The Pebble Group plc (PEBB) Earnings Call Transcript & Summary

[Audio Gap] Claire Thomson, CFO. [Operator Instructions]. Thank you all for joining today's call. And I'll pass you over to Chris Lee, CEO. Chris, please go ahead.

Thanks, Garet. Hi, everybody. So welcome to The Pebble Group Half Year '26 results. And sort of myself and Claire here to walk you through them. So those of you who've known us, I know we've been here a long time. We've invested certainly from a time perspective, financial perspective, and that's sort of definitely to emotionally invested as well in what we do. So we're going to talk about The Pebble Group. We're listed on AIM, and we've got 2 businesses that -- where all the action happens. So Brand Addition and Facilisgroup, I'll talk you through Facilisgroup and Claire will do Brand Addition. We'll share some numbers at the beginning and do a bit of an outlook at the end. But just as an introduction, we're in both Facilis and Brand Addition. We're in the promotional product space, and so I've got the kind of water bottle here very proudly with The Pebble Group. I use that every day because I'm proud to be part of this business. And so promotional products are aimed at all stakeholders, whether you're an employee, a customer, a supplier or general brand awareness wants to be created with the company in a world of digital really creates an emotional attachment and an impression on you that digital wouldn't. And so that's why it's a great industry to be involved in and every company of every size, every sector buys promotion products. In terms of the size of the industry, on a global basis, it's an estimation, our estimation of about $50 million gets spent on promotion products on an annual basis. We'd roughly split that 50-50 between North America and the rest of the world. And I say we're Pebble Group with Facilis and Brand Addition and our lens into that GBP 50 billion comes from those 2 businesses. And we have, I think, a unique perspective and insight into the industry with $1.7 billion that we see, and how does that get split between our organizations. Well, at the bottom there, Brand Addition is selling promotional products like these to some of the best companies in the world, the most well-known companies in the world who you'd know the names of. and that's selling a product and how we're involved. Facilis slightly differently, we sell technology to businesses like brand addition all over North America, and we give them -- that technology helps our business become more efficient, hopefully, more successful and help those businesses grow through the foundation of the technology that we provide. So at $1.7 billion is a unique insight and a large insight into what is a fun and interesting industry to be part of. And so in terms of the -- well, you'll kind of make your own sort of ideas of what the investment case is. But to summarize what's on that table, we really are about creating long-term relationships with our suppliers, with our customers and our team and investors to create value for all of them. And so we're not just looking for what can we make tomorrow and move on. We're actually looking to build relationships across all our stakeholders that adds value. And I think that's a theme that will come out throughout. And by doing that in the right way, we do believe that we grow, and we can create profits and cash that we can return to shareholders. In terms of then the highlights of what we've done in the first half of 2026, that we have -- every 6 months we do this. And I think sometimes it's nice to look back and see actually what's the story that's built and not just look at the half year itself, and that's really what's on here. So if I start on the right-hand side, Brand Addition is again selling product to the really large organizations, you can see there when we talk about long-term relationships, what are those retention rates like, what is that NPS score like? And then we're growing and bringing new logos into what we do as well. So we -- Claire and I joke about it, but I think because it's true, we've been part of Brand Addition for over 20 years, and it's kind of so close to us, but we always feel we don't do justice into the terms of the quality of the organization it is. We've got some nice revenue growth in there in the first half of 4% on very consistent margins, and both gross and net margins. And it does create a lot of cash that we can use in -- we got our capital allocation slide later. But a very strong business. that has been around a long time and has long-term relationships with some great customers and has performed well in this first half with 4% revenue growth. Onto Facilis. And again, those of you who have been following us for a while will know we've put a lot of investment into our leadership and our team that's translated into better quality technology, better engagement with our existing partners, our customers, and now we're looking to grow again. And what's really nice is not only we've got nice retention, again, nice NPS, but now we're actually into growth mode in our historic numbers, a 7% growth, which is great. But then when we look forward with the mixture of our growing partners, our existing customers new partners joining us, those things are rolling up and our look-forward numbers are even more interest in and looking to get to double-digit growth on what we're doing there. So those 2 quality businesses generating profits and cash allow us to do what we do with Pebble Group, which is present some nice numbers today, but also have made some sort of pretty significant returns to shareholders both last year, full year '25 and also in the first half of 2026. So Claire will run you through some of those numbers now, and then we'll dive into the individual businesses.

