The Duckhorn Portfolio(US:NAPA)2022-12-08 01:04Financial Data and Key Metrics Changes - Q1 2023 net sales reached $108.2 million, reflecting a 3.8% increase in organic growth compared to the prior year period, driven by a 9.2% growth in volume [31][11] - Adjusted EBITDA for the quarter decreased 6.4% to $35.7 million, representing 33% of net sales compared to 36.6% in the prior year period [40] - Net income was $19.8 million, with diluted EPS at $0.17 per share, down from $21.3 million and $0.18 per diluted share in the prior year [39] Business Line Data and Key Metrics Changes - Wholesale to distributor was the greatest contributor to growth, increasing 15.8% versus the prior year quarter, with both on and off-premise channels up double digits [33] - Direct-to-consumer channel saw a decline of 46.3% compared to the prior year quarter, primarily due to Kosta Browne DTC shipment timing shift [36] - Adjusted gross margin improved to 50.8%, up approximately 20 basis points year-over-year, despite a decline in the higher margin DTC business [37][15] Market Data and Key Metrics Changes - The Duckhorn Portfolio was the fastest growing among the top 15 suppliers in the $15 per bottle and above segment, with mid-teens growth in both dollars and units [14] - The California direct-to-trade channel was up 0.7% versus the prior year period, reflecting a moderation in trend due to a challenging year-ago comparison [35] - Overall, the company continues to outperform the luxury wine sub-segment, with strong demand for high-quality luxury wines [9][12] Company Strategy and Development Direction - The company is focused on a multi-faceted growth strategy, including increasing new accounts in the wholesale distribution channel and enhancing direct-to-consumer sales [18][20] - Product innovation remains a strategic pillar, with new releases expected to contribute to growth in the second half of the fiscal year [23][24] - The company plans to continue investing in growth opportunities to fortify its competitive position within the luxury wine industry [45][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining outperformance despite economic uncertainties and inflationary pressures [9][10] - The company reaffirmed its fiscal year 2023 guidance, expecting net sales of $393 million to $401 million, reflecting approximately 5.5% to 7.5% organic volume-led growth [41] - Management noted that while there was a pull forward in sales from Q2 to Q1, they remain optimistic about continued strong demand [47][75] Other Important Information - Lori Beaudoin, the CFO, announced her intention to retire next spring, with a national search for her successor already underway [25][26] - The company is committed to maintaining its strategic growth investment plans for fiscal 2023, despite changes in interest expense expectations [42][44] Q&A Session Summary Question: Trends in October and November - Management acknowledged a slight slowdown in the category but emphasized that the company continues to outperform competitors [54] Question: On-premise performance amidst slowdown - Management attributed continued success in the on-premise channel to strong brand positioning and effective customer engagement [60][62] Question: Guidance and distributor inventories - Management clarified that strong depletions and distributor ordering patterns contributed to the Q1 outperformance, with no decline in demand observed [73][75] Question: California direct-to-retail channel performance - Management noted that excluding a unique bulk wine sale from the prior year, California results were healthy, with high-single-digit growth [79] Question: CFO search process - Management confirmed a national search for a new CFO is underway, focusing on candidates with public company experience [82] Question: Pricing and margin context - Management indicated that pricing changes have been effective, with no pushback observed, and margins improved in the wholesale channel [86][90]