HelloFresh SE — Investor Presentation 2023

Mar 15, 2024

Q4 & FY 2023 Results

15th March, 2024

Disclaimer

This document has been prepared by HelloFresh SE (the "Company" and, together with its subsidiaries, the "Group"). All material contained in this document and information presented is for information purposes only and must not be relied upon for any purpose, and does not purport to be a full or complete description of the Company or the Group. This document does not, and is not intended to, constitute or form part of, and should not be construed as, an offer to sell, or a solicitation of an offer to purchase, subscribe for or otherwise acquire, any securities of the Company, nor shall it or any part of it form the basis of or be relied upon in connection with or act as any inducement or recommendation to enter into any contract or commitment or investment decision or other transaction whatsoever. This document is not directed at, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. Persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

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This document contains forward-looking statements relating to the business, financial performance and results of the Company, the Group or the industry in which the Group operates. These statements may be identified by words such as "expectation", "belief', "estimate", "plan", "target" or "forecast" and similar expressions, or by their context. Forward-looking statements include statements regarding: strategies, outlook and growth prospects; future plans and potential for future growth; growth for products and services in new markets; industry trends; and the impact of regulatory initiatives. These statements are made on the basis of current knowledge and assumptions and involve risks and uncertainties. Various factors could cause actual future results, performance or events to differ materially from those described in these statements, and neither the Company nor any other person accepts any responsibility for the accuracy of the opinions expressed in this document or the underlying assumptions. No obligation is assumed to update any forward-looking statements.

This document includes certain financial measures not presented in accordance with IFRS, including, but not limited to, AEBITDA. These financial measures are not measures of financial performance in accordance with IFRS and may exclude items that are significant in understanding and assessing the Company's financial results. Therefore, these measures should not be considered in isolation or as an alternative to result for the period or other measures of profitability, liquidity or performance under IFRS. You should be aware that the Company's presentation of these measures may not be comparable to similarly titled measures used by other companies, which may be defined and calculated differently. See the appendix for a reconciliation of certain of these non-IFRS measures to the most directly comparable IFRS measure.

2023 Year in Review

Fifth consecutive year of profitable, self-funded growth, in which we delivered over 1bn meals to our customers, up ~4x since 2019 Revenue of €7.6bn, a constant currency growth of 3% Rapidly growing and profitable global RTE business with revenue of €1.4bn Contribution margin expansion by 1.3 pp to 27%
AEBITDA of €448mn, down 6% yoy
Improving cash flow from operations and positive FCF for the full year

2023 marked the 5th consecutive year of self-funded, AEBITDA profitable growth

Despite the temporary slowdown, we have held onto the Covid-supported growth better than comparable categories

(1) Revenue weighted peer growth yoy by sectors, indexed to 2019 (FMCG: Nestle, Unilever, Danone, Mondelez, General Mills, Kraft Heinz; Grocery: Ahold Delhaize, Walmart, Target, Tesco, Kroger, Carrefour, Albertsons, Sainsbury; General E-Commerce: Amazon, Chewy, Etsy, Shopify, Allegro; Fashion E-Commerce: Zalando, Asos, Boohoo, Stitch Fix; Furniture E-Commerce: Wayfair, Westwing)

Number of orders moderately down in Q4, but with an improving trend throughout the year

• Orders in both segments (NA and Intl) down yoy in Q4 by low single digit %
• Improving yoy trend in Q4 vs prior quarters
• Strong positive RTE order growth throughout the year, despite delayed ramp-up of additional US production capacity

Continued AOV expansion throughout the year

• AOV growth continued in Q4, increasing 6.4 % yoy on a constant currency basis
• Both segments showed meaningful increase in AOV in Q4
  • NA: 7.0 % (CC)
  • Intl: 5.0 % (CC)
• Q4 AOV increase yoy driven by:
  • Increased RTE contribution
  • Selected price increases
  • More meals per box
  • Increased take-up of HelloFresh Market

Constant currency Q4 revenue growth of 3.4%, and 2.8% for the full year

• Positive CC revenue growth across both segments, with re-acceleration over the last 2 quarters
  • NA +4.4%
  • Intl +1.6%
• RTE growing strongly to €1.4bn revenue in 2023, at positive AEBITDA. Well-positioned for continued strong growth in 2024
• In meal kits, softer trading environment due to lower new customer acquisition activity, as previously flagged

Procurement expenses as % of revenue up 0.8pp yoy in 2023, driven primarily by RTE growth

• RTE has comparatively higher procurement costs, as it captures all aspects of the cooking process
• In NA, procurement expenses increase mainly driven by RTE (mix effect) in addition to Q4 extra costs as previously discussed
• In Intl, improvement by 1.7pp in Q4 as ingredient inflation slows