Okay. Thank you. So just with just touch on the financial highlights of the first half. And again, just reemphasizing what Chris has said, it's really nice to be able to sit here and say that we've had some sensible revenue growth. and I'll touch on that a bit more when we get to the P&L, but that's on sustainable long-term margins that we've been delivering for kind of over the long term. And there because underneath those margins, we've got good discipline and cost control, then that that improvement in sales volume is translating through to increased EBITDA. And then outside of that, on the right-hand side of the chart is the -- we've got 2 really cash-generative businesses. And what that's enabled us to do is to make some sizable returns to shareholders, both across the whole of '25 and in the first half of 2026. This chart is just allowing you to kind of recap on the different business models that we've got in the group. So as we've said, we've got Facilisgroup and Brand Addition and sitting over on the left-hand side of the chart, that gray those 2 gray bars are showing you the revenue of both our businesses. So you can see that Brand Addition, the business that's selling product to those large international corporates is the lion's share of our revenue, Facilis where we are charging a fee for the technology that we provide and earning revenue on the market network that we create is a smaller proportion of the group's revenue. But when you move across the chart, to the right-hand side, you can see in those 2 gray bars that because the revenues at Facilisgroup are SaaS revenues and where we generate real special margins, then the EBITDA contribution of both our businesses, like splits relet equally between the 2. So group P&L. -- and as we've said, we've got 4% revenue growth, which is nice. We've kind of had a couple of years where we've not been able to say that. So it's good that we've we're having this experience through the first half of '26. And that's a combination in both businesses and really solid performance on our underlying existing businesses where we've seen some growth and then the impact of new business wins. So we'll come on to talk about the investment that we've made in Facilis and how that investment in sales and marketing is starting to take hold and be reflected in our financials. But also in Brand Addition where we had some really nice new business wins in '25. Those have been implemented, and we start to see those impacts as we move through -- as I said, that's been delivered on a sensible, sustainable margin where the teams -- Brand Addition -- Facilis is 100% gross margin. So our margin is around -- is in Brand Addition and the team has done a great job over the last few years of moving that margin forward, and we're at a great point there. And then below margin controlling our costs, it means that our EBITDA moves forward. below EBITDA, we've got the noncash elements of our P&L, which is depreciation and amortization. So that was taken through the P&L, the investment that we've made in recent years at Facilis, and then the share-based payments is the charge for the LTIP that we've got in place across the group. So the balance sheet, when you look at our balance sheet, think Brand Addition. So there's no working capital in facility the working capital relates to Brand Addition. So we talked about is working with large organizations. And so we've got real high-quality balance sheet. So the stock that we have in brand addition is underwritten by the customers that we work with. So that's really nice in the event of a brand change or a contract termination, then that the ultimate liability for that start loss with the customers and not with us. And then again, the high-quality organizations that we work with mean that we don't suffer any exposure on bad debt. So there's a movement in our working capital that follows the volumes in our P&L. But as we -- again, as I've said, we've got a real high cash generation in both our businesses and the quality of the balance sheet just turns into cash. It takes you nicely onto the cash flow, which I would like to say is it's nice and simple. We'll see that movement in working capital. We have a really well trodden path where we're at a low point in working capital. When we begin the year that builds as we move through Q2 and peaks in Q3. So we have an outflow of working capital that comes back through the second half, and we've publicly said that we expect to be in line with expectations for the year-end from capital expenditure. We are always looking to improve our technology at fails and then we have an infrastructure that we have to maintain a kind of really clean cash flow. And then below that, those operating cash flows, as you can see there, the quantums that we've paid in the first half in terms of the dividend that we've made to our shareholders and the share buybacks that we've been implementing. This takes me to our capital allocation. So we shared this slide a few times now when is kind of moving from left to right. And the decision that we're very purposely taken is that we're going to invest some of the cash that we generated into accelerating growth at Facilisgroup, and it's nice for us to be able to say that, that's starting to impact and Chris will give a bit more flavor on that as we move through the presentation. We've paid a dividend for the last 3 years now and that we did that again in the first half and that quantum feels about a sensible number for us to be fix into as we go forward. And then on top of that, we've got decisions to make around what do we do with the rest of our cash. And so far, we've made the decision that we're going to return that to shareholders. be that through a tender offer that we completed last year or the share buyback that we've undertaken in the first half of this year. And then we always -- we've put this point far in here to kind of bring out that we are alive to other opportunities like our group has grown successfully over time. acquisition. And so we're always open to looking at those opportunities should the right thing come along that will generate shareholder value for all of us.

