NAPA - Earnings call transcript Q3 2024 | The Duckhorn Portfolio, Inc.

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Operator

Good afternoon, ladies and gentlemen. Thank you for joining today's Duckhorn Portfolio Q3 2024 Earnings Conference Call. My name is Tamia, and I will be your moderator for today's call.[Operator Instructions] I would now like to pass the call over to Ben Avenia-Tapper, Vice President, Investor Relations. Please proceed.

Ben Avenia-Tapper

Good afternoon, and welcome to the Duckhorn Portfolio's Third Quarter 2024 Earnings Conference Call.

Legal call Jennifer Mahlan, Officer; followed Fall Sullivan, Strategy today's Officer Chief and by on we Chief Chairperson; moment, and Jung, and the me Q&A. are brief President, Deirdre Executive Sean will Joining give a remarks Officer.In Chief Financial By should approximately at X:XX to have the the release for out now, quarter that ended went everyone third April access earnings XX, XXXX, p.m. time. Eastern after XX accompanying an at risks press are conclusion see on the today's call, and based forward-looking and website webcast and like for shortly begin, such, discussion The company's be ir.duckhorn.com, and currently statements that it, as would on a accessible presentation the remind today's days.Before of archived release environment you the I includes we contains to will the uncertainties. we next as

refer company's assets the from a cause If differ results presentation, earnings will acquisition. most of remember to obligation recent Duckhorn's the of in factors the you in to earnings statements revise see Please forward-looking filings, that forward-looking note these also reflects future.I Sonoma-Cutrer the could statements. Portfolio's no you actual discussion company XXXX, the XX, balance release, the and to company's these sheet Duckhorn undertakes SEC materially April update as or the acquired that

earnings to comparable of full make number does of these measures. income underlying in because business on have growth Sonoma-Cutrer a the However, a of believe provide trends reconciliation useful our day the to results quarter.We with measures and GAAP the the closing measures. perspective occurred financial not that We include of included non-GAAP most measures statement investors will the release last quarter, the non-GAAP on the the in financial third references

for same in will call to is to otherwise In year addition, turn the or the versus consumption the in April over U.S. and today's unit Circana that, retail will unless refer cited period track please data call the to I XX-week XX, according XXXX, the period growth channels, and that all on Deirdre. scanner ended dollar note prior noted.With

Deirdre Mahlan

good us our Thanks, afternoon, financial third and Ben, Thanks to for performance. today quarter discuss everyone. XXXX joining

Duckhorn.I'll goods results with Following walk financial my years for my Board the to call time, member began after to career a ago beverage since role XXXX our X sector. engage I pleased I've passion that alcohol guidance.I'm my XX-year quarterly opening Jennifer on Interim CEO here brand turn broader the to me is updated role. for last and our me took aspect be be the and a first a consumer us temporary.Since Board Duckhorn for this and a through had and to work and opportunity of strong committed will every earnings tasting it resist. profitable and expected and role by would the is our now business, clear visiting long-term, commercial a growth again delighted couldn't and ample to to it rooms, in I am talented wineries and business stay what lies well-positioned the energized team.When the if I with the be meeting for industry. consider I remarks, as accepting in long-held with I serving asked ahead CEO to the teams, business the I and that When opportunity September, with

our integration the an update we near-term comprehensive of distribution and substantial acquisition us achieved and the consumer initiatives, for of impacting results. XXXX, are priorities progress the and up Sonoma-Cutrer fiscal set performance of close conditions rooted our Duckhorn's respect some third including to trade our in industry potential to the business. growth.Before challenging believe in my potential see significant demand. remain wine key Although have network, pressured This the is sector quarter environment next our realignment phase remains market the with provide both across business The trends of due I I'll we for soft initiatives, perspective sharing on our immediate wholesale and which on and

While to down we in in in speaks enduring the data of had by quarters.Our measured our a to business wine quarter, industry continued brand. which to previous the grow expected from luxury low-single-digits Circana, period, market the the QX, consumer as was for X% the strength reversal outperform

on series control this came appellation line combination ongoing gross margins and drove in efficiency accomplished cost expense focused of our $XX.X margin. top at have while $XX.X and adjusted pressure in Kosta response Importantly, industry QX.While to careful of EBITDA management. XX.X% we million, than offering and anticipated operating created The sales million, a outperformance headwinds Browne remaining softer net strong

We $XX are a per to the category, per in wholesale $XX which wine closely wine, bottle details our to $XX some category.I'll degree, outperform bottle trends XX% see start meaningfully to our and channel, of continue drove premiumization the the watching preference to an to for below industry greater even and demands additional where with $XX about consumer in share within category, what I'll continues the quarter. represents on results now $XX business.

