Scalare Partners Holdings Limited · ASX:SCP
Scalare Partners — Corporate Update (July 2020)
37 slides from Scalare Partners's corporate update, Jul 8, 2020
Slide 1: Business Update July 2020
BUSINESS UPDATE JULY 2020 1
Slide 2: About Us
ABOUT US Candy Club is a US-based confectionery company that is focused on its fast-growing B2B wholesale business, which has grown out of a long-running B2C subscription business. Candy Club operates through two main distribution channels – traditional brick-and- mortar stores and e-commerce. 2
Slide 3: Company Overview
COMPANY OVERVIEW
Slide 4: Company Background
COMPANY BACKGROUND Founded in 2015, Candy Club started as a pureplay business-to-consumer (B2C) subscription-only business. Candy Club re-calibrated its strategy in September 2019, pivoting its business to retailers where a gap in the market for high-end candy products was identified. Since then, th
Slide 5: 2Q FY2020 at a Glance
2Q FY2020 AT A GLANCE Candy Club changed its reporting currency from Australian dollars to US dollars, commencing with the quarter ended 30 June 2020 (2Q FY2020), to better reflect its underlying operational and financial performance. 1Q FY2020 2Q FY2020 QoQ Change 1H FY2020 Total gross revenue US$1
Slide 6: Highlights
HIGHLIGHTS Candy Club recorded a remarkable 2Q FY2020 while operating in an extremely challenging environment: The COVID-19 pandemic caused widespread closures of brick-and-mortar stores for most of the 2Q, There have been further delays in store openings due to civil unrest in the US, There has bee
Slide 7: Highlights
HIGHLIGHTS Candy Club expects to be profitable (EBITDA-positive) in 4Q FY2020 with its current balance sheet and available financing facilities . Candy Club enters the second half of FY2020 with a very promising outlook. Furthermore, 3Q and 4Q are usually seasonally stronger quarters, which will ben
Slide 8: B2B Market Opportunity
B2B MARKET OPPORTUNITY
Slide 9: B2B Market Opportunity
B2B MARKET OPPORTUNITY Annual sales in the US confectionery market is US$40bn. Candy Club has identified a massive untapped opportunity in this sector. Key benefits of the candy category to retailers; Reliable gross Long shelf life Defensive margins product US$40 billion Annual sales of US$40 billio
Slide 10: White Space Strategy
WHITE SPACE STRATEGY In September 2019 the Company identified under-utilised counter space at premium retailers across the US as a growth opportunity and an untapped sales and distribution channel for Candy Club products. This “white space” opportunity represents over 3.2 million retail doors. Candy
Slide 11: White Space Strategy
WHITE SPACE STRATEGY Being successful in the specialty market requires: Differentiated Premium Giftable Higher price products products packaging points … and Candy Club has it all 11
Slide 12: B2B Segment Performance
B2B SEGMENT PERFORMANCE
Slide 13: B2B Revenue & Gross Margin
B2B REVENUE & GROSS MARGIN B2B Revenue & Gross Margin It was a strong quarter for Candy Club’s B2B US$ '000 1,800 40% segment where it experienced exponential 1,600 growth. 39% 1,400 Total B2B gross revenue surged in 2Q FY2020 to 1,200 US$1.6 million. 38% 1,000 This represents a growth multiple of 2
Slide 14: Total Retail Doors & Customers
TOTAL RETAIL DOORS & CUSTOMERS Total Retail Doors & Customers Candy Club’s total number of retail doors 15,000 continued to increase from 4500 in December 2019 to more than 8800 June 2020. 12,000 The number of customers has more than 9,000 doubled year-to-date. Candy Club started the year with less
Slide 15: Re-order Rate
RE-ORDER RATE Re-order Rate Re-order rate is the rate a customer repeats an 100% order. 90% The average quarterly re-order rate has exceeded 90% in three of the last four quarters. 80% Repeat orders represent customer satisfaction in the products purchased. 70% The high re-order rate is bolstered by
Slide 16: Customer Feedback
CUSTOMER FEEDBACK Faire and Tundra are two of the most prominent online wholesale platforms that carry Candy Club’s products. Candy Club’s retailer satisfaction ratings are outstanding as Faire averages at 4.8 out of 5 while on Tundra the rating averages at 5 out of 5. 16
Slide 17: Product Differentiation
PRODUCT DIFFERENTIATION MASS MARKET PRODUCTS Gummy Dinos Sour Pink Cadillacs M&M’s Mars Snickers Hershey’s Chocolate Pretzels Blue Razz Laces 17
Slide 18: B2B Inbound Customer Leads
B2B INBOUND CUSTOMER LEADS B2B Inbound Customer Leads Total number of B2B inbound customer leads 1,800 are ramping rapidly. 1,600 Generally, 35% of total B2B inbound customer 1,400 leads convert to B2B customers. 1,200 This will eventually translate into additional B2B 1,000 customers, ensuring a ro
Slide 19: B2C Segment Performance
B2C SEGMENT PERFORMANCE
Slide 20: B2C Revenue & Gross Margin
B2C REVENUE & GROSS MARGIN B2B Revenue & Gross Margin The B2C segment also saw a solid performance. US$ '000 900 45% The subscription-based segment is profitable as 800 a standalone business on the first customer 700 consignment. 600 44% 500 400 300 43% 200 100 0 42% 3Q FY19 4Q FY19 1Q FY20 2Q FY20