Okay. Thanks, Claire. So moving on to the individual businesses now. We're going to talk about Facilisgroup, and that's [ Matthew Cromer, ] who is our Chief Product Officer, he joined us just over 2 years ago and part of our leadership team and along with the other members of that team have made a real difference into engagement of existing partners, but also now the growth of the business. So we've got a really super team there that we're very proud about. And so we think of Facilisgroup technology is definitely at its hard. So that's what we do, first and foremost. Our partners are from GBP 2 million to GBP 20 million is really a sweet spot. But certainly, we can't go a little bit below that. It's a win new business, and we definitely want our partners to grow beyond GBP 20 million and stay on the journey with us as well. But that's really the sweet spot of where the majority of our partners actually exist. And so we provide that technology to just over 250 companies, and they put about $1.6 billion through that technology. And that's an amazing scale. And with that scale, we create a market network or a buying group to support both the supply side and the distributor side in helping them become successful. And if we help them become successful, then so do we, too. So it starts with technology, the scale that, that technology provides and helps us provide a buying group -- and that -- and with that buying group, we pull our suppliers and our teams and our partners together and create this great community. And what you can see on the right is some visuals of our Chicago events that we had in July. I wish I could replicate the feel and we -- and the energy that comes from those events because we're a great technology company, but more than that, would create even better value than simply a technology for our partners and our suppliers. And we had over 600 people there. And the energy that comes from that is so positive. And again, I wish I could kind of translate this on screen. In terms of the actual sort of financials that we've produced over -- well, the last sort of few years, but then this last 6 months, some really nice graphs moving in the right direction. So strong EBITDA margins, great retention, the sales of the GMV that goes through the technology and the amount going through our preferred suppliers all moving in the right direction. The bit that we want to focus on and have them over the last 18 months is how do we return this great business to growth. And if we can do that, we think we have a really valuable organization that should create great value for our team, our partners, our suppliers and our investors too. And so that top right-hand side -- sorry, on the top left-hand side is what we've been working on is taking that back to growth. And if we can do that, I say we think we've got a super business for everybody to be involved in. The next slide. Yes, Yes. So what we -- this is something we shared with you in -- at the end of full year '25, so 6 months ago. We've got this amazing lifetime value to cost of customer acquisition ratio. And why we've got a really good lifetime value is that we have 2 sides to our income in that subscription for technology and then our activity fee from helping our preferred suppliers and our partners talk to each other. We get that 2-sided piece. We help our existing partners to grow. We have a super retention rate, and we're attracting partners that are the larger than the previous ones we're attracting and then we have these really nice margins. So the combination of those things gives us this amazing lifetime value, and what it's saying to us in terms of customer acquisition cost is that we've got this ratio of 7:1, again, something we shared with the end of last year that if we can share it in that way, if we can have a 7:1 ratio, then what we really benefit is saying to spend more, and that's what we've been doing over the last 12 months. So I'm really struggling to move those slides forward. So I don't know if Gareth or Sean, could you move the slides forward for us because they're really sticky on here. So we'll ask you to do that. So we've got one back now, that would be great. Thank you very much. So that 7:1 ratio is saying invest more, and that's what we've been doing on the right-hand side from a base of full year 2024, we put more into 