Here, had on retailers purchasing a by patterns meaningful the have impact business.

the X Blanc. with quarter, Decoy lower-in-calorie/lower-in-alcohol for innovation last products we growth As our half.First, new a outlined second primary like Sauvignon Featherweight reminder, drivers

our our including are dynamics initiatives market particularly of the through with programming, And traction, gaining them Chardonnay. programs.While you take individually. availability results. of Duckhorn on-premise increased greater by-the-glass high-demand these are impacting third, relaunch current Second, Starting the some I'll with products, innovation. of

it's product holds those that you chance to received.For had have Blanc, to a the options, other of our to well agree, but who pleased of that Sauvignon try our portfolio. While from not Decoy Featherweight I rest a low-alc only think introductions you'll still perspective, it's I'm most recent a you great wine quality to early, been have truly tell up

Merlot, of release. new are for Both Robles Cabernet excited these are a initial our wines, by Paso the at wines And been Decoy very luxury occupy XX greater Sauvignon across on alike.Looking X availability brands days, have Blanc which Chardonnay launches, Blanc feedback to top note, wholesalers Circana domestic recent domestic second signs our early results Decoy the is Decoy-limited eighth Sauvignon. reorder all luxury and data.Duckhorn Following the spring Sauvignon similarly one Also in we're including of largest release, of its is of traction encouraged of we've most and we initiatives initiative, about consumers on the the from soon-to-be-launched already Featherweight product first according now portfolio early received label Limited mixed. spots expectations the but rate past chart. the the exceeded key has our Duckhorn leader of based X-week

shipments saw sales, double-digit anticipated. in Merlot didn't Decoy Duckhorn generate growth While Chardonnay strong a year-over-year growth in in the quarter we net Limited

Although consumer as has impacted been by trends. most industry we broader programming, demand, notably has are by the which very been represented increase initiative, Circana, by strong.Finally, third encouraged our

we've both programs. The of in market our and some has seen and improvements Specifically, since QX the slower our seen February the and Across uptake to of on-premise distributor lows industry, the to data. continue by-the-glass on in sales outperform off-premise. industry according dipped results March,

previously these expect anticipated.On second our visitation to constitute we model However, we net programs accommodate contribution than club refine sales half consumer now to we're a behavior. to and continuing shifting the smaller direct-to-consumer side, to

spend remains While strong. visitor at across our tasting per industry, rooms visitor volume is down the

channel our at The an selling this we're elevated initiatives with wine.Tasting important our the Winery visitation highly and nearly multi-tier room which #X label focused wine In the on vineyard-designated label room clubs Duckhorn our opportunities, Pinnacle price including Discussion, sells experiences. twice Duckhorn brand, of visits red represent fact, for Vineyards' conversion for the is tasting opportunity like Vineyard's tasting the of

As releases, preferences we to and underperformed expectations purchasing behavior. evolving consumer our see we its previously has most Browne communicated, recent continue Kosta and in

immediate will manage more portfolio to the portfolio of of developing that well-respected achieve to increased We will at of the plan results achieved. of are and network network include from carefully varietals, believe unevenness and than as as element of million in brands of be X by our capitalize Chardonnay-led the across has these drive acquisition, anticipate fiscal key April upon following and by and seamless I've these for fluctuations million The complex a fuel This one of opportunity nature complementary approach forecast our operating architecture most has planned quarters, I transaction expect We over wines greater Duckhorn cutover.We to approximately brands transition far the wholesale These basis a is XXX in winery closed the last something cost build the our receiving luxury from be initially efforts comprehensive data. now strategic XX-week integration to up and Sonoma-Cutrer's Duckhorn distribution we number to who integration We I announced accounts evaluation distributor of $XX synergies. set of benefit focus of portfolio.As allow phasing broader realignment. distributor beloved Sonoma-Cutrer the Interim some shipments a Thanks realignment. supplier to investment to our Circana winery be a the we us to of $X an within U.S. the points we wines processes resonance scale realignment current new priority we're growth.The Further, diagnosing our of and short-term is of to CEO and in effectively the the market since the outpacing priorities, our and improved which recently and shipping significant performance strong improved day. teams expect we the begun, serving the integration of execution already on wine prioritized second the across network any in and per next the end cost including synergies the brand luxury in completion outweighed depletions continues growth. see changes, and network account. Sonoma-Cutrer labels all wholesale to year, incremental our began the for distributors.The trends Sonoma-Cutrer our longer-term orders existing critical and and one the XX, while help consumer our and on it's a September, action successful a fastest-growing

