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BOSTON BEER CO INC (SAM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered mixed top-line but strong margin performance: net revenue fell 11.2% to $537.5M on shipments down 13.7%, while gross margin expanded 450 bps to 50.8% and diluted EPS reached $4.25 .
  • Versus S&P Global consensus, EPS beat by ~$0.91 (+27%), EBITDA beat, and revenue was a slight miss; this was driven by margin initiatives and mix despite shipment rebalancing in the quarter* [Q3 2025 EPS est 3.34 vs actual 4.25; Revenue est $542.0M vs actual $537.5M; EBITDA est $77.4M vs actual $86.0M]*.
  • Full-year 2025 guidance raised: gross margin to 47–48% (from 46–47.3%), EPS to $7.80–$9.80 (from $6.72–$9.54), ad & promo spend increased to $50–$60M (from $30–$50M), and CapEx lowered to $50–$70M (from $70–$90M); tariff cost impact reduced to $9–$13M .
  • Narrative and potential stock reaction catalysts: strong margin expansion “highest since 2018,” increased internal production, and guidance raise; offsets include industry volume pressure, Twisted Tea softness, and higher Q4 brand investment .

What Went Well and What Went Wrong

What Went Well

  • Gross margin reached 50.8% (+450 bps YoY), cited as highest level since 2018, driven by procurement savings, efficiencies, pricing, and mix .
  • Management raised FY25 EPS and gross margin guidance while lowering expected tariff impact; strong operating cash flow of ~$230M YTD supports incremental advertising .
  • Brand highlights: Sun Cruiser cited as a top RTD spirits gainer; Angry Orchard grew for a second consecutive quarter; focused innovation and sponsorships underpin future growth .

What Went Wrong

  • Volume softness: depletions down 3% and shipments down 13.7% as the company rebalanced shipments relative to depletions; revenue declined 11.2% .
  • Twisted Tea and Truly underperformed as macro affordability and category shifts (RTD spirits) pressured velocity; management called out Hispanic consumer weakness and moderation trends .
  • Higher advertising and selling expense (+$16.8M YoY) and noted Q4 deleverage/shortfall fees expected to weigh on seasonally low-margin quarter .

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Net Revenue ($USD Millions)$605.477 $587.949 $537.494
Gross Margin %46.3% 49.8% 50.8%
Operating Income ($USD Millions)$45.833 $82.069 $62.049
Net Income ($USD Millions)$33.514 $60.433 $46.155
Diluted EPS ($)$2.86 $5.45 $4.25
Advertising, Promo & Selling ($USD Millions)$147.986 $159.713 $164.739
G&A ($USD Millions)$43.818 $45.751 $44.913
Effective Tax Rate %31.7% 28.1% 28.1%

KPIs and operational notes:

  • Depletions YoY: Q2 2025: -5%; Q3 2025: -3% .
  • Shipments (approx. barrels): Q2 ~2.1M; Q3 ~1.9M .
  • Shortfall fees/prepayments impact: Q3 gross margin included $1.0M shortfall fees and $1.9M non-cash third‑party prepayments (−54 bps) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Depletions & Shipments % changeFY 2025Down high single digit to down low single digit Down mid single digit Maintained/Refined lower range
Price IncreasesFY 20251%–2% 1%–2% Maintained
Gross Margin (incl. tariffs)FY 202546%–47.3% 47%–48% Raised
Advertising, Promo & Selling YoY ($M)FY 2025$30–$50 $50–$60 Raised
Effective Tax RateFY 202529%–30% 29%–30% Maintained
EPS (incl. tariffs)FY 2025$6.72–$9.54 $7.80–$9.80 Raised
Capital Spending ($M)FY 2025$70–$90 $50–$70 Lowered
Tariff total cost impact ($M)FY 2025$15–$20 $9–$13 Lowered
Tariffs GM impact (bps)FY 202570–100 40–60 Lowered
Tariffs EPS impact ($/share)FY 2025$0.96–$1.28 $0.60–$0.80 Lowered

