Executive Summary

Strong start to FY25: Net sales grew 19.9% to $122.9M, driven by inclusion of Sonoma-Cutrer; adjusted EBITDA rose 39.9% to $48.6M with margin expanding 560 bps to 39.5%. GAAP EPS was $0.08; adjusted EPS $0.16 .
Mix headwinds and distributor transitions: Price/mix was -4.8% and management noted one-time inventory transfers as outgoing distributors moved unsold stock to new distributors, diluting revenue and gross margin (50.0%, down 250 bps YoY) .
Operating discipline: Adjusted SG&A rose just 5.8% vs net sales +19.9%, supporting margin expansion and a leverage ratio of 1.7x net debt/TTM adj. EBITDA .
No earnings call and limited forward commentary amid go-private process: The company did not host a Q1 call; near-term stock narrative anchored by pending $11.10/share cash merger with Butterfly (shareholder vote held Dec 23; closing targeted in FQ2 per merger filing) .

What Went Well and What Went Wrong

What Went Well
- Inclusion of Sonoma-Cutrer accelerated growth and scale: Net sales +19.9% YoY; adjusted gross profit +19.8% and adjusted EBITDA +39.9% supported by Sonoma-Cutrer contribution and cost control .
- Margin execution: Adjusted EBITDA margin rose to 39.5% (+560 bps YoY); adjusted SG&A as % of sales decreased 260 bps YoY .
- CEO tone on positioning: “We believe our distinctive brands, operational excellence and market-leading performance leave us well positioned to deliver long-term growth and profitability.” — Deirdre Mahlan, President, CEO and Chairperson .
What Went Wrong
- Price/mix and gross margin pressure: Price/mix was -4.8% and gross margin fell 250 bps to 50.0% (cost-of-goods increase; mix headwinds) .
- Distribution transition drag: “One-time inventory transfers” from outgoing to new distributors negatively impacted net sales during route-to-market realignment .
- Elevated non-GAAP add-backs: Significant transaction expenses ($13.1M) and other adjustments widened the gap between GAAP and adjusted results (GAAP NI $11.2M vs adjusted NI $23.8M) .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Net Sales ($USD Millions)	$92.532	$107.395	$122.942
Gross Profit ($USD Millions)	$51.443	$51.312	$61.500
Gross Margin (%)	55.6%	47.8%	50.0%
Net Income ($USD Millions)	$13.323	$11.296	$11.164
Diluted EPS ($)	$0.12	$0.08	$0.08
Adjusted Net Income ($USD Millions)	$16.278	$20.418	$23.773
Adjusted EPS ($)	$0.14	$0.14	$0.16
Adjusted EBITDA ($USD Millions)	$37.726	$39.910	$48.566
Adjusted EBITDA Margin (%)	40.8%	37.2%	39.5%

Channel mix (% of Net Sales)

Channel	Q3 2024	Q4 2024	Q1 2025
Wholesale – Distributors	60.4%	78.3%	79.3%
Wholesale – CA Direct-to-Trade	16.0%	14.8%	13.9%
Direct-to-Consumer	23.6%	6.9%	6.8%

Growth Drivers (YoY decomposition)

Metric	Q3 2024	Q4 2024	Q1 2025
Net Sales Growth (Decline)	1.4%	7.3%	19.9%
Volume Contribution	(4.6%)	23.7%	24.7%
Price/Mix Contribution	6.0%	(16.4%)	(4.8%)

Additional KPIs and Cash/Liquidity

Leverage ratio: 1.7x net debt to TTM adjusted EBITDA (net of debt issuance costs) .
Cash: $5.407M at Oct 31, 2024; Operating cash flow in Q1: $27.235M .

Non-GAAP reconciliation context

Major Q1 add-backs included transaction expenses ($13.125M), purchase accounting adjustments ($1.957M), equity-based comp ($2.000M), and derivative fair value changes ($0.137M), lifting adjusted EBITDA to $48.566M and adjusted NI to $23.773M .

