Naked Wines Plc · LSE:WINE
Naked Wines — FY2021 Earnings Presentation
47 slides from Naked Wines's earnings presentation, Jun 11, 2021
Slide 1: FY21 Results Presentation: A bigger better business
FY21 Results Presentation Results for the 52 weeks ended 29 March 2021 A bigger better business 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: Introduction
Introduction Nick Devlin Group CEO Winemakers: Stephen and Jamie de Wet, South Africa
Slide 4: FY21 highlights
FY21 highlights 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 Co
Slide 5: Naked Wines
Naked Wines Our PURPOSE Our MISSION Our AMBITION Connect everyday wine To disrupt the wine To go from impacting drinkers with the world’s industry for the benefit individuals, to changing best independent of all wine drinkers, how an entire industry winemakers winemakers and works by shaping the our
Slide 6: Business model provides for a virtuous circle and differentiation
Business model provides for a virtuous circle and differentiation Building a bigger, better business Our subscribers (Angels) generate unlocks scale economies a stream of cash and product data Naked can share efficiencies with 4 886k 1 The larger the Angel base the more winemakers and offer better v
Slide 7: Uniquely differentiated customer proposition
Uniquely differentiated customer proposition • Quality / value advantage • Exclusive access to world • Direct connection to world • Vibrant community of class wines class winemakers shared interest • Satisfaction and pricing guarantees • Personalised • Authentic brands built from • Part of it: polls
Slide 8: Naked offers winemakers a unique proposition
Naked offers winemakers a unique proposition Autonomy Creative freedom Autonomy Own brand Passion Self employed Security Return to vineyard / Limited capital risk cellar Guaranteed sales Wines you want to make Reward Multi-year commitment Attractive lifestyle Scale rapidly Access 886k Angels High in
Slide 9: 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 10: With a measurable value for money advantage for Angels
With a measurable value for money advantage for Angels Naked Pricing vs Vivino Market Average (red wine) Average $80 price $70 $60 $50 $40 $30 Average price Average onon price Vivino Vivino $20 $10 Naked Angels Naked pay Angels pay $0 3.6 3.7 3.8 3.9 4 4.1 4.2 4.3 Vivino Wine Rating • When consumers
Slide 11: Large addressable market drives continued sales growth
Large addressable market drives continued sales growth Excl. states cannot sell to1 Wine <$10 a bottle $20bn Those who buy wine regularly Those interested in wine £2bn A$2bn Source: 2020 Direct to Consumer Wine Shipping report. See https://www.sovos.com/shipcompliant/resources/wine-dtc-report/ Naked
Slide 12: Financial Review
Financial Review Shawn Tabak Group CFO Winemaker: Leighton Joy, Australia
Slide 13: FY21 financials at a glance
FY21 financials at a glance Group Sales Repeat Customer Investment in Adjusted EBIT (£ million) Contribution profit New Customers (£ million) (£ million) (£ million) 340.2 84.9 50.0 68% 83% 113% (1.5) 202.9 46.4 23.5 (2.4) 37% FY20 FY21 FY201 FY21 FY201 FY21 FY20 FY21 • Shift to online wine • Driven
Slide 14: COVID-19 has driven change in existing cohort behaviour
COVID-19 has driven change in existing cohort behaviour Monthly Cancellation of Angels Monthly Order Rate of Angels (>12 months tenure) (>12 months tenure) 120 250 2019 2020 100 200 Jan 2019 = 100 Jan 2019 = 100 80 150 60 2021 2021 2020 2019 100 40 50 20 - - Jan Feb Mar Apr May Jun Jul Aug Sep Oct N
Slide 15: FY21 cost base
FY21 cost base Gross profit Fulfilment costs Advertising costs General and (£ million) (£ million) (£ million) administrative costs (£ million)1 1 58.3 42.3 36.4 135.5 25.2 35.0 77.6 19.8 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 Gross profit margin: As a % of total sales: As a % of total sales: As a
Slide 16: KPIs – New Customers
KPIs – New Customers FY21 FY20 Change New Customer • Loss attributable to sales to New Customers; represents loss on trial £7.7m £3.8m +105% Contribution loss purchase, increasing due to the higher number of first orders in the period • Advertising costs to acquire New Customers, increase in the yea
Slide 17: 5-Year Forecast Payback progression
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 FY20 13
Slide 18: KPIs – Repeat Customers
KPIs – Repeat Customers FY21 FY20 Change Repeat • Increase in the customer base and increased order frequency, which was even £283.9m £173.7m +63% Customer sales higher during COVID-19 related government restrictions and lockdowns Repeat Customer • Increase driven by an increase in active Angels, sc
Slide 19: Segmental overview: sales
Segmental overview: sales Total US UK Australia (£ million) (£ million) (£ million) (£ million) 340.2 68% 161.7 133.1 45.5 42% 78% 66% 202.9 32.0 80.0 90.9 FY20 FY21 FY20 FY21 FY20 FY21 FY20 FY21 As a % of total sales As a % of total sales: As a % of total sales: 45% 48% 39% 39% 16% 13% Group sales
Slide 20: FY21 summary financials
FY21 summary financials Repeat Customer Contribution profit Repeat Customer Contribution profit (£ million) • All geographies benefitted from the increased demand for our offering and US UK Australia 44% 9.7 increased order frequency from the 47.9 74% 27.3 100% Repeat Customer base 6.8 • Strong grow
Slide 21: Balance sheet and cash flow
Balance sheet and cash flow For the year ended (£m) FY21 FY20 FY19 Closing cash balance 85.1 54.7 (15.5) Well positioned to continue to drive growth and intrinsic value Non-current assets 52.6 59.7 41.9 - Intangibles 34.0 36.0 39.1 • Free cash flow of £30.6 million - Others 18.6 23.7 2.8 • Sufficien
Slide 22: Current trading ahead of PY despite strong comparatives
