Naked Wines Plc · LSE:WINE
Naked Wines — Investor Presentation (February 2022)
40 slides from Naked Wines's investor presentation, February 2022
Slide 1: Investor Presentation February 2022
Investor Presentation February 2022 Winemaker: Mike Paterson, New Zealand
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: Our business
Our business Winemaker: Carmen Stevens, South Africa
Slide 4: The wine industry needs Naked
The wine industry needs Naked We have an organic, clear and compelling mission: To disrupt the wine industry for the benefit of customers, winemakers and our people Wine Drinkers… Wine Makers… The problems The problems • Consumers are unhappy with the level of choice & knowledge • Winemakers are und
Slide 5: Naked Wines by the numbers
Naked Wines by the numbers £340.2m Group sales (FY20:£202.9m) £39.3m 3.0x Standstill EBIT 5-Year Forecast Payback (FY20: £9.6m) (FY20: 2.6x) 886,000 20% 88% active Angels of Angels on subscription Repeat Customer Sales (FY20:580,000) products (Never Miss Out & Retention Wine Genie) (FY20: 83%) Note
Slide 6: Differentiated model with a virtuous circle
Differentiated model with a virtuous circle We use this money to back Our subscribers (Angels) independent winemakers to generate a stream of cash 1 2 make wine exclusively for us; and product data 947k the data enables them to The larger the Angel base the more active make better wine cash we recei
Slide 7: Naked offers winemakers a unique proposition
Naked offers winemakers a unique proposition How we find What we look for in What we offer to Our winemakers Our winemakers Our winemakers Our teams, led by Lucy in the US, Ray in The credentials and expertise to make Autonomy; we offer winemakers the UK, and Johan in Australia truly world-class win
Slide 8: Model engineered to deliver affordable luxury
Model engineered to deliver affordable luxury Where your money actually goes Marketing Things you In this $60 bottle of Napa Cab Middlemen 0 … there is only $10 of Napa Cab can’t taste $6 Bottles, cork, labels Winemaking We can sell the same $10 of Napa Cab for $25 – and still Things you make >50% m
Slide 9: A measurable value for money advantage for Angels
A measurable value for money advantage for Angels Naked Pricing vs Vivino Market Average (red wine) $80 $70 $60 Average Price $50 $40 ivino $30 e price on V Averag Average price on Vivino $20 $10 Naked Angels pay Naked Angels pay $0 3.6 3.7 3.8 3.9 4 4.1 4.2 4.3 Vivino Wine Rating • When consumers c
Slide 10: Attractive customer profile
Attractive customer profile 36+ Year Olds 82% 83% Male : Female 48:52 Long-Term Repeat Customer Sales Retention Rate2 Household Income1 >$90k 49% 1. Reflects the US active Angel base only. 2. FY21 Repeat Customer sales retention was 88%, long-term retention based on FY20 figure of 83%. 10 Naked Wine
Slide 11: Just getting started with Global TAM of $25bn
Just getting started with Global TAM of $25bn Commenced shipment to Kentucky in 2021, Excl. states cannot sell to1 Alabama license pending, together add an additional ~$0.3bn $20bn TAM Wine <$10 a bottle Launched: 2012 Those who buy wine regularly Those interested in wine £2bn TAM A$2bn TAM Launched
Slide 12: Go-to-Market strategy
Go-to-Market strategy Main Channels Today Social Insert Marketing Approach based on: • Testing and developing further marketing channels not previously explored • Discover which channels produce quality Search TV Audio Partnerships customers and attractive returns engines • Investing to generate lon
Slide 13: Our critical assets
Our critical assets Great people with Strong leadership Strong capital Deep relationships Data led relevant experience and culture position • Strong and experienced • 235 independent • Nimble, innovative • 28.9 million ratings and • Well funded with £85 management team winemakers culture reviews fro
