Marley Spoon Group SE (MS1.F) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, a warm welcome to today's earnings call of the Marley Spoon Group SE, following the publication of the Q4 and full year figures of 2024. Marley Spoon is represented by CEO, Daniel Raab; and CFO, Thorsten Struck, who will speak in a moment and guide you through the presentation and the results. After the presentation, we will move on to a Q&A session in which you will be allowed to place your question directly to the management. And having said this, I hand over to you, Daniel.

Thank you, [indiscernible]. Good afternoon, everyone, and welcome to the presentation of Marley Spoon Group's Q4 and full year results. My name is Daniel Raab, I'm the CEO of Marley Spoon Group, and I have here with me today, Thorsten Struck. I'm delighted to welcome Thorsten to Marley Spoon where he started with us back in January. Thorsten is completing our Management Board with his extensive CFO and international business experience. We will start the presentation with an update of our strategy, followed by the operational performance in '24. After that, I will hand it over to Thorsten for a closer look at our financials. I will round off the presentation with an outlook for '25, and then we'll open the call for your questions. Let me start with an update of our strategy. Having originally started as a meal kit direct-to-consumer business. Over the years, we've been identifying several adjacent categories, which allow us to maximize the value of our product for our customers, which is demonstrated by the growing average order value over the past months. On this path, we have launched new brands, new product lines, but also acquired businesses, which contribute to increasing our total addressable market. We now operate in a very large space. And within this space, the consolidation efforts are still fundamental. We aim to become one of the world's leading food and nutrition solutions platform. By broadening our offering with a single destination -- within a single destination, we will be able to better serve the different needs of our international customers. The benefits of transitioning into an integrated platform will drive both customer value and financial efficiency. The platform model also supports scalability by allowing for easier expansion of products and services, lower marginal cost and diversified revenue streams. We will generate income from not only subscriptions but also ready-to-eat, ready-to-heat, supplements, third-party partnerships, groceries and cross-selling opportunities focused on improving our customers' experience driving customer lifetime value. '24 was a pivotal and -- was pivotal in preparing this path, transitioning to an asset-light business model in the U.S. with the partner enabling us to broaden our offering and acquiring BistroMD, a U.S. ready-to-eat brand serving customers doctor-designed meals. Already at the beginning of '25, in the European region, we have successfully migrated our Dinnerly brand customers into the Marley Spoon ecosystem, operating now as a single brand and are in the process of launching high-quality ready-to-heat fresh meals. Let's now go over to Q4 and full year '24 results. In Q4 '24, we set new records for the group and made significant steps towards becoming a food solutions platform that led to a 13% higher average order value. Our teams continue to focus on developing our products, both our meal kits and ready-to-eat meals, but also digital products like our minimum order value logic with the focus on delivering a better and more flexible customer experience every day. The combination of these factors resulted in 7% year-on-year revenue growth at 320 basis points contribution margin expansion and EUR 5 million operating EBITDA, up 91% from last year. In '24, we raised EUR 8 million in capital, paid down EUR 10.5 million in debt and engaged in the M&A becoming asset-light in the U.S. and acquiring BistroMD. Revenue increased 0.5% from last year to EUR 330 million. At the same time, we were able to achieve a record high 34.7% contribution margin. Operating EBITDA increased more than EUR 12 million year-over-year to EUR 9.2 million when compared to -- and was positive all quarters for the first time in our company's history. The full year results we present today over achieved or exceeded all our revenue and profitability targets, which demonstrate the success of the efforts we put in place by the teams throughout this demanding period. I'm really thankful for all our teams having contributed for this great success. Let us give you a bit more details on our successful year '24. During '24, we fully refocused our customer acquisition strategy, moving away from voucher-intensive approaches and short-term revenue volume tactics, focusing on more higher-quality customer acquisition. As a result of that, we continue to see average order frequency increasing by 6% year-over-year in Q4 following the positive track record of previous quarters and slowing down order decline to 5.5% year-on-year. Average order value is continuing to grow at 13% to EUR 67 as the combined result of expanding offering, lower discounts and higher value product lines, such as premium recipes and specialty grocery items for the whole family. In Q4, revenue was up to EUR 78.5 million, 6.8% higher than in '23. Overall, in '24, voucher discount investments decreased minus 46%, leading to a stronger-than-ever customer base, which are ordering more frequently and spending more on each purchase. From a contribution profit perspective, all regions participated in delivering an additional EUR 11 million when compared to '23, setting a new record for the full year and exceeding our guidance. A key driver of the margin gains year-over-year was the change of our marketing strategy, which resulted in a reduction of marketing margins given to acquire new customers. The strategy was developed -- deployed globally, significantly operational improvements in each region also contributed to the performance. Please note that we have also made advancements towards our ESG commitments, managing our resources and [indiscernible] our planet more sustainably of which an example is achieving 98% packaging rate being reusable or recyclable up from 85% in previous years. In all our regions we remain fully committed to our revised marketing strategy, focusing on improving our marketing efficiency. Compared to the previous year, we deliberately reduced marketing spend by 8%, totaling to 15.6% of revenue. In '24, we achieved significant cost reductions decreasing G&A by 8% year-on-year and more specifically, 24% in Q4. Cost reductions is the result of continued efforts, streamlining our operations and simplifying our organizational structures. To note, the cost reduction for central function were negative 35% year-on-year, reconfirming our commitment toward efficiency at a global level, while staying close to the customer in the regions. Let me just make a note here. This excludes, obviously, the cost reductions we announced in February, which will come on top, effecting '25. As a result of all drivers trending in a positive direction, in '24, we managed to achieve a EUR 12 million higher operating EBITDA and were positive all quarters for the first time, totaling EUR 9 million. To sum it up, our teams delivered revenue growth on a full year basis while achieving a record high contribution margin and a sequential lower cost base which is the result of a very busy but very, very successful '24 and a strong basis for the next years. With that, I would like to hand it over for the first time to Thorsten, who will walk you through the regional performance as well as the financial statements.

