The Boston Beer Company, Inc. (SAM) 25 Apr 242024 Q1 Earnings call transcript

Greetings, and welcome to The Boston Beer Company First Quarter 2024 Earnings Call. [Operator Instructions] 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, Mike.

You may begin.

you. Thank welcome. and afternoon, Good is Mike of and Secretary General Andrews, Boston Beer Associate The Counsel Company. Corporate This I'm pleased to call. kick off our XXXX first quarter earnings

Joining CEO; Beer Chairman; Boston CFO. the Koch, call and Founder are Michael Diego and Jim our Reynoso our Spillane, from

business, discuss with start our our Before I'll we disclaimer.

are information expectations future. on As reflect this projected in the the release, statements. or statements. that the and forward-looking company's some earnings stated discuss to these predictions in could may the management's predictions important call Such of actual we company's forward-looking of those differ or note our we It's come up from materially that results

concerning company statements, whether from future most to the information to company's events forward-looking that the does results publicly XX-Q otherwise. update contained actual differ those XX-K. and new not in Additional recent materially of information, or undertake The could forward-looking factors as cause in statements result a is

comments. for pass now will I introductory it to Jim some over

Thanks, our of Diego, Immediately Mike. overview comments we to our Michael, an the this who on details quarter provide the line of financial open as will call will as results following a well outlook I'll of remainder turn focus the will comments, who will the over with remarks for then first XXXX. then hand and over Diego's begin questions. business. to for Michael my our few introductory afternoon

enhancement and the continue initiatives. margin depletions continues see in to and Tea progress its pleased were We steady on to Twisted we quarter revenue momentum, to flat first deliver make strong our growth.

million innovate cash-generative Beyond brands stock through our thus in balance growth and nature and our supported of Beer long-term far remains Our continuing strategy return to The $XX investing repurchase in our to our sheet strong in business XXXX. of unchanged. powerful in to sustainable

ideal this have distributors in the I'd to to to opportunity assistance make the XX on a products And I'm Burwick contributions like to Company to for for implementation solid our to his take to to experience growth. to and Beer will joined pass delighted year. history operational Michael long-term in now who call the as Michael's choice years today, long team, of Michael. like our Spillane, I'd to CEO continue strong of return start in thank also thank strategy consumer and over this our Boston him with formally retailers Dave the to company month. Michael earlier transition. I the his Boston call his the their Beer excellent support and our

breweries, reinforced the with brand the the visiting ahead Thanks, good and as team, spent force my afternoon, as that lie team Boston our and unique join which Jim, for strong serving best for opportunities a first meeting to in excited my the Member after has company. in with President X Beer powerful years. equities, Board everyone. distributors and conviction weeks and has culture. a CEO our beer entrepreneurial a I Boston few I'm sales Beer

brands being business to our in sustainable growth long-term innovation. this us capital. deliver our on is of powerful generation improve allows optionality efficiency to strategy invest stewards cash implementing and The our and operational and the focused of while remain We long-term disciplined

protecting category to return to which that continuing while Our drive their full delivering they growth. we and so company our reach to sustainable to innovation in may is highest brands volume as growth. involves expect core priority Beyond nurturing a drive This Beer, potential

as the new recapture awareness as and service focused our brands, media conversion. with levels customers on continue strong core shelf the we're our deserve. In to point maintaining well retailers, working at drive of will in-store focus our providing core we the distributors on and to Working drive and share brands capture and levels appropriate sale that ensuring on of highly both spend marketing attract to of

continue we'll to line area. core to brands, in we'll a extensions on map our innovation Finally, disciplined our and innovate manage and be product road fine-tuning

brands, sales up momentum dollar Tea XX% growing quarter, channels. continues, in X.X first our core points in by Within with measured Twisted while the share

to to #X is strong loyalty, brand continue position increase We Twisted the awareness with additional share and strong invest strong hard maintaining resets. per distribution point tea and achieved intend shelf while to and with maintain sales original in the brand spring appropriately Tea growth. space we the

continues focused Tea highly markets Twisted of and incremental, stabilizing encouraged test in packs single-serve We and early in and Light seen packages. be sequential Tea to variety Truly our Twisted improvement remain on Extreme. results higher-ABV lighter our we're by have the flavor

seltzer hard working diligently However, trajectory. remains part and expect in and Truly in strong mix of to we category is low in to smaller share hard pressure with category declines we're volume continue channels, remains a XXXX, a the of XX% but business Twisted improve measured seltzer the teens. under its our growth, now

