Q4 2023 The Duckhorn Portfolio Inc Earnings Call

Speaker 1: ..

Okay.

Okay.

Okay.

Okay.

Okay.

Speaker 1: The.

[music].

Okay.

[music].

Okay.

[music].

Okay.

Okay.

[music].

Good afternoon, and thank you for attending today's Duck Horn portfolio Q4, and full year 2023 earnings conference call.

Speaker 2: And thank you for attending today's Duckhorn portfolio Q4 and full year 2023 earnings conference made possible by Duckhorn Foundation providing the best quality data in the world.

My name is Sierra and I'll be your moderator for today.

All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

Speaker 2: All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question.

If you'd like to ask a question. Please press star followed by one on your telephone keypad.

I would now like to pass the conference over to our host Sean Sullivan.

Speaker 2: I would now like to pass the conference over to our host, Sean Sullivan.

Please proceed.

Speaker 3: Good afternoon and welcome to the Duckhorn portfolio. 4th quarter and fiscal year, 2023 earnings conference call. Joining me on today's call is Jennifer fall young. Our chief financial officer.

Good afternoon, and welcome to the del corn portfolio fourth quarter and fiscal year 2023 earnings conference call.

Joining me on today's call, Jennifer Paul Young our Chief Financial Officer.

Speaker 3: In my opening remarks, Jennifer will walk us through our quarterly results and the details of our Fiscal Year 2024 Financial Guises that we are issuing today.

I think my opening remark, Jennifer will walk us through our quarterly results and the details of our fiscal year 2024 financial guidance.

Today I will.

Speaker 3: I will then conclude with some closing remarks before we take questions.

I'll, then conclude with some closing remarks before we take questions.

Speaker 3: By now, everyone could have access to the earnings release for the fiscal quarter and fiscal year ended July 31st, 2023. That was distributed at approximately 405 PM.

By now everyone should have access to the earnings release for the fiscal quarter and fiscal year ended July 31, 23 that was distributed at approximately four or five P. M Eastern time.

Speaker 3: The press release and an accompanying presentation are accessible on the company's website at IR.Duckhorn.com. And shortly after the conclusion of today's call, a webcast will be archived for the next 30 days.

The press release and an accompanying presentation are that's the ball on the company's website at IR Dot dot corn dot com.

And shortly after the conclusion of today's call or webcast will be archived for the next 30 days.

Speaker 3: Before we begin, I would like to remind you that today's discussion contains forward-looking statements based on the environment as we currently see it, and as such, includes risks and uncertainty.

Before we begin I would like to remind you that they contain forward looking statements.

On the environment as we currently see it and does not include the risks and uncertainties.

Speaker 3: If you refer to Deccorn's earnings release, as well as the company's most recent SEC filing, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward-looking states.

If you refer to duck Corns earnings really.

Well, it's the company's most recent SEC filings.

Could you discuss the factors that could cause the company's actual results to differ materially from these forward looking statements.

Speaker 3: Please remember the company undertakes no obligation to update or revise the forward-looking statement in the future.

Please remember the company undertakes no obligation to update or revise these forward looking statements in the future.

Speaker 3: We will make a number of references to non-gavel financial medias.

We will make a number of references to non-GAAP financial measures.

Speaker 3: We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included in our earnings release a full reconciliation of non- GAAP financial measures to the most comparable gap measure.

We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included in our earnings release, a full reconciliation of non-GAAP financial measures. The most comparable GAAP measure.

Speaker 3: In addition, please note that all retail scanner data cited on today's call is sourced from Serkana, which was formerly known as IRI, and will refer to dollar consumption for the 12 week period and a July 30th, 2023, and growth first is the same period in the prior year in U.S. track channel unless otherwise noted.

In addition, please note that all retail scanner data cited on today's call is sourced from China, which was formerly known as IRI and will referred to dollar consumption, but the 12 week period ended July 32023 and growth versus the same period in the prior year.

In U S crack panel unless otherwise noted.

Before we discuss our financial performance and outlook I would like to pair an update about our company's leadership team.

Speaker 3: Before we discuss our financial performance and outlook, I would like to share an update about our company's leadership.

Speaker 3: As you may have seen in a press release issued a few moments ago, we have announced that Alex Ryan retired as our President, Chief Executive Officer, and Chairman to focus on family and personal matters.

As you may have seen in our press release.

Want to go we have announced that Alex Brian retired as our President and Chief Executive Officer, and chairman to focus on family and personal matters.

Speaker 3: We wish Alex well and thank him for his 35 years of leadership and service at the Duckhorn Portfolio.

We worked out well.

Okay, 35 years of leadership and service at the dock corn portfolio.

Speaker 3: In light of Alex's retirement, I'm also pleased to announce that our Board of Directors voted to appoint Deirdre Mullen to act as our interim president, chief executive officer, and chairwoman.

In light of Alex's retirement, I'm also pleased to announce that our board of directors voted to appoint Deirdre Marlin to act as our interim President and Chief Executive Officer, and Carol woman.

Speaker 3: Geardra is an excellent choice to lead our companies through this transition, given her close work with the company and management over the past nearly three years, and her extensive expertise in the alcohol beverage industry.

<unk> is an excellent choice to lead our company through this transition given her close work with the company and management over the past nearly three years and her extensive expertise in the alcohol beverage industry.

Speaker 3: Deirdre spent nearly 20 years in leadership positions at Diageo. From 2010 to 2015, he served as Chief Financial Officer of Diageo PLC.

You drift back nearly 20 years in leadership positions at the IPO.

From 2010 to 2015, he served as Chief Financial Officer at Yahoo Plc.

Speaker 3: Delta served as chief executive officer of the Aja North America between 2015 and 2020.

He also served as Chief Executive Officer of the husband North America between 2015 and 2020.

Speaker 3: Since early 2021, he has been a key collaborator with the company's veteran leadership team that's continued to boast more than 60 years of collective experience at Duckhorn.

Since early 2021, he has been a key collaborator with the companies that current leadership team that continues to both more than 60 years of collective experience at duck corn.

Sierra: Thank you for attending today's Duckhorn portfolio Q4 and full year 2023 earnings conference hall. My name is Sierra and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you like to ask a question, please press star followed by one on your telephone keypad.

Speaker 3: My colleague joined me in excitement about Eardra accepting this most important leadership role in our company.

My colleagues join me and excitement about ear accepting the most important leadership role in our company.

Speaker 3: stepping back, the success of the Duck Cornfort Folio has always been the result of our The Duck Cornfort Folio has always been the result of our

Stepping back.

Sean Sullivan: I would now like to pass a conference over to our host, Sean Sullivan. Please proceed Good afternoon and welcome to the Duckhorn portfolio Q4 and fiscal year 2023 earnings conference call. Joining me on today's call is Jennifer Fall Young, our chief financial officer. Having my opening remarks, Jennifer will walk us through our quarterly results and the details of our fiscal year 2024 financial guidance that we are issuing today. I will then conclude with some closing remarks before we take questions.

Success of the DUC corn portfolio has always been the result of our philosophy. The collaborative efforts of our amazing team and our unwavering commitment to <unk>.

Speaker 3: collaborative efforts of our amazing teams and our unwavering commitment to producing the highest quality ones.

<unk> the highest quality wines.

Speaker 3: At its core, the Deco Ramportfolio is made up of more than 500 passionate employees.

At its core the DUC corn portfolio is made up of more than 500 passionate employees.

Speaker 3: Our team, our values, and our commitment to excellence have always been and always will be the foundation of our success.

Our team our values and our commitment to excellence have always been and always will be the foundation of our success.

Sean Sullivan: By now everyone could have access to the earnings release for the fiscal quarter and fiscal year ended July 31, 2023 that was distributed at approximately 405 PM Eastern time. The press release and an accompanying presentation are accessible on the company's website at ir.duckhorn.com and shortly after the conclusion of today's call, a webcast will be archived for the next 30 days. Before we begin, I would like to remind you that today's discussion contains forward-looking statements based on the environment as we currently see it and as such includes risks and uncertainties.

Speaker 3: We look forward to you getting to know Deirdre very soon that she settles into her new role at the company.

We look forward do you getting to know Deirdre Barry soon settled into her new role at the company.

Moving now to our financial results I'd like to start by saying how pleased we are with our fourth quarter and full year performance.

Speaker 3: Moving now to our financial results, I'd like to start by saying how pleased we are with our fourth quarter and full year performance.

Speaker 3: Nest sales group 28% in the fourth quarter, resulting in full year sales growth of 8%. Complmented by full year adjusted EBITDA growth of 13%

Net sales grew 28% in the fourth quarter, resulting in full year sales growth of 8% complemented by full year adjusted EBITDA growth of 13%.

Speaker 3: Our strategies to drive profitable sales growth through leveraging our brand strength, evolving our portfolio, expanding our wholesale network, and growing our DTC panel continues to pay off.

Our strategies to drive profitable sales growth through leveraging our brand strength evolving our portfolio expanding our wholesale network and growing our DTC panel continues to pay off.

Sean Sullivan: If you refer to Duckhorn's earnings release, as well as the company's most recent SEC filing, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward-looking statements. Please remember the company undertakes no obligation to update or revise these forward-looking statements in the future. We will make a number of references to non-gap financial measures. We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included in our earnings release a full reconciliation of non-gap financial measures to the most comparable gap measures.

Speaker 3: Before Jennifer discusses the additional details about our performance, I will share some observations on the industry, including recent trends in retail-wine sales.

Our fourth Jennifer discussed as additional details about our performance.

First some observations on the industry, including recent trends retail wine sale.

Stepping back with a broad view, we're pleased to see signs that the total U S wine industry seems to be turning the corner.

Speaker 3: stepping back with a broad view, where you're pleased to see signs that the total US wine industry seems to be turning the corner.

Speaker 3: The $25 up sub-segment turned positive in the 12-week period and the July 30th, 2023. And the luxury wine segment, wines at $15 and above, grew at 5.4% in the same 12-week period.

The 25 dollar and up sub segment turned positive in the 12 week period ended July 32023, and the luxury wine segment winds at $15 and above grew at five 4% in the same 12 week period.

Speaker 3: We continue to outpace the broader luxury segment on a full year base.

We continued to outpace the broader luxury segment on a full year basis.

