Good morning, ladies and gentlemen, and welcome to the HelloFresh SE FY 2025 results call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Dominik Richter.
Good morning, ladies and gentlemen. Thank you for joining our Q4 and full year 2025 earnings call. Alongside this presentation, we've also published our full year 2025 shareholder letter, which provides some additional strategic context on the year and on our outlook. We encourage everyone to read it in conjunction with today's remarks. With me today is also Fabien Simon, our group CFO, who joined us about six months ago. The structure of today's call is as follows. I'll start by providing a strategic overview of where we are as a company and where we're headed. Fabien will then walk you through the full year 2025 financial results and our 2026 guidance in detail, and after that, we'll open the floor for your questions.
Before we do this, I'd like to give, Fabien some time to introduce himself and his observations today briefly.
Thank you, Dominik, and good morning to all of you. Few months ago, I shared with many of you on the call the reason for me joining HelloFresh. After 25 years in consumer goods, I projected myself into the future of the industry and towards what the consumer value more and more, which are, first, affordable, healthy food that do well for the community, ideally with more local sourcing, more sustainable than existing alternatives. Second, when and where you do provide differentiated services beyond the other product. Here I could refer to help to discover new recipes or just to deliver all ingredients at home and removing the pain of in-store shopping, for example. Third, a company with cutting-edge direct-to-consumer marketing engine, which is critical to interact with the consumer of today and likely even more with the consumer of tomorrow.
Fourth, where in the end, the consumer feels valued and recognized with personalized solutions and not a one-size-fits-all product, which is kind of the model of most traditional CPG. Back then, I believe that HelloFresh was the largest DTC food player globally, born with those characteristics, which are very difficult to replicate, and that do provide strong competitive advantage over time. Now, six months down the road, I do recognize in HelloFresh those characteristics, especially with data, infrastructures, technology, and last mile to a level that I have never experienced before. At the same time, I do see opportunities for HelloFresh to simplify the complexity that crept in over the years to be more focused and possibly to be more realistic and more disciplined sometime. The company has great DNA, such as speed and agility, but sometimes stepping back and walking before you run had some benefits.
Overall, I would say that HelloFresh is a unique company in the industry landscape and is at a junction between an FMCG and a direct-to-consumer tech business. I'm glad to join the team to learn many new things and hopefully as well to share some of my accumulated experience to support Dominik and the team in writing the next chapter of HelloFresh.
Thank you, Fabien. Very fortunate to have you at HelloFresh. I want to use my time today to cover three things. First, where we stand on the strategic reset we began in summer 2024. Second, an honest assessment of where our growth trajectory is heading across both Meal Kits and Ready-to-Eat, including what went well and what didn't. Third, how we're thinking about 2026, including potential headwinds, investments, and the choices we are making to position the company for durable value creation. Our shareholder letter, which we published this morning, covers this in depth. I won't repeat it, but I want to give you the strategic frame that should guide how you interpret the numbers that we will share as part of this earnings call. In summer 2024, we made a deliberate choice.
Before we could credibly invest in growth, we needed to fix the foundation of the business by improving unit economics and cutting fixed costs. We outlined a EUR 300 million efficiency reset program and sequenced it ahead of everything else. The logic was pretty straightforward. Efficiency creates margin room, margin room funds product reinvestment, better product drives retention, and retention is what ultimately unlocks sustainable and profitable growth. This program was predominantly fixated on fixing our Meal Kits business, which had grown insanely fast but accumulated a cost structure that was not in line any longer with the volume outlook of the business.
At the time of creating this efficiency program, we expected our RTE product category to continue its path of double-digit growth and correspondingly post higher absolute EBITDA and expanding margins for 2025 and 2026. Two years in, we're very much in line with our original plan in Meal Kits. In fact, somewhat ahead in terms of Meal Kit profitability, but have faced operational setbacks in RTE we hadn't planned for. On the efficiency side, roughly 80% of the program's initiatives were implemented by year-end 2025. The P&L impact in 2025 alone was approximately EUR 160 million, with another roughly EUR 140 million expected to flow through in 2026 as the remaining initiatives take full effect and we benefit from run rate savings. The majority of these are not one-time savings.
