Marley Spoon Group ("MSG") released solid Q2’24 results with sales coming in at € 87m, +1% yoy (excluding bistroMD c. € 80m; eNuW: € 78m). As anticipated, cautious consumer behavior in the meal-kit segment continued to weigh on sales as the number of active subscribers fell 17% yoy to 195k (eNuW: 194k) - 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 Q2’24 group sales of c. € 7m (eNuW).

Importantly, after a stabilizing Q1, MSG continued to observe bottoming-out effects in its subscriber base (+1% qoq) as well as a recovery in both order frequency (+2% qoq to 6.6; +5% yoy) and basket size (+5% qoq to € 67; +16% yoy) indicating a somewhat measured but steady return to healthy 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) a  consumer sentiment that is beginning to stabilize.

While topline headwinds persisted, MSG managed to yet again expand its industry-leading contribution margin in Q2 to 34.6% (+3ppts yoy, eNuW: 32%) on account of reduced voucher and promotional activity and first cost savings in fulfilment (-8% yoy to € 12.2m) as a result of the FreshRealm partnership. Notably, for a third quarter in a row, MSG was able to translate a higher contribution margin into a solid positive operating EBITDA margin (€ 1.1m or 1.2% for Q2) impacted by a more streamlined G&A setup (-12% yoy to c. € 18.5m).

This overall healthy Q2 performance led the company to confirm its FY’24 guidance, expecting sales to grow by a single-digit percentage figure and a flat contribution margin of c. 31.5%, with operating EBITDA seen to grow to a positive mid-single-digit figure. While, in our view, this guidance looks achievable aided by operational progress towards group profitability, we nonetheless note that the sales recovery to former levels as well as the operational cost downsizing might take longer than expected and therefore reduce our estimates accordingly. Having said that and considering the depressed level at which MSG shares are currently trading at, we reaffirm the attractive risk reward proposition. 

We reiterate our BUY rating with a changed PT of € 5.40, based on DCF.