Earnings Call Themes & Trends

TopicQ1 2025 (Previous)Q2 2025 (Previous)Q3 2025 (Current)Trend
Supply chain & internal productionMargin expansion to 48.3% driven by pricing, procurement, efficiencies 49.8% margin; continued efficiencies; explicit expectation of shipment reversal in Q3 50.8% margin; internal production cited at 90% in prepared remarks and 98% in Q&A; reduced obsolete inventory Improving, accelerating execution
Tariffs & macroTariff estimate $20–$30M; 50–100 bps GM headwind Tariff estimate lowered to $15–$20M; included in guidance Further lowered to $9–$13M; 40–60 bps GM headwind; macro affordability, Hispanic consumer pressure, moderation trends Tariff headwind easing; macro still challenging
Twisted TeaShipments up YTD among drivers YTD shipments up (Sun Cruiser & Twisted Tea), but quarterly details focused on Truly/Sam Adams declines Velocity softness; pricing architecture adjustments (4×16oz pack <$10, tactical price resets on 12-packs); category display pressure from RTD spirits Soft near term; targeted remediation
Sun CruiserNational rollout momentum; innovation highlighted Positive consumer response; innovation supportive Top RTD spirits gainer; strong on‑premise leadership; planned format expansion and sponsorships Strong growth runway
Truly hard seltzerDeclines noted Declines; focus on messaging, lead flavor, high‑ABV Unruly Category down; new creative; Unruly gaining share; US Soccer sponsorship activation to 2026 World Cup Stabilization efforts ongoing
Angry Orchard & ciderNot highlightedNot highlightedReturned to growth on flavor trend and WWE sponsorship; Halloween activation Improving
Regulatory/legalNot highlightedNot highlightedHemp beverages noted as competing in some states; reaffirmed stance opposing tax equivalency changes Monitoring; policy unchanged

Management Commentary

  • “We reached over 50% gross margin in the third quarter, which is our highest gross margin since 2018.” — Jim Koch, CEO .
  • “As expected… our shipments rebalanced relative to our depletions which negatively impacted third quarter shipments and revenue… we are raising our 2025 gross margin and EPS guidance while adding incremental advertising investment.” — Diego Reynoso, CFO .
  • “We believe Sun Cruiser will be the next iconic brand for our company… leading RTD spirits tea and lemonade brand in on‑premise bars and restaurants.” — Jim Koch .
  • “In the third quarter, we produced 90% of our domestic volume internally compared to 66%… [Q&A reference: 98% in Q3].” — Diego Reynoso .

Q&A Highlights

  • Pack architecture and pricing: Twisted Tea to add a 4×16oz pack at $8.99–$9.99 and surgically reset certain 12‑pack price points below imports/craft/other F&Bs to restore value .
  • Margin durability: internal production cited at 98% in Q3 (prepared remarks referenced 90%); efficiencies and production mix helped offset shipment deleverage — note the discrepancy clarified during Q&A .
  • Brand investment cadence: AMP spend increased in Q4 and likely to continue into 2026 to support Sun Cruiser, Twisted Tea, Truly; management maintains a bias toward growth .
  • Macro and category: Hispanic consumer softness, health/moderation narratives, and hemp beverages identified as headwinds for beer/F&B consumption .
  • Capital allocation: cash $250.5M, unused $150M credit; share repurchases year‑to‑date $161.3M; CapEx cut to $50–$70M focused on productivity .

Estimates Context

MetricS&P Global Consensus*ActualSurprise
Diluted EPS ($)3.34*4.25 Beat*
Revenue ($USD)$541.97M*$537.49M Slight miss*
EBITDA ($USD)$77.45M*$86.01M*Beat*

Values retrieved from S&P Global. *

Implication: Consensus will likely revise up gross margin/EPS expectations, while trimming near‑term volume forecasts to reflect shipment/depletion dynamics and Twisted Tea softness .

Key Takeaways for Investors

  • Strong margin execution offset volume pressure; gross margin at 50.8% underpins the raised FY25 EPS guide despite shipment rebalancing .
  • Sun Cruiser momentum and brand investments should support mix and margins into 2026; watch distribution scaling and on‑premise leadership translating to off‑premise data .
  • Twisted Tea remediation (price architecture, pack formats, targeted Hispanic outreach) is a key swing factor for depletions in 2026; near‑term trends remain soft .
  • Tariff headwind notably reduced (EPS impact now $0.60–$0.80), freeing room to reinvest — but Q4 seasonality and expected shortfall fees will pressure quarterly EPS .
  • Expect estimate dispersion to narrow around raised margin levels; trading setup skews to guidance credibility and brand execution versus industry volume backdrop .
  • Capital deployment remains supportive (buybacks, lower CapEx), with $250.5M cash and $150M undrawn credit for flexibility .
  • Monitor narrative shifts on moderation/health concerns and state‑level hemp beverage dynamics; management’s regulatory stance on tax equivalency remains unchanged .