They're permanent structural improvements such as direct labor productivity gains, network rationalization, a fundamentally leaner overhead structure, and a complete restructure of our equity compensation programs, which have reduced stock-based compensation expenses by over 30% year-over-year. The financial proof is very visible in our Meal Kits product category. Meal Kit adjusted EBITDA margin reached 13.5% for the full year 2025, the highest level since the pandemic, and a nearly 4 percentage point improvement over 2024. Contribution margin for the group expanded one full percentage point to 26.8%, and both free cash flow and EBITDA per order improved meaningfully year-over-year. In essence, this means that the structural earnings power of the group is significantly higher today than 18 months ago.
While the size of our Meal Kit business declined in absolute terms, the revenue quality today is much higher. Tenured customers, that means those with more than 50 lifetime orders, now represent 51% of all meal kit orders, up from 13% in 2022. The absolute number of orders we get from this cohort has remained highly stable even as the total volume declined, which tells you that the core of our customer base is healthy and engaged, and the volume decline has come from lower new customers joining. This is a deliberate outcome. We've prioritized margin over volume, tightened marketing ROI thresholds, and accepted a temporary reduction in the active customer base to structurally ensure that when we re-accelerate acquisition, it is on top of a better product and fundamentally healthier unit economic profile.
Most important is not the margin expansion itself, it's what we do with it. In summer 2025, we launched our reinvestment program called The ReFresh. It's the largest product investment cycle in HelloFresh. We expanded protein variety, introduced new cuisines, significantly broadened the number of unique SKUs on our menu, and upgraded ingredient quality in key categories, including organic dairy and higher welfare proteins. In select markets, we increased portion sizes. Cumulatively, these investments have made a big difference to customer sentiment and our ability to monetize customers better over their lifetime. While it's hard to prove the individual impact of each change we're making, the cumulative impact of these to the customer experience has been extremely well-received. This has been a stage-gated rollout.
We piloted in the Nordics and the U.K. first, measured rigorously against pre-established KPIs, and only expanded to additional markets like the U.S. once we saw clear evidence of the impact it has. The early results are encouraging. Cumulative net revenue per conversion, which is the best proxy for customer lifetime value, is up 16% after 10 weeks and 21% after 20 weeks when comparing our H2 2025 cohorts to our H2 2024 cohorts. We've also seen some of the highest NPS ratings in years. Critically, customers perceive stronger value for money despite us having raised prices simultaneously. We're now investing with discipline, funding product investments from structural savings, and continuously rolling out proven strategies to more markets globally. That is the flywheel working as designed. Now let me be direct about where we are on the growth trajectory, because it's a mixed picture overall.
In Meal Kits, the trajectory is clear and the story pretty clean. It's moving in the right direction. Constant currency revenue declines narrowed in every single quarter of 2025, from -14.5% in Q1 to -13% in Q2, -12% in Q3, and -10% in Q4. That's four consecutive quarters of sequential improvement with international Meal Kits nearing a return to positive growth in 2025 already. We expect this trend of sequential quarterly year-over-year revenue improvement to continue throughout 2026. In Ready-to-Eat, the story is more complicated, which is why I want to address it head-on.
2025 was a tale of two halves for RTE in the U.S. In H1, we absorbed the consequences of regulatory-driven food manufacturing challenges that cascaded into product quality issues and impacted customer experience at exactly the wrong time while we were simultaneously spending on brand and performance marketing. The result was worse unit economics, lower marketing ROI, and lower customer retention, resulting in a significant gap to our original plan. Later in the year, we made a difficult but correct decision. We pulled back growth investments substantially, prioritized fixing the operational foundation, and focused on restoring product quality and customer sentiment. That meant accepting a short-term decline in the active customer base, which is the position we find ourselves in entering 2026. The underlying indicators have turned when you look at December exit rates.
