- Earnings call transcript Q1 2023

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Operator

Good afternoon. Thank you for attending the Duckhorn Portfolio First Quarter 2023 Earnings Conference Call. My name is Matt, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to our host, Sean Sullivan. Sean, please go ahead.

Sean Sullivan

to Portfolio's welcome earnings quarter and call. conference afternoon, the first Duckhorn XXXX Good

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

you based it, forward-looking discussion remind Before risks that such, today's on environment see currently we uncertainties. statements begin, and we as and as includes contains like the I'd to

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

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

in will XXXX, noted. period prior US or XX, call otherwise and With consumption today's will dollar call to all Alex. October the addition, unit same versus unless that, In the year, on please XX-week the refer that food I over period growth consumption cited turn total the data note for to ended

Alex Ryan

performance. really We us Sean, first financial to quarter continued you everyone. joining you, and good today discuss afternoon, our appreciate strong Thank

mixed and wines well indicators, momentum in execution sales to the Irrespective a outlook. provide would strengthening excess fiscal and update strong begin brand in our of show growing powerful of Following day, our uncertainty will quarterly to industry, the results my our quarter. our and to luxury are also our strategy of sustain growth XXXX deep the have walk In Then as are the sub-segment open we from a every sound our this as continued for of the economic we Lori to sub-segment. through call well with we further and pressure an outperformance significant equity with questions. positioned opening with we remarks, well execution the few will backdrop, customers the connections to highlights like our consistent focus offering by call I inflationary accelerate on and seek fastest today's us period of

sales, year the particular First, the of Vineyard up the years. more when QX into future was all which year, QX marked was fact a prior even quarterly in from another Costa in fiscal net beginning performance year that Browne adds comparison will QX in observed strength all-time X%, is included and QX Single remarkable consider nearly in net with strong October. Organic high growth rate This growth XX% period. prior to sales but you remain release in this shift

high of Duckhorn Second, depletions our to Vineyards continued by another high was sales Moreover, even of example led demand into the wines. wholesale Decoy growth driven luxury be net robust our almost and brands. were teens, volume the X% growth winery a quality entirely stronger and our by

as top broad-based. line the go-to-market of to our Third, brands shop remained our and strategy, continue one-stop interconnectivity luxury wine growth win

with all in was shipping distribution new all balanced and how cases, luxury from channels consumption, strength the it and strong distribution. and of Vineyard resonates all reinforcing QX, points of entire core we key Brown's release well healthy. shipments series our remain impact further portfolio very Costa account which across our that realized metrics, sold portfolio Fourth consumer Costa trends of removed Brown's and the performance Excluding schedule, across Single the

the was And wine, of Within fastest of top the greater again $XX the than fastest per supplier XX price headwinds prior up nearly our higher where that luxury growing gains fifth, of goods and margin winery bottle from cadence a a take sub-segment was adjusted keenly other appropriate. carries and share that to that versus and units gross reflecting portfolio ability a in Duckhorn than consolidated any gross dollars XX Costa both Brown, in period, company the year suppliers we delivered consistent mid-teens spite of above a amongst in to manage up growing is wine. the once margin the rate shipment and market average, testament cost

on are took which September optimizing in increasing prices have effect Our combination trade no our primarily fine demand place early our to we trade our likely wines. increasingly Thus far, consumer's affluent the and of portfolio, calculated through luxury not down thoughtfully increases flowing dampening any absorb within for pricing sign more ability actions, and modest system. frontline reflection through of spend and a seen thoughtful a of price

growth which channels, ability and wholesale, continued growth from in all execute off-premise contribution Our double key in positive total strength metrics in successfully the recognize reflecting quarter to was on depletion sold, Beginning up we quarter. multi-faceted account sales with digits in performance strategy. this showcases double-digit particular on both our a

front is we business. current within in this our greatest off-premise the believe widespread on is opportunity growth represents our have increasing new wholesale majority our As discussed the accounts which in we primary channel, new penetrating on accounts, further we our and focus earnings call, us for distribution focus considerable of of last opportunity the wholesale

depletions distribution in to gains accounts. of velocities In also points were addition off-premise digit per by double growth, bolstered both account and solid

