Naked Wines Plc · LSE:WINE
Naked Wines — H1 2021 Earnings Presentation
44 slides from Naked Wines's earnings presentation, Nov 19, 2020
Slide 1: Acceleration delivering step change in scale
Acceleration delivering step change in scale H1 FY21 Results Presentation Results for 26 weeks ended 28 September 2020 Winemaker: Jen Pfeiffer, Australia
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: Nick Devlin, Group CEO
Nick Devlin Group CEO Winemaker: Katie Jones, France
Slide 4: H1 FY21: Strong performance drives guidance upgrade
H1 FY21: Strong performance drives guidance upgrade Repeat Repeat customer Active Standstill 20 year Sales Investment contribution sales Angels EBIT payback retention +80% +89% +16ppts +37% +555% +121% +100% to £157m to £36m to 95% to 757k to £26m to £23m to 7.6x Future value generated £173m; +341%
Slide 5: Transformational changes improved the virtuous circle
Transformational changes improved the virtuous circle Our subscribers generate a stream Which means that we can offer our of cash subscriptions and unique customers better wines for less money 4 757k 1 product rating data active Growing Angel base adds Operating cost efficiencies from additional £60
Slide 6: Period of transformational growth
Period of transformational growth Market Scale LTV Wine Online Now Customer Appeal to opportunity operating economics winemakers accelerated at scale improved enhanced Enduring change: Not just a larger business, but a permanently better one 6 Naked Wines plc 2021 Half Year Results Presentation
Slide 7: COVID-19 promoted unprecedented level of channel shift
Market COVID-19 promoted unprecedented level of channel shift . . . US offline vs online channel growth Wine e-commerce trend (Aug’17 – Jul’20) Buyers (m) 3.0 2.5 2.0 84% 84% 80% 90% 86% 95% 1.5 1.0 0.5 16% 16% 20% 10% 14% 5% Pre w/e w/e w/e w/e w/e 0 crisis1 Mar 21 Mar 28 Apr 4 Apr 11 Apr 18 2017 2
Slide 8: Mounting evidence that shift to online DtC models is enduring
Market Mounting evidence that shift to online DtC models is enduring Total wine, off-premise Total wine, DtC shipments Volume % change vs prior year Volume % change vs prior year • Rapid growth seen by off-premise channels 39.6% 37.4% as COVID-19 spread • The summer has seen a 2 pace market 27.0% em
Slide 9: Infrastructure scales efficiently
Scale Infrastructure scales efficiently Scaled our fulfilment whilst Customer Happiness Team Working with winemakers to support preserving the customer goes remote transformative growth whilst experience maintaining quality • Contacts +80% driven by volume • Increased capacity by >100% • 13 million
Slide 10: …driving enhanced economic performance
Scale …driving enhanced economic performance Fixed costs/sales Fulfilment costs/order % $ • Rapid growth in demand has demonstrated scale potential for US 11.6% economics $39.50 5ppts 22% • Potential to leverage existing infrastructure in the US to service 6.6% substantially larger business $31.03 H
Slide 11: Investment to increase LTV is paying off
LTV Investment to increase LTV is paying off Example: New subscription options enhancing lifetime value (“LTV”) “Never Miss Out” contribution & retention vs average Angels 45 1.1 40 Enhancing • Over 180k Never Miss Out sign-ups globally 35 1LTV 30 • Highly incremental: +9% value in 6 months 25 • Hig
Slide 12: COVID-19 has driven change in existing cohort behaviour
LTV COVID-19 has driven change in existing cohort behaviour Monthly cancellation of Angels Monthly order rate of Angels >12 months tenure (index, Jan 2019 = 100) >12 months tenure (index = Jan 2019) 2020 2020 2019 2019 Jan Feb Mar Apr May Jun Jul Aug Sep Jan Feb Mar Apr May Jun Jul Aug Sep • Naked m
Slide 13: As data builds so does confidence in COVID-19 cohort quality
LTV As data builds so does confidence in COVID-19 cohort quality COVID-19 cohorts first 90 days contribution (£ per Angel) March – May cohorts from 2019 2020 acute lockdown phase showing exceptional early quality signals June onwards cohorts +175% reverting closer to long-term norms; early +166% qua
Slide 14: Focus on driving community engagement to support retention
LTV Focus on driving community engagement to support retention during lockdown Total customer posts H1 FY20 338k H1 904k FY21 Supporting the wider wine Delivering digital experience Vibrant Angel community industry • 10 virtual tours hosted in UK, • 168% increase in Angel posts • $5m COVID Relief Fu
Slide 15: Enhancing appeal to world's best winemakers
