HelloFresh (OTC:HLFFF) SE (HFG), the global meal-kit company, reported its first half of 2024 results, revealing significant growth in its Ready-To-Eat (RTE) segment, while facing challenges in its meal kit business. The company's RTE revenues increased by over 45% year-over-year (YoY) since the acquisition of Factor, with Q2 net revenues nearing EUR 2 billion. Despite a 10% decline in meal kit revenue, HelloFresh achieved a total group AEBITDA margin of 7.5% and generated approximately EUR 57 million in free cash flow in Q2. Additionally, the company has executed a new term loan facility of EUR 190 million and plans to streamline costs to match demand more effectively.
Key Takeaways
- HelloFresh's RTE segment saw a 45% YoY revenue increase.
- Meal kit business is three times larger and 10 times more profitable than five years ago, but revenue declined by 10% in Q2.
- Q2 net revenues reached nearly EUR 2 billion, with a total group AEBITDA margin of 7.5%.
- Free cash flow for Q2 was around EUR 57 million, with a new term loan of EUR 190 million secured.
- Company plans to reduce fixed costs and optimize marketing spend for higher customer quality and retention.
Company Outlook
- HelloFresh reiterates its full-year 2024 outlook with 2% to 8% constant currency revenue growth and an AEBITDA range of EUR 350 million to EUR 400 million.
- The company remains cautious about macroeconomic risks and continues to focus on streamlining costs and productivity improvements.
- Q3 is expected to show constant currency revenue growth of 1% to 2% and an AEBITDA of EUR 30 million to EUR 50 million.
Bearish Highlights
- The meal kit segment experienced a softer new customer acquisition activity, leading to a decrease in marketing spend for these products.
- There may be impairments in Q3, and the full-year Ready-To-Eat adjusted EBITDA margin might be slightly lower than 4%.
Bullish Highlights
- The company has adjusted its economic marketing budget to focus on paid channels, improving customer quality and retention.
- A positive AEBITDA margin of 4% was achieved in the RTE category in Q2.
- The company has streamlined its CapEx plans for the full year 2024 and aims to further reduce CapEx in 2025.
Misses
- The growth rate of RTE in Q2 was around 45-46%, slightly below the target of 50% year-over-year growth rate.
Q&A Highlights
- CEO Dominik Richter anticipates the RTE growth trends to continue in the second half of the year.
- The company is focusing on increasing the profit and free cash flow of the RTE product group.
- More quantitative guidance on CapEx and other financial metrics will be provided later in the year.
HelloFresh SE is navigating a period of transition, with notable success in the RTE market but a need to recalibrate its traditional meal kit segment. The company's strategic adjustments to its marketing and cost structure reflect a proactive approach to the evolving consumer landscape and market demands. With a clear outlook for the remainder of the year, HelloFresh aims to maintain its growth trajectory while enhancing profitability and cash flow.
InvestingPro Insights
As HelloFresh SE (HFG) continues to adapt to market shifts while capitalizing on its Ready-To-Eat (RTE) segment growth, it's important to consider the company's financial health and stock performance. Here are some InvestingPro Insights that shed light on the current status of HelloFresh:
InvestingPro Data shows that HelloFresh has a market capitalization of $1.15 billion, reflecting its size and market presence. Despite recent challenges, the company boasts an impressive gross profit margin of 63.44% for the last twelve months as of Q2 2024, indicating strong operational efficiency in generating profits from sales. However, it's also notable that the company's stock has experienced a significant price decline over the last six months, with a total return of -59.25%.
InvestingPro Tips reveal that management has been actively buying back shares, which could signal confidence in the company's future prospects. Additionally, analysts predict HelloFresh will be profitable this year, which may offer reassurance to investors concerned about the recent decline in meal kit revenue.
For investors seeking a deeper analysis, InvestingPro offers a comprehensive list of 13 additional InvestingPro Tips, providing further insights into HelloFresh's financial health and market performance. These tips can be found at https://www.investing.com/pro/HLFFF, offering valuable perspectives for making informed investment decisions.
