NAPA - Earnings call transcript Q2 2022 | The Duckhorn Portfolio, Inc.

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Operator

Greetings, and welcome to the Duckhorn Portfolio Second Quarter 2022 Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions].

As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Sean Sullivan, Executive Vice President, Chief Administrative Officer and General Counsel.

Sean Sullivan

to Portfolio's welcome Earnings Quarter and Call. Conference afternoon, the Second Duckhorn XXXX Good

today's Alex the XXXX. XXXX, release It Eastern Financial call the accessible went CEO be on at a XX should January fiscal second brief me Joining are next XX, quarter Q&A. by for at p.m. and moment, will Everyone Beaudoin, the remarks a press ended of followed and webcast days. the approximately after of website access Time. our Ryan, Lori year The shortly our release the In is our on Chief to X:XX will Officer. And today's for have we out ir.duckhorn.com. archived give earnings conclusion Chairman; President, our period call,

let Before currently as environment everyone include risks remind on discussion and as does that we based statements contains such, me uncertainties. we begin, forward-looking the see and it, today's

company's well in obligation refer to future. factors cause you If results no a the Please discussion from forward-looking or remember company's undertakes will these to that revise statements. the Duckhorn's SEC company that of could these actual update release, statements as filings, you materially see differ to as forward-looking most earnings recent the

in to make growth comparable GAAP underlying trends that references will earnings investors We the financial most a We a perspectives number and measures release of on the non-GAAP of included non-GAAP believe with have measures. financial our of measures. full these to business useful measures reconciliation provide the

over call unless And dollar in Alex. the for and will all the January growth period call that IRI versus to to turn with the note prior XX, data consumption ended consumption on please year, the I'll noted. addition, today's XXXX, cited that, otherwise In XX-week same period refer

Alex Ryan

spite performance our our and ability team's adapt were of short-term solid unrelenting off-premise luxury while and on beautiful to of results, great Sean, fine in I'm of economy, continued share today. We make positive and the the us I'm the able for lines. top year. luxury disruption measurable second proud Later earlier in afforded showed introduction In luxury Duckhorn on-premise, wine in today, you the and quarter our you here upwardly sales appreciative of American standard outlook. good appreciate excited wine. business overview to The great outperform continued strong an unpredictable of another of discussing us we've environment, the continued to of results. you, outstanding deliver continues in our will this the high-growth the on with wines our accelerated afternoon. across and In financial revised in the we resiliency channels. market. we of course Omicron's to net start of joining all profitable pandemic quarter growth both I strategic new the we have sales share be Portfolio gains force will and to The investments the I'm over also call, set Thank observed with wines very benefit, adjusted all EBITDA made a actually

Specifically, I notable quarter. would data like to points from highlight the five

ability growth costs. bottom against This adjusted by line the on company First, underscores both public EBITDA to when stakeholders. top also our organic XX% deliver by approximately and burdened generated an net on XX% and sustainably quarter, comparing we prior basis, sales grew performance year for our the

line depletions the that line Second, volume shipments, robust. strength consumer with remains broadly luxury wines for and fact highlighting our the growth in XX.X% demand were by top our driven was our high-quality

top fastest-growing wine Portfolio XX the among in supplier Duckhorn IRI, suppliers In the fact, according wine the the to was U.S.

consumption XX; top points. of teens dollars high high-teen brand average And Combined, space relative still the volume considerable Decoy our wine winery Gateway times bottle at luxury within $XX U.S. dollar grew rate in of believe than Vineyards a Third, the to scaled it over within we all market; be and across our winery wines. our has on the portfolio bottle $XX only -- leading proven growing Not Duckhorn itself dollar Fourth, also and brand, X.X Decoy to approximately brands wine within and number brand the fastest-growing top the percentages was two to have our the X over winery X segment are but by addressable U.S. over closest sustained it our broader brands the our lead by continue consumption per yet, Duck, per was XX powerhouse. white brands the We and winery high-growth we price competitor times U.S. faster peers.