Customer retention has bounced back to levels we had seen before we were hit with the temporary operational setbacks. Our full menu catalog has been unlocked for our customers again, and meal reheat times are back to normal, which has contributed strongly to better quality, taste, and customer sentiment. Productivity in our cooking facility has also converged back to the longer-term averages. As a result, NPS and Factor U.S. is up 400 basis points year-over-year. Cancellation rates are down approximately 16% across all customer maturities. Net revenue per customer, the best early proxy for customer lifetime value, is tracking meaningfully above prior year levels at every measurement interval. For 2026, we will continue to build on top of this strong foundation of operational excellence.
Our primary goal is to restore the bottom line profitability for the RTE product group back to the levels we saw in 2024 already. We are now also slowly turning our attention back to reigniting our growth strategy. This is the single biggest swing factor for 2026. We cut growth investments materially in H2 2025 as we focused on fixing the operational foundations and culinary excellence. Restarting the Factor growth engine is the number one operational priority for 2026 now that customer quality metrics as well as unit economics are in the right place again. On the RTE business outside the U.S., in Canada, in Europe, and in Australia, we were not affected by these issues and have continued to post healthy double-digit growth and improve profitability.
We aim to continue on this strong growth trajectory also in 2026 and expect the overall RTE product group to show sequential improvements over the course of every quarter in 2026. At the group level, the strong progress in Meal Kits was partially obscured by RTE underperformance. Meal Kits are tracking ahead of our original EBITDA plan outlined in summer 2024, while RTE is behind. This gap is real, and it has shaped our reported results. It doesn't change the structural improvement we have achieved in the core business, and I want to make sure that that distinction is clear to everyone. We are now entering the year with a set of headwinds that are partly within our control and partly not. In Q1, severe winter storms across the U.S. and Europe caused significant operational disruption.
Specifically, Winter Storm Fern in the U.S. was brutal and widely reported to be the heaviest winter storm in 75 years. Our employees were unable to reach distribution centers, inbound ingredients deliveries were delayed, orders stranded in our supply chain and had to be discarded, and last mile delivery failed across affected regions, leading to high customer credits and refunds. The estimated impact is approximately EUR 20 million on revenue and about EUR 25 million on adjusted EBITDA. That's a one-off, but it's a meaningful one-off, and it will be visible in our Q1 results. Second, Factor U.S. new customer volumes are down year-on-year versus the heavy spend quarter we had at the same time last year, given our primary focus on operational excellence and restoring profitability first. Against these two headwinds, we're still making a conscious choice to keep investing.
Our mid-teen EBITDA margins in Meal Kits give us the room to do so. We'll continue to expand The ReFresh program across more markets, broadening menu selection, upgrading ingredient quality, and improving the consumer app experience. These investments have a time-lagged impact on the P&L. Case studies from our early markets give us confidence that the retention and lifetime value improvements are real and will compound over time. All in all, we try to be very deliberate about not making short-sighted decisions that would sacrifice the investments needed to return this business to durable growth in the face of the two headwinds I quoted. I'll now hand over to Fabien, who will take you through the detailed financials and our 2026 guidance.
Thank you, Dominik. Let's now look at the key highlight for the year. Let me check the page. Sorry.
Okay, now it's working. Sorry. I will not spend too much time on all these points here, as we will be talking about it in more detail further. We delivered a group revenue of EUR 6.8 billion, which represents a 9% decline in constant currency. While the headline figures reflects a deliberate pivot towards efficiency, even at the expense of volume growth, I want to emphasize that order volumes from our loyal tenured customer base remain highly stable throughout the year, as Dominik presented earlier. In our Meal Kit category, we saw a sequential narrowing of revenue declines in every single quarter of 2025. This shows that investment in variety, quality, portion sizes through the Hello reFresh initiative are resonating well with consumers.
For Ready-to-Eat, while the recovery in the U.S. has paced below the initial expectations, the operational issues that held us back in 2025 are now fully resolved. On the bottom line, our full year 2025 adjusted EBITDA reached EUR 422.8 million, landing squarely within our guidance range and representing a 14% increase year-on-year in constant currency. The Meal Kit margin, in particular, reached 13.5% of net revenue, its highest level since the pandemic. Finally, we hit a major milestone by turning free cash flow positive post-lease and to its highest level since 2021 at EUR 18.9 million for the year 2025. Moving to page 13, we see that orders declined by about 12% for the full year 2025.