ongoing grew team's digit, highlighting on-premise proud execution driver luxury quality depletions our high QX still While against wines, were sell distribution of reliable I off-premise particularly our believe the and given comparison, sales double wine within as strong gains remains of leverage, partner's positioned will the supplier year-over-year well the luxury a and share for in resilient. confidence channel, are for as channel am reputation a trade a that brands sell. by scale by significant continued greater fine dining We on-premise our channel through growth our particularly we

addition, see as we have continue cadence also which experience. are competitive fortify a agenda wine In impress our our sales past, the offerings healthy will to growth with spite positions. In well. to we for believe that exceptional our our much I'll our each we the now headwinds strategic like and direct-to-consumer is wine to we investments advance in business, innovative make needed club turn margin high in of providing performing shipment visitor trends luxury loyal to by an customers Brown, most Costa we new continue

quarter, how present shaping move the Is latest direct-to-consumer we of impeccable into Costa second providing released with example outpacing Vineyard felt channel. we series our demand this the good track Brown's into up of continues Single the the record about As supply, dynamic.

moment, well market of and product about really new Now, of let excited touch I'm Canvasback, the including our the favorite as Brut product releases, coming of innovation areas, months. [ph] Red innovation. Cuvée my a for as several Mountain to on solid in Decoy new the next one pipeline me few

outpace strategic successfully to important It introductions is continued we are industry to these within an that pillar that new product growth. be sub-segment. history the rich of We innovating will of us our allows continue have a and the confident a aspect luxury

development Lori, today. Before to comment on another to I turn important want I things over

this next duck the eager her at XX success sound spring. leader truly over we the and beaver release years. strong as press She the for afternoon, me to this announced us is would all with intention Officer a grateful. a and high in Lori's Portfolio been today wines, are a professionalism, and over been inspiration discussed character opportunities. for next tremendously luxury company. have Lori's She warmth We intelligence, her instrumental not past to moral of of company retire and leave will an if are where and not has and As Lori career platform the clear run she Financial Duckhorn vision strong leadership with to set Chief of has dedication to our take we the leading as quality on

future. turn and us to the joins counsel quarter With that, year conducting updated our also serve for performance the surge company's to are national to as CFO plans our now over Lori to to over a a Lori the into next transition a Lori the expect continue discuss company Senior 'XX outlook. I'll her Advisor new CFO afford seamless we to after next transition We fiscal first to and ensure thoughtful until our CFO months. few as

Lori Beaudoin

proudest has to partnered I organization. years, XX the Thank After that period you, professional this more time Portfolio I say dedicated at than have have career. the a the my and of Duckhorn honored am at outstanding spanning career team talented my we immensely unequivocally Alex. can with been

of countless Over realized achievements. tremendously my here, course we this more XX business and have than grown the years

Duckhorn built the by make have on Dan We Portfolio wine premier the America's foundation established to Margaret and Duckhorn luxury company.

ahead the could not advantaged wine continue Portfolio spirit mindset sit force said, of my come. company, transition. ensure and remain and focus in and the Duckhorn executive the will to and and I I because oriented that within of us growth be work a deliver a with confident plan position seamless profitable shared quarters remained growth today steadfast team diligently rest innovative which driving across Given we successor to entire the Alex, for more luxury the that eventual to on my of the years the to With

noted And results as beginning the growth outpaced decline million, of brands. case result Decoy metrics; timing growth in our increase a and of first lesser nicely first earlier, our distribution points Costa account, The quarter Turning reflect all Duckhorn contributed channels partially key price mix. to to leading prior shipment These off-premise relative as quarter previously of outperformance growth. wholesale growth, Alex mix were and by over Brown to in the period. negative in the a a sold, sales shipments velocity to X.X% line, depletions Vineyards in on-premise volume, number extent, year $XXX.X continued the and brands X.X% of other our to strong our to account was with continued in discussed as the and primarily price led offset winery per Winery shift compared X.X% execution organic net results, top a and

was a on the on distributor performance consumer's growth, digits Let's net the versus continued strength by both prior and quarter, in the to highlighting moment Wholesale all channel. off-premise wines double quarter, luxury and of sales focus desire were up to high quality again for the our greatest in year contributor once portfolio for XX.X% our increasing our settings.

