STZ - Earnings call transcript Q1 2020 | Constellation Brands, Inc.

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Operator

Welcome to the Constellation Brands Q1 Fiscal Year 2020 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode.

Following the prepared remarks, the call will be opened for your questions. Instructions will be given at that time.

I will now turn the call over to Patty Yahn-Urlaub, Senior Vice President of Investor Relations. ahead. go Please

Patty Yahn-Urlaub

morning conference Good Newlands, to first Constellation's CEO; Thanks, I'm and here XXXX CFO. our call. David Bill this quarter and Daniel. Klein, welcome morning our with

risk the financial SEC most reminder, a GAAP which any make Please this factors, news in reconciliations www.cbrands.com. are the release filings available to measures As Company's directly this or website on on discussed forward-looking at news otherwise between impact measure Constellation's statements comparable and included for release our and call non-GAAP may on refer the we call.

on over Bill, which Thanks like person, everyone now And call the turning in I we one quarters, to to will would help Before advance. ask limit time. that Bill. to call here's similar us per prior to question to our end

William Newlands

Patty, to you, quarter first an and Thank to Welcome good new everyone. our of fiscal excellent and our which Constellation’s discussion earnings reflect start results, sales morning, year.

with I ability Gallo, to call. expect Wine our are in we our Number in Before morning's half occur I Spirits calendar second transaction confident of and business the one, this will to get would emphasize close key on review, which started we takeaways three XXXX. with like the

timing. accordingly updated adjust EPS we as the that are we we the end entire transition. For more our closed Meanwhile, fiscal portfolio now, will supporting guidance our get we on at but fully quarter, of have XXXX to exact the we throughout assume committed the to clarity second

depletion is growth to power which high-margin Spirits by for collection first transformation is the and forward. business brands achieved growth of working, expected our brands quarter. the the strategy going faster-growing, This two, in the Number in of portfolio, drive the business over X% Wine led our

quarter, that posted our strong Modelo margin Especial. outstanding by in beer our business we results the is three, by growth and sales engine for driven net first continued number And performance

our X% nearly Premier while with last Familiar. with some the Corona pleased unfavorable Extra are seeing from we overall markets Corona the impact year’s launches Corona of even quarter, depletion addition, of and In largest several during growth, successful in highly overlapping weather

we line, EBIT our in beer net for to our X% fiscal remain ability Bottom confident and to growth XXXX. X% business sales achieve in

one Speaking share This than category quarter. significant the continued of high-end first our beer, gain the driving of growth the across Especial Beer the to with brand number quarter, growth growth gainer marketplace business the trend. all as our within excellent during compared the the growth exceptional U.S. to for U.S. in Modelo top acceleration a and contributor sequential of portfolio spot Constellation has the beer one-third most quarter the was of market. beer XX%, achieved more momentum share fourth depletion channels, with

Modelo of in to We continue our take Modelo consumers. reap new up We both and benefits are XX-ounce which have distribution we trade advertising recently the to single-serve as opportunities off-premise. we investments resonating bottle core and of the the advantage continue with the our launched

on-premise the format than the with for the XX% in increasing We progress quarter. Modelo also made excellent draft more

was during drive to also of performance. while posting advertising the family channels the in are propelling quarter. rollout as IRI the continues depletion Premier Corona brand, as the campaign Corona The well National this TV draft which double-digit gainer top growth brand momentum share a

distribution volume gained brand in than the sponsorship its multi-year all has supporter Association which of Corona of Corona This ACV or Golf a deal proud more Open. the Refresca at And introduction. the be Corona XX States newest began United launched with May, end innovation a the Premier family, nationally U.S. summer, since of to already commodity the

are momentum which with growth of national remainder of the portfolio. the growth selling produced throughout and we our double-digit season retail strong presence. the positioned increasing great of marketing I Pacifico’s Overall, this advertising the in-store past support quarter activities by entire also driven ongoing to a beer campaign lineup summer depletion are promotions Pacifico believe and well promotional

Wine now Spirits. Moving and to

Hanson you his hired recently our valued As American the was six-year Eagle and of Levi member our John President management consumer Wine business. a and was senior roles extensive product know, previously Outfitters, and Hardy, Directors of of experience Board Robert as Strauss. Spirits at Robert new from has prior

and developing are executive brands our that for thrilled shares has team. the Robert that management Welcome love joined he we Constellation Robert. passion consumers to

expectations. quarter communicated Wine our that results first exceeded Spirits The business previously and delivered

mentioned, growth portfolio This and I like X% for Prisoner SVEDKA Kim The High Vodka, the West, brands depletion the our to posted continued gain industry-leading Meiomi, includes key brands quarter. over outperform which and of share. market As power first Crawford,

Overall, on extremely bullish margin these future key expect the be long-term to are we the the for of business and brands drivers these higher higher we growth, brands. runway

fast-growing Spirits with on flavor and emerging and Wine focus been successful has agenda In new innovation a categories, formats combinations. addition, our

will our super the in X innovation introduced great cases selling its wine at price example Robert Mondavi Barrel-Aged new to Private point. Aged Red Bourbon the first Rye We Barrel-Aged Barrel million which resounding two been is first has continue success, over Blend, a includes which a Selection, premium expand A Rye program, years.

will $XX the Silenced, addition Prisoner to July, Pinot product This which in we'll segment. sold shipping price is introduction Eternally premium the the Noir be In begin portfolio. first over

brand the to efforts campaigns the We year will our the impactful with building support remainder innovation portfolio. marketing throughout and and build of strengthen continue to

advertising a the We programming have summer, key power new launch in solid portfolio. our of the for place including Woodbridge TV campaign for this brands

