Boston Beer(US:SAM)2022-07-22 01:21Financial Data and Key Metrics Changes - The company reported a net income of $53.3 million or $4.31 per diluted share for Q2 2022, down from $59.2 million or $4.75 per diluted share in Q2 2021, primarily due to lower gross margins despite increased revenue and lower operating expenses [37] - Q2 2022 gross margin was 43.1%, a decrease from 45.7% in Q2 2021, attributed to higher material costs and increased returns on scrap [41] - Depletions and shipments for the first 29 weeks of 2022 declined by 7% and 11% respectively compared to the same period in 2021 [42] Business Line Data and Key Metrics Changes - Depletions for Truly Hard Seltzer declined by 17% in Q2 2022, while Twisted Tea and Hard Mountain Dew showed growth, with Twisted Tea expanding its position as the number one FMB [19][25] - Excluding Truly, depletion volumes for the rest of the business increased by 14% in Q2 2022 [15] - Samuel Adams brand depletions were down low single digits, while Angry Orchard maintained a 48% share in the hard cider segment [31][32] Market Data and Key Metrics Changes - The hard seltzer segment saw a 13% decline in dollar sales in Q2 2022, with a shift in consumer preference back to premium light beers, particularly among the 35 to 44 age group [19][20] - The hard seltzer category's growth forecast was adjusted down from flat to +10% to a decline of 15% to 20% for 2022 [22] - Hard seltzers accounted for 10% of total beer dollars in Q2 2022, down from 11.4% in Q2 2021 [21] Company Strategy and Development Direction - The company aims to become the number one player in the fast-growing Beyond Beer segment, focusing on Twisted Tea, Truly, and Hard Mountain Dew for growth [16][11] - A reformulation of Truly's core flavors is underway, with the addition of real fruit juice to enhance taste [24] - The company plans to maintain momentum for Twisted Tea and Hard Mountain Dew while improving Truly's performance through innovation and marketing [18][30] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by declining consumer demand and supply chain issues, leading to a reduction in volume and earnings guidance for the remainder of 2022 [10] - The company remains optimistic about the long-term outlook for its diversified beverage portfolio despite current challenges [34] - Management emphasized the need to reengage consumers with hard seltzer and simplify choices in a crowded market [66] Other Important Information - The company generated over $100 million in operating cash flow during Q2 2022 [10] - The 2022 fiscal year includes 53 weeks, which is expected to positively impact growth rates [45] - The company plans to invest between $110 million and $140 million in capital expenditures, primarily for brewery improvements [47][48] Q&A Session Summary Question: How has Truly been trending around the 4th of July? - Management noted that while there was good execution during the 4th of July weekend, it is too early to determine if this indicates a trend [51][53] Question: How to address margin issues related to Truly? - Management explained that margins have been impacted by lower volumes and higher product returns, but improvements are expected as internal production capacity increases [56][58] Question: What are the assumptions behind updated shipment guidance? - The updated guidance reflects a more conservative outlook based on current trends, with expectations of continued declines in Truly and stable performance from Twisted Tea [80][84] Question: What is the expected contribution of Hard Mountain Dew to shipments? - Hard Mountain Dew's contribution is anticipated to be more significant in the latter half of the year as the brand continues to roll out [86] Question: What is the outlook for Truly's shipment volume? - Management confirmed that Truly's shipment volume is expected to decline more than 20% for the full year, aligning with the overall category decline [88][89]