Naked Wines plc

Good afternoon and welcome to the Naked Wines Plc investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And now I'd like to hand over to Rodrigo Maza, CEO. Good afternoon, sir.

Hello everyone and welcome to our FY26 results presentation. We are very grateful for your time. My name is Rodrigo Maza. I'm Naked CEO. I'll be presenting today along with Dominic Neary, our Chief Financial Officer. This is the agenda we'll go through. In FY26, we delivered results in line with the strategy we set out in March of 2025. While our revenue declined, our focus on profitability resulted in adjusted EBITDA coming in ahead, at 7.6 million, which represents a 35% year-on-year improvement at constant currency. We finished the year with 33.4 million in net cash, up 9 million, even after buying back over 10% of the company in recent months. In April 26, we made an important call. to transition from our legacy tech stack into Shopify, a move that will not only deliver an improved experience to our customers, but will materially reduce costs for naked wines. We saw customer satisfaction and retention strengthen from what was already a high baseline. This was driven by our focus on the elements that make naked wines stand out. The craft of independent winemaking the people who make the product and those who found them to do so, and critically, the connection between them. Let me tell you more about this. In FR26, we continue to investigate what makes Naked different and better in the eyes of our customers. We always start with the angels we have, especially those that have been loyal to us for a very long time. but we also talked to those who we want to recruit but, for whatever reason, have yet to bring in. And after literally thousands of interactions with all of them, we came to the conclusion that our customer value proposition needed some refreshing. While we'll remain focused on delivering high quality at a fair price, a reliable and trustworthy delivery experience, and we are making active investments in enhancing the shopping experience on our site, It's that direct, meaningful connection between winemakers and angels that people value most. It's what truly sets us apart, so we're doubling down on it. It's the consistent delivery of our customer value proposition that makes the naked flywheel spin. When we fulfill our promises, angels don't just stay, they recruit. Their funds allow us to back independent winemakers who, armed with the data we provide can then offer more choice and better wines. As the flywheel turns, it generates more sales and resources that our team then invests in capabilities that allow us to deliver even more value to our angels. And so it goes. Every turn of the flywheel makes the business stronger and for shareholders that shows up directly as we turn on equity and capital. This isn't a linear model, it's a compounding one, and it's the lens for everything else we'll cover today. So over to you Dom.

Thank you Maza, and good morning everyone. I'm going to take you through the FY26 numbers and then walk you through the progress we've made against the first two of our strategic pillars, releasing cash and recalibrating to profitability. Maza will then take you through the progress we've made on a return to growth pillar after that. But let's start with the shape of the business today. For those newer to the story, a quick reminder of what Naked looks like. We finished the year with 486,000 angels, our members, across three markets. The UK is our largest with 49% of that. The US is 38% and Australia 13%. The health metrics matter as much as the size. NPS of 77 is really excellent. Member retention of 76 is also great as well. 93% of our wines are rated as like it by the people who actually drank them. And behind all of that sit around 280 independent winemakers. and we can also, in the US, ship to over 90% of the population in what is a heavily regulated market. So we are deliberately a smaller business, but a demonstrably healthier one. And you'll see that theme running through everything today. Four headlines for the year on our key financial KPIs. First, net cash is 33.4 million. So that's up 3.3 million on last year. Underneath that, we actually generated $9 million of cash because we returned $6 million of that through the share buyback. Second, on to adjusted EBITDA. So that's before inventory liquidation and associated costs, which we'll come on to in a minute. This was $7.6 million, up 35% at constant currency. And three things drove that. There were over 11 million of marketing efficiencies as we focused on more profitable customers. Gross margin improved by 150 basis points on prior year, reflecting the impact of pricing and our savings initiative. And we saw the first contribution from our B2B services business of over £300,000. And that's coming out of the new Sonoma facility and we see upside for that in the future. As I've already indicated, revenue is 199.1 million, down 18% of