Ten Lifestyle Group Plc ($TENG)

Okay. Now we've got our first company presentation with Ten Lifestyle. Welcome, Alan, and welcome to Alex.

Thank you.

There we go. A little bit later there, but don't worry. You've certainly got your full quota of time if you want to tell us how things are going, and I'll come back for the Q&A at the end, there?

Alex [indiscernible].

Alan, you go ahead.

We're okay. I think we're good to go. Are you there, Alex?

Yes. Can you hear me okay now?

Yes, we can hear you. Perfect.

Fantastic. Let me just bring this up here and that should be the presentation. So hopefully, the Internet will stay stable, but very good to be here today. I'm Alex Cheatle. I'm the Co-Founder and Chief Executive of TEN Group. I own a big chunk of the business. And Alan?

Yes, I'm Alan Donald. I'm the CFO. I've been with TEN for just kind of 7 years now.

And in the next few minutes, we're going to talk about how we make money, how we make money from our B2B clients and then what the investment case is and the consumer service that we deliver to the end users of Ten Lifestyle Group. And then we're going to talk about the growth engine in our business model and how we're digitizing and have been digitizing very successfully to grow margins and service quality and revenues in the business. And then we'll talk about what -- where from here? How do we get to $100 million in net revenues from the 70- we're at today and what that means for our financials. And then we're going to do all that in the next 15 minutes, so we've got plenty of time for Q&A. This next slide really shows our progress. So we've been growing revenues in recent years and growing the number of people using our service, the active members. For the period up to the end of February, we've actually seen the continued inflection in the business. So we're now up to 436,000 people are using our services. And our profitability and our revenues are all up on the same period last year. H1 is always smaller for us than H2, but we're up on net revenue. We're up very significantly 23%, 24% on active members. We're up on EBITDA margin, tax -- profit before tax is up 60%, and we are now debt-free and cash positive for the second year on the trough. So the business has gone through the inflection point, and our job from now on is to continue to grow those revenues, grow that profitability and grow that cash generation, all the while still investing into the business so that we maintain our market leadership and grow that forward. Alan?

Thank you, Alex. So how do we make money, our B2B2C revenue model. So the majority of our revenue comes from our corporate clients. And those are banks, wealth managers, credit card companies who pay us to look after their high-value clients who we call members, and that's from the sort of mass affluent up to ultra-high net worth that we look after. And that's 87% of our revenue come from the banks and credit card companies. And that's normally -- the contracts we have with these banks are long term in nature, 3 years, normally go to 6 years. And we are basically paid by activity, whether you talk to one of our lifestyle managers to organize something through chat, e-mail, or increasingly through our digital platform where we can self-serve. And we get paid by activity, and that's wrapped on to. And we make higher margin on digital revenue by lower revenue, but higher margin, and that's where the growth has come through. So the 23% that Alex talked about in our active members in the previous chart, a lot of that is the digital platform now then engaging more members across our client portfolio and growing engagements across all our clients. And then on the remaining revenue, we make 13% from supplier revenue, which is mostly travel hotel commissions at the back end. So who are our clients? These are our corporate clients. We operate internationally across the world. And these are blue-chip financial service companies who provide us with strong annual recurring revenue. We work with Mastercard, Visa and Amex globally. I'll just call out a few. We've got NatWest, Royal Bank of Scotland, Barclays and James' Place in the U.K. We've got a really good business in Japan. That's SMTC, Luxury card and Credit Saison. And also, we've got Bank of America, Merrill and City National in the U.S. So we've got strong blue-chip companies who pay us to look after their high-value members. And why do they pay us to look after our members? Well, we drive return on investment for our corporate clients because we can prove their own data that we improve loyalty, we improve acquisition, retention and profitability. And that's really driven by engagement and using our digital access and hyper-personalized communications, which we'll touch on later. And that improves customer outcomes in terms of value through a consistent high-quality service and it actually supports higher spend on the card for the credit card company, but also higher AUM with clients going forward. And the digital channel, as I say, is growing engagement across all of our segments. And we did do a voice of the customer earlier this year. And actually 62% of our customers said it was a strong -- very strong -- sorry, Alex, you want to go back just one slide. It's a strong and decisive role in terms of staying with our sponsoring brand. That's higher than we thought. That's a really good indication of the service we provide. And we've got case studies on our website that you can see as well. I thought I'd give you a real practical example of what digital is doing to us as a business. So this was a full digital relaunch we did to a European bank back in October last year. And this is actually to 40,000 eligible members to our service. It's a subset of our total portfolio. And I'll name this, this was RBS in Scotland. So they had 40,000 eligible members, and we relaunched our service through the digital platform. And so this is 6 months after we relaunched. Out of those 40,000, we got 11,500 registrations, of which up to 75% were new to concierge did not know about our service before. We nearly doubled the active members using it, and that got us to our penetration up to 25%. So 1/4 of those elderly members are using the service, and that's been driven by our digital mix growing by 75%. So that shows that when members are aware of our concierge service, they want to engage with it. By going through digitally, it means the cost to the bank is lower per engagement. And at the same time as people registering, we actually get them to actually tell us what they're interested in. So we have full interests. They can tell us what they like, and we use that data to then [ hyperpalize ] back to them from a marketing perspective, and that grows revenue and engagement as well. And so that was what we did with RBS, and we're looking to actually roll this out fully to the NatWest portfolio, which is 5x bigger than this probably at the end of this calendar year. So that's a real practical example of how the digital platform is really guiding engagement for our business. So let me hand back to Alex now.