Continued reduction of relative fulfilment expenses by 2pp yoy in 2023

• Significant improvement in relative fulfilment expenses for the 6th straight quarter
• NA: Improvement primarily driven by structural lower fulfilment costs in RTE; somewhat offset by extra Q4 expenses as previously flagged
• Intl: fulfilment cost improvement driven by ongoing efficiency gains

Despite previously flagged RTE ramp-up and other costs in Q4, 1.3pp contribution margin expansion, reaching 27%¹for the full year

• Strong contribution margin expansion across both segments:
  • NA: 1.6pp expansion for the year, despite being down (1.3pp) in Q4, due to previously flagged extra costs
  • Intl: 1.1pp improvement for the year, driven by both fulfilment and procurement efficiencies across most markets

Marketing spend above prior year at 18.8%¹ of revenue

• Meal-kits absolute marketing spend relatively flat yoy (FY)
• Absolute RTE marketing spend up by ~60% yoy, in line with revenue growth (FY)
• Less efficient marketing spend in Q4 due to demand steering in RTE

Full year AEBITDA of €448m for the Group

• AEBITDA development yoy driven by:
  • Softer EUR-FX rates
  • Continued contribution margin expansion
  • Somewhat higher relative marketing expenses
• Previously discussed Q4 effects: US RTE production extra ramp up related expenses and softer meal kit trading environment

Return to positive free cash flow of €78m in 2023

• Cash Flow from Operations increased to €384m
• CapEx reduced to €306m
• Strong cash position of €433m at year end
• Ongoing share buyback program, under which €30m of stock has been bought back in Q4 2023

Free Cash Flow

(in € millions)

We are well advanced in our multi-year capex program; most important projects completed or close to completion

CAPEX development (€ millions)

• 2024 capex primarily comprises:
  • RTE production capacity expansion (US, CA, EU)
  • Completion of automated meal kit fulfilment centers, started in 2021/2022 primarily DEAT and UK, and other automation
  • Capitalized own-developed software
  • Some last mile build-outs
• From 2025 onwards capex expected to further step-down to c. €200m or below; RTE representing the biggest investments in those periods
  • This will further drive attractive FCF/share expansion from 2025 onwards

Strong balance sheet with ample liquidity resources and little financial debt

(In € millions)
Cash on Balance Sheet	433
Untapped and available RCF	366
Total liquidity resources	799
Convertible bonds(1)	172
Liquidity Cover	4.6x

Liquidity vs. financial debt	Leverage (at mid point of AEBITDA guidance)
------------------------------	---------------------------------------------

Net Debt/AEBITDA	0.77x
AEBITDA (2024 mid point)	375
Net Debt	289
Capitalized leases(2)	550
Convertible bonds(1)	172
Cash on Balance Sheet	(433)

2024 will be a relatively complex transition year for HFG

	Key Trends	2024 Group Outlook
RTE	Meal Kits
• Robust secular demand driving attractive revenue growth	• Relatively soft consumer demand • Negative volume growth, but with easing trend in H2	Constant Currency Revenue Growth 2% - 8%
• Ongoing production volume ramp up expenses, starting to ease in H2 • Elevated marketing expenses due to	• Fixed cost impact from volume deleveraging • Ramp-up of modern fulfilment	AEBITDA
strong customer growth Ongoing RTE internationalization	centres with higher target efficiency but with initial extra costs • Product investments	€350m - €400m

Strategic Update Highlights

The attractiveness of our customer base has increased significantly over time and the value we generate with our existing base is highly predictable

(1) Average order value in Q4 of the respective year

(2) Average order rate in Q4 of the respective year

(3) Average cumulative net revenue for 10 weeks after conversion for customers acquired in Q4 of the respective year

We are shifting focus in our meal kit business towards existing customers and stabilization of growth, as we build the muscles required for the next leg of growth

Roll-outs happening gradually over the next 12 months

With more moderate growth expectations, we will target faster expansion of meal kit earnings than top-line in the coming years

Mid-term margin Long-term Upside

Long-term AEBITDA margin profile(1) Measures to improve the margin mid to long term:

Right size the cost base and optimize production infrastructure

Bring new automated fulfilment centers quickly to target productivity levels

Investments in technology, machine learning and GenAI to drive cost efficiencies

Lower marketing costs by moving from financial toward product incentives

Growth in 2024 will be driven by RTE, which still operates at a relatively low TAM penetration and has just commenced internationalization

RTE Revenue

Growth Levers

RTE ramp-up will switch from being a margin headwind to a margin tailwind as we reach greater maturity

Long-term AEBITDA margin profile(1)

Mid-term margin Long-term Upside

(1) AEBITDA excluding holding costs, in line with segment reporting

Capitalizing on HFG's growth playbook and platform to improve the margin

Higher AOV through broadening our assortment and add-ons offering

Productivity improvements with increasing maturity of production network

Marketing as a % of revenue will decline as customer base matures

After initial investment period, newly launched International RTE geos will turn AEBITDA profitable