Full transcript - Hellofresh Se (HLFFF) Q2 2024:
Operator: Good morning, ladies and gentlemen, and welcome to the HelloFresh SE H1 2024 Results. At this time all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. [Operator Instructions] Let me now turn the floor over to your host, Dominik Richter.
Dominik Richter: Welcome, everybody and thank you for joining our Q2 earnings call. At HelloFresh, we have a powerful mission to rally behind; we change the way people eat forever. And we have come a long way in the last decade. With meal kits, we've arguably established the biggest innovation to home cooking during that period with millions of satisfied and long-term retentive customers ordering hundreds of millions of meals per year. We have also successfully ventured into building the global market leader for RTE meals. The path to getting to this point, however was anything but linear and we had to navigate vastly different market environments in the last few years. A demand shock during the pandemic was followed by a strong inflationary pressure period, low consumer confidence and high interest rates. While our meal kit business today is about 3 times larger and 10 times more profitable than the whole group was five years ago, we have also built up a fixed cost base that does not match the current demand outlook. This requires us to make some hard decisions around streamlining and optimizing for costs in the short term, but it's a path that we're committed to work on to rebuild cash flows and profit in this product segment and for the group as a whole. Together with a relentless focus on improving the customer experience through product innovation and better service levels, the strategic direction is very clear to us, but will take some time to come to fruition given the timing and the time lag of many initiatives that we have started. RTE, on the other hand has surprised us to the upside. Since acquiring Factor, we have grown the brand nearly 20 times since early 2021 and it now has a comparable size and profitability levels as meal kits had in 2019. Given the availability of many high-conviction growth opportunities at our disposal, such as growing the brand awareness for Factor in the US, bringing the brand to more European countries and diversifying distribution channels, we are excited about the future prospects of this product vertical. RTE will remain the single biggest contributor to growing both revenues and profits for the group in the next few years while we work towards building out a third and fourth product vertical over time. The path to where we are today, especially the last six months to nine months, have been rocky, but it is very clear to us that we need -- what we needed to do to rebuild confidence and an attractive economic profile in the next couple of quarters. We talk at greater detail about these dynamics and the longer-term outlook in our H1 shareholder letter, which you can find as part of our H1 report. Let's now turn the attention to our Q2 results, and let me quickly start by sharing some of the highlights of our second quarter. First of all, we saw continued year-over-year AOV growth of 4.7% in constant currency with both of our operating segments and product segments increasing AOV meaningfully. Secondly, we generated net revenues just shy of EUR2 billion, a round about 1% year-on-year growth rate. RTE continued on its high growth trajectory, achieving a net revenue growth rate of over 45% year-over-year. Meal kits, on the other hand was down by about 10% year-over-year in Q2. More importantly, we managed to stabilize adjusted EBITDA margins for meal kit, which amounted to 12.2% in Q2 and returned to a positive 4% adjusted EBITDA margin for RTE. In summary, we achieved a total group AEBITDA margin of 7.5%, equivalent to over EUR146 million in adjusted EBITDA. The decline in meal kit order volume is predominantly due to lower new customer numbers as a result of strategically focusing on higher quality customers as well as on a reallocation of marketing budgets to RTE, where we currently see somewhat higher ROI on our advertising spend. Taking into account the changed volume outlook for meal kits, we have started to streamline our operational footprint, which triggered non-cash impairment charges of about EUR45 million in H1 in total and about EUR32 million for Q2 specifically. On the positive side, order patterns and customer retention rates performed really well across all segments and product groups and are up year-over-year. At the same time, we are also nearing the end of our CapEx investment cycle that we started mid-pandemic. Due to lower CapEx spend year-over-year, we increased free cash flow year-over-year and reached about EUR57 million of free cash flow in Q2 alone. Finally, we also successfully executed a new term loan facility of EUR190 million with three-year and five-year maturities, which more than covers any upcoming future refinancings and other corporate purposes. We successfully delivered 29 million orders in Q2, that is about 1 million orders or 3.6% fewer orders than in the corresponding