fundamentals, we outperformance reflects of shipments, discuss the business strong and in X.X% relative forward internal October, our to in looked at believe Trade was period. to California our detail I second will pull the from addition the In prior year versus greater Direct shortly. timing The particularly expectations this up quarter. channel some

performance positive we've already. we comparison I'd DTC other prior DTC ago a a XXXX year's marks related reopening this point this entirely territory, our would last Costa California's as moderation the net Costa was excluded on the our While benefit XX.X% sales shift to solid have decline if context, from shipment shift year in The first-quarter performance, the This noted challenging from put rooms. channel that substantial shipments a fiscal tasting underscoring Brown out To direct-to-consumer as to times timing clubs pandemic Brown year in and quarter. trend, QX was material down the grown few subsided. in compared in recognized nicely call

and the points up basis than the period. $XX This decline DTC million. as in the the cash compared from quarter mix versus in and total million, equity-based $X.X X.X period. leverage This debt channel and per net transaction-related offset shipments and period. million prior prior of a EPS year investments negative quarter, year-over-year was profit continued by income gross by DTC was income in of of improvements growth $X.X our in in share up or million million was growth of sales times XX.X% our in First adjusted quarter line represented selling, the was as QX. increase income total an our prior to the timing margin, business or net wholesale On pursuit of of within a overall opportunity $XX.X decreased shift XX.X% $X.XX investments of gross support planned period. year represents $X.XX period. was excludes at The XX.X% administrative $XX.X non-cash EBITDA increased against adjusted adjusted well to reduction compared primarily million the X.X% margin or net $XX.X our At sales by Brown white $X.XX diluted to long out compared approximately was resulting our The to diluted adjusted debt. quarter million which increased diluted XX.X%. $X.XX Net per end more $XX.X $X.X compared term Adjusted considerable with the in had of versus share wholesale and of $XXX.X million On increase $X.X space and general share XX% higher channels. an in the share year margin or driven prior the in to million execution XX million net prior grew gross per ratio million $XX.X per and came operating to basis, EPS X.X% diluted compensation, for X.X% expenses year were to and a basis, expenses we strategy. Adjusted an $XX.X as year Total the profit and expectations net Costa million, reflects the year of period. expenses distribution prior

share. adjusted to $XXX organic million Regarding which XXXX, our $X.XX of Adjusted to we volume to per $XXX reflecting are $X.XX of calls year $XXX for X.X% led sales guidance million for our EBITDA of net outlook, fiscal to a approximately million million, reaffirming growth. and $XXX EPS X.X%

updates adjusted We few and assumptions are to a namely, underlying year though, interest gross guidance margin. certain our expense full making

growth cover year-over-year. other We on the changes Winery the still winery no our expect assumptions. other other strategic offset no one on be and hand Duckhorn and greater For There million million of gross XX There from by will previously. our a inflation to to from XX are expect continued given to fiscal outperformance plans approximately basis in down $XX margin first rates, our $XX.X expect down now improvement to approximately for in reflect rise to quarter up to guidance XXXX interest XXX To basis points, be interest continued we pricing margin changes fiscal to our vineyards XXXX. brands expense, an the million hand. adjusted we basis outperformance, now growth Decoy to year-on-year for contribution points flat from our from investment are $XX.X $XX brands million, planned prior points

scale competitive current wholesale our set of long leading expanding investments over us the Our cementing position wine enable Duckhorns' time, and to to our term. continue should execute for against within multi-year distribution luxury industry profitably moat opportunity further and the

provided margin Aside a guidance given new our from call, cadence the detailed our delivery quarterly wines. on year Brown we high also guidance ultra-luxury sales last offered Costa full for net

during DTC outsized QX. we That and wholesale said, As we and first do here wholesale than embedded in observed sit can and in the influence shipments anticipated particularly and of quarter, any we performance on second growth was are signaled half, pulled believe in of that growth we as today, outperformance our with produce on particularly Costa net we plan Based given economic quarter, in uncertainty. guidance for forward. Brown sales stronger times can confident variability a in both remain late September, the portion in monthly

quarter second to to digits digits. our are the up As mid-single mid-to-high single from up such, sales for expectations tempering net growth we low

year closing for back we throughout will guidance now comments. encouraged to Alex XXXX. quarter the turn our success look remains we the unchanged. to However, call year continued and over for the first forward I Overall, very by are fiscal full fiscal