Across our on Boston brands, and remain channels. Angry of as these our late opportunity our the craft the company's as dollars in the which Dogfish grew non-alcoholic Seasonals legacy. innovation Sam new Head, quarter, focused Sam nurturing areas and offerings. see Adams an Orchard the quarter remain continue core well in Adams' packaging measured other of in to and portfolio and and brands, in we'll We non-alcoholic Adams, Lager, first part introduced we in Sam first XX% invest new important

long-term core we'll for our brands, supporting product growth. to future to addition on continue innovation seeds plant focus to In

markets to the will launches. test Our goal smaller move national steady cadence generate is a forward innovations, to determine winners and brand of to which in

rollout is of second the impact of the year. early the XXXX have in stages half innovation will more Our in significant

HARD in has and vodka-based retailers. our of consumption well our and to thus is network and as the reach well positions tea, on-shelf distributors achieve been availability distribution. we to DEW has Sun MTN early to eventually stages Cruiser, its will received transition national DEW begun expand HARD and us by of far,

low our single reiterating low down XXXX of single Today, guidance up or digits we digits. volume are

analysts While ahead at teams, retailers look strategies my remains of ahead. the key quarter road believe to our quarter have to the in the the refining few I product year, company, continue the map infrastructure In return on the months a was and meeting smaller place team, to volume deliver will to right I forward with investors solid and excited and work we innovation to process. selling objectives, and us. first month season further I'm our our long-term a start distributors it's growth. to on focus our and in and first to

to first XXXX guidance. over our results quarter I'll now pass review to the and call Diego

and this Twisted offset peak built Depletions our Michael. us and than depletions process, system. ship other were product by support to optimize prior support and along system, inventories improvements customer you, our year, in everyone. the as Truly to quarter season, our and selling our growth and in of Tea, inventory to waste in the X.X% we afternoon, We Seltzer additional Thank from management first the due were flat implementation Good help further shipments will network. in the Hard our automated chain declines with other distributors increased brands. higher reduce believe primarily some Shipments ordering new supply

and weeks approximately as was the quarter of of mirroring quarter XX, returns. compared inventories of end of XXXX. X.X% the X.X volume X.X lower to weeks an the fourth Revenue each and of the the due first on hand the to X of level end hand on distributor pricing appropriate and XXXX, weeks at our for XXXX March at for at quarter believe increased averaged increases, We brands

consistent from was the the from our the Our quarter full the returns. first returns quarter in that additional of underlying do pricing benefits the to range, we for expect with continue year not the in Please the guidance with year. first balance note lower benefits

basis points Gross the a gross XX.X% Our increased Truly excluding margin up onetime quarter nonrecurring and Vodka in brewer. from basis prior procurement lower to performance improved inflationary margin the on basis. third-party year-over-year, year related volumes, a XXX a and underlying returns, rebrand first quarter to XXX was to of including a in savings benefit on year-over-year payment margin quarter by gross offset Seltzer somewhat was related The points costs. primarily pricing, contract therefore, expansion higher reported the brewery

and which was fees calls, in our gross discussed production shortfall XX.X%. margin prior we've Excluding third-party prepayments,

X.X% selling promotional spend, spending. and first the freight lower expenses in first or more Advertising, to of we was by and which declines due our for lower of promotional from media Within quarter increased the XXXX a million than both efficiencies. decreased result XXXX brand investment, quarter other rates as offset $X.X of costs

by offset benefits in consulting were Officer $X.X administrative year-over-year, General higher transition the which due salaries primarily XX.X% that costs, or and to expensed expenses costs. fully quarter, includes Chief first partially Executive increased costs million decreased

year-over-year net per of the quarter share and margins. higher was We compared share diluted higher diluted XXXX. revenue reported to $X.XX EPS $X.XX a The driven gross of improvement in by per first loss of

tax planned in first related of to the CEO compensation driven was which quarter higher costs. rate our expense transition than rate, Our the XX.X% by nondeductible was