This figure is made of meal kit orders, which are improving sequentially now for all quarters of the year and slightly ahead of expectations, while ready-to-eat orders lagged our internal expectations. As I said in the introduction, despite the overall decline, the absolute numbers of orders from our tenured customer in Meal Kit, those who have placed more than 50 orders with us, has remained highly stable. This customer now represents 51% of our meal kit orders, up from 42% in the end of 2024. This shift is a direct result of our value over volume strategy. By focusing marketing on high intent, high quality customer, we are building a more predictable and profitable ecosystem. On page 14, you can see the continued expansion of our average order value.
For the full year, AOV was up 3.4% in constant currency, and this was driven by two main factors. One, by a higher contribution from add-on and recipe upgrades as higher quality customers engage more deeply with our menu. Second, by a reduction in price incentives for new customers as we focus on ROI positive acquisitions. In Q4 specifically, both North America and international segment showed meaningful growth, with international leading at 4.8% in constant currency. Now turning to the overall revenue performance on slide 15. So as mentioned, group revenue declined 9% in constant currency for both Q4 and for the full year. The divergence between our categories are very clear. Meal Kits are on a steady path towards stabilization, narrowing the revenue gap for four consecutive quarters, and is expected to continue this trend into 2026.
Ready-to-Eat, however, saw a 7.5% decline in Q4, given the impact of the U.S. operational challenges on conversion. For a business like Ready-to-Eat, conversion underperformance has a stronger negative impact in our P&L versus Meal Kit, given the lower maturity of the customer base. We expect these Q4 trends to carry over into at least the first few quarters of 2026 for Ready-to-Eat. Page 16, let's discuss our contribution margin for both the quarter and the full year. Here, I'm pleased to report that we delivered a full year 2025 contribution margin, excluding impairment, of 26.8%, which represent a year-on-year improvement of 100 basis points, exactly as we guided. This expansion was structural and broad-based, driven by the efficiency measures we have described already on multiple occasions, and with contribution margin growth achieved in both of our product categories.
Looking at Q4, the group contribution margin reached 28.3%, up 1.2 percentage point versus the previous year. This was driven by a few factors. In Meal Kit, especially in North America, we saw significant margin expansions driven by continued productivity gains in our fulfillment centers. In Ready-to-Eat, we saw a healthy recovery in margin, both sequentially and year-on-year, as the operational issues that hampered our first half performance were successfully resolved. Now, on marketing spend, in line with our commitment to prioritize efficiency, full year 2025 marketing spend declined meaningfully in both absolute and relative terms. For the full year, we reduced our marketing investment by over EUR 200 million. The primary driver here was in Meal Kit category, where we've remained highly disciplined in our agenda of high ROI, high-quality customers, even though that came at the expense of volume goals.
To illustrate the level of this discipline, the year-on-year percentage reductions in Meal Kit marketing spend was double the rate of our order decline there. This was particularly prevalent in the U.S., where Meal Kit saw their marketing spend in US dollar declining more than 40% in 2025. On the other side, marketing spend for Ready-to-Eat did increase during the year overall, partly due to brand and performance marketing investment in the first half, which did not have a corresponding impact on conversion given production issue. In H2, particularly in Q4, we scaled back our marketing spend while we fixed the fundamental. Now that these issues have been resolved, which were our first priority, we also turn our attentions to reinvest, but carefully, into marketing and product during 2026 from a low base in Q4 to return to growth in Ready-to-Eat.
You can see now on slide 18 our adjusted EBITDA performance for the quarter and the full year. We delivered for the full year a group adjusted EBITDA of EUR 422.8 million, landing squarely within our guidance range. Had it not been for Forex impact, we would have landed well within the original guidance issued in March 2025. A key highlight of this result, again, is the profitability of our Meal Kit category. We achieved a full year adjusted EBITDA margin for Meal Kit of 13.5%, the highest level we have seen since the pandemic, demonstrating again the power of focusing on the efficiency reset and better quality customers. Even if we reinvest part of that into the product in the short- term, we still plan to maintain a double-digit margin for Meal Kits going forward.
