- Earnings call transcript Q1 2023

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Vintage Wine Estates First Quarter Fiscal Year 2023 Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions]

to conference like Pawlowski, to now Relations. Investor would turn over the Deborah I ahead. go Please

Deborah Pawlowski

and Sachi, time in your your everyone. today, interest Estates. Wine Thanks, Vintage afternoon, and good We certainly appreciate

our Pat on me Founder Terry Johnston, the CFO. are: President; Joining Roney, Kris and call and our CEO; our Wheatley,

You our well that slide as the should deck of conversation after wires that release a earnings copy accompany today. the the have will our crossed market, as

on documents, If at our you found have can website these they do ir.vintagewineestates.com. be not

Pat to the with more brief quarter. ask open Kris guidance a Then the will call provide we our will the on to is questions. will for to begin going Afterwards, analysts overview fiscal also review Terry of and details XXXX. results. Kris our

to find If Slide harbor statement. will X, safe you our you turn

uncertainties will that may cause from in and presentation to and actual Q&A during you well aware, As XX-Q subject factors be Exchange noted are as are with some to well future forward-looking were release. factors statements statements press the this make and that could session. as we materially apply in filed provided events as Commission These other where the differ we and other risks Securities uncertainties as These and today. the to results our risks

measures, that find believe You we performance. out we on today's during sec.gov. evaluating non-GAAP which point our in these also call, financial documents discuss I can website or are will at our will useful some

GAAP. information for prepared as substitute consider not results in this the with isolation accordance should presentation or additional You of in a

and X discussion accompany non-GAAP measures to today's are GAAP covered We have release. the in with Slide provided tables reconciliations X. on comparable that Terry's Pat of

Pat now turn that, to let to with So begin. over it Pat? me

Pat Roney

especially few pleased start year growth. include growth with XX% key for where the business Deb, provide welcome, a our revenue we solid Highlights to execute to direct-to-consumer business, organic our will the objectives. segments, Terry minutes. quarter double-digit everyone. We're our as strategic against net continued the and on including in for a growth Thanks, off results I'm revenue across details additional first

in premium that are in wine recession, business macroeconomic back categories uniquely environment. in proving categories and great the luxury great the in Interestingly, are changing rapidly and resiliency. these We positioned demonstrated this particular, our resilient wine

grow We're able time revenue through that our net to and income. both

these we and expect, We current differentiate value our to navigate help brands competition. as propositions categories, times, us from will the

results, growth contributions organic saw we acquisitions. our from excellent our Beyond strong also

order with integration the synergies. capture progress making to operations are the of in We into acquisitions our

number quarter, of growth capacity shipments Cider this fact, enhanced line facility a in Cider elevated for pressures, to This increased enabled ongoing record in the achieved as We by canning Sebastopol. areas result installed to accelerated ACE headwinds improve the In the in of driven made business. the cost despite prices. at gas new of ACE progress efficiencies, related costs shipping operational a

chain production While helped with supply, customers. deliver of flexing we class ongoing of has and to to timing the to team our experience continue agility to closures supply the our keep constraints

as more up with including to trucking further, communications pick working get operations are We with them they improve schedules. to products, to companies their struggle

we we've these will additional of the to we some continue As you progress and opportunities to taken know, selectively headwinds, pricing offset evaluate year. as price through

Production, the to Senior areas. enhanced organization & has Zach was the promoted recently Chief Long, key in our within Winemaking Vice President the Officer position. Operations of recently We've who talent winemaking. of continues knowledge has leadership in Zach activities. organizational He complement oversight that chain supply and all highly insights, his his production to over full depth operational prove now and skills been

beverage business gains Experience Officer, digitally Wines, will she unique affinity deepen acquisition Jessica with our native across for Growth Jessica ways and recently Kogan, Cameron XXXX of drive Estates be Vintage in focused the our named a Chief additional to Wine to of responsibilities that the expanded joined category. we addition, she alcohol cofounded. consumer our on where businesses In who

