Ten Lifestyle Group Plc (TENG) Earnings Call Transcript & Summary

So let's take you through the results for the year to the end of August 2025. I'm going to run through the highlights of the year and a business overview. Alan is going to talk about how we make money and the specific financial results, and then we'll look at some of the things that we've achieved operationally before we look at how we're developing the business today and into 2026. So overall, now this is a page you might want to pause on and absorb in detail. But the best way to understand this is to look at the next slide. And effectively, the story is that we've grown the business in terms of net revenue, in terms of Active Members, in terms of Material Contracts from the corporates that pay most of our money. And because we've grown the business and we put technology into the business well, we've also improved profitability. So we're at record revenues, record number of members using our service, but also record profitability of both an EBITDA basis and also on the base of PBT. And that has predictably resulted in an improved cash position. Now our mission remains to become the world's most trusted service platform, for our members so that they organize the best things in their life really effectively and learn to trust us through that, and through our corporate partners, we get improved customer metrics because of the impact we have on their top value customers. Our corporate clients remain some of the most blue-chip, most reliable clients you could possibly have around the globe and they are seeing better results from our service all the time. And on the right-hand side of this slide, you can see that banks around the world when the -- the people who use our service asked, what impact does it have on your choice of bank, over half said that using our service has a strong or decisive role in them choosing their bank. And the vast majority say it has some kind of good influence on that choice. And overall, banks can be confident using their own data that we improve customer retention, customer acquisition and the profitability of customers. Now how do we work? So our members at the top of this chart here, our members get their service access paid for by our Corporate Clients. They can then access us through phone, e-mail, through a digital platform, through chat, and they can organize their travel, their lifestyle, entertainment, their dining and their retail benefits through hundreds of thousands of suppliers organized either self-serve through our platform or by our lifestyle managers using Ten MAID and other technologies to help them do a better job. Now why are people investing in Ten? Well, firstly, as we grow, we are maintaining our investment in technology rather than growing that, and that in itself is improving the operating margin. On the far right-hand side, we have a growth engine that means that as we invest more into our business and improve it, we become more profitable and more successful, and that allows us to invest more into our growth and that virtuous cycle continues. And we're already the #1 customer experience platform in the world, working for banks and also the very best way to combine travel, entertainment, dining and retail, all in one connected journey in one connected experience, which is what the end user, our members want. And in our market, we are only scratching the surface of the opportunity. So we believe we're at less than 0.25% of the customer -- the market for customer loyalty amongst banks, credit cards and wealth managers. Never mind a much bigger market of organizing the fun things in life for the world's wealthy. So a very strong investment case. A video which you should definitely watch if you haven't already, is the growth engine video, which is on the Ten Lifestyle Group website in the Investors section. And that will explain in more detail. It's a 4-minute video. It's been updated, but we will explain in more video how that growth engine works and how it's working in practice right now. Over to Alan to talk to the business model.

