each other?

Yes, we're definitely looking at that in conjunction. If you think about the LTV equation

that Ed showed before, you either have AOV and margin sort of like on your net revenue, on your net price and then you also just have your media CAC in the CAC line or you go to your gross AOV and you go to your gross contribution margin on gross revenue prices and then you have CAC plus discounts in the denominator gets you to the same ratio -- gets you to the same LTV to CAC ratio. But internally, like for sure, we look at sort of like both budgets and -- in the end, we're pretty agnostic whether we put it in price incentives, so whether we put it in media CAC. We optimize according to LTV to CAC.

And when you guide, let's say, you say prices are going to increase roughly with inflation going forward. Does that now mean your list prices go up or your realized prices go up or with inflation because you could increase list prices with inflation and drive up the discount so that the realized prices go up with less than rate of inflation. How does that look like?

Yes, very detailed question. Look, a lot of what you just said, like I 100% understand what you mean because those are exactly some of the drivers that we're looking at, right? So -- for example, if you have a mature customer base who has shown you over and over again that they have a high willingness to pay because they found a lot of value in your product. Maybe it's easier sort of like to increase prices for your existing base. And before new customers, you also have a higher price point, but you also give higher price incentives. So that it's still cheap for them to try out the product, et cetera. So there's a lot of different strategies how to optimize that price mix. This is actually why I put that down in one of the key capabilities that we have built to really understand and do a lot of these fine-tuned pricing decisions to understand like at the moment, like how our price elasticities for your existing base for potentially new customers that don't know the product yet, and we're optimizing around all of these different levers.

There's a question from Adrien from Bank of America. What does it mean for the margin of the business to be adding more business verticals and units?

So the trend that -- so Adrien, this is paraphrased he says basically -- could it be that when we launch a lot of new businesses that this has an impact on EBITDA margin. The answer is yes. So when we ramp up a new business, then that is diluting in that period, EBITDA margin, but then obviously pays back over a longer period of time. So this is true to a certain extent. But again, versus the strategy we discussed today with all the underpenetrated meal kit markets, new vertical launches. All of that is baked into a EUR 1 billion EBITDA target by 2025.

Thanks for the disclosure on Factor versus the mainline meal kits and the breakouts. My question is about Factor. I was pleasantly surprised to see that you guys broke even on the brand, frankly, much earlier than expected with only 6% brand awareness. And are there things you're doing, for example, the cross promotion that could massively expand brand awareness while not spending too much? And given the ramp curve of margins, which you saw with the mainline brand EBITDA expansion in 2019, do you expect Factor margins to expand to similar levels?

Ed, do you want to take that?

Sure. Yes. So I think on the development of the Factor customer base so far since acquisition, the customer acquisition costs were significantly higher than HelloFresh to start with. They've come down massively to start with, all of that was driven by the synergies and the capabilities that we had from the HelloFresh marketing playbook, not from leveraging HelloFresh inactive customers. Over time, we started to look at ways to leverage some of our inactive customers, maybe people who've canceled because they wanted more convenience recipes, push those customers towards Factor, and that's helping to drive even more efficient growth. But I think where we stand right now, the key message is there's still massive untapped demand. We're limited by capacity. We could be growing significantly faster than we actually are right now. That's playing some role potentially in the fact that we've reached breakeven faster. But certainly, if you look at the underlying unit economics, the return on marketing investment, in Factor, even outside of cross promotions, it looks very attractive in line with HelloFresh. So the business will get to similar margin levels as HelloFresh at scale.

[indiscernible]. Maybe 2, first one, what's the price gap between HelloFresh and food retailer as of now?

Food delivery or retailer?

Retailers?

It's a highly debated question. So I think there's a lot of different ways to make that comparison. I think from being significantly cheaper for the same type of quality, if you sort of like also attach some cost for your time, et cetera, to it to being slightly more expensive. I think I'm pretty confident that from all the customer research that we've been doing and how customers perceive price and value that they're getting that is pretty sort of like on par with how much you have to pay if you shop for those same quality ingredients at an upscale supermarket.

But is this gap narrowing or not?

Yes. So I mean supermarkets have increased prices by about 15% on average across our geographies and some even higher than that. So that definitely -- for us, our sort of like increase was about 7%. So that definitely has further sort of like narrowed the gap or widened the gap, how you want to look at it.