Crafters only perfect brand, is Wine but and tailgating. a not with introduce and Union, to our In a to forged have sell the addition, Can, new promote our format NFL games which in football relationship Woodbridge for we the

growth. that These examples and sponsorships of digital be initiatives just Kim through to U.S. major and TV the with will planned incremental campaign a recently Crawford to consumer this new with consumers we and few advertising other and summer. the continues tennis partnership the are a Open drive its have align featured strengthen events launched and portfolio, campaigns awareness

increases portfolio new gained in plus the SVEDKA recently with Your across portfolio innovation already up velocity the SVEDKA momentum has by the product and campaign, line Bring advertising Our is new Rose spirits national exceeding Own in the Spirit bolstered growth expectations.

first network, provides During and the Nelson's will the whiskey quarter, opportunity a Ventures this is Constellation investment acquired majority be It Green that iconic which stake for of fully is significant emerging brand. Whiskey Brier, integrated categories well a which Constellation and distribution of that Tennessee in in American an growth sales the into Ventures craft. plays

and introduction the are especially excited Brier to we Nelson's about unique Green fall. distributor whiskey reach, market this consumer our partnerships consumers insights, of With Tennessee

market rapid While the Belle Meade award brand continues Bourbon winning its growth.

transformation net mid intend journey as with business, margins sales and the to the to begin Spirits we operating goal would for Wine to in like we I reiterate grow our our single-digit As this business for migrating long-term range XX%.

This quarter, market we and goods be profile. shaping we Spirits business a margin and toward sales have with portfolio forward best Wine goal look to a progress that and our of leading made to class consumer

our Growth, total cannabis be in about in global comments few Canopy to a sales. continues leader which Now investment the

into the entered right Acreage the Acreage permissible. to During cannabis Holdings enter grants market and acquire U.S. Growth agreement federally Canopy an and quarter, Canopy that once the

in provides a reform. path leading are for a Canopy U.S. to We the excited have as opportunity position federal it about cannabis upon this

on this overwhelmingly shareholders details our duration Acreage will transaction provides for additional and of flexibility David provide financial Canopy in call. provide will to Canopy to for Constellation which Recently, which cash the extend shareholders. that opportunity approved the warrants the long-term deployment later

and space And remain the were long-term happy recent we while with end we Canopy's investment with cannabis pleased year its results. in not reported potential, our

markets factors path to matter profitability. paving that However, support long-term aggressively form a to to more we focused and on continue a clear Canopy while strategy win

products will this We include branded are margins. believe of on quarter products these well the in calendar line and to higher CBD U.S. that as year. edibles some in form Canada during the beverages as of expected come fourth command vape, These factors

am continue this pleased on the of to across strategic I'm first our the demonstrates Wine In year. with key to remainder business deliver our results Excellent our year. for prospects our across strong that and closing, businesses, Spirits start quarter excited we execution I the and of Beer, the imperatives about

the With to over I who results financial would from our to review call now the will David that, like turn quarter.

David Klein

assumes our through Spirits growth. income EPS excludes to range Thanks, Bill, start. business, by and operating our great results is Canopy a and exceeded off impact everyone. earnings to operating cash XXXX generated $X.XX which sell $X.XX. revised to This XX%. Bill and basis, a free business with diluted We've business that transaction Beer These good primarily XX% outlined. timing were Wine XX% of comparable equity full-year up range cash now flow portion driven increased Core and results our expectations morning, Fiscal flow strong up

and transaction of The Spirits of $X.XX XXXX million from guidance expect million fiscal to debt portion our by additional continue represents business by interest second XXXX. incremental end one now million we've of increase costs Spirits closes, the paydown Wine the low-end cost half the offset $XX EPS to to at in expense we $XXX After targeted the due of to in XXXX. savings of a Wine to sell, total the a eliminate from fiscal fiscal and of realization partially to and of business our agreed expected for the now stranded delay of be quarter range $XX that EBIT

Shipment review let's to the increased of as made efforts results. tariff shipment additional X%. beer. expected, in risks. QX of Now potential comparable primarily focus performance volume Net part basis on financial mitigate due Starting end of X% quarter to I’ll the higher on detail, with where generally than sales growth was volume more shipments at

at fiscal the occur reverse the remainder in during QX. since of timing result, the to XXXX XXXX As beer a expected benefit of fiscal now shipment it is end didn't

strong new driven two-year streak at portfolio prior our key in Depletion came Day This depletion X% continuing product Memorial generating holidays. performance is launches growth Cinco to growth X% average the in the growth during year and excellent by of compared of growth of X%.

by and XXX net as Bill marketing percent to XX upfront XX.X%, higher by our XX% operating outlined points in Beer increased offset and leading transportation season planned to favorability pricing summer earlier. costs. brands investments as to basis partially driven the support margin of logistics a basis were by into points increased FX selling Marketing as sales

fiscal our to includes approximate For sales This pricing to continue within X% X% net margin operating expect X% and income growth of to full-year operating portfolio. and X% we our Mexican XXXX, XX%. to of

a reminder, a compare QX. facing we're As XX% for growth depletion

timing In the digits mid-single some mentioned range. and addition, to a of in QX. EBIT net the result, be QX And we earlier we in as sales benefit expect shipment to expect reverse growth

are expected our year We be from as benefit the reversal be the flattish inflation Gross gross initiatives. will in of mostly to the investments offset for to productivity be of and shipment continue margin fiscal the expect XXXX. margin growth pricing remainder timing cost by headwinds product also in impacted to

XXXX fiscal basis expect initiatives. to our to marketing as innovation continue points support of a XX growth We in to X.X% around net percent and of increase sales