was our once on-premise again growth driver channel. Finally, wholesale-to-distributor a for

also However, in showed growth double-digit achieved our we by continued the strong with well. growth off-premise strength build results points top accounts high a off-premise during results, sequential distribution. channel sold depletions, Much of broader in restrictions continues the of level like our to shipments, bolstered COVID-XX as and

channel The last new down from past some gains quarter variant rapidly supply while shows Omicron Now the spoke the recovery, patterns narrow and little in chain. and country about across let's early coming how its dining this December, we spreading from growth to on seeing both from focus our dynamics. The has was our are consumers existing wine for accounts. considerable creating out. it of we consumption list with that continued channel the When wines influence latest in distribution would data further on primary on-premise uncertainty and did our dissuade markets, share COVID's

back at-home outsized pre-COVID the to business against quarter. fiscal to exceptionally toward as our of it off-premise year, and prior results off-premise metrics year as strength of accelerated such sales by simply of key quarter up in performed continuing grow share we performance, points nicely be is Compared a the well capable move on-premise, We as this we're providing luxury the This to and choice of preferred supported accounts in well positioned double both continues well wine the to one-stop holding from with consumption, we partner continue a our seen are In quarter, it. digits seeking distribution. by to retailers the depletions the believe levels, first the but strength wine. growth are as performance not another fine quality example of of of addition convenience portfolio how brand luxury shop our of sold of

share Duckhorn Although dollar the per Vineyard our to Decoy drivers bottle serve we $XX the brands portfolios point are the our wine to portfolio, In highest broad-based aggregate, of most luxury both of over peers, for growth our strength our seeing to within double are when compared we luxury as wines and growth gains. up in with continue price U.S. significant digits. amongst contributors brands across

the X the Decoy's the the growth. for As accordingly, distribution scale brand can relative opportunity reasons. as three in same Decoy its number we we is drove years lion's gap ACV we for luxury dollar wine distribution believe narrow to At consumption, winery and lower has believe peers time, Decoy considerable of this coming share future key over the a this

demographics retailers, additional that wind equally to which our luxury to a take our address affluent, than our rest bode And optimistic in its growth portfolio, the to to the and we like are moment will and winery as gateway we educated a analytics to to well portfolio as I Decoy's at space offer younger First, points luxury on accessible the an growth what highly duck second, inflationary consumer the well. data for Decoy that that of of wines. lead prominence effort are over a exceptional partners for have of believe for list of the on-premise these appeals distribution consumers; quality would price attractive continued brand current to a successful Combination further trade shelf. new seen up environment. wines result distribution favorable are we for to will also These compelling result average Decoy demographics, as found in and label; the Decoy the as of offering more incentivized the with our future Decoy array and Decoy and Limited price. Decoy as Limited broad brands because our other serves as rise drive we've off-premise seeing the blue also the the into third, indexes be

our of location. cost Relatedly, keep in and grapes, visibility from is unique our supply pressures falls the on for the function good observed of goods have capabilities, production our As as into our well relatively cost scale somewhat diversified each of been the which and across a chain. or of mind insulated input great sourcing market recent largest are and afforded as and cost COGS we based the rises dynamics idle that

to pricing the continue As when to designed you strategy, has goals over timing this margins, that growth margin the to Keeping make maintenance of changes healthy the enhance profile deviate cost although in prudent. for and expect increases long-term our business. is our of our be the time. not been long-term those line hastened have positioning our wines our environment brand may we by the know, keeping strategy mind We and of and we from goal of broader structure thoughtful some with for a in competitive do is

encouraged will we these always pricing In Let that half as me I'm on clear quarter very at questions. focus our by second be growth summary, first our and results. laser take look priority

today's to DTC end, luxury President, growth DTC will Marketing all Executive as year and the this in Wines. our Gayle in discussed our the are at broad-based has served This revised President, be the team our brings and joining Gayle the strengthen over the and XX Decoy in supported our am the we as strength ability While wine have expectations and luxury Senior today's seen you and -- continues and it's in full serves Gayle announce by To confident Vice broad Marketing be a because results team within channels. agile separate Bartscherer luxury as of that I recently, few and wine Vice the Family luxury to market of leadership wine also release weeks. force and business. experienced Jackson of the upwardly that achieve outperform a to robust behind high-growth Most Sales, Officer strength as next grow well afternoon, guidance. continues business. position that we will driving industry in in discussed that Development pleased And as across executive marketing our growth, Business International this understanding years to advantaged Chief our see portfolio may deep experience as

executive be her On to team, I'd her and in with will working forward Gail that from Marketing her behalf our thrilled work the are DTC. Board joining of Officer. for benefiting the outstanding Reber to experience and like as look Carol also We Chief Duckhorn and thank team notable Portfolio's

own tenure, XX-year vastly strengthen DTC we Carol. our For our and brand numerous to successes grew equity presence

stronger position her We second like would are that we as Lori she quarter to in in continued fiscal updated transition. our it to CMO leaves for I a year this help to during turn and grateful over XXXX discuss outlook. role, the mind, With are performance and