I'm certification designation California and all to wineries our our state proud report for that sustainable of the a we've vineyards. of with ESG advanced strategy receipt

a stewardship, our of ongoing strategy. These certifications commitment reflection and are our support environmental to sustainability

Speaking of successfully this completed year's the harvest. vineyards, we

very volume is California's light, good, While was the in Washington. quality Oregon is quality as and

talk to let it that, segment over turn results. Terry? our With me to Terry more about

Terry Wheatley

Perfect. Yes. Thank you, Pat.

businesses. Pat double-digit we organic in direct-to-consumer and mentioned, the especially pleased growth with are As achieved our BXB

continues business strategy our industry-leading enabler direct-to-consumer marketing growth. to strength focus digital of an Our demonstrate as and customer the of

power we our Digital omnichannel innovation consumers. technology the focused to is will on a pillar leverage overall unifying growth and digital continue strategy, the for of of our experience

In believe our versus one of almost is which our innovative driving differentiators of total our today, in strategy our competitors, strongest business. that represents fact, X/X segment, I this is our DTC and area

impact strong Within this White environment with and BXB driven current on steady and are we from almost a trends a QVC primarily custom And our strong key Club the impressive tourism hospitality segment, from our quarter, we from contributions traffic during its inflationary cost saw Meier's in increased growth saw our business, particularly growth consumers, our growth by business, tasting of for our and the seeing despite and equally customer We rooms acquisition. foot activities, XX%. channels. production

we in the our promoting line continue of brands Cider launching newly is segment perspective, wine core along outperforming priorities focus our category the and key our to marketplace. ACE acquired on and developing, wholesale a as products, From U.S. portfolio with

brands, a Dog, quarter, priority particularly and the marketplace Pie Bar key strong Cherry During performance for saw Photograph. we including

driven growth acquisition. market alcohol by Pat our beverage segment efficiencies this Cider acquired brand the of production achieved As mentioned, since category and volume ACE recently for record delivered ongoing performance

of made placement new shelf you on year. brands, we benefits progress authorizations obtaining the which for key see this in addition, later will retail In

we to this perspective, year and driven refresh we Although marketing with wholesale progressing had are our brand. start depletion Layer initiatives a the from by slow Cake, a rebranding for

year. You should this results look of forward later these to the efforts

to turn talk quarter Kris? over it me let first Kris about more that, to With results.

Kris Johnston

fine, everyone. my feel I afternoon, lost voice. Terry, I but apologize, and I've Thank you, good

appreciate I as pause go to patience may I we throw have So suit as your to through. my

X. Slide to Turning

You'll see segment additional discussion.

of quarter, the included in acquired million $XX.X million $XX or which XX% grew revenue. Revenue

As Terry growth to This organic and strong million. with direct-to-consumer XX% the million up revenue acquired quarter revenue. of segment, growth XX% was we of of $XX.X very strong $X.X mentioned, in in result had the our

You will find in have our we a supplemental the revenues provides slides quarter. that table by that acquired

from label to our million our including is contributed business activities, Next, Meier's private wholesale where in high-volume custom was marketplace. $X.X increased growth a business, $X.X to revenues production in Cider, million, which is of million the the driven that well quarter. increased on XX% acquisition revenue BXB XX% extremely revenue $XX.X business, by while and ACE performing the Within acquired

strong you'll If you'll year due to revenue increased Slide profit turn X, while was growth to that across segments, gross increase business all absorption. XX.X% versus the margin resulting overhead QX from QX gross XX.X% prior see in

slide to X. Looking

$X included reflect of plus in SG&A $X.X first acquisition-related last the from year's results Our in issuance that was quarter. million million SG&A, not stock-based compensation

headwinds guidance experienced free of the talent increased made from SG&A we details minute. costs provide FY a at investments and organization. 'XX in around additional in addition, In I'll key areas