Slide 14: High barriers to scale
High barriers to scale Established Brand & Network Continued Reinvestment in Ecosystem Scalable for wine makers Recruit winemakers Optimized network of marketing partners Build a distribution network Large base of loyal and engaged customers Grow customer base Effective Operational Platform Strategi
Slide 15: FY22 Strategic Pillars
FY22 Strategic Pillars 1. 2. 3. ENHANCE LEVERAGE BROADEN AND CUSTOMER SCALE TO ENHANCE GO PROPOSITION ENHANCE TO MARKET TO IMPROVE VALUE STRATEGY LTV CREATION 15 Naked Wines plc Investor Presentation
Slide 16: FY22 Strategic Pillars: Enhance customer proposition
FY22 Strategic Pillars 1. ENHANCE • Improving e-commerce infrastructure and user experience CUSTOMER • Enhancing the core shopping experience for our Angels PROPOSITION – Improving recommendations to aid customer discovery TO IMPROVE – Including more awards and critic reviews LTV • Extending the sco
Slide 17: FY22 Strategic Pillars: Leverage scale
FY22 Strategic Pillars 2. LEVERAGE • Scaling global network to commit to volumes and unlock predictable cost reductions SCALE TO ENHANCE • Attracting more winemakers and increasing the range and volume capacity VALUE CREATION • Delivering even better wine and value for our customers • Growing our me
Slide 18: FY22 Strategic Pillars: Broaden and enhance go to market
FY22 Strategic Pillars 3. BROADEN AND • Personalising the new customer offering by tailoring it to ENHANCE GO individual needs and taste preferences TO MARKET • Improving the new customer onboarding process STRATEGY • Continuing to spend £3m p.a. on Marketing R&D to expand the channels through which
Slide 19: Investment highlights
Investment highlights • Disruptive business model that delivers a superior product to consumers • Large under-penetrated markets, particularly in the U.S., with positive secular trends • Unique solution for winemakers that leans into their strengths • Subscription model with a loyal customer base, a
Slide 20: Committed to maximising long-term value
Committed to maximising long-term value A well-rounded and thoughtful approach to investing From ”Lifetime” to 5-Year Forecast Payback We believe this is a time horizon that appropriately balances a tangible ability to predict customer behaviour while maintaining a focus on building a business for t
Slide 21: Financials
Financials Winemaker: Jen Pfeiffer, Australia
Slide 22: FY21 financials at a glance
FY21 financials at a glance FY171 FY181 FY19 FY202 FY21 CAGR 340.2 2017-2020 £ million 178.4 202.9 144.3 156.1 +24% Group sales FY17 FY18 FY19 FY20 FY21 84.9 39.8 46.4 26.9 34.9 Repeat Customer 33% Contribution profit FY17 FY18 FY19 FY20 FY21 Repeat Customer 24% 25% 26% 27% 30% Contribution margin 5
Slide 23: Segmental overview – FY21
Segmental overview – FY21 US UK Australia (£ million) (£ million) (£ million) Sales Sales Sales +66% 133.1 +42% 45.5 +78% 161.7 32.0 80.0 90.9 FY20 FY21 FY20 FY21 FY20 FY21 Repeat Customer Contribution profit Repeat Customer Contribution profit Repeat Customer Contribution profit +44% 9.7 +100% 47.9
Slide 24: KPIs – FY21
KPIs – FY21 New Customers Repeat Customers FY21 FY20 Change FY21 FY20 Change New Customer Repeat £7.7m £3.8m +105% £283.9m £173.7m +63% Contribution loss Customer sales Repeat Customer Advertising costs £42.3m £19.8m +114% £84.9m £46.4m +83% Contribution profit Investment in Repeat Customer £50.0m £
Slide 25: Balance sheet and cash flow
Balance sheet and cash flow For the year ended (£m) FY21 FY20 FY19 Well positioned to continue to drive growth and intrinsic value Closing cash balance 85.1 54.7 (15.5) Non-current assets 52.6 59.7 41.9 • Utilising capital to invest in growth - Intangibles 34.0 36.0 39.1 • Sufficient cash position o
Slide 26: FY22 guidance
