10x in 6 Months, What Will Drive ASX Emerging Company- Marley Spoon

  • Aug 11, 2020 AEST
  • Team Kalkine
10x in 6 Months, What Will Drive ASX Emerging Company- Marley Spoon

Summary

  • COVID-19 crisis has been tough for various companies; however, many businesses are thriving during this challenging period.
  • Marley Spoon, a global subscription-based meal kit service provider, has witnessed 983 per cent growth in its stock price in the last six-month period.
  • MMM offers an easy solution for cooking and hence growing fast in the pandemic-driven world.
  • In Q2, the company registered 1st positive global operating EBITDA, delivered 13.2 million meals and recorded 129 per cent year-on-year growth in revenue.
  • For 2020, Marley Spoon has upgraded guidance to at least 70 per cent revenue growth from ~30 per cent.

COVID 19 pandemic has led to a challenging time for a number of businesses. Given the unprecedented and extraordinary situation caused by the pandemic, governments imposed lockdowns and halted several business activities, resulting in a massive impact on the economy. As many governments are now easing restrictions in a phased-wise manner, several sectors are trying hard to recover.

In Australia, initial phase of the pandemic was well-controlled, and it seemed that the country almost won the battle against this deadly virus. But the new cases in Victoria and NSW seem to jeopardise the government's plan of phase-wise recovery of the economy. 

However, in this dark period of unprecedented and prolonged crisis, there are few companies that are shining bright and growing fast. One such company is Marley Spoon AG (ASX:MMM), which seems utterly immune from the pandemic's impact. If we look at the last six-month performance of this company, it grew by a whopping 983.33 per cent.

At a time when people are driven back to home-cooked food due to hygiene reasons during the pandemic, Marley Spoon is helping people in doing so. MMM is a global subscription-based meal kit service provider that brings easy, delightful and market fresh cooking to the people.

The company, established in 2014, currently operates in Australia, US and Europe (Germany, Denmark, Sweden, Austria, Belgium and the Netherlands). It makes the cooking process fun and hassle free. One only needs to decide what to eat, when to eat, and Marley Spoon sends the meal kits based on requirement. In the package, you get recipes and spices in the exact quantity required for the meal. The outcome is a healthy meal with loved ones.

The company's global mission is to aid millions of people around the world to cook better and conveniently, via its three brands Marley Spoon, Martha & Marley Spoon, and Dinnerly.

First Positive Operating EBITDA for Marley Spoon in Q2  

During late-July 2020, MMM released its quarterly report for the period ended 30 June 2020. The company mentioned that pandemic contributed to the robust growth of its global business, as adoption to online grocery shopping boomed in this period. 

The pandemic has only worked in favour of MMM, with retention remaining solid and customer acquisition costs reducing significantly. The company served 13.2 million meals in Q2 2020 and developed more than 26,000 recipes. Number of active customers grew by 104 per cent to reach 350k and total orders went up by 114 per cent to 1,551K.

Q2 revenue stood at EUR 73.3 million, up by 129 per cent on the prior corresponding period (PCP). The second quarter reported positive operating EBITDA of EUR 4.5 million, representing the first positive operating EBITDA on group level.

The Global Contribution Margin (CM) in Q2 was a record 30.5 per cent, up 6 pts year-over-year (YOY).

Source: MMM ASX Update

United States remained the most substantial growing region for MMM, where revenue went up by 171 per cent to EUR 38 million and contribution margin grew by 8 points to reach 28 per cent. During the second quarter, the company doubled manufacturing capacity and exited the period with spare capacity (same as Australia and Europe).  

In Australia, revenue was up by 103 per cent to EUR 24 million and contribution margin grew to 37 per cent with a surge of 4 points. Australia remains operating EBITDA positive since Q2 2019 for the company. During Q2, the company also signed pre-lease for a 14,200sqm purpose-built facility in Sydney.  

In Europe, Q2 revenue stood at EUR 11 million, reflecting an increase of 83 per cent and CM increased to 25 per cent, added 10 points. In Q2, the company rolled out the Dinnerly brand in Germany.

Net cash flows from operating activities grew from EUR 0.5 in Q1 2020 to EUR 7.6 in Q2 2020. This is the 2nd consecutive quarter with positive operating cash flow. Cash and cash equivalents at the end of the quarter stood at EUR 18.4 million, compared with EUR 5.9 million at end-Q1.

Recently, Woolworths Group Limited (ASX: WOWconfirmed that its venture capital arm, W23 converted its AUD 2.95 million Convertible Bond into 5.9 million CHESS Depository Interests (CDIs) in Marley Spoon. W23 continues to hold AUD 27 million in MMM secured Convertible Bonds and looks forward to working with Marley Spoon under the five-year partnership and strategic agreement entered into in June 2019.

Upgraded Revenue Growth Guidance – Amid the robust growth, Marley Spoon upgraded its full-year guidance to a minimum 70 per cent revenue growth for 2020, compared with an earlier guidance of 30 per cent.

As per Marley Spoon, now when consumer purchasing is shifting towards online platform, grocery is one of the most significant untapped opportunities. MMM is well-positioned to capture this market zone with its products and geographic reach. The company is also focusing on innovation through technology investments in manufacturing, software as well as data & personalisation platforms.

On 11 August 2020 (AEST 01:56 PM), MMM was trading at AUD 3.125, down by 3.846 per cent from its previous closing price, with a market cap of AUD 566.71 million.

Good Read: 10 Consumer Discretionary Stocks in ASX Bull Run

 

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