constant currency. Now, Maza will come back to this later, but essentially there are two distinct impacts here, both of which mechanically reduce and lessen over the medium term. First is the mechanical unwind of the exceptionally large FY21 and 22 cohort, and second is our deliberate decision to stop inefficient acquisition spend from the second half of FY25 onwards. This is the impact of resetting the model and the reason why EBITDA will grow progressively over the medium term. Finally, a loss before tax of 6.3 million. Now there are over 11 million of adjusting items and inventory liquidation costs here. which are truly unusual in nature. The first is this year's restructuring and also the write down relating to the digital transformation as we move digital transformation from CapEx into OpEx. This is a really important part of our future savings and essentially is the driver which will mean that ultimately by the end of FY29 we will see G&A 10 million lower than it's going to be in FY27. The 5 million inventory liquidation costs will not be new to you. They're obviously painful to the P&L, but conversely, they're resulting in the cash delivery as we liquidate our inventory. We provide guidance to them later on as to how that will continue over the medium term. So what do the key strategic KPIs look like? Well, we've lined these up across the three pillars and the numbers here on the reported FX basis. So on releasing cash, free cash flow is 10.6 million. So this is, as expected, lower than last year's 18.5 million free cash flow as the significant inventory on wines matures. Return on capital employed is up from 9% to 12%, and that's helped both by the EBITDA growth and the buyback. On recalibrating profitability, gross margin, as I've already said, is up to 19.9%, a trend that's going to continue on as we go forward. That's up 150 basis points higher than last year. Acquisition break-even has materially improved from 75 months to 42 months. For me, this is one of the most important numbers on this page. An adjusted EBITDA of 7.6 million including more than 11 million of marketing G&A savings. As we move on to growth, MPS is excellent at 77 and up slightly on prior year. Retention is also up to 76% with particularly notable improvements in the US and Australia. Customer acquisition costs and revenue per member both look slightly softer as reported but both are actually improving in constant currency. So every KPI on the page is moving in the right direction and we continue to anticipate ongoing improvements as we continue to implement the strategy. So that's the year in numbers. Now we'll move on to the pillars and show you where we stand against the strategy we set out in March 2025. So as a reminder, the March 2025 strategy carried three medium term commitments. Firstly, on releasing cash, we committed that we would generate more than 45 million by the end of FY30. We've delivered 9 million of that so far, so 20% of the way there in year one. On recalibrating profitability, adjusted for FX, we committed to 9 to 14 million at EBITDA over the medium term. At 7.6 million this year, we're likely to reach that range early, potentially as early as FY27. and on return to growth, we communicated a 5% to 10% exit growth rate. That's one still in progress. Acquisition break even has improved significantly to 42 months and we're already seeing 24 months or better in FY27. So the economics are fixed, but volumes are still too low. Maza will come back on this. So an honest scorecard, two on track or ahead. and one where the machine works but isn't yet quite running at scale. Moving on to releasing cash from the balance sheet in a bit more detail. So we have 33.4 million of net cash plus an undrawn facility of around 19 million. So liquidity remains strong and is improving. Net cash is up 9 million before the buyback. One thing to note, 7 million of angel balances now sit in a non-cash obligation and we anticipate this will keep growing over the medium term. On inventory, this is down around 11 million since FY25, of which 4 million is FX and non-cash, so movements in the provision, but there's plenty of upside left there. were still carrying roughly 27 million more stock than we were in FY20, and we anticipate, therefore, significant cash coming out of this. Importantly, of course, and I communicated this at the half year, the overstock is mostly in premium US rents, and those typically have more than 10 years of shelf life. So this is a timing question, not a quality one. And on distributions, the 6 million buyback is complete as of early FY27. That's 10.5% of the share capital we had back in August 2025. We remain committed to substantial ongoing and ad hoc distributions over the medium term, and we will consider inorganic opportunities as they arise. Now, all of this is governed by the disciplined capital allocation we've launched, which is the next slide. Our disciplined approach to capital allocation. This is how we make