Naked Wines Plc · LSE:WINE
Naked Wines — FY2022 Earnings Presentation
58 slides from Naked Wines's earnings presentation, Jun 23, 2022
Slide 1: FY22 Results Presentation
FY22 Results Presentation Largest DtC Wine Business in the World Continues to Drive Growth via Disruptive Business Model March 2022 Naked Wines 2022 Full Year Results Presentation 1
Slide 2: Disclaimer
Disclaimer This presentation (the “Presentation”) has been produced for discussion purposes only. The information contained in the Presentation is not intended for any other use. The Presentation is being made only to, and is only directed at, persons to whom it may lawfully be communicated (“releva
Slide 3: Introduction
Our Winemakers: Serena Cordero, Italy Introduction Nick Devlin Group CEO Naked Wines 2022 Full Year Results Presentation 3
Slide 4: Agenda
Agenda To Disrupt the Wine Industry for the Benefit FY22 FY23 Outlook & of Our Customers, Winemakers & Our Results Long-Term Plan People Naked Wines 2022 Full Year Results Presentation 4
Slide 5: The Problem We Exist to Solve
The Problem We Exist to Solve Problem: For Winemakers, It’s Hard to Get Recognition. For Consumers, It’s Hard to Make Sense of Market & Inefficient Economics. WINEMAKER CONSUMER 1. Access to real choice: Consolidation means the few 1. Access to capital: Making wine is determine choice of consumers e
Slide 6: A Unique, Win(e)-Win(e) Value Proposition
A Unique, Win(e)-Win(e) Value Proposition Problem: For Winemakers, It’s Hard to Get Recognition. For Consumers, It’s Hard to Make Sense of Market & Inefficient Economics. WINEMAKER CONSUMER Autonomy Reward Value Exclusivity Creative Freedom Scale Rapidly Quality/Value Exclusive Access to Advantage W
Slide 7: The World's Largest DtC Wine Business
The World’s Largest DtC Wine Business Active Angels by FY Total Group Sales (£ million) 1,200,000 CAGR 340 350 1,000,000 CAGR 20% 800,000 21% 600,000 203 178 156 400,000 142 200,000 0 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY17* FY18 FY19 FY20 FY21 FY22 (1) *FY17 is 52-weeks Naked Wines 2022 F
Slide 8: Financial Review
Our Winemakers: United States Financial Review Shawn Tabak Group CFO Rudy VonStrasser Jacqueline Bahue Ondine Chattam Camille Benitah Diamond Napa District, Napa Sonoma / Lodi Mendocino / Sonoma Napa Naked Wines 2022 Full Year Results Presentation 8
Slide 9: FY22 Performance Themes
FY22 Performance Themes Consolidated FY21 Disciplined Investment Enduring Appeal of Growth Approach Proposition • Investment moderated based • Repeat Customer sales • 5% Group sales increase on payback outlook retention of 80% constant currency • Full year EBIT ahead of • Active Angel base increased
Slide 10: FY22 Financials At-a-Glance
FY22 Financials At-a-Glance Group Sales Repeat Customer Cont. Profit Investment in New Customers Adjusted EBIT (£ million) (£ million) (£ million) (£ million) 340 350 85 86 50 8.7 41 6.7 203 178 46 40 24 0.7 186% 2.0 156 142 34 19 146% 27 220% 15 (1.5) 14 (2.4) 179% FY17* FY18 FY19 FY20 FY21 FY22 FY
Slide 11: FY22 Cost Base
FY22 Cost Base Gross Profit Fulfilment Costs Advertising Costs G&A Costs(2) (£ million) (£ million) (£ million) (£ million) 42 142 63 43 136 58 34 36 35 25 78 24 69 30 20 18 18 55 22 24 48 13 194% 11 FY17* FY18 FY19 FY20 FY21 FY22 FY17* FY18 FY19 FY20 FY21 FY22 FY17* FY18 FY19 FY20 FY21 FY22 FY18 FY
Slide 12: KPIs – Repeat Customers
KPIs – Repeat Customers(1) £ million FY17(2) FY18 FY19 FY20 FY21 FY22 YoY 2 Yr. Chg. Repeat Customer 114.3 134.5 152.9 173.7 283.9 315.1 11% 81% Driven by strong consumer proposition Sales Repeat Customer Maintained profit, which was offset by higher transportation & Contribution 26.9 33.8 39.8 46.4
Slide 13: Margin Rates Ahead of Expectations Despite Cost Pressures
Margin Rates Ahead of Expectations Despite Cost Pressures Repeat Customer Contribution Margin Bridge FY20-FY22 Naked Wines 2022 Full Year Results Presentation 13
Slide 14: Strong Retention Across Cohorts
Strong Retention Across Cohorts… Percentage Contribution Contribution Profit by Cohort(1) Retained in FY22 90 (£ million) • Sales retention of 80% 80 10.8 driven by strong consumer 70 FY21 124% proposition 26.5 60 • Loyal customers drive a 32.8 solid base of contribution 50 FY20 60% profit 6.9 18.4
Slide 15: …Is generating attractive & proven returns