period one year ago. We observed similar trends between our two regional operating segments. As a consequence of allocating more advertising dollars into RTE and our strategic shift to focus on fewer but higher quality customers, we saw a step-down in new customers for our North America meal kit business in-line with our expectations. While early in our journey, we saw both new customers and existing customers exhibit strong order patterns with both order rates and customer retention improving for both meal kits and RTE customers. Order rates continued to be higher than during the pandemic, a testament to the many improvements we have initiated and successfully deployed to the customer experience. This is a strong evidence that investments in the customer experience pay off and a major driver of why we will relentlessly focus on creating more value for our customers through more exciting menus, greater recipe choice, additional customization options and faster delivery times. Notably, we saw an increase in AOV year-over-year, the majority of which was not driven by like-for-like price increases but rather a combination of the following factors. In North America we saw a revenue mix increase towards RTE, which typically has higher AOVs. For both North America and International, our focus on more premium meal options and broadening the assortment of our HelloFresh marketplace led to increased basket values. And finally, for both America and International, we benefited from lower price incentives given, driving up net AOV per order. This has resulted in North America increasing AOV year-over-year by 5.4% and International increasing AOV year-over-year by 3.7%. Group AOV stood at EUR67.1, a record for HelloFresh in Q2. Similar to Q1, lower order volumes were more than made up for by the growth in AOV to achieve a year-over-year net revenue growth rate of about 1%. Net revenue for Q2 amounted to EUR1.95 billion for the group. Looking at it from a regional as well as a product group perspective, we can observe the following Q2 trends. Revenue was up by 0.9% for North America and 1.1% for International. In terms of product groups, we saw revenue increase by about 46% for RTE and down by about 10% for meal kits. As mentioned a few minutes ago, this is largely in-line with our plan. Meal kits benefit from strong order patterns of existing customers, but suffer from low new customer volumes compared to the previous two years. RTE growth has been enabled by scaling our cooking and fulfillment footprint to match the demand we see for convenient and tasty ready meals. Next, Christian will share some additional details on our cost performance with you before diving into detailed guidance for the remainder of the year.
Christian Gartner (NYSE:IT): Thanks, Dominik. So let me touch upon our procurement and cooking expenses. We've seen relative procurement and cooking expenses increase by 3 percentage points. In North America, we have seen an expansion of 5 percentage points of revenue, which, same as last quarter, is primarily driven by, firstly, a higher share of Ready-To-Eat in the overall mix. And secondly, the fact that COGS within Ready-To-Eat in the US are temporarily elevated during the ongoing ramp-up, although with an improving trend. In International, we maintained relative procurement and coking expenses flat versus last year. In both segments, we are further investing into the product through more choice, more customizable meals and high-value ingredients. We plan to more than offset these additional investments through equivalent cost savings elsewhere. Let us now turn to our fulfillment expenses. Here, the first thing to highlight is that we have taken some non-recurring, non-cash impairment charges on certain US meal kit production facilities given the more modest near-term volume outlook. These amounted, as Dominik had mentioned before, to around about EUR33 million in Q2 and EUR45 million for H1 overall. If you adjust for these non-cash charges, fulfillment expenses as a percentage of revenue are broadly stable year-on-year. Given the higher share of Ready-To-Eat, which has less associated pick-and-pack expenses, overall relative fulfillment expenses excluding impairment in North America are down by 1 percentage point. Within International relative fulfillment expenses are mildly up year-on-year by circa 50 basis points. Same as in Q1, to a large extent driven by the factors discussed previously, i.e., the ramp-up of new fulfillment centers in our biggest international markets, Germany and the UK, which will be visible also for most of the rest of the year; and secondly, some modest volume deleveraging impact. These trends in our operational cost line items result in a contribution margin of 26% before impact of impairments. Now this is down 2.8 percentage points year-on-year. The key drivers of this year-on-year margin compression are, in order of importance, effectively the factors I just went through, i.e., number one temporarily higher production costs within RTE during the current ramp-up. While these are elevated, we have realized already