Yes. And then on Factor. So that's very bulk, that's a great portion of the growth for the coming years. What makes you so sure that European consumers will be quite happy with such offer only because if I'm right, in Europe right now, we don't have this kind of offer. So what makes you so sure that it will work?

Ed, do you want to take that?

Yes. So I think, firstly, I would say we're not sure. That's why it starts with a pilot launch and we're not building a facility that's anywhere near the scale of the facility that we're launching in the U.S. That said, we've had, I think, very promising signs so far both looking at the Australian market, where we now have an active acquisition, Youfoodz, which actually has even higher household penetration than Factor does in the U.S. And then looking at some of the very early data from the Canadian market where we've launched Factor. I think we have fairly high confidence that the product is one that customers will love. We're going to need to figure out what does that mean in terms of the recipes themselves. Is there a different type of communication tactic we need to use in the beginning? In some ways, the European market has much higher penetration of prepared meals in grocery stores. In other ways, the direct-to-consumer market, which typically comes with a much higher quality level is way more nascent in Europe. So trying to figure out those dynamics. I think, is something that's going to like any new business that we launch, take a few quarters to figure out. But overall, everything we've seen with all of our forays into ready-to-eat in different markets, across the world now, I think, give us a lot of confidence that this is not just a U.S. phenomenon. It's something that should be very broadly applicable to global consumers.

How much higher do you think your factory sales would have been in '22 if you have had the Arizona side from day 1 of the year?

I think it's not so much '22. It's more now in '23. Like biggest marketing quarter is Q1, right? So we exited '22 on a fairly high utilization of our capacity, but then very quickly arrived at capacity limits now in early 2023. So I think it's less about having grown even faster in '22 but we would probably be able to post better year-over-year growth numbers in Q1 if we weren't at capacity max in Factor.

Sam [indiscernible]. So first question, please. You obviously gave some insights into the opportunity around reengaging users, which I think has become a sort of bigger mix. Is there anything you can sort of say to help sort of quantify that opportunity, learnings from the past, like what portion of users are sort of interested in coming back to the platform sort of within 1 year to year? I know you can't give an exact number, but sort of directionally, is it single digit, high double digit? Any sort of color?

Yes. I mean it's a very material share of customers who tell us they want to come back, and it's a very material share of customers who do come back over time, and that share is rising over time. Certainly, like of the people who lapse and press the cancel button, it's -- it's solid double-digit numbers who are ultimately returning to HelloFresh at some point. I know that's a very wide range. But it's a material share of the customers who come back. And again, like thinking about it more conceptually, talking to people who've used the product, the vast majority of people have had a positive experience or at least have had an experience that maybe didn't fit their lifestyle at that moment. But as Dominik mentioned, they might reach a different lifestyle stage in the future, and that brings them back into the market. We've studied a lot of subscription businesses similar to us in smaller niches. If you think about the mail order catalog businesses that have been around for decades, it's really a big driver of that long-term revenue growth and buildup comes from continuing to market to the base of users who previously had a product experience. And that's just where we'll see more of our efforts be directed over time in advanced markets.

And one more, if I can, please. So you obviously have more resources now following your hiring last year as well as, I guess, the sort of normalization of COVID more time to consider potential AB testing, optimizations. Can you maybe give just some insights on 2 or 3 of the more of the areas where you're seeing sort of high potential so far and where you're most excited? Either on marketing side or the sort of UX side?

So I think what we really want to put into focus on both our advanced as well as our underpenetrated meal kit markets is investing into the menu. And so some of the things that we're piloting there is like strong focus on convenience, lots of people that want to cook multiple times per week, but ideally only spend 15, 20 minutes cooking. Another big focus is also more towards families and sort of like kids meals, et cetera. So I think what I'm personally most excited about is really on the physical product side. On the digital product side, I think at any point in time, per months or year-to-date, there have been like over 1,000 sort of like different experiments launched. That's from sort of like reimagining how you actually manage your account to going forward. I think there is some things that some of you have asked me about as well. What's the HelloFresh? Is there going to be like a HelloFresh loyalty program or something like there? Is there going to be HelloFresh prepaid? So I think there are lots of good ideas, some of which we are working on, which should also help kind of like make customers aware of all the value that they actually accrete over time being a HelloFresh customer. Last question?