Guidance Changes

No formal FY25 guidance was provided in the Q1 release; the company did not host a Q1 earnings call . | Metric | Period | Previous Guidance | Current Guidance | Change | |---|---|---|---|---| | Company Guidance | FY2025 | Not provided in Q4 release; FY24 ended | Not provided in Q1 2025 | N/A |

Earnings Call Themes & Trends

Note: No Q1 FY25 call was held. Themes reference prior two quarters’ calls and Q1 release commentary.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 FY25)	Trend
Distributor realignment & shipment/depletion timing	Strategic realignment underway; expected short-term shipment unevenness over next 2 quarters; orders from newly aligned distributors already received; variability expected between Q4 and Q1 .	One-time distributor inventory transfers negatively affected Q1 net sales as outgoing distributors moved unsold inventory to new partners .	Transition effects peaking; expect normalization post realignment.
Sonoma-Cutrer integration & synergies	Closed 4/30; synergy target raised to up to $10M; main savings in compensation/ops; majority to appear in FY25 .	Inclusion drove higher net sales and adjusted profit; separate ex-Sonoma-Cutrer comps provided .	Integration progressing; synergy realization expected through FY25.
Price/mix & margins	Q2 noted strong GP margin; Q3 mix tailwinds from release timing but flagged margin pressure in Q4 as timing reversed .	Price/mix -4.8%; gross margin down 250 bps YoY from COGS increases; adjusted GP margin -10 bps YoY to 51.9% .	Mix/COGS headwinds persist; offset by SG&A control.
DTC & Kosta Browne	DTC visitation down but spend per visitor strong; Kosta Browne underperformed; plan to refine offers and timing .	DTC mix ~6.8%; no specific KB commentary in release .	DTC remains subdued; brand work ongoing.
On-premise/by-the-glass	Restart planned; acknowledged lower margins; slower uptake in Q3 .	Not discussed in Q1 release .	Neutral to slightly negative near term on margin mix.
Macro/industry	Luxury wine demand soft; destocking normalization; stabilization signs into Apr/May; cautious outlook .	Management emphasized outpacing industry and long-term positioning .	Cautious but stable backdrop.
Regulatory/legal (M&A)	Announced $11.10/share cash merger with Butterfly; go‑shop; closing targeted in FQ2 .	Supplemental proxy disclosures and merger-related litigation noted; special meeting Dec 23 .	Deal process advancing; overhang persists.

Management Commentary

Strategic positioning: “We are pleased to begin fiscal 2025 with strong financial performance. Our growth continues to outpace the industry as our teams remain focused on advancing our strategic initiatives.” — Deirdre Mahlan, President, CEO and Chairperson .
Operating discipline: Adjusted SG&A rose 5.8% vs net sales +19.9%, improving operating leverage .
Communication change: “The Company will no longer host its earnings conference call and webcast.” .

Q&A Highlights

No Q1 FY25 call was held . Key Q&A themes from prior quarter (Q3 FY24) for context:

Consumer softness and normalization: Management cited inventory normalization across tiers and soft but stabilizing luxury wine demand; not seeing broad trade-down below $15 .
Distributor transitions and timing: Expect shipment variability around realignment with normalization by Q2 FY25 .
Kosta Browne dynamics: Brand equity intact; consumers purchasing less frequently/volumes; refining offers and timing to reaccelerate .
Synergies and reinvestment: Sonoma-Cutrer synergies up to $10M (primarily OpEx); reinvestment via distributor alignment and programming; cautious on promotional intensity to avoid “buying share” .

Estimates Context

Wall Street consensus (S&P Global) for Q1 FY2025 revenue, EPS and EBITDA was unavailable via S&P Global due to a temporary mapping limitation for NAPA; therefore, estimate comparisons are not provided. Values were not retrievable from S&P Global at this time.

Key Takeaways for Investors

Quality of beat on profitability: Despite mix/COGS pressure, adjusted EBITDA grew ~40% with 560 bps margin expansion, demonstrating cost discipline and integration benefits; GAAP-to-adjusted gap was driven by $13.1M transaction costs in the quarter .
Mix headwinds are real but manageable: Price/mix fell and gross margin contracted YoY; management offset with SG&A leverage and scale from Sonoma-Cutrer .
Distribution realignment is the key swing factor: One-time distributor inventory transfers weighed on Q1; normalization should follow as the new network stabilizes over coming quarters .
Deal sets near-term valuation anchor: The pending $11.10/share cash merger with Butterfly is the primary stock catalyst and limits upside/downside to deal spread and closing risk/timing .
Limited forward visibility (no call/guidance): With no Q1 call and no FY25 guidance, monitoring depletions, channel mix, and integration synergy capture into FY25 is critical for the standalone trajectory if conditions change pre-close .
Balance sheet stable: Leverage at 1.7x TTM adjusted EBITDA provides flexibility through the transition period .
Focus areas: Watch margin sustainability as by-the-glass and on-premise programming scale back up (lower margin mix), progress on Kosta Browne brand actions, and cadence of Sonoma-Cutrer synergy realization in FY25 .

Duckhorn Portfolio, Inc. (NAPA)·Q1 2025 Earnings Summary