Now I'll discuss our guidance. XXXX

for the week weeks X of fiscal from have X% decreased first XXXX. Our depletion trends XXXX

updating We are year to reiterating our our compensation related estimated in tax our from XX.X% to to guidance guidance CEO February EPS full costs. due transition nondeductible call increase our an expenses and and XXXX volume

low to low an XXXX single expect depletions to of range single and digits. of a to continue decrease shipments We between increase digits

price expect between We X%. X% and increases

expected are margins be XX% to and gross reported between XXXX year Full XX%.

but flavorings. expect by commodity XXXX, XXXX, and in inflation at primarily a We rate sweeteners driven than lower

with some we headwinds products our the cover Where We be labor expect somewhat on of continue commodity dependent to will to mix higher expect within the but from additional sold. our do inflation range margin of costs breweries. in guidance land pricing, dollars

are from to in shortfall The to impact of XXX in XXXX, points a timing to on we've amortization. that production our and have to production XXX expected prepayments last full XXX contractual due to year reducing our amortizations call prepayment negative XXX lower discussed the basis changes fees

needs terms these commitments partners. contractual capacity and our we expire, production reassess third-party with our As will

range This shipment $X decrease in million freight of expenses increase investments are changes in distributors. promotional our our of products to does include million. not and of Our for to an advertising, any from a expected the costs to selling $XX

on targeting highly consumer volume earnings currently and This of inflationary projections, chain XXXX per in projection performance sensitive changes year $X of impacts full and to mix versus are owned is spending. supply share brands, We diluted $XX. partner between

As impacted shipments. the in year, you is keep timing and please by mind our revenue changes that seasonal model volume out of performance

were gross lowest will trends margin the shipment the quarter. please of they During the Also, above first depletion than fourth were note that depletion estimated is currently typically our and shipment quarter in trends absolute year. trends rebalance trends second in lower resulting that the quarter, being

with us quarter to the flexibility We balance an line $XXX.X a our share the fund with cash $XXX shareholders growth business, Turning which allocation. ended credit cash to and base our of unused our program. to future provides buyback continue of in to initiatives return capital invest through million, million and

million improve XXXX, $XXX capital investments primarily capabilities our year efficiencies. of full related and expenditures we the For between will own expect million. be breweries build to $XX to These and

XX, the During April XX, and March period XXXX, repurchased through the $XX shares XXXX, XXXX in $XX April amount and XX-week from million we period of ended X, million. the

remaining approximately of the million As $XXX authorization. April repurchase billion had $X.X share XX, XXXX, we on

concludes This line And open for now we remarks. prepared the our questions. will

Evercore our And question ISI. line the with of Ottenstein Instructions] first comes Rob [Operator from

at of Great. Congratulations, any this kind picture that of One, what timing of on current best just a XX give So kind to of would was questions. of number can fair in going Easter Is in us with be trends? April? giving look you one. weeks and together terms Mike. few all A sense

you any Truly the core and gains you products? lost some think innovations there? can I the space shelf for in of about space I I shelf some the spring shelf two, gain shelf for But the the believe. And did don't flavor Number -- know leave space, sets business? a I why it of core lot the talk actually

I'll -- first one. Perfect. take so the I'll take

take I'll which first XX to There's it? No, ordering you one and Easter your were XX the least we'll first So one is take weeks point, if or do want moved. the of go distributors Truly to kind take you year-on-year. patterns through from specific the first then at I'll from that we period there's year-on-year look because weeks, one, then. -- comparisons.

weeks, week if can always So the take X X comparison. or you have you

always view, our to enough So from the XX-week of look trends we point at comparisons of our take brands.

of the terms fluid we're to And then continues in a of Right. the it to shelf very moving where space, situation lighter truly some be flavors.

have this rolling also the Truly, We new a line. to year, really addition out and as

some losing and look we will we'll adjustments think that in I for some again, the where tracking flavors. space of with shelf are lighter be flavors So continued the adding

Deutsche the question And Steve line of comes from Bank. the Powers next with

Two Michael, could. I well from you as me. then Congratulations, One Great. and for if questions, Diego. one for