Thank you, Daniel, and welcome to our conference. Let's look at our performance by region. In the U.S., net revenues in Q4 increased 17.5% versus prior year, similar growth trend as we have seen in Q3 2024. And one of the main drivers was the average order value of growing nearly 18% year-over-year and the positive impact of our BistroMD business. So although the active subscribers did decline year-over-year, driven by competitive voucher environment, the order frequency increased 5% in Q4 '24 versus Q4 '23. The U.S. overall delivered a strong, very strong contribution margin in Q4 year-over-year and an improvement of approximately 4 percentage points. And this was mainly driven by a reduction in marketing vouchers as well as lower operating expenses. Food and packaging synergies with FreshRealm continues to materialize. So the margin improvements helped the U.S. region to deliver EUR 5.4 million in operating EBITDA in Q4 2024, which is an improvement of EUR 1.3 million versus Q4 last year. Moving to Australia. In Australia, net revenues in Q4 '24 declined slightly by 3% year-over-year, although the cohort quality has improved significantly. As a result of the company's strategic shift away from heavy discounting, the order frequency continued to improve, growing by 7% in Q4 '24 versus Q4 '23. So for the full year 2024, the contribution margin was up 100 basis points versus full year 2023. Significant savings in general and administrative expenses helped here to achieve another quarter of positive operating EBITDA resulting in EUR 4.2 million better operating EBITDA versus 2023 and ending at EUR 12.1 million in 2024. In Europe, a conscious reduction of marketing investments drove a 5.8% net revenue decline, which is in line with our strategy. The order frequency grew by 9% in Q4 '24 versus Q4 2023 and the average order value increased by plus 3.5% year-over-year mainly driven by a higher percentage of family size plans and the product mix impacting positively our contribution margin and operating EBITDA. So both contribution margin and operating EBITDA margin for the full year 2024 improved versus last year. Our contribution margin by 350 basis points and operating EBITDA margin by 380 basis points. A reduction in marketing vouchers due to the changes to the global marketing strategy, and improved operational expenses, especially across food and logistics costs were mainly driving those margin improvements. So overall, Europe delivered a positive operating EBITDA in Q4 '24 and reduced the losses for the full year 2024 by EUR 1.5 million versus the full year 2023. So to summarize all drivers of this business performance, the combination of improved marketing efficiency, an active customer base ordering more frequently, and significant cost reductions, improved the net income by EUR 17 million for the full year 2024 versus 2023. So 2024 is an important year for the company because it delivered a significant turnaround. And at this point, I want to explicitly thank and congratulate the team for those amazing achievements. In 2024, we ended with a cash position of EUR 6 million. As a highlight, we have improved our operating cash flow versus 2023 by approximately EUR 9 million. The U.S. asset sale, the capital raise and the debt repayment in 2024 impacted our net debt position, which ended at EUR 66.2 million in 2024. And with this, I would like to turn it back over to Daniel.

Thank you. Thank you, Thorsten. For 2025, we continue to expect similar positive developments by prioritizing higher profitability and careful capital allocation setting ambitious financial and operational goals to advance our platform vision of empowering people to enjoy healthier lives through personalized and tasty food nutrition solutions. At this point, we're also prepared to issue our guidance for 2025. We are expecting a single-digit revenue decline in constant currency, continued contribution margin expansion above 100 basis points versus '24 and positive operating EBITDA with full year growth between 70% to 80%. With this, I would like now to open the call for your questions.