2025 and got some nice results out of. And so we've gone again in 2026. And so it's definitely sacrificing some profit margin in the short term, but for very good reason because people talk about rule of 40 businesses. And if we got that at the EBITDA percentage level, if we can get kind of a double-digit growth, we think the combination of those things makes us really powerful. And if that's sort of concentrating on last year, if we go to the next slide, we'll be able to show you kind of how those results are coming out. So the right-hand side there said we've had 7% -- well, we've had 7% growth in our full year -- in our half year '26 results. But actually, if we look forward and see the activities that we've been doing over the last 2 years really, they're combining now to show what we have from the beginning of the second half is a look-forward rate in our technology subscription fees of around 12% and how that's come from 3 things. Our existing partners continue to grow. And so as we -- they grow, we support them to grow, and that kind of brings more income into Facilisgroup. We're attracting a larger partners, again, sort of grow in the GMV that goes through and attracting more revenue from that. But also from the journey that we've gone on in the last couple of years is building our team to build the right technology and then to win the trust of our partners and existing customers. And as we've done that, we've had the confidence to actually say we now need to move that pricing forward as well. And we did a pricing change in the second quarter that starts from the beginning of the third quarter. And the combination of those things have now given us not only a historic 7% growth, but actually looking forward a technology subscription fee of 12%. And I think we've only been able to do that because of the hard work that's gone in over the last couple of years. So going to the next slide there. And what we're able to do now is sort of say from those price discussions, long-term relationships, again, is a common theme that we have here. And for a long time, our partners have been on rolling 12 -- 4-month of contract, which is actually fine and great. But what we wanted to do was offer our partners the ability to fix pricing and also backers in the journey that they're on with us and the trust and the confidence that they have has been incredibly well supported. And on an average basis, everybody was on 4 months in terms of the visibility of our revenues. And now by our partners having a choice to do 1, 2 or 3-year contracts the amount of ARR that's gone into the longer-term contracts has been excellent, and we've been very humble and very proud to be supported in the way we have, and we've changed that fivefold in terms of the amount of committed revenue we have in the business. And we take that with a great responsibility to keep our technology moving forward, but our partners have certainly place a lot of trust in us to do that, and that feels really good for myself and the team and all the hard work that's gone in. So we'll take the next slide, I'll just finish off on Facilisgroup. We always set ourselves these 3 sort of targets at the beginning of the year, never taking for granted our existing relationships and engagement, and that should be with investors, suppliers, partners and our team and looking after each other, making sure we are the leader in technology and wanting that to come through to revenue growth. So the statistics there in the sort of the lower half of that slide show you that, that engagement level through length of contracts partner MPS. And all the things that we've been doing there has been really powerful. Go to the right-hand side, it's really nice to so the revenue coming through, and we're able to achieve 1 and 3 because we put a lot of effort in to make sure our technology is the right technology that our partners wish for. It's constantly moving forward, and it's well packaged and put together. We've signaled been on this journey for a while with Facilis the last 2, 3 years. It's really nice to put some actual revenue growth in historics. We certainly want to continue that trend and grow that. So we believe we're a turning point in the business, but taking nothing for granted, but I think we're at a good place. So I'll let Claire now talk you through Brand Addition.

