The Boston Beer Company (NYSE:SAM) Q3 2025 Earnings Call October 23, 2025 05:00 PM ET Company ParticipantsNik Modi - Managing DirectorJim Koch - Founder, CEO, and ChairmanEric Serotta - Executive DirectorMike Andrews - Associate General Counsel and Corporate SecretaryFilippo Falorni - Director of Equity ResearchBill Kirk - Managing DirectorDiego Reynoso - CFOConference Call ParticipantsPeter Grom - Equity Research AnalystNone - AnalystOperatorGreetings, and welcome to The Boston Beer Company third quarter 2 ...

The Boston Beer Company (NYSE:SAM) Q3 2025 Earnings Call October 23, 2025 05:00 PM ET Company ParticipantsNik Modi - Managing DirectorBill Kirk - Managing DirectorJim Koch - Founder, CEO, and ChairmanEric Serotta - Executive DirectorMike Andrews - Associate General Counsel and Corporate SecretaryFilippo Falorni - Director of Equity ResearchDiego Reynoso - CFOConference Call ParticipantsPeter Grom - Equity Research AnalystNone - AnalystOperatorGreetings, and welcome to The Boston Beer Company third quarter 2 ...

The Boston Beer Company (NYSE:SAM) Q3 2025 Earnings Call October 23, 2025 05:00 PM ET Speaker2Greetings, and welcome to The Boston Beer Company third quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce to you Mike Andrews, Associat ...

The Boston Beer Company (NYSE:SAM) Q3 2025 Earnings Call October 23, 2025 05:00 PM ET Speaker0Greetings, and welcome to the Boston Beer Company Third Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you Mike Andrews, Associate General Counsel and Corporate Secretary.Thank you, Mr. Andrews. Please go a ...

Core Insights - Boston Beer Company is navigating a challenging operating environment characterized by macroeconomic uncertainty, pressured consumer spending, and weak category demand, yet it has achieved strong margin gains and earnings growth [1][4] - The company's innovation strategy, particularly with products like Sun Cruiser and Twisted Tea Light, is driving consumer engagement and brand relevance, helping to offset declines in more mature categories [2][7] - Boston Beer is focusing on long-term brand building, reinforcing core brands like Twisted Tea and Samuel Adams while expanding newer offerings, which illustrates a disciplined strategy in a competitive beverage landscape [3][4] Financial Performance - Despite weak demand and soft retail traffic, Boston Beer posted margin gains and earnings growth, indicating resilience in its financial performance [7] - The company's shares have gained 18% over the past three months, outperforming the industry and broader Consumer Staples sector, which declined by 6.6% and 1.8%, respectively [5] Valuation Metrics - Boston Beer currently trades at a forward 12-month P/E ratio of 20.43X, which is higher than the industry average of 13.82X and the sector average of 25.51X, suggesting that investors may be pricing in stronger growth prospects [9]

Core Insights - Sin stocks, representing companies in industries like alcohol, tobacco, cannabis, and gambling, are often viewed as unethical but have a history of delivering strong returns due to consistent demand [2][3][4] - These stocks are characterized by their defensive nature, maintaining stable demand even during economic downturns, which allows for strong pricing power and consistent cash flows [3][4] - Despite their potential for robust returns, sin stocks face challenges such as heavy regulation, negative public perception, and ethical concerns that may deter some investors [5][10] Industry Overview - Sin stocks have shown resilience during both economic expansions and contractions, making them appealing for investors willing to overlook ethical concerns [4] - The alcohol sector is experiencing a shift towards premium and craft offerings, while tobacco companies are adapting to declining cigarette use by investing in vaping products [8] - The cannabis industry is rapidly expanding in regions where legalization is increasing, presenting both growth opportunities and volatility [8][9] Company Analysis - **Diageo Plc (DEO)**: Focuses on market share growth through innovation and premiumization in the alcohol sector [6] - **Las Vegas Sands (LVS)**: Concentrates on property upgrades and strategic investments to drive growth in the gambling sector [6][18] - **Turning Point Brands (TPB)**: Building a growth story around established brands and next-generation products, with a focus on smoke-free alternatives [12][13][14] - **Boston Beer Company (SAM)**: Maintains a strong position in the U.S. craft beverage market, emphasizing innovation and operational efficiency to adapt to consumer preferences [15][16][17] - **MGM Resorts International (MGM)**: Holds a leading position in global gaming, enhancing its competitive edge through capital investments and expansion in digital gaming [18][19][20]

