Cheffelo AB (publ) (CHEF) Earnings Call Transcript & Summary

Welcome to Cheffelo Q2 2026 Conference Call. [Operator Instructions] Now I will hand the conference over to the speakers CEO, Walker Kinman and CFO, Erik Bergman. Please go ahead.

All right. Good morning to everyone joining us. Thanks for your interest in Cheffelo, and welcome again to this presentation of our second quarter results. So my name is Walker Kinman, CEO of Cheffelo. I'm joined by Erik Bergman, our CFO. I will take a few minutes to give you a short intro on the company and walk you through our prepared remarks on the second quarter development before Erik takes you through the financials. We'll then take your questions, and you've heard how you can set those. So let's start with a little about Cheffelo. So every evening, families across the Nordics face a similar question, what's for dinner? Cheffelo solves that daily moment for tens of thousands of households every week, and our ambition is to do it better than anyone else. We have been pioneers in the meal kit category for more than 2 decades. We run a proven, profitable, dividend-paying business, and we operate trusted local brands in each market, Godtlevert in Norway, Linas Matkasse in Sweden and RetNemt in Denmark. At the heart of our service is a simple value proposition. We provide meals that unite families. By removing the stress of planning, shopping and deciding what to cook, we make it easier to put nutritious, well-balanced and great-tasting food on the table. With the widest range of recipes in the meal kit category tailored to different preferences and dietary needs, we keep customers engaged over time. And because this whole experience is powered by our own technology platform and data, we can keep improving, turning everyday dinners into recurring revenue, strong loyalty and attractive unit economics for our investors. Our business model is built on a demand-driven subscription model for meal kits. Customers choose their recipes in advance, which lets us plan purchases tightly, keep inventories low and significantly reduce food waste. One of our key competitive advantages is personalization at scale. We offer the widest recipe selection in our markets with flexible portion sizes from 2 to 6 persons and recipes tailored to different needs and preferences. Our goal is to give customers the right selection, not endless scrolling so they can find what works for their household without being overwhelmed by choice. This is enabled by our in-house technology platform and deep data analytics capabilities. We use custom-built advanced algorithms and machine learning models to preselect and recommend recipes, forecast demand and plan production. This allows us to run a highly personalized service with efficiency and discipline. Every order is produced individually in our own fulfillment centers using tech-enabled processes and supported by a strong, scalable Nordic supply chain. Together, this creates a business model that's difficult to copy. It's structurally efficient and is well positioned to continue delivering profitable growth. Turning to Slide 6. Let's talk about some of the key figures for the quarter. So it really feels like the first half of 2026 has been a fantastic period for us. So strategic choices made over the last several years have contributed to directional clarity. It's sharpened operational execution, further leading to our strong financial results. As I wrote in my comments in the report this morning, the clearest proof point we have of this now is Norway, which I'll come back to shortly. Cheffelo's net sales growth for the first half was 18%, which hit the high end of our expectations. This is the first time in a while that we have gotten a bit of a tailwind on the accounting side from a strengthening Norwegian Krone. So in local currency, the growth rate was 17.5%. Norway continues to headline the growth story, but we are also seeing an encouraging development in Denmark, while Sweden again delivered solid double-digit growth. Our operational leverage means that growth in the first half also led to record profitability with over a 90% increase in EBIT over the period versus last year. When we say operational leverage, let me guide you specifically on what that meant over the first half. First of all, our central functions costs were flat on a consolidated basis, which is well under inflation in local currency and emphasizes the team's ability to grow the business with existing talent and capabilities in place. Leverage can be further seen on the fulfillment side with contribution margin rising back to 31% on a last 12-month basis despite investments in further developing our offering. This was a 0.5 percentage points increase in contribution margin over the first half. These product and service investments and the consolidation of brands in Norway have both an effect on reducing churn and increasing purchase frequency while removing structural costs related to promoting a unique brand. The net result is that we achieved our 18% growth over the first half with an absolute decline in sales and marketing expenses and a relative decline in discount vouchers. We continue to see decent momentum at the start of the third quarter. As you might remember, we saw 27% local