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Appendix 4C - Q2 2022 & Business Activity Report

BERLIN & SYDNEY, July 30, 2022 (BUSINESS WIRE) --
Marley Spoon AG ("Marley Spoon" or the "Company" ASX: MMM), a leading global subscription-based meal kit provider, is pleased to share with investors its highlights from the quarter ended 30 June 2022 ("Q2 2022").

Conference Call

Management will present a business update to investors on a conference call at 9:00 am AEST on 29 July, the details of which have been released separately to ASX.

Highlights:

Q2 2022 net revenue at EUR109m, +35% growth year-over-year (+25% growth in constant currency) H1 2022 net revenue of EUR212m, +34% growth year-over-year (+26% growth in constant currency) Global Contribution Margin (CM) in Q2 at 27.2%, a 50 basis point (bp) improvement vs. the prior corresponding period (PCP) Q2 Operating EBITDA loss of EUR(3.0)m(1), a sequential improvement vs. Q1 2022, with both the US and Australia delivering a profitable quarter Operating Cash Flow at EUR(5.3)m and quarter end cash balance of EUR29m providing balance sheet capacity to continue executing 2022 plans On track to deliver full year 2022 guidance

Marley Spoon CEO, Fabian Siegel, highlighted, "In the second quarter we continued to see good growth that was driven by the successful execution of all three pillars of our growth strategy. We continue to acquire subscribers at attractive unit economics, we have increased average order volumes by expanding our offering to our customers and revenue from our newly acquired ready-to-heat business, Chefgood, further drives growth of our Australian segment.

While the business is growing healthily, we were also able to keep margins stable year-over-year, offsetting operational headwinds and inflation.

The increased scale and improved margin led to a sequential improvement of Operating EBITDA both quarter-over-quarter as well as year-over-year, reducing our Q2 2022 Operating EBITDA loss to EUR(3.0)m.

Overall, we have executed H1 2022 to plan and expect to deliver on the 2022 guidance we provided at the beginning of the year.

I would like to thank our teams for their ongoing, tireless contributions in a challenging operating environment, which have kept us on course to date for executing our 2022 plan."

Q2 BUSINESS UPDATE

Q2 2022 net revenue grew 35% vs. the PCP to EUR109m, an acceleration versus the previous quarter. This growth was driven by Australia (+53%) and the United States (+43%), both of which benefited from an increase in active subscribers and basket size. Europe was down 14% vs. the PCP driven by reduced order frequency in a market environment of lower consumer confidence and overall slowdown of e-commerce activities.

During the quarter Marley Spoon successfully executed its three-pillar growth strategy, namely investment in growing active subscribers, initiatives to grow basket size and inorganic growth from the Chefgood acquisition, complementing the Company's meal kit business.

Active subscribers grew 13% in the quarter to 309k, nearly the same level of growth seen in Q1 2022 despite a lower level of marketing investment. Continued favorable unit economics and a focus on reactivating customers helped deliver the increase in active subscribers.

Basket size, which grew 23% (13% in constant currency), benefited from a number of revenue-enhancing activities, namely an expanded number of recipes which led to high average meals per week, improved recipe quality and pricing executed half-way through the quarter to offset inflation. The Company's recently launched Market initiative, which offers add-on items to meal kits, also continued to grow in the quarter.

Contribution Margin in Q2 2022 was 27.2%, an expansion of 50 bps versus the PCP. Operating Contribution (Operating CM), defined as CM excluding the impacts of marketing vouchers and fixed costs such as expenses relating to site leases, also improved slightly versus the PCP by 40 bps to 36.7%. Operational efficiencies and pricing helped offset the high inflation the Company saw across food ingredients and fuel in all regions. However, further margin expansion was impacted by the ongoing external supply chain issues seen in Australia, particularly substitutions due to lack of availability or poor quality.

The Company's planned sequential reduction in marketing spend versus Q1 2022 led to marketing expense as a percent of net revenue of 16% in Q2 2022. This, and the expanded Operating CM, led to an Operating EBITDA result that was significantly improved versus the previous quarter, landing at EUR(3.0)m, excluding one-time charges from severance payments and a historical sales tax correction in the US.