Sean Sullivan: In addition, please note that all retail scanner data cited on today's call is sourced from Serkana, which was formerly known as IRI, and will refer to dollar consumption for the 12-week period ended July 30th, 2023, and growth first is the same period in the prior year in U.S, track channels unless otherwise noted.

Speaker 3: The Deccorn Portfolio grew 9.1 percent, versus just 1.6 percent for the luxury segments during the same period as measured by FACANA.

The duck corn portfolio grew nine 1% versus just one 6%, but the luxury segments. During the same period as measured by per corner.

Speaker 3: We are encouraged by windcrens going signs of a rebound and remain competent in our ability to continue to outperform the luxury wind segment and take care in this coming fiscal year.

We are encouraged by wind trends showing signs of a rebound and remain confident in our ability to continue to outperform the luxury wine segment and take care in the coming fiscal year.

Speaker 3: Now I would like to note a few highlights from the fourth quarter.

Sean Sullivan: Before we discuss our financial performance and outlook, I would like to share an update about our company's leadership team.

Now I would like to note a few highlights from the fourth quarter.

Speaker 3: First, on the top line, we performed in line with our expectations with net sales increasing 28% over the prior year.

First on the topline we performed in line with our expectations with net sales increasing 28% over the prior year.

Sean Sullivan: As you may have seen in a press release a few moments ago, we have announced that Alex Ryan, retired as our president, chief executive officer and chairman, focused on family and personal matters. We wish Alex well and thank him for his 35 years of leadership and service at the.cornportfolio.

Speaker 3: We planned fourth quarter growth to be the most robust of the year, given the cadence stiff in our cost-to-ground appellation offering an expected strong wholesale growth. And we achieved...

We planned fourth quarter growth to be the most robust of the year given the cadence there and.

And our cost of ground Appalachian offering.

The strong wholesale growth and we achieved it.

Speaker 3: wholesale net sales increased 20% with performance strongest earlier in the quarter.

Wholesale net sales increased 20% with performance stronger earlier in the quarter.

Sean Sullivan: In light of Alex's retirement, I'm also pleased to announce that our Board of Directors voted to appoint Deirdre Mahlan to act as our interim president, chief executive officer and care woman. Deirdre is an excellent choice to lead our companies through this transition, given her close work with the company and management over the past nearly three years and her extensive expertise in the alcohol beverage industry. Deirdre spent nearly 20 years in leadership positions at DIZO.

Speaker 3: Direct consumer net sales increased 75% driven by the fifth of the cost of brown Appalachian offering from the third quarter last year to the fourth quarter this.

Direct to consumer net sales increased 75% driven by the shift of the Costa Brown Appalachian offering from the third quarter of last year to the fourth quarter of this year.

Speaker 3: Second, our volume grew by 10.6% which reflects an acceleration over the third quarter.

Second our volume grew by 10, 6%, which reflects an acceleration over the third quarter.

Speaker 3: Consistent with typical seasonality patterns, shipment growth in the quarter modestly outpaced the pleating growth, but the pleating growth and shipment growth were in line with our expectations for the full physicality.

With typical seasonality pattern shipment growth in the quarter modestly outpaced the placement growth, but depletion growth and shipment growth were in line with our expectations for the full fiscal year.

Sean Sullivan: From 2010 to 2015, he served as chief financial officer of DIZO PLC. Delta served as chief executive officer of DIZO North America between 2015 and 2020. Since early 2021, he has been a key collaborator with the company's veteran leadership team that continued to boast more than 60 years of collective experience at Duckhorn. My colleagues joined me in excitement about DIZO accepting this most important leadership role in our company. Stepping back, the success of the Duckhorn portfolio has always been the result of our philosophy, the collaborative efforts of our amazing team and our unwavering commitment to producing the highest quality wine. At its core, the Duckhorn portfolio is made up of more than 500 passionate employees. Our team, our values and our commitment to excellence have always been and always will be the foundation of our success.

Speaker 3: And importantly, at the end of the fourth quarter, wholesale channel inventory is consistent with our ex.

And importantly at the end of the fourth quarter wholesale channel inventories were consistent with our expectation.

Speaker 3: Third, our portfolio remained a category growth leader within the $15 an up-to-lumped free segment, where we continue to pay.

Third our portfolio remained a category growth leader within the 15 dollar and up luxury segment.

We continue to make there.

Speaker 3: And finally, we posted an improved adjusted EBITDA margin of 34.2% versus 28.6% in the prior year.

And finally, we posted an improved adjusted EBITDA margin of 34, 2% versus 28, 6% in the prior year.

Speaker 3: The fourth quarter benefited from the shift of the Costa Brown Appalachian offering and robust growth margin expansion resulting from opportunistically lean straight.

This quarter benefited from the shift of the Costa Brown, Apple waiting offerings and robust gross margin expansion, resulting from Opportunistically lean right.

Speaker 3: Let me take a moment to update you on another aspect of our growth strategy. Growing the number of accounts in which our luxury wines are sold.

Let me take a moment to update you on another aspect of our growth strategy growing the number of accounts and with our luxury wines are sold.

Speaker 3: As part of our annual assessment of our total addressable market for the wholesale channel, we calculate the number of accounts in which our luxury wines are sold and set its target for its future growth.

As part of our annual assessment of our total addressable market for the wholesale channel, we calculate the number of accounts and with our luxury wines are gold and set a target for future growth.

Sean Sullivan: We look forward to you getting to know Deirdre very soon that he settles into her new role at the company.

Speaker 3: We are pleased to see the number of accounts sold grow from 59,000 as the June 30, 2022.

We are pleased to see the number of accounts sold grow from 59000 as of June 32022.

Sean Sullivan: Moving now to our financial results, I'd like to start by saying how pleased we are with our fourth quarter and full year performance. Net sales grew 28% in the fourth quarter, resulting in full year sales growth of 8%, complemented by full year adjusted EBITDA growth of 13%. Our strategies to drive profitable sales growth through leveraging our brand strength, evolving our portfolio, expanding our wholesale network, and growing our DTC panel continues to pay off.

Speaker 3: to 65,000 as of June 30th, 2023, reflecting greater than 10% growth in the number of accounts.

The 65000 as of June 32023, reflecting greater than 10% growth in the number of accounts.

There remains significant white space.

Speaker 3: We are targeting that the number of accounts that would draw lines this old to grow at a cager of 7 to 8% over the next four years.

We are targeting that the number of accounts that would go wines are sold to grow at a CAGR of 7% to 8% over the next four years.

Speaker 3: I would like to pair a brief update on the production winery we acquired in June in Sonoma County.

I would like to share a brief update on the production winery, we acquired in June in Sonoma County.

Sean Sullivan: Before Jennifer discusses additional details about our performance, I will share some observations on the industry, including recent trends in retail wine sales. Stepping back with a broad view, we are pleased to see signs that the total US wine industry seems to be turning the corner. The $25 up sub-segment turned positive in the 12-week period and the July 30th 2023 and the luxury wine segment, wines at $15 and above, grew at 5.4% in the same 12-week period.

Speaker 3: As we have noted before, our strategy with respect to the acquisition of production assets is to optimize the balance between in-house production and the use of custom-crust partners in a manner that enhances the quality of our wine, increases diversification and op-finality, and reflects an efficient use of talent.

As we have noted before our strategy with respect to the acquisition of production assets is to optimize the balance between in house production and to use the custom crush partners in a manner that enhances the quality of our wine increases diversification and optionality and reflects an efficient use of cash.

Capital.

Speaker 3: Production wineries of this scale are rarely available in California. And this acquisition reduces our reliance on third party custom processing, storage, and bottling. And takes a longer term view with respect to future capacity requirements to meet our long term growth plan.

And wineries that this scale are rarely available in California, and this acquisition reduces our reliance on third party custom processing storage and bottling and take the longer term view with respect to future capacity requirements to meet our long term growth plan.

Sean Sullivan: We continue to outpace the broader luxury segment on a full-year basis. The DECORM portfolio grew 9.1% versus just 1.6% for the luxury segment during the same period as measured by the corner. We are encouraged by winecrens going signs of a rebound and remain competent in our ability to continue to outperform the luxury wine segment and take care in this coming fiscal year.

Speaker 3: by optimizing our production processes and affording a greater visibility into our cost of goods in future years. We view this acquisition as an investment in our future growth, our winery brand, and our financial performance.

By optimizing our production processes and affording us greater visibility into our cost of goods in future years. We view this acquisition as an investment in our future growth, our winery brand and our financial performance.

With that I'll now hand over the call to Jennifer to take us through our Q4 performance.

Speaker 3: With that, I'll now hand over the call to Jennifer to take us through our Q4 performance and preliminary fiscal 2024 guys.

And preliminary fiscal 2020 for guidance.

Sean Sullivan: Now, I would like to note a few highlights from the fourth quarter. First, on the top line, we performed in line with our expectations with net sales increasing 28% over the prior year. We planned fourth quarter growth to be the most robust of the year given the cadence stiff in our cost-of-ground appellation offering and expected strong wholesale growth, and we achieved this, wholesale net sales increased 20% with performance strongest earlier in the quarter.

Speaker 4: Thank you, Tom, and good afternoon, everyone. Beginning with our top line, net sales were 100.1 million, an increase of 28.3% compared to prior year, and consistent with our expectations.

Thank you John and good afternoon, everyone.

With our top line net sales were $100 1 million, an increase of 28, 3% compared to prior year and consistent with our expectation.

Speaker 4: The growth was driven by both strong price mix and volume growth imported meaningfully by the shift in the Costa Brown Appalachian Series offering into the fourth quarter of this year.

The growth was driven by both strong price mix and volume growth imported meaningfully by the shift in the coaster Brown Appalachian series offering into the fourth quarter of this year.

Speaker 4: We have a long term pricing strategy for our luxury wines and our planned price increases during the past fiscal year were well received by both retailers and consumers alike. We continue to take care at all price points within the portfolio.

We have a long term pricing strategy for our luxury wine and our planned price increases during the past fiscal year were well received by both retailers and consumers alike.