investment decisions, and the board and management are completely aligned on this. Every material invested is tested against the new 20% IRR hurdle. Where returns clear the hurdle, we reinvest. Customer acquisition, where the payback works. Operational investments, like the Fast Re platform that Maza will be coming back to. Inorganic opportunities, where they arise. and share buybacks when their share sits below the intrinsic value that the board believes. Of course, when nothing clears that hurdle, the surface will go back to shareholders as dividends. It's deliberately simple and it's already working. We have 33.4 million of net cash. We anticipate that this cash balance will be able to be reduced materially over the medium term. We've already delivered 20% of the £45 million medium term cash generation target and because of this we've brought back 10.5% of our shares. On to profitability. On cost discipline we've now actioned £25 million of savings against the original £23 million target which means they've either been delivered in FY26 or we've taken the actions which will ensure that those savings are generated in FY27. We stopped low ROI customer acquisition, and that's resulted in acquisition break-even reducing from 75 months down to 42. Zero-based budgeting has been introduced and is now a part of our culture, and it's funding the $5 million of SaaS transition costs, which historically we had told you were going to be going to CapEx, are now going to OpEx, to G&A, and are not leading to an increase in G&A because of the cost discipline and zero-based budgeting approach. On the P&L, gross margin is up 150 basis points and that's from better first order losses, so better acquisition, better pricing, improvements in retention and the improvements in lifetime value of about 35 to 40% in all markets. and we would also flag we've now got price rises of over 5% live in every market and with more to come. So just to double click a little bit more into that pricing point. This is one of the most encouraging things that has happened this year. Now, we knew we had room to raise prices, but rather than slipping them through quietly, Maza wrote to angels and told them exactly what we were doing and why. And the response, and you can see some of it on the slide, was remarkable. Many angels don't just tolerate the increases, they support them because they understand the money protects our independent winemakers. That's the connection at the heart of this business doing real commercial work. And the numbers bear it out. Increases of more than 5% are live in every market. and you can see 150 basis points of margin improvement that will continue to improve in FY27 and first order losses down 53% globally. And moving on to the medium term, we delivered 7.6 million EBITDA which is ahead of target and up 35% in constant currency and that's EBITDA excluding inventory liquidation adjusted. The re-platform takes 10 million of cost out versus FY27 by the end of FY29. So that is 5 million of genuine future savings and 5 million reduction as the transition costs are falling away. All of this makes us increasingly confident on both the scale and the speed of the medium-term EBITDA range, which we'll double-click into now. So this chart builds a bridge which explains our confidence as to why we are committed and why we believe in our medium-term EBITDA guidance and potentially better. So we start with the EBITDA range of 7.6 million to 9 million, which is the guidance we'll be coming to at the end of this presentation. So imagine we delivered that in FY27. How would that build over the next few years? From there through FY30, I'd highlight two EVIC car drivers that we ensure as a minimum we deliver our medium-term goal. Firstly, even in a downside revenue scenario, we have already identified more than 10 million of clearly identified cost savings, and that's the SAS 3 platform implementation that I've already talked about. So clearly identified. We also now have a proven track record of delivering on our cost savings. So that alone gives us strong confidence that we will hit our median term EBITDA guidance. But on top of that, there are many other things which will be driving profitability in the future. And we've already seen and proven opportunities from already. One example of that is pricing. So we are assuming that pricing offsets COGS in our modelling. But actually what we're seeing at the moment is that pricing will over deliver on our cost of goods increases. and if pricing was just 0.7% above inflation, that's worth 3 million of EBITDA on its own. And of course that forgets other opportunities and calls them variable costs, which we are pursuing as well. But the levers that take us beyond that range, potentially towards 20 million and more, are the commercial levers of retention and acquisition. These are the two dials that over deliver this plan, and on that note I'm going to hand back to Maza to talk about the return to growth.