Great. Thank you very much. So I think when people look at our business, they see a strong investment case. So we're growing revenues and margin, and we've been doing that consistently for several years. But the good news is now for a few reporting periods, we've been positive on profitability and cash. So that growth is coming through in the numbers and now giving us cash generation. And as we grow, we get more buying power, we can organize more things more successfully. The investment in tech makes us more efficient, and all of that generates more margin and more success for the business. We were also in a market where we are still a very small player. In the total market for customer loyalty for banks, wealth managers and credit card businesses, we're less than 0.25% of that market. So these banks, our client base, those logos you saw earlier on, they've got a lot more that they could be spending with us, knowing that the more they spend with us, the better customer profitability, acquisition retention they receive in return. But in our market of providing travel and lifestyle benefits to high net worth and the mass affluent, we are the player that's invested most into technology and most successfully. And so when contracts come up for grabs, we expect to win them. We've got a very strong win rate and a very strong client retention rate as well. And all of that, you can see more about our proposition on this video, which is on our website. We're not going to play it now, but this really talks about how we can organize restaurants better than you can yourselves as a member of the public, organize travel with better pricing and value-add benefits than you can as an individual, organize tickets for music, theater, sport more successfully than you can yourself and also organize offers, benefits, events around luxury goods, luxury services more effectively than any individual can themselves. All of that drives the joy of using our service, which then drives the customer satisfaction of those banks. And our growth engine means right in the middle here, where it says build a more valued service. As our service gets better, we engage more people because they can see the value in the service. We've got more powerful marketing messages. And we have got more people that use our service for a second time, a third time or a fourth time because the service is better. That gives a better return on investment for the banks and the wealth managers and the card businesses. So they then give us more customers to look after, more revenue to drive our business, and we win more contracts with them and from other players in the market. All of that drives up our buying power, so we can extract more value from the restaurants, the hotels, the venues all to benefit our members and to make us more efficient. We get more API integrations and so on. And the second flywheel, the smaller flywheel is all around technology. By getting those API integrations, which means that we've got access straight into the booking systems and restaurants and venues and hotel groups, airlines and so on. That makes us more efficient. It means members can self-serve. It means our lifestyle managers are also more efficient when it's a human engaged with your request and also quicker and more personalized. And we use a lot of AI in our business to drive that personalization. AI is very good at personalization, but also a lot of technical integration to drive the content pricing benefits and so on from our suppliers straight through to our members or to our lifestyle managers to allow them to serve better, quicker and in a more personalized way. And it's very true that for our wealthiest members, they tend to be very, very valuable to those banks. And so they're offered a hybrid service. They can use our digital platform when they want to. But when they want to speak to a human being, they are more than welcome to, and that's encouraged at the top end of our business. In the mass affluent space, where the customers are less valuable to the bank, we tend to encourage them to use the digital platform first. And sometimes, they are only offered the digital platform, but sometimes they're offered a hybrid digital first. But if they need to speak to a human being, then we make that happen. And that's opened up new contracts for us in the last 6 months, and we've seen a lot of success there. So we've signed a contract to launch with one of the big banks in the U.K. to their Premier Group. That's around 1 million members on a digital-only platform. And our technology has now got good enough to allow us to launch a digital-only platform, which opens up that mass affluent space. Top right here as well, we've launched a digital-only platform in North America with a major financial services brand as well, again, to that mass affluent space. But our technology also helps us win at the very top end. The one there in February 26 on the bottom row. That's a contract with some of the wealthiest people in the world and we're serving many, many thousands of them, and they're offered a high-touch service as well as digital. But again, it's the fact that we've got great technology supporting the lifestyle managers, making the service quicker, better, more personalized that meant that, that very mature business has come to us rather than keeping the service with the incumbent provider that they had before. Top left, another European bank that used to be 100% high touch. It's now 70% digital. We're serving many, many more people. And we've doubled the size of the contract for us in terms of revenues but we've massively increased by far more than 2x, more like 4 or 5x the number of members that we're serving there. So around the world, it's technology that's allowing us to scale, improve the quality of the service, win new contracts, beat our competitors and then make us absolutely essential to the proposition that these banks and wealth managers offer to their most valuable customers. So we're proven and winning with our technology and in the financial services space. One thing that's also good news for us is we're already global as well. So whilst there are 1 or 2 markets we might enter over the next couple of years, generally, we are in most of the markets where we want to be. So when we reach EUR 100 million of net revenues from our currently more or less EUR 70 million, probably EUR 96 million of that EUR 100 million will come from markets where we already are. And the reason that's important is it means we don't need huge new investments into new markets. When we IPO-ed 9 years ago, half of our IPO investment went into going digital, which we've done very successfully. The other half went into growing us out internationally, and we are now there. Now the other important thing here is that we are continuing to grow in Europe, the Americas and also Asia, Middle East and Africa. Those are our 3 regions. We're growing in each of those. And we're already getting -- we're already at more or less 30% EBITDA margin in Europe and in Asia, Middle East and Africa. We're below that in the Americas, where we're maturing very rapidly. But as we mature the Americas rapidly, continue to drive more business into the high-margin, very scalable digital platform, then that's where we expect to get to that GBP 100 million of net revenue with a 35% EBITDA margin, and that will be generating GBP 25 million plus of cash in a year. And that's really the next financial step for us is to get from where we are today. We've gone from losing money through our investment period to today, even though we sustained the investment in tech, we're making cash. We've lost our debt. And the next step is to get to that EUR 100 million, 35% EBITDA margin is what we're aiming for. We're already at 30% in our most mature regions, and we can mature them some more and use tech to drive those margins up. So that's the last slide from us, but we're very excited about our business. And now we'd love to take any questions that you might have for us.

