Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Naked Wines PLC (NWINF, Financial) has significantly improved its cash and liquidity position, with net cash almost doubling year on year to nearly GBP20 million.
- The company has successfully reduced its inventory by 11% year on year, marking the first reduction in three years.
- Operating G&A costs have been cut by 11% year on year, with further reductions expected to support profitability into FY25.
- A new credit facility with PNC provides GBP20 million to GBP30 million more usable liquidity, enhancing financial flexibility.
- The company has implemented a robust financial foundation and systems to ensure focus and alignment on top priorities, driving winemaker engagement and employee morale.
Negative Points
- Revenue declined by 13% year on year, primarily due to a reduction in the number of Angels (subscribers).
- Adjusted EBIT fell by 66% to GBP5 million, impacted by a GBP16 million reduction in repeat customer contribution.
- The company made a statutory loss, with nearly GBP17 million of adjusted items reported during the year, including inventory provisions and goodwill impairments.
- Customer recruitment remains challenging, with a net loss of customers despite efforts to stabilize the trend.
- The US market remains overstocked with 24 months of inventory, which is double the ideal level, posing a risk to profitability.
Q & A Highlights
Q: What senior management changes have you made? And will you be making any more?
A: We've made a few key appointments in the past few months. I have confidence we have the right team in place to deliver on our present and future challenges. I don't expect any further changes to happen once Dominic Neary joins the company as our CFO in November. β Rodrigo Maza, CEO
Q: How is the relationship with the winemakers?
A: The relationship with winemakers is fundamental to our business. I would say it's very strong. We value their trust and support and are looking for ways to further drive their engagement. We recently launched our winemaker success program, which establishes shared sales, marketing, and operations objectives. β Rodrigo Maza, CEO
Q: The testing activity you plan for FY25 on improving recruitment/retention/personalization going forward. Is the level of activity focused on any particular country or is it spread across all geographies? Which regions are you experiencing most volatility in Q1?
A: We are running tests in all markets. It's an advantage of being a global company that we're fully leveraging. The UK is a market where we're experiencing the most volatility in Q1. We've had both good and bad months so far, but trading is in line with expectations. β Rodrigo Maza, CEO
Q: When do you anticipate revenue stabilizing and returning to growth?
A: The conditions for growth had to be established, and they now have been. We have a robust financial foundation and are re-engaging our stakeholders. The focus now is to find the levers that get us back to a 2x payback. We will do that in FY25 and scale those improvements in FY26, which is when we should be going back to growth. β Rodrigo Maza, CEO
Q: You've talked through some interesting opportunities to potentially drive growth, personalization, Wine Genie, premium customers, amongst others. Which do you think is the biggest upside?
A: I think personalization brings them all together. By giving customers choice over the relationship they want, their lifetime value is going to be higher. The signals so far are very positive. β Rodrigo Maza, CEO
Q: What evidence makes you confident that Naked's differentiated proposition is feeding into a better value proposition, i.e., price quality trade-off for customers?
A: The strongest evidence is our retention rate, which has been strong historically and continues to be strong today. Our customers look for great value, and we offer world-class wine at very fair prices, facilitated by our business model. β Rodrigo Maza, CEO
Q: From your experience of running subscription businesses in the past, how do you view the payback of 2 times compared to what you had seen in past businesses you worked at?
A: We always like for the payback to be higher, but given where we are, I think 2x payback is the right number to target. All the testing we're conducting is aimed at delivering that. β Rodrigo Maza, CEO
Q: Given the 1.3 times payback, why do you still insist on investing GBP22 million to GBP25 million in new customer recruitment?
A: The main reason to maintain investment levels is the stability of the operation in terms of scale and the strength of our partnerships. It's very hard to turn those partnerships off and on again. We believe we can get those partnerships back to the right level with the changes we're making. β Rodrigo Maza, CEO
Q: Why aren't you conducting share buybacks to create shareholder value at this depressed valuation alongside your testing to grow? Why does it have to be after the testing?
A: It comes down to focus. We are running many tests, some of which will work and some won't. We need to focus on the implications of the results for the long-term trajectory of the business. Armed with that knowledge, we can then make other types of decisions. β Rodrigo Maza, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