Yes. Thank you very much for the presentation, the deep dive into the numbers and the guidance for 2025. We now move on to the Q&A session. [Operator Instructions] So Mr. [ Cole ] you should be able to speak now and place your questions.

Yes. Thanks, Daniel, for that. And congrats on the performance for last year and the turnaround, that's been really good. I'm just -- with 2025, so net revenue reduction -- you're obviously enhancing the contribution margin. So what's the driver in that and -- into doing that? And then how does that become a little bit dangerous just with cost cutting and not reducing anything on your service proposition to your customers.

Thank you. So look, for the last question, the last part of the question, we have been working on centralizing our teams quite a bit and standardizing technology, et cetera. So we are very comfortable with the setup we found as a company. The limitations you mentioned, we don't foresee, totally the opposite. As I mentioned before, for us, '25, a very, very big focus is improving our service offering, integrating different food solutions into our brand, Marley Spoon. This is specifically not only about adding more value to meal kit but also providing customers with fresh, healthy, ready-to-heat and ready-to-eat meals, this on a global basis. And we believe, despite the macroeconomic impacts, and we don't have to discuss those here with the tariffs, et cetera. We believe that our service offering to customers will lead to higher customer engagement, but we are only ready to reinvest significant money in marketing when we've improved our product significantly to achieve a higher ROI. And that's basically the picture of the guidance we have drawn.

Okay. And maybe just a follow-on question. In terms of brand consolidation, I think last year was talking a bit about just consolidating some of the smaller brands into Marley Spoon and Marley Spoon being a bit of an aggregator of that. Are those opportunities still around or other brands -- other smaller brands persisting pretty well by themselves?

No, it's absolutely the same. I mean we're doing it in our own business, right? We just mentioned that we integrated Dinnerly into Marley Spoon in Europe. Those developments we are seeing, especially from a customer behavior perspective, only add a lot of comfort for us to be ready and willing to consolidate the industry, not only in Europe, but also in the U.S. We obviously have to do our homework and also reshape our balance sheet, which I've been commenting on over the last month. And you can be assured that this is something we are very actively working on.

[Operator Instructions] Mr. [indiscernible] you should be able to speak now.

I would have a question on the balance sheet. So with EUR 6 million cash at the end of last year, do you have a rough estimate in regards to cash burn per quarter. So I mean, I wouldn't expect you to be cash generative as of Q1. Do you have some kind of indication for that?

I mean we're not guiding for cash flows. Therefore, it's complicated to provide a forward-looking statement. What I can tell you, and I've been commenting on this for a while now is we want to be bottom line profitable right, and ultimately also cash flow positive. And all the efforts from a cost saving and efficiency perspective have been focused on getting our company to a cash flow positive position as soon as possible. That doesn't mean that we will not have a negative cash flow quarter, but we are very focused on getting our company in this position.

Yes. And the strong increase in the average order volume and order frequency in the U.S., I mean that's quite impressive. Would you expect this to further improve throughout the year? Or are you taking measures that should support that?

Yes. So overall, not only in the U.S., it's definitely the goal to offer a wider range of product, better customer service, also service offering from a digital product perspective, and that should lead to growing average order values mainly because of the strategy that we've documented in this presentation of widening our product offering.

Yes. And on the first, you started your presentation with this 1 slide showing the product road map. So next 1 coming up is the RTE in Europe. Do you have some kind of informed time line as to when you want to reach, I don't know, the end of the time line, it was branch are they all coming one after another? Or is it all coming within the next 6 months? How do you see that?

Yes. The chart you've seen wasn't meant to be a time line, it was more meant to demonstrate our customer journey, our customers, we believe, pick and choose the products they put in our box. With the platform approach we want to get away from being a simple meal kit box. We want to be much wider positioned offering more products to our customers. And it doesn't mean that what you've seen on Page 2 or 3, whatever it was that this is a step-by-step function. All the teams are working on enabling new products every day to increase customer experience. So there's no end-to-end time line. What I can tell you is, in Europe, we're expecting to launch ready-to-heat in -- within Q2.

Well, thank you for placing your questions. We have 1 short question in our chat box. When do you expect to be cash flow positive?

Sorry, same answer I gave to [indiscernible]. We're not guiding on cash flows here. But again, a very, very big focus of the management team of the whole company, very cost and efficiency focused to get our company to cash flow positive as soon as possible.

Well, that was pretty clear. [Operator Instructions] And in the meantime, we do not have further questions on the line. So if one of the participants want to place a follow-up question you're invited to do so. That's how well we have someone -- Trion, you should be able to speak now.