Regarding Ready-to-Eat, while the full-year margin was slightly negative at -1.2% due to the issue we already talked about in the U.S., the category returned to a positive 6.6% margin in Q4. This confirms that the operational fixes we implemented in the second half are taking hold. Here we want to provide a bridge of our Meal Kit profitability to show that the progress we've made is structural. We grew Meal Kit adjusted EBIT from EUR 365 million in 2024 to EUR 486 million in 2025. As you can see, the negative impact from volume price mix was more than offset by our pivot toward higher marketing ROI. Similarly, the realization of our efficiency program more than offset our investment in product for the year.
These are self-funded product investments that create a sustainable midterm trajectory as our volume base stabilizes. When we talk about guidance in a few slides, we can contextualize further how these buckets evolve in 2026 specifically. In the midterm, as volume eventually turns positive for Meal Kit, we should expect a tailwind to adjusted EBITDA with operational leverage from volume price mix. Similarly, as we think further into the future about efficiency, we don't plan to spend more in product than what we structurally save by being a leaner organization. This means that we should see adjusted EBITDA for Meal Kit in the medium term to grow from here in absolute euro. On free cash flow, well, we are very pleased to report that we returned to positive free cash flow in 2025 and to the highest level we have been since 2021.
For the full year, we generated EUR 18.9 million in free cash flow on our new post-lease definition, which represent a significant EUR 42.5 million increase year-on-year. This milestone was mostly achieved through two drivers. First, improved operating cash flow. Our cash flow from operating activities rose to EUR 297.4 million, up from roughly EUR 266 million in 2024, supported by our higher EBITDA. Second, we significantly reduced our CapEx from EUR 166 million in 2024 to EUR 130 million in 2025. This reflects the ongoing success of our CapEx streamlining measures, even when accounting for some intentional deferrals into 2026. I should note as well that our 2025 lease liabilities were higher than typical at EUR 123.9 million.
This was due to certain one-off lease termination payments we made in the third quarter as we optimized our footprint. For 2026, these lease liabilities are expected to normalize back to a level below EUR 100 million. Ultimately, this return to free cash flow positivity is a clear signal that our efficiency reset is translating into a self-funded growth engine. Turning now to our guidance for 2026. Before we get to the number, I want to address transparently the specific internal and external drivers informing our outlook so far for the year. As we mentioned in our pre-release, Meal Kit performance continues to improve sequentially, while at the same time, we acknowledge that the Ready-to-Eat recovery in the U.S. is lagging behind our initial expectations.
Just like it was the case in 2025, this will have an impact on our group level top line performance in 2026. Furthermore, we faced, as Dominik highlighted, significant unexpected weather disruption in Q1 2026. A series of severe winter storms across the U.S. and part of Western Europe prevented employees from reaching our manufacturing facilities and disrupted both inbound logistic and last mile delivery networks. We estimate the impact of this storm alone to be about EUR 20 million on revenue and about EUR 25 million on adjusted EBITDA. These are truly one-off. Nevertheless, this will be reflected in the Q1 numbers. With that in mind, our 2026 guidance is as follows. For net revenue growth, we expect a range of -6% to -3% in constant currency. This includes the estimated slightly above 1% negative impact from the Q1 storm.
On adjusted EBITDA in constant currency, we are guiding to a range of EUR 375 million-EUR 425 million. Importantly, this accounts for a EUR 25 million weather-related in Q1, which would have otherwise meant that the midpoint of our guidance for 2026 would have been our 2025 adjusted EBITDA level. The midpoint of our respective range includes the current top line development as we see them from Meal Kit and RTE, the expectation that our efficiency reset measures continue to progress, and some stage-gated investment in the product, which should amount to about 1.5% of incremental COGS as a percentage of net revenue in 2026 versus 2025. This value is slightly lower for Ready-to-Eat and higher for Meal Kit, and it is presented net of the impact of price increases.
