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Duckhorn Portfolio, Inc. (NAPA)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 net sales rose 7.3% year over year to $107.4 million, driven by 23.7% volume growth from the Sonoma-Cutrer acquisition; price/mix fell 16.4% due to the Kosta Browne release timing shift and Sonoma-Cutrer’s lower price point . Adjusted EBITDA increased 16.7% to $39.9 million with margin up ~300 bps to 37.2% .
  • Gross margin compressed to 47.8% (–740 bps YoY), or 51.2% on an adjusted basis (–390 bps YoY), reflecting normalized trade spend and the unfavorable mix shift .
  • GAAP diluted EPS was $0.08; adjusted EPS was $0.14. Note: the press release narrative shows a prior-year diluted EPS of $0.05, while the financial statements show $0.15 for Q4 FY2023; we anchor to the statements and note the discrepancy .
  • FY2024 results: net sales $405.5 million, adjusted EBITDA $155.1 million (+7.3% YoY), adjusted EPS $0.60; these exceeded prior guidance ranges for adjusted EBITDA and came in-range on net sales and adjusted EPS .
  • The company canceled its scheduled Q4 earnings call; management emphasized successful Sonoma-Cutrer integration and cost controls as they enter FY2025 .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA margin expanded ~300 bps in Q4 to 37.2% on higher net sales and operating discipline .
  • Volume growth of 23.7% from adding Sonoma-Cutrer bolstered revenue despite weaker price/mix; SG&A as a percent of sales declined 190 bps due to active expense management .
  • Management integration progress: “We believe the successful integration of this marquee brand [Sonoma-Cutrer]…positions the business for solid growth and profitability into fiscal 2025 and beyond” — Deirdre Mahlan, President & CEO . In Q3, synergies were increased to “up to $10 million,” primarily in operating expenses .

What Went Wrong

  • Gross margin pressure: GAAP gross margin fell to 47.8% (–740 bps YoY); adjusted gross margin to 51.2% (–390 bps YoY), due to normalized trade spend and Kosta Browne timing shift .
  • Price/mix headwind of –16.4% in Q4 from Sonoma-Cutrer’s higher white varietal mix and the Kosta Browne release moving to Q3 FY2024 from Q4 FY2023 .
  • Continued caution around premium DTC dynamics and Kosta Browne underperformance vs expectations noted in Q3 Q&A, with evolving consumer purchasing behavior and slower on-premise by-the-glass uptake .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Net Sales ($USD Millions)$103.0 $92.5 $107.4
Diluted EPS ($)$0.14 $0.12 $0.08
Adjusted EPS ($)$0.18 $0.14 $0.14
Gross Margin % (GAAP)56.6% 55.6% 47.8%
Adjusted Gross Margin %56.0% 55.6% 51.2%
Adjusted EBITDA ($USD Millions)$42.7 $37.7 $39.9
Adjusted EBITDA Margin %41.5% 40.8% 37.2%

Segment/channel mix:

Net Sales MixQ4 2023Q3 2024Q4 2024
Wholesale – Distributors (%)65.1% 60.4% 78.3%
Wholesale – CA Direct-to-Trade (%)15.9% 16.0% 14.8%
Direct-to-Consumer (DTC) (%)19.0% 23.6% 6.9%

Key KPIs:

KPIQ2 2024Q3 2024Q4 2024
Cash ($USD Millions)$13.1 $15.7 $10.9
Leverage Ratio (Net Debt / TTM Adj. EBITDA)1.9x 2.1x 2.0x

FY2024 summary:

MetricFY 2023FY 2024
Net Sales ($USD Millions)$403.0 $405.5
Adjusted EBITDA ($USD Millions)$144.5 $155.1
Adjusted EBITDA Margin %35.9% 38.2%
Adjusted EPS ($)$0.67 $0.60

Note: FY2023 net sales in the table above reflect the FY23 reported baseline; Q3 and Q2 documents include FY guidance and context .