Turning to X. Slide

adjusted EBITDA adjusted EBITDA was burdened favorable revenues, QX income. some by and inclusive on in million. touch overhead for change cost fully The $X.X increased I'll product the result mix. Adjusted SG&A, of of of and primarily EBITDA was the offset net

structure. adjusted performance. capital accurate of provides acquisitive income Moving net net million presents understanding a normalized of cash our our or that non-GAAP QX basis, an profile, believe more reflection our income share. on, was we $X.XX XX per On for diluted $X.X given adjusted Slide

strong have We the flexibility a invest balance financial growth to to our sheet continue strategy. and in

be will $XX 'XX to fiscal million, $X in related million about CapEx maintenance our CapEx. is $XX which expect about of We million to

and focused is to growth. remainder synergies, capacity support improving The on expansion capturing productivity

This we million to for on includes million fiscal $XX net XX, As fiscal which Slide are see acquisitions. $XXX revenue, expect guidance million the our to an $XXX incremental $XX from you million be reaffirming to XXXX can we in 'XX range.

plan the we of million throughout remainder SG&A We to to an spend primarily expenses And elevated 'XX We level. the have million. by $XXX million continue in $XX be the originally higher of SG&A EBITDA invest driven that expect the than adjusted range while QX $XX FY expenses $XXX SG&A to in was revised be an range, year, believe we to planned. the anomaly at million to business in to

that, turn it me let XX. to With back Slide Pat wrap up on to

Pat Roney

Wine is as value. Vintage Estates company better a positioned evolving summary, In is to Kris. ever public that Thanks, deliver than

questions. have I'd industry.With like vision some on and that, the strategy of call the to we U.S. VWE thank commitment executing their in we the team to focused our being are unrelenting that profitability. While a to for industry-leading work delivers leader open wine the to enhanced do, can growth we

Operator

from [Operator Vivien Instructions] Cowen. from The question Azer is first

Vivien Azer

now over in row gives really like like And SG&A year. confidence the just suggest was you on that in for where quarter I guidance. I'm SG&A million. is spend does the appreciate spend a been what second the quite what full $XX the wanted So quarterly offered. But has driving double at transitory? back I that? the to a year remainder quarter just the growth that just normalization the cadence, of it's curious And was of kind the commentary It looking this year-over-year do

Kris Johnston

Sure.

in our costs. captive was to driving acquisitions, had and expense that our we that QX, was So insurance and some atypical related higher-than-expected

Vivien Azer

two? another would it costs, the quarter acquisition-related But to flow or through

Kris Johnston

one-time in were they No, nature.

Vivien Azer

the of tasting that a just we wanted guys coming trends your in of Obviously, out are I tough on were you the some summer. room. touch Terry, seeing on last call, So to pretty

lean consumer Do engagement year-over-year. consumer feel that detail So Has normalizing? it's had hear growth can to like to encouraging Did there? trends that more guys close offer to into Any you incremental double-digit changed? you anything just drive you are you traffic?

Terry Wheatley

technology our room. travelers. about, release, the longer. are they Their come our have And people feel that done the through -- when outreach Well, lot of Napa higher they tasting that's as Valley could are traffic in a going But purchases we've on And like, costs of XX% saw a found stay our for DTC our up year. lot team as I had think room. talked I you improvements, tasting last was higher the into over in

to So consumer in our tasting engagement, information. go we pandemic, that think prepared on before back the I years maximize capturing if really to advance you rooms X enabling

that's have almost paid call Those experiences. we for and into So the engaged. off great us. hit, the We've back. customers got rooms pivoted -- They're stayed centers, when coming tasting we when pandemic

continued it'd on Pegase. or Hilltop, can just a from engagement, We've really Clos over and go You to whether to that. Kunde with benefiting that customer be we're

we're So that. with thrilled

Vivien Azer

for you. I last the kind and resiliency the Absolutely. Great category back around referencing really appreciate of Pat, the to And the of one commentary Recession.