Lori Beaudoin

Thank you, Alex, and good afternoon, everyone.

details pricing Duckhorn which of timing Decoy the first unique into versus winery quarter for walking quarter the an shift the our Let the of was sales in increase similar outpacing and our the to contribution, Volume brands, million, the prior also and results. partially XX% second growth Wholesale-to-distributor in again and for immaterial on from and X.X% double-digit level select Net our growth points quarter, quarter. sales me the our price year channel. out channel strong were changes by through by movements distribution. accounts of shipments This And negative leading growth result quarter volume like-for-like growth Vineyards of high of second from open brands. $XX.X growth positive broad, strong and a offset basis, DTC incurred our and up California was results. by sold winery XX.X% the direct-to-retail resulted mix other primarily were once of the DTC was exceeded

our growth the and for remain basis. stacked our in As accelerating shipment modestly depletions with X-year XX.X% Alex strong, noted earlier, line nearly on quarter a

over up strength to by our prior business, return coupled other versus quarter. accelerated a year our This Turning on-premise channel. of growth the growth. off-premise of the with channels, performance Wholesale-to-distributor exceeded all was result XX%

exceptional stack grew reap ability continue quarter two-year to timing. growth gains two-year realized a and growth Primarily from pandemic, second DTC down growth versus distribution ongoing from We basis. to the due California on XX% quarterly we of also benefited to the cluster revitalization the our on in shipment on-premise also remaining fall improve The our and sales throughout last which sales greatly benefits year. direct-to-retail net above see increasing offering stack XX% was channel XX% channel our basis. brown a

the last we discussed spoke December. You time may recall, had forward the we shift in

channel clubs. in DTC interaction our with rooms wine our our quarter tasting luxury strong and Second reflected consumers through

brand a the XX or mix of tasting prior primarily gross to by and compensation tasting mix to $X.X than an retention company. equity transactions, profit XX.X%. was and Valley were heightened sales selling nearly quarter, $X.X private our Gross members rooms we to points. basis profit Napa room $X.X to prior up for million, administrative any this partially meet increase were The unfavorable increase workforce-related activities were strong was administrative markets bringing an increase was or remaining operating expenses, of elevated in Our general Adjusted versus higher that million. costs were in channel strong sales year was sales existing expense net million, related Gross double margin our and present offset This driven million up and capital QX increase Similarly, support sales to costs due to quarter. shift or year and are our by attributable a club to million general were travel quarter million $XX.X XX.X% profit The X% Total XX.X%, was and expansion wine than such favorable lower driven approximately greater in impact. margin customers. led more of $XX.X expectations as that us expenses was new members. XX.X% particularly and seasonal the when visitation fees XXXX. $XX.X up

X to $X.X which share, company XXXX an earlier, EPS EBITDA top sales. been I in in quarter of of company of of that This at million the company. of the per fiscal share $XX in our prior EPS year XXXX recent growth public a basis, diluted rate recently quarter. of basis tax results, effective would per would in which was year Adjusted to costs Our the was adjusted million, compared partially it's when XX.X% XXXX comparative results XXXX quarter to QX remember was results the At did apples-to-apples current prior represents quarter. diluted adjusted costs, second of effective quarter million and not burden $XX.X similar million the compares offset adjusted $XXX.X line, year against XX%. with approximately our per quarter On adjusted against ratio and net the for discuss This $X.XX for quarter, of favorably compares company most tax of public share. the reflect cash we diluted end against $XX.X X.X% results a quarter was diluted exist public which a a was of including rest which and on of $XX.X outlook the XX.X% the slightly and EBITDA if diluted of look for represents have yields general administrative to this XXXX. $X.XX per when year prior with million EPS $X.XX million income company costs of EPS rate were would income adjusted was selling, income second share that reflect use completed a These with in quarter income We was nearly fiscal an of we and diluted now private and second take share net rate important include net of XX%, $XX.X XX.X% EPS adjusted second I quarter the of which a times. Like had Net is positive below second and $X.XX was burden per moment for million, the million comparison $XX.X the net over net prior sales. Adjusted share. count, strength like by increased our fiscal continued increase EPS growth and costs. fiscal adjusted an XX%. $X.XX quarter leverage public $X.X level million EBITDA noted we debt net costs,

our half As and Alex continued discussed, first performance strong demonstrated performance sales execution.