Guidance Changes

MetricPeriodFY2024 Guidance (Q2)FY2024 Guidance (Q3, incl. Sonoma-Cutrer)FY2024 ActualChange
Net Sales ($USD Millions)FY2024$395–$411 $398–$408; includes ~$16 from Sonoma-Cutrer $405.5 In-range; Q3 range tightened
Adjusted EBITDA ($USD Millions)FY2024$145–$150 $146–$150 $155.1 Raised/Beat
Adjusted EPS ($)FY2024$0.63–$0.65 $0.56–$0.58 $0.60 Above Q3 guide midpoint; below Q2 guide
Diluted Share Count (Millions)FY2024115–116 123.5 (post Sonoma-Cutrer) 123.55 Maintained
Effective Tax Rate (%)FY202425–28% 27–29% N/A (disclosed tax expense, not full rate) N/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2)Previous Mentions (Q3)Current Period (Q4)Trend
Consumer/Macro & Inventory NormalizationLuxury wine growth flat-to+1%; retailer/distributor inventory reset; cautious H2 outlook Softness in luxury; depletions improved Apr–May; normalization expected; cautious by-the-glass uptake Call canceled; press release notes dynamic backdrop and normalized trade spend Stabilizing depletions; cautious trade spend; conservative tone
Kosta Browne (DTC performance)Shipment timing moved from Q4 to Q3; DTC below pandemic highs Underperformance vs expectations; working on retention/offer strategy Kosta Browne timing shift impacted price/mix and margins in Q4 Active remediation; impact persists via mix
Distributor Network RealignmentInitiated comprehensive review (pre Sonoma-Cutrer close) Realignment underway; short-term shipment variability; long-term benefits Continued emphasis on route-to-consumer realignment Execution phase; short-term variability
Sonoma-Cutrer Integration & SynergiesExpected ~$5M cost synergies; accretive FY2025 Synergies increased to up to $10M; seasonality noted; distributor transitions “Successful integration” highlighted by CEO Upward synergy momentum
On-Premise Programming (By-the-Glass)Restart planned; margin drag but brand awareness Slower uptake industry-wide; contribution smaller than anticipated Normalized trade spend cited in Q4 margin drivers Gradual rebuild; margin trade-offs

Management Commentary

  • “We meaningfully advanced our strategic agenda in fiscal 2024…including the strategic acquisition of Sonoma-Cutrer. We believe the successful integration of this marquee brand…positions the business for solid growth and profitability into fiscal 2025 and beyond.” — Deirdre Mahlan, President, CEO and Chairperson .
  • “We now expect [Sonoma-Cutrer] cost synergies to be up to $10 million…majority from compensation and organizational leverage; 2025 is when they will flow through” — Jennifer Fall Jung, CFO (Q3 call) .
  • “We remain focused on operating efficiency and careful cost management…Adjusted EBITDA margin of 40.8% [in Q3]” — Deirdre Mahlan (Q3 prepared remarks) .

Q&A Highlights

  • Consumer/macro and inventory normalization: management sees destocking and normalization across tiers; depletions improved in April–May, not declaring victory, but stabilization evident .
  • Kosta Browne: brand equity remains strong; challenge is evolving consumer behavior (club purchasing cadence, spend) and tailoring offers/retention; more specifics promised post-year-end .
  • Distributor realignment: ~20% of volume impacted; short-term shipment timing variability expected as new distributors stock up; normalization anticipated by Q2 of next fiscal .
  • Sonoma-Cutrer seasonality and transitions: Q4 contribution of “$16 million” illustrative; caution on extrapolating due to seasonality and distributor changes .
  • Gross margin investment: ability to reinvest in programming/marketing with gross margin improvements; Q3 mix favored margins (Kosta Browne timing), Q4 margin pressure expected without that offering .

Estimates Context

S&P Global consensus estimates for Q4 FY2024 (EPS and revenue) were unavailable due to a Capital IQ mapping limitation for NAPA; therefore, comparisons to Wall Street consensus cannot be provided. Values would be retrieved from S&P Global if available.

Key Takeaways for Investors

  • Q4 delivered a solid revenue and adjusted EBITDA result despite margin headwinds from mix and normalized trade spend; adjusted EBITDA margin expansion underscores cost discipline even with Sonoma-Cutrer onboarding .
  • FY2024 beat on adjusted EBITDA versus guidance and achieved in-range net sales; adjusted EPS landed above Q3 guidance midpoint, below Q2 guidance, reflecting cautious second-half posture and share count impact from Sonoma-Cutrer .
  • The narrative into FY2025 is integration-led and execution-focused: distributor realignment should improve wholesale execution over time; near-term shipment timing variability is expected .
  • Mix will matter: expanding white varietal contribution (Sonoma-Cutrer) and Kosta Browne timing can pressure margins; watch trade spend normalization and on-premise programming ramp (margin trade-off vs brand reach) .
  • DTC remains strategically important but requires refined club/offers; Kosta Browne brand equity is intact, but consumer cadence has shifted; improvements could be a margin tailwind if higher-margin DTC stabilizes .
  • Balance sheet/financial flexibility: leverage at ~2.0x net debt/TTM adjusted EBITDA and cash at $10.9 million; monitor post-close working capital and interest expense trajectory .
  • No Q4 call and limited FY2025 formal guidance increases the importance of tracking operational milestones (synergy capture, distributor transitions, on-premise programming) as catalysts for sentiment.

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