Current trading ahead of PY despite strong comparatives • Positive sales growth1 (+8% vs last year) in Sales Growth at Constant Currency1 the first two months 300% – Driven by Repeat Customers on the Current growth1 vs first two months of FY20: larger Angel base, sales1 +30% 250% Total +96% – New Cu
Slide 23: FY22 guidance
FY22 guidance • Total sales of £355 million - £375 million (growth +4% to 10%), noting the strong comparatives in FY21 • Investment in New Customers of £40 million - £50 million, with continued discipline and data-driven approach to creating intrinsic value • Repeat Customer Contribution profit of £
Slide 24: Strategy
Strategy Nick Devlin Group CEO Winemakers: Easthope Family, New Zealand
Slide 25: 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 CREATION LTV 25 Naked Wines plc 2021 Full Year Results Presentation
Slide 26: Optimising the customer shopping experience
Optimising the customer shopping experience Recently delivered…. Coming soon…. Subscriptions operating at scale: • Focus on ease and speed of shop for our Angels Wine Genie and Never Miss Out combined >180,000 subscribers1 • Increased winemaker content and greater >95,000 orders in FY21 prominence f
Slide 27: Some highlights from this year
Some highlights from this year Subscriptions scaled and Successful rollout of new app incrementality proven across all 3 Naked markets Contribution per Angel days post ‘Never Miss Out’ sign up • 4.8 star rating NMO Customers +25% • Enhanced features (scanning, recommendations, upsells) • Driving eas
Slide 28: Communicating our wine quality
Communicating our wine quality More awards & Highlighting 3rd party Expand luxury: Luxury & Greater space for critics reviews creds on site & app classic regions winemaker led content Our research shows that our quality perception lags our objective quality: we see addressing this as a major opportu
Slide 29: More of the world’s best on the platform
More of the world’s best on the platform Patricia Benitez “Launched first wine “Debut wine sold from new Naked out in one weekend exclusive Exposed in Australia: our brand: already won most expensive Gold and 95pts at wine ever at $75” IWSC” Josh Pfeiffer Jesse Katz “Debut 2018 “Exclusive Strasser v
Slide 30: 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 CREATION LTV 30 Naked Wines plc 2021 Full Year Results Presentation
Slide 31: Scale enabling further differentiation of wine offer
Scale enabling further differentiation of wine offer Top Ten US Winemaker Volumes 9.0 Showing growth in • Proof of model: Naked established as 8.0 volume for the top 10 US winemakers viable platform to build scale brands 7.0 Number of bottles (million) 6.0 • Increased appeal: Naked able to support 5
Slide 32: 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 CREATION LTV 32 Naked Wines plc 2021 Full Year Results Presentation
Slide 33: Our Go-to-Market priorities for FY22
Our Go-to-Market priorities for FY22 Diversify beyond Direct Response Brand • Driving long term value via brand investment Investment • Measured risk: long-term testing mindset Increased Relevance: especially in our New Customer funnel • Greater tailoring of initial offer by customer group and chann
Slide 34: Brand investment
Brand investment Right time for brand to move from 100% Direct Response spend mix • Clarity on brand positioning • Enhanced market opportunity R&D spend in FY21 has shaped plans • Proven ability to move key brand metrics • Shows need for “long & slow” and to separate brand vs DR Long-term investment
Slide 35: We’ve already seen proof of concept for relevant funnel
We’ve already seen proof of concept for relevant funnel • Proof of concept established for “triage” of new traffic • Rollout in FY22 once wine range replenished • Investments in data & merchandising automation enable more sophisticated options later in year Simple customisation of funnel via series
Slide 36: Direct response channel diversification
Direct response channel diversification Encouraging results • Google shopping • Native Platforms • Lead Gen For all new channels we are • Direct mail applying a note of caution and seeking to validate successful Test & learn ongoing testing from 2020 in a post • Direct Response TV vaccine world befo
Slide 37: Changes delivered enhance our long-term prospects
Changes delivered enhance our long-term prospects Winemaker Market Economics Community Appeal Transformed Enhanced Strengthened Magnified • Expanded addressable • Improved economics = • Scale to support further • Naked’s appeal greater buyer pool higher LTVs = higher differentiated wine offer than e
Slide 38: Q&A
Q&A Winemaker: Jen Pfeiffer, Australia
Slide 39: Appendices
Appendices Winemaker: Constanza Schwaderer, Chile
Slide 40: Income statement
Income statement £m FY21 FY20 YoY% Total sales 340.2 202.9 68% Cost of sales (204.7) (125.3) 63% • Revenue +68% to £340 million driven by 78% growth Gross profit 135.5 77.6 75% in the US Gross profit margin 40% 38% +160bps • Gross profit +75% to £136 million, with increased Fulfilment costs (58.3) (
Slide 41: Bridging contribution to Adjusted EBIT
Bridging contribution to Adjusted EBIT FY21 (£ million) (50.0) 84.9 (36.4) (1.5) Repeat Customer Investment in General and Adjusted EBIT Contribution profit New Customers administrative costs Adjusted EBIT loss of £(1.5) million, relatively flat with the prior year • Increased Repeat Customer Contri
Slide 42: 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 43: 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 44: 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 45: 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 46: 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 47: 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