We and are geopolitical forecast uncertainties also our that COVID-XX upheaval meaningful business. mindful present as we

XX% to X.X% as or to the said, in rates but $X.XX which the first growth half, regular we assumes moderate assets EBITDA and XXX.X to a a the X.X% brand last to expect are or strategic We no or organic production call. versus fiscal second That respect our equal versus through year. of strength strong marginally $XXX the cycle to recovery reflecting greater of million will effective in We we expenditures purchases, on rate provided million of and our strong $XXX we half opportunities for light the million change M&A. dollar prior excluding to continue contribution our guidance our million EPS guidance QX you confidence million Vineyard diluted sales performance on-premise tax our although outlook Adjusted $X.XX outstanding. back $XXX of of have to now share, X% QX. in Adjusted XXX.X net growth. of shares expect half, X% $XXX XXXX we of brands, planned capital growth, to per million first raising with to October And from fairly

advantaged position flexible production best and and are navigate do a inflation, because that to considerable continue of of their model. an economy broader we industry sourcing highly through the our period As in to we believe

wines fostered XX strong years. we we response the ability equity strategic are this interval, this that price brand have of positioning, the to evaluate for actions shift we price luxury or based deflationary Due increases. our inflationary sustained have high-quality on the timing certain go-to-market over differentiated to In and regularly and accelerating for of Our the promotional periods. inflationary strategy planned and pricing to timing

the changes expect strategy to price vigilant our not our results, do have we impact we in However, remain and material a in XXXX reassessing pricing will on year fiscal future.

these environment communicate distributors further we price changes So and partners and increases, continue are we closely current retailers implemented. will continues our work with accelerate to these to while changes planned this and

is growth thoughtful clearly, stated With over Alex Alex line I to call will As comments. Future eye back our turn to top momentum. maintaining that, with be an adjustments and paramount. closing timing for will his the

Alex Ryan

Thank you, Lori.

profitable average. for us, history reiterating present of I the As guiding that fiscal today, considerable distribution our years move a by and share company sought-after our long-term the five I having in months strategic look at first what principles and this upon continued industry pillars on Duckhorn always well to market XX Irrespective of on of comments positioned wines like focus conditions past year, sustained sustained reported and the half growth we as XX-year that we Portfolio remains the substantial our success excess old and forward. The profitable my for of luxury us runway I of well of around six build confident to delivering momentum are am have growth. storied continuation our exist would focused close growth. of our is

sourcing addition omnichannel platform to our capabilities. production in and operating scaled diversified our First,

sales luxury leveraging brand approach. shop wine strength our our one-stop Second, especially marketing and

driving questions. sourcing Sean, organic brands production strategic and fifth, and with and and our us view important that, an grape to I a and last experiences assets create winery pursuing industry-leading engage new adoption the luxury company innovation and brands. marketing for this in With DTC opportunity that growth And optimize long-term behind through channels and margin investing We M&A. both pillar evangelists available are as across provides of to drive engine to supplement consumer Duckhorn to Fourth, high-quality high-quality the as base. consumers, for thoughtfully luxury our bringing your Third, profile. wines all growing Lori

Operator

proceed. Please comes [Operator The with Instructions] Suisse. Kaumil Gajrawala first Credit question from

Kaumil Gajrawala

afternoon Hi, for guess guys. guys. Good you I

a equivalent? it like that On the same-store distribution growth, maybe in of terms versus type of more how maybe came sales much you little can bit maybe dissect look of from might something a

Lori Beaudoin

you Yes. for good Thank question. Really Hi the Kaumil. question.

predominantly how So for quarter distribution, points of the to it's from our growth come past. the similarly came in

had in and So XX% of POD we the as growth sold a in well. XX% accounts

the that's from. see growth where we coming So

Alex led our course, brand, by Decoy is as mentioned, duck. which, our Of gateway

Kaumil Gajrawala

a Obviously, are bit Yes. much Got just late. step forever. run distribution. just opportunity It far back Can think you of had talk and can't further successful is a on maybe go And out it. on the -- you taking runway a maybe you you've how and it's for very about how along thinking left?