FY22 guidance • Total sales of £340 million - £355 million – Growth of 2% to 7% on a constant currency basis • Investment in New Customers expected to be £35 million to £45 million • Repeat Customer Contribution profit of £85 million - £90 million – FY22 margin expected to be 100-200 basis points be
Slide 27: FY21 summary
FY21 summary Market Economics Community Winemaker Transformed Enhanced Strengthened Appeal USA now largest 29.9% 886,000 Angels Magnified division Repeat Customer Over 60 new Contribution margin winemakers • Online inflection point • +320bps Repeat Customer • Improved retention • Unprecedented Contr
Slide 28: Appendices
Appendices Winemaker: Constanza Schwaderer, Chile
Slide 29: Leadership team
Leadership team Nick Devlin Shawn Tabak Max Miller Alicia Kennedy James Crawford David Crawford Bryn Snelson Jason Scott Chief Executive Chief Financial President of US AUS Managing UK Managing Chief Technology Director of Brand, Director of Officer Officer Business Director Director Officer Proposi
Slide 30: H1'22 financials at a glance
H1’22 financials at a glance Group Sales Repeat Customer Investment in Adjusted EBIT (£ million) Contribution profit New Customers (£ million) (£ million) (£ million) 6% CCY £5.7m 23.8 82% 157.1 159.3 112% 99% 21.3 1.2 41.3 37.4 87.5 (3.2) 19.5 10.7 (4.5) H1'20 H1'21 H1'22 H1'201 H1'21 H1'22 H1'201
Slide 31: KPIs – H1'22
KPIs – H1’22 New Customers Repeat Customers 2 YOY 2 YOY H1’20 H1’21 H1’22 Change H1’20 H1’21 H1’22 Change New Customer Repeat £1.9m £3.7m £3.4m +79% £75.4m £124.9m £144.7m +92% Contribution loss Customer sales Repeat Customer Advertising costs £8.8m £20.1m £17.9m +103% £19.5m £37.4m £41.3m +112% Con
Slide 32: Segmental overview – H1'22
Segmental overview – H1’22 US UK Australia (£ million) (£ million) (£ million) +89% +90% Sales 7% CCY Sales Sales +46% -1% CCY 76.5 74.4 62.4 57.8 22.8 22.5 39.3 32.8 15.4 H1'20 H1'21 H1'22 H1'20 H1'21 H1'22 H1'20 H1'21 H1'22 Repeat Customer Contribution profit Repeat Customer Contribution profit Re
Slide 33: Income statement
Income statement £m FY21 FY20 YoY% HY20 HY21 HY22 2YoY% Total sales 340.2 202.9 68% 87.5 157.1 159.3 82% Cost of sales (204.7) (125.3) 63% (54.0) (95.2) (92.7) 72% Gross profit 135.5 77.6 75% 33.5 61.9 66.6 99% Gross profit margin 40% 38% +160bps 38% 39% 42% +350bps Fulfilment costs (58.3) (35.0) 67
Slide 34: Repeat Contribution by acquisition cohort and payback
Repeat Contribution by acquisition cohort and payback 90.0 Investment in 7.0 8.1 10.3 14.6 14.1 19.1 23.5 50.0 New Customers 80.0 85% 111% 98% 75% 76% 67% 82% Year 1 Payback 70.0 27.3 60.0 % (£ million) Contribution 50.0 retained in 19.0 FY21 7.2 FY21 40.0 5.0 FY20 265% 12.5 30.0 3.9 10.1 FY19 81% 1
Slide 35: H1'22 5-Year Forecast Payback progression
H1’22 5-Year Forecast Payback progression 5-Year Payback Forecast Age at Original Payback Cohort reporting date Latest forecast 1 forecast 2 to date FY16 61-72 months 3.1x (actual) 3.1x (actual) 3.7x FY17 49-60 months 2.6x 2.5x 2.6x FY18 37-48 months 2.8x 2.5x 2.1x FY19 25-36 months 2.4x 2.3x 1.4x F
Slide 36: Standstill EBIT (L12M)
Standstill EBIT (L12M) £m FY19 FY20 FY21 Repeat Customer sales 152.9 173.7 283.9 Repeat Customer Contribution profit 39.8 46.4 84.9 Sales retention 80.7% 83.3% 88.2% Repeat Customer Contribution lost to attrition 7.7 7.7 10.0 Year-1 Payback (from PY cohort) 78.0% 67.0% 82.0% Spend to replenish lost
Slide 37: 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 38: Glossary of terms (continued)
Glossary of terms (continued) Investment measures 5-Year Forecast Payback The ratio of projected future Repeat Customer Contribution profit we expect to earn from the new customers recruited in the year over the Investment in New Customers. We forecast contribution at a customer level using a machin
Slide 39: 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 40: 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