quarter-on-quarter improvements in Q2 and our ownership trajectory to continue these improvements. This is, however, not a linear process, and there remains still quite some [indiscernible] for us. Secondly, some impact from fixed cost deleveraging from lower volumes in meal kits, which we are addressing through production capacity rationalization. And then lastly, the temporary impact of new fulfillment centers in Germany and the UK, as just discussed. This impact should be largely mitigated next year. Now with that, let's turn to our marketing expenses. These have largely developed as I predicted at our last earnings call, i.e., of all relative marketing expenses as percentage of revenue are at a similar level as in Q2 last year with around about 17%. This is the result of three drivers. Firstly, we are continuing to acquire a lot of new customers in Ready-To-Eat. This means absolute and relative marketing spend for the RTE product group is up year-on-year. Secondly, given the overall softer new customer acquisition activity in meal kits, absolute euro spend on marketing as well as marketing as a percentage of revenue in meals kits is down year-on-year. Overall, for both product categories, as flagged a few times now over the last few months on this call, we recalibrated how we split our economic marketing budget between price incentives and paid channels, i.e., compared to last year, we started in Q1 to weigh more to the latter, i.e., to pay channels with an overall beneficial impact on customer quality and retention. Lastly, on marketing, I would just like to remind you of our normal seasonality in our marketing spend. The back-to-school period in the latter half of Q3 is an important seasonal time for us from a marketing perspective. Therefore, marketing as percentage of revenue is usually up versus Q2. Last year, that expansion in Q3 versus Q2 was around about 3 percentage points of revenue. You should expect something similar this year. With that, let's have a look at our AEBITDA. There are quite a few numbers on this page, but focus on the top left-hand side for the time being. For the group, we delivered an AEBITDA of EUR146 million in Q2, a margin of 7.5%. This is at the upper end of what we had previewed at our last earnings call and somewhat better than consensus expectations. It is the result of, given the circumstances, of a good cost performance on each line item down to contribution margin by keeping marketing spend in line with the opportunities we saw. This means for the total of H1, AEBITDA sums up to EUR163 million. It hopefully alleviates concerns, which some of you had that our AEBITDA distribution would be too much back-end weighted this year. When you look at our two reporting segments at the top here of this page, North America delivered an AEBITDA of EUR132 million, a margin of 10.2%, and circa EUR35 million lower than last year. The key driver for the difference is the effect of our Ready-To-Eat scale-up while we maintained prior year's AEBITDA margin on the meal kit side on lower volume. International delivered an AEBITDA of EUR54 million, a margin of 8.1% and therefore, 1 percentage point lower than last year. This is partly driven by the ramp-up of new fulfillment centers in Germany and the UK. When you look at our global product categories in the bottom half of this page, you see that number one, we largely maintained our AEBITDA margin in meal kits where lower marketing spend largely offset the contribution margin impact of lower volume and the German, UK fulfillment center ramp-up. Secondly, we achieved a positive AEBITDA margin of -- in Ready-To-Eat of 4% in Q2 after being negative in Q1 due to sequentially improving contribution margin and sequentially lower marketing expenses for that product group. Now before I turn to our outlook, let me briefly talk about our free cash flow trend in the first half of this year. Despite EUR95 million lower AEBITDA in H1 compared to the same period last year, we actually increased our free cash flow by EUR30 million year-on-year. The key drivers for this are: one, lower CapEx spend of EUR73 million; and secondly, lower corporate income taxes paid. Now on CapEx also for the full year 2024, we further streamlined our CapEx plans. If you remember initially, we were targeting EUR280 million of CapEx for this year, we scaled that back to EUR240 million this year. This means we continue to maintain a strong balance sheet. In that context, it's also worthwhile to mention again the new term loan facility of EUR190 million, which we just signed, and roughly split into equal 3-year and 5-year tranches. We intend to draw on this term loan later during the year. It more than covers upcoming future refinancings and other corporate purposes, such as the outstanding amounts under our buyback programs. As of today, so not just end of 30th of June, but as of today, we have bought back on around about 9 million shares for over EUR85 million and EUR23 million nominal of our convertible bond since inception of the program in October 2023. Now let me conclude by reiterating our full year 2024 