currency growth in Q3 last year, driven by a surge in new customer acquisition, where we had a 64% increase in Norway alone. Part of that was related to the successful new partnership with SAS EuroBonus launched in August, which has no new equivalent this year. As we have pointed out on multiple occasions, our business can show bumpy growth, especially if new customer acquisition rates vary. As we look at the second half of 2026, we expect growth to be primarily driven by improved customer behavior dynamics rather than an absolute increase in acquisition rates. We'll also remind you that for our business, the third quarter experiences significant volume decline in July and early August due to traditional Scandinavian vacation periods, while we also ramp acquisition and reactivation costs moving into the second half. So let's take a closer look at where we're at in each market on Slide 7. As we noted earlier, Norway continues to headline our growth with a 22.3% growth in local currency over the first half. Norway accounts for 53% of our net sales. So this high growth also has an overweight effect on our top line. The Norwegian market, which grew at around 39% in local currency in Q3 last year, continues to grow after this remarkable first half development, and we remain optimistic on the future growth trajectory moving into the second half, but clearly at a lower level. Sweden growth increased to 14.3% over the first half, which was up from single digits in the same period last year. This was almost 5 percentage points ahead of the Sweden Online Grocery Index, which capture the wider online sales of groceries in the Swedish market. The market also sticks out right now based on the latest consumer confidence survey, which showed a sharp improvement in July and reached its highest level since January of last year. As with Norway, we continue to experience decent momentum in Sweden moving into the second half and are likely to see growth in these 2 markets converging. As with Norway and Sweden, our business in Denmark has also shown an acceleration in growth. What stands out in Denmark is this shift from a small contraction in the first half of last year to a 7.6% growth in local currency this year. This comes from both a modest increase in delivery volumes and a higher average order value. We remain cautiously optimistic about the effect the changes we have introduced will have on our ability to accelerate growth in Denmark and build a long-term sustainable meal kit business. That said, we are still seeing aggressive discounting continuing in Denmark and even the withdrawal of Nemlig from the meal kit market. Combined with weak consumer sentiment, we are patient in our approach to Denmark and are not looking for any short-term bounce on growth. Let's continue a bit with Norway on the next slide. We were very happy to be able to confirm over the summer that we have regained our market leadership in Norway based on publicly filed accounts for 2025. Local currency growth last year of 24% underline the attractiveness of our offering. We further took the step to acknowledge that driving 2 brands in the market was suboptimizing both and with that, made a bold move to consolidate into a single brand, Godtlevert. That consolidation has proven to be exactly the right move and not only has seen a very successful migration of active customers, but also helped us re-attract many previously inactive Adams customers to try Godtlevert. It also simplified operations in a way that unlocked the ability to expand our menu even further to 150 recipes on a weekly basis and increase the level of personalization our customers experience. This, in turn, has contributed to higher onboarding and retention rates, increased order frequency and average order values, which has supported growth. Furthermore, because the consolidation eliminated the need to maintain certain structural costs associated with 2 brands, a large portion of the marketing efficiency improvements happened in Norway, where we have also reduced discounts on an absolute basis over the, first half. Let's shift briefly to the Finnish market on Slide 9 and share where we are at with the pilot. So as of yesterday, our website is live with first deliveries in the Helsinki region planned for early September. The project to prepare for the pilot has gone well, and we are happy to introduce our full range of 150 weekly recipes in portion sizes from 2 to 6 persons to Finnish households. As with any new undertaking, we still don't know what we don't know. But fortunately, we can control for many of the most complicated components from day 1. This means that deliveries will originate in Sweden with one of our world-class meal kit fulfillment centers, which is already today operating at scale and lives and breathes operational excellence. It means that we have a stable fulfillment environment together with well-established supply change -- chains, which gives us both exceptional control on input costs and a deep understanding of the interplay between menu dynamics and unit economics. It also means that our data-driven feedback culture supports iterative learning. And as we engage with Finnish customers, we fully expect adjustments that will further help us in our ambition to solve dinner better