Moonpig Group Plc Adr

Good morning and welcome to the first full year results of Moonpig Group as a public company. I'm Nicol Reitharfer, the CEO, and I'm here today with Andy McKinnon, our CFO. It has been a transformational year for Moonpig Group on so many levels. We've accelerated the delivery of our strategy and we've seen a permanent step change in the scale of the business. And we're really excited today to talk you through some of the progress we've made. If I can just quickly turn your attention to the disclaimer, please take a moment to read it later. The running order today, I'll give a quick overview of the year, I'll hand over to Andy to run you through the numbers, and then we'll close with me taking you through an update on our strategic progress. But first, I want to take a minute to give you a very quick reminder of why we are here. Our vision is to become the ultimate gifting companion. We want to make it as easy as possible for our customers to be as thoughtful as possible on every occasion that matters to them. And we do this by number one, ensuring we have the perfect range, the best card and gift for every occasion. Number two, by investing in our brands and our service offering so that our customers are excited to receive a Moon Pig or a Grease product. And number three, by investing in technology so that we can leverage the data that we have at our fingertips to create the most effortless gifting experience possible. And we're confident that if we do all of these, we will capture the growth opportunity that's in front of us. According to this year, we've made more progress on each of those pillars than in any previous year in our 20 year history. It's been a year of record performance. We've doubled both revenues and EBITDA, and we've locked in an enduring uplift in the scale of the business. We've made real progress on our strategic pillars, completing our technology and data replatforming for the Moonpig brand, moving a third of our customers onto the app, and continuing to enhance our customer proposition. And as a result of these actions, today we're announcing an upgrade to our expectations for FY22. We're also reiterating our confidence in our medium-term guidance and our ability to capture the long-term growth opportunity for this business. Now, I'll run through some of the key highlights before turning to Andy. As I mentioned, we doubled the size of our business, with revenue and EBITDA both at the top end of our guidance range, and we delivered over 50 million orders to our customers. Critically and most pleasingly, our gifting business continues to thrive, growing at 133% and now representing almost half of our entire sales. We completed our three-year technology and data replatforming project on schedule, and this is a really key milestone for us in being able to optimize our data and personalize the customer experience at a more rapid pace than ever before. And whilst we were building this, we were also collecting data at pace with over 50 million reminders now set by our customers and more customers downloading our app than ever before, which is our flagship device, 6 million downloads in 12 months. And all of these are critical in driving customer lifetime value, which we know is the key part of our strategy. We also made real progress when enhancing our market leading customer proposition. growing our card range by 60%, growing our gift range by 40%, and adding countless new brands, themes, categories, and price points, which all bring us one step closer to having that perfect card and gift for every occasion. All of this sets us up for a fantastic year ahead, and with that, I'll turn to Andy.

Thanks, Nicole. And hello, everyone. I'm Andy McKinnon, the CFO of Moonpig. And I'm going to start with a recap of our powerful financial model. Moonpig is a unique business with a high quality economic model, combining four individually attractive pillars in one. We have strong revenue growth, which has been consistent across two decades. We have sticky customer relationships with three quarters of our revenue coming from existing customers. And we have high profit margins with an adjusted EBITDA margin of 25%. And we have strong cash conversion, which is over 100%. That's all underpinned by the loyalty of our customers and the consistency of customer cohort behavior. Then Moonpig's also a business that's been through a transformational period of acceleration. We more than doubled orders to 51 million through a combination of more customers and more orders per customer. Growth in AOV was moderate at 2% and that reflected choices that we made in the year. Underlying AOV growth was strong, driven by growth in attached gifting, but this was partially offset by promotional activity intended to drive specific customer behaviours that align with higher frequency and improve retention, such as reminder setting or app downloads. Now, at the IPO, we set out three growth drivers, increasing the number of customers, increasing our share of wallet and increasing the attach rate. Nicole's going to go through strategic progress that we've made on each of these. And in the next few pages, I'll explain our financial progress, starting with new customer acquisition. We've raised new customer revenue nearly fourfold from £24 million in FY19, which was the last full year prior to lockdown, to £92 million in FY21. We acted with agility during the year, flexing spend to capture available market opportunity wherever possible. Our customer cohorts are sticky and historically each annual cohort has behaved almost exactly the same. For every £100,000 of revenue in year one, we take 50,000 in year two, and then keep doing the same year in, year out in what becomes a revenue annuity. The good news to date is that the customers acquired in lockdown have been replicating the loyalty patterns of historical cohorts. And that gives us a sound basis for confidence in the future revenue potential of customers that we've acquired in the last