How are the very quarter, Just for selling guys, for Are very, obviously broadly. into season? thinking you thinking yourselves down? important the you you ahead more next preparing O&D holiday to industry but key about trade guys heading consumer alcohol

Pat Roney

at stays people So the we we're the $XX beyond we there some might the see make of the don't we think kind overall benefit Great of a well and to our bottle. December wanting prevailing the expecting amount Yet to surcharges. This be price the it. continue are vast with of in with we trade of actually to business. to in that people that of Recession, below trends $XX.XX the of FedEx the continue that to into the that the $XX throttle November -- trade and Again, more deliveries will down that, will a lower related that of in is growth labor pretty some are UPS $XX. the will category in that some many headwinds majority end be can will more down. And to But were some category believe in see the And in that also trade category to that points down we and benefit the $XX. in trade and and of things you issues will

-- way wholesale in going so quarter to And the direct-to-consumer. for revenue in and the for our we're both first that. And about through the this work trends, we're excited

Vivien Azer

a certainly, nice start to year. Yes, the

Operator

Davidson. D.A. from Baker Mike from is question next The

Mike Baker

One, curious first the raising? sort in that being raising I the first a comments guess will more just year it quarter in year as of But were big is seems seems like and be not it assumption the simply why start guidance XX% It environment. I'd a beat better maintained what early So usually the like My of guidance. sales. to Again, than just I early is think this yet couple. quarter? raise? little is much your conservative too Or you I'm about this yet is, full guess to -- sales quarter at getting you're expected, to be I it

Pat Roney

is hard actually two, one, got Mike, raise; think, the to big ACE a I quarter and too that also there's pretty early part, for Well, the it Cider them.

see will over that, pick more that we'll We for us. down trail in So that up quarter few next final acquisition, the year bit a quarters. little of the the

a things it's guidance certainly because think totally. we're we're comfortable are And still I And go the combination where of X given. we've So with next But those do of with political landscape that the it, end of not opportunity an there's things. environment the interest raise to the the and at going we'd if to to quarter. like sure

Mike Baker

exactly didn't did because ahead on ahead on to our the fair how first estimates. the line your plans? first was quarter of that come right -- seasonality guess least we estimates perhaps top just plan? quarter say Is internal the it But your my it to of relative But have was ACE? I at in

Pat Roney

not ahead. little bit A ahead, but significantly

Mike Baker

and gross thing to on Does basis. integrating Xx about the Second investments little basis, cause now. your that part a acquisitions. story, bunch you a about cash? wanted But A maybe just I to X.Xx big to course, slow up north ask, a I and -- net think, you're the a of of past leverage, some is preserve on in of maybe down

Pat Roney

we market while with fairway. really we we very, right be do the think going that that things an operating only Well, market the the tightening intend the as to are And last strong swaps of the us, very interesting down of businesses look for think covered going the I they're see that very rates. strategically things in environment, and fit create we're the middle we may of any now, as our be down the to very Recession. debt they right the to macroeconomic as acquisitions, on are acquisition opportunities during the category. at pay middle credit trends interest And with the from have. interest well some bank's if some right going that we great did up, wine rate continue to make and They're We

Operator

Genuity. The next question is Luke from Canaccord Hannan from

Luke Hannan

with start just working little guidance, I'll so a here. backwards bit the

So margin to million between sort be depreciation million added and the of let's $XXX If say, year from amortization, $XX working I and guidance, to in SG&A that is that. It a would say, you'll your million. going will implies for do and get to guide have EBITDA the of $XXX we backwards that somewhere be assume, that back gross to XXs, the perspective. low for

guess, a would question what that you're achievable environment? market, that on assumption I first in of this sort be, Pat, the one, think based you in the fair So is that's seeing

Kris Johnston

wanted amortization. to Pat, SG&A Sorry, just I exclusive quick. clarify of real is the that guidance

Luke Hannan

Right. But it includes depreciation, correct?