outlook of 2% to 8% constant currency revenue growth and an AEBITDA range of EUR350 million to EUR400 million. Based on our H1 performance, we are currently trending towards the lower end of our top-line guidance. From an AEBITDA perspective, given the overall decent Q2 performance, we have somewhat derisked the lower half of our outlook. We have generated EUR163 million of EBITDA in H1, as just discussed, and expect AEBITDA in Q3 to be somewhat better than in Q1 and also Q4 to be a touch better than Q2. We therefore think that AEBITDA sell-side consensus for the full year is reasonable. Nevertheless, we remain cognizant of, number one macro risks, namely, a more uncertain outlook for the US consumer as well as, secondly, that we need to continue to actively streamline our cost base. This entails in particular, firstly, further product increases -- productivity increases in our Ready-To-Eat business; secondly, ramping up productivity in our new fulfillment centers in Germany and the UK; thirdly, streamlining our overall meal kit production capacity; and fourth reviewing overall overhead costs. While a lot of these initiatives are underway, the timing of implementation and seeing them actually land in our P&L somewhat varies by measure. Coming back to Q3, we expect very indicatively at this stage largely a continuation of the top-line trends experienced in H1, i.e., indicatively constant currency revenue growth of around about 1% to 2% and relative marketing spend in-line with the same period last year; and in AEBITDA which is based on normal seasonality impacted by lower volume during the summer months and a seasonally higher marketing spend during the latter part of the quarter. This, together with the trends discussed will translate into an AEBITDA of indicatively EUR30 million to EUR50 million in Q3, which would be roughly EUR15 million to EUR35 million better than Q1 this year. With that, we look forward to your questions.
Operator: Ladies and gentlemen, we will now start the Q&A. [Operator Instructions] And the first question comes from Luke Holbrook, Morgan Stanley (NYSE:MS). Please go ahead.
Luke Holbrook: Hi, good morning everyone. And thanks for taking my question. My question is just on the facility and the rightsizing that you're talking and discussing about. How should we now think about the integration of Factor within the existing meal kit facilities throughout North America and also as you expand into Europe? Thank you.
Dominik Richter: Hi Luke. Good morning. So generally, there are some smaller opportunities to consolidating certain parts of the assembly and pick-and-pack processes between RTE and meal kits. But as a general framework, I think on the fulfillment side, this is where the 2 businesses are least integrated, given that one is really about pick and pack and assembly and that's meal kits, and the other one is really about big cooking operations. Like I said, in most other parts of the supply chain from logistics to procurement to anything else, we have platformized the Factor business and they are run by the same teams. On the fulfillment side, they are largely separated with some smaller opportunities to actually use some of the facilities for combined pick-and-pack operations further down the line. In Europe, we don't have an RTE facility as of yet. We are planning to introduce one over the course of next year, which we will then use to deliver to many countries in Europe from that same facility.
Dominik Richter: Understood. Thank you.
Operator: And the next question comes from Andrew Ross, Barclays (LON:BARC). Please go ahead.
Andrew Ross: All right. Good moring all. I wanted to ask about the meal kit margin where you clearly made some good progress in Q2 with margins down 70 basis points year-on-year on a top-line of so minus 10%. You've obviously spoken about quite a few initiatives around kind of streamlining the cost base of the business. But as we kind of put that together, can you give us a feeling as to how to think about operating leverage in, I guess, 2025? So the kind of different ranges of scenarios on meal kit top-line, what figure of meal kit margins into next year? Thanks.
Christian Gartner: Andrew, it's Christian. So for now, we are focusing on guiding for 2024 and guidance for 2025 will be provided later on during the year, but it's clear that we are focused on expanding our overall margin and free cash flow profile, as Dominik had alluded to at the beginning of this call, and that certainly also applies to our meal kit category.
Andrew Ross: Okay. And maybe to follow up on that. I mean, could we expect that, that kind of relationship between top line and margin that you've seen in Q2 could then kind of continue to improve then in the second half as some of these measures work for you without being specific on numbers, but directionally?
Christian Gartner: So in terms of top-line and margin profile, you should assume that trends prevail in the second half, yes.
Andrew Ross: Thanks.
Operator: And the next question comes from Nizla Naizer, Deutsche Bank (ETR:DBKGn). Please go ahead with the question.