Consolidated Income Statement (unaudited)
-----------------------------------------
EUR in millions                   Q2 2022   Q2 2021  % vs. PY        H1 2022        H1 2022   H1 2021  % vs. PY
----------------------------------------- ------- -------------------- ------- -------------------- -------- -------------------- ------- -------------------- ------- -------------------- --------
Revenue                                     109.2     80.6       35%       211.8     158.0      34%
----------------------------------------- ------- -------------------- ------- -------------------- --------                      ------- -------------------- ------- -------------------- --------
Cost of goods sold                          60.1      44.3       36%       116.1     85.9       35%
% of revenue                                55.0%     55.0%      0pt       54.8%     54.4%      0pt
Gross Profit                                49.1      36.3       35%       95.6      72.1       33%
% of revenue                                45.0%     45.0%     (0)pt      45.2%     45.6%     (0)pt
Fulfilment expenses                         19.4      14.8       31%       37.9      28.9       31%
% of revenue                                17.8%     18.4%     (1)pt      17.9%     18.3%     (0)pt
Contribution margin (CM)                    29.7      21.5       38%       57.7      43.2       34%
% of revenue                                27.2%     26.7%      1pt       27.2%     27.3%     (0)pt
Marketing expenses                          17.4      16.8       3%        40.6      32.3       26%
% of revenue                                15.9%     20.9%     (5)pt      19.2%     20.4%     (1)pt
G&A expenses                                20.0      16.2       24%       38.4      30.1       27%
% of revenue                                18.4%     20.1%     (2)pt      18.1%     19.1%     (1)pt
EBIT                                        (7.8)    (11.6)     (33)%     (21.1)    (19.3)      10%
----------------------------------------- ------- -------------------- ------- -------------------- --------                      ------- -------------------- ------- -------------------- --------
Operating EBITDA                            (3.0)     (9.1)     (57)%     (12.7)    (14.8)     (8)%
% of revenue                               (2.8)%    (11.3)%     8pt      (6.0)%    (9.4)%      3pt
----------------------------------------- ------- -------------------- ------- -------------------- --------                      ------- -------------------- ------- -------------------- --------
 

SEGMENT REVIEW

United States

Q2 2022 net revenue was up 43% to EUR54m YoY, +26% in constant currency Strong margin expansion in both CM, at 27.4%, up 3 pts vs. the PCP, and Operating CM at 37.2%, also up 3 pts vs. the PCP The US returned to profitability in the quarter, deliver Operating EBITDA of EUR2.5m

Revenue grew 43% (+26% on a constant currency basis) driven by growth of the Company's subscriber base as well as growth in order value coming from an increase in portion sizes as well as pricing taken to offset inflation.

This pricing, combined with operational efficiencies such as increased picking line productivity, led to contribution margin expansion of 3 pts year-over-year to 27.4% in Q2 2022. Equally, operating contribution margin expanded 3 pts to 37.2%, helping lead to a profitable quarter for the region, with delivery of EUR2.5m in Operating EBITDA.

The Company continues to see improved attachment rates for its Market initiative which is now available nationally across the US.

Australia

Q2 2022 net revenue up 53% YoY to EUR42m, +46% in constant currency Q2 2022 CM at 30.1%, down 3 pts vs. the PCP, while Operating CM reached 38.3%, down 3.7 pts vs. the PCP Operating EBITDA of EUR2.4m in Q2 2022

Australia had a solid quarter despite significant supply chain challenges. Revenue grew 53% y-o-y in Q2 2022 thanks to strong subscriber growth and improved recipes, as well as the consolidation of the Company's newly acquired Chefgood business.

Given the ongoing supply chain challenges stemming from the pandemic and the flooding, contribution margin contracted versus the PCP in Australia, with CM and Operating CM landing at 30.1% and 38.3%, respectively. Substitutions of ingredients that were either unavailable or of poor quality and inflation were the primary drivers of margin pressure.

However, the region's focus on cost discipline led to a return to profitability, with Operating EBITDA coming in at EUR2.4m in Q2 2022.

The Company's integration of Chefgood continues as planned, with synergies particularly in marketing beginning to materialize.

Europe

Q2 2022 net revenue down by 14% versus the PCP to EUR13.5m Q2 2022 CM at 17.2%, down 5 pts compared to the PCP and Operating CM at 30.5%, down 1.5 pts compared to the PCP Operating EBITDA loss of EUR(2.1)m in Q2 2022 excluding headquarter costs

Europe had a challenging quarter. Net revenue declined versus the PCP driven primarily by lower order frequency as the e-commerce sector in the region has been particularly soft while consumer confidence deteriorated. Contribution Margin was impacted by food and fuel inflation leading to a y-o-y decline. The reduced scale and compressed margin led to a disappointing performance and an Operating EBITDA loss of EUR2.1m excluding headquarter costs.

The Company is actively working to implement turnaround plans to return to growth, expand margin and bring the European business to breakeven profitability.

KEY OPERATING METRICS*

Q2 2022 Active Subscribers grew 13% compared to the PCP to 309k, a new high for the Company. This was driven mainly by Australia (+36%) and the US (+9%).

While orders per subscriber were down slightly by 3%, average order value was up 23%, reflecting the Company's focus on basket size-generating activities, including its pricing initiatives, Market add-ons and increased recipe choice.

preliminary & unaudited                           Q2 2022                Q2 2021              Variance %             H1 2022              H1 2022                H1 2021              Variance %
------------------------------------------ -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------
Group                                                           
Active customers (k)                                447                    425                    5%                     658                    413                    59%
Active subscribers (k)                              309                    272                    13%                    302                    265                    14%
Number of orders (k)                               1,995                  1,813                   10%                   4,032                  3,562                   13%
Orders per customer                                 4.5                    4.3                    5%                     6.1                    8.6                   (29)%
Orders per subscriber                               6.5                    6.7                   (3)%                   13.3                   13.4                   (1)%
Meals (m)                                          16.9                   15.1                    12%                   33.7                   29.6                    14%
Avg. Order value (EUR, net)               54.7                   44.5                    23%                   52.5                   44.4                    18%
Avg. Order value (EUR, net) in CC         50.2                   44.5                    13%                   49.3                   44.4                    11%
                                             