Wine Enhancing appeal to world’s best winemakers Jesse Katz launch one of largest in Naked US history • ‘Aperture’ range launched 4 July • $250k sold in 24 hours • Average price per bottle of $42 • Launching exclusive ‘Exposed’ range with Naked from vintage 2019 Matt Parish sold $350k in first week
Slide 16: The USA's #1 wine club
LTV The USA’s #1 wine club • Nakedwines.com awarded #1 wine club in USA for 2nd year running • A National award, voted by readers of ‘USA Today 10 Best’ 16 Naked Wines plc 2021 Half Year Results Presentation
Slide 17: Delivering substantial market share gains
LTV Delivering substantial market share gains Volume share of DtC market Value share: • Naked is the largest DtC wine company in USA 2.8% 4.3% 5.8% by volume 20.5% • Naked growth outpaces market and is sustained post lockdown 16.5% 12.9% YE March 19 Last 12 months COVID-19 YTD 17 Naked Wines plc 202
Slide 18: Scale driving growth flywheel
Scale driving growth flywheel Which means that we can Increase scale as we grow investment and reach further maintain paybacks 4 1 customers Scale Increase investment AND Efficiency = maintain margin payback 3 Higher LTV 2 Each 1% improvement in Delivering margin contribution margin means we improve
Slide 19: Well funded to deliver growth opportunities
Well funded to deliver growth opportunities Strong cash position at £76m, +£21m in the half where we: • Accelerated rate of investment in customer acquisition • Invested in capability (data, technology, people) We intend to continue to invest: • In customer acquisition • To expand our range • To bui
Slide 20: James Crawford, Group CFO
James Crawford Group CFO Winemaker: Nina Stocker, Australia
Slide 21: Growth accelerated in all markets
Growth accelerated in all markets USA becoming clear lead market... ...and growing the fastest H1 FY21 sales split by market H1 FY21 sales growth 95% 14% 37% 76% 48% 49% 21 Naked Wines plc 2021 Half Year Results Presentation
Slide 22: Momentum accelerated as new customers convert to repeat
Momentum accelerated as new customers convert to repeat Total sales growth by month vs prior year Lockdown impact: % 300% • Surge in new customer sales 250% • Plus increased repeat customer frequency 200% • New customers then convert to repeat driving ongoing momentum 150% 100% Best-estimate FY sale
Slide 23: Repeat contribution re-invested in growth
Repeat contribution re-invested in growth Drivers of the change in EBIT from H1 FY20 to H1 FY21 Margin: Part- • c.70% of increased repeat contribution sustainable is sustainable: – Growth in customer numbers Frequency: COVID-19 impact Investment: – Margin improvements due to Part-sustainable market
Slide 24: Years of repeat contribution added due to high retention
Years of repeat contribution added due to high retention… H1 repeat contribution Group sales retention £m 36.2 +£17m 94.6% 90.4% +£17m 19.2 83.2% 83.5% 17.5 82.4% 82.9% 15.1 15.0 80.7% 11.3 5.0 2.0 H1 H1 H1 H1 H1 H1 H1 H1 FY16 FY17 FY18 FY19 FY20 H1 L12M FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY21
Slide 25: …and substantially higher early payback
… and substantially higher early payback… Repeat customer H1 contribution by acquisition cohort £m • Phasing of investment and new Angels earlier in Investment in new customers 22.7 the year than usual delivering high levels of Year 0 payback 35% contribution from new cohorts within the half year 7.
Slide 26: …and significant repeat contribution margin improvement
… and significant repeat contribution margin improvement Drivers of the change in contribution margin from H1 FY20 to H1 FY21 • Country mix and fulfilment COVID-19 driven marketing efficiency should sustain and range changes, plus enhanced buying scale • Underlying gross margin improvement due to ma
Slide 27: New customer investment payback driven by CAC and LTV
New customer investment payback driven by CAC and LTV Payback H1 FY21 vs H1 FY20 Cost: lower marketing fees LTV: Higher purchase rates and improved contribution margin H1 FY20 Cost per LTV per Mix/other H1 FY21 payback Angel Angel payback 27 Naked Wines plc 2021 Half Year Results Presentation
Slide 28: Payback enhanced by lockdown period
Payback enhanced by lockdown period Group spend and payback by month (2020) 5.0 25.0x 4.0 20.0x • Limited UK capacity in April to prioritise repeat customers 3.0 15.0x • Partner channel operates with time lag to set up new deals 2.0 10.0x • Cohort value forecasts have been increasing 1.0 5.0x 0.0 0.