[Operator Instructions]. First one from Leslie. How exposed are you to a reduction in luxury consumer spending if your clients scale back their headcount or budgets?

Really good question. Not very -- that's not a huge risk for us because we rely on banks wanting to keep their high net worth and mass affluent customers happy. Now in good times, they want to grow that book and invest behind growing it. In bad times, banks and wealth managers have to retain those assets to stay as viable successful businesses. So after Lehman Brothers collapsed, we grew our business 33% in the year after Lehman Brothers collapsed and 29% the year after that. Why? Because banks were desperate to hang on to people that were asset rich. I'd also say that when things get tight, that's when we can get more value from our suppliers. So the best time for us to do restaurant deals is in the quiet summer months in the U.K. is the quiet summer months that in January. And the worst time for us to try to do deals with restaurants is December when they're busy and packed out. When times are tough on the supply side, we can extract more value and improve our proposition for our members and our end users. So we've got a natural hedge there as well. So if banks want to invest behind their top customers, which they do in good times and bad, and when times are bad, we can extract more value from the supplier base. We are not concerned about that.

Very good. Now I've got 2 very similar questions regarding AI. So I'll just read out one of them. Thanks for the presentation. I would be keen to get your thoughts on the potential for AI to disrupt your business or how you'll defend against it or be a beneficiary, of course.

So I'll take that one as well. I'm sure there'll be some for Alan coming up. So we were very early in on AI. We've been waiting for technology to emerge that allows for mass personalization. That's why we set the business up in the first place because technology was going to make personalized service scalable for the first time in human history. And that AI has enabled that. So the personalization sits at the core of what we do. When we tell members about something that we've got that we know that a particular individual will be interested in because of their profile, that drives up member satisfaction and really delights our members. And because of that allows us to grow our revenues from the banks. On top of that, AI really helps us streamline our service, both the high-touch service and to drive more people to digital because it allows everything to flow so much better. We've already got an AI agent that checks every e-mail we send out and suggest improvements to it. We've got AI agents that allow -- that can go to individual restaurants and make a booking without a human needing to get involved. We've got AI agents that search for -- if we know that -- if we've got 10,000 members that we know love Coldplay, we can have AI check whether that means they also love Razorlight or Travis or whoever else it might be and how true that might be so that we can match those personalizations too. I think in the coming months and years, people will increasingly be using agents to organize their lives. We want to be that agent for many of our members. Other members might use their own agent.

We've lost you, Alex, a little bit.

But then we'll make out I've booked your restaurant using your Barclays or NatWest concierge service and made that happen for you. So we're excited about AI, but not complacent at all about the fact that it will create some interesting other routes for people to get things done. And we want to be integrated in with that, and we will be.