Sean Sullivan: Direct consumers net sales increased 75% driven by the shift of the cost-of-ground appellation offering from the third quarter last year to the fourth quarter this year. Second, our volume grew by 10.6% which reflects an acceleration over the third quarter. Consistent with typical seasonality patterns, shipment growth in the quarter modestly outpaced depletion growth, but depletion growth and shipment growth were in line with our expectations for the whole fiscal year. And importantly, at the end of the fourth quarter, wholesale channel inventories were consistent with our expectations.

We continued to take care at all price points within our portfolio.

Our DTC channel was a major driver of our consolidated net sales growth benefiting from the previously discussed.

Speaker 4: Our D to C channel was a major driver of our consolidated net sales growth, benefiting from the previously discussed, stiff, and cadence of the Costa Brown Appalachian Series Office.

Cadence.

Brown Appalachian theories offering.

Speaker 4: As a reminder, this movement is simply a cadence dip that was a headwind in the third quarter and a tailwind in the fourth quarter.

As a reminder, this movement is can be exceeded if that was a headwind in the third quarter and a tailwind in the fourth quarter.

Speaker 4: Also, shipment grows outpaced the policing growth in the fourth quarter. But the shipment growth and the policing growth were in balance for the full fiscal year.

Wholesale shipment growth outpaced the cleat and growth in the fourth quarter.

Shipment growth and depletion growth were in balance for the full fiscal year.

On a net sales basis, the wholesale channel posted strong double digit growth driven by off premise demand from national accounts.

Speaker 4: on a net failed basis, the wholesale channel hosted strong double digit growth driven by off from a demand from national account.

Sean Sullivan: Third, our portfolio remained a category growth leader within the $15 and up-to-blood segment where we continue to take care. And finally, we posted an improved adjusted EBITDA margin of 34.2% versus 28.6% in the prior year. The fourth quarter benefited from the shift of the cost-of-ground appellation offering and robust growth margin expansion resulting from opportunistically lean trade sales.

Speaker 4: From a sub-town perspective, off-premise was a key growth driver in the quarter, outperforming the growth of our on-premise sub-townl and showing strength into pleacin, account sold, and number of labels for account.

From a channel perspective off premise was a key growth driver in the quarter outperforming the growth of our on premise channel and growing strength in Depletions accounts sold and number of labor per account.

Speaker 4: By swiping a test prior year comparison that had benefited from the continued on-premise reopening, we still grew our on-premise account base this quarter.

Despite lapping a tough prior year comparison that had benefited from the continued on premise reopening we still grew our on premise account base this quarter.

Speaker 4: As we have noted on prior earnings calls, our exclusive focus as a producer of luxury wine means that we emphasize placement of our wines on wine lists in fine dining restaurants and other on-premise books.

As we have noted on prior earnings calls our exclusive focus as a producer of luxury wine means that we emphasized the placement of our wine on wine list and fine dining restaurants and other on premise that statement.

Sean Sullivan: Let me take a moment to update you on another aspect of our growth strategy, growing the number of accounts in which our luxury wines are sold. As part of our annual assessment of our total addressable market for the wholesale channel, we calculate the number of accounts in which our luxury wines are sold and set a target for a future growth. We are pleased to see the number of accounts sold grow from 59,000 as of June 30th, 2022 to 65,000 as of June 30th, 2023, reflecting greater than 10% growth in the number of accounts. There remains significant white space. We are targeting that the number of accounts that which our wines are sold to grow at a figure of 7 to 8% over the next four years.

Speaker 4: to expand briefly on the net sales performance by sub-count in the fourth quarter.

You expand briefly on the net sales performance by sub count in the fourth quarter.

The wholesale distributor sub count continues its growth trajectory this quarter, increasing an impressive 23, 9% over the prior year.

Speaker 4: The wholesale to the distributor sub-tannel continues its growth trajectory this quarter, increasing an impressive 23.9% over the prior year, driven by a combination of case volume growth and favorable brand mix led by our Duckhorn Vineyard and Decoi winery brands, with continued expansion of Decoi limited in the panel.

Even by a combination of case volume growth and favorable brand mix led by our DUC, one vineyard and be quite winery brands with continued expansion of be quite limited in the channel.

Speaker 4: The California Direct-To-Trade Subtanel was up 7.3% compared to the prior year on healthy volumes and price.

The California Director trade sub panel was up seven 3% compared to the prior year unhealthy volumes and pricing.

Speaker 4: We are pleased to see this growth in California, which is already our strongest state.

We are pleased to see this growth in California, which is already our strongest state.

The direct to consumer channel increased 75% when compared to the prior year.

Speaker 4: The Directive Consumer Channel increased 75% when compared to the prior year.

Sean Sullivan: I would like to share a brief update on the production winery we acquired in June and Sonoma County. As we have noted before, our strategy with respect to the acquisition of production assets is to optimize the balance between in-house production and the use of custom-crush partners in a manner that enhances the quality of our wines, increases diversification and oftenality, and reflects an efficient use of capital. Production wineries of this scale are rarely available in California, and this acquisition reduces our reliance on third-party custom processing, storage, and bottling, and takes a longer-term view with respect to future capacity requirements to meet our long-term growth points, by optimizing our production processes and affording a greater visibility into our cost of goods in future years. We view this acquisition as an investment in our future growth, our winery brand and our financial performance.

Speaker 4: This increase was largely anticipated given the cadence of our custom brown off.

This increase was largely anticipated given the cadence of our Costa brand offering.

Speaker 4: excluding the impact of the timing shift, D to C net sales would have increased solidly in the quarter.

Excluding the impact of the timing to be to see net sales would have increased solidly in the quarter.

Speaker 4: Our strategy to drive our direct to consumer business through customer engagement and our taping room is proven out as our per person spend is higher than pre-pandemic level.

Our strategy to drive our direct to consumer business through customer engagement and our tasting room is proven out as our per person spend is higher than pre pandemic levels.

Speaker 4: First quarter gross profit was $55.3 million, an increase of $16 million, or 40.6% compared to prior year.

Fourth quarter gross profit was $55 3 million, an increase of $16 million or 46% compared to prior year.

This represents a 55, 2% gross margin up approximately 480 basis points year over year, improving due to the debt and the timing of the customer Brown Appalachian theories offering and in our wholesale channel as a result of successful planned price increases and lower discounting.

Speaker 4: represents a 55.2% growth margin up approximately 480 basis points year over year, improving due to the shifts in the timing of the Custom Brown Appalachian Series offering and in our Holtdale Channel, as a result of successful planned price increases in lower discounting.

Total selling general and administrative expenses were $30 4 million, an increase of $2 7 million or nine 8%.

Speaker 4: Total selling, general, and administrative expenses were 30.4 million, an increase of 2.7 million or 9.8%.

Jennifer Fall Young: With that, I'll now hand over the call to Jennifer to take us through our Q4 performance and preliminary fiscal 2024 guidance. Thank you, Sun, and good afternoon everyone. Beginning with our top line, net sales were 100.1 million, an increase of 28.3% compared to prior year, and consistent with our expectations. The growth was driven by both strong price mix and volume growth, supported meaningfully by the shift in the Costa Brown Appalachian series offering into the fourth quarter of this year.

Speaker 4: The increase was primarily attributed to higher compensation costs as we continue to invest in our workforce and deliver on our long-term growth strategy.

The increase was primarily attributed to higher compensation costs as we continue to invest in our workforce and deliver on our long term growth strategy.

Speaker 4: Net income was 17.8 million or 15 cents for diluted care. Adjusted net income was 16.7 million or 15 cents for diluted care, which nearly doubled from our fourth quarter of last year.

Net income was $17 8 million or 15 cents per diluted share.

Adjusted net income was $16 7 million or 15 cents per diluted per which nearly doubled from our fourth quarter of last year.

The increase in adjusted net income was driven by higher net sales and.

Speaker 4: The increase in excessant income was driven by higher nut failed.

Speaker 4: and higher growth margin percent compared to the prior year, partially offset by higher operating expenses, increase and income tax.

And higher gross margin percent compared to the prior year, partially offset by higher operating expenses interest and income taxes.

Jennifer Fall Young: We have a long term pricing strategy for our luxury wine and our planned price increases during the past fiscal year were well received by both retailers and consumers alike. We continue to take care at all price points within the portfolio. Our D2C channel was a major driver of our consolidated net sales growth, benefiting from the previously discussed, stiff, and cadence of the Costa Brown Appalachian series offering. As a reminder, this movement is simply a cadence that was a headwind in the third quarter and a tailwind in the fourth quarter, wholesale shipment growth outpaced the cleast and growth in the fourth quarter, but the shipment growth and completion growth were in balance for the full fiscal year.

Speaker 4: Adjust your EBITDA with 34.2 million, an increase of 11.9 million or 53.5% year-over-year growth.

Adjusted EBITDA was $34 2 million, an increase of $11 9 million or 53, 5% year over year growth.

Speaker 4: Adjusted EBITDA margin improved 560 basis points versus the prior year.

Adjusted EBITDA margin improved 560 basis points versus the prior year.

Speaker 4: The increase was driven by higher net sales and improved growth margin, primarily as a result of pricing optimization, partially offset by higher operating expense.

The increase was driven by higher net sales and improved gross margin primarily as a result of pricing optimization, partially offset by higher operating expenses.

Overall, our fourth quarter was a solid end to a strong year at the current portfolio.

Speaker 4: Overall, our fourth quarter was a solid end to a strong year at the Deco-Importfolio.

Speaker 4: At the end of the quarter, we had cast of 6.4 million and total debt of 233.8 million. As a result, our leverage rate failed to climb to 1.6 times net debt.

At the end of the quarter, we had cash of $6 4 million and total debt of $233 8 million as a result, our leverage ratio declined to one six times net debt.

Jennifer Fall Young: On a net sales basis, the wholesale channel hosted strong double digit growth driven by off from a demand from national account. From a sub down perspective, off premise was a key growth driver in the quarter outperforming the growth of our on premise sub channel and showing strength and depletion account sold and number of labels for account. The site laughing a test prior year comparison that had benefited from the continue on premise reopening, we still grew our on premise account base this quarter.

Speaker 4: Let's turn now to our initial outlet for full year fiscal 2024.

Let's turn now to our initial outlook for full year fiscal 2024.

While we are mindful that ongoing macro uncertainty can impact customer discretionary spending we believe we are well positioned to continue outperforming the overall wine industry and taking there and luxury wine.