Alex Ryan

you, Thank Lori.

to upon strong a external are fiscal guidance. strategic meet 'XX to our great priorities. year and we executing off factors, to and the on of delivering year results Regardless are pace start We growth five

the we chain. are standards of luxury supply quality our highly procuring ample wines diversified high meets supply through First, that a for fruit

build Second, we scaled tuned brand platform, are our awareness. leveraging continue with to and consumers channel Omni gains

considerable luxury as sustainable new continued long the stop to from one deliver and differentiated our are of needs the term portfolio fastest the innovating wine we our distribution growth to position exciting margins. shop outperformance deploying your penetration net fifth, means Fourth, questions. to as approach at wholesale to should Sean strength offerings a all space a are trade investing well sales single growth partners. I sales take strong, we and and of consistent available of sub-segment our opportunity, continuously are support ensure drive we refresh Lori, are of white as Third, With to fine wine high which that, wine target attractive of meet of growing organic thoughtfully digit luxury, highly

Operator

instructions] the with Kevin Jefferies. [Operator The Grundy of is from question first line

now Your is open. line

Unidentified Analyst

Hi, as you've some recently broadly, seen you the Kevin. guys well this more October, slowdown Could in general November, Noah premium is thanks. as trends in comment on on suggesting comment for for more on Nielsen with trends wine category

Alex Ryan

a Yeah, business. of Think Noah, that. just data one-third our bit, about sure. at look largely I'll represents that take overall little back

in little So to bit. category we same The We've context. that the take the slowing data. seen need all is a

So significantly the continually within We higher than and are the that. identify the progressing let's category. just category competitors

than a position and three-year So the And year we're can't -- advantage an we we there. trends more trends trends. just look two short I at feel are don't the call lot stable the term industry. frankly,

going We're to to Hit that. in confident. front of growth our on competitors are stay rates still we So continue outperform. our and

that it. that? Do a on looking contact have hope little to up at I follow gives you So how a we're

Unidentified Analyst

I'm Thank you, guys. No. good.

Operator

line from of Peter your Galbo Bank for question. you Thank with The is question America. of next the

Your line now open. is

Peter Galbo

afternoon guys, to congrats and Lori. Hey good

Lori Beaudoin

Peter. you, Thank

Peter Galbo

break of double you of seem business? high a end Alex, the Can particularly of on-premise digit if at seeing a there's to And slowness data? the us on-premise, it's -- don't interesting, with the something your you're what fine-dining. on even you're comments lot because of kind just a of share of depletion, found that tell pretty seen, seeing would the if guys that's some that you with or have we've I I trend in still the kind in other at lot if that taking obviously else know that more on-prime

Alex Ryan

right. correctly. and customers making right we're want good, with with partners be been where and ourselves wines aggressive price The taste are meeting position brands Peter, the very they seeing we met. our seeing we're We've sure our been success, to the We've selling.

there's So off-premise. on-premise both a confidence and

think throughout the our up We it teams pandemic. in on-premise equally. applies kept sales investment I

we well be in that and center is really focus. were to responsibly and seriously we of successes that came in things So that take poised when think back you're customers front seeing our what really and I

Peter Galbo

that's to bit that how the year retail, as Thanks can in about any this of o much innovation it give more that to Back color -- provide of a is your much. time to start 'XX little now? roll very And some No, maybe Great. follow-up, that when Cannabis see just Decoy embedded Alex, the might you more that's and helpful. fiscal a growth a you Just event? Is talk we more incremental there. out or in more plants it just