year. Now let's look at the second driver, which is share of wallet. We doubled revenue from existing customers in FY21. And that's significant because order frequency has historically been an extremely stable KPI. Frequency has been elevated across the lockdown. It increased whenever government restrictions have tightened in the UK or the Netherlands. Now, in recent months, we've seen a clear trend towards normalisation as restrictions are eased, and we expect that trend to continue. Of course, we've been working hard to lock in frequency. Nicol will talk later through how we have strengthened our data-driven customer retention flywheel, and as a result of the action we've taken, we expect frequency to steady at a level which is 5% higher than before lockdown. Let's turn now to the third driver, which is raising gift attach rate. We want every Moonpick and Greets customer to find the perfect card and the perfect gift through an effortless experience. We're delivering on this. We've delivered a five percentage point increase in the mix of sales from attach gifting in FY21. And 46% of total sales were from either standalone or attach gifting. Some of this uplift was temporary during lockdown due to a higher mix of gifts that were sent directly to the recipient, because in those circumstances the propensity to attach a gift is higher. But it's primarily an underlying shift, reflecting our broader commercial proposition, 70 new high-quality brands, new categories such as homeware and toys, and premiumisation such as in champagne, It reflects the evolution of our recommendation algorithms and it reflects the improved servicing of gifting recommendations throughout the online journey. So more customers and more share of wallet and more attach have together added up to an extraordinary period of revenue growth. We've grown group revenue by 113%. We're pleased that this growth has been delivered through both of our segments, reflecting the successful rollout of the Moonpick Operation Playbook at Greets. We did see a stronger growth rate at the MoonPig segment, which was helped by the longer period of lockdown in the UK during summer 2020, but it primarily reflects the benefit from the MoonPig technology and data platform that we've developed over the last three years. Greece will be migrated off that platform by the end of 2022, at which point it will be able to access the same capability. So what has this done to underlying revenue? we delivered underlying revenue growth at 24% in FY21 as new customer acquisition from March and April 2020 flowed through into the underlying growth rate. Headline sales include a significant COVID boost. Now about a third of that is the excess of new customer revenue versus a typical year. And we expect that in future to flow through into lower revenue in year two, as it passes through the cohort curve. And about two thirds is higher frequency, which will trend down as lockdown restrictions are eased. Standing back across the period of the lockdown, we've delivered a step change in the scale of our business. And we're moving to FY22 with a significantly enlarged customer base and higher customer order frequency, which we expect to settle at around 5% above pre-COVID levels. The volume growth has also allowed us to take advantage of the inherent operational leverage in our business model and drive significant profit growth, which we'll look at on the next few slides. the strong growth in attached gifting has helped us to more than double absolute gross profit. And our cross-sell business model means that incremental gross profit from attached gifting flows through to EBITDA very efficiently. Now, as expected, the increase in the sales mix of gifting has driven a headline reduction in percentage gross margin rates, That reduction is specific to Moonpeg. It reflects increased promotional activity to drive customer behaviours, such as migrating customers to the app or getting them to set reminders, and a higher mix of outsourced production for reasons of resilience. At the same time, we have raised Greece's gross margin to 46% as we've driven our cards-first strategy through that business and leveraged the fixed elements of its operational cost base. What that means for adjusted EBITDA is that we've more than doubled adjusted EBITDA to 92 million. Our business model means that adjusted EBITDA is relatively controllable, and we chose to prioritise market share capture over the short-term optimisation of profit margin rates. We invested in marketing. As we said, we invested in operational resilience. And we invested in promotional activities to change customer behavior, such as giving customers to download the app or to set reminders or to make a second purchase. We also converted to just EBITDA strongly into operating cash flow. EBITDA to operate in cash conversion remained above 100%. our closing net debt to EBITDA was 1.25 times. So we remained clearly below the two times net debt to EBITDA commitment that we made at the time of the IPO. Now in terms of the way that we think about the deployment of that net cashflow from operations, our capital allocation priorities remain unchanged and they're focused around growth. We continue to follow a clear hierarchy. Our primary focus is on organic investment, and in the short term, that's likely to be in our existing core markets of the UK, Ireland, and the Netherlands, taking into account that this is a significant target addressable market to go after in those geographies. We'll consider M&A, but only where it's both relevant to strategy and clearly value accretive. Whilst dividend policy is always under review, our focus remains on investing for growth, and we do not intend to pay a dividend. Now, moving on to guidance. FY22 has started moderately ahead of expectations. That's consistent with lockdown restrictions being lifted more slowly than previously expected in both the UK and the Netherlands. I spoke earlier about how customer order frequency has been at elevated levels