Speaker 4: where we are mindful that ongoing macro uncertainty can impact customer discretionary spending. We believe we are well positioned to continue outperforming the overall wine industry.

Speaker 4: and taking care in luxury wine, due to our superior brand strength and scaled, highly diversified business.

Our superior brand strength and scaled highly diversified business model.

Speaker 4: We expect to realize volume driven, pop line growth, up mid to high single digits.

Jennifer Fall Young: As we have noted on prior earnings calls, our exclusive focus as a producer of luxury wine means that we emphasize placement of our wines on wine list in fine dining restaurants and other on premise locations. To expand briefly on the net sales performance by sub down in the fourth quarter. The wholesale distributor sub channel continues its growth trajectory this quarter, increasing an impressive 23.9% over the prior year driven by a combination of taste volume growth and favorable brand mix led by our duck one vineyard and decoy winery brands with continued expansion of decoy limited in the panel.

We expect to realize volume driven top line growth.

Mid to high single digits.

Net sales contribution will be balanced across our channels and brands with a profitability growth consistent with the top line.

Speaker 4: Netfail contribution will be balanced across our sub-tannels and brands with a profitability growth consistent with the top line.

Speaker 4: Adjusted SNA will increase in total dollars, but decrease as a percentage of net sales, as we continue to make disciplined investment to execute against our considerable distribution of white space opportunities, which underpins our long-term strategy. Thank you very much.

Adjusted SG&A will increase in total dollars, but decreased as a percentage of net sales as we continue to make disciplined investments.

Execute against our considerable distribution white space opportunity, which underpins our long term strategy.

For fiscal year 2024, we expect.

Speaker 4: NET sales in the range of 420 million to 430 million, which represents growth of 4 to 7 percent.

Net sales in the range of 420 million to $430 million, which represents growth of 4% to 7%.

Jennifer Fall Young: The California direct trade sub channel was up 7.3% compared to the prior year on healthy volumes and pricing. We are pleased to see this growth in California, which is already our strongest state. The direct consumer channel increased 75% when compared to the prior year. This increase was largely anticipated given the cadence of our cost of brown off. Excluding the impact of the timing death, D to C net sales would have increased solidly in the quarter.

Speaker 4: I just see EBITDA in the range of 150 million to 155 million, which represents growth of 4 to 7%.

Adjusted EBITDA in the range of $150 million to $155 million, which represents growth of 14, 7%.

Speaker 4: Adjust an EPS in the range of 67 to 69 cents per diluted tear. This includes approximately due to sent per diluted tear of pressure due to the Geyserville facility acquisition in late fiscal year 2023.

Adjusted EPS in the range of 67 to 69 cents per diluted share.

This includes approximately two cents per diluted share of pressure due to the guys are available facility acquisition in late fiscal year 2023.

Speaker 4: capital expenditures of approximately 8 to 10% of net sales.

Capital expenditures of approximately 8% to 10% of net sales.

Jennifer Fall Young: Our strategy to drive our direct to consumer business through customer engagement and our tasting room is proven out as our per person spend is higher than pre-pandemic levels. The 55.2% growth margins up approximately 480 basis points year over year, improving due to the shift in the timing of the customer brown Appalachian series offering and in our hotel panel as a result of successful planned price increases and lower discounting. Total selling general and administrative expenses for 30.4 million an increase of 2.7 million or 9.8%.

Speaker 4: Interest expense in the range of 14 to 16 million and an effective tax rate of 25 to 27 percent of free tax income on a US VAA PV.

Interest expense in the range of $14 million to $16 million and an effective tax rate of 25% to 27% of pretax income on a U S. G. A a P basis.

Due to the seasonality of our business and the variance in prior year comparative we thought we would provide some additional color on Q1 in the first half dynamics.

Speaker 4: Due to the seasonality of our business and the variance in prior year comparatives, we thought we would provide the medicinal color on C1 and the first path dynamic.

While the first half of the year is expected to be proportionately in line with last year.

Speaker 4: While the first half of the year is expected to be proportionally in line with last year, rows will be specifically within Q2, with Q1 to go some downward pressure as we lap some shipment timing in the first half of the prior year.

Rose will be specifically within Q2.

With Q1, because some downward pressure as we lap some shipment timing in the first half of the prior year.

For Q1, we were looking for a high to mid single digit decline given last year's peak wholesale increase.

Speaker 4: For Q1, we are looking for a high-to-mid single-digit decline given last year's predefined finale opening at the level of best speed voice acting in the 7 finite Sets biggest, most theology numerous times, such asroscopic technique to make possible on this track.

Jennifer Fall Young: The increase was primarily attributed to higher compensation costs as we continue to invest in our workforce and deliver on our long term growth strategies. Net income was 17.8 million or 15 cent for diluted care, a decent net income was 16.7 million or 15 cent for diluted care which nearly doubled from our fourth quarter of last year. The increase in a decent net income was driven by higher nut sales and higher growth margins percent compared to the prior year, partially offset by higher operating expenses, interest and income taxes.

Speaker 4: As a reminder, the prior year Q1 benefited from shipment timing favorability, part of which was full-forward from Q2 into Q1 as distributors stuffed up to avoid logistical challenges or to steer inventory before pricing.

As a reminder, the prior year Q1 benefited from shipment timing favorability part of which was pull forward from Q2 into Q1 as a contributor ducked up to avoid logistical challenges or just your inventory before price increases.

Speaker 4: I want to reiterate, as we have discussed in the past, that quarter to quarter volatility in shipment volume is common given the relative size of our wholesale channel business and the timing movements across quarters are not meaningful indicators of the underlying health of the business.

I want to reiterate as we have discussed in the past that quarter to quarter volatility and shipment volume is common given the relative size of our wholesale channel business and the timing movements across quarters are not meaningful indicators of the underlying health of the business.

Speaker 4: In terms of seasonality, we expect first half and second half of personality that is generally in line with our historic trends.

In terms of seasonality, we expect first half and second half of personality that is generally in line with our historic trends.

Jennifer Fall Young: Adjusted EBITDA was 34.2 million an increase of 11.9 million or 53.5% year over year growth. Adjusted EBITDA margin improved 560 basis points versus the prior year. The increase was driven by higher net sales and improved growth margins primarily as a result of pricing optimization, partially offset by higher operating expenses. Overall, our fourth quarter was a solid end to a strong year at the Decoran portfolio. At the end of the quarter, we had tax of 6.4 million and total debt of 233.8 million as a result our leverage ratio declined to 1.6 times net debt.

We also note that the second half includes some refinements to shipment cadence between Q3, and Q4, where our coastal brown offering as we continue to strive for the optimal customer experience and bring these exceptional wines directly to our customers.

Speaker 4: We also note that the second half includes some refinements, the shipment cadence between Q3 and Q4 for a close-up around offering as we continue to strive for the optimal customer experience in bringing these exceptional wines directly to our customers.

Speaker 4: These movements and shipment timing will bring net sales out of Q4 and and into Q3 relative to prior year.

These movements and shipment timing will bring net sales out of Q4 and into Q3 relative to prior year.

Speaker 4: For fiscal year 2024, we anticipate downward pressure on gross margin of up to 50 basis points as we restore pricing to more normalized levels.

For fiscal year 'twenty 'twenty, four we anticipate downward pressure on gross margin of up to 50 basis points as we restore pricing to more normalized levels.

Speaker 4: On a foliar basis, our growth outlook is in line with our long-term growth algorithm, and we remain puttently optimistic despite some potential industry and macroeconomic stress.

On a full year basis, our growth outlook is in line with our long term growth algorithm and we remain prudently optimistic despite some potential industry and macroeconomic pressure.

Jennifer Fall Young: Let's turn now to our initial outlook for full year fiscal 2024. We are mindful that ongoing macro uncertainty can impact customer discretionary spending. We believe we are well positioned to continue outperforming the overall wine industry and taking care and luxury wine due to our superior brand strength and scaled highly diversified business model. We expect to realize volume driven top line growth up mid to high single digits. Net sales contribution will be balanced across our sub-panels and brands with a profitability growth consistent with the top line.

Speaker 4: In conclusion, we are pleased with our fourth quarter and full year 2023 results. We continue to outperform and take care within the luxury wine segment. And I believe we remain in an advantageous position within our industry as we look forward to a strong fiscal year ahead. I will now head back over to John for closing remarks.

In conclusion, we are pleased with our fourth quarter and full year 2023 results, we continue to outperform and take their within the luxury wine segment and I believe we remain in an advantageous position within our industry as we look forward to a strong fiscal year ahead.

I will now hand, it back over to John for closing remarks.

Thank you Jennifer.

Speaker 3: We're very pleased with our strong financial results and our consistent out performance of the luxury wine segment.

We're very pleased with our strong financial results and our consistent outperformance of the 131 segment or.

Speaker 3: While the impacts of the short-term macroeconomic environment are challenging to predict, we are confident that the Duckhorn portfolio will continue to deliver in the long-term against our growth strategy with results that demonstrate the strength of our brand and the resiliency of our cuts.

While the impacts of the short term macroeconomic environment, our talent to predict we are confident that the DUC corn portfolio will continue to deliver in the long term against our growth strategy with results that demonstrate the strength of our brand and the resiliency of our customers.

Jennifer Fall Young: Adjusted FDNA will increase in total dollars but decrease as a percentage of net sales as we continue to make disciplined investment to execute against our considerable distribution of white space opportunities which underpins our long term strategy. V. For fiscal year 2024, we expect net sales in the range of 420 million to 430 million, which represents growth of 4 to 7%. I just the EBITDA in the range of 150 million to 155 million, which represents growth of 4 to 7%.

Speaker 3: We remain committed individually and as a team.

We remain committed individually and as a team.

Speaker 3: delivering sustainable, profitable growth, and will always strive to create value over the long term for our stockholders.

Delivering sustainable profitable growth.

And we will always strive to create value over the long term for our stockholders.

Speaker 3: With that, Jennifer and I are available to take your questions.

With that Jennifer and I are available to take your questions.

And we would appreciate our focus on questions about our business strategy financial performance and guidance for the new fiscal year. My statements earlier in the call and also the press release issued earlier. This afternoon include all of the information we have to share today with respect to the.