I I'd emphasis just could, above strategically new as that that bit if a points of to the you you Firstly, you operationally priorities the for any you for on see approach you new that. or Michael, guess, love either have for organization, role expand any

makes call. year the the more gross it's the an or if upper stronger perspective, start than I for outside your year, gross then it at Curious how a from into make think, the coming And premature if margin with to the expectations quarter -- end you comfortable lot it from the to now and expected to that Diego, own was too on range margin? compares least of

Okay.

to saying, X start be been I'd the on I excited appreciate here. I've Board I'm the for really by So off congratulations. years.

very and is I'm truly I'm impressed the we we're Where sure team I really end-to-end making that sure and in was strategy, that leaning by alignment. I have the with and that both. strategy familiar executing just So making to think

truly back the that getting and to profitable and innovation, and We're bit sharper focused on get probably a on little scalable. our it's growth to growth sustainable sure it's trying really we're making distinctive, it's -- long-term

team really we're I sure at a but just a plan in make to emphasize have we fantastic down and to that want drill and into that again, level. walked So going really a we execute high to place good

in we're I we're very is still would your the in to we But have why plan, has a gross we margin XXs our at we plan. are arrive gross maintaining our compare. overall, you to question comparisons, right. say years. X guidance strong what the downs Steve, year-on-year margin next confident that's with margin ups XXs guidance. question, year-on-year maintaining gross around high Similar And to and when our think the All and

just the that is this think more one plan. down positive step I So line in

And line the from the of Sachs. Bonnie question from next comes Goldman Herzog

of question of which level me trying Congratulations quarter. spend, as sales on a your I was from right. you All too, an hard to on why don't and understand, increase quite I as then tea other a spending the is a growth. see do believe have I'm frankly, to Truly maybe maybe in return What need moving guess, brands right some level, to the to you of intensifies in the percentage competition guess, attempt and I the Michael. down some advertising in advertising, forward?

be would there thoughts helpful. Your

invest can returns. invest year, thanks, And look at of we Bonnie. back growth. where opportunities be a continuing, again, when upside Great. to we choose could We're in extent see to performance To to we have the good we where And We're our this timing. always drive again, lot sustainable looking in. this may

that we to see we're in choose marketing. invest the aligned will reinvest we where there. Look, as performance, for But of And to and investment the upside the we Tea, in Twisted we'll probably we rest portfolio the strong continue fit. have assess we'll see

general are thumb And important rule we a of company. That's a objective. very Bonnie, a us, for growth as

thumb, -- And and rule via of so growing our a of generates voice long that advertising market as to we than because have our in in gain, higher share a will haul, the categories. share we're tend of share

Okay.

momentum the then say, behind some should about feel maintain or So reaccelerate stabilize, I growth Twisted you spending of kind good the levels guys and Truly.

that's fair I a Yes, think statement.

ask ambitions of could brand your about in for or teens. DEW this performance the ultimately, the lived you helpful. again, what low little color whether especially hear hard question whether MTN guys on could a year, expectations your comments your for quarter for on if confirm light And expectations. your up is then the earlier in are decline seltzer the I'd bit in more to HARD the made to the it's I That's you DEW. love And MTN maybe Okay. the HARD and guidance then just brand And another to not? in category

perfect. So

that. I'll So take

I lot not of one the have the areas brand. rolled is a in we over think first the performance is that

the a move to going distribution it's Blue transition before, the pieces from be mentioned to states our we've Cloud as and to longer So over different of different network.

to we be planned. be and really we So able feel downs guidance territories But but faster there or I And brand a our we long than have strong. could if It current the some ups some have and think really term, along we is it's move equity. adjustments will as within into of expect the some it do currently good bringing that in our networks some strong plan, -- role way. distribution has to given our are upside the

next Morgan the line from Stanley. the with comes question Serotta of And Eric

do Hoping big to comps, And you where Great. between mental of the perspective your that in it of you just at -- of through? you do were with larger Obviously, or impressive, from base? long runway recent other where tougher the still craft How how, and sort Tea do physical lens terms not you slowdown us look mid- analogy opportunity how slowdown you I could at interaction predecessor Twisted channels. growth look slowdown of brands, kind your used Mike, And -- do is unpack How know you do then you sort do high-teens what and see availability. Twisted from of give the the runway? very you ago. here? in a from but

now a short wouldn't say business. assess paying and trend a as anything the it's trends, but -- going of to of sort We for period right time, don't terms we're we're attention, that it's In see to very it. recent the of continue it we longer-term we'll

of for investing will Twisted Tea at the in we be appropriate marketing. terms levels noted, As

an is Tea -- It's capturing customer. existing our not customer. is coming that cannibalizing have additional Light We in that any in we're a way Twisted

about. we Extreme And a have we higher feel that content also the optimistic is very which product,