Nizla Naizer: Thanks. I hope you could hear me. My question is on your International business. Could you give us some color as to whether there were regions where there was sort of strong pockets of growth? We've heard one of your peers talk about the Nordic market, for example that it grew double digits for them. So just trying to understand if some markets are stronger than others, some color you could give us there on maybe the take-up of meal kits would be great. Thank you.
Dominik Richter: Hi, Nizla. So International compared to North America is obviously a much more diverse group of markets that we operate in. Some of those markets we've been operating in for 12 years and they are more towards higher penetration levels. There are others that we've only entered three or five years ago, which we are still lower penetration. And hence, yes, there is some diversity in growth rates among our International businesses, but this is mostly driven by penetration rates in our view and that we are earlier in our journey in some markets, where we can apply and deploy the growth playbook that we have come up with in many, many cases before. So I'd say, yes, diversity of the group is much larger than in North America. There are some businesses that have been growing faster, most of that due to the fact that those are younger businesses that are at much lower penetration levels.
Nizla Naizer: Thanks.
Operator: And next question comes from Sven Sauer, Kepler Cheuvreux. Please go ahead with your question.
Sven Sauer: Yes, hello. Good morning. I was wondering on the 7.5% AEBITDA margin, you mentioned that because it is better than what you were guiding for and you mentioned that it's because of good cost performance on each line item and also marketing, I was just wondering if you could provide some more color on that. Was the higher margin intentional? And if you could, yes, share the info on where there were really benefits.
Christian Gartner: Yes. It is at the upper end of what we've been discussing before and it is really spread relatively broadly across our P&L, so good performance on all of our cost line items down to contribution margin, including productivity and how it could absorb some of the volume compression that we discussed on this call. And then on the marketing side, also good ROI discipline, which we tried to allude to on this call as well. So it's really not one single cost line item, which stood out. But I would say, given the circumstances, decent execution across the whole P&L.
Sven Sauer: Thanks.
Operator: And the next question comes from Marcus Diebel, JPMorgan (NYSE:JPM). Please go ahead with your questions.
Marcus Diebel: Hi everyone. Just one for Christian, the treatment of impairment is different. It was the case already in Q1, but obviously a much bigger impact in Q2, which helps on the AEBITDA line. How shall we think about impairments in Q3? From what you can see at this point, is that really everything pretty much done in Q2? Or shall we also expect impairment, which is not treated as special items anymore in Q3? Thank you.
Christian Gartner: Yes. So Marcus, you're right. As of this year, impairment base given that it's effective in accelerated depreciation, sits within D&A, which we got as a suggestion from others and other stakeholders, probably that's how others do it as well. On your -- on the [cover] (ph) question, could there be more to come? The answer is yes. So this is an ongoing process and there may be more to come, not limited to our North America segment.
Marcus Diebel: Thank you.
Operator: [Operator Instructions] And the next question comes from Joseph McNamara, Citi. Please go ahead.
Joseph McNamara: Hi there. Thanks for taking my question. You previously talked about meal -- sorry, Ready-To-Eat adjusted EBITDA margins being broadly flat year-over-year for the full year at about 4%. Does this still hold given, I guess, the kind of approximately 0 Ready-To-Eat AEBITDA margin in the first half? And kind of if so, can you talk about how you expect this kind of 8% implied margin for the second half to be split Q3 versus Q4, please? Thank you very much.
Christian Gartner: Yes. It is a good point and maybe a touch of that than 4%. So Q3 in particular, based on just the seasonality that we had discussed, it will certainly be lower than what you saw from us in Q2. So for Q3, if you assume somewhere around breakeven for that product group, I think that's a good assumption. And Q4 should be quite a bit more healthy, knock on wood, but we're not seeing any of the, let's say noise that we have discussed in detail that we saw in Q4 last year. So it may be a touch softer than 4% for the full year. But again, our overall group guidance with respect to AEBITDA stands, as I tried to articulate it a couple of minutes ago.
Joseph McNamara: Got it. That's really helpful. And I guess if I could follow up the maybe kind of touch below 8% run rate that you're likely to see in the second half. Is that a reasonable way to think about, I guess, 2025 Ready-To-Eat AEBITDA margins as well?
Christian Gartner: Again, 2025 guidance we'll provide later during the year, but you should assume higher than this year.