Thank you, Alex. This slide is a reminder of our revenue model. So the majority of our revenue comes from corporates who pay our high-value clients. That's 88% of our revenue. And then we have 12% from supplier revenue, which is normally travel, hotel commissions. On the right-hand side of the slide, it just shows that the makeup of our Corporate Client Contract, typically long-term in nature, often with guaranteed minimums, 60% of our contracts have minimums in place. And we get paid by activity via High-touch requests through using one of our lifestyle managers or through our platform Digital revenue. and that's slightly lower. And whilst the Digital revenue is lower than High-touch, the margin is a lot higher. This next slide just shows that actually in the year, our Active Members grew by 7% to 375,000 members. And the way we look at this is that we segment our client base into three segments, very high, high and medium. And we do that through looking through the lens of the bank and how they see their clients. The left-hand side of the graph is the eligible members for the high and very high value segments, and that's been around 2.1 million in the last year. On that left-hand graph, we don't have the medium segment graph because that runs into tens of millions of eligible members. So on the right-hand side, Active Members, the 375,000 broken down by the member cohort. And those Active Members are once in the past 12 months. And as I said, growing 7% to the end of the year. And also since the end of the year to October, we've grown to 387,000, so continue to grow into this new financial year. And then we do look at the proposition differently by value segment in terms of affordability and how we approach them. So when you're in a medium cohort, it's first, it's a lower cost per active member and the more Enhanced Hybrid approach, so lifestyle manager or through the Digital platform. And at the very high end where you've got a high assets under management or a really premium credit card, it's really Personalized dedicated team, exclusive experiences, our private travel service is offered to those members. And then where do we make money? It just shows that actually the average revenue per active member, we make up to 3x as much in the very high segment compared to medium. Why is that? Because the bank can afford to spend more per member on these very high-value members compared to the medium segment. And here's to give you an example of a study here. This is a European bank, which back in 2022, they have been marketing actively to it and they engaged with us to really reengage with the member base. And we want to do Digital First. So test delivery was through digital channels, adding self-serve location-based features to make it relevant to the member and keeping expert support in the background to do complex travel and bespoke experiences. So what's happened over the 3-year period? So from a client perspective, digital users up 50% from '22 to '25. Active Members are up 40% CAGR over the 3-year period. As a result of that, member experience, NPS is up 25 percentage points. So from a client point of view, very successful. And from a Ten perspective, it's actually good for us from a commercial point of view. The contract has grown by 25% CAGR year-on-year, which means we've doubled revenue in that period. And because of the move to digital, which is a more profitable request for us, the margins have grown upwards of 25% absolute year-on-year from '22 to '25. Moving on to the financial results for the full year. As Alex said, we've had record net revenue. Now I've got a bridge to go through and I'll explain that. Our adjusted EBITDA reported was 14.6 million. But even on an underlying basis because we had some good currency gains, but then offset that with some one-off costs, underlying EBITDA is aligned to the reported EBITDA. Record margin of 22%. And then we are still continuing to invest in our digital platform, [indiscernible] up a little bit to restructure the business as we get more efficient and digitize the business. And our net finance expense increased slightly due to lease interest and some FX losses on intercompany. But what that all means is that in the third consecutive year, record PBT at GBP 2.9 million, a fivefold increase on last year. On net revenues, the net revenue bridge shows that we did have a bit of a headwind on our revenue on a currency basis. So actually at constant currency, we're at GBP 67 million. And you can see the bridge is the base corporate revenue did grow in the year by GBP 3.2 million. New contracts contributed GBP 4.5 million, and that was an extra large win in the U.S. that started in January of this year. And the three major wins in EMEA and Europe contributed to that growth. Then the contract loss is predominantly the large contract we lost at the tail end of 2024, and that's a full year impact coming in this year. And supply revenue is pretty stable, just up 0.2%. And on the next slide, you'll see that this just shows that since COVID, the recovery and then we are -- it's around about 12% of net revenue, and that shows the consistency around the strength of the product offering across our supplier base. Breaking down that net revenue and adjusted EBITDA by region, I take Europe to start with, that is our most mature region with a margin of 36%. The revenue is down a bit and EBITDA is down, that's due to the large contract loss that I said earlier. The star of the regions this year have been AMEA, where net revenue has been up 37% to GBP 15.7 million and that's with the new launches, contract retention is 100% and continued sustained member demand. And that's meant along with operational efficiencies, EBITDA has more than doubled to GBP 4.3 million, and we're now set with a margin of 12% improvement at 27%. With Americas, net revenue is slightly down. We do have some clients who are deferring growth pending our digital rollout. We'll go to explain that a little bit later in this presentation. We did have FX headwinds on the revenue, but then EBITDA was up year-on-year, driven by some favorable FX on our cost base and the new contract launch. We continue to invest in technology. However, as a percentage of revenue, it continues to come down. It's now at 19%. We expect this trend to continue as we grow the business. We capitalized about GBP 6.7 million, and that will be -- continue to be flat going forward. We don't see that going up in any great extent. And the overall spend, including the P&L spend will be around the GBP 12.6 million we got in the graph. We do that because it grows competitive advantage. It efficiency into the business, which we'll talk about later, improves the service levels and ultimately grows revenues. Cash flow. We ended the year with gross cash of GBP 10.6 million, net cash of GBP 9.7 million. We had a cash flow in the year of GBP 0.2 million driven by the increase in PBT. We, as we said, continue to invest in our platform and AI, GBP 6.7 million invested in the year. And as you remember, at the start of the year, we did have a share pricing, which raised GBP 5.7 million, and that allowed us to repay loan notes that we had early of GBP 4.5 million in the year. And if we move on to the next slide on the balance sheet, that's meant our net assets have grown year-on-year due to the share issue and the increased profit. And then post year-end, we have repaid loan notes in full, so we have no debt in the business now, and we've terminated our invoice discounting facility. And we've secured a 3-year GBP 5 million revolving credit facility with NatWest and that supports our short-term working capital requirements and gives us a good buffer in the years ahead. I'll now hand back to Alex on the operational update.