Yes. Thank you. So yes, sharing some more members of our team there. So that's Helen Brothers. She looks after the consumer sales. in brand edition where our customers are using products to support their own is gift with purchase to support their own sales. So Brand Addtion, when you think about Brand Addition, think about business that works with some huge international brands that it works with over the long term, under contract. And the -- what these brands looking for from us is for us to supply them with really cool product that engages their stakeholders, be that their customers, their employees, their suppliers. And so it's a core product, but it's a core product that's done in the right way. So that allows them to walk the talk on their own ESG commitment. So we know factors our products are made in and whose hands they made and what they made of that's very important to the customers that we work with, and that we're all able to deliver and fulfill their requirements on an international basis. So I think kind of really cool product that delivered on time and made in the right way. Move to the next slide, please. Thank you. So similar position into Facilis sharing our kind of financial and operational metrics. So it's nice as I said right at the beginning, to see that growth in our revenue number delivered on what we think is a long-term sustainable margin and then that control of costs below gross margin meaning that, that new revenue growth is translated through to EBITDA. And then those 2 pie charts at the bottom left showing you there the really nice spread we've got in brand addition that's both by sector, kind of not overly dominant in any one sector and spread by geography as well and again, the same applies. We'll move on. Next slide. Just -- so here, this is just breaking down really the bridge of of H1. And so that sales increase I referred to before is a combination of kind of increasing momentum from the new business wins that we converted last year. And so they were -- we had some nice wins last year implemented in the first half, and they're starting to ramp up and translate into invoice sales, which is always nice that then kind of a really robust performance from our existing clients, which kind of the last couple of years, we haven't -- we've had pressure on that underlying number. So again, nice to see that both of those things are coming together. And as we -- when we announced our results on Tuesday morning, we said the visibility of the sales that we've got both invoiced in the year and then booked to be invoiced in the year versus this point last year, we're up 5% on that. So that's kind of a nice place for us to be, and again, delivered on sensible margins and well controlled costs. So the next slide is just really -- we've made the statement that we think that what we know and can feel, touch and feel from our existing activity helps us make the statement that we're confident in achieving our FY '26 numbers. And here, again, that's given -- this is just giving you some building blocks to support why we're making that statement. And so taking you from the GBP 52 million, which was our half year invoice number and then the orders that have been received since then that will be invoiced in this year gets us to we're at low 8s as at 7th of September. And so what we can see in terms of customer activity, what we know is coming up and what we understand from the historics and how our clients performed over the long term, and that leads us to be comfortable around making the statement that we think we're going to hit that GBP 109 million for the full year. The next slide is -- so that's all about the kind of the first half and our view of the second side is just really trying to take a step back. And I think Chris touched on at the beginning, we always feel like we don't do Brand Addition when we're having these conversations in terms of getting over what a great business is kind of high quality, and that's not only the customers that it works with, but the people that work in it. And so here, just putting out some such we've kind of -- we've been listed. We listed at the end of '19 and the sub everything you can throw out Brand Addition has happened we've pulled out 4 things here. We could have filled this with kind of 10. But the sense of this slide is meant to whatever happens to Brand Addition, it kind of holds on to its clients. We've got amazing brands that choose to work with us and choose to work with us over the long term in a really well disciplined and controlled business model that churning out kind of plus 10 points in EBITDA margin. Great client NPS scores of 60. That's the latest one that we're sharing with you today, and then that's all kind of bound by strong cash generation. So kind of when we think Brand Addition think amazing customers over the long term with great product, on a really well disciplined business model that throws off a lot of cash that gives us choices about what we do with that cash. And then just to take us home, Again, we are 3 things that we're focusing on, and we've talked about it a lot. So number one is going to kind of client retention. So holding on to those amazing clients is our #1 priority, looking after them and our NPS Score speak to the hardware that goes on around doing that. And kind of we have successfully negotiated renegotiated our major contracts that have come up for -- in the first half of this year, which is always nice to be on the right side of those conversations. Kind of the next piece of [indiscernible] retention that we've got. The next piece of [indiscernible] is getting some new logos, and we've had some kind of really nice wins in the first half. So if the red invoice sales number have been supported by the wins from last year, we're kind of always working on that pipeline and conversion rates to bring some new clients into the business that will support our progress next year, and we're kind of excited about the brands that have chosen to work with us in 2026. And then again, it's -- I've said it let's do that in a really disciplined financial -- in a really financially disciplined way that means that when we do generate revenue growth that, that translates through to EBITDA.