Slide 21: 2Q FY2020 Performance
2Q FY2020 PERFORMANCE
Slide 22: 2Q FY2020 Financial Results
2Q FY2020 FINANCIAL RESULTS US$ '000 Total Gross Revenue Candy Club experienced a strong 2Q FY2020. 2,500 Total gross revenues grew 67% QoQ to US$2.3 million, mainly driven by 135% growth in B2B 2,000 gross revenue. 1,500 This is an exceptional result amid the COVID-19 pandemic and a quarter that is
Slide 23: 2Q FY2020 Financial Results: EBITDA
2Q FY2020 FINANCIAL RESULTS EBITDA EBITDA loss continued to reduce, at only -US$0.4 3Q FY19 4Q FY19 1Q FY20 2Q FY20 million in 2Q FY2020. 0 Candy Club expects to reach profitability -200 (EBITDA-positive) in 4Q FY2020 as it continues to focus on sustainably scaling its business. -400 As Candy Club’s
Slide 24: 2Q FY2020 Financial Results: Net Operating Cash Flow
2Q FY2020 FINANCIAL RESULTS Net Operating Cash Flow (NOCF) Net operating cash flow (NOCF) improved to -US$0.9 3Q FY19 4Q FY19 1Q FY20 2Q FY20 million in 2Q FY2020. 0 The difference between the EBITDA loss and NOCF -250 can be attributed to inventory purchases required to support future growth (US$36
Slide 25: Appendix
APPENDIX
Slide 26: Candy Club Timeline
CANDY CLUB TIMELINE • Focused on adding scale and validating all • Australian roadshow • B2C turns profitable on KPI metrics and pre-IPO rounds; lower scale • First US-based subscription economy • Exponential growth in investment loses momentum B2B business 2015 2016 2017 2018 2019 2020 • Founded by
Slide 27: Candy Industry Overview
CANDY INDUSTRY OVERVIEW Annual sales exceeds 97% US A customer makes 18 US$40 billion with household purchases annually on 2% growth p.a. penetration average Candy is the primary category sold at the check-out register with 100% penetration in the mass market, including: Big-box (discount) stores –
Slide 28: White Space Strategy
WHITE SPACE STRATEGY There are several reasons why this opportunity exists, including: Category leaders are more mass market-focused and their products are not a good fit for specialty market retailers due to pricing, package and lack of product differentiation Fragmented specialty market manufactur
Slide 29: Income Statement
INCOME STATEMENT in US$ million 1Q FY2020 2Q FY2020 1H FY2020 Gross Revenue 1.41 2.34 3.75 Discounts & Refunds -0.18 -0.17 -0.35 Net Revenue 1.23 2.18 3.40 Cost of Goods Sold -0.71 -1.28 -1.99 Gross Margin 0.51 0.90 1.42 Gross Margin (%) 42.0% 41.4% 41.6% Selling Expenses -0.23 -0.36 -0.59 Contribut
Slide 30: Balance Sheet
BALANCE SHEET in US$ million as at 30 June 2020 Cash 0.64 Accounts Receivable 0.25 Inventory 2.65 Other current assets 0.44 TOTAL CURRENT ASSETS 3.98 Fixed assets 0.05 Other fixed assets 0.48 TOTAL LONG TERM ASSETS 0.53 TOTAL ASSETS 4.51 Accounts Payable 1.46 Other current liabilities 0.95 TOTAL CUR
Slide 31: Statement of Cash Flow
STATEMENT OF CASH FLOW in US$ ‘000 1Q FY2020 2Q FY2020 1H FY2020 Beginning Cash 0.53 0.35 0.53 Cash from provided/(used) from Operating Activities -1.19 -0.93 -2.11 Cash from provided/(used) from Investing Activities 0.00 -0.10 -0.10 Cash from provided/(used) from Financing Activities 1.01 1.32 2.32
Slide 32: Cap Table & Top Shareholders
CAP TABLE & TOP 10 SHAREHOLDERS Total shares outstanding: 236,154,102 Total options outstanding: 102,981,624 Total shares and options on a fully diluted basis: 339,135,726 Holder Name Holding % IC 1 JCKB PTY LTD 49,300,514 20.88% 2 CITICORP NOMINEES PTY LIMITED 22,184,501 9.39% 3 INSTANZ NOMINEES PT
Slide 33: Executive Board
EXECUTIVE BOARD Keith Cohn Founder, CEO & Executive Director More than 20 years of experience in the consumer industry, a 4x serial entrepreneur and startup executive. Founder & CEO, Vendare Media, a leading adtech company with 300 employees and annual sales of A$200 million. Founder & CEO, Bardon A
Slide 34: Executive Board
EXECUTIVE BOARD James Baillieu Chairman Mr Baillieu brings a wealth of corporate experiences to Candy Club, having previously served as Non-Executive Chairman of BidEnergy Limited (ASX: BID), which was the best performing stock on ASX under his leadership. Mr Baillieu was also an early investor in A
Slide 35: Executive Board
EXECUTIVE BOARD Andrew Clark Non-Executive Director Mr Clark joined Candy Club Board with a wealth of knowledge gained in executive and senior leadership positions whilst working for more than 20 years in the Consumer Goods sector. Domestic and global roles held in large multinational and national p
Slide 36: Executive Board
EXECUTIVE BOARD Kan Tang Non-Executive Director Founding Partner of Asia Summit Capital, a private equity firm focused on consumer growth and the technology sector in Indonesia and Southeast Asia. Kan co-founded Asianlogic which was listed on UK’s AIM stock exchange in 2007 raising over US$100 milli
Slide 37: Thank You.
ey ge Thank You.
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