Now, by product category, for Meal Kit, we expect to maintain a double-digit adjusted EBITDA margin. While we anticipate some volume deleverage and incremental product investment, which means that Meal Kit adjusted EBITDA in 2026 will temporarily come slightly below 2025, we believe the structural gains of 2025 are here to stay. For Ready-to-Eat, our focus is a return to full year adjusted EBITDA profitability. We are leveraging our reserved operational baseline to reignite the growth toward the second half of the year, which we expect will more than offset the adjusted EBITDA consumptions of ramping up operations in Europe. On page 25, we are announcing an enhanced reporting framework to improve transparency for our investors. Going forward, we will focus on the same key metrics, adjusted EBITDA and revenue growth, but we will guide on a constant currency basis for both as per market practice.
Starting from Q2 2026, we will shift to full P&L reporting by product category, Meal Kit versus Ready-to-Eat, instead of a geographical segment. We believe this will provide a better understanding of the underlying dynamics of the business. Our primary cash flow metrics will now be free cash flow plus leases in line with investor feedback. Going forward, and as we did already in January this year, we will endeavor to pre-release our full year high level result in a scheduled matter. Finally, on page 26, now we have concluded our share buyback program in line with the AGM mandate. Our capital allocations priorities are evolving. On share buyback, we repurchased 20.3 million shares at an average price of EUR 7.5. We also canceled just shy of 14.2 million shares in 2025.
Looking ahead to 2026, our capital allocation priorities are first, organic growth, investing behind the product improvement we've discussed today. Leverage by maintaining a disciplined net debt to adjusted EBITDA ratio of about 1.5x . Pursuing disciplined bolt-on or opportunistic acquisitions. Finally, tactical buyback. There we will seek AGM authorization for the flexibility to execute further buybacks if market conditions warrant and in the order of the above priorities. On that, I will hand over the call to the operator for the Q&A session.
Thank you. Ladies and gentlemen, first, we kindly ask that you limit your question to one, and if you would like to ask a question, please press nine and the star key on your telephone keypad. If you would like to cancel your question, please press three and the star key again. Please press nine and the star key if you would like to ask a question. The first question comes from Luke Holbrook from Morgan Stanley. The floor is yours.
Good morning, everyone. Thank you for taking my question. It was just really thinking about the delta in the efficiencies that you're recognizing in 2026, but then with adjusted EBITDA flat year-over-year when you strip out that Q1 weather impact. Can you just run us through a little bit more detail how that kind of EUR 140 million effectively gets down to zero? Thank you very much.
I think what you are looking for is kind of understanding the bridge of our performance in 2026 on the adjusted EBIT level, if I hear well your question, Luke. Let me help you here. Here I would distinguish again what's very important going forward is Meal K it versus RTE. On RTE, we are expecting a moderate increase as we have been presenting in a few slides ago. On our Meal Kit business, what we see is tailwind from continued efficiency progress, and overall, we are expecting for the company EUR 140 million incremental savings to hit the P&L in 2026 above 2025. Part of this saving, sorry, will be reinvested in product investment as we described.
We should acknowledge at the same time that for Meal Kit, as we are in steady recovery growth, we are still expecting to be in volume decline in 2026, which is leading to operational deleverage, which is the only reason why we see some lower absolute EBITDA in our Meal Kit business for 2026.
Understood.
You have to be.
Previously, you've said that if you are churning through unprofitable or lower profitable customers that it will benefit profitability, but you're suggesting today that actually it's the deleveraging, the lower utilization impact that's essentially a net negative into 2026.
No, I think what you should. The way I would look at as a Meal Kit business, I would say on top line and on bottom line. I think first, if you look at the bottom line, I think we have re-earned the right to invest behind product because we are in a food company and providing a better quality solution to consumer will work out. We see that on top line, and we have to look at it step by step. First, you have to reduce the churn of the customer base, make your existing customer ordering more product. This is what we see today, which I think it's a success. What we have to turn now is ensuring that this increasing consumer proposition will be well-known and will attract higher new customer.
This is the agenda where we are now. We do not see dilution of profitability on our existing customer. It is the opposite.
Okay, thank you.
Thank you. The next question comes from Giles Thorne from Jefferies. The floor is yours.
Thank you. It was a single question for Dominik, please. It would be useful to hear the logic for the partnership with Target in the United States, given it represents, I think a big departure on distribution channel. First time you've gone retail and also a big departure on monetization model, given it's again, just a per meal sale. Any color around your thinking there, and also on the direction of travel, should we expect to see more of this type of thing?
