Ten Lifestyle Group Plc

Thank you everybody for coming to the analyst's presentation today and welcome to this year's annual results from TEN. We've got a lot of good results, a very positive outlook to share, so we'll press on. As a reminder, I think everybody listening to this video will know that we're all about becoming the world's most trusted service. And as an investment, we're all about being the world's best place, the world's best service to organize dining, travel, entertainment, and premium shopping. And that's a huge total addressable market that runs into the trillions. And within that, today, we're the market leader in lifestyle concierge. So we organize things for our members around the world. And those members come to us because our corporates pay for them to be members of our service. We've got improving profitability on a percentage margin basis in the business, even despite the pandemic. And we've got a growth engine that delivers better service as we get bigger. That better service allows us to win more business, that allows us to invest more into our tech, more into our proposition, grow the quality of service, grow the size of the business as our corporates invest more with us and see better results from us. So that's really how we become the most trusted service business in the world. Now, there is no time for a metaphor. And this is somebody that some of you may recognize. It's Tom Dean. Tom is a swimmer. And some of you will know him from July when in Tokyo in his first Olympics, this young man won gold in the 200 meters freestyle. And he then also won an amazing second goal in a freestyle relay. And in doing that, Tom became the first British man to win two gold Olympic medals at the same Olympic Games in 113 years. And today you'll learn that Tom and Ten share many of the same characteristics. So at the end of 2019, Tom was expected to do well, but nobody expected him to win a gold if the Olympics had been held in 2020 as planned. But the 12-month COVID delay allowed his 20-year-old body an extra year to strengthen into the best swimmer in the world. Now, like Tom, we were doing pretty well going into COVID. We were back to a very good double-digit growth, 23% in the year before COVID. And we were expected to generate positive cash flows, some of which we would have invested back into more growth. And COVID did delay that growth. However, here we are after COVID now doing even better than we were in early 2020 with great growth and results ahead of where we were back then because we're fitter and better than ever. Now, Tom kept building the strengths and the techniques during the pandemic that won him the golds. And at 10, we kept investing into the technology and the service levels that underpin our success. We could have easily cut, but we managed our business so that we didn't need to. Tom actually and amazingly caught COVID not once but twice in 2020 and the pandemic shut his practice pool down in the city of Bath. However, he still won those two golds and because he worked well on his recovery and he adapted, he adapted his training so that he swam in the River Thames near his home in Marlow instead of in a swimming pool. Now, at 10, we were hit by COVID too. Our core service categories, traveling, eating out, live entertainment, were hugely reduced. But we adapted with organizing staycations, home deliveries, book clubs, virtual events, and so on. And those efforts meant that we came through COVID with net cash. And remarkably, we didn't need to raise debt or sell new equity. We actually increased our EBITDA profitability on a percentage basis. And now today, our core services are recovering. We still benefit from our successful adaptations and the innovations we made during the pandemic. And we'll benefit coming out of COVID because we've got record service levels, better technology than ever, higher profit margins, a stronger competitive proposition. And because we retain not most, but actually every single one of our corporate clients, and we won new contracts in the past 18 months, we've today got more eligible members than we had before the pandemic. And we've got a strong pipeline of new business too. So Tom's focus is now on the world championships in Japan and the European championships in Rome. And then it will be all eyes on Paris 2024. Now, at 10, our focus is to continue to drive our growth engine. Our improved proposition and service levels allow us to grow revenues, increase our buying power, which allows us to invest more into tech, improve our proposition and service levels, which drives more growth. So that's where we are today. Now, for a deeper look at the numbers, over to Alan Donald, our CFO.