than anyone else. In Finland, we are debuting Cheffelo as a direct-to-consumer brand. For those of us who get meal kit deliveries every week in Norway, Sweden and Denmark, we have already gotten a feel for this brand identity, which is now aligned across the Nordics. Let's look closer at that on the next page. Our brands now share one refreshed identity across every market. This is not a change in strategy. It lines the brands up behind what we already do best, solving dinner with meals that unite families. What the refresh does change is our appearance and how we speak to our target market. The new brand identity is intended to come across like a helpful friend, modern, warm and a little bit playful, but always there to make everyday life easier. It has been designed intentionally to appeal to a younger and wider audience. It centers on the moment around the table with one simple promise, Cheffelo is for all tables. The bolder palette and the brighter yellow in particular, helps us stand out in a crowded market and makes our brands easier to recognize and remember. Cheffelo is committed to the idea that a healthy future for all of us begins around the table, and we exist to help make that happen. Part of our job in solving dinner is also in making it easier to understand how our choices affect the world around us. I'd like to turn to the next page and briefly mention one of our latest releases. When you're in a business that has food as a central component, it is the farming of the ingredients that drive the vast majority of climate impact. We are working hard to solve dinner and in that spirit, are trying to nudge but not judge how customers choose to eat. By providing clear information at the recipe level, we can help highlight how CO2 equivalent emissions are affected by what we eat, and we're the first Nordic meal kit company to make this information available on all of our recipes. The great news is that over 60% of Cheffelo's menu is already classified as low impact, which gives customers plenty of options if they're inspired to make changes. With that, I'll now hand it over to Erik to take us through the financials and summarize our outlook for the upcoming year.

Thank you, Walker, and good morning, everyone. The second quarter was a strong quarter for Cheffelo with growth accelerating and profitability reaching new records. But let's start with net sales. Net sales grew by almost 27% in the second quarter or 23.8% adjusted for currency effects. The second quarter did benefit from a positive comparison effect related to Easter as Easter vacations were fully in the second quarter last year but moved partly into the first quarter this year. Since a higher share of customers typically pass deliveries during holidays, this shift affects comparability between the quarters. We don't publish an Easter adjusted number, but instead, to give you a fair view of the underlying performance, I will focus my comments mostly on the first half. First half growth came in at 18%, right at the top end of the 14% to 18% range that we talked about in our Q1 report, and we are really pleased to see that result. Looking at the drivers behind it, active customers grew by 9.6% end of the period, supported by improved retention rates and good new customer inflow. Average order value increased by 4.8% in the first half, driven by price adjustment and a successful mix shift towards meal kits with more recipes and more portions. And as a last note, I also want to mention the currency effect that we saw in the quarter as Norway made up about 53% of our net sales and the Norwegian NOK has strengthened against our reporting currency in Swedish SEK. This explains why the almost 24% growth in local currency is 27% in reported currency. All in all, we saw a good underlying growth momentum with double-digit growth and our top line metrics pointing in the right direction. So let's move on to a look at our profitability, starting with the contribution margin. In the second quarter alone, contribution margin reached 31.8%, which is the highest contribution margin in the second quarter ever, although this is helped by some of the higher volumes related to Easter. So looking at the contribution margin for the first half, it improved by 0.5 percentage points to 32.1%. That is an increase of almost SEK 38 million in absolute contribution margin. Looking at some of the line items, we see input goods remained quite stable at 46.8% of net sales for the first half. The relative improvement in contribution margin was driven by the leverage on fulfillment costs, where higher volumes reduced fulfillment costs as a share of net sales by 0.8 percentage points. With the good performance in the second quarter, our last 12 months contribution margin is now at 31%. As we continue to see good cost leverage, we now expect to see full year contribution margin to exceed that level going forward. Let's move to have a look at our EBIT. The higher first half net sales converted into a SEK 38.1 million increase in EBIT, resulting in an EBIT of SEK 80 million. That is a growth of almost 91%. At the same time, the EBIT margin improved by 4.3 percentage points to 11.3%, up from 7% last year. This improvement is broad-based across our cost structure, and it reflects continued