Great question. As a matter of fact, we actually have a strong presence with our Ready-to-Eat meals in Australian retail already under our Youfoodz brand. We have a very healthy retail business established in Australia. It was never the question if we are also choosing to offer our Ready-to-Eat meals in other distribution channels than direct to consumer, just when. What we did, and you're absolutely right there, is we ran a very successful pilot with Target, and we're now sort of like working through different ways how we can scale that further up also for the U.S. market. We definitely see that as one of the vectors of growth in the future to diversify sort of like our growth trajectory in RTE further.
We still very much believe in, obviously, direct to consumer, and we think the propositions. That's also what we see in Australia between retail and direct to consumer are slightly different use cases. We have high confidence that our product also works on such distribution channels well, and that's what we will now also increasingly focus on outside of Australia, where this is already an established business.
Great. Thanks very much.
Thank you. The next question comes from Joseph Barnet-Lamb from UBS. The floor is yours.
Excellent. Thank you very much for taking my question. It sounded, Dominik, like you were saying things at RTE have been bad, but they bottomed. In many ways it feels like we've sort of heard that before. We had the Arizona issues, the regulatory issues, then we were expecting things to get better in late 2025 and now they're sort of not. Has your fundamental view on RTE, either as a standalone business or specifically with you as owners and operators changed at all? Do you still think that you're the best owners of that asset? I'm just wondering if all of these issues makes you question the big picture around RTE at all. If I could just squeeze one other quick one in.
You've guided to profitability on a constant currency basis, but at current spot FX, what would group adjusted EBITDA guidance be? Thank you.
Second one, while you reflect on the first part of the question. I think if Forex would stay where it is today, we see almost very, very marginal, no impact on our adjusted EBITDA. I think we are talking about a single- digit million euro impact around EUR 5 million. I don't think it's meaningful enough to have an impact on our guidance range.
On your question on whether we feel that we're the right owner for the RTE business, I very much, the short answer is yes. We continue to be excited about the business. We've obviously worked very, very hard after we run into the troubles in H1 2025 last year to restore the culinary excellence, to restore customer quality, et cetera. Some of the metrics I shared today, I think are really pointing in the right direction. Customer happiness, NPS, et cetera, strongly up. I think we have actually proven that we can operate this business well. We've obviously grown it very fast, and it is a very complex business. There's definitely stuff that we had to learn along the way.
My belief in the category long- term is definitely unbroken. I also think that, as a matter of fact, the modes that we've now created in terms of food science, in terms of how to operate those facilities, in terms of dealing with those challenges and making sure that with the scar tissue that we have, we actually fix those things for good for the long- term. I still think that we are very much the right owner of that business, and I do think that this business will be a lot bigger in a few years than what it is today.
Excellent. Thank you for the color, and thanks for the planned improvements in disclosure as well. It's much appreciated.
Thank you. The next question comes from Andrew Ross from Barclays. The floor is yours.
Great. Good morning, all. My question is about the trajectory for Meal Kits. You kinda say that it's running a bit ahead of what you were hoping for a couple of years ago, but I guess the Meal Kit top line is still down 10% in local FX in Q4. Can you give us a bit more color on the path as to when you would expect stable year-on-year revenue growth for Meal Kits, you know, puts and takes behind that? I guess to follow- up, it kind of sounds like your tone is that the Q1 growth is gonna be down maybe below the low end of your full year guidance range at the group?
What would need to happen to get close to the top end of your full year guidance range, and why wouldn't the lower end be more realistic? Thank you.
I can start answering, and then Dominik can build on the overall trajectory on growth. The way we look at it is we are in food. In food, you have to be disciplined, consistent, and patient. I believe we are doing the right thing to be a more consumer-centric business. You can see that we have now, for four consecutive quarters, experienced improvement on our top line, and we expect it to be the case. At the current trajectory of the recovery quarter on quarter, it doesn't seem unrealistic to believe that in the next 18-20 months we would be returning to growth. I would say the more dangerous thing would be to change strategy because it's not going fast enough. It is paying off.