Lori Beaudoin

you. too. Yes, question, a really sure. Thank That's great

there. So we for see considerable opportunity out us

our as White Decoy. well for both Limited blue against new as So Label label our

XX-week So mid-XXs look major-scaled look Decoy's the of were if of for data IRI if happy that to low the January, in versus luxury in you some peers. mid-XXs you ending period last to ACV at sits the you'd the see XXs

have us label. gives that for the long and that that we out what half for really is in and continued but Limited only we confidence of of the have for of that for about growth there white runway our Decoy, Decoy the also not for that brand Limited distribution Decoy So strength great

considerable well. have out there that we So space as grow to

Kaumil Gajrawala

you. Thank great. Okay

Operator

Please next with question from proceed. Barclays. comes Lieberman The Lauren

Lauren Lieberman

than much. want difficulty] Great. you move and lower I bit be trend some actions. the to to half and quite first Thanks [technical could Maybe inflation. when talk about inflationary being a profitability bit of a a pressure expedite just so that margin pricing little gross to

that and seeing you anticipated. but the more it, a think -- of where still most of well visibility great inflation, great you're So as deal have clearly, inflation major areas knowing do that and is goes you the than I into, some impacting

more love than I'd So that.

Lori Beaudoin

Lauren. the Good thanks for afternoon, and Thank you, Yes. question.

question. there were a bit understanding your for you was I out -- So me, cutting but I think

correct? asking seeing. then of what And about that kind is we're You're inflation

Lauren Lieberman

or obviously a big, so knowing have anticipated. right? you. Thank that but great than visibility Yes. That's right. higher Because is That's right. we're You

Lori Beaudoin

Yes.

the great grapes So cost of the biggest is grade discussed, out. goods, of and pricing years into our as cost have several cost our in visibility we we've of the

are more grapes great agriculture fluctuate, cost. Our season, growing to the on if related will, really you based strictly the the

what So are. we know those

increases seeing aren't We in prices.

grape seeing were to growing And from somewhat We smoke. season due last are with suppressed in the the prices year's just year. last that

So we've seen slight for 'XX, back that's for increases but year costing normal grapes. harvest to coming really

So see thought pressures our some we transitory labor being that we do some had originally were of costs. in

cost some you'll of can have so we the that and Lauren, glass. recall, But term caps as the We our our our items for those inputs, have contracts of on are long -- relatively amount increase. majority

around So seeing for we delivered. is as goods, too increases majority freight, that contracts of our but inputs aren't of significant our the some limited cost are in our as more negotiated

Lauren Lieberman

was could be a decide enough that clear, it to sooner? thanks, still you on that be your words move you plans Okay. price you to to since have catalyst increases been

Lori Beaudoin

Yes. sure. Oh,

pricing. work our with the regard very pricing, as we we frequently. you maximize and in methodical We our But to take a at look our our talked holistic also from also will, trade if past to to and spend planned approach So discounting. we've return, the

have pull are have upcoming different and to place, we programs in are we there also can that that So out that programs work we levers.

to and our we've on stay for of rest that a seen, issues based and inflationary that the I some the think, while. is if just So with pressures here understanding the inflation realization, the of country

pricing. accelerated some on changes of have We our our

of of programming type of spend. to with So and some some those regard the

of with accelerated that so our our distributors have and pricing, are. the retailers aware do we in So we that what well combination they are and partners, changes

so forward. sure move And did understands. make we we -- that And with but work things them everybody to

Lauren Lieberman

Okay, so Thanks great. much.

Operator

Kevin go Grundy Please you go Kevin The your ahead, question ahead. Jefferies. question. comes with can from next with

Kevin Grundy

okay? guys me you Can hear

Sean Sullivan

Now, we can.

Kevin Grundy

Okay. Perfect. and Great. question Thanks the results. congrats strong for the on

wouldn't of may broadly. guidance? the more have within with to raise you balance may Just year first speak you the strength then And on just of, first the the the well. on the pressure initial if back was consumer, any other fact changed, risk strong, as including see wine pricing that how you was an second to year respect Alex, inflationary on clearly comparisons. and comment to just of an in maybe half the broadly of year under that to better. than from the be perspective. as just the really to to with see on you're of what quarter To and consumer, sales difficult strong the guidance year the Maybe picking more broadly the of a that's a the first quarter not bit the seeing half you of given of comment of anything, point, But inflationary sort that. touch What's Clearly, half up going facing now mind, year-over-year you balance Lauren's it relative lot that, respect pressures if concerns really opportunity, in any it's strength to not. your Maybe portfolio. the given they're see decision The

Alex Ryan

ahead, Go Lori.