Speaker 3: And we would appreciate a focus on questions about our business strategy, financial performance, and guidance for the new fiscal year. My statements earlier in the call, and also the press release issued earlier this afternoon, include all of the information we have to share today with respect to the CEO transition.

Jennifer Fall Young: I just an EPS in the range of 67 to 69 cents per diluted share. This includes approximately 2 cents per diluted share of pressure due to the Geyserville Facility Acquisition in late fiscal year 2023. Capital expenditures of approximately 8 to 10% of net sales, interest expense in the range of 14 to 16 million, and an effective tax rate of 25 to 27% of fleet tax income on a U.S. VAAP basis.

CEO transition.

We will now begin the question and answer session.

Speaker 2: If you'd like to ask a question, please press star followed by one in your telephone keypad. To remove your question, press star followed by two.

If you'd like to ask a question. Please press star followed by one on your telephone keypad.

To remove your question press Star followed by two.

And if you are using a speaker phone.

Please pick up your handset before asking your question.

Jennifer Fall Young: Due to the seasonality of our business and the variance in prior year comparatives, we thought we would provide the medicinal color on C1 and the first half dynamics. While the first half of the year is expected to be proportionally in line with last year, growth will be specifically within Q2 with Q1 to go some downward pressure as we lap some shipment timing in the first half of the prior year. For Q1, we are looking for a high-to-mid single-digit decline given last year's speed wholesale increase.

Speaker 2: Our first question today comes from Christian John Quir with Bank of America.

Our first question today comes from Christian <unk> with Bank of America.

Please proceed.

Speaker 5: Hey everyone, you have Christian on for Pete. Before we ask her question, I just wanna say it was a pleasure working with Alex and we wish him the best.

Hey, everyone you have Christian on for Pete before we asked a question I just want to say it was a pleasure working with Alex and we wish him the best.

Speaker 5: first we need what needs to sorry sorry go ahead

First we need what needs to.

Sorry, sorry go ahead.

You said, we do too.

Speaker 5: So first question, and then I have a quick follow up. What needs to transpire for you guys to hit the high end of your sales and EBITDA outlook?

So first question and then I have a quick follow up what needs to transpire for you guys to hit the high end of your sales and EBITDA outlook.

Jennifer Fall Young: As a reminder, the prior year Q1 benefited from shipment timing favorability, part of which was full-core from Q2 into Q1 as distributors sucked up to avoid logistical challenges or to secure inventory before price increases. I want to reiterate, as we have discussed in the past, that quarter to quarter volatility in shipment volume is common given the relative size of our wholesale channel business and the timing movements across quarters are not meaningful indicators of the underlying health of the business.

Speaker 4: Hi, Christians, this is Jen. Nice to meet you.

Hi, Christian this is Jan nice to meet you.

Speaker 4: As we talked about a little bit in our performance in FY 2023, part of our longer-term goal in terms of gaining market share really comes from really our account growth that we see in both on and off-premise.

As we talked about a little bit in our performance in FY 2023, part of our longer term goal in terms of gaining market share really comes from really our account growth that we see in both on and off premise as well as continuing to attract new customers with into our portfolio. So yeah. We will continue with that strategy. It has been working.

Speaker 4: as well as continuing to attract new customers within to our portfolio. So...

Speaker 4: We will continue with that strategy. It has been working. And we definitely see a path for that, for our upper end of our guidance. We are keeping in mind that there are macroeconomic and industry headwinds out there, but we feel really good about our top line guidance that we put forth.

And we yeah, we definitely see a path for that for our upper end of our guidance and we're just keeping in mind that there are macroeconomic and industry headwinds out there, but we feel really good about our topline guidance that we put forth.

Jennifer Fall Young: In terms of seasonality, we expect first half and second half of personality that is generally in line with our historic trends. We also note that the second half includes some refinements to shipment cadence between Q3 and Q4 for a close to brown offering as we continue to strive for the optimal customer experience in bringing these exceptional wines directly to our customers. These movements and shipment timing will bring net sales out of Q4 and Q3 relative to prior year.

Okay perfect. Thank you Jennifer and then one follow up I believe you touched on this towards the end of your remarks, but just the cadence of seasonal revenue for this the cadence for the seasonal revenue for fiscal 'twenty three changed because of the timing of cost of Brown shipments now is it fair to assume that <unk>.

Speaker 5: Okay, perfect. Thank you, Jennifer. And then one follow-up, I believe you touched on this towards the end of your remarks, but just the cadence of seasonal revenue for this, the cadence for the seasonal revenue for fiscal 23 changed because of the timing of cost of brown shimmings. Now,

Speaker 5: Is it fair to assume that sales seasonality for fiscal 24 for the first and second half should look closer to what it was in fiscal 23, right? Are we thinking about that correctly? And thank you.

L seasonality for fiscal 'twenty four for the first and second half should look closer to what it was in fiscal 'twenty three right are we thinking about that correctly and thank you.

Jennifer Fall Young: For fiscal year 2024, we anticipate downward pressure on gross margin of up to 50 basis points as we restore pricing to more normalized levels. On a full-year basis, our gross outlook is in line with our long-term gross algorithm and we remain puttently optimistic despite some potential industry and macroeconomic pressure.

Speaker 4: Yes, directionally. You know, we say proportionately, we feel on a half basis, which I think is where you were starting. You should see the same cadence on a half basis. Just keeping in mind that we, you know, we feel really great about the cost-around offering and how it performs in Q4, obviously driving a lot of growth. But we do think, you know, moving it back into Q3 will be more optimal for our customers. So you just have to think about that as you're looking at the court.

Yes, Directionally, we say.

Proportionately, we feel on a half basis, which I think is where you are starting you shouldn't see the same cadence on a half basis, just keeping in mind that we you know we feel really great about that cost around our offering and how it performed in Q4, obviously driving a lot of growth, but we do think you know moving it back into Q3 will be more optimal for our customers. So you just have to.

Jennifer Fall Young: In conclusion, we are pleased with our fourth quarter and full-year 2023 results. We continue to outperform and take care within the luxury wine segment and I believe we remain in an advantageous position within our industry as we look forward to a strong fiscal year ahead.

Think about that as you're looking at the quarters in <unk>.

Speaker 3: In Christian here, we have an investor deck that is just filed a few minutes ago as well. If you take a look at that, it's got a really helpful schematic that will put a finer point on that for you, which respect to the cost of Brown Off. Perfect, I'll pass it on. Thanks guys. Thank you.

We believe we have an investor deck.

That was just filed a few minutes ago as well.

Sean Sullivan: I will now hand it back over to John for closing remarks. Thank you, Jennifer. We are very pleased with our strong financial results and our consistent outperformance of the luxury wine segment. While the impacts of the short-term macroeconomic environment are challenging to predict, we are confident that the Duckhorn portfolio will continue to deliver in the long-term, against our gross strategy with results that demonstrate the strength of our brand and the resiliency of our customers.

Take a look at that it's got a really helpful schematic that.

Final point on that for you with respect to Costa Brown office.

Perfect I'll pass it along thanks guys.

Thank you.

Our next question comes from Lauren Lieberman with Barclays. Please proceed.

Okay, great. Thank you.

Speaker 6: Great, thanks. Good afternoon, everyone. I'm trying to put this in the touch on the off premise versus on premise trends. And you've mentioned that off premise was outperforming, but kind of what sort of assumptions underpin the 24 guidance in that regard. And then also within the on premise.

Good afternoon, everyone I'm trying to kind of touch on the off premise versus on kind of trends I know you'd mentioned that off premise was outperforming but I'm kind of what sort of assumptions underpin. The 24 guidance in that regard and then also within the on premise.

Sean Sullivan: We remain committed individually and as a team to delivering sustainable, profitable growth, and will always strive to create value over the long-term for our stockholders. With that, Jennifer and I are available to take your questions. And we would appreciate a focus on questions about our business strategy, financial performance, and guidance for the new fiscal year. My statements earlier in the call and also the press release issued earlier this afternoon include all of the information we have to share today with respect to the CEO transition.

Speaker 6: Just curious what you're seeing in terms of consumer trade down, how you feel about your availability on wine lists of having.

Just curious what you're seeing in terms of consumer trade down how you feel about your availability on wine list of having.

Speaker 6: You know, some of your lower or more moderately priced offerings available in key accounts at this point, or if that's something that is building as an opportunity to, you know, have more information.

You know some of your lower or more moderately priced offerings available.

In key accounts at this point or is that something that is it building as an opportunity to have more installation.

Speaker 4: Yeah, hi Lauren, this is Jen, great to meet you. You have we felt performance as we mentioned in our speech this year was

Yep, Hi, Laurie this is jen great to meet you yeah.

How are we saw performance as we mentioned in.

In our our speech this year was a lot of the growth did come from off premise, which we felt really good about solid growth both on premise and off premise had account growth in the quarter and on the year. So we are seeing favorable results in each channel. What you saw in on premise is that based on FY 'twenty two.

Speaker 4: A lot of the growth did come from off-premise, which we felt really good about solid growth, both on-premise and off-premise had account growth in the quarter and on the year. So we are seeing favorable results in each channel. What you saw on-premise is that based on FY22, there's a bigger hurdle so the comps were a little bit tougher. So although it did grow and we feel great with the performance, we were just copying a reopening in 2022 of on-premise.

Operator: We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. To remove your question, press star followed by two. And if you are using a speakerphone, please pick up your handset before asking your question.

The big bigger hurdle, so the comps were a little bit tougher so although it did grow and we feel great with the performance. We were just comping a reopening in 2022 of on premise and as we look forward you know part of our growth trajectory is to expect that both on and off premise will continue to grow from an account perspective, and that's where you know our new sales team is focus.

Speaker 4: As we look forward, you know, part of our growth trajectory is to expect that both on and off-premise will continue to grow from an account perspective. And that's where, you know, our new sales team is focused as well as the rest of the leadership team. And we will continue to get more of our wines into, you know, both the on-premise and off-premise category, knowing that they do, you know, there are some puts and takes with label mixes as we move through a year.

Christian Junquera: Our first question today comes from Christian John Quir with Bank of America. Please proceed. Hey, everyone. You have Christian on for Pete.

As well as the rest of the leadership team and we will continue to get more of our wines into both.