Summary

Meal kits in consolidation phase in 2023 and 2024: return to sustainable growth will be a function of further improving customer experience
Accelerating Group revenue growth expected in 2024: driven by RTE through deploying our proven hyper scale-up playbook
Meal kit cost base to be right-sized to match growth path
Long term AEBITDA margins should trend toward > 10% for every business unit: mix shifts and different maturity stages hide underlying profitability currently
We are actively working on identifying and scaling the next \$bn business line

Group: Operational and Financial KPIs

1. Contribution margin is defined as revenue less cost of goods sold and fulfilment expenses, excluding share-based compensation expenses

2. AEBITDA is calculated by adjusting EBITDA for special items and share-based compensation expenses; AEBITDA margin is defined as % of revenue

3. Based on constant currency

NA: Operational and Financial KPIs

1. AEBITDA is calculated by adjusting EBITDA for special items and share-based compensation expenses; AEBITDA margin is defined as % of revenue

2. Based on constant currency

International: Operational and Financial KPIs

1. Contribution margin is defined as revenue less cost of goods sold and fulfilment expenses, excluding share-based compensation expenses 3. AEBITDA is calculated by adjusting EBITDA for special items and share-based compensation expenses; AEBITDA margin is defined as % of revenue

2. Based on constant currency

Profit and Loss Statement

		3 months ended	Change %	12 months ended		Change %
	31-Dec-23	31-Dec-22	YoY	31-Dec-23	31-Dec-22	YoY
Revenue	1,859.0	1,874.5	(0.8)%	7,596.6	7,607.2	(0.1)%
Procurement Expense	(670.1)	(642.1)	4.4%	(2,675.6)	(2,620.3)	2.1%
Fulfilment Expense	(692.0)	(733.2)	(5.6)%	(2,910.7)	(3,070.7)	(5.2)%
Contribution Margin	496.9	499.2	(0.5)%	2,010.3	1,916.2	4.9%
% of Revenue	27.1%	26.9%	0.2pp	26.9%	25.5%	1.3pp
Marketing Expense	(356.7)	(303.6)	17.5%	(1,440.5)	(1,284.2)	12.2%
G&A	(97.0)	(93.6)	3.7%	(411.0)	(366.5)	12.1%
Other Operating Income (Expenses)	(16.4)	(7.4)	121.3%	(48.1)	(24.6)	95.3%
EBIT	33.7	85.6	(60.6)%	112.5	217.4	(48.2)%
% of Revenue	1.8%	4.6%	(2.8)pp	1.5%	2.9%	(1.4)pp
Financial Result	(47.1)	0.8	(5990.7)%	(17.3)	(7.8)	122.2%
EBT	13.6	38.5	(64.6)%	73.3	200.0	(63.3)%
Income Tax (Expense) / Benefit	(25.0)	(5.0)	401.6%	(55.2)	(74.9)	(26.2)%
Net Income / (Loss)	(11.3)	33.5	(133.9)%	18.1	125.1	(85.5)%
Reconciliation starting at EBIT
EBIT	33.7	85.6	(60.6)%	112.5	217.4	(48.2)%
D&A	67.7	52.7	28.6%	231.3	165.8	39.5%
EBITDA	101.5	138.3	(26.6)%	343.8	383.2	(10.3)%
% of Revenue	5.5%	7.4%	(1.9)pp	4.5%	5.0%	(0.5)pp
SBC	13.3	(1.2)	nm	82.0	55.5	47.9%
Special Items	(1.1)	23.0	(104.8)%	21.7	38.7	(43.8)%
AEBITDA	113.6	160.1	(29.0)%	447.6	477.4	(6.3)%
% of Revenue	6.1%	8.5%	(2.4)pp	5.9%	6.3%	(0.4)pp

Balance Sheet & Cash Flow Statement

In MEUR	As at 31-Dec-23	As at 31-Dec-22
Assets
Non-current assets	1,756.4	1,623.0
Cash and cash equivalents	433.1	504.0
Other current assets	391.7	408.2
Total assets	2,581.3	2,535.2
Equity and liabilities
Equity	1,019.0	959.6
Non-current liabilities	649.3	605.1
Current liabilities	913.0	970.5
Total equity and liabilites	2,581.3	2,535.2

In MEUR	2023	2022
Cash and cash equivalents at the beginning of the period	504.0	827.1
Net Cash flows from operating activities	383.8	313.4
Net Cash flows from investing activities	(339.6)	(443.8)
of which M&A	(36.1)	(25.6)
Net Cash flows from financing activities	(110.8)	(204.3)
Effects of exchange rate changes and other changes on cash and cash equivalents	(4.2)	11.5
Cash and cash equivalents at the end of the period	433.1	504.0