Thank you, Alex. If we just stick on the key financial highlights, I've always say is the groups managed to remain relevant to our clients and members throughout the year, maintaining profitability despite the challenging conditions. As Alex noted, net revenue was down 21.6% to 35 million versus last year. And if you look at that between our corporate revenues, i.e. the revenues we earn from the corporates who pay us to look after members, that was down 22%. And our supplier revenue was down only 15%, slightly less than corporate. The better supplier revenue performance, we saw an improvement in the last quarter of the year as travel opened up, especially in Europe. And I've got a slide later on to explain that. To offset the net revenue shortfall, we did manage our operating expenses and they reduced by 9.1 million versus last year. And that meant that our adjusted EBITDA of 4.4 million was just slightly below prior year of 4.8. As Alex said, though, we did improve our margin. Our EBITDA margin actually improved by two percentage points to 12.8. And that related to an improved loss before tax of 5.5. And as Alex said, we did continue to invest in our technology. Hence, our cash did reduce in the year. But that was a conscious decision to continue to invest in the business so that we're stronger coming out of the pandemic. Next slide. This is just a look of our income statement. I've got a couple of slides on net revenue later, but just to explain the operating expenses in terms of the savings we made. The bulk of these savings are delivered through our continued operational efficiencies and the freeze we put on salary and bonuses. Together we're reducing our headcount to just manage our resource to the activity levels we saw. We also still continued our salary sacrifice exchange for share options, and that was predominantly a cash saving measure, but it did save it at EBITDA level, and the charge for that came through in our share-based payments charge below NPVT. We also got government support across most regions, and that amounted to 2 million this year versus 1.6 million in the prior year. That included furlough in the UK, cursor bite in Europe, and other similar government schemes across the world. In addition, as part of retaining key personnel in the US, we did take out a US government bank PPP loan last year. And that loan was fully forgiven in a year as we qualified with the expenses we paid. Depreciation did decrease 1.2 million year on year and actually been driven by the reducing right of use assets, which is our property leases. And that's because we did look to downsize and we also renegotiated a lot of our office space and lease costs in the last year. As I mentioned, our share based payment charge is in line with last year, and that's what we've been driven by the salary sacrifice schemes we put in place. We did have some exceptional costs in the year. 0.4 of that was an empowerment charge on our content that we capitalised. And we also have some exceptional project costs of 0.2 we wrote off in the year. And I said that related to a loss of 5.5 and improvement of 0.4 on last year. As I said, this is just a graph on our net revenue bridge. And it's then, as I said, 21.6 to 34.7. Generally, we didn't lose any clients during the pandemic, but our base corporate revenue did contract by 7.9 million as our core activity is reduced. Our supplier revenue reduced by 0.5 versus prior year. I've got a slide, next slide, we'll go into a bit more detail on that. And then as mentioned last year, One large contract, Revolut, changed to a small affiliate contract at the start of the year, and that reduced revenue by 1.6 million. But we also did launch two new medium contracts in the year, and that contributed 0.5. As I said, I want to just take a little bit of time to explain what happened to our supply revenue and the impact of the pandemic. To remind you, it's predominantly travel-related, and specifically the majority of our supply revenue is hotel commissions. The graph on the left hand side, that's the full year supply revenue from 2019 through to 2021. So pre-COVID for full year 19, we made about 5.5 million of supply revenue, which is 12% of our net revenues. Now that reduced to 3.3 million, 7.4% of net revenue in FY20. And for the year just gone, it went down to 2.8 million, which is 8% of net revenue. However, you look on the right hand side, this is the half year split. So H1 2020 was just before pandemic hit and we are at 2.5 million, which is 10.7 of net revenue. There is some seasonality in our business because supply revenue is probably higher in the second half of the year. But then you can see the impact of the pandemic from H2 20 onwards down to 0.8 and then a slight recovery in H1 2021. And then we've seen some strong recovery in the second half of this year just gone, and predominantly in the last quarter. As I said, that's where EMEA, we saw travel opening up across that region and people start to travel again. Moving on, this is just a split of the net revenue by region. As you can see, the pandemic hit across the world. EMEA declined by 18%, America's 28%, and APAC down by 21%. As I already highlighted, in Europe, the revenue contract change happened in EMA, and then we did have the supply revenue recovering in the last quarter. Then just looking at the adjusted EBITDA by region, whilst EMA EBITDA is down by 2 million to 6.2 versus prior year, the margin actually held up pretty well. It was 34% versus 37% in the prior year. Remember, EMA is our most mature region in the group. Our American loss actually decreased by 1.7 million. We managed costs really carefully. And as I said, maintain key resources, activity returns. And that's where we got the USPP loan forgiven during the year. And APAC, despite the revenue shortfall, we did improve profitability. And that was through continuing operational efficiencies and various cost control measures. We always put this slide in because it's a key one for us. It's looking at the continued technology investment in the business And in the year, we invested about £11.5 