Lori Beaudoin

Kevin. the Yes. today, questions. for and thanks you to Nice talk to

of brands. half than third benefit contribution will growth at with we in strength increased the a half, fiscal And holidays type quarter. look the the so equally slower about thinking seasonality traditionally, feel some our the year. the that we half, yes, fourth half marginally of our and the back the of guidance So are our year, back bit has back raising our of We're the extremely excited without about for our first little the when going greater back on. of But thing and up the in of come quarter between that third we some growth the

our our from what we remember, experienced early QX product And we're if bit, you last a distributors part our QX. QX, of bit so or versus I who that held of innovations a little year. deferred think were we shipments up impact have some by for And shipping QX part include early to of the some the shipments you new in will, holding our are if of

our QX Kosta this we And QX. list forward have that have into a don't little do that, against Browne, impact offering. year, So, which comping from also, bit we is pull spring our of

constrained, you as Alex, So well. KB is want And then and remains be that our QX to to? do impacting supply

Alex Ryan

doing. Yes. Hey how you’re Kevin,

I'm Our that. brands consumers half. being and if can on a are going is a with quite turning. we it, the pulling The but consumer, our as pressures didn't a think trade thing behind the they're see you wines And Decoy, marketplace. lot the strong because getting I by very into think into to of are right the now. luxury good led continue they clearly, for through concerned And our be I see efficient We back inflationary brands our distributors they remiss us are think of Duckhorn are I'd way wines. getting That's reaching

that, then inflation, So I when of nervous, get finally, that offset a some -- typically, think the good category. would job, into or I inflationary consumers think they a doing And take go to little really And brands. it trusted to years geopolitical would we fit be that when with pressures. XX

of yes, we increases So we care sure are carefully, and and consumers. watch our to to taking it we our our address programs try price make

we our continue assume to in our think place have be what's up, somewhat wines are place we've programs sure continue we're We concerned we the unknown environment. let's it's are the and goals end brands increasing sell. and relationships to guidance and to environment. that, again, got strategies we the with hit but through make in inflationary not going inflationary knowing So going weather to the to to and But feel that the

So we're confident.

Kevin Grundy

That's helpful.

of course, beverage We in Alex, overall just alcohol of then trends December on on bumpy And sort of and well. in view the maybe January hit went all Omicron is U.S. follow-up. quick the industry. took period. through did wine total as a of with on-premise, kind one Just

at wine industry. still a bit little soft As Nielsen looks the we the data, for look it

maybe Some of that it not. is comp related, of some

just I'll thoughts wine within Thanks. And But better thoughts be maybe would understanding than So overall on. pass your there trends think on then broadly, premium the to hold that up continues your parts. other U.S. I helpful. industry just it

Alex Ryan

Great Got it. question.

really, sub-segments in are there, segment, that wine there continue to easier help And Thank to me. deciding it we has doing in. the environment that to story makes I you on remains the many Ultra-premium them appreciate due I'm that's for one the only and think because wine $XX It is not wind you. plus that I answer really and in been is going and well. comment compete think and grow exciting strong. it. I that. on total to me so segment wine, people

So we're bullish in on area. area. staying focused that that We're

next think I is we're there. step the think firmly planted I

So area, in others that been because leg try into we have to a only as area. up that have we get focusing

of lot where section Napa, will wouldn't So at we're that's growing as and time the believe -- action spend the a focusing, is. the overall look category I ultra-premium I continue and that wouldn't looking where you wine is grow, to that's because I to and

I So the have. out, you've -- seen as as that and much data bears

excited going we're focusing be to So We're to there. focus on it. continue

Kevin Grundy

you Very good. Thank both. luck. Good

Operator

The next question Bank comes ahead. America. go of Please Galbo with from Peter

Peter Galbo

sales maybe guide from clarification a good guys, afternoon. still remarks, Kevin's wanted on to Lori, you last you're back to following that the on the fiscal you're you're levels. up year, this lapping like ask from on-premise think year, tough I XXXX Hey mentioned big Thanks half the think question. of in your lapping understand the kind into way all kind although back of year, I this year. last taking of not numbers I just for question. of even I would

that scanner would the I also being think would still I maybe through the So tailwind. just about strong. And think recent quarter as

to upside sources as of Just revised wondering sales potential the how to think about even guide? those actually

Lori Beaudoin

Yes.

as think back So the half, I we've we're as confident, we said. very -- about really

