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BOSTON BEER CO INC (SAM)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 delivered strong profitability despite volume headwinds: diluted EPS $5.45 (+24% YoY) on net revenue $587.9M (+1.5% YoY) and gross margin 49.8% (+380 bps YoY), driven by brewery efficiencies, procurement savings, pricing, and mix, partially offset by inflation and tariffs .
  • Results vs S&P consensus: EPS materially beat ($5.45 vs $3.96*) on in-line revenue ($587.9M vs $588.6M*); EBITDA also exceeded consensus ($109.4M* vs $87.3M*) as margin initiatives outperformed expectations .
  • Guidance reset: volume outlook cut (depletions/shipments now down high-single to down low-single digits) but gross margin raised to 46.0–47.3% (incl. tariffs); GAAP EPS range now $6.72–$9.54 (incl. tariffs), with capex trimmed to $70–$90M .
  • Key narrative for H2: management expects shipments to rebalance below depletions with most reversal in Q3 (shipments down low-to-mid teens) as inventories normalize; near-term category pressure (macro, weather, Hispanic consumer softness) remains the chief headwind .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion: Gross margin reached 49.8% (+380 bps YoY) from process improvements, procurement savings, pricing, and mix; QTD EBITDA outperformance reflected these gains . “Despite a weaker volume environment, we have raised our gross margin guidance…” — Jim Koch .
  • EPS beat and cash flow: EPS rose 24% YoY to $5.45; operating cash flow YTD $128.4M supported $110.5M of buybacks YTD and ended Q2 with $212.4M cash, no debt .
  • Innovation traction: Sun Cruiser reached ~4% share of RTD spirits and is gross margin accretive; distribution tripled into national chains, positioning for further measured-off-premise presence .

What Went Wrong

  • Topline/volume pressure: Depletions -5% and shipments -0.8% YoY, driven by declines in Truly and Samuel Adams, partially offset by Sun Cruiser and Dogfish Head growth .
  • Category headwinds: Twisted Tea held share but saw measured-dollar sales down 4% in Q2; hard seltzer category down 7% with Truly underperforming, prompting marketing refresh and focus on Unruly high-ABV .
  • Tariffs and shortfall fees: Late-Q2 tariff costs pressured margins; shortfall fees and non-cash third-party prepayment amortization reduced Q2 gross margin by ~141 bps; full-year tariff headwind now embedded in guidance (70–100 bps GM, $15–$20M costs) .

Financial Results

P&L vs prior periods and S&P consensus

MetricQ4 2024Q1 2025Q2 2025 (Actual)Q2 2025 (Consensus)*
Net Revenue ($M)$402.3 $453.9 $587.9 $588.6*
Diluted EPS ($)-$3.38 $2.16 $5.45 $3.96*
Gross Margin (%)39.9% 48.3% 49.8% —
Operating Income ($M)-$56.0 $33.8 $82.1 —

*Values retrieved from S&P Global.

Notes:

  • EPS materially beat consensus on stronger-than-expected margin delivery; revenue was essentially in-line with consensus .
  • “Gross margin primarily benefited from improved brewery efficiencies, procurement savings, price increases and product mix,” partially offset by inflationary and tariff costs .

Operating KPIs and cost lines

KPIQ4 2024Q1 2025Q2 2025
Depletions YoY~0% (flat) -1% -5%
Shipments YoY-0.5% +5.3% -0.8%
Shipment Volume (M barrels)1.496 ~1.7 ~2.1
Distributor Inventory (weeks)~4 ~5 ~4.5
Ad/Promo/Selling Expense ($M)$139.5 $137.5 $159.7
G&A Expense ($M)$47.7 $48.0 $45.8
Effective Tax Rate27.7% benefit 31.9% 28.1%
Cash & Equivalents ($M)$211.8 $152.5 $212.4
Share Repurchases (YTD)—$60.5M $110.5M

Brand/Category datapoints (Q2)

  • Twisted Tea measured-channel dollars: -4% YoY, but held share; Light/Extreme SKUs gaining shelf/velocity .
  • Hard seltzer category: -7% dollars; Truly marketing refresh and Unruly (3% volume share) focus to stabilize .
  • Sun Cruiser: ~4% share of RTD spirits; distribution ramping in national chains; margin accretive .
  • Shortfall fees + third-party prepayment amortization: -141 bps gross margin impact in Q2 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Depletions & ShipmentsFY25Down low-single to up low-single digits Down high-single to down low-single digits Lowered
PricingFY25+1% to +2% +1% to +2% Maintained
Gross Margin (incl. tariffs)FY2544.0%–46.5% 46.0%–47.3% Raised
Gross Margin (ex tariffs)FY2545.0%–47.0% 47.0%–48.0% Raised
Ad/Promo/Selling YoY ($)FY25+$30–$50M +$30–$50M Maintained
Effective Tax RateFY2529%–30% 29%–30% Maintained
GAAP EPS (incl. tariffs)FY25$6.10–$9.25 $6.72–$9.54 Raised
EPS (ex tariffs)FY25$8.00–$10.50 $8.00–$10.50 Maintained
Capital Spending ($M)FY25$90–$110 $70–$90 Lowered
Tariffs – total cost ($M)FY25$20–$30 (not in prior EPS) $15–$20 (now included) Lowered

Color:

  • Guidance embeds tariff headwinds (70–100 bps GM, $0.96–$1.28 EPS impact) and assumes shipment/depletion rebalancing primarily in Q3 (shipments down low-to-mid teens) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24)Previous Mentions (Q1’25)Current Period (Q2’25)Trend
Supply chain/productivity & marginsMulti-year plan across procurement, network, brewery; path to high-40s–50% GM over time 48.3% GM; progress in procurement, efficiencies; internal production 85% 49.8% GM; brewery performance ahead; internal production 76% in Q2; GM guidance raised Improving
Volume outlook & inventoryH1’25 shipments at high end; H2 rebalance expected Expect H1 shipments > depletions; H2 reversal Volume guide cut; shipment reversal weighted to Q3 Softer volumes; tighter inventories
TariffsNot included in FY25 base guide Expected $20–$30M headwind; 50–100 bps GM Embedded; lowered to $15–$20M; 70–100 bps GM; net of supplier mitigation Still headwind; better quantified
Sun Cruiser (RTD spirits)National expansion in H1’25 planned Tripling points of distribution; margin accretive ~4% RTD spirits share; distribution expanding to chains Building
Twisted TeaExpect natural decel to single-digit growth over larger base Low-single-digit FY growth expected; heavy support Held share; -4% dollars in Q2; price mix, displays, and macro pressures; Light/Extreme strong Near-term pressured, long-term supported
Truly / Hard seltzerPortfolio refocus; Unruly leading high-ABV Category -5%; Unruly 2% share Category -7%; Unruly 3% share; creative refresh underway Stabilization efforts continue
Macro/Hispanic consumer & weatherCategory dynamics evolving Macro inflation & weak category; Easter timing Softer Q2 demand; poor weather; Hispanic consumer pressure Headwind persists
Delta-9 cannabisRisk factor acknowledged —Monitoring; regulatory volatility; no U.S. volume planned Watch list
Capex$90–$110M planned $90–$110M planned Lowered to $70–$90M Reduced focus on productivity-first

Management Commentary

  • “Despite a weaker volume environment, we have raised our gross margin guidance as we continue to see positive impacts from our multi-year margin enhancement initiatives.” — Jim Koch, Chairman & Founder .
  • “We are encouraged by our strong gross margin and earnings performance in the first half of 2025 and the positive consumer response to our Sun Cruiser innovation… our first half performance and strong operating plans for the remainder of the summer give us confidence in our ability to deliver our full year financial guidance.” — Michael Spillane, CEO .
  • “We reported EPS of $5.45 per diluted share, an increase of 24.1%… driven by higher gross margins and lower share count, partially offset by lower volumes and increased investments in our brands.” — Diego Reynoso, CFO .
  • On Twisted Tea displays and pricing: “We lost a lot of display space… retailers have swung towards RTD displays… We may have pushed the price up… higher than sustainable.” — Jim Koch .
  • On tariffs: “We estimate tariffs will have an unfavorable 2025 cost impact of approximately $15–$20 million… an unfavorable gross margin impact of between 70 to 100 basis points… net of mitigation within our suppliers.” — Diego Reynoso .

Q&A Highlights

  • Volume guidance widened and turned lower given volatile summer trends; shipments to undershoot depletions in H2 with Q3 most impacted as inventories rebalance; visibility remains limited (weather/macro) .
  • Twisted Tea: Mix and displays pressured multi-pack velocities; Light and Extreme SKUs offset some pressure; some cross-over with RTD teas but management sees premiumization and margin benefit from Sun Cruiser .
  • Gross margin sustainability: Teams emphasized procurement/brewery initiatives and positive mix (Sun Cruiser); 2026 GM path depends on tariff trajectory, volume, and mix .
  • Tariffs: Q2 impact started late; FY25 headwind now embedded, net of supplier mitigation; ongoing mitigation under review .
  • Capex: Reduced by ~$20M to $70–$90M to prioritize productivity programs .

Estimates Context

  • Q2 vs S&P Global consensus: EPS $5.45 vs $3.96* (beat); Revenue $587.9M vs $588.6M* (in-line/slight miss); EBITDA $109.4M* vs $87.3M* (beat) .
  • Outlook implication: Street models likely raise margin/EPS on higher GM guide and observed cost execution, while trimming volume assumptions to reflect lower depletions guidance and Q3 shipment reversal .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality of earnings > quantity of volume: margin execution is tracking ahead of plan, supporting EPS despite softer volumes and tariffs .
  • H2 set-up: expect shipment reversal in Q3; watch July/August scans and wholesaler inventory cadence for bottoming signs; volatility warranted near term .
  • Innovation/mix tailwind: Sun Cruiser’s accretive mix and distribution ramp provide multi-quarter support; monitor measured-channel capture as chain placements scale .
  • Twisted Tea near-term reset, long-term franchise: pricing, display, and innovation (Light/Extreme) are key levers; management intends to protect share with elevated spend .
  • Tariff risk now embedded and moderated: cost estimate lowered and included in EPS/GM guide; further mitigation upside possible if tariff landscape improves .
  • Capital discipline: capex cut and robust cash balance/no debt provide flexibility for brand investment and buybacks while sustaining margin programs .
  • Leadership watch: post-quarter CEO transition announced Aug 1 (Koch to CEO); continuity of strategy expected; could be a narrative catalyst into H2 .