Alex Ryan

we our -- grow, were incremental No, making and and plan. I We for really they're planned second in them. we then expect that you strategically bullets. puzzle, the knew to in should made silver we make we to make the beyond of to successful those not and a as continuing to half see pieces not impacts We we combination to really the try wouldn't call, try so

impact you the they're our customers year of I times, they're employees And this many and we've embedded overall half keeps plan second my into about not keeps the the as They're keeps excited, talked -- know innovation market be -- excited. keeps not remember, in think will the future. the excited, but most So outliers.

customers excite a to that is just is as a our So up and average innovation bring the long-term price forward. strategy of bottle going

that. -- is implementation this just just this -- is So year's of this

Lori Beaudoin

when it Several -- been we've growth. completely that is we and seen great dad, we've and releases a be hi, significant especially what a thinking we integrated take release will we're those over wine, and decoy with time. year won't a of years to year I this three we new about wholesale Peter, anticipate Lori. we my point limited just where be over wine, reach releasing Yeah, success varietals as our seen

the from So continue we new benefits these product for future. reap to the into innovations years

Peter Galbo

very to Great, forward much. thanks them. trying Look

Lori Beaudoin

Absolutely.

Operator

The your from from is Teixeira you next of the question. Thank question JPMorganand. line Andrea for

Your line is now open.

Drew Levine

Lori, Hey, this our for is well. Levine as taking and on Andrea. Thank for you Drew the questions congratulations

wanted teens. October, and guidance. on mentioned but I pull from were So on the ask potential depletions some noted Alex in hand, Clearly, first forward came I the running you other quarter expected the better than to high think wholesale

would I'm curious, anything, depleted guess there So distributor suggest I are just I is inventories seem that to faster. being

guess more on like some I more didn't the any on there why thoughts perspective, you. is that it seeing curious second the Thank you're a anything but I'm So conservatism sound consumer there. from quarter, just guidance

Lori Beaudoin

Sure. Yeah.

the So did as a of into outperformance about QX see for QX estimating are pulling growth -- you and QX. half we're we is volume was from we driven that mentioned,

-- was distributor price So of function strong to well. a we're and direct outperformance depletions really as then the

all. ordering from price not quarter at We thought the would when had were towards and at thinking not taken normal that we some that really seen saw heavy originally to what depletions and the process the of doing We've a those we our really distributors which then figured pulled changes ship quarter effect forward their us our saw. what's planned effective and in much expectations distributor's we giving the planning, cadence. buying end bring that's that's QX. of originally exceeding into really our in these prior We really to distributors in mid-quarter our that increases, So impact what really would were we were heavy

I seeing said, demand We're So any seeing decline depletions great, not in continue. we're at all. as

all So the from at we that changes no implement. price concern

Alex Ryan

sales. always And some in is timing of there of mind variability that keep level wholesale in the

QX. we QX over that of get cognizant just Lori that as next as as QX again the relates border to and we're to occur it can mentioned the So

things. So want at of how cognizant look be that we to and we

Drew Levine

the so follow the away in against Thanks retail not a then just three comparison, decelerate a obviously on and for market bit performance, Duckhorn. as quarter. the from but developed much channel, Obviously the year the more color tough director up California a a for anything did taking

anything seeing, that So California from maybe relative United a you're else the perspective in consumer to rest there's just curious the of if States.

Alex Ryan

Hey Drew, a year. great and time from reported on lot will we we of I had that's some that. reporting. in manage sales, a quarter bulk unusual, sale but shipment, this bulk think a built to wine a to We the question bulk had wine earlier quality, do time do prior normally It's of don't we wine to the

single somewhat If high you consuming exclude State state digits the up we of Union. California, largest unique wine item, the in the in that are

as clarifying California on sales were think to really, put we core luxury typically a business. So that our that I -- results for in do we the point really that, just healthy that -- our were bottled wine

Drew Levine

Lori. much color. again so Okay, I thanks that for and it appreciated congratulate

Operator

question. you Thank Porter is your with next question for Greg Evercore. line of The from the

Your line open. is now

Greg Porter

and provide I wondering you kind internal there. can guys, more you Hey thinking for more color CFO you're the search just you color versus if any taking about how call. thank could of the was on any Thanks. provide external