during lockdown, and as restrictions have eased, we've started to see this normalise. We expect this trend to continue until frequency settles at 5% higher than it was before the pandemic, which is in line with our previous expectations. As I mentioned earlier in this section, the repeat behaviour of customers acquired during the past year remains consistent with historical cohorts, and this provides a sound basis for our expectation that there will be an enduring uplift in the scale of our business. As we mentioned, our approach during the second half of FY21 was to prioritise additional investments in marketing and market share capture rather than the short-term maximisation of profit margin rates. We intend to follow this approach in the year ahead. We now expect group revenue in FY22 to be approximately £250 to £260 million. This implies 45 to 50% growth compared to FY20 and an underlying double-digit growth compared to FY21. As we've consistently said, there will be a year-on-year decrease in headline revenue in FY22. This reflects a normalization of order frequency and the headwind from the large pool of new customers acquired last year as they collectively follow the cohort curve and display historical second-year spending patterns. And over the medium term, we continue to target annual potential revenue growth in the mid-teens and an adjusted EBITDA margin of 24% to 25%. And now I'll hand over to Nicol, who'll talk through the strategic progress that we've made during the past year. Thank you.

Thank you, Andy. Now, as Andy mentioned, I'm going to run you through some of the strategic highlights of the past year. As I said before, it's been a genuinely transformational year for Moonpeg Group, and we've made exceptional progress on all of our growth levers, delivering at pace against the strategy we outlined at IPO. As this is our first results presentation, and some of you may be new to the story, I'm also going to take a couple of minutes to remind you on the strategy itself and how it all centers around this virtuous circle of growth powered by our data. Moon Pig Group has been the clear online leader for over 20 years in a large market, which is still in the early days of moving online. Both of our brands, Moon Pig and Greets, are clear number one in their markets. And although our roots are as a greeting card business, the success of our gift attached strategy continues to deliver with now almost half of us revenues coming from gifting. there is still huge runway for growth in our domestic markets. And we're confident we're gonna capture that growth due to our card first business model and the virtuous cycle of growth that it drives. We have a very clear card first approach. Cards are the magic that allow us to profitably acquire customers that are loyal and frequent and cards give us the data to cross sell gifts successfully. It's the strength of our brands and our market leadership that allow us to consistently acquire these card customers profitably. And we use it essentially as a springboard to enter the gifting market through the back door by cross-selling highly relevant gifts to customers based exactly on who and what they are buying for with no incremental marketing costs. And in fact, we've designed our entire business model and our technology ecosystem around this highly valuable and proprietary data set, the data of customers gifting intent. It all drives a growth flywheel that continues to strengthen day after day. The data we get from each card allows us to understand the unique relationship and occasion that a customer is celebrating. And this feeds into our data science models to offer highly relevant contextual recommendations throughout the experience and in particular on gifts. The fact that 90% of card giving occasions repeat on the same day every year for the same customer means that every year our ability to personalize the customer experience grows exponentially. So the fact that we can improve the customer experience every time they interact with us is what drives this flywheel. It means that customers become more loyal, more frequent, they attach more gifts and they drive more viral acquisition through referrals. And we've seen this flywheel deliver growth for us every year for the past 20. Today, this flow is stronger than it's ever been as we've accelerated both the capture and the use of this data by rebuilding our technology platform, collecting more data like reminders and moving more customers onto our flagship devices like our app, all of which drive lifetime value and long-term growth. And this is what drives deep and growing barriers to entry. Our original and our most longstanding competitive advantages are the power of our brands and the scale that we have relative to our competitors. Being three times larger than the next player in each of our markets gives us a marketing power and a viral growth capability that is unmatched. And it drives really attractive unit economics, both on the customer acquisition side and also on the unit cost side. But it's data that is now our number one asset. we have more data around gifting than anyone else. And we capture more data points every day than the rest of the market put together. The more data we get, the more relevant and personal we can make the customer experience. And this is all facilitated through our proprietary technology platform. Critically, we've leveraged our data to optimize every part of the site and the user journey. And that's what makes our technology incredibly hard to replicate. We're really pleased that this technology is now live on the Mupig brand and that it's coming to the Greets brand over the next couple of years. Now, we talked at IPO about the three growth levers that drive our business. We look to grow our customer base. We look to increase the number of cards that those customers buy each year. And we look to increase the number of gifts that they attach to those cards. The great thing about these three growth levers is