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BOSTON BEER CO INC (SAM)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net revenue rose 2.2% to $402.3M, with gross margin expanding 230 bps to 39.9% despite shortfall fees and third‑party prepayment headwinds; GAAP diluted EPS was a loss of $3.38 and non‑GAAP diluted EPS was a loss of $1.68, reflecting a $26M supplier contract settlement in the quarter .
  • Depletions were flat and shipments fell 0.5% YoY; distributor inventory normalized to ~4 weeks from ~5.5 weeks in Q3, aiding clean channel levels into 2025 .
  • 2025 guidance targets gross margin of 45–47%, GAAP EPS of $8.00–$10.50, price increases of 1–2%, and a $30–$50M YoY increase in advertising/promotional spend; mgmt aims to lift internal production mix and continue procurement/network efficiencies to drive margins over time toward high‑40s to ~50% excluding contractual items .
  • Stock reaction catalysts: step‑up advertising across portfolio, national expansion of Sun Cruiser, and continued margin trajectory; offset by lingering headwinds in Truly and non‑GAAP adjustments (shortfall fees/prepayments) that weigh on reported margins .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 39.9% (+230 bps YoY), with procurement savings and pricing more than offsetting inflation; excluding shortfall fees and third‑party prepayments, Q4 gross margin reached 42.9% .
  • Twisted Tea continued to lead hard tea and show distribution gains, while new products (Sun Cruiser vodka iced tea; Twisted Tea Extreme; Truly Unruly) built momentum; “We are entering 2025 as a stronger company focused on end‑to‑end execution” .
  • Strong cash generation and balance sheet flexibility enabled $268M in share repurchases since Jan 2024 and funded elevated brand investment in 2025 .

What Went Wrong

  • GAAP net loss of $38.8M (-$3.38 EPS) driven by $26M supplier contract settlement and higher advertising/selling expenses; non‑GAAP loss was -$1.68 EPS .
  • Truly remained a drag; mgmt is conservative for 2025 and still expects declines near‑term despite improved trends from repositioning to lighter flavors and high‑ABV offerings .
  • Q4 operating loss widened to -$56.0M vs -$25.9M in Q4 2023 as ad/selling costs rose 8.5% YoY and G&A increased, while Q4 is seasonally the lowest absolute margin quarter .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Net Revenue ($USD Millions)$393.7 $605.5 $402.3
GAAP Diluted EPS ($USD)-$1.49 $2.86 -$3.38
Non‑GAAP Diluted EPS ($USD)N/A$5.35 -$1.68
Gross Margin (%)37.6% 46.3% 39.9%
Shipments (Barrels, Millions)1.503 ~2.24 1.496
Depletions YoY (%)N/A-3% 0% (flat)
Distributor Inventory (Weeks on Hand)N/A~5.5 ~4.0
Ad/Promo/Selling Expense ($USD Millions)$128.6 $148.0 $139.5
Operating Income (Loss) ($USD Millions)-$25.9 $45.8 -$56.0

KPIs and margin headwinds:

  • Shortfall fees impact on gross margin: ~205 bps in Q4 2024 .
  • Third‑party production prepayments impact: ~90 bps in Q4 2024 .
  • Distributor inventory levels: ~4 weeks on hand at year‑end (appropriate vs brands) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GAAP EPSFY 2024$5.50–$7.50 $3.80–$5.80 Lowered (contract settlement)
Non‑GAAP EPSFY 2024$8.00–$10.00 $8.00–$10.00 Maintained
Effective Tax RateFY 2024~30% ~34% Raised (contract settlement effect)
Depletions/ShipmentsFY 2024Down low single digits Down low single digits Maintained
Gross MarginFY 202444%–45% 44%–45% Maintained
Price IncreasesFY 2024~2% ~2% Maintained