Slide 29: Fixed cost growth remained below medium-term guidance trajectory
Fixed cost growth remained below medium-term guidance trajectory Fixed costs 18.0 90% • 20% growth in fixed costs versus sales growth of 80% 80% 15.0 – Below the medium-term guidance at 50% of 70% sales 60% 12.0 50% • Key investments include: 9.0 40% – Additional roles to support the larger group 30
Slide 30: Heightened KPIs show L12M Standstill EBIT of £26.0m
Heightened KPIs show L12M Standstill EBIT of £26.0m L12M Standstill EBIT £m L12M £m Repeat contribution 63.0 Sales retention 90.4% Repeat contribution lost to sales attrition 6.1 (3.6) Year 1 payback (from PY cohort) 66.8% 5.1 Improved retention and payback cause reversal 2.8 10.1 Spend to replenish
Slide 31: Strong cash generation driven by working capital reduction
Strong cash generation driven by working capital reduction For the 26 weeks ended (£m) HY20 HY21 YoY • £21m of cash generated in the half Adjusted EBIT (4.5) (3.2) 1.3 Add back depreciation 0.8 1.0 0.2 • Outflows to build inventory – Right-sized position Adjusted EBITDA (3.7) (2.2) 1.5 – Need to rep
Slide 32: Upgrading outlook on delivery of strong performance
Upgrading outlook on delivery of strong performance FY 2021 FY 2022 • Intent to sustain investment – minimum FY21 levels, Financial guidance FY21 targeting 4.0x payback (20 year) Total sales growth +55-65% • Repeat business wide range of outcomes after Repeat contribution £75-80m exceptional FY21 In
Slide 33: In summary
In summary • Transformative growth in the first half • Results in an upgrade to the full year guidance • Operation proven at scale, rapidly responding to growth in demand • Scale breakthrough delivering enduring benefits • Naked benefiting from structural shift in online wine market • Balance sheet
Slide 34: Q&A
Q&A Winemaker: Rebecca Santolin, Australia
Slide 35: Appendices
Appendices Winemaker: Constanza Schwaderer, Chile
Slide 36: Income Statement
Income Statement £m H1 FY21 H1 FY20 YoY % New customers 32.2 12.1 166% Repeat customers 124.9 75.4 66% Total revenue 157.1 87.5 80% US 76.5 39.3 95% UK 57.8 32.8 76% Australia 22.8 15.4 48% New customers (22.7) (10.3) 121% Repeat customers 36.2 19.2 89% Contribution 13.5 8.9 52% Fixed costs 1 (16.7)
Slide 37: Summary balance sheet and Free Cash Flow drivers
Summary balance sheet and Free Cash Flow drivers For the year ended (£m) FY20 H1 FY20 H1 FY21 Non-current assets 59.7 50.6 52.3 - Intangibles 36.0 41.0 34.2 - Others 23.7 9.6 18.1 Non-current liabilities (5.8) (6.2) (4.1) Working capital Inventory 69.9 81.4 84.9 Other current assets 5.4 8.5 7.1 Cust
Slide 38: Standstill EBIT (L12M)
Standstill EBIT (L12M) £m H1 FY19 H1 FY20 H1 FY21 Repeat contribution 36.3 41.9 63.0 Sales retention 81.6% 80.9% 90.4% Repeat contribution lost to attrition 6.7 8.0 6.1 Year 1 payback (from PY cohort) 83.5% 66.3% 66.8% Spend to replenish lost repeat contribution 8.0 12.1 9.1 SS EBIT is calculated as
Slide 39: Strong retention and trading uplifting all LTV forecasts
Strong retention and trading uplifting all LTV forecasts Payback1 Age at Latest 5 year vs previous Latest 20 year vs previous Payback Cohort reporting date (forecast) forecast (forecast) forecast to date FY16 55-66 months 3.1x (actual) 0.0x 6.7x 0.4x 3.2x FY17 43-54 months 2.6x 0.1x 5.5x 0.3x 2.3x F
Slide 40: Historic IFRS 2: share based payments
Historic IFRS 2: share based payments £m FY20 FY19 FY18 FY17 FY16 Acquisition related SBP charges - (1.4) (4.1) (6.9) (7.3) Naked ongoing schemes (1.0) (0.5) (0.3) (0.2) - Total attributable to Naked (1.0) (1.9) (4.4) (7.2) (7.3) Discontinued operations (1.0) (0.4) (0.5) (0.5) (0.2) Total (1.9) (2.3
Slide 41: Glossary of terms
Glossary of terms Alternative performance measures Adjusted EBIT Operating profit adjusted for amortisation of acquired intangibles, acquisition costs, impairment of goodwill, restructuring costs and fair value movement through the income statement on financial instruments and revaluation of funding
Slide 42: Glossary of terms (continued)
Glossary of terms (continued) Investment measures Investment in new customers The contribution earned from sales to new customers (also referred to as new customer contribution) Lifetime payback The ratio of the Lifetime value (see below) of the customers recruited this year to the investment we mad
Slide 43: 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 CAGR 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 e
Slide 44: Glossary of terms (continued)
Glossary of terms (continued) Operational 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 service” Th