Jennifer Fall Young: Before we ask her question, I just want to say it was a pleasure working with Alex and we wish him the best. First, we need to go ahead. I said we do too. So first question and then I have a quick follow-up. What needs to transpire for you guys to hit the high end of your sales and EBITDA outlook? Hi, Christian. This is Jen. Nice to meet you. As we talked about a little bit in our performance in FY 2023, part of our longer-term goal in terms of gaining market share really comes from really our account growth that we see in both on and off-premise as well as continuing to attract new customers within to our portfolio.

Both the on premise and off premise category knowing that they do yeah. There are some puts and takes with label mixes as we move through a year.

Speaker 3: and with respect to trade down i would uh... uh... note relative stability frankly across the price points in the portfolio uh...

And with respect to trade down I would note relative stability frankly across the price points in the portfolio.

Speaker 3: you know the luxury wine category experienced a softening of demand and then some increases in its overall performance.

The luxury wine category experienced a softening of demand and then some increases in its overall performance.

Speaker 3: but we're focused on our performance relative to that uh... which is continued to be quite strong as we take care uh... i would point out also uh... our account growth which i think that the first of the three key vectors to wholesale growth going from fifty nine thousand to sixty four thousand twenty twenty three and a projection uh... that we take out at a keg or seven to eight percent over the next four years for growth that's that ah...

We're focused on our performance relative to that which has continued to be quite strong as we take share.

I would point out also our account growth, which I think the first of the three key vectors to wholesale growth.

Going from 59000 to 64000 as of June 30 of 2023, and a projection that we take out at a CAGR of 7% to 8% over the next four years for growth that's that comprised primarily more so of off premise and on but that is I think the underlying element of wholesale but also should be.

Jennifer Fall Young: So we will continue with that strategy. It has been working and we definitely see a path for that for our upper end of our guidance. We are keeping in mind that there are macroeconomic and industry headwinds out there, but we feel really good about our top line guidance that we put forth. Okay, perfect. Thank you, Jennifer. And then one follow-up, I believe you touched on this toward the end of your remarks, but just the cadence of seasonal revenue for this, the cadence for the seasonal revenue for fiscal 23 changed because of the timing of cost of brown市ments.

Speaker 3: primarily more so of off-premise than on but that is i think the underlying uh... element of wholesale but also should be kept

Kept in mind.

Okay great.

Speaker 6: correct, great. And then also wants to ask about promotions. I know, you know, goal has been to make this progress on kind of tempering promotions. Just any kind of color, you could spring, you know, to frame kind of the work that, you know, been done over fiscal 23 and kind of how much room is less going forward on that, you know, promotional, that kind of frequency.

And then also I just wanted to ask about promotions I know coal has been taken we'll keep making progress on you know kind of tempering promotion.

Any kind of color you could frame just frame kind of the work that's been done over fiscal 'twenty, three and kind of how much room is left going forward on that you know promotional satcom frequency conversation.

Jennifer Fall Young: Now, is it fair to assume that sales seasonality for fiscal 24 for the first and second half should look closer to what it was in fiscal 23, right? Are we thinking about that correctly? And thank you. Yes, directionally. You know, we say proportionately we feel on a half basis, which I think is where you were starting. You should see the same cadence on half basis. Just keeping in mind that we, you know, we feel really great about the cost-around offering and how it performs in Q4, obviously driving a lot of growth, but we do think, you know, moving it back into Q3 will be more optimal for our customers.

Speaker 4: Yeah, we saw significant improvement, as you saw, within our gross margin, as we have very limited promotion, promotions in the back half of the year. We do expect, and it's made...

Yeah, we saw a significant improvement as you saw within our gross margin as we have very limited promotion of promotions in the back half of the year, we do expect and it's made substantial improvements over FY 'twenty two for 'twenty 'twenty four as we noted in our call. We do expect to go.

Speaker 4: substantial improvements over FY22. You know, for 2024, as we noted in our call, we do expect to go more to a normalized basis of promotional cadence and really that is just thinking about, you know, whether that are consumer pressures or industry pressures we're seeing, but we do not think it will get back to the higher levels of the 2022 and we will continue to monitor that and be very strategic about our allocation strategy to make sure that we are, you know,

More to a normalized basis of promotional cadence and really that is just thinking about you know what are their consumer pressures or industry pressures, we're seeing but we do not think it will get back to the the higher levels of the 2022, and we will continue to monitor that and be very strategic about our allocation strategy to make sure that we are bringing all of them.

Jennifer Fall Young: So you just have to think about that as you're looking at the quarters. In Christian, we have an investor deck that's just filed a few minutes ago as well. If you take a look at that, it's got a really helpful schematic that will put a finer point on that for you, with respect to the cost-to-brown-off. Perfect. I'll pass it along. Thanks, guys. Thank you.

Speaker 4: bringing all the margin dollars possible to the bottom line.

Margin dollars possible to the Bottomline.

Okay, great. Thanks, so much.

Thank you thanks Lauren.

Yeah.

Speaker 2: Our next question comes from Andrew Sterlitz-Zick with BIMO. Please proceed.

Our next question comes from Andrew Sterlet sick with BMO. Please proceed.

Lauren Lieberman: Our next question comes from Lauren Lieberman with Scarclay. Please proceed. Hey, great. Thanks. Good afternoon, everyone. I'm trying to put into touch on the off premise versus on premise trends. I know you've mentioned that off premise was outperforming, but kind of what sort of assumptions underpin the 24 guidance in that regard. And then also within the on premise, just curious what you're seeing in terms of consumer trade down, how you feel about your availability on wine lists of having, you know, some of your lower or more moderately priced offerings available in peer accounts at this point, or if that's something that is building as an opportunity to, you know, have more installation.

Speaker 7: Hey, good afternoon. Thanks for taking the questions. The first one from me is on your comments about the one industry turning to corner. You know, I completely understand, obviously, that that your goal and objective is to gauge share relevant to the category. But for me,

Hey, good afternoon. Thanks for taking the questions first one for me is on your comments about the wine industry turning the corner.

Completely understand obviously.

Sure.

Second is to gain share relative to the category.

Speaker 7: Why do you think that that is the case, the chair of the quarter comment? Is it sustainable or is there something that's changed? I'm just curious, I don't have a friend.

What do you think that that is the case because the quarter comment is this sustainable or is there something that's changed so I'm just curious.

Rainbow.

Speaker 3: Sure, good afternoon to you by the way. I think as we look at luxury, so I think the first thing as you've probably heard us talk about on many occasions, I think I look at the total wine industry is less impactful than looking specifically at the luxury category, which we define as $15 in above.

Sure.

Good afternoon to you by the way.

I think as we look at luxury so I think the first thing is you probably have heard us talk about on many occasions.

I think I look at the total wine industry is less.

Tactful, then looking specifically at the luxury category, which we define as $15 and above.

Lauren Lieberman: Yeah. Hi, Lauren. This is Jen. Great to meet you. How we felt performance, as we mentioned in our speech this year was a lot of the growth did come from off premise, which we felt really good about solid growth both on premise and off premise had account growth in the quarter and on the year. So we are seeing favorable results in each channel. What you saw on premise is that based on FY22, there's a bigger hurdle so the comps were a little bit tougher.

Speaker 3: The data that we see, which is a mix of the Serkana data, which focuses about a third of our business, the scanner data, and other data points that we have and look at for the broader industry and for us specifically, show that luxury itself is

The data that we see which is a mix of the zircon.

We're gonna data, which focuses on about a third of our business the scanner data and other data points that we have in and look at for the broader industry and for US specifically show that luxury itself is turning that corner and starting to see a reacceleration I think our viewpoint is it.

Speaker 3: turning that corner and starting to see a re-exceleration. I think our viewpoint is probably a function of a number of factors. Some of it is related to the macroeconomic environment. Some of it is related to the choice of younger consumers who, some of whom may say, I'll drink a little less, but I want to drink a little better. And some of it might just be the sort of time of year we're going in.

Probably a function of a number of factors some of it is related to the macroeconomic environment. Some of it is related to the choice of younger consumers, who some of whom May say I'll drink, a little less but I want to drink a little better.

Lauren Lieberman: So, although it did grow and we feel great with the performance, we were just copying a reopening in 2022 of on premise. As we look forward, you know, part of our growth trajectory is to expect that both on and off premise will continue to grow from an account perspective. And that's where, you know, our new sales team is focused as well as the rest of the leadership team. And we will continue to get more of our wines into, you know, both the on premise and off premise category, knowing that they do, you know, there are some puts and takes with label mixes as we move through here.

And some of it might just be the sort of time of year, we're going into with our with the upcoming fall season and holidays, but I think if we look at it altogether.

Speaker 3: with the upcoming fall season in holidays. But I think if we look at it altogether, I think what we feel buoyed by is an overall, you know, deceleration of decline and now we're seeing some acceleration. We're cognizant that the industry as a whole won't be a straight line. There'll be some wobbles, faster growth or slower growth. But we like the overall trends, but we also particularly like our ability to take share an out performer.

I think what we feel buoyed by is in overall.

<unk> deceleration of the decline and now we are seeing some acceleration, we're cognizant that the industry as a whole won't be a straight line there'll be some wobbles faster growth or slower growth, but we like the overall trends, but we also particularly like our ability to take share and outperform our peers.

Lauren Lieberman: And with respect to trade down, I would note relative stability, frankly, across the price points in the portfolio, you know, the luxury wine category experienced a softening of demand and then some increases in its overall performance. But we're focused on our performance relative to that, which has continued to be quite strong as we take share. I would point out also our account growth, which I think that the first of the three key vectors to wholesale growth going from 59,000 to 64,000 as of June 30th, 2023 and a projection that we take out at a k-group of seven to eight percent over the next four years for growth. That's that comprised primarily more so of off premise than on, but that is I think the underlying element of wholesale that also should be kept in mind. Okay, great.

Speaker 3: And that has been the hallmark of something we've talked about on this call and on other calls is a very consistent long-term pattern that we have established through the work of our Salesforce and the organizational prowess that I think we bring to the table. So our outperformance, I believe, will continue in addition to what we hope is an industry that really has turned.

And that has been the hallmark of <unk> and something we've talked about on this call and on other calls is a very consistent.

Long term pattern that we have established through the work of our sales force and the organizational.