So to to a maintain we're very that. It's and much the committed I just company be able to for priority going the product. believe the consumer that high is

to Hispanic out brand, both an and we We to. into bring also have consumers new opportunity reaching the consumers African-American which are

question Sarwat line of And Nadine the from next Bernstein. with comes the

me. from questions Two

has Michael. know, of you obviously First, over multiple categories wave for Beer the of the a as Boston in many years. couple last innovation question had, past year across successful

the view, to view do X, hear I versus a come you And between see love extensions? next taking over the perhaps future new line into long-term X would as years? innovation So on you world portfolio, Beer's this of mix how Boston the you role, how the

then an a and us And performance production capacity second utilization, of Could capacity? contracted obviously, quarter. very your question, update nice level this for some margin on your the third-party give you internal gross your both

Great.

I'll us that. doing the part have a I portfolio. as So -- And first driving, past, the see take we in balanced of

brands, which all to great stabilize We And them beer, a so and the Dogfish, back we growth continue Angry look lot potential. Tea. there put and like opportunity way reach Truly Orchard. to I then of both it in have is our to get need their we drive see Twisted to I'd to

for because are I this company. exciting for signed role me reasons we is The great a key thing why innovation the of one and on

coming our we who through that ability so is marketplace. be But Cruiser, including And great a part so we have innovation been products are. formula hard to will well for which success, repeat the in of has Sun the received which tea, vodka-based some pipeline, always

people space. you We the than Beyond best a Beer And beer. better know that category to is think we're growing as the like that in at rate

really drive for business. that of feed It's So our we'll to continue that and us. important part

do to innovation. both to be going maybe between have we other, balance or and sure a reaching chose find So To to honest, their the balance one pillars make we sometimes, the core potential. that we're and doing

to On be exact where in-house complexity to production part confirm XX-XX high and to of external of but the products. moving second XX-XX, want XX% we an your you a from we've the numbers, for I'll question, especially leverage the really been mix

So se. -- the QX and number confirm but come back we'll per

of Filippo comes And the Citi. question Falorni the from line with next

the Michael, congrats new on role.

incrementally resets on give current Twisted some one distribution including Twisted Clearly, gains. year over of you well So Tea. last you I can context and have X years, on Maybe you've the us level for spring these Tea. couple are very of with how and expecting shelf significant space shelf done to much last questions, space gain

margin a margin. But Diego, And on then in is second sequentially margin you of gross I year. QX follow-up the mentioned question higher the my is is we lowest that margin X QX. think cadence? gross gross we typically, in particular something expect should sequential is there next Or margin from gross similar QX in think a quarters? about and in Should a the improvement gross your

first I'll part Diego. then pass that, of to jump and I'll the on

So we're bringing grow. new We're to space. Tea, continuing continue leader. how to We're again, just to on sure the and drinkers, brand making demand. going add reiterating our and to in to we're sponsorships both on support marketing spending really We're is drive Twisted market continuing is this expand which

And energy. then we're bringing in

a So for which Tea now, be going Rocket Pack us. mentioned a the was which ABV, dropping which Twisted is for Pop instance, Party again, will And year. think is energize new we of business last to I consumer driver higher big Extreme, the

space. energy, to that expand our new opportunities we'll feed we see shelf consistently So business and with

margins gross margin gross higher will QX your we see question, On QX. in yes, and

and a We in had we also did quarter strong really shipment QX. that mention production

bit that little a So come will of QX. out of

between might as years. So other in QX high be seen the and not jump QX we've as

because have that guidance believe strong So road still we map. year we're our really gross maintaining full a margin we

from question Piper next comes Lavery with the Sandler. Michael of And the line

And congrats, well. Michael as

be the gaps HARD you distributor little just takes understand if help one more as the if X, and there MTN because likely existing follow-up other? on a Just in distribution transition. DEW bit, time. of said the that is handed you've can, to I Maybe off from Or a mechanics the us know it's Are can. some to transition markets seamless? it I

