On Tuesday, Marley Spoon Group ("MSG") released healthy Q1’24 and final FY'23 consolidated results that were in line with expectations. Q1’24 sales came in at € 80.7m or -12% yoy (excluding bistroMD c. € 76m; eNuW: € 75.6m). Cautious consumer behavior in the meal-kit segment continued to weigh on sales as the number of active subscribers fell 23% yoy to 194k (eNuW: 189k) - the effect of which was more pronounced for Europe and Australia than for the US – while revenue from bistroMD partially offset this decline and had a noticeable impact on Q1’24 group sales of c. € 5m (eNuW).

Importantly, after several quarters of decline, MSG was able to observe bottoming-out effects in its subscriber base (+0.5% qoq) as well as a recovery in both order frequency (+5% qoq to 6.5; +2% yoy) and basket size (+3% qoq to € 64; +11% yoy) indicating a return to healthy growth and KPI levels. This positive development was overwhelmingly driven by (1) a higher-quality subscriber base with enhanced retention levels on the back of a rectified voucher strategy in H2’23, (2) higher-priced and larger-sized plan items and (3) an overall stabilizing consumer sentiment.

While topline headwinds persisted, MSG managed to expand its industry-leading contribution margin in Q1 to 34.4% (+335bps yoy, eNuW: 32.5%) on account of reduced voucher and promotional activity and first cost savings in fulfilment (-37% yoy to € 9.2m) derived from the FreshRealm partnership. Notably, MSG translated a higher contribution margin into a healthy operating EBITDA margin of 0.2% for Q1 (c. +700bps yoy) impacted by an increased marketing efficiency (-33% yoy to € 13.8m) and a more streamlined G&A setup (-3% yoy to c. € 21.5m excluding one-offs) as cost reduction measures from automation, centralization, and the closure of underutilized operations began to kick in.

This promising Q1 performance led the company to confirm its FY’24 guidance, expecting sales to grow by a single-digit percentage figure (eNuW: +9% yoy) and a flat contribution margin of c. 31.5% (eNuW: 31.8%). Operating EBITDA is seen to grow to a positive mid-single-digit figure (eNuW: €  2m). In our view, this guidance looks achievable and - aided by a promising strategic outlook and operational progress towards group profitability - MSG looks set to disproportionately benefit from an eventual return of consumer confidence.

We reiterate our BUY rating with an unchanged PT of € 7.00 based on DCF.