talented environment, winery to and industry. continue unwavering dynamic on the remain a consistently have outperform team, operational us allowed to portfolio an the world-class commitment business.We a has of excellence brands, execution we we focused across to navigate As that the sharp

fourth the details in and improve financial our over is our performance.With I'll results outlook trends While our that, quarter impacting quarter fourth to expect turn it outlook, top to organic provide more do to for Jennifer quarter to market on the the we the relative year-to-date channel the wholesale line for softness in year.

Jennifer Fall Jung

pressure all the the Strong Thank fiscal you, which offset afternoon, by operating is please top saw sales us X.X%, and third million, as with good growth in QX line unless enabled EBITDA walk margins distributor margins Beginning new everyone. weaker our deliver another despite results. accounts quarter to quarter and in management channel, quarter.As and account. line sales preannounced comparisons of otherwise P&L, the active I note in stated. per adjusted were of labels that demand range.By expense an declined environment the wholesale us top $XX.X line, our net profitability on to deliver of through are XX% to partially net increase Deirdre, robust XXXX, strong with the gross was

to distributors.Over sales new we generate we distributor enhanced alignment. believe a net XX% our greater constrained Deirdre derived channel will inherent our distribution in alcohol X-tiered days XX wholesale drive of distributors in realignment market quarter focus, alignment commitments our described, demand distributor the forecast. in in expect wholesale growth distributor days from the the our of investments will with with model.We more as from have variability hand, conditions network led We and our states above these of inventory weaker the that minimize the states which on have are ended and expectations long-term some As a

XX wholesale with and was reflected excludes commensurate with the in by we realignment.California growth.Net line operating average $XX associated $X.X is discretionary reduction spend including $XX.X X.X% integration versus fiscal direct-to-consumer guidance.Moving driven increase was the direct-to-consumer remainder expenses in expenses, the updated year-over-year, in from XX.X%. share. and the increased reflecting down, driven had continue and acquisition the in year approximately or At to now margin the million Adjusted XX.X%, X.Xx in income channel million, expect income days of a increased $XX.X approximately will as Sonoma-Cutrer of direct-to-consumer of million part hand declined be by prior net part million of historical leverage of prior the this transaction the activity, updated carefully $X.X year. lower-than-expected our is EBITDA trade to down by Gross per any wholesale same year. share. to up which our as $XXX.X This our with in $X.X reflecting cash current contribution.I'll debt to is our the inventory P&L. Adjusted which margin between contemplated turn year-over-year. our per improved diluted QX, and Kosta There acquisition to the $XX.X of points debt million we largest our channel. variable above revenue to million shift XX.X%, offering for $XX.X into or a sales wholesale basis factors net diluted mix in as do ratio the guidance, While net and QX well $X.XX an basis quarter, come debt. period last The our lower million million manage of this direct-to-trade depletion Browne XXX points $X.XX the outlook spend SG&A, Adjusted promotional or quarter.Adjusted of EBITDA by EBITDA on volumes of Sonoma-Cutrer, reflecting was total in slightly million, end channel QX in we year impacting compensation levels, out-of-state X.X%, aided distributor the from level was

One reflect closed having approximately full-year our to we guidance.For acquisition fiscal earnings provide growth sales the million, of slide to fiscal in sales expect range $XXX of a additional XXXX inclusive We our guidance results. represents the and This April rate presentation year on quarter positive to $XXX third- XX, full the that included are our XXXX, Sonoma-Cutrer revising which X% environment to factors note, full now is we've reflects market vineyards. current contributing year minus To guidance million of our describes a in the net X%. net a now clarity, approximately an or range fourth sales net of EBITDA, a midpoint of quarter we includes to X%. sales fourth This This Sonoma-Cutrer $XXX in growth. range growth net million from anticipated the million quarter.For of expect the to million at X% approximately we adjusted $XX guidance execution our of expect X% $XXX expect at EBITDA approximately and management.For previous continue to cost midpoint, line between XX% focus interest million on guidance represents for as we tax the XX%. adjusted in we margin and XX.X% and with our rate, expense, $XX

the share we believe by of EPS, diluted of $X.XX an we growth range a approximately count in For the adjusted shares, expect comments. despite $X.XX issued facing acquisition to We Sonoma-Cutrer.I'll million reiterating with shares million connection share per reflects of currently close can XX.X XXX.X average on headwinds the accelerate industry. which Deirdre's