Joseph McNamara: All right. Thank you very much.
Operator: And the next question is from Andrew Ross, Barclays. Please go ahead.
Andrew Ross: Sorry, I thought I'd come back in the queue. I just wanted to dive into a bit more to the Q3 guidance on top-line of plus 1% to 2%. Can you give us some flavor between meal kit and the Ready-To-Eat business, please? Are you still expecting the Ready-To-Eat will reaccelerate in Q3? Thanks.
Christian Gartner: So you should assume current trends to largely prevail, Andrew. So what you've seen from us in Q2, that's all part what you should expect from us going into Q3 again indicatively at this stage. But that's what we try to bring across.
Andrew Ross: Just to follow up there. I kind of assume the phasing of marketing has meant that Q3 might reaccelerate a bit in Ready-To-Eat. Maybe I got that wrong, that happens all the time.
Christian Gartner: I got it. I'm sorry, I thought you were talking about the top-line. On marketing, yes. But so for both product groups as well as for the group then overall, you should assume marketing to go up sequentially in Q3 versus Q2. Again, back to school is reasonably important for us in most of our markets last year. So if you take that as an anchor in your thinking, we expanded sequentially by around about 3 points, 3 percentage points of revenue, our marketing spend, that's ballpark the size of what you should expect sequentially for us in Q3 as well.
Andrew Ross: Okay. But the expectation is that Factor should grow similar in Q3 to what it grew in Q2, for Ready-To-Eat to grow similar in Q3 to what it grew in Q2. Has that expectation softened in terms of your budgeting in the last quarter or --.
Dominik Richter: So if I understood your question right, Andrew about whether our top line assumptions for RTE have softened, then I'd say largely not. So overall, at the beginning of the year when we talked about it, we said we're aiming towards a 50% year-over-year growth rate. And I think right now, what you've seen in Q2 is about 45%, 46%, a little higher in Q1. So we are a touch beneath that right now and we largely expect continuation of those trends into H2.
Andrew Ross: Okay, thanks.
Operator: And we have a follow-up from Sven Sauer, Kepler Cheuvreux. Please go ahead.
Sven Sauer: Hi, thanks for taking my question. I was just wondering, when do you expect this decline in the meal kit business to be over? And when should the business start to grow again?
Christian Gartner: So again, for the next two quarters, you should assume current trends to largely prevail. Our focus at the moment is to increase absolute profit and free cash flow of that product group into next year, where we're taking the right measures. That's all I would say at the moment.
Operator: And the next question comes from Nizla Naizer, Deutsche Bank. Please go ahead with your question.
Nizla Naizer: Great. Thank you. I just wanted to dive into the free cash flow assumptions for the full year. I think previously, we were sort of expecting break-even levels of free cash flow. Now that you've reduced your CapEx and sort of there is been lower income tax spend, could you maybe give us some color as to how we should think about the absolute free cash flow generation for the full year? And next year as well, I think the assumption was that CapEx could lower by another EUR100 million or so. How should we think of CapEx next year from this new base? Some color there would be great.
Christian Gartner: So Nizla, the fact that we pay lower income taxes on lower profit, that was baked into our guidance already. So that's not changed. The only thing that has somewhat changed that we further fine-tuned are effectively in our CapEx plans into next year. If you recall, initially we were targeting something around EUR280 million of CapEx for the full year. This we brought down by around about EUR40 million in our plan. So that basically adds to our overall free cash flow. So you could call that like-for-like, add that on top of your breakeven. And that's, I would say, a good anchor to -- in your thinking for this year in terms of overall free cash flow for the year. Into next year, again we give quantitative guidance later during the year. But yes, we still stick to further bringing down CapEx in 2025. What we had given indicatively when we discussed that previously was that we were targeting EUR200 million of CapEx or around that number, and that still stands.
Nizla Naizer: Thank you.
Operator: And this was the last question. I hand back for closing remarks.
Dominik Richter: Thank you, everybody, for joining our Q2 earnings report. We look forward to catching up with you individually over the next couple of days and look forward to welcoming you back once we meet for our Q3 earnings call. Have a great day. Bye-bye.
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