Prowess that I think we bring to the table so.

Our outperformance I believe will continue in addition to what we hope is as it is a is an industry that really has turned the corner.

Speaker 7: very clear and then my second question is just on the gross

Very clear and then my second.

This is just on the gross margin outlook.

Speaker 7: They provide an understanding that, you know, kind of normalizing pricing is by a role. But keep just talk about some of the key puts it takes across the cost buckets, levels of inflation, those types of things, any texture would be. Very helpful. Thank you.

Provide an understanding that you know kind of normalizing pricing.

Can you just talk about some kind of some of the key puts and takes across the cost buckets levels will be producing those types of things that actually would be very helpful. Thank you.

Jennifer Fall Young: And then also, I want to ask about promotions. I know, you know, kind of temper and promotion, just any kind of color you could frame, you know, to frame kind of the work that, you know, we've done over fiscal 23 and kind of how much room is left going forward on that, you know, promotional debt and frequency conversation. Yeah, we saw a significant improvement as you saw within our growth margin as we have very limited promotion promotions in the back half of the year.

Yeah, and nice to meet you Andrew So as we kind of look forward for our gross margin. We did note that we did anticipate some pressure coming into 2024 and really a lot of what underneath the covers and what youre seeing in that is we did note the trade spend because we did see significant favorability in trade spend.

Speaker 4: a nice meeting, Andrew. So as we kind of look forward to our gross margin, we did note that we did anticipate some pressure coming into 2024. And really a lot of what underneath the covers, what you're seeing in that is we did note the trades bend because we did see significant favorability and trades bid in 2023, particularly in the back half. So as we look forward, that'll be more normalized.

In 2023, particularly in the in the back half and so as we look forward that'll be more normalized and then also you there will be some puts and takes from a channel perspective, and although this all nets out at the bottom and our adjusted EBITA you. Once you kind of layer on SG&A the channels kind of neutralized, but are you as we.

Jennifer Fall Young: We do expect, and it's made substantial improvements over FY22. You know, for 2024, you know, as we noted in our call, we do expect to go more to a normalized basis of promotional cadence and really that is just thinking about, you know, whether there are consumer pressures or industry pressures we're seeing, but we do not think it will get back to the higher levels of the 2022 and we will continue to monitor that and be very strategic about our allocation strategy to make sure that we are, you know, bringing all the margin dollars possible to the bottom line. Okay, great. Thanks so much. Thank you. Thanks, Horan.

Speaker 4: and then also you know there will be some puts and takes from a channel perspective and although this all nets out at the bottom at our adjusted ebit dot you know once you can layer in s gna uh... the channel's kind of neutralize but uh... you as we continue to grow our our out of state wholesale distribution network which has

To grow our our out of state wholesale distribution network, which has.

Speaker 4: slightly lower margins in our in-state California a wholesale network so as those as those gross rates

Slightly lower margins in our in state, California, our wholesale network. So as those as those growth rates are.

Speaker 4: go a little higher than you'll see a little bit of pressure on the margin. But it does support that growth rate in out-of-state supports our long-term growth strategy. It's just more opportunity and whitespace in out-of-state than our highly penetrated California market. Thank you all for that.

I'll go a little higher than Youll see a little bit of pressure on the margin, but it does support that grocery in out of state supports our long term growth strategy and it's just more opportunity and white space in out of state that are highly penetrated in California market.

Andrew Strelzik: Our next question comes from Andrew Strelzik, with Bimo. Please proceed. Hey, good afternoon. Thanks for taking the questions. The first one from me is on your comments about the one industry turning to corner. You know, I completely understand, obviously, your goal and objective is to gauge share relevant to the category. But, I mean, why do you think that that is the case, the chair of the quarter comment?

Got it thank you I'll pass it on.

Thank you.

Sean Sullivan: Is this sustainable or is there something that's changed, but just curious about how to frame that? Sure. Good afternoon to you, by the way. I think as we look at luxury, so I think the first thing as you probably have heard us talk about on many occasions, I think I look at the total line industry is less impactful than looking specifically at the luxury category, which we define as $15 in above.

Yeah.

I apologize I was having a technical difficulty.

Speaker 2: Thank you again for your questions. As a reminder, it is star one to ask the question and star two to remove. Our next question comes from Andrea Tecferra with safety Morgan.

Thank you again for your questions. As a reminder, it is star one to ask a question star two to remove.

Our next question comes from Andrea Teixeira with JP Morgan.

Please proceed thank you.

Speaker 2: Thank you, operator. I just wanted to first thank you, Alex Ryan, for his impressive contribution to this company, and also to the California wine industry as a whole, and also so accessible to investors. And welcome you, Jennifer, looking forward to working with you. And my question is, what was the underlying the patient rate, some goals, say, or to retail? I know the puts and takes, of course, and Jennifer, you just discussed how you're growing into that, you know, in daily more distribution.

Operator, I just wanted to first thank you Alex Bryan for his impressive contribution to this company and also to the California wine industry as a whole and also so accessible to investors and welcome you to Jennifer looking forward to working with you.

Sean Sullivan: The data that we see, which is a mix of the Serkana data, which focuses on about a third of our business, the scanner data, and other data points that we have and look at for the broader industry and for us specifically show that luxury itself is turning that corner and starting to see a re-exceleration. I think our viewpoint is probably a function of a number of factors. Some of it is related to the macroeconomic environment.

And my question is why don't I say underlying depletion rates on wholesale to retail I know the puts and takes of course and Jennifer you just discussed.

How youre growing into that and gaining more distribution, but by the same token of course, you had a very strong fourth quarter, but your guide implies at the midpoint I think is a 6% top line growth.

Speaker 2: But by the same token, of course, you had a very strong fourth quarter, but your guide implies, at midpoint, I think is a 6% offline growth, and assume that you had approximately two to 3% pricing benefit in the year that just closed. I'm assuming that is still a carryover effect, or an...

And assuming that you have approximately 2% to 3%.

Sean Sullivan: Some of it is related to the choice of younger consumers who may say I'll drink a little less, but I want to drink a little better. Some of it might just be the sort of time of year we're going into with the upcoming fall season in holidays. I think if we look at it altogether, I think what we feel buoyed by is an overall deceleration of decline and now we're seeing some acceleration.

I seen benefits in <unk>.

In the year that just closed.

Is that still a carryover effect or and.

Speaker 2: In other words, it would take you to about three to four percent volume growth only. I'm just trying to piece it together and understand that obviously you tend to be more conservative, but it's likely to be a little guy, I mean, it's likely to be a little delguried. So just wondering if you can elaborate more on that.

Other words who'll take you to about 3% to 4% volume growth only I'm just trying to piece it together I understand that obviously you.

And to be more conservative, but it's likely to be a little guy I mean, it's probably a little the algorithm.

Sean Sullivan: We're cognizant that the industry as a whole won't be a straight line. There'll be some wobbles, faster growth or slower growth. But we like the overall trends, but we also particularly like our ability to take share and outperform our peers. And that has been the hallmark of something we've talked about on this call and on other calls is a very consistent long-term pattern that we have established through the work of our sales force and the organizational prowess that I think we bring to the table. So our outperformance, I believe, will continue in addition to what we hope is an industry that really has turned the corner.

So just wondering if you can elaborate more on that.

Andrew Strelzik: Okay, very clear.

Yeah, Thank you and nice to meet you as well.

Speaker 4: Yeah, thank you and nice to meet you as well. So the pricing that the organization took last year in fiscal 2023, the prices were effective, I think, September 1st, but it takes a while for some time to those take effect and we did have a lot of buy-in early, prior to the price increases in the quarter.

So the pricing.

The organization took last year in fiscal 2023 are the prices were effective I think September 1st but you know.

It takes a while for sometimes it does take effect and we did have a lot of buy in early prior to the price increases in the quarter.

Speaker 4: So, sorry about that. So as we look forward, we do see our growth in 2020 for it to be primarily driven out of volume because those price increases have really kind of, we're lapping those already within the...

So so sorry about that so as we look forward, we do see our growth in 2024 to be primarily driven out of volume because those price increases have really kind of we're lapping those already within the quarter.

Jennifer Fall Young: And then my second question is just on the gross margin outlook. They provide an understanding that, you know, kind of normalizing pricing. It is, by the way, the key to talk about some of the key puts it takes across the cost buckets, levels of inflation, those types of things, any texture would be very helpful. Thank you. Yeah, nice to meet you, Andrew. So as we kind of look forward to our gross margin, we did note that we did anticipate some pressure coming into 2024.

Speaker 2: And if you can talk about how much more distribution gained or to DPs you're looking to gain outside California, to kind of illustrate that. Because I know you're gaining a lot of with Kruger and a lot of different retailers. So if you can give us a little bit of a decay this.

And if you that is helpful. If you can talk about like how much more distribution, gaining or <unk>, you're looking to gain outside California.

So kind of illustrate that because I know you were gaining a lot of kroger and a lot of different retailers. So if you can give us like a little bit of what the cadence and then obviously understandably. The first quarter has that you know that.

Speaker 2: and then obviously understandably the first quarter has that, you know, that, you know, bump, that, not bump, I would say, the opposite, tough comparison. So if you can kind of help us like think about shelf reset and how to think in a more kind of cadence into the year.

Bump that not bump I would say the opposite tough comparison. So if you can kind of help us think about shelf resets and how to think in a more kind of cadence into the year.

Jennifer Fall Young: And really, a lot of what underneath the covers, what you're seeing in that is we did note the trade spend because we did see significant favorability in trade spit in 2023, particularly in the back half. So as we look forward, that'll be more normalized. And then also, you know, there will be some puts and takes from a channel perspective. And although this all nets out at the bottom at our adjusted EBITDA, you know, once you kind of layer in SGNA, the channel is kind of neutralized.

Speaker 3: Sure, hand read, Sean. I will take the first part of that question and then pass Jennifer for the second part. I would focus first if you recall in the wholesale channel are three vectors, right? We have the number of accounts sold, the number of skews per account, and then the velocity of those skews turning. So focusing on the first of those three vectors, we saw over the last year an increase from 59,000 to 65,000 accounts sold.

Sure handwriting Sean.

I will.

Take the first part of that question and then pass to Jennifer for the second part.