Our strong quarter third commitment highlight driving results to our profitability.

long-term deliver and Our we our Circana brands sustained, take data, it and industry to profitable share will now outpace hand continue in back are Deirdre, continue you. growth.Thank to to ability in to the confident I

Deirdre Mahlan

we're I inflection important current the at market for company. Despite an conditions, point believe the

strong stronger by As we've we even have portfolio, of the a Sonoma-Cutrer. addition discussed, made

Sean our and now our We to look deepened confident I have I updating we and ahead growth, am available your deliver profitable can progress.With take Jennifer, of strengthened a robust continue the realigned to to that, market on I network. questions. and distributor network sustained, to you grow forward wholesale are by And

Operator

question The Jefferies. with first Instructions] [Operator comes Kaumil Gajrawala from

Kaumil Gajrawala

Couple of things.

can over useful. on? just there I'm seen else the just talk the slowdown? details consumer-led? the some thinking when would Just this think sure is you've any about years, going about maybe you is be what something First, cycles Is we're industry, and you behind

Jennifer Fall Jung

Yes.

bit and but to strength of hearing as our hard hearing know hear -- we're we -- yes, to there seeing goes continue outperform. on We're to consumer the it's happening distributors kind from in that We really on-prem. well it we're in as -- back you. I little from to as what's So, seeing slowdown is category But we're just and think, data. in is we're our nice it the lens, it's what of a

seeing the wine much total not as you the you're that segment segment. are in as in So, luxury

Deirdre Mahlan

then and retail, change levels, started retail demand in down stored own to maybe and saw retailers rising I just of add through on others to cycle. mean, go from days in is And their end the X people behaviors hear And year this and through that and is were think all a purchasing kind tiers, I a channel, the of at year, level perhaps outlook they Kaumil, continued little may that have certainly their starts some interest softened, starts normalization stores into as across that lessening. One things. pattern, the clearly, their happening consumer then or slowing adjusted of -- and and behavior.And 'XX Yes. there bit as inventory to adjustment be people industry as wholesale that that starting think of the all normalization, through up this through seems that -- some that. calendar I post-COVID.So through the felt the the calculated at last ring probably wholesale Bev-Alc happening happening call that is hand thought impact and a I'll of softening the the you consumer, forecast rates have it, started their started industry. -- including things through the to change the changing or then that calendar their adjustment that been most X purchasing kind I although

consumer robust There up. we of just is noted although down been on, not slowing. the did I remarks the better Circana as third in our price you is we that don't that in backs some operate there is it power, our we're indicative tiers staying a pleased third of quarter a and more and softening can is the that think softening, turned course, of I you some kind our at more we, It's see months since. think reason -- the and it's of it's little it's -- get the And gotten that just market heard, in just is bit anything. -- in points bit.I think takeoff.I the data there some terms quarter, marked, recent don't that we because the

I So a, the that some a happen I demand, would softening just do combined adjustment consumer that to call think with we have needed what market. through

not are that but impact, it's although that's no we're you've adjusting So, changing what of the where been saying the more consumer there's seeing the been meeting and brand they in what effectively through I marked clear engaging the think, we're the tiers that of how think, what bulk was we're happening busy growth. to with within consumer the has I post is change ensure a consumer, the and normalization pandemic consumer that than our for them is, of, to all behavior year,

Kaumil Gajrawala

-- continues just to Got words but feels cycle in just consumer to to it your maybe make put it. trying to sound I like get Okay. you if worse. the not doesn't it mouth, -- we're and And I maybe that early sure like understand,

going it's you about saying? you're maybe Is of what were fact, with In some stabilized. where that

Jennifer Fall Jung

I'm -- not crystal don't a ball. Yes, I have

careful I to of that. not want to be So, indicate course,

a of couple of other. predictable. and and overall that.Of or you months, a data from seeing of And often the this of every closer piece one -- macro view, I'm data, by as an bit each encouraged last than point do, day than there's we're so contradict encouraged the we it's more piece by they environment, or close watch more are course, what We depletion

feels it well. not So, that the I'm But worsening. consumer seeing as

fair of So, our I is a think that assessment views.