We are doing the right things. We're seeing on orders from existing customer, lower churn on existing customer, and that will continue to improve year on year. On your question on Q1, I want maybe to very proactively share some numbers on how we see it now, because we are really approaching to the end of the quarter now. We are expecting our top line to be around -8% in constant currency with again similar improvement in Meal Kit as we have seen before, and a stabilized performance in Ready-to-Eat versus the Q4 of 2025. On the adjusted EBITDA line, we are expecting a level of about EUR 20 million, which is low, but it's historically Q1 is always a quarter with lower adjusted EBITDA.
This month it is very meaningfully impacted by the winter storm we talked about. The remaining gap versus last year, if you look on a year-over-year basis, is mostly coming from the remaining operational delivery that we are seeing in our segment.
That's helpful. If I could just follow- up there. You're talking about Meal Kit getting back to stable revenue growth, let's say kind of late 2027. How would that have compared to your internal expectations when you did the CMD a year ago, or when you kind of relaunched the strategy, you know, prior to that?
What we've seen is that we've performed better and are slightly ahead of our profitability targets in Meal Kits. I think back then we guided to Meal Kits achieving double-digit EBITDA margins sustainably. We've now seen that shoot up by 4 points year-over-year in 2025. I think some of that additional improvement over what we had shared back in summer 2024 is due to the fact that we pulled back very hard on marketing spend because we wanted to make sure we have the room to invest into the product, which has shown strong signs on consumer and customer metrics. We're now sort of like reinvesting back both into the product and also in marketing strategies, et cetera.
Overall, I think on the profitability side, it's just very, very clear that we're ahead of where we were trending back at the CMD and also ahead of where we thought we were in summer 2024. On the top-line side, this was sort of like slightly at the expense of top-line recovery, so that we really make sure we can restore profitability and fund the product investments that we wanna make, because this is what really drives durable and sustainable growth in the long run for any direct-to-consumer business. That's sort of like the retention that you see in your existing customer base, and this is what we focused on, and this is what we're very bullish about going forward. I think the strategy is working.
What Fabien said, I just want to emphasize again, we're very convinced that this is the right strategy, and we don't wanna basically diverge from this strategy because we have a winter weather event one-off or we see something else coming up in the business. I think the indicators that we have in the business are very strong, that this is the right strategy and this is also why we wanna deliberately invest behind that.
Very helpful. Thank you.
Thank you. The last question comes from Nizla Naizer from Deutsche Bank. The floor is yours.
Great. Hi. I have one question. Your decision to leave Spain and Italy, could you remind us how big these two markets are in terms of annual revenue and what was their impact on EBITDA? Are there any other markets that you would now consider sort of exiting as you think of rightsizing your operations? Some color there would be great. Thank you.
Sure. On the impact of Italy and Spain are not gonna be significant. I think the level of EBITDA consumption that both businesses represented were single-digit million euro and will not have similarly a very meaningful impact on top line. I think what's important is more to share the reason why we've decided to cease operations. I think we after being very disciplined over a bit more than four years we realized that the structural economics at individual level were not sustainable and scale will not be what will change it going forward.
We thought the best decision was to focus more on the remaining part of our business, as well as avoiding to accumulate loss over the years in these two operations. Of course, we are very grateful and sad to make the decision, but grateful for the team who have been working very hard and sad to make this type of decision. We believe it is the right thing to do going forward.
Okay. Thank you.
All right. Thank you for your attention and for joining today's earnings call. We hope we could provide some context as to how 2026 will shape up. I think bottom line is, we think that our strategy in Meal Kits is working. We'll expect to see sequential and steady improvements in our Meal Kits business over the course of 2026, which should give everyone confidence that this is the right strategy to reinvest behind the product and make sure that we score points with consumers for durable long-term growth. In RTE, somewhat of a more mixed picture, but I think we've done our homework after this fallout in H1 last year. I think we've really restored customer quality metrics. We've restored productivity metrics. We've unlocked our full meal catalog again, and that we've also seen unit economics come back.
We'll restart the growth engine for RTE so that hopefully we'll also see 2026 exiting with a positive growth in RTE again. Thank you for your attention and to speak to you in our next earnings call.