Yes. It's Trion Reid here from Berenberg. I just wanted to ask one question around tariffs. One, whether you've seen any impact in consumer confidence, obviously, in the U.S. around sort of tariff uncertainty and whether you foresee any impact on your costs and what you would do to mitigate that if that were to happen?

Thank you, Trion. We have not seen consumer behavior changing after the announcement of the tariffs. We all know it's a fairly unclear situation. But there was no direct consumer behavior impact visible in our numbers. But I can tell you on the impact on our business, there is no direct impact expected right now. There is obviously sourcing of vegetables, fruits, from South America and also from Canada, but there's different sources for our business partner, we have FreshRealm to avoid any cost increases. So right now, we have -- we are not worried about the tariffs impacting our business. The consequences that we are very aware of, are more focused on currency impacts.

And we have a follow-up question from Mr. [ Cole ] Mr. [ Cole ] you should be able to speak now.

Daniel, maybe just a quick question on BistroMD and I guess, the economics of that, how that's going and how that differs from the economics of, say, the Marley Spoon core business?

Yes, we are talking about regions when we are -- maybe in our business. What I can tell you about BistroMD is that value is not only in BistroMD stand-alone business. For us, the acquisition was very focused on enabling us to also provide customers with ready-to-eat meals and especially with very healthy nutrition quality-focused meals and BistroMD is one of the top brands in the U.S. to deliver those kind of products and this will have a significant impact over the time on Marley Spoon, both not only from an average order value perspective, customer lifetime perspective, but then also on a total revenue perspective.

Well, thank you. And in the meantime, we have received no further questions. I'll wait a few moments if there's someone using the chance of placing their question to the management. Well, yes, so we have a follow-up one from Mr. [indiscernible]. Mr. [indiscernible] you should be able to speak again.

Yes, me again, just a really quick one. Are you still -- I mean you have cut down marketing expenses quite a lot. Are you still engaged in brand marketing? Or are you currently entirely focusing on performance marketing?

No, we have not stopped any specific marketing approaches. Obviously, with the reshape of our product offering, we will also continue to invest in brand marketing. But it's not a 0-1 decision as the question was kind of supposing. It's a total marketing package. While we are changing the parameters of our marketing investments on all levels, we have not stopped brand marketing in its totality.

Okay. And again, a follow-up question. You should be able to see now.

Trion again from Berenberg. Just a follow-up on the outlook for 2025 in terms of the sales outlook. I first just wanted to sort of clarify what was the organic decline, i.e., excluding BistroMD in 2024? And obviously, you're guiding for another single-digit decline in 2025. What do you think would be the trigger for us to get back to sales growth -- and could that -- is that what you're thinking about for 2026? Or will it take longer?

Yes. There's 2 key focus right now, right? And I think I've been mentioning this since I've been around with Marley Spoon. It's all about customer experience, driving customer lifetime value and getting our company to a cash flow positive state. Once we've hit all those targets, we are more than ready to reinvest in marketing probably at a different strategic level than before because we are, I believe, much more details in our allocation strategy. And therefore, for us, the target is to reinvest in growth organically once we are extremely comfortable with the strategy execution that we've presented earlier.

Perfect. Okay. And just on the -- the decline in '24 or maybe the contribution from BistroMD in '24?

Yes, I don't have it on top of my head, Trion, but we'll be getting it back to you on this one.

Well, thank you very much. No further questions by now on the line, wait a few moments. Well, it seems not to be the case. So we come to the end of today's earnings call. Thank you on your interest and all the questions a bit. Thank you to the management Mr. Raab, Mr. Struck for giving us the numbers in our presentation and for answering the questions, should further questions arise at a later time. Please feel free to contact Investor Relations. I wish you all a lovely remaining weak and a wonderful day. And by now for some final remarks, I hand back over to Mr. Raab.

Thank you, [indiscernible]. Just quickly, let me just summarize what we've presented. After revising our marketing strategy in late '23, we have delivered 5 consecutive quarters with positive operating EBITDA enabled by our full focus on delivering great products and customer experience. Our customers order our products at a significantly higher frequency and significantly higher average order value, choosing more premium recipes or incremental market items for their weekly deliveries. All our teams in all regions have done a fantastic job of delivering a record high contribution margin of 34.7%, expanding 330 basis points year-on-year. On top of all of that, we are proving that our platform is well suited for market consolidation, and we are convinced that our numerous consolidation opportunities in the market that will allow us to increase scale and profitability. This is backed by already with the acquisition of BistroMD, positioning us very well to participate in the growth verticals, health focused ready-to-heat meal plans. I can assure you our team is head down focused on continuing to execute our plan fully focused on delivering a strong 2025. With that, I want to thank you again for your time today and looking forward to seeing you again soon for our Q1 results. Thank you so much.