Thank you very much, Al. So let's play a video first about our proposition. This is an updated video that will give you the very latest about why our members love using our service. [Presentation]

So what did we achieve in the year? Starts of with us launching the Ten Box Office. We also launched many other technical in technology developments. On top of that, we launched new contracts in Japan and new contracts in the U.S. and other contracts around the world. Every single month, we achieved something that a step forward towards our vision of becoming the most trusted service in the world. In terms of our digital improvements, we've made improvements internally and externally. Internally, it's about improving how well lifestyle managers manage the service. So the AI Guardian improves how we QA and check and quality audit, the requests that we manage and what we send back to the lifestyle manager in terms of confirmations. That improves service quality and drives repeat use and overall satisfaction with the service. The Lifestyle Manager Copilot allows lifestyle managers to accurately get more information more quickly and again, serve members live on call, revert to e-mails much quicker and overall drive repeat use and member satisfaction as well. Ten PX drives up how well we engage with members differently because of what we know about them. So we can tell members that live in one part of the world about different restaurants than somebody that lives in the next city. We can tell them about restaurants in their city. We can tell people about things based on their age, based on their sex, based on their location, based on the preferences that they've given us based on when they last used the service. All of this drives repeat use, which drives revenues and drives member satisfaction as well, which drives a long-term business. Externally, we've built the world's first AI-powered member assistant that books restaurants across -- in the U.K., for instance, across the biggest restaurant booking systems with restaurant benefits and availability at many, many hundreds of them, altogether, about 850 of them today. And that's available both through Talia, the AI-powered member assistant, but also on our digital dining platform. And in entertainment, we've built out the Ten Box Office, and that's led to a 30% increase in bookings since we launched it. Let's play a video now that explains why members use our restaurant booking service. [Presentation]

And let's also bring alive why the chefs and the owner managers of the restaurants wants to work with us. [Presentation]

So to recap across our platform, we've already built all of the capability to the left, and all of that was built before the start of the last reported year. But in the last reported year, we improved hotel search. We integrated more partners for dining. We improved map functionality and search. We launched Ten PX. We enhanced content outside logging. So members who are not yet registered with us get far more reasons why they should want to go through the very simple registration process. We launched LINE in Japan, which is the Japanese equivalent of WhatsApp or WeChat. And we also launched Copilot and Ten Guardian. So thinking about the outlook for 2026. We're going to grow the top line, and we expect to do that both through winning new contracts with current clients, growing existing contracts with current clients, winning new contracts with new clients and then also winning new clients in new verticals on top of our current business, which is largely financial services. And across the business, we expect to grow Active Members. Already, they're up to 387 just 2 months into the year. We expect to continue to benefit from the fact that banks want to increase customer loyalty, that end users of our service want to experience better dining, better travel, better live entertainment. And across the world, people of all ages are adopting digital at ever-increasing rates. All of that is very good for us. As we roll out our tech, not only will that grow our service because people use our service more, it will also grow our margins. These are our plans for the year ahead. And that's why we're confident that we should expect to have a good year ahead and even better years beyond that. Thank you very much.