Wine net XXXX quarter. the and expected to fiscal Spirits respectively. and decreased decrease expect X% EBIT we fiscal and due and and sales fiscal volume XX% X% fiscal this benefit in comparison to the remaining QX fiscal mentioned X% for XXXX a are Spirits last XXXX reversed Wine QX XX% shipment in to QX, shipment QX XX% result to reverse to timing net in income to and difficult This respectively. mostly declined QX, operating along X% benefit timing in XXXX shipment XXXX year-over-year with sales

minus power than brands muted and Vodka, SVEDKA by were of Meiomi, The lower-end X% X%. Overall West, High depletions high-margin greater Crawford, fast-growing, depletion like Schrader generated of trends Kim Our brands. Prisoner,

to pricing and due XX SG&A basis mix. Wine favorable along by operating with margin Spirits increased partially to marketing lower costs points offset in XX.X% unfavorable primarily

in and summer helped shift marketing shift due brands of to selling original as outperform EBIT a lower our ramp guidance. The to This us during support in in spend timing QX were spend part season. the SG&A a into significant we have QX benefits power the

Spirits and due XX% the to to net operating Wine decrease now Spirits to XX% XX% decrease earlier. discussed expect XX% income and transaction to We timing of sales Wine XXXX fiscal and the revised to

to the Wine And I'd strategy like power XXXX, targeting expect an already mid mid produce depletion is fiscal a of we're sales single-digit the in result growth working. brand growth. Bill's confidence margin single-digit that migrating transformation Longer-term, we to net to Spirits and business operating as while echo XX%.

business, related million are recognized we and primarily basis were efforts QX, the $XX charges excluded and to results. connection cost efficiencies charges, which in of structure the with business. to from These In Wine ongoing the Spirits gain of reduce comparable

expected half costs related organizational cash which structure in with Roughly, to excess contract of charges The operating have charges and into occur guidance. associated terminations, cash changes. include outlays factored been write-downs of these certain our XXXX, are inventory, fiscal to flow

expense investment in XX%, expense interest approximately Interest increased quarter Growth related incremental for reflects to of Canopy which for funding the $XX November the million our XXXX.

now related the Spirits XXXX million, to of by to Fiscal range million in interest to is expected favorability. of interest offset and expense the $XXX rate incremental anticipated Wine transaction, which reflects timing $XXX partially revised be

stock-based comparable basis XX.X% overlap a one-time for benefit. effective earnings, lower driven foreign tax compensation primarily by lower the for Our rate at year, the on in of versus QX came partially rate last items quarter by unfavorable XX.X% offset and

the QX in our that XXXX anticipate XX% QX will effective to We tax similar range. rate the rate be fiscal

full-year with half our tax expected towards be the year. benefits the of fiscal effective compensation to to forecast approximate we However, stock-based to XXXX second XX% rate weighted continue

free provided CapEx. to as define net operating Moving activities flow, by which we cash cash less

results For lower free was of by cash flow beer primarily $XXX to driven compared XX% flow CapEx. operating and strong generated impressive million year. QX, we growth This cash million last $XXX

to We be timing $X and billion $X.X flow the flow to cash reflects of now in range revised be billion. of expect to and $X.X operating Spirits $X.X of the XXXX This range free transaction. billion, billion in to Wine the fiscal cash

breweries, beer to fifth Obregon CapEx including and glass $XXX We approximately expansion, of Mexicali glass of the continue in our for CapEx a million. to This furnace Nava the million includes $XXX expect and investments at million $XXX plant. Mexico operations

excluded Canopy an the QX, investment, $XXX recognized since in In the of Growth. investment to total Growth decrease in initial investment fair our we Canopy results. basis XXXX million of The was net comparable Shifting $X.X our pretax gain value Canopy in which November billion. recognized from is

Canopy shareholders Bill proposed mentioned, As approved Acreage. of and Acreage Growth's Canopy Growth acquisition

longer As certain duration and a pricing. were Constellation revised result, warrants to modified include

a recognize basis that Canopy results. comparable warrants landscape our exclude these modified warrant QX We allow the more in expect reflect to to the how Constellation is time expire. assess warrants from cannabis will progressing to material before gain changes and These on gain modifications

long-term with businesses flexibility deployment our cash cash Coupling structure our new warrant for incremental to strong generation provides shareholders.

from committed we So shareholders and $X.X form fiscal XXXX billion in to remain repurchases fiscal returning to dividends the of XXXX. share

totaled first fiscal equity Canopy release, XXXX X%. earnings representing comparable diluted $X.XX growth basis excluding share, per the in of summarized As quarter EPS earnings impact

an rapidly is will their business results volatile earnings invest to evolving this results. Canopy to on in reports Canopy's to be likely quarter, and we they quarterly financial after disclose as release impact our growth opportunities. Similar X-K plan Canopy's

the remind range into income on we've Canopy our basis factored to our and XXXX will are core equity in fiscal our underlying to to like earnings $X.XX recognized guidance not of and I'd EPS focus business. non-cash earnings our us statement of Canopy equity $X.XX. comparable allow This investors performance everyone,

as in from investments secular deliver like continue generate XXXX, start we fiscal are we're us growth the support position for to we today, off We opportunities and we favorable trends demographics. to premiumization our growth, commitments. strong on believe industry-leading while fiscal making a In XXXX closing, of to benefit

that, and take your are I With to Bill happy questions.

Operator

Instructions] first question Our Hong Sachs. from [Operator Goldman comes with Judy

Your now open. line is

Judy Hong

Good Thank morning. you.