cost discipline throughout the organization. It builds on the improved contribution margin that I just covered, combined with improved efficiency in both sales and marketing and economies of scale in central functions. Sales and marketing expenses as a share of net sales was reduced by 1.8 percentage points for the first half from 11.2% to 9.4%. I want to point out that despite lower spend in absolute terms in the first half, we see a net sales that has increased by 18%. Part of this reflects the brand consolidation in Norway, where migrating Adams customers on to the Godtlevert brand reduced the need to run 2 separate acquisition campaigns. We also managed to lower discounts across the business without softening demand, which is another sign of strong marketing efficiency. Behind that is the sharper communication of our value proposition to the right customers with improved messaging and better targeting accuracy. Together, economies of scale, combined with contribution margin gains, marketing efficiency and disciplined overhead cost pushed our first half EBIT margin and EBIT level to a new record, reaching SEK 80 million in the first half and 11.3% in EBIT margin. Let's move on to the next slide to have a look at the cash flow. The improved profitability is showing up in our cash generation. For the first half, free cash flow amounted to SEK 67.2 million, an increase of just over SEK 40 million versus same period last year. This is an increase of over 150%. During the quarter, we paid dividends of almost SEK 92 million compared with SEK 42 million last year. Despite the large increase in payout, our cash position at the end of the period was SEK 38.3 million higher than last year. And looking at the change in net working capital, it was reduced -- reduced cash flow by SEK 27.6 million in the quarter. This reduction follows our normal seasonal pattern in net working capital. The variance versus last year in the quarter was mainly a timing effect carryover from the first quarter. Looking at the first half, the cash flow effect from change in net working capital was in line with what we saw last year. All in all, we are pleased with the first half with a good growth momentum translating both to a higher profitability and increased cash flow in both absolute and relative figures. So let's move on to have a look at the outlook for the coming quarters. Looking forward, the performance from our existing customer base remained positive. That said, the third quarter is always a quarter that is highly dependent on the after summer customer ramp-up, which occurs towards the end of the quarter. We are facing tougher comparison than in the recent quarters. Last year, the third quarter grew in a record pace, driven by new customer acquisition. We don't expect that the new customer acquisition will reach the same record level this year due to the dynamics in customer acquisition and the relative higher dependence on volumes from new customers in the third quarter, we expect growth to be lower in the second half compared to what we have seen in the first half. In August, we also made a minor price adjustment averaging slightly above 3%, which is slightly higher than last year. As mentioned earlier, we now expect full year contribution margin to exceed 31% and to continue on profitability. The third quarter is seasonally our weakest quarter. Lower summer volumes are followed by higher sales and marketing activity towards the end of the quarter as we prepare for the autumn acquisition cycle. In the third quarter this year, sales and marketing investment will also be somewhat increased as we are supporting the rollout of our refreshed brand identity across all markets. With that, I would like to hand back to Walker for a quick summary.

Thanks, Erik. And let's go to the last slide to conclude, and then we'll open it up for questions. And in summary, we are pleased with how the first half of 2026 has developed. And here are the following takeaways. Higher double-digit growth in the second quarter lifted first half net sales by 18% and EBIT profitability for the first half increased by over 90% and achieved a record SEK 80 million. Stronger profitability drove increased free cash flow. We regained the market leadership position in Norway for 2025 and a successful brand consolidation this year in that market has outperformed expectations. Our pilot project in Finland is on schedule with first deliveries planned for September. And we have given our brands a fresh new look with modern, warm and more playful identity, which is now live across every market. Finally, we have positive momentum moving into the third quarter, but somewhat tempered growth expectations as we face comparability against the second half of 2025, which experienced a surge in new customer acquisition. The first half is strong is only possible because of the people behind it, and I want to thank every Cheffelonian again for their efforts in making it happen. We have an exciting future ahead of us, and I look forward to talking more about our progress on the road. This concludes our prepared remarks, and we're ready to answer questions. Don't be shy to ask. We really appreciate it gives us a chance to expand on the business, and we've got plenty. So let's get started.