Or X fill some a deloading more as out the -- and And you're then ordinary it dynamics quarter? new trade on pipeline the was in is the calling big and factor that some there? XQ loading just innovation, of

and of distributor. with implemented flow of So I'll new inventory a it's the of as the part Yes, just our exactly, sourcing start business and talked to material sort I And add, question. second will also we've the system before, timing. management the normal we with

up just it bit sure loaded QX to to in we we before able little supply place that our in we put all a So were just source make think correctly customers. and we

it's but what a not would we're have piece, So say bit a then the national little a bit little it's like of discussed. And feel we'll fluid, hoping terms in it's I I transition huge But of MTN distribution. again, we that DEW, tracking. and reasonable a is time within

line [Operator question the Instructions] Capital ROTH Partners. of Kirk from the And with Bill next comes

I one have follow-up Nadine's earlier. on on a from --

the like was the I the XX-Q highest guess in-house question looks it's XX%. it that one, production is, think I in number that's years. in And been

could look summer, bigger So in like that look XX% The months in when the heavier months? I what XQ, is, those number summer what guess we can get the to seasonally, production like? it in question the

So I XX%, in talk the through our to products XX when also are that's to some to we products that we'd like mix But facilities. specific mentioned, depends flowing we're that's again, of from the and only between to on There as have externally. be, plan. But get XX-XX. XX-XX, We be want our want right would XX% about quarter. and we we where we specifically know now, at it

that's the target key where go to But get So to up. as we one our those drivers we end of forward. is that levels of

And the to third on loan them that Okay. like like money them like kind year? And XQ. to in looks that are extending third another of shortfall gave start prepayment other payment from you Is a form reduce of related party it like loan? in then shortfall by party, the the from any you a some mechanisms fees the there fees, got back the upfront the

that repeat for question just a you can second, So please?

Yes.

flow a on that like flows, had relationship. prepayments, inbound -- there's So where prepayment. you the the I looks cash if was it production with is positive think in $X wondering from to from like cash reduction lent anything And the payback an just third-party it a do I million them money almost that

So questions. lower are I by And cash there's X to your guess, them mechanisms prepayment positive obligations on there number is flow? extending credit? What the that

So here. the the loan. There's timing payment has that work to there's the the still that things do with nothing of of amortization

that's one. So

our So -- part changed of payments. we of because our we've the terms, amortization expanded and

is but made one have and similarities amount been it of repaid, to and be -- would the fees we've sense? that have have will amount independent. the loan agreed. second loan Does The to That a we that some that similar City. at the They happen be repayments as some repaid make they're be will will paying, just to we

there other are And does. It future? loan the in like similar ways any that to do something to reduce prepayment

we've piece money of contracts is reducing we we an we're shortfall it strategies. because reality the back. get loaned our independent the in the mechanism our them, shortfall It back. fees. based our fees just the what footprint technically the based But the be right reviewing getting will should the the third see to future, what not parties -- we it's while And are going Well, on end, prepayment that, happened on we're doing come level with is, we to want be. negotiate what forward as to That's

goal. a of longer-term XX-XX I might is add, internal-external the balance

key have our capacity contract a are this forward. and going future, exclusive get City for partner pretty -- foreseeable to there We the they much Brewing our is piece year. And

It's a year, get see be year, we going next probably certainly not XX-XX. could this to before but to it's So while we not that. longer term,

comments. Jim at back further over floor no to time. this would I are there gentlemen, and like turn questions Ladies any the to for closing

his Well, under giving Burwick's quarter a warm Michael everybody going to and thanks for was because of and most welcome it contribution for recognize guidance and I'm to this direction. joining Dave us

X to So have very lead help amazing I've company. Thank this you. fortunate people been

this concludes And today's teleconference.

You lines your your may for Thank disconnect you at this participation. time.