that there is significant headroom for growth in each lever, but also that they compound each other. They multiply together to drive our revenue growth. And so it's really great to see this year that we've made real progress on each of these. And I'll talk through some of the key highlights now. Turning to the first one, to customer acquisition. As Andy mentioned, we took the strategic decision in the past year to invest heavily in our brands. And we launched new campaigns at both Moonpig and Greets. In particular, for those of you in the UK, you may have seen our new assets, the Moonpiglets, which launched in April across a number of media channels and have had rave reviews, but critically have driven Moonpig brand awareness to all-time highs. And we saw the same results in Greets, where a new campaign took brand awareness to an all-time high. Unsurprisingly, it's been a record year for customer acquisition across the group. We've also launched several new services and features which continue to support customer growth. Group Cards is a new product we launched in February this year, and it's inherently a viral product. I'd encourage any of you to try it next time you have a colleague's birthday coming up. It allows multiple people to collaborate on one card, bringing more people into the Moonpig ecosystem. Handwriting was a real barrier for certain customer segments. There were customers out there that felt that a Moonpig card wasn't personal enough because they wanted to write it by hand. We found a digital solution for this. It's live on our apps, and the uptake has been very encouraging. We think this unlocks another part of the market for us. We've also continued to extend our cutoff times, delivery days, and offer new delivery options, which all continue to just improve our customer experience and grow the size of our customer base. The second growth lever is purchase frequency. And primarily this is driven by always ensuring we have the best card for every occasion and making sure that we surface it at the right time. That's why we took a decision this year to significantly grow our card range. We grew it by almost 60%. We added countless new brands, new artists, new independent designers, licensees and themes. And the results and the sales of these new ranges has been really encouraging and validated the decision to invest and grow the range. We're also getting smarter every day in the way that we're personalizing the experience. Reminders are the key example that we're making that reminder journey more and more personal because we know exactly what a customer wants and much likely what they did last year for that specific occasion. But we're also looking to introduce personalization throughout the journey so that at every touchpoint with Moonbig, a customer gets a more personal experience based on who they are and what they've done in the past. Another key driver of driving customer frequency is moving customers onto our app. We know that when a customer downloads our app, their lifetime value increases. It's because our app is our flagship device. It offers the most seamless and personalized experience where we can leverage our data in the most powerful way. And the app also has certain features like digital handwriting, which are unique only to the app. It was great this year to see 6 million downloads of our app. It was great to see us hitting the top spot in both app stores above a number of pretty big apps like Zoom, like Instagram, like TikTok. And we're really, really close to our vision of becoming an app-first company. The final growth lever is gift attach. Gift attach is driven by having a fantastic range and having the recommendation algorithm and the user experience to surface the right product at the right time. And we've made great strides in both of these. On the range, we've added multiple new brands like Lego, like Cath Kidston, like Nutella, all of which have had great results from the day of launch. Customers trust and love these brands and they enhance the value of our gifting proposition. We've also expanded into new categories like home and garden, and we've experimented with premium price points, in particular on premium champagne ranges, where the early results have been very encouraging and will influence our roadmaps going forward. And on the user experience, we continue to get smarter. Our recommendation engine continues to incorporate new data points and data sets, making those recommendations even more relevant day after day. And that's really important in a world where we're growing our gifting rate. Now, our browsing experience has historically been optimized for cards, but this year we've made sure we've invested in our gifting browsing experience so it's just as easy to search and navigate and browse for gifts to make sure that our customers get the same experience. And this has meant not only that we've improved the gifting experience, but also it now allows us to surface gifts at different touch points throughout the journey so that we can drive awareness and make it easier for customers to add a gift where they have the highest intent. Now, finally, we're really pleased to launch our first ESG strategy. Our purpose as a business is to bring people together and to help them connect with the people that matter to them. And so it's important that our impact on the environment and our people and our communities reflects that positive purpose. Today, we are committing to eight goals across these three pillars of environment, people and communities, which are outlined on this slide. In summary, it's been a record-breaking year for Moodle Group, where we've doubled our business, we've made huge strides on accelerating our strategy, and we're in a position to upgrade our expectations for the current fiscal year. The long-term growth opportunity remains vast, and we're as confident as we've ever been about our ability to capture this growth. Thank you for listening, and see you shortly at the Q&A session.