I would I would focus first if you recall on in the wholesale channel are three vectors right. We have the number of accounts sold the number of Skus per account and then the velocity of those skus turning so focusing on the first of those three vectors. We saw over the last year, an increase from 59000 to 65000 accounts.

Jennifer Fall Young: But, you know, as we continue to grow our out of state wholesale distribution network, which has slightly lower margins in our in state California, a wholesale network. So as those those gross rates go a little higher, then you'll see a little bit of pressure on the margin. But it does support that gross rate in out of state supports our long term gross strategy. It's just more opportunity and white space in out of state than our highly penetrated California mark.

Operator: Thank you. I apologize, I was having a technical difficulty. Thank you again for your questions.

Sold.

Speaker 3: We are looking as we project forward over the next four years. Our goals show a cater of around seven to eight percent of growth, which puts you to about 86,000 accounts.

We are looking as we project forward over the next four years, our goals show a CAGR of around 7% to 8% of growth, which puts you at about 86000 accounts.

Speaker 3: That is, so I think the upside of that is, as you think about the story is, on a year-to-year level, is there is a clear path to support elements of growth that is foundationally laid in the number of accounts.

That is so I think the upside of that is as you think about the story is on a year to year level is there is a clear path to support elements of growth that is foundational aways and the number of accounts and then with our large white space. The fact that even in two.

Speaker 3: And then with our large white space, the fact that even in, you know, 2027, we would, with these projections, we would project a penetration of about 27% of the accounts that would be, you know, appropriate for our luxury wines. We have a very nice one.

2027, we would with these projections, we would project a penetration of about 27% of the accounts that would be.

Operator: As a reminder, it is star one to ask the question, the star two to remove.

Appropriate for our luxury wines, we have a very nice runway there. The other elements of growth then support that once we're in an account it's easier for the sales team to offer them one of our other wines in the portfolio because of its brand strength and of course, we like to believe and I think we have a good addition of the consumer demand for.

Andrea Teixeira: Our next question comes from Andrea Teixeira, with Stacey Morgan. Please proceed. Thank you, thank you operator.

Speaker 3: The other elements of growth then support that. Once we're in an account, it's easier for the sales team to offer them one of our other wines in the portfolio because of its brand strength. And of course, we like to believe, and I think we have a good indicia of the consumer demand for our wines, which then leads to faster velocity of those wines. And that's obviously something that's pleasing to the retailer and the distributor.

Jennifer Fall Young: I just wanted to first thank you, Alex Ryan for his impressive contribution to this company and also to the California wine industry as a whole and also so accessible to investors and welcome you, Jennifer, looking forward to working with you. And my question is, what was the underlying depression rate, some wholesale to retail? I know the puts and takes, of course, and Jennifer, you just discussed how you're growing into that, you know, in gaining more on our distribution.

Our wines, which then leads to faster velocity of those wines and that's obviously something that's pleasing to the retailer and the distributor. So as we look at that on the on the whole from just sort of as you're building out the model in the longer term that's kind of how we're looking at the wholesale growth in the components of it within fiscal year 'twenty for old Jennifer maybe you can.

Speaker 3: So as we look at that on the whole, from just sort of as you're building out the model in the longer term, that's kind of how we're looking at the wholesale growth and the components of it. Within fiscal year 24, I'll get it from you.

Speaker 4: Yeah, as I noted earlier within fiscal 24, really is volume driven. Our volume growth is supported by the account growth, and obviously, which is fueled by the depletion growth. So really focused on account growth outside of state, as well as just from a volume perspective.

Yes, as I noted earlier with it within fiscal 'twenty four it really is a volume driven our volume growth is supported by the account growth and obviously, which is fueled by the depletion growth. So I'm really focused on our account growth outside of out of state as well as just from a volume perspective.

Jennifer Fall Young: But by the same token, of course, you had a very strong fourth quarter, but your guide implies, at midpoint, I think, is a six percent applying growth, and assuming that you had approximately two to three percent pricing benefit in the year that just closed, I'm assuming that is still a carryover effect, or in other words, it would take you to about three to four percent volume growth only. I'm just trying to piece it together, understand that obviously you tend to be more conservative, but it's slightly below the algorithm, so just wondering if you can elaborate more on that.

Yeah.

Speaker 2: And then I just find point, it's super helpful, but just a fine point on the volume issuing the first quarter is just like liking the employee buildup or just really tough comparisons as you go into the first quarter.

And then just a final point just super helpful, but just a fine point on the volume.

He's showing the first quarter is just like like inventory buildup that or.

Just really tough comparisons as you go into the first quarter.

Speaker 4: It's absolutely really tough comparisons that we go into the first quarter. We had a very strong Q1 FY23 in our wholesale channel, which was driven by the price increases and our distributors buying in earlier to get their inventory prior to the increases, as well as a few logistical challenges we believe happened on within our suppliers, they were making sure they could actually get our product. So as we look forward to FY24Q1,

It's absolutely really tough comparisons as we go into the first quarter, we had a very strong Q1, FY2023 in our wholesale channel, which was driven by the price increases and our distributors.

Jennifer Fall Young: Yeah, thank you, and nice to meet you as well. So the pricing that the organization took last year in fiscal 2023, the prices were effective, I think, September 1st, but, you know, it takes a while for sometimes to those take effect, and we did have a lot of buy-in early prior to the price increases in the quarter. So, so sorry about that, so as we look forward, we do see our growth in 2024 to be primarily driven out of volume, because those price increases have really kind of were lapping those already within the quarter.

Buying in earlier to get their inventory prior to the increases as well.

The logistical challenges, we believe happened on our within our suppliers that they were making sure they could actually get our products. So as we look forward to FY 'twenty for Q1.

Speaker 4: We've been, we're comping those. So you'll see the growth in the first half, but you'll see it in the second quarter. And hopefully, we kind of talked about that on the call. Overall, we feel the inventory levels are super healthy out there and our Q1 guide, or does nothing to do with our inventory levels out in the marketplace. Mm-hmm, okay, that's fair.

We're just comping those so you'll see the growth in the first half, but you'll see it in the second quarter and hopefully we kind of talked about that on the call. Overall, we feel on the inventory levels are super healthy out there and our Q1 guide it does nothing to do with our inventory levels out in the marketplace.

Mhm, Okay. That's fair thank you.

Jennifer Fall Young: And if you that's helpful, if you can talk about like how much more distribution gained, or to DPs you're looking to gain outside California, to kind of illustrate that, because I know you're gaining a lot with Kruger and a lot of different retailers, so if you can give us like a little bit of a the cadence, and then obviously understandably the first quarter has that, you know, that, you know, bump, that, not bump, I would say the opposite, tough comparison, so if you can kind of help us like think about shelf resets, and how to think in in in a more kind of cadence into the year. Sure, hand read Sean.

Thanks.

Thanks Andreas.

Yeah.

Thank you guys for your questions.

Speaker 2: There are no questions waiting at this time, so I'll pass the conference back over to Sim or Sean, I'm sorry, for any closing remarks.

There are no questions waiting at this time, so I'll pass the conference back over to Sam or Sean I'm, sorry for any closing remarks.

Speaker 3: Thank you. We want to thank you again for joining us today to review our Forest Quarter performance and to present our guidance for fiscal year 2024. We look forward to speaking with you again in December when we report our first quarter results. Until then, take care.

Thank you.

We want to thank you again for joining us today to review, our fourth quarter performance and to present, our guidance for fiscal year 2024, we look forward to speaking with you again in December when we report our first quarter results until then take care.

That will conclude today's conference call.

Speaker 2: that will conclude today's conference call. Thank you all for your participation. You may now disconnect your line.

Jennifer Fall Young: I will take the first part of that question and pass Jennifer for the second part. I would I would focus first if you recall on on in the wholesale channel are three vectors, right? We have the number of accounts sold, the number of skews per account, and then the velocity of those skews turning. So focusing on the first of those three vectors, we saw over the last year an increase from 59,000 to 65,000 accounts sold.

Thank you all for your participation you may now disconnect your lines.

And thank you for that.

Speaker 4: Thank you for the schedule this time. That was my folks.

Yeah.

And thank you for the.

Jennifer Fall Young: We are looking as we project forward over the next four years, our goals show a a cater of around seven to eight percent of growth, which puts you to about 86,000 accounts. That is, so I think the upside of that is you think about the story is on a year-to-year level is there is a clear path to support elements of growth that is foundationally laid in the number of accounts. And then with our large white space, the fact that even in, you know, 2027, we would with these projections, we would project a penetration of about 27 percent of the accounts that would be, you know, appropriate for our luxury wines, we have a very nice one.

Jennifer Fall Young: Deirdre Mahlan, that's kind of how we're looking at the wholesale growth and the components of it. Within fiscal year 24, I'll get it from you. As I noted earlier within fiscal 24, really is volume driven. Our volume growth is supported by the account growth and obviously which is fueled by the depletion growth. So, really focused on account growth outside of state, as well as just from a volume perspective. And then just a fine point, it's super helpful, but just a fine point on the volume issuing the first quarter.

Jennifer Fall Young: It's just like liking the employee buildup or just really tough comparisons as you go into the first quarter. It's absolutely really tough comparisons that we go into the first quarter. We had a very strong Q1 FY23 in our wholesale channel, which was driven by the price increases and our distributors buying in earlier to get their inventory prior to the increases. As well as a few logistical challenges, we believe happened on within our suppliers, they were making sure they could actually get our product.

Jennifer Fall Young: So as we look forward to FY24 Q1, we're copying those. So you'll see the growth in the first half, but you'll see it in the second quarter. And hopefully we kind of talked about that on the call. Overall, we feel the inventory levels are super healthy out there and our Q1 guide or does nothing to do with our inventory levels out in the marketplace. Okay, that's fair. Thank you. Thanks. Thanks, Andrea. Thank you guys for your questions. There are no questions waiting up this time, so I'll pass the conference back over to Sam or Sean. I'm sorry for any closing remarks. Thank you.

Sean Sullivan: We want to thank you again for joining us today to review our fourth quarter performance and to present our guidance for fiscal year 2024. We look forward to speaking with you again in December when we report our first quarter results. Until then, take care. That will conclude today's conference call. Thank you all for your participation. You may now disconnect your line. And thank you for the. Thank you.