Australia                                                       
Active customers (k)                                167                    133                    25%                    243                    169                    44%
Active subscribers (k)                              108                    79                     36%                    104                    93                     13%
Number of orders (k)                                788                    585                    35%                   1,547                  1,111                   39%
Orders per subscriber                               7.3                    7.4                   (1)%                   14.8                   12.0                    24%
Meals (m)                                           6.8                    5.2                    30%                   13.2                    9.9                    34%
                                             
USA                                                             
Active customers (k)                                197                    197                   (0)%                    290                    173                    68%
Active subscribers (k)                              137                    125                    9%                     134                    114                    17%
Number of orders (k)                                870                    825                    6%                    1,781                  1,638                   9%
Orders per subscriber                               6.4                    6.6                   (3)%                   13.3                   14.4                   (7)%
Meals (m)                                           7.4                    6.7                    10%                   14.9                   13.4                    12%
                                             
Europe                                                          
Active customers (k)                                83                     94                    (12)%                   125                    71                     76%
Active subscribers (k)                              65                     68                    (5)%                    64                     59                     10%
Number of orders (k)                                336                    403                   (17)%                   703                    813                   (14)%
Orders per subscriber                               5.2                    5.9                   (13)%                  10.9                   13.9                   (21)%
Meals (m)                                           2.7                    3.2                   (15)%                   5.5                    6.4                   (13)%
                                             

CASH FLOW

Marley Spoon ended the quarter and H1 2022 with EUR29m in cash. Cash flow from operations was EUR(5.3)m in the quarter, tracking lower than Operating EBITDA due to working capital impacts. For the first half, cash from operations was EUR(9.4)m.

Cash flow from investing activities landed at EUR(2.9)m, almost equally split between the purchase of efficiency-generating and infrastructure items for the Company's FCs and investment in product development. For H1 2022, cash from investing activity was EUR(12.8)m, or EUR(6.2)m excluding the impact of the purchase of Chefgood in Q1 2022.

Finally, cash from financing activities was EUR20.4m for the quarter, reflecting the proceeds of 1) tranche 2, US$20m or EUR19.3m, of our debt facility with Runway Growth Capital and 2) the renewal of the Company's EUR5m term loan with BVB, offset by cash outflows for lease and interest payments and repayment of borrowings.

For the second quarter, cash payments to related parties of the entity were EUR343 thousand in aggregate. These payments were personnel compensation for key executive management, including the Management Board and the Supervisory Board.

2022 OUTLOOK AND GUIDANCE RE-AFFIRMED

Having delivered another quarter in line with the Company's expectations, Marley Spoon reaffirms its full year guidance. Marley Spoon expects inflation globally and supply chain volatility in Australia to continue, and as such will maintain its focus on operating with financial discipline and within its balance sheet capacity.

Guidance is affirmed:

Mid-to-high teens YoY net revenue organic growth plus full year contribution from Chefgood Contribution Margin in-line with 2021 Operating EBITDA better than EUR(15)m

INVESTOR CONFERENCE CALL

An investor conference call will be held at 9:00 am AEST on 29 July 2022. Pre-registration links and dial-in details have been released separately.

This announcement has been authorised for release to ASX by the Board of Directors of Marley Spoon AG.

About Marley Spoon

Marley Spoon (MMM:ASX, GICS: Internet & Direct Marketing Retail) is a global direct-to-consumer brand company that is solving everyday recurring problems in delightful and sustainable ways. Founded in 2014, Marley Spoon currently operates in three primary regions: Australia, United States and Europe (Austria, Belgium, Germany, Denmark, Sweden and the Netherlands).

With Marley Spoon's meal-kits, you decide what to eat, when to eat, and leave behind the hassle of grocery shopping. To help make weeknights easier and dinners more delicious, our meal kits contain step-by-step recipes and pre-portioned seasonal ingredients to cook better, healthy meals for your loved ones.

As consumer behaviour moves towards valuing the convenience aspect of online ordering, Marley Spoon's global mission through its various brands, such as Marley Spoon, Martha Stewart & Marley Spoon, Dinnerly, and Chefgood is to help millions of people to enjoy easier, smarter and more sustainable lives.

______________________ (1)This result excludes the impact of one-time charges stemming from a) EUR0.4m in severance costs and b) EUR0.5m for a historical sales tax correction in the US

View source version on businesswire.com: https://www.businesswire.com/news/home/20220728005496/en/

SOURCE: Marley Spoon AG

<img alt="" src="https://cts.businesswire.com/ct/CT?id=bwnews&sty=20220728005496r1&sid=cmtx6&distro=nx&lang=en" style="width:0;height:0" />

COMPANY INFORMATION: 
Fabian Siegel, Marley Spoon CEO
fabian@marleyspoon.com

INVESTOR QUERIES: 
Michael Brown, Pegasus
0400 248 080
mbrown@pegasusadvisory.com.au
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