…Is generating attractive & proven returns Cumulative Initial Contribution Profit Payback to Cohort Contribution Profit Investment After Payback date FY13-FY15 92.4 19.4 73.0 4.8x • Since FY13 we have invested FY16 41.1 10.9 30.2 3.8x £190M which has returned contribution profits of £350M FY17 42.2
Slide 16: Standstill EBIT – L12 Months
Standstill EBIT(1) – L12 Months As Reported - £ million FY18 FY19 FY20 FY21 FY22 FY22 PF(2) Standstill EBIT calculation Repeat Customer Contribution 33.8 39.8 46.4 84.9 86.2 86.2 Less: Replenishment Spend (7.0) (9.8) (11.7) (12.2) (25.0) (19.2) Less: General & Admin Costs (18.3) (23.7) (25.2) (33.4)
Slide 17: KPIs – New Customers
KPIs – New Customers(1) New Customer Contribution Loss + Advertising £ million FY17 FY18 FY19 FY20 FY21 FY22 YoY 2 Yr. Chg. Costs = Investments in New Customers New Customer Loss attributable to sales to New Customers; Contribution Loss (1.8) (2.7) (1.5) (3.7) (7.7) (7.2) (7)% 95% represents loss on
Slide 18: FY22 Payback
FY22 Payback Group HY to FY Payback bridge • Payback outlook for cohorts acquired in H1 is lower than reported at Interims • We have seen some pressure on consumer sentiment that has resulted in higher early attrition • UK market position – opportunity to move toward higher value offering & customer
Slide 19: Segmental Overview: FY22 Sales
Segmental Overview: FY22 Sales US UK Australia (£ million) (£ million) (£ million) 162 147 46 46 157 133 32 91 80 73% 84% 43% FY20 FY21 FY22 FY20 FY21 FY22 FY20 FY21 FY22 As a Percentage of Total Sales As a Percentage of Total Sales As a Percentage of Total Sales 45% 48% 45% 39% 39% 42% 16% 13% 13%
Slide 20: Segmental Overview: Customer Contribution & Investment
Segmental Overview: Customer Contribution & Investment (£ million) Repeat Customer Contribution Profit US UK Australia Repeat Customer Contribution Profit 27 28 11 48 10 • Australia margin increase driven by 47 gross margin improvements 7 • Global supply challenges in US & UK 16 markets increased co
Slide 21: Strengthened Balance Sheet: Added A $60M Credit Facility
Strengthened Balance Sheet: Added A $60M Credit Facility Key Balance Sheet Amounts (£ million) FY20 FY21 FY22 • Cash position of £40m Closing Cash Balance 54.7 85.1 39.8 • Invested in inventory to restock, offset Working Capital(1) by customer funds & payables Inventory 69.9 76.1 142.4 Other Current
Slide 22: FY23 Guidance Update
FY23 Guidance Update Themes relevant to FY23 guidance: • Inflationary pressure in all markets • Consumer sentiment impacted by inflation & geopolitical environment • UK business shifting toward a more premium offering, resulting in approximately £5 million less Investment in New Customers & relative
Slide 23: Strategy
Winemaker: Carmen Stevens, South Africa Strategy Nick Devlin Group CEO Naked Wines 2022 Full Year Results Presentation 23
Slide 24: FY22 Highlights
FY22 Highlights Observations Our FY23 Operating Strategic Growth on FY22 Approach Initiatives Naked Wines 2022 Full Year Results Presentation 24
Slide 25: F22 Takeaways
F22 Takeaways Naked navigated a dynamic consumer environment & inflationary pressures well in FY22 & consolidated the step change achieved in FY21 Proposition Resonates Disciplined Investment Enhanced Winemaker Appeal Our consumer proposition continues to Our long-term record of disciplined We conti
Slide 26: Proposition Resonates
Proposition Resonates We Have a Proven Track Record of Improving Revenue per Active Angel Repeat Revenue per Active Angel, FY17-22, GBPm(1) 340 327 320 320 299 300 290 283 280 268 4% 260 CAGR 240 220 200 FY17 FY18 FY19 FY20 FY21 FY22 • Proven track record of expanding revenue per active angel throug
Slide 27: Proposition Resonates
Proposition Resonates Consumer & Industry Recognition as Leading Online Wine Offering Recent Naked Wines Recognition Naked Wines 2022 Full Year Results Presentation 27
Slide 28: Disciplined Investment
Disciplined Investment FY22 Payback Was Below Our Targets; We Will Continue to Operate a Disciplined & Data-Led Investment Model DRIVING FACTORS IMPACTS & ACTIONS • Marketing inflationary pressure (esp. in digital channels H1) • Current view of H1 payback is 1.4x vs 1.7x • Success of investments imp
Slide 29: Disciplined Investment
Disciplined Investment Three Levers We Are Pulling to Address Lower Payback Market Media vs Investment in Positioning First Order Loss Early Customer Experience Naked Wines 2022 Full Year Results Presentation 29
Slide 30: Disciplined Investment
