The Duckhorn Portfolio(NAPA) - 2024 Q4 - Annual Results

Financial Results Overview This section provides an overview of the company's financial performance for both the fourth quarter and the full fiscal year 2024, including key metrics and management's perspective Fourth Quarter 2024 Performance The company reported a 7.3% increase in Q4 net sales to $107.4 million, primarily driven by the Sonoma-Cutrer acquisition, with adjusted EBITDA growing 16.7% to $39.9 million Fourth Quarter 2024 Key Financial Metrics | Metric | Q4 2024 | Change vs. Q4 2023 | | :--- | :--- | :--- | | Net Sales | $107.4 million | +7.3% | | Net Income | $11.3 million | -36.5% | | Adjusted Net Income | $20.4 million | +22.2% | | Adjusted EBITDA | $39.9 million | +16.7% | | Diluted EPS | $0.08 | -46.7% | | Adjusted Diluted EPS | $0.14 | -6.7% | - The net sales decline of 13.9% (excluding Sonoma-Cutrer) was primarily due to the shift in the Kosta Browne Appellation Series release from Q4 in fiscal 2023 to Q3 in fiscal 2024[2] Fiscal Year 2024 Performance For fiscal year 2024, net sales grew modestly by 0.7% to $405.5 million, while adjusted EBITDA increased by 7.3% to $155.1 million, improving the margin to 38.2% Fiscal Year 2024 Key Financial Metrics | Metric | FY 2024 | Change vs. FY 2023 | | :--- | :--- | :--- | | Net Sales | $405.5 million | +0.7% | | Net Income | $56.0 million | -19.2% | | Adjusted Net Income | $74.8 million | -3.2% | | Adjusted EBITDA | $155.1 million | +7.3% | | Diluted EPS | $0.45 | -25.0% | | Adjusted Diluted EPS | $0.60 | -10.4% | - Excluding the impact of the Sonoma-Cutrer acquisition, net sales for the fiscal year declined by $18.4 million or 4.6% compared to the prior year[3] Management Commentary Management expressed satisfaction with Q4 performance and strategic progress in fiscal 2024, highlighting the Sonoma-Cutrer acquisition as a key driver for future growth - The company meaningfully advanced its strategic agenda in fiscal 2024, highlighted by the strategic acquisition of Sonoma-Cutrer[4] - Management believes the successful integration of Sonoma-Cutrer and execution of strategic initiatives position the business for solid growth and profitability into fiscal 2025 and beyond[4] Detailed Financial Analysis This section provides an in-depth look at the company's financial performance, including sales drivers, margin analysis, and channel mix for the fiscal year Fourth Quarter 2024 Financial Details Q4 net sales growth was driven by a 23.7% volume increase from Sonoma-Cutrer, partially offset by a 16.4% negative price/mix impact, while SG&A as a percentage of sales declined by 190 basis points - The increase in Q4 net sales was driven by a 23.7% volume growth from the Sonoma-Cutrer acquisition, while price/mix had a negative contribution of 16.4%[6] - Adjusted gross profit margin declined 390 basis points, partly due to the timing shift of the higher-margin Kosta Browne release to Q3[7] - Selling, general and administrative (SG&A) expenses as a percentage of net sales declined by 190 basis points, reflecting active operating expense management[7] Sales Channel Mix For fiscal year 2024, the Wholesale - Distributors channel increased its share of net sales to 69.8%, while other channels experienced a reduction in their respective shares Net Sales by Channel (% of Total) | Channel | Fiscal Year 2024 | Fiscal Year 2023 | | :--- | :--- | :--- | | Wholesale – Distributors | 69.8% | 67.9% | | Wholesale – California direct to trade | 16.3% | 17.1% | | DTC | 13.9% | 15.0% | Consolidated Financial Statements This section presents the company's consolidated balance sheets, statements of operations, and cash flows for the reported periods, detailing asset, liability, equity, revenue, expense, and cash movement Consolidated Balance Sheets As of July 31, 2024, total assets grew to $1.82 billion from $1.35 billion, largely due to the Sonoma-Cutrer acquisition, with total liabilities increasing to $544.6 million and equity rising to $1.27 billion Key Balance Sheet Items (in thousands) | Account | July 31, 2024 | July 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,817,028 | $1,347,682 | | Total current assets | $537,540 | $387,530 | | Goodwill | $483,879 | $425,209 | | Total Liabilities | $544,573 | $405,274 | | Long-term debt, net | $200,734 | $210,619 | | Total Stockholders' Equity | $1,272,455 | $942,408 | Consolidated Statements of Operations For fiscal year 2024, net sales were $405.5 million, but higher costs led to a decrease in income from operations to $94.8 million and net income to $56.0 million Fiscal Year Statement of Operations (in