Financial Data and Key Metrics Changes - Depletions in the second quarter decreased by 5%, while shipments decreased by only 0.8% compared to the previous year, primarily driven by declines in the Truly Hard Seltzer and Sam Adams brands [30] - Revenue for the quarter increased by 1.5% due to increased pricing and favorable product mix, partially offset by lower volumes [31] - Gross margin for the second quarter was 49.8%, an increase of 380 basis points year over year, benefiting from improved brewery efficiencies and price increases [31] - Earnings per share (EPS) was reported at $5.45, a 24.1% increase compared to the prior year [32] Business Line Data and Key Metrics Changes - Twisted Tea held share in the overall FMB category, with dollar sales declining by 4% in measured channels last quarter [15] - Sun Cruiser has quickly grown to a 4% share of the RTD spirits category and continues to grow volumes week over week as distribution expands [20] - Dogfish Head grew depletions in the second quarter for the first time in many years, driven by the successful launch of Grateful Dead juicy pale ale [25] - Angry Orchard returned to growth in depletions, driven by increased investment and new sponsorships [26] Market Data and Key Metrics Changes - The overall beer industry is estimated to be down over 4%, while the company gained share [8] - The hard seltzer category declined by 7% in dollars in the second quarter as consumer preferences shift towards more premium RTD spirits [22] - The Hispanic consumer segment has been under pressure, impacting overall volume performance [14] Company Strategy and Development Direction - The company is focusing on long-term growth opportunities in the Beyond Beer category, which represents over 85% of its volume [7] - Continued investment in brand support and innovation is emphasized, particularly for Sun Cruiser and Twisted Tea [10][19] - The company is committed to a disciplined approach to investments, only pursuing clear opportunities [10] Management's Comments on Operating Environment and Future Outlook - The management acknowledges a challenging macroeconomic environment, with factors such as economic uncertainty and poor weather negatively impacting consumer demand [6][7] - Despite near-term challenges, the management remains confident in the company's strategies and innovation pipeline to create long-term value for shareholders [11][28] - The company has updated its volume guidance to reflect a more dynamic industry environment, expecting volume to be down in the high single digits to low single digits for the year [33] Other Important Information - The company generated over $125 million in operating cash flow in the first half, enabling investments in brands and cash returns to shareholders [9] - The company ended the quarter with a cash balance of $212.4 million and an unused credit line of $150 million, providing flexibility for future investments [40] Q&A Session Summary Question: Update on business performance and Twisted Tea's decline - Management acknowledged a slow start to summer and noted that the industry is down 4-5%, but the company has gained volume and dollar share [46] - The decline in Twisted Tea is partially attributed to competition from the vodka tea category, but management believes the brand can recover as the market normalizes [49][51] Question: Clarification on updated guidance and depletion trends - Management explained that the updated guidance reflects softer depletion trends in Q2, leading to a wider range for future expectations [56][58] Question: Long-term growth potential for Sun Cruiser - Management expressed confidence in Sun Cruiser's growth potential, emphasizing a measured approach to its rollout and strong consumer reception [66][70] Question: Impact of tariffs on financial outlook - Management discussed the complexities of tariff impacts, noting adjustments based on supplier negotiations and changes in aluminum pricing [72][76] Question: Future gross margin potential - Management indicated that while current margins are strong, future performance will depend on tariff impacts and volume recovery [82][83] Question: Strategic actions in response to industry challenges - Management acknowledged the need for potential strategic actions in the industry due to ongoing structural headwinds [104]