Kaumil Gajrawala

do I at also and closely pretty I it look don't know.

why guess So, that's I I asked.

Deirdre Mahlan

Yes. in good you're company. Well,

Kaumil Gajrawala

get When would start to them your you about year? get think assume where you when inventories to we next be I think that like about -- -- that when yes, just does you I guidance,

Jennifer Fall Jung

Absolutely, yes.

Operator

The next Barclays. Lieberman comes question with from Lauren

Lauren Lieberman

Great.

us -- flagged digging you'd reason offering I for and bit uptake starting it to dynamics. standpoint? Kosta thought on are Browne. is So, -- you're Kosta consumer I like a a part high-end give I as better. talk the on that issue I you you Browne understand little this know bit the you'd year's concerning to brand-relevance to feel want dynamic? a also, just was And and suggested had visibility of the this it in was a understanding. to if guys into And like guess a it's wondering softer I -- maybe little was you're Or high about it a pretty more from just on you then quarter's cyclical preview.Does are that you my almost seeing uptake try like things a

of that about just I'm So, degree curious also surprise.

Deirdre Mahlan

for that, thanks Yes, Lauren.

what I'll to have done think one a the that whom comments I which club. brand consumer navigating about is terms consumer another how with see say we Kaumil's do is I behavior of of purchase.So, -- base consumers clubs we we outreach in kind I the brand, in opposite. think of all is of this made Kosta -- industry people shifted. back response is there, behavior And the engaged the our the in not relationships Kaumil's through couple the way of in Browne goes to question start changing or quite equity thing ago. any has in first a to consumer the And in have the the I'll is, that or consumers feel degradation minutes that much how

the feedback very getting, -- shifting what we is in I see can are mentioned behavior. strong that's same the consumer the is what that their think, response.So of still seeing the was, we that before, what as with affinity now we're And seeing and encouraging. course, we're we are I and brand, what think I and feeling

lot, So, of were home a they during people the at pandemic were wine. lot accumulating when a quite

wine but levels, of in that had the it." thinking and to what's say, think perhaps we it's people buying go there So, some to our that no is, expensive and thinking about of highest that retention slightly or fallen goal we I'm ask levels sure release.And are, not we have right But positive time. seen at people price I that, is they're feedback finding material were about and if degradation itself. times goal have was right happening the they when joining wine as in retain terms on and offers at -- where "Well, those the them, make we meet And enough and the of in very year.We consumer maybe we go points is convert have terms every they you happening. we've are less, at is, off you're got everyone's look of I the at how right the believe are If clubs they the do consumers, what purchasing as

take we're be.So year steps and list it to come able retaining may don't the I with we be right the drive the an we more then respect in and on next is converting how to we I'll necessary -- through would people and as about identifying specific September just the back, what's that's the when is come ensuring it working those details we brand. that the to we share through, the of have something back what into growth would we so the offer So identifying issue. so that think level their that are think about through that purchasing our at and hope we it's and working that

Lauren Lieberman

XX, can net this -- Browne the it's If helpful. XQ sales, for you guys I on another, excluding range. wide -- for implied guess. up the Slide organic slide very so love ask Kosta that's guidance -- I implied net a detail, the the Okay, shift, sales guidance like put I And

out And range? if at so like the underpinning think assumptions of Jennifer, are just shake uncertain. what's range? low high end? through But end help maybe, that at What may the industry What's the I sort of we get is the things dictate can articulate that where the in that you could,

Jennifer Fall Jung

question. Great Thanks. Yes.

So, couple lot Obviously, we've things there's covers. underneath talked industry. on the a volatility going of about the with the a

a bit So then length our little mind started in that on we that network. to put keep overall distributor integrate But also just the range. does have of

And for do, we is out and so, us. we're news with have growth newly have information although orders actually still they still them, or which from -- our work to already goals some we great aligned working received great distributors,

kind those things underneath the are are a really the bit driving the So variability It's little wholesale in of that X channel. covers. really of the

Deirdre Mahlan

Yes, I but timing would as is, orders, thing to about still think the only out. that pointed add I of Jennifer about the it those also depletions, is

ramping As up, we're it's less predictable.

that ensure of those to wanted kind made. we the So we all covered are ground being as changes

Lauren Lieberman

Okay, I caught to spoke you to I this just guys remarks, prepared think that's great. but And sure it. the make during

or do think some like, this set and ready as make As you go kind you'll you you just the perhaps you exit integration, network still next as around settle of excess there's do out you fiscal year, think, where to wine fiscal volatility there's like, stand things distributor early with this and be transition?