So we'll take question number one. Can you elaborate on why you expect growth to be driven primarily by customer behavior dynamics such as order frequency, retention, average order value rather than by new customer acquisition? Thank you. And I think this is also one of these things where we see and we've talked about the last year a lot about a surge in new customer acquisition. We had new partnerships that came online that were successful. We were successful in the market in acquiring customers at a rate which was higher than what we had seen previously. This creates a type of portfolio dynamic, and it leaves you with a choice. The choice is, do you try to increase new customer acquisition at any cost? Or do you focus on making a great experience for customers? So when we talk about making a great experience for customers, this means focusing on really the things that create these long-tail cohorts. We don't expect to see the same level of new customer acquisition, which means that growth will be driven by other types of fundamentals in the portfolio, which we have seen over quite some time. So we're looking forward to continuing to work with improving the customer experience. Let's take the next question from Kristian Smolle. You're guiding towards lower growth in Q3 year-over-year. Could you break out how much the sauce new partnership campaigns contribute to the 27% organic growth last year? Unfortunately, Kristian, this isn't information that we release. We can say that we don't have a comparable style of new partnership campaign this year, which means that what we're seeing is media-based efforts, the type of normal activity that a meal kit company works with every year. The next question also from Kristian. Denmark showed very solid growth. How do you think about the outlook for the market going forward? Are you already seeing payoff from the marketing investments there? Keep in mind that marketing investments and changes to how we're communicating in the Danish market have only been live for a very short period of time. And with that, a brand refresh. We're trying to cut through a lot of noise in the Danish market, which has been one of the markets with the most competition. In the competitive environment, what we've seen is Nemlig exit the market over the summer when it comes to specifically to meal kits. On the other hand, we also see a really aggressive discounting patterns of other competitors in the market where we have chosen to not be aggressive in attracting customers who are focused on price. And in that regard, it doesn't necessarily mean that we're going to see the effect of marketing activity in the short term as you would, of course, hope for. But I think this is a long game for us, and we've said we are patient. The next question on the average order value growth, could you elaborate on the successful mix towards meal kits with more recipes and/or more portions? Should we expect this mix shift to continue? I'll leave that question to Erik.

So the mix shift towards larger meal kit that means either that you buy -- that our customers buy in average more days or also including more persons. So we are -- we will continue to focus on driving existing customers to add additional days. But when it comes to adding more persons, that's depending on the households, yes, we will continue to focus on both the smaller households and larger households. That meaning that it's hard to really assess the mix effect going forward. But if you look at the average order value, one of those components that will continue to drive that increase in average order value, except for the price increases is also how we handle discount and our focus on reducing discount will still remain effective.

Thanks. Our next question, moving to a little bit of inorganic growth question. Without referring to it, you are going -- if you are going to do acquisitions or not, what potential acquisition targets are there? Any market that offers better opportunities? I'm only after the holistic view here of what is available and what could create value. I think when it comes to this type of question, of course, we couldn't talk about specific scenarios, but one thing we can reflect on is that the market has consolidated in the Nordics over the last several years and even the exit of Nemlig demonstrates one further type of exit from the meal kit space. Very clearly, though, with a company like that, absolutely no interest in sharing customer databases or having -- and selling a piece of the operation, simply exiting and stopping an activity. And I think that's what we're seeing most of in the space. I think over time, when we think about are there more attractive areas or where could we go or what could we do? I think -- when we talk about moving into Finland, this is a way of increasing the total addressable market. When we look across the Nordics and include these 4 markets, the total population is not much more than 25 million. There's obviously other markets in the world, which are significantly larger, but at the same time, create different types of operational and strategic challenges that need to be looked at. So I think what we're doing is we're demonstrating that Cheffelo has legs. We can enter new markets. We're going to work with that and put it down as a proof point. I think it also opens up the doors for other things down the road. Let's shift gears. We'll look at food inflation and the question from Tom Smith. Food inflation has been tough on families. Have stable grocery prices helped your margins? Or are you still find it expensive to source ingredients? I'll leave that to Erik.

Thank you, Tom, for your question. When it comes to grocery prices, it varies from grocery to grocery on the inflation. I wouldn't say that it has stable for us, but we're trying to navigate when it comes to what item that we are sourcing, focusing also on having our Nordic procurement contracts and trying to find the most synergies from that. But we are monitoring food inflation quite close. And our approach to it is not to push forward the inflation effects towards our customers, not to absorb the impact on the margin upsell.