Alex Ryan

to all, position someone of hired remain is would you as going in you've until expect, CFO where Yes, Lori and the first integrated.

no in there's So lapse anything.

coverage items take company company be of the and support to years We've experience public solid significant search full hired and a this into to us future. that a experience, So going are company time. for them that one we the looking confident is until for several have next help national public we're firm very

the parts us. from all think and to that covering need going we the important I we've that So need market's

Greg Porter

then just And quick one other follow up. Great.

you So release Costa color there I know to have that out? the based press guess more any to underlying you kind the can shift you're of planned decline been have provide, that was the going cadence Is what or through you on I sort you're of from in flattish. the of the I you is got ramp -- level Brown channel kind mix what do and the that sustain pricing X%. numbers that the saw around think of or do Is the of year to end without track price impact that seeing expect

Lori Beaudoin

Yeah.

So separately don't from brand. Greg, out we really break price

we quarter. did price the mix have So we in see

would offset sure and of as we have benefit didn't margins from decline had So as had they a extent we we mix, that anticipated for brand the -- and then because little the We what that's saw. to would mentioned we didn't experienced than of strong our we DTC actually our we hadn't really mostly which impact I margins changes anticipated the that earlier also earlier pricing helped some that we anticipated. thought

Alex Ryan

the account into that this year. I beginning changes fiscal think take to and quarter pushback point seen another we've is zero on pricing our first of into the

made and those continue the to the time at the we performance do the right we the -- through flow expect flow for So, confident right to that ones year. we're through

Operator

with Kaumil The line the Gajrawala next of question Credit of front in Suisse.

Your line is now open.

Kaumil Gajrawala

versus for don't channel. with just call so and of and this it on thanks us maybe spread well, the appreciate some kind to context and margins there the business were your that and business. part on what's wholesale improving of you you improve on I easy maybe you managed effort and IPO. CFO said the you your looks wholesale on just congratulations all California are Lori, believe you a margins. you on business any especially talk everybody. the then maybe able that Can on you, within the around perhaps specifically well I I'll how your the as what think of with all margins that going Thank on just about help, question saw a like start

Lori Beaudoin

Yeah.

business to anticipated we heavy our had sales to referring buy-in was of Kaumil, was we more didn't saw our what mid prior spread wholesale were the we with October, saw so the we our regard changes also price heavier bring behavior. and is So kind saw quarter. distributors so more price what in that our end and channel of as than would quarter. to we usual the end effective see saw the anticipated in that I of had towards but then We changes We

So right. benefit from our And greater how we recall anticipated. recognize that pricing we than the in we quarter changes, implement had

ways reducing it. changing frontline trade through and majority was One trade implemented is price our We price have the one multiple changing through can and spin. this do through so is changing of we our spend

Kaumil Gajrawala

what what versus differential it wholesale would of curious I your was business. curious, director California between I it looked or price like margin your like the it was -- looks now business

Lori Beaudoin

Oh, sure. Yeah.

as talking highest is the California Direct and California operating we have to right? to then within distributor the in direct we two our or second those the the operating three then about, highest well have DTC as remember is expenses highest highest different but our been third, across then coming also business, in margin trade margin business to being in business. with talk past direct channels as trade is we So our consumer years second we've the expense to for margin direct

the in other selling people more wines California we lot a with our because XX The have than states. out second being lot -- a

quite right similar the So down they're bottom channels. when of to contribution to between in it line comes contribution, those terms

Operator

further your questions questions additional you time. currently There no at instructions] no There Thank for [Operator are question. registered. this are waiting

closing team pass for So over remarks. any conference will to the I the management

Alex Ryan

portfolio, review you of joining our the forward early when and All care you I like season. of talk our you XXXX behalf to first quarter our to wish for look thank results second right, quarter until want Take holiday then and with safe the soon. the us performance in again remainder Duckhorn we and to to for today fiscal year. happy you updated to a speaking I March report and outlook I'd entire on again

Operator

That the Thank for concludes you call. conference participation. your

may You lines. your now disconnect

The Duckhorn Portfolio, Inc. (NAPA) 8 Dec 222023 Q1 Earnings call transcript