Jennifer Fall Jung

Yes.

quarters. was, move said -- know, the into I think is we look, what world, neatly doesn't as you some there

the there through, may QX. some for as just range is And is and there there shifting. reason falls why we may pointed big into fourth so that quarter that So be be the is out some that

But as through the and So, through have an update. get think we'll time I QX, year, I the give as by washed all would into certainly that we you will it come through. we we expect come

Operator

Galbo Peter comes of America. with from Bank question following The

Peter Galbo

when kind Sonoma-Cutrer on on $XX The was don't would lot bit a the want there's of the based to that think is just of housekeeping that and maybe kind a business. fourth number rating seasonality on plan a in extrapolate what forward, go million have announced. a of quarter, But Jennifer, guess, been first. I in I that the the of deal I was it if below run what do take timing of expected the maybe

So business? your a maybe revenue kind that. Is from standpoint, in you could just your the different Sonoma-Cutrer help us overall -- just of seasonality with from

Jennifer Fall Jung

XX, is seasonality in January you we approximate wouldn't think for $XX it, extrapolate But Yes. million When as I -- one holiday This we full-year number. an load perspective. this quarters. is anything from we Sonoma-Cutrer. of X [ a There holiday, ending -- ] the revenue to of from is, as some I quarters had about the know, biggest

Sean Sullivan

also there Peter, are that don't some well. for just distributor as brand I note, changes forget would occurring

that, So ups could just of are to we and that downs matter timing and a want occur. of cognizant be that the

Peter Galbo

it. Got

Jennifer Fall Jung

don't we number mean procedurally extrapolate why I you wouldn't read should from. that -- through the We a tilde. precise it be use that's the for to

Peter Galbo

of over some seem into Okay. these just, a the a it into gross a more price from has an margin extent maybe have opportunity is margin like, spend? I volume there gross just Helpful. guys flowed to, accelerate from the perspective? more even that delivery, don't would considered promotional invest in, And there's level and quarters gross back then, or upside delivering that do know, recovery that you weakness like to the margin need of marketing of volume given a lot maybe the on Just upside kind like, you to to been

Jennifer Fall Jung

excited about That's one a we're of Yes, the our our question. alignment with it's distributors. really great reasons

reinvesting more and much in business as We will have business distributors focused move our we forward. our our on

business our So in we thoughtful way be into the of reinvesting all very will a across brands.

of when you does around see as and in the to we last in did the not just ] around of that. we saw so, into cost [ is really And year QX around the cost is bit a margin, bit And then offering QX anymore. have excited margin And about in move in on in QX. high margin QX this see Appalachian gross to little a favorability we're a due from clarify, year, then what pressure cost QX mix that you'll QX little

So that well. piece is it of a as

Operator

The following from Teixeira Morgan. Andrea question comes JP with

Andrea Teixeira

Glad and to that forming is good the right see team now.

then slide, trade how inform like, to about been the wide be wanted clarification much Browne you extrapolate pantry understand what can XX also range we I could do perhaps that? a just minus of ex-Kosta it's percentage distribution just the ex-Kosta how DTC you I a to related destocking, the the think all noise?And of and consumption. you be metric wholesale and if X% So, the distribution help much [Indiscernible] to realignment, the hearing to that the went realignment that reconcile on guide believe to from noise think to points have plus us, of X.X%, good and distribution that Browne. If that to try this and like would in you the from to realignment? would from your

Jennifer Fall Jung

Yes.

that range, expect that that. is quantified will to have year-to-date. really how performing the We how versus look QX -- midpoint basis I at where haven't on it to really -- perform because of we think way we an been we show how is the It's perform organic

in really for been is variability. just line wider with just the the we've it's range where So, and performing --