So little more on weren't for if supply growth would a bit constraint shipments. have our it the KB we

talked KB. really we to with that regard constraints solve we've supply -- about to our hard worked So

doing great we expectations. half the shore up for really how it's production think is in is the supply job we're our of the Our comps meeting And a for prior story But as working in the the QX growth future. year. against that huge back and to that about,

had in we QX year. remember, I XX% think last you growth if

year. So which in feel constraint But ability that our growth to a continue contributor we last last compared do to this large supply our have confident that we grow in KB quarter. do very huge is to in off year shipments,

Peter Galbo

Got it.

expansion the had Obviously, expecting mix for with modest were XXXX. of kind think kind margin I Okay. gross of of you mentioned Lori, year quarter, modest impact. you expansion, last some the still margin but had you quarter, gross -- and And this

outlook Just is inflationary the curious still about, that the Or that comment? with case? and with that to you've talked a revision is there

Lori Beaudoin

Yes.

to So with margin so phenomenal with not shipped which our when the regard that have we in do brand. back QX, would expect some is slight margin half, improvement in KB the much

So some driven slight improvement we margin back mix the by half. in mostly brand expect do

be so not that up back to QX, picked improvement, will QX. much So in regard margin but with

for back in we've similar to see half, very margins expect the the so And we first what half. seen

Peter Galbo

so Thanks much.

Operator

Robert with from Please question next proceed. The comes Evercore. Ottenstein

Unidentified Analyst

for today. Hey is results on guys, this Greg Robert. Great actually

question a Just on pipeline have you M&A. with quick the

You new as are being new you if plans a well I assets just maybe of you. could you for what any big sort looking this towards. wondering have you any maybe. you guys also And on as touch guys you innovation talked year for there? have guys updates Thank if and about that year was just then

Sean Sullivan

Greg, it's pass to piece of first the take Sean. it and I'll Alex. that

yes, M&A what front. the active think with out of year talked bearing XXXX on the continue do about an So brand to for see being I we we

about brands and effort focused going be, winery on as Our is we've talked disciplined. to highly before, luxury

thoughtful mid- could good have reasonable. the a to we where valuations, in see recent digits. on is We've a reasonable be deal. place high we're that. multiples think think, piece are So double they, increasing. the we increase activity and continue seen to that of broad-based I do deals focused that, is EBITDA The and a They in We

element the a So we parcels we going and think from we've and the before, quarter. have production that, talked for that's primary separate on I closed to where of talked on time, and brands. the three be apart us. We is vineyards at during about M&A last that we vineyard new about as All focus looking facilities are

didn't you of be center is positioned just it. and compelling that going I would the organic said, the So story an about well remiss excited be to but it, as if year, our I is think interesting note in I very one. We're very

want if Alex, about the are So our you will. feet to our development? talk you NPDs, new think, to I And product fire,

Alex Ryan

Yes.

think it's to important add this that me take on away. Let just to continue Sean we what all and said, I

we're and As earlier going in lies. real times, I've stay focused stated to where numerous and in growth luxury performance that's because the opportunity

opportunities imaging, price profile, brand of points name that criteria and winery stuff. front measure in to up may all margin placed positioning growth that So a all profile, such, the we not

a there's but So Napa. it fit that quickly pipeline, you would that things narrows in, strong would into fit into the would expect

jewels, be So find goals. that those that's innovation, long-term where our number a talked fit you supportive we're trying will, spending most into our and to of On time to of we've about this if profile our of times. can

we've We the pipeline something. was in have a lot of introduced both grow. continue to and I to products going mention just to that

that's overall continuing I think growth want the comment. if down new nervous goal. it just of in products, slow to to I it's Lauren's create and was of wasn't maybe to to future going kind be helps -- I'd our if our part

two the years keep broad takes get the Decoy And So just introduced, it blue overall to fully it market. Limited. into -- the not mind, takes in a three about product example, only distributed have we to for U.S. label,

the strategic and X far to, and the that the we'll But risk offset giving with come have up our engine we So into keeps particular be to once the a product lot releasing future products growth again, continue any gift new on -- future. a you in product. exciting of over time new

coming you to on updates new can to So products continue year. the expect hear throughout

exciting quarter we've apologize year. you this teasing and part, That's out been an on, good coming fourth one, our on of We have guys that. I which just marketing in the

tuned. stay So

Unidentified Analyst

wine could update X you could squeeze Any channels any that's Great, in I guys. just tracked guys maybe more doing. could color Thank been there? provide the you seltzer, have on great. us more be about a how But If thank have if guys you plans give you. The you quick just strong. would