Disciplined Investment Over Time we Continue to See Realized 5-Year Returns Exceed Initial Expectations “Goldilocks” Range (1) Bottles sold “bespoke” i.e., not as part of pre-merchandised cases with an angel price of >$25 per bottle. Q3 = October-December and reflects the time of year we have our la
Slide 31: Enhanced Winemaker Appeal
Enhanced Winemaker Appeal Strengthening Our differentiation FY22 266 Winemakers 230 Awards 110 Quality Index 151 Brands Strengthening Gaining Critical Enhancing Quality Building Scalable Winemaker Base Recognition Perception Brands Quality Perception Score in Brand Winemaker brands w annual sales Gl
Slide 32: Sales Per Winemaker Increasing
Enhanced Winemaker Appeal Sales Per Winemaker Increasing Total Sales Per Winemaker (£) 1,600,000 280 1,446,809 1,400,000 260 1,315,789 1,200,000 240 Total Sales Per Winemaker Number of Winemakers 1,000,000 962,085 220 903,553 825,581 825,397 800,000 200 600,000 180 400,000 160 FY17 FY18 FY19 FY20 FY
Slide 33: Multi-Year Investment: Enhancing Wine is Showing Dividends
Multi-Year Investment: Enhancing Wine is Showing Dividends Naked US, Q3 Luxury Wine Sales, FY22 vs FY21, USD million(1) Naked Australia, Average Repeat Order Value, AUD(2) 2.7 171 167 166 1.5 87% 9% 157 FY21 FY22 FY19 FY20 FY21 FY22 (1) USD Value of wine sold to US members with an angel price of >$2
Slide 34: Our Scale & Premiumization is Unlocking New A-List Winemaking Talent
Enhanced Winemaker Appeal Our Scale & Premiumization is Unlocking New A-List Winemaking Talent • Multi-award-winning Napa winemaker & owner of Von Strasser brand • This year Rudy moved to working exclusively with Naked, including distribution of award winning von Strasser brand • Rudy's wines at Nak
Slide 35: FY22 Highlights
FY22 Highlights Observations FY23 Operating Strategic Growth on FY22 Approach Initiatives Naked Wines 2022 Full Year Results Presentation 35
Slide 36: Our Perspective on an Uncertain Macro-Economic Climate
Our Perspective on an Uncertain Macro-Economic Climate 1. Wine category is robust in downturn: • Volume inelastic • US wine market saw strong performance in GFC • Consumers change buying behaviour 2. Naked’s model is Resilient: Naked well positioned in • Evidence from UK market downturn… • High leve
Slide 37: This Informs Our Intended Trading Approach to FY23
This Informs Our Intended Trading Approach to FY23 1. Ensure Naked is well 3. Seek opportunities to 2. Reinforce key positioned to endure benefit from changes in differentiators downside risk consumer behaviour • Strengthen balance sheet • Better wine for your • Continue to invest based • Prudent tr
Slide 38: FY22 Highlights
FY22 Highlights Observations FY23 Operating Strategic Growth on FY22 Approach Initiatives Naked Wines 2022 Full Year Results Presentation 38
Slide 39: Focused on Improving Our Economics to Drive Sustainable Growth
We are Focused on Improving Our Economics to Drive Sustainable Growth 1 Better translate traffic to LTV IMPROVE Improved economics = best Strengthen 2 ECONOMICS sustainable way to unlock Repeat mid-term growth Economics NEW Unlock new CHANNELS / STRATEGIES 3 investment opportunities Naked Wines 2022
Slide 40: Translate Traffic to LTV
Translate Traffic to LTV We are Investing in Improving 3 Key Processes to Increase LTV per Session 2. Winback & Remarketing Traffic New Customers 1. Conversion Rate 3. First 90 Days Optimization Naked Wines 2022 Full Year Results Presentation 40
Slide 41: Translate Traffic to LTV
Translate Traffic to LTV Enhancing LTV by Driving Higher Conversion to 2nd Order Naked’s model generates high 80%+ revenue retention from repeat shoppers • Opportunity to materially increase LTV per member; focus on initial 90 days of member experience • Increasing resource & organizational factors
Slide 42: Translate Traffic to LTV
Translate Traffic to LTV We Have Proof of Concept for Increasing Share of Angels via Remarketing Building a smart model to indicate probability to reactivate Winbacks vs. First-Time Angels 17% FY22 83% 4% FY21 96% 5% FY20 Winbacks 95% First-Time Sign-Up 6% FY19 94% 4% FY18 96% 3% FY17 97% Reactivati
Slide 43: Translate Traffic to LTV
Translate Traffic to LTV These Strategies Leverage our Data & LTV Models to Drive Cohort Economics LTV Variance by Customer Attribute, US Example LTV by Self-Reported Monthly LTV by Customer Age Band LTV by First Time Signup vs Winback Wine Consumption Index average LTV = 100 Index average LTV = 100