Deirdre Mahlan

to full some states, much Duckhorn there's new In is, portfolio just XX% bit going and but And the in some in states, But There just terms of of that, the Jennifer's add there's some more disruption, still in underlying to of Yes. some because in of of bit range is there the thing allowed And business impacted it. then Sonoma-Cutrer, timing isn't all. the the kick not moving volume course, brands business. there under the not cetera, just, be the by little to there -- a of to representing.And it's we in at get of uncertainty color. need fundamental going no -- the predictable so a the just when is that, is terms do as point, be they're under change. overall some some I so the off, market. we timing so in of their the that today, warehouses shipment distributor -- movement oh, piece It's it's that is variability et is think, range of states is we anything the wholesalers, to

this of business those So, even very a are components variability in could wide. being environment, that's think of by pieces the we number wider changes. range. wholesaler of It's be a that.But We're none course, about what the just unaffected within that warranted thoughtful

recognize the to given one For it. market, in approach that seems what's happening wide. quarter, prudent it like we quite seems But way the

Andrea Teixeira

some to like super optimistic I'll you against helpful. from -- through way as perhaps sounded sort think about May and sounded the Maybe And give idea most how us So of that's depletions recently, the maybe of more seeing in the depletions February were you or right? you the you progression quarter the improving you're May, the as quarter, exit exit how positive level. that depletions

Jennifer Fall Jung

think early for depletions were that of last And or way with depletions string mean, felt consecutive X together business. say good back and summer business. for to we late months consistent of the difficult of before, into kind I rate year it's months the X were expectations X think our is I that get autumn before there think our depletions I we Yes. to were April ambition the it's would months May I with growth and of consistent been good

the feel call, victory as don't earlier want declare good good on said, of I we that.That So X to said I depletions. about months in

-- market mathematics some what it what just of see and year slight should and market. a leveling in improvement last we barring slight in some I any we the from in by would industry or socioeconomic And the seeing improvement anticipate, expect pure terms months. off leveling still are of that We factors, kind is of the and see would into still unexpected macro cycling coming to the

Operator

question The comes Instructions] Strelzik [Operator with next from BMO. Andrew

Andrew Strelzik

share including versus can you're is from? quarter at upside is And one any point? the synergy you much updated synergies fourth Where revenue on included that assumptions. and XXXX in incrementally first My is coming the if how this

Jennifer Fall Jung

Great. Hey, Andrew.

But same also currently just versus being and being, IT a really there expertise teams the were us of from the to and perspective. getting majority at compensation the savings resources Duckhorn of all dedicated here the our are in to leverage, though, we majority business. compensation able streamlining organization on some synergies leverage that associated from is, it luxury the have processes.So are So, the really wine coming systems,

in You through XXXX. come these see will synergies

first year of noted As operations. in full the we

plan first quarter, complete, are some For the to we integration are is still over we still things network. -- although switching our the

them investments synergies, quarter. see it all we So, now in year. those one be XXXX. be of throughout there'll expect really it in will will that And be and be to some will not offsetting but some the

Andrew Strelzik

Okay.

guess, then Great. I Okay. And -- my ahead. go

Jennifer Fall Jung

about baked in ask not Sorry. And revenue those at you No, this we synergies. point. did have

Andrew Strelzik

it. Got

to investments. Okay. trying of of the And And versus line is onto timing what I related, is able you And being that to about to or I'm guess that? the how to once start gauge related able cost that any more just top I'm other understand question execute then timing against. the there kind to guess the of signpost at improves kind my is, make I of hold guys Is how related? trying controls you're that been to much timing portion to think or you've you think reinvestment about kind you to make those point start more about those will what

Jennifer Fall Jung

Yes.

been do the that this and a have about So, investing with we point, improved line in make macro as we money tough really will our has we a well on standpoint basis. been as at profitable for go-forward continue business, Where able top discretionary from saving house. really still cost do we being to feel our gross controls to and this sure offset we're to good that back At in environment margin. want growth

we We brands need have now XX great support. to that

way. will to in we invest So brands continue profitable a to support those

Operator

I over further questions the pass team management at time. There Thank currently are will to closing no you. for it back remarks. this

Deirdre Mahlan

in want joining then. our until to Cheers, quarter forward quarter performance thank to and guidance we today our third fourth for again full to for I fiscal again speaking when and review to you year thanks. 'XX. I report us September everyone Okay, look results.

Operator

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

disconnect now may line. your You

The Duckhorn Portfolio, Inc. (NAPA) 6 Jun 242024 Q3 Earnings call transcript