Alex Ryan

Yes.

one. Just be of is was small, small part a to a planned business. our and quick Seltzer

our It's but little hit a working so objectives, and primary there. echoed headwinds. are trades of but going the was just, with really with throughout again, it, that. the was again, the our Our working small, distributors -- our going business that and seltzer it's a development meeting obviously, be broadening part forward, big name Decoy It of to launch the the goal not out and it's we

much more So that. not to update on

Unidentified Analyst

guys. Great. Thanks

Operator

Modi Nik Please RBC Markets. Capital from comes with question proceed. next The

Filippo Falorni

Nik. afternoon is good Hey, This on guys. for Falorni Filippo

talk improvement business What whether terms well second you your share back driving a and guess, the and restaurant are as to gains after first, trends We've half growth? And total wanted the in continuing. the Omicron I seeing second, mobility in reported impacts, on-premise in I early similar February you and your sequential to the So in channel. on-premise those is acceleration significant of maybe are can in then go reservation of about seen channel March. those?

Lori Beaudoin

the Filippo. Yes. you, question. Thank for Thanks

We quarter. same we at the also So excited in some very saw saw we growth about are growth December, the very January, but the about in saw are the on-premise in time. in we we slowed off-premise growth excited great November, in

recall, to you realized points continue that had if those we in COVID, but not off-premise them. and during from had only we also that retain gained gains we're time, that we growing at So really we strong

But So growth we're led increase seeing QX percentage by a on the on-premise in really strong per was sure. both. growth for of channel

Filippo Falorni

the as Got mandates? further And you it. the also I business in see guess, less given did acceleration you mass sequentially, exited less quarter, a restriction,

Lori Beaudoin

seen Yes. we return the on-premise a growth. Yes, have to

helping will, We're gain very we in those shorter wine the listings, if wine wine with list, sell-through. little but our excited the I really are continuing on list. and continue down see past, on a bit -- list, you seeing to we paired think is -- discussed wines so that to we to we're our are which And

Filippo Falorni

Thank you it. Got guys.

Operator

question next comes JPMorgan. proceed. The from with Andrea Please Teixeira

Drew Levine

you're question. on shipments if shipments relative just is Andrea. line some on distributor in and they're if really for taking sort Drew the Can of for about, Levine be to in sort inventory if given to have make year? room with the levels, to you on this planning underlying talk ask back you the guys, in Thanks I levels, strong to maybe up half continuing demand. depletions historical the line, wanted of I about guess, the of Hey

Lori Beaudoin

Yes.

question. the for Drew, you, thank So

our the Inventories And out they QX, during increased distributor in holidays. we traditionally, don't that we So similar run sure results. inventory they see floor. somewhat saw so make

So we quarter, the relevel, will distributor expect between them variance QX. that much will, similar. to ships we expect be in fairly floors But expect don't the and in do we depletions if you

Drew Levine

go have wanted you just long-term them but some I inflation But sort with there really I these Perfect. to of bear your the And but underlying just they to Or then understand I you you. and of contracts suppliers. with asking labor to some freight, you mentioned back is point. Thank those are that much know the burden increases? on inflation categories? in not

Lori Beaudoin

Yes.

cases, some being but they're some for us not -- sharing, in we're change. partial asking much So seeing they're really

with anybody so cost of we do like we sit said, inputs have, all. I we in our our at our like considerable increased predicting we of would. -- course, work So contracts with But down. long-term and caps increases partners, And aren't these

Drew Levine

Thank Perfect. you.

Operator

additional no at this waiting questions Thank time. you. There are

to for the pass I'll Alex Ryan conference additional So remarks.

Alex Ryan

wine to you to we meaningfully for first today quarter. again high-growth in thank results. confident report to second speaking you raise to review the to joining we luxury our strong XXXX us segment excited early June fiscal summary, remain with again and third look to half XXXX In our profitably in our forward want ability are I year We year continue very Goodbye. a quarter following when guidance our performance. fiscal outperform

Operator

XXXX Quarter for your Thank participation. the Second Earnings concludes Duckhorm That Call. Conference Portfolios you

lines. now your may disconnect You

The Duckhorn Portfolio, Inc. (NAPA) 11 Mar 222022 Q2 Earnings call transcript