Yes. And Derek, do you want to add anything, Alan? Or is that good to go?

That's good.

Okay. Derek wants to know -- thank you, Alex. Pricing power question, if I may. What level of pricing power do you think you have? In other words, what is your view on the market customer reaction if you change prices?

Alan, do you want to take that?

That's an interesting one because as Alex said earlier, when you look at our competition, they have not invested in their platform or digital at all. So where we have the big advantages is that we can offer engagement with the bank at a lower cost per active per engagement. As an example, we may be going to an RFP for a contract worth GBP 2 million, which is all high touch because that's what the competitor can only offer. We can go and say actually, we can do that for the same price, but engage a lot more members because we can then drive a lot of those requests to be digital. So the cost per interaction is lower. So we don't need to actually up price. We can actually price better overall rather than changing prices for high touch or digital. So it's the overall blended cost will be lower for the bank coming on board with us. So that's our big advantage with our digital platform.

Who do you find out of interest are your competitors?

So we've got 3 main competitors, direct competitors. There's a company called Aspire Lifestyles, who are big in Asia and North America. And we've recently won some contracts from them in Japan and some other markets as well. And then Quintessentially are fairly big as a business-to-consumer business. And we've also won some contracts from them in previous years. And then there's a company called John Paul, which is owned by AccorHotels, which was big globally. We won a number of clients from them. And they are now really strong in France and a couple of other markets on the continent. But our view is that when Accor have got spare money to invest in technology, they spend it on hotels. And we are the only company in our market that's invested successfully and in a long-term way into technology. And that drives our margins, our pricing power, our competitiveness, the personalization, all the things that really drive the future success of our business. So it would now be incredibly expensive for those competitors to invest to catch up because we've got higher net revenues than any of them, materially much higher. And so we're in a good position and that moat, that competitive moat is growing all the time.

Great. Another one here now from Martin. Can you explain your average cost of client acquisition? Are you considering growing your staffing base or keeping it steady over the next 2 to 3 years?

So if we grew our revenues by 10%, 15% a year, we could keep our headcount base flat. So one of the numbers that we've just reported in the last set of results and it's in our RNS is the net revenue per FTE, and that's a number that you should expect to see as an investor in TEN growing and increasing as we develop and as we digitize more. So that's a really important measure that we will continue to report every reporting period from now on.

FTE was actually up 11% at the half year, so double digit. So we'll continue to report that. So we'll get more efficient and the growth will drive on revenue, as Alex said, we don't anticipating our FTE to grow like it will be pretty flat for every 10% growth roughly.

Yes.

Now clearly, if we double the net revenue because things really take off, then we might see some headcount growth because there are still some great contracts like the one we -- I mentioned earlier, dealing with some of the wealthiest people in the world, where they do want to be dealing with a human being some of the time, although we're making that service more and more efficient, there are still, for some contracts, some headcount growth. But because a lot of our growth will be in the mass affluent space, where it is largely digital and some contracts entirely digital, the headcount growth should be fairly contained.

Yes. Now Margaret wants to know what factor will limit further growth?

Well, I think we're excited about -- once we get beyond the GBP 100 million, we actually think that the growth should speed up because as we become the best way for high net worth people, mass affluent people to organize things in their life, we expect to then grow outside of financial services as well. So if you bought a luxury property, whether it's in a holiday resort or in Dubai or Central London or whatever else, why wouldn't that come with a concierge service that gets you the best access nearby the apartment as well as on a more global basis. We've got a whole bunch of other areas where we can grow and develop into the employee market, into the auto market, a number of other places where we're developing. And all of those are...

Alex has cut out again. So just to continue what Alex was saying is that we do see other opportunities outside of financial services. So we will still grow financial services, but there are other sectors that we can get involved in and in fact, we just announced a small contract with a relocation company. So we provide our service for executives going overseas on an expat. So that was a small contract. So that shows that we do have other verticals we can look at going forward.

Well, that rounds up the questions. If you've got anything further to add, Alex, that's all done from this end.

Well, thank you very much, and thank you to those of you that are already holders of shares. And no doubt you enjoyed the broker upgrade that we had just recently for next year's EBITDA went up from GBP 17 million to 18 million and our job is to make sure that, that success continues. So thank you, and thank you, Mello, for the opportunity.

Yes, brilliant. Well done to both of you. It's always nice to hear about upgrades. And I can't remember, are we seeing you at [indiscernible] as well?

I think we're hoping to be there. So we haven't finally confirmed, but we're certainly hoping to be there. Thank you, Dan.

We'll do everything we can to get you there. Great. Lovely. Thank you...

Thank you very much.

Thank you very much.