Financial Data and Key Metrics Changes - Depletions decreased by 1% compared to the first quarter of the previous year, while shipments increased by 5.3% [33][34] - Revenue for the quarter increased by 6.5% due to volume and price increases [34] - Gross margin for the first quarter was 48.3%, an increase of 460 basis points year over year, attributed to lower brewery processing costs and pricing savings [35][37] Business Line Data and Key Metrics Changes - Twisted Tea grew dollar sales by 1% in measured channels, maintaining over 86% market share in the hard tea category [17] - Hard seltzer category sales declined by 5% in the first quarter, with Truly experiencing performance challenges [21][22] - Samuel Adams and Dogfish Head brands showed flat depletions, with Dogfish Head's new product launch achieving significant media impressions [24][25] Market Data and Key Metrics Changes - The broader beer category is expected to remain relevant, with growth opportunities in the "beyond beer" segment [10] - The hard seltzer category continues to decline, impacting Truly's performance [21] - The company noted a pullback in consumer spending, particularly among Hispanic consumers, affecting overall market dynamics [81] Company Strategy and Development Direction - The company is focusing on increasing advertising investments in 2025 to improve market share and support new product launches [12][10] - There is a commitment to innovation, particularly with the vodka-based hard tea SunCruiser and the expansion of Twisted Tea [15][27] - The company aims to enhance gross margins through procurement savings and improved brewery efficiencies [39][41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging macroeconomic environment, with inflation and economic uncertainty impacting consumer behavior [11][82] - The company expects to see positive depletions in the second half of the year, driven by increased brand support and marketing efforts [108] - Future guidance remains cautious, with anticipated tariff impacts and a dynamic market environment [44][46] Other Important Information - The company repurchased $61 million in shares year to date, with a remaining authorization of approximately $367 million [51][52] - Capital expenditures for 2025 are expected to be between $90 million and $110 million [51] Q&A Session Summary Question: Can you unpack the gross margin performance in the quarter? - Management indicated that stronger shipments contributed to the gross margin uplift, but the main driver was ongoing gross margin initiatives [55][57] Question: What is driving the cost pressure from tariffs? - Key components include the cost of aluminum and point of sale materials from countries with higher tariffs, particularly China [60][61] Question: How much did Sun Cruiser and Truly Unruly contribute to shipment volume? - Management did not provide specific breakout figures but confirmed that Sun Cruiser is meeting expectations and is margin accretive [66][67] Question: What are the main drivers of the slowdown in Twisted Tea? - The slowdown is attributed to increased competition and macroeconomic challenges, but management is confident in recovery through marketing investments [68][70] Question: Are you making any assumptions about changes in consumer demand due to tariffs? - Current guidance does not include changes in demand, as it is too early to assess the impact [76] Question: What is the outlook for Twisted Tea's growth? - Management is optimistic about reaccelerating growth through innovation and marketing, despite recent performance challenges [88][90] Question: Will you absorb the incremental tariff costs or take pricing action? - The company is assessing the situation and is prepared to implement solutions as needed, including potential pricing adjustments [96][97] Question: What is the distribution status of Sun Cruiser? - Most current volume is in untracked channels, with expectations to triple points of distribution in measured channels by mid-summer [99][100]

Financial Data and Key Metrics Changes - Depletions decreased by 1% compared to the first quarter of the previous year, while shipments increased by 5.3% [22][7] - Revenue for the quarter increased by 6.5% due to volume and price increases [23] - Gross margin for the first quarter was 48.3%, an increase of 460 basis points year over year [24] - Earnings per diluted share (EPS) was $2.16, more than double compared to the prior year [25] Business Line Data and Key Metrics Changes - Twisted Tea grew dollar sales by 1% in measured channels and maintained an over 86% share in the hard tea category [12] - Hard seltzer category sales declined by 5% in the first quarter, impacting Truly's performance [14] - Samuel Adams and Dogfish Head brands achieved flat depletions, with Dogfish Head's Grateful Dead Juicy Pale Ale launch being particularly successful [17] Market Data and Key Metrics Changes - The broader beer category is expected to remain relevant, but inflation and economic uncertainty are significant drivers of recent weakness [8] - The hard seltzer category continues to decline, with Truly facing challenges in maintaining market share [14][15] Company Strategy and Development Direction - The company is focusing on supporting category-leading brands, launching strong innovations, and expanding gross margins [8] - Increased advertising investment in 2025 aims to improve market share trends and ensure successful product launches [9] - The strategy includes nurturing core brands and pursuing a "fewer things better" approach to innovation [10] Management's Comments on Operating Environment and Future Outlook - The macroeconomic environment is challenging, with inflation and consumer confidence impacting performance [8][62] - Management remains confident in the strategies and team in place to deliver on 2025 plans and generate long-term sustainable growth [9] - The company expects to see improvements in depletions in the second half of the year, driven by increased brand support [84] Other Important Information - The company has repurchased $61 million in shares year to date [7] - Tariffs are expected to have an unfavorable cost impact of approximately $20 million to $30 million in 2025 [29] - The company ended the quarter with a cash balance of $152.5 million and an unused credit line of $150 million [34] Q&A Session Summary Question: Can you unpack the gross margin performance in the quarter? - Management indicated that stronger shipments contributed to the gross margin uplift, but the main driver was ongoing gross margin initiatives [38][39] Question: What is driving the cost pressure from tariffs? - Key drivers include the cost of aluminum and point of sale materials from countries with higher tariffs, particularly China [41][42] Question: Can you break out the contribution of Sun Cruiser and Truly Unruly to shipment volume? - Management typically does not break out shipments by product but confirmed that Sun Cruiser is meeting expectations and is margin accretive [48][49] Question: What gives confidence in Twisted Tea's growth after a slowdown? - Management noted the presence of smaller competitors and emphasized ongoing investments in advertising and innovation to regain market share [52][53] Question: How is the company addressing changes in consumer demand? - Management acknowledged the impact of macroeconomic trends and consumer behavior changes, including reduced sociability and health concerns [62] Question: Will depletions flip positive in the second half of the year? - Management expects depletions to improve, potentially flipping positive in the second quarter or second half of the year [84]