Do you have a sense for customers who purchased both the core meal kits and Factor or ready-to-eat meals? I think it might be early, but I think you're doing it for the HelloFresh brand where you're selling ready-to-heat products? Do you find that the retention rates go up from adding new types of form factors? Or do you think that long-term retention rate is probably where things ultimately settle despite new product innovations and cross-selling?

Conceptually, I think it should go up over time. I think conceptually, the better the product, the more people buy and order with you. I think that's very easy. But having said that, with 30% plus long-term revenue retention that you've seen from our older cohorts and younger cohort settling at a higher level than that, that is sufficient to get to north of 10% adjusted EBITDA margin for sure.

Got it. So it's -- it would be upside. And any -- and I guess secondly, any pricing that you decide to put through, that would also be upside to the EUR 10 billion? Like pure pricing?

Yes. I think today, we wanted to give you like some data that is very specific, where it's like very clear how that will develop over the next 2 to 3 years. There is obviously like a number of other levers and dimensions which kind of trade a little bit off against each other, which are more dependent on what environment are we operating in, et cetera. But I think there is like outside of the 3, 4 like very specific things that we told you, there's like a bunch of more things that we have high hopes. It can materialize in making us a better business in the long run.

This is [indiscernible] from RV Capital. Just wondering what kind of things you're doing to maintain but also improve the company's culture, in particular, in these sort of hybrid work times where potentially some of the employees aren't in the office that often?

So I think what's very important is to like very clearly articulate what type of DNA you want to have in the company. I think it's also very important to articulate what type of leadership styles make the most sense for a company like ours and how those can be compatible across different teams. So I think over the last 10 years, we invested quite significant time into, first of all, like defining, what are some of the values, what's the DNA of HelloFresh, also defining what does it mean to be a leader and then trying to weave a lot of those elements into every part of the process, right, into how you get talent on board and then the recruiting process and performance management, how you work together? How do you interpret some of your values in your day to day? So I think that very significant resources basically are spent on that every year, and it should underlie like a lot of the decisions that we're actually making. And then on top of that, I would say it's also about making sure that you find the right ways for teams to interface with each other, to work with each other, especially as you're building an increasingly complex organization, how do you make sure you're not hamstringing some of your best talents, but actually giving them sort of like the freedom to operate within certain boundaries and without too many dependencies on other teams. So these are definitely topics that we're thinking about a lot. There are some inspirations out there of companies that have maintained growth at -- with very complex business models and at scale for a very long time. And there are certainly some things that we can learn from them while still kind of like pushing our own culture and our own DNA values.

Yes. And then maybe just one final question, feel free to link it to my previous one. Just in terms of the KPIs you use to run the business and I guess, potentially maintain the culture, what are they? Ed, I think in response to one of the earlier questions you mentioned [indiscernible] account was something you kind you of cobbled together at midnight before the IPO, which suggests to me that's not a big focus for you, but I'm sure there are things which are in focus. So which are the ones that you really focus on internally?

I would say the biggest one is LTV to CAC. That's definitely the biggest one. We're thinking all the time about sort of like how do all of the different drivers move? What can we do to over a period of 1 year of 2 years of 5 years actually make LTV grow, make CAC going down. Sometimes we trade off higher CAC for higher LTV. Those are also very conscious decisions. But this is probably sort of like the framework that we're thinking most about inside the company because sort of like everything feeds into that, right? You have everything in there outside of sort of like your G&A line which Christian has like a very careful look at and which I think is actually pretty efficient for the size of business we've built.

Yes. In that case, just an observation. I mean, for maybe next time. I don't find kind of marketing expense to revenue a particularly useful way to think about marketing expense, I think kind of IRRs and like you say, LTV to CAC is way more useful. So maybe more discussion on that.

We get a lot of questions on that, if that number moves up by 1 point from 1 quarter to the next. I agree. The right metric to look at is LTV to CAC and how that trades over time. Over longer periods of time that should converge with sort of like marketing spend going down quarter-to-quarter, there's obviously like sometimes effects that make one of the lines go up or go down by 1 point. But for us internally, LTV to CAC is a much more important metric. Thank you so much for attending the Capital Markets Day today. We're at the end of the session. Hopefully, lots of additional context that we could provide. IR has been around all day. If there are any other questions, we're going to stick around for a couple more minutes and then wish everyone a nice journey home. Thank you so much for your attendance.