million into our platform, communications and technologies. And that adds up to about £46 million in total since IPO. Why do we do that? It's a good to great investment. We do it because it creates competitive advantage. It drives efficiency, drives service levels and revenues. A lot of this is discretionary. We could have put a hold on this. We didn't think that was the right thing to do as we came through this pandemic. Our cash flow, operating cash flow in the year was 4 million. That was predominantly driven by our operational efficiency and costs. In non-cash items, that was slightly down. Our increased amortisation was offset by the loan forgiveness and the reduction in depreciation I talked about. And that's been offset by the reduction in lease payments further down the cash flow as we renegotiated and reduced our space. In addition, as I said, we've continued to invest in our technology. And of that 11.5 million, we capitalise 5.4 million in the year. And then during the way, we did get some cash receipts in from employees exercising share options in the year. That meant our cash stood at 6.7 million, a decrease of 4.3 in a year. As I said, that's principally driven by our technology investment. And also note, just post year end, we did actually have further proceeds of about 1.1 million as more employees exercised options in September 21. So that helped us support our cash position into the new year. I then want to just take a little bit of time to go through our business model. And this slide we showed before, and this just looks at our revenue model. The pie chart on the left-hand side is a split of corporate revenue, supplier revenue, which I've gone through already. So in the full year 21, supplier revenue is 8%, and our corporate revenue, which we get paid for by our clients, is 92%. On the right-hand side, this is the makeup of our typical contract. We get paid a fee for high-touch service, where a lifestyle manager responds to an email or a call or live chat or WhatsApp, versus a digital request which comes through our platform. Our contracts are normally three years in length, and at the moment about 60% of these contracts have a guaranteed minimum attached to them. Now this is a new couple of slides, and I'll take a little bit of time to go through this. And this is the first time this year we've analysed our member base, and this is looking at our eligible members and active members. The left hand graph highlights the number of eligible members and are very high value and high value segments from 2019 through 2021. I'll explain what these segments mean in a minute. The right hand graph highlights the total number of active members by value segment. That's very high, high and medium. So what do these categories and segments mean? Well, eligible members are defined as the individual members who have an eligible product offered by one of our clients and have legitimate access to our service. Active members of those have used our service at least once in the past 12 months. We've then split our client base into very high, high and medium value segments. Very high, that includes private banking clients members who have a high level of investable assets under management with the bank or customers that are very premium high-end fee products. The potential or actual corporate budgets per member from these clients are higher because of the profitable nature of this member segment and typically results in a higher penetration of active members to eligible and also a higher average concierge revenue per active member in this segment. For high value, this includes typically mass affluent retail banking or credit card holders of an issuing bank proposition. And finally, in our medium segment, that's made of customers are less valuable per capita to sponsor and corporate for various reasons. And it's specifically tied to type of car product, and it's probably normally through contracts with other payment network providers. And the average value per member is lower, but represents a large eligible member base, which gives us global coverage across the world. As you can see on the left hand graph, eligible members have grown since 2019, despite the impact of the pandemic, as we've won new contracts and expanding existing into the very high and high segments. No, we have included the medium segment in this graph because the eligible base runs into millions. And then on total active members, for all segments we've grown over the period since 2018, although in a slight dip between 2021 and 2020 due to the impact of the pandemic. This next slide, the final slide I'm going to look at, is just looking at the concierge revenue by value segment. And just to highlight, 62% of our concierge revenue is underpinned by material contracts, be it medium-large, extra-large, where the members are of high or very high value to our corporate members. I'll now hand back to Alex, who can go through our operational update.

Great. Thank you very much, Alan. So operationally, very good news. We won two contracts despite the fact corporate activity was subdued during the pandemic. So we won with Westpac, one of Australia's top banks, and Credit Saison, who are like the Barclay card, the kind of super Barclay card of Japan. We retained every single material contract in the business. Now, that is really worth reflecting on. How much do our corporate clients value us? Well, every single one of them continue to invest with us over the last 12 months at a time when it would have been relatively easy to pause and we continue to invest into tech content comms that's helped us with efficiencies and service quality which has improved our ebitda margin we've continued to invest into our people both our 10 academy our top performing senior leadership team we've got improved member proposition and record member satisfaction as a result of that So really, really happy with how we've operated over the last 12 months. But to remind us what we're all about, I'm just going to play a one-minute video as a musical interlude and remind you how we actually serve our members.