Slide 44: Strengthen Repeat Economics
Strengthen Repeat Economics Repeat Contribution Economics: We Have Pricing Power Naked’s ecosystem allows high level of control over realized margins Vertically-integrated Exclusive brands & Measurable consumer Ownership of sales production model products surplus channels • Product & package redesig
Slide 45: Strengthen Repeat Economics
Strengthen Repeat Economics Case Study: Playbook in action in Australia Case Study: We’ve added 4.5 ppts to repeat contribution margin in Australia Australia Repeat Contribution Margin Percentage: +4.5% Key Levers • 36% of Lift: Deepened collective sourcing for dry Australia good (bottle cost) eleme
Slide 46: Unlock New Opportunities: Investment in Brand
Unlock New Opportunities Investment in Brand We believe brand investment can accelerate our growth Investment Thesis Key FY22 Learnings • Investing in long & short-term advertising • We can cost effectively change perception of represents large investment opportunity Naked (Australia, Denver) • Move
Slide 47: Investment in Brand – An Approach With Measurement at its Core
Unlock New Opportunities Investment in Brand – An Approach With Measurement at its Core Our plans for FY23 are to elevate long-term brand impact via key learnings on prior FY brand investment US Test Market(s): UK Test Market(s): Estimated Marketing Mix, Percentage Denver, Washington, D.C. South of
Slide 48: Unlock New Opportunities: Brand Investment
Unlock New Opportunities Brand Investment Naked Wines 2022 Full Year Results Presentation 48
Slide 49: Setting Our Infrastructure & Organization up to Scale Efficiently
Setting Our Infrastructure & Organization up to Scale Efficiently Investment in Key Infrastructure to Setting up the Organization for support Naked at Scale Efficiency Key Projects to be delivered in FY23: New role created of Group Chief Operating Officer • ERP / Netsuite implementation (COO) • New
Slide 50: In Summary
In Summary FY22 Results Clear Mission to A Focus on Compelling Show Disrupt Wine Responsible Long-Term Proposition Industry Growth in FY23 Growth Path Resonates • Large & underpenetrated • Disruptive model benefitting • Consolidated FY21 step- • Robust position in face of TAM winemaker & consumer ch
Slide 51: Q&A
Q&A Naked Wines 2022 Full Year Results Presentation 51
Slide 52: Appendix
Our Winemakers: Dominic Hentall & Ben Darnault Appendix Naked Wines 2022 Full Year Results Presentation 52
Slide 53: Income Statement
Income Statement £m FY20 FY21 FY22 YoY 2YoY • Revenue +3% vs FY21 to £350.3 million driven by Total sales 202.9 340.2 350.3 3% 73% the strong retention & demand from existing Cost of sales (125.3) (204.7) (208.6) 2% 66% members Gross profit 77.6 135.5 141.7 5% 83% Gross profit margin 38% 40% 40% +60
Slide 54: Bridging Contribution to Adjusted EBIT
Bridging Contribution to Adjusted EBIT(1) (1) Excluding statutory adjustment for other contribution Naked Wines 2022 Full Year Results Presentation 54
Slide 55: Glossary of Terms
Glossary of Terms Alternative performance measures Operating profit adjusted for amortisation of acquired intangibles, acquisition costs, impairment of goodwill, restructuring costs Adjusted EBIT and fair value movement through the income statement on financial instruments and revaluation of funding
Slide 56: Glossary of Terms (Continued)
Glossary of Terms (Continued) Investment measures The ratio of projected future Repeat Customer Contribution profit we expect to earn from the New Customers recruited in the year divided by the Investment in New Customers. We forecast contribution at a customer level using a Machine Learning (ML) mo
Slide 57: Glossary of Terms (Continued)
Glossary of Terms (Continued) Definitions Angel A customer who deposits funds into their Angel account each month to spend on the wines on our website Compound annual growth rate. The year on year growth rate required for a number of years for a value to grow from its beginning balance to its ending
Slide 58: Glossary of Terms (Continued)
Glossary of Terms (Continued) Customer experience KPIs Product availability % of targeted range available on websites as indicated by our inventory reporting Wine quality – ‘Buy it again ratings’ % of “Yes” scores in the last 12 months as recorded by websites/apps Service ratings – ‘5* customer serv