thousands, except per share data) | Account | Fiscal Year 2024 | Fiscal Year 2023 | | :--- | :--- | :--- | | Net sales | $405,481 | $402,996 | | Gross profit | $214,926 | $215,689 | | Income from operations | $94,843 | $105,978 | | Net income | $56,021 | $69,286 | | Diluted EPS | $0.45 | $0.60 | Consolidated Statements of Cash Flows In fiscal 2024, net cash from operating activities significantly decreased to $4.2 million, primarily due to increased inventories, while financing activities provided $77.6 million, resulting in a net cash increase of $4.5 million Fiscal Year Cash Flow Summary (in thousands) | Activity | Fiscal Year 2024 | Fiscal Year 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,160 | $70,092 | | Net cash used in investing activities | ($77,274) | ($72,572) | | Net cash provided by financing activities | $77,633 | $5,666 | | Net increase in cash | $4,519 | $3,186 | Non-GAAP Financial Measures and Reconciliations This section explains the company's use of non-GAAP financial measures and provides detailed reconciliations from GAAP to non-GAAP figures for both the fourth quarter and the full fiscal year Explanation of Non-GAAP Measures The company uses non-GAAP measures like Adjusted Gross Profit, Adjusted EBITDA, Adjusted Net Income, and Adjusted EPS to provide a clearer view of core operating performance by excluding specific non-recurring or non-cash items - The company uses non-GAAP measures to enhance the reader's understanding of past financial performance and future prospects by excluding items not related to core operating performance[12][23] - Adjusted EBITDA is calculated as net income before interest, taxes, depreciation, amortization, and other specific adjustments to help management monitor core operating performance and make strategic decisions[25] - Adjusted Net Income and Adjusted EPS exclude items like non-cash equity compensation, purchase accounting adjustments, and transaction expenses to improve comparability of results between periods[30][32] Reconciliation of GAAP to Non-GAAP Measures Detailed tables reconcile GAAP figures to their non-GAAP counterparts for both the fourth quarter and the full fiscal year, itemizing adjustments for various non-operating factors Fourth Quarter Reconciliation For Q4 2024, GAAP Net Income of $11.3 million was adjusted to a non-GAAP Adjusted Net Income of $20.4 million, with key adjustments including purchase accounting, derivative fair value changes, and equity-based compensation Q4 2024 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Profit | $51,312 | $3,690 | $55,001 | | SG&A | $30,614 | ($6,752) | $23,862 | | Net Income | $11,296 | $9,122 | $20,418 | | EBITDA | $29,081 | $10,829 | $39,910 (Adj. EBITDA) | Fiscal Year Reconciliation For fiscal year 2024, GAAP Net Income of $56.0 million was reconciled to a non-GAAP Adjusted Net Income of $74.8 million, with significant adjustments for transaction expenses, equity-based compensation, and purchase accounting FY 2024 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Profit | $214,926 | $2,478 | $217,404 | | SG&A | $120,083 | ($30,735) | $89,348 | | Net Income | $56,013 | $18,783 | $74,796 | | EBITDA | $132,087 | $22,997 | $155,084 (Adj. EBITDA) | Other Information This section provides background on The Duckhorn Portfolio, Inc. as a leading luxury wine company and includes important disclaimers regarding forward-looking statements and associated risks About The Duckhorn Portfolio, Inc. The Duckhorn Portfolio is North America's premier luxury wine company, managing eleven wineries and over 2,200 acres of vineyards, distributing wines globally across a wide price range - The company is positioned as North America's premier luxury wine company with eleven wineries and over 2,200 acres of vineyards[11] - The portfolio includes revered wineries like Duckhorn Vineyards, Decoy, Sonoma-Cutrer, and Kosta Browne[11] - Wines are sold throughout the United States, on five continents, and in more than 50 countries[11] Forward-Looking Statements This section warns that forward-looking statements are subject to risks such as economic downturns, inflation, competition, supply chain disruptions, and acquisition integration challenges, which could cause actual results to differ materially - The press release contains forward-looking statements regarding future financial performance and growth initiatives, which are not guarantees of future results[13][14] - Applicable risks include economic conditions, consumer demand, supply chain disruptions, successful execution of growth strategy, and risks associated with the acquisition of Sonoma-Cutrer[14]