William Newlands

Judy. Hi,

Judy Hong

your also was weather category being cannibalization you've So booming, of Clearly, Corona depletion in how clearly kind Spiked versus much to family? for Corona about weather I and the analytics much kind is impact brand of Modelo the into beer obviously the zero a factor and talked that on to cutting how the Modelo accelerating point a then Seltzer growth the the around particularly brand sort but guess family. I want of factor, does

guidance you poor caution dovetailing summer comparison, second just around is quarter, that there about And given or the a their the can kind other you on of depletion to mid depletion drivers that, weather? if think you. the of Thank talk the bit more single-digit the how little for just the is shipment really given about much performance a start just than

William Newlands

All right, Judy.

wrap We thought. that into try will to one

is brand. we Look, with a comfortable we here Corona go. where as are So

at first tough challenges admittedly recent trends the If look is overlaps with that Corona had most during you quarter. weather through Extra up very the against X/XX, the we IRI

It's as some been XX% trends that has recognize Modelo the accelerating has overall appropriate larger the it's had of well. a in become growth years. And also noting to portfolio prior it worth impact high-end the with certainly that than within in certainly, business Seltzer that factor

have certainly of on impact overall the those business. all things So some

With all flattish. the of that is overall roughly said, family

our in and up that across We are was X% with you business our noted, overall where first as just profile entire is looking, quarter. comfortable depletion business the under

fact, day of above a that be a depletion June, while year in which be at comparable the versus rate the ago, June the quarter lose Friday happened depletion we in in single you look quarter rate. the taking If actual out month this would year-to-date to

David Klein

Yes. to I just Bill point that last on want made. that expand

depletions, our a So back in which doesn't report QX. we results, we lose day when come of until QX

you anomaly models. an that into factor it's So your guys should

Operator

And you. from Wells Herzog Fargo. Bonnie comes our Thank question next with

line is open. now Your

Bonnie Herzog

right. All you. Thank Good morning.

William Newlands

Good Bonnie. Hey, morning.

Bonnie Herzog

Hi.

Just more on Corona. a few questions

Premier, be. you the hear just so you were to better still it's why? you not the really wanted results then from Light, on expected And in and want on Corona First than quarter it if to guys where I

maybe a to have initiatives brand? further drill So the down bit on improve little might any you

timing For how there your just is a in that? of possibly think missing now extend what touched Corona, brands further finally, opportunity which can on, to Seltzer, the you're you way right of you then existing instance, do And could Corona brand? much one the leverage an be of Thanks. kind and

William Newlands

Sure.

up in when the that scenario was year fiscal profile we the and against the brand in quarter. doing raised for it about let's very a of ago, were Premier. and automatically when stock-up mind, year. you With introduced. normal was advertising the so said, that brand, introduced be it, all we Keeping pleased going talk the know, results double-digits, first first Premier which was with remainder have We has of So this of the as we'll it

family are Relative way, of Refresco. that, excited very by I you had it to encourage any an delicious the Corona haven't do start refreshing. and We're so. excellent to we're to They Corona, of and you the as if off you against really about know, strongly would overall very

that and season just fiscal our potential approach sure focus Refresca the make mix selling to is we Premier year brand this of in both family. the for overall well the the Corona summer of So this as certainly that maximize as of

previous about your With excited that Seltzers that than question the with of Seltzers to all said, in we a that larger and taken to We have piece we that going had years. recognize forward. have in be relative the of growth quarters the continue opportunity do Corona they high-end profile about

And the is way this. participate that. will where That's certainly, we a options have ability continue we standard categories, our explore view do to profitably operate. we We to and all in

going that do will We forward. again

Operator

from Thank comes Modi question RBC you. Markets. Capital Nik next with And our

line now open. is Your

Nik Modi

Thanks. Yes. Good morning, everyone.

William Newlands

Hey, Nik.

Nik Modi

The question Wine is on Spirits. and

I bit brands of taken your in the to campaigns has the that do this airwaves other different? plans of of hitting Jim the Can now. role, over near-term? new a Woodbridge have about similar little types on Mondavi process here So talk just you kind ad that's the do campaign CMO is and power guess you Now

William Newlands

Yes.

together, brand think compelling. that it have yet, just don't us a you excited if As because its profitability. of the I campaign sheer critical team seen marketing The you've Nik, know the about. haven't, Woodbridge advertising of and rest put highly brand very is we're I if it's the for size Jim know and you

just think limiting But advertising and at goal about this an Board put the job every yesterday, we've and developed we're not that that. showed excited efforts it brand. Robert launched to price great speaks point our does to our to I of on was We every original And exceptional that potential really wine just suggesting the we're it very to because table. it advertising week, Mondavi's

responded. raised accelerated prior profile and versus and As SVEDKA our we've you've Vodka The has in SVEDKA brand profile has spent growth year. seen, the

during lead and on with Blanc supported We that both Crawford the of spending will season. is will in for all Meiomi season, Crawford. coming and mentioned summer also the be Kim be in I its that both months Sauvignon the course summer particular during others wine addition the the and a Kim terrific to selling Meiomi

David Klein

price and Yes. I'd portfolio and higher that and to – that that to realized SVEDKA. Wine get driven pricing ability by add Woodbridge for I in my mentioned script in was Bill favorable we've primarily our that had our we Spirits

to and Two brand, why that where brands. but that behind help to brands, really brands that be appropriately exists charge we're CPG new the investing consumers all for excited the the to then to it's that to the to we're able understand we're of we're kind approach in That's going about power really nurturing value going back proposition we're approach offering. spend our our equity

Operator

from And you. our Lauren question next Barclays. Lieberman Thank comes with

Your line open. is now

Lauren Lieberman

quarter sort Thanks. We many to in on the was definitely industry morning. press. view on the asked trade of discounting cans said some that Good the our times of Corona got

on full-year was kind Corona sort portfolio X% you newer If of on a expectation comment pricing poor pricing family part and that up the or Thanks. and so plan, to of was with could X% already for plans strategy that the within to and these during little came was what weather went of that the the on? brand something degree what for quarter guys the And overall? bit just

William Newlands

local individual happens lot with as know, formats sizes. It you on and all Well, particular of time the retailers. a programming occurs

pricing of achieved strong said, price that certainly in was pricing no we and the X%, uniform up have While and promoting. X% quarter, we discussion to

moment particular during seasons. get formats a on price on occurs points lot, occurs promotion Again, price local particular selling a a level key it said to and as I ago, usually

we normal achieving the So from our successful in fact, were price expectation quarter. quite moved during And to not we away of have X% promotion in pricing. X%

Operator

from Company. comes and our Azer Vivien question next with Thank you. Cowen And

is Your now open. line

Vivien Azer

Canopy's your recent Bill, your Hi, prepared view remarks candor most in appreciated of I your results. good about earnings really morning.

in I So that. wanted just to dig on

quarter, your the certainly out, In but there disappointment that more topline? the concern specific the around I was losses around any terms color mean stand So just of any comment. in expanded EBITDA

your financial Canopy as follow-up can the forward? you talk And you. for that, public expectations CAGNY results to to around relative going a previous from Thank then commentary about

William Newlands

Sure.

We continue to said, run profile year that that of rate expect need range. to and the run end fiscal be next will the billion topline we the by rate in $X With are to various all had be business like better either recognize. when There going splits of and what have starts around and or this acceleration anticipated. factors acceleration products weaker a everybody form the

provinces, As terms you behind been ultimately biggest know, stores, which Ontario, impacts which a has of other be the always opening little some the things. of should province in

So this there and thing. splits in be starts is some going to

I the the about are profitability focused right form think going things. that things business a long-term matter to an working on ultimate business, excited that drive a what that to be are the that in way with and is we a remain time things factors The in ensure to business, appropriate we gets for and that all basis this going big frame. on to the to is going are daily almost Canopy are that we

David Klein

world the P&L Those markets, legalization course medical have billion $X which would we'd in our accretive in legalization their know because from our investment, investments, we Canada, we in happy be comment results our assumed the market. in of they I'll return make able Vivian, U.S. previously predicated being XXXX. be all on around drive in to to to and large participate Canopy's made on the wouldn't rest performance that large were U.S. of to Yes. performance commentary their in comments existing business

pick me and those let the through just about state. talk current So

because So our that think our array that Canada recognized of on that all the FYXXXX on we edibles know mostly products FYXXXX will have because slight the calendar will or we beverages we it's is one including outlined, it of in in unlikely on market which it's income impact our but Bill that Canopy next We business broad expectations. – the Canopy lag track two this in as the delay in likely Canada, as relates know quarter of with volatile to year XXXX, affect quarter calendar will of month which by Canopy. consolidate one, we first

past. is So really be working issues had existing From are we through we're it performance in track, markets world real team any their execution spaces again the team Canopy but on have quite Canopy strong we the of in that pleased the expect track, markets, at they Canada way rest good that and is medical the may with. and on by to those volatile think those

the about In terms we're you which excited agreement of we're a foreseeable a saw to U.S. affect with our would investment And Bickel, in in in there which, is the be Storz results expected triggering future the a profitable in way company until quarter. & results won't investment returns, extremely be consolidated very with their and numbers Acreage happy in Canopy last while reported through the that event the

U.S., their could for what be the And they're last we which already there. resources really happy unexpected really money of very significant good that to a and profitable focus take And advantage the a require their them is themselves investment, how Canopy of U.S. announced. a that's place amount really of legalization then on point the market positioning CBD large has to in think which And in will and with the we're

this which when look, to. very investment into are and still we the and people starting our we So to are did wake investment, space up we we're happy, more more made bullish Canopy on very

statements to we Constellation. it or go through dilution how going our As to FYXXXX relates to its will we assess adjust continue effect financial our as as results, we're the on accretion on to effects on

Operator

And Mohsenian you. comes with Stanley. next our from Morgan Thank question Dara

now Your open. line is

Dara Mohsenian

Hey, guys.

William Newlands

morning. Good

David Klein

Dara. Hi,

Dara Mohsenian

guess in that of I Clearly, a better-than-expected a QX versus expected. modest beer some that in of quarter inventory expectation. less to to flat drawdown But than margins beer. only implied was came portion appear the your would be

– for reverse beer we QX on upside? the just we're that raise the despite in lack big year remainder in are of about the of more should the that? business, a full-year that beat, factors How might think there of other the curious margin that QX or the early year just So still is some

William Newlands

Yes.

continue benefits just I we QX, Dara, see. and of still other So that and and have logistics costs the Mexico that increased rate we productivity some offset think of pricing have In out. good by primarily packaging. we I still the and improvements inflation FX, had to really freight concerns that and some listed headwinds were in business wage about from the forms glass We things in

had as So down operating to from line its which bit you QX, in in bottom way shipments said, a the growth works and benefit a we margin. over of

In on that which QX. max of our achieved be little in slightly will kind out the – a lower our XX.X% coming have we we this a margins to QX, that QX. in margin year-over-year in expect than comment will probably spend marketing We QX, up tend

lower So that this we'll little bit run year. than a

us driven And then year, the we outsized unexpected will in I pricing for right by out, margins, we the this is which think any number target or maybe further really for put in FX. XX% benefits from growth be that from feel away gains

our represents XX% full-year. the remainder think view the a of of I pretty So balanced

Operator

comes Robert Ottenstein you. question ISI. Thank from Evercore And with next our

Your now open. line is

Robert Ottenstein

very thank Great, you much.

better bit your best comps. could I you It's demand? want that, just little to given some impact weather. of was consumer tricky kind wondering the feel of do get guess And a of give the Just the to for perhaps of quarter underlying a

is XXX thinking XXX points, maybe are basis points, be, that too basis could high? it We

quarter terms Thank talk are the that of we quantify also way got kind incremental roughly any that's if And amount timing of right also in of shelf it? quite in the you. you that about a finally. in space nice hearing you Can of that to –

David Klein

at can and hole. Yes, it shot a I'll in take the Bill then fill

So large think a consumer across had perspective, I seen as clearly this over April over past And markets weather effect in where index. there very think strong country, the results. we in years, demand particular where the we a our a few I is from seen you've volatility in we've from

entire we've the of to it level biggest biggest industry. demand our really your – across consumer can't I competition, in comment the on But the change can hasn't weather, result range, in we the numbers that that other get brands. detail anything factors Seltzers. affecting been of outside portfolio says our result has of of of seen acceleration of market been It really the the the

William Newlands

we've a to is, this quarter same add bit Familiar. and profile would is we touched both the a and that I that thing are with overlapping growth then year David in last only before, on Premier from strong The very

overall So just growth had by. of the to depletion X%, of we the pleased show we quite in are that under kind quarter

successful. very introduction. major Any see, have continues they very be overlaps time overlapping you as you and the successful were Premier both can to And two

with setting You the With impact will have some in on year how pleased quite we're your said, X% growth is almost that quarter, business. the with up.

David Klein

XX%. you an And shelf mentioned growing is one seen a space Corona particular based velocity our important Robert in almost just other increased and Premier's that know We've by you also that point, team that's sales laser-focused component volume on. XX-week

the marketplace, our in some seeing we're really brands. signs as relates good it So to

Operator

Grundy our Jefferies. And from question Kevin you. Thank next comes with

line Your open. now is

Kevin Grundy

Good EPS that? of the guidance, it return capital, the confirm everyone. wind then if outlook housekeeping you margin Questions and the strong revision guidance, the is entirely your one just on so on to EPS the quickly on Thanks. upward timing for performance, like due to despite of on morning, David, divestiture, sounds the could

of And as transaction. maintaining few have to you in you're Thank repurchases Canopy return of Acreage the capital, the prior guidance guidance? to prior dividends then can to warrants of that on that of terms the you. just see favorable billion comment Maybe more that over flexibility was potentially the the part greater the in you but the $X.X next years, respect with

David Klein

Kevin. Thanks, Yes.

one $XX $XX we sold, revision our reflects likely million well at from we – our brands significantly the we're So million why ability takeout is guidance cash a cost by same timeframe of to to million stranded additional the the more quarter of said anticipated, as the which that to for increase receiving later the hindered, year, get in year. be closes transaction $XX sale to be expense that in our is the are range high-end the had in offset be because because the really we won't yes, an as interest as to

to hit million still $XXX But on for clarity, cost total stranded track takeout.

focused the solely so guidance the divestiture. on Wine was Spirits change And really and

margins at beer will XX% said, I year operating As we the remain that end our the belief in we business. of

the get to do return billion as of the we and I Kevin, returning but after can remain $X.X of with happy And our as just possible shareholders. we that to and billion of cash in investment we're decide terms revisions cash from guess, really continuing simply what return and we we're as quickly return, on our shareholders. Canopy focused then we yes, incremental much $X.X that flexibility the again, that, warrants on the getting as to we we'll to out to focus want

Operator

of comes you. Spillane Bank Thank America. from Bryan of question next And our

Your now is open. line

Bryan Spillane

good of about follow-up mentioned you in is and the Spirits. that response or guess And the maybe some Focus morning there in more earlier. question Wine advertising I next longer everyone. next Can wanted kind two, to marketing a brands you on Nik's timeframe? Hey, and over to talk within I year just

Are there opportunities couple to merchandising saw maybe beer today you give over the optimized are that brands that runway of that those aren't similar of kind a or in like last you what might in of opportunities like years? growth distribution

William Newlands

Sure.

You bet.

the a way doing are brands our analytical the around to lot work We what to is present of public. best

like the our as example. space are else, work As business of wine facings not we than example, space better doing more in assessment, to in kind an an beer or assessment we're much whether have as something on same done

So brands. we upside that of that do there believe and for interesting is significant set

leverage you time our which we're time, potential they are sales to that with we support to is all, in same the and brands. participate our of and growing focus incremental we do and our analytical maximize where those at our and those growing increasing for they like while distributors first many brands, going consumer capability of things of the categories, organization, them so note, they're advertising, They attention

yes. short answer is, So the

should of our, being sector the power that things done and that are our brands All of in are those business. give within us significant the upside opportunity

Operator

question comes our And Suisse. you. Kaumil from Thank with Gajrawala Credit next

Your now line open. is

Kaumil Gajrawala

afternoon good Hey, everybody.

depletions able the all wine just from is to second came them route? a certain deal, going X.X% And on severe quick then products have brands none, question, up how new it structured that First and or you carve keep effectively the to one, collectively? your your or ends you as are out one, if it

And and at they, this so options can you in have process, go whole request sell through be as points the it curious pieces to thing, the I information or second or quite why is, that of look the kind you reason the not? of market certain turns price at have high, we they sell if ask and you if shares if to

William Newlands

ahead, David. Go

David Klein

Yes.

on start successful committed we're that way and that a expect we to one. remain transaction I'll agreed FTC the we working with Kaumil, to process, So Gallo, we've our we'll through that reach conclusion. Look, the

FTC We've we for in we the to we've extended to that second year. expected our end want we X-K, guidance the of clear in also do stated to of the clarity announced needed through when QX, the that would the the stated with close the that we that work while close, be half transaction additional we as

as provide we we'll a resolution. when clarity, to final more closer a get little So

William Newlands

depletion double-digit driver XX% and Premier sheer of And the growth Corona the Pacifico. our and as growth the was obviously that with your single profile actually growth depletion size coupled in that your Especial of question about business with to of Modelo both piece in growth biggest

the So of Premier and necessarily We view Corona don't part as as at product" a view at "new this that this – point. point, franchise. we

to Obviously, on growth the those that mega groups. quarter, of Refresca brands during sheer and was Premier/Pacifico Corona it had some existed but relatively compared minimal the benefit Modelo the

Operator

with our Markets. And question Capital Thank BMO next Sharma you. comes from Amit

now open. Your is line

Amit Sharma

Hi. everyone. morning, Good

William Newlands

morning. Good

Amit Sharma

I trends your came rate the data focus you bit to depletions than that you talk for the weaker can forward run about be. a or of business? us mean, that think data the we maybe your beer showed on Bill, on-premise out going Is IRI that? lots about little where and should

would you innovation, already think And you into that category you the in category? believe on Or question one have you marketplace Seltzer extend side as brand to of the you brands Seltzer about the as then of like is do go the forward? business, extensions to focus the going on the your

William Newlands

Sure.

Let off question business, digits. up compared as start for with beer an on-premise see industry our low-single On probably your our overall we being to portfolio on-premise. mid single-digits about me that's

draft that of we we're arena. think, Modelo plus are excellent certainly outperforming in and entirely as occurs example, uptick seeing the obviously noted I So an as on-premise through which an I remarks original XX% in my

watching But I I'll we as very admittedly are carefully. focus this. say Our category said, also have Seltzer

business attention our year. Refresca Our is where focusing are this we

who is to critically their put a new it's We important new critically think are mouths the a it said you brand get I mouths interested. into product getting the and as important that into just element they because intensity on they good introduce of are a when as of delicious. you that as And consumers focus are that earlier,

this all do sense explore to for in of focus our of business all where think participate we around intention as options is to season, the entirely for profitably the so. us we earlier, and Refresca So continue but will makes we where can we said areas it

Operator

question comes our JPMorgan. from next you. with Teixeira Thank Andrea And

open. now is line Your

Andrea Teixeira

thank Hi, you.

So hi, Bill Patty. and and David,

William Newlands

Hi.

Andrea Teixeira

are and to most from in the just are standpoint, in Corona on you? read comment family, family go day recent wanted one back I the the leaving I quarter the appreciate less Corona How comment. accelerating our to depletion the the we

spot on-premise, back noise mid that you removing less and the think flat commentary can the inventories you demand the standpoint? But of to think from re-accelerate takeaway and family consumer the final single on the to including or that go single-digits one day, do from the from sweet channels, low consumer gave you the if even a all

plus had just the put the plus last give the you perspective together But X year us to demand everything and the final plus can to know all we you're X. that how channels? of X comparing I from some

William Newlands

Yes.

family. be to going that Premier, include would solid We across the Corona growth expect would have very family family, a Familiar etc. would I include again That year Corona That Extra. the is and the with entire

know. that business perform that well to will continuing as are expect So we you

increased the this for franchise Our actually while many the Well, others Corona advertising doing has are been opposite. against year.

be beer our the and Corona an important that optimistic are with and off this are within years growth will this voice of year. Modelo category profile part amazing to selling summer that XX up share to of and season start we're on double-digit during our counting going So be acknowledging our we growth is very we an

Operator

Group. our from you. Thank Ramey Pivotal Research with question next And comes Tim

open. now is line Your

Timothy Ramey

in the super quick a different like? growth wine expectations interesting. on category. one. look XXXX hot thoughts initiative It's and that for CapEx what a then Maybe on and really one Any cans a might been early Any is

David Klein

Yes.

CapEx year Yes, the our we if I'll hit at over horizon. three a CapEx So look question.

inclusive So will maintenance and be FYXXXX, net $XXX $XXX million a that business. of kind FYXXXX, we're our million to that we and expect and of to that's FYXXXX $XXX of CapEx million million headed range within toward $XXX

of couple in So this range though guidance million I that think, even going which total $XXX CapEx, to year's for $XXX be is is the to million next years.

William Newlands

about in of NFL excited the our can, our we the which the And it's a format. great and it tying are question think around my relative was part I with as we to remarks, previous brand, very a is wine Crafters Union in commented

comfortable on consumer with feel portfolio. will real to with wine. the research, a we at and within for can give there is it in consumer brands based Crawford idea other participate We're seems is packaged also opportunities. well. example. the for our are single as and where I'll And appropriate can of we on-the-go a at for consumers you the a like can format be great events an certainly that summer the and We're are Kim It Kim our looking Crawford. demand looking going serve therefore,

Operator

Steve you. next Powers from Deutsche question our comes And with Bank. Thank

Your now open. line is

Steve Powers

the the quarter. say take guidance, to wine But your risk profits expense. after interest on that of just follow-up ran I understand said XX and the A at you've thanks. for great, days, takes up the numbers, XX.X%, the if $XXX I that David. beer I loss your down X% and is midpoint, through guess, back puts specific year question for Hey, million stepping the so in what profits at you

but Opus tax just point costs to something out add million so so closer well then seems so like EPS, to or million I'm $X.XX your for in above corporate $XXX and $XX current for I the through take math effected $X.XX And or running range. XX%, that away to

So in just my for thanks? the am that in – I either me, or or just can logic math something bridge gap missing you

David Klein

one comes there be I consider Yes, our we really are to previous I things think that. are with the, going brands is a couple of take for earlier, quarter sold. to the it back pointed add And out guidance. We the to wine Steve, which of EBIT that things

brands we all, to brands out we will the business, take are out are and we months of out those won't nine to performance those of of to take declining. put to it the now earnings their First release, take used costs cost our cost we last able six business. in because have months be have year, There stranded that

the and So have that. interest on the incremental expense we incremental

we think to NCI I in is think you all guidance range. NCI, look were million maybe the to those is year's thing the million-ish makes last in, numbers, range other think $XX of be at So sense. to our one $XX in you when Maybe that, through the of I if $XX million number factor going

Operator

next UBS. you. with And Thank our question Sean comes King from

is now Your line open.

Sean King

accelerating but are the sort I the that Modelo if I expectation missed apologize Especial? strength somewhat, with by of but you decelerating for that Hi full-year channels Growth? in holding guys, or Premier morning. to offset track is your I know good this one, more

William Newlands

accelerating yes if sure we off the start velocities franchise. profile. previously it are is, answer it's to We're growth expected or Premier will a that to, Premier the as The be little bit we're the pleased no. not the with before is expecting and alluded David I'm seeing very against

go. comfortable where we're yes, So expect to we with that

Operator

from next Guggenheim. comes our with Grandet And you. Thank Laurent question

now Your open. line is

Laurent Grandet

Good everyone. Yes. morning,

William Newlands

Hi, Laurent.

Laurent Grandet

on questions, so quick one spirit guidance. Two

growth guided Wine single-digit growth. communication high low So in single-digit a and between mid organic XQ, operating the sales and organic income you Spirits previous single-digits, and after

not are this you So providing guidance any quarter. more, any

this? we read should how So

you the very Refresca, my And mean first early about receiving wholesalers, maybe trying is on. question this consumers. I mean with retailers you still share feedback any could it's I know But having, and are from I second

that you. would So Thank be very helpful.

William Newlands

Yes, so sort what for guidance inorganic Spirits. Wine to, is and you're of I think referring

to expect to And that down. so be slightly we flat would

bottom quarter. Now line upon the both topline incremental and based

variety days. that pleased gotten are to And very to your the And many it's been month. question days on ACV always With relative has that selling. XX of after particularly too to said, we've in Refresca, noticed with successful early on it's where and pack make days worth first distribution the has our we dangerous the early projections

the very seen. Now it think that pack those consumer to be which continues, variety and expectations. I well in of exceeded certainly whether not been response the has sampling remains early or deciding, could to happen – prefer, but has be they It our

Operator

And question comes our you. from next Bill with Thank Chappell SunTrust.

Your line is now open.

William Chappell

taking Thanks the Good question. for morning.

brand, forward. Just want and to portfolio, sub much wine and and of a – the Woodbridge, to is still thoughts at spirits the go and back kind just to part going power both which year next your understand these a rate trying growing faster of with brands $XX of

of Woodbridge with growth part that with Just mean of that points the can the competition seen down years that that? contribute that that to actually trying pull in you've or category and I how what price years, couple and up as in for doesn't it down kind confident,

David Klein

Yes.

you appropriate said – in us portfolio, to we critical our and clout feel retailers. with with our we've when look facilities to, and past that at So required in retain retained mass is production the for Woodbridge

the business in continues a portfolio, one-third portfolio, of drag even about remaining it if sale. the category, the we result, kind category our needed it Woodbridge post about on a in it's in, share plays total its be understanding as represents And will and of that grow just to

some that we're growth in that its think last category. we brand week, be seeing need think can for we new evidenced brand's come and onto focused on get TV the Sabia over are we And this a because and we spots share Hanson is brand the important this very to outsized this growth, Jim driving healthy, Robert by But our very as portfolio. and

power to And of a be little at the with the bit give pricing same ourselves brand. able time,

feel we and it of upside portfolio. as a to So brand of power pretty our part excited lot Woodbridge we're about having

William Newlands

And pun intended. the which other within Bill would the is size, thing It's portfolio mind $XX.XX. XX sells size for purely is that add the larger in the larger I no the keep

So is consumer to price the for $XX pulling their it wallet plus into our out gets point, pay a brands. when

job we going expect the echo additional an So done excellent I in be category piece we as Woodbridge what and it said outperforming and competes, to co has against important forward. make to our David with continue an go that remain of that is it, of will support that investment which and the we're

Operator

for Thank the any now remarks. would I'm Newlands questions to like showing over you. William not back at this to further And turn time. call I closing

William Newlands

Thanks very much, Daniel.

and in now call So very successful is our The our across momentum full with initiatives and excellent nicely thank advertising another fiscal The underway, are for summer entire today. well we season swing, team has you plans the joining for positioned on we all as have selling our positioned start portfolio. to outstanding business to our marketing XXXX year. capitalize

just wine friends fantastic and is products. celebrations around your with X, And responsible spirit as hope the July include family corner, holiday will beer, I our and

So thanks a call great and summer. joining the again have for everyone

Operator

and concludes thank Ladies disconnect. a wonderful Everyone for you all may in you participating program, and day. have This today's today's gentlemen, conference.

Constellation Brands (STZ) 28 Jun 192020 Q1 Earnings call transcript