Thanks, Claire. Yes. So if we can just go on, we always do a bit on ESG. And that's Kirsten, who does an amazing job of leading our ESG initiatives. And the primary audience for ESG is not necessarily our investing community actually sort of it is our team and our clients and particularly at Brand Addition, where those really large organizations want to know where the product comes from whose hands it was made and what materials it's made of. So we just kind of... [Technical Difficulty]

Just to make you aware, we seem to have lost the management team. We will contact them as quickly as we can and try and get in the back. If you're happy to please hold on the webinar, we will restart as soon as we can. Please hold on, and we'll get management team as quickly -- back as quickly as we can. Everyone, apologies once again for the delay. We're in contact with the management, and they're hoping to rejoin very shortly. So if you can, please hold on, we've only got a couple of slides left and then there'll be Q&A. So obviously, if you are able to hold on until they rejoin, that would be much appreciated. We're in touch with them and trying to get them back online as soon as we can. Thank you..

So ever so sorry about that, and we had literally a computer just crash on us and which we've recovered from now. So can you you hear us okay?

We can. Thank you. Yes, that's all good. And thank you very much to the audience for holding on for a couple of minutes, much appreciated. You were on Slide 29, I think, talking about ESG once you can assemble your thoughts.

No, we're all good. So so apologies for it for you, and hopefully, you've commented about still with us. So ESG, we showed Kirsten, who kind of runs it. And he's just actually helped us and got this back online. So thanks. He's is multitalented man. And -- but ES, our audience is not necessarily the investor, but definitely sort of our clients at Brand Addition and our teams. And so ESG to us is about doing the right thing, again, long term, -- and if we do those things, it all comes together. So overall, that being a big -- not only kind of a successful company, but a responsible one as well. And a lot of the initiatives that we do in the business are around there. Kirsten does a great job on Sole-3 would pull out there in terms of that is the sort of bulk of the emissions that we are part of and managing those well with our suppliers but also going down into gender pay gaps and just making sure but what we do in our communities is the right thing as well. So some nice initiatives there, but they can be seen. If we move on to the next slide, what they can be only seen, we have some very detailed reports on our websites on The Pebble Group. We do an annual report in terms of all the initiatives we have there as an organization overall group. But at Brand Addition as well, we really deep dive into what we do with our clients and what's important to us there. So it's not necessarily slides that a lot of investors might -- it's not as fashionable as it perhaps once was, but it has no less importance and relevance to what we're doing in our organization on a day-to-day basis. And that just takes us to sort of summarize in what's going on there. And then we're happy to take some questions. And move from left to right. But Facilisgroup was in a better place. We've worked really hard with our team, we our technology engagement with existing partners and suppliers. And now we're moving that business into growth. And if we can do that, we hope to win the trust of the investor to. Brand Addition, a great business in a mid-digit growth, a single-digit growth, but also really nice margins and cash generation. and some of those 2 allows us to make those capital returns. And so as we sort of sit here, we feel in a sensible place about full year for '26. And also, we want to create some value. We want to create value for ourselves, for our teams, our partners and also our investors. And looking on how can we do that in terms of the position our individual business is in and what they're worth. And so we always keeping our eye on what are the opportunities to create value overall, not just take the businesses along and make sure we find the right homes for those businesses to achieve the right value and the right homes for our teams and our partners, too. And so we'll stop there. There's some appendixes after this, it's all on our website, and you can kind of drill into the numbers. But we'll stop here. We'll kind of come on screen, hopefully, stay on screen. And I'm really happy to take any questions that you all have.

That's great. Thanks very much, indeed, Chris and Claire. That's all very good. And thank you for navigating the technical [indiscernible] as we went through. [Operator Instructions]. We've already had a few questions come through. First of all, can you run us through the assumptions behind the $7 million LTV number quoted for Facilis, please?

Yes. So it's an LTV to CAC ratio of 7:1, and that was on -- that's for full year '25. So we were comparing the incremental income that we've received in full year '25 versus the incremental investment that we made, and that was a 7:1 ratio. And so what goes into that is what you win, kind of how long you think you'll keep that, how it will grow during what you do. I think we have a WACC that goes in a sort of a weighted cost of capital and then dividing that by the costs that have gone in. So it was -- the 7:1 ratio was full year '25 compared an incremental ratio compared to full year '24 and that ratio of 7:1 is very strong, so it says spend more to generate more.

That's great. Slightly broader question across the group. You've made a number of payments to shareholders over recent years via the tender offer and buybacks. Do you have any plans for further returns of capital?

Yes. Okay. So I'll take that one. Yes. So I think we touched on the capital allocation slide. And our first decision has been to invest in ourselves and grown our business. And that's what we've done at Facilis, and we just talked about the LTV to CAC when we get to the end of 2026. And then we'll look at those numbers again. And if that continues to be a high number, then that tells us that we should continue to invest and -- so we'll do those calculations and make those calls. We're not planning to change the dividend payment. So we'll be making those returns. And I think then, yes, we have got 2 really cash-generative businesses. And so the option will remain for us to return that to shareholders, if that's what we think is the right thing to do with our cash at that time. But again, as I touched on, if the right opportunity comes up, for us to kind of look at something inorganic, then we're always live to that, but that's kind of not been part of our recent past.