Kris Johnston

It include correct. does depreciation,

Pat Roney

things. do to going we of have we're opportunities those that other I to opportunities and And be the I us that -- at, where there's margin some XXs the be continued trends look in with expect get extent think cut there. and to is we margin to are low going think Yes, the that. synergies the XX% But gross to somewhere to going it's costs, we'll to

Luke Hannan

was the curious And performance. indicative guess, volumes forward? one, on to business, my key case? question that release is was two, the drivers being about I of what -- commentary necessarily why then really I what are in is second the case exactly going I not for just BXB underlying there press know mean, -- that is And

Pat Roney

of and business strength number the sizes the cases confusion the has associated Meier's very, that things got -- there's case felt but as of have case of you're volume specific. because, the on better hospitality believe per other different is business, the our rates more parts Hard are average what that the were is depletion We it. average business, terms complex. I versus analysis indicators of other the average very no and different we direct-to-consumer business wine with -- with and which of that associated What acquisition case case indications Cider revenue-driving, that felt the sales or we've also And about depletions. business And volume that the we with talking then just not BXB that in

Operator

from is Group. [Operator Joseph Instructions] The next Feldman question Telsey from

Sarang Vora

Sarang you of much how for help Vora Joe how pricing the Organic and that -- on Feldman. continuing question, Can volumes, the growth was growth at about XX%. the you on volume look prior up from organic standpoint much XX%? was was the us your

Kris Johnston

well segment really growth key sales. saw really our televised as as of was BXB a segment. DTC our some we in strong So contributor in our with That

there's pricing. So some

While there's volume I'd a impact, say is some contributor. pricing main

Sarang Vora

year-over-year specific seems would why a about sales be very Or inventory year-over-year? it XX.X%. color share growth. down Is reason strong be to And that by had can Any why? you you down any why there's

Kris Johnston

the of I'm sorry. there. I your missed question beginning

Sarang Vora

Inventory worries. be year-over-year. seems No down to

So can to color you on any share that? if curious know just

Pat Roney

Is year-over-year. Inventory question was? the what is that down

Kris Johnston

Yes.

Sarang Vora

Yes. Yes.

Kris Johnston

from it change. So indicative expected. just of a I We still of think in forward significant as rolling what's that's are trends coming have harvest those where charge, and we the year-end took all

Operator

Genuity. from next The from Luke a is Hannan follow-up question Canaccord

Luke Hannan

follow-up one press in also release for to There about an covenants. comment question your amendment was a the me. Just

what Just helpful. more you Any certain amended, a curious what exactly are give be was if new little definitions â€“ there covenants? can those more for those on detail maybe bit detail would the

Kris Johnston

covenant the the EBITDA. how definition of around definition adjusted we're amended our of calculating financial We

Luke Hannan

though? changed Is there -- and what exactly, has I guess, there,

Kris Johnston

details we've the level previously. those of into I gone covenant don't think on

Luke Hannan

than now a or I Is ago? was it is X favorable speaking quarter it say guys though, you to can mean, more you broadly -- it maybe

Kris Johnston

Correct. accurate. That's

Operator

remarks. Pat the over question-and-answer I'd session. turn to for any to conference back Roney concludes closing the This like

Pat Roney

are Clos for call Kunde I little an your And Well, Blanc talking or in the a your or but or to on hear again, appreciate know for Vintage to Sauvignon Wine ACE what about tonight, to you, bottle having taking time get thing And your plans time. Thanks and Hard time the would Chardonnay near of the Girard bit a do Pino today. very look everybody, don't you to Estates. Pegase again and forward be great thank nice Cider more a we future.

Operator

conference This concludes call. today's

disconnect a your for You have pleasant may Thank participating lines. you and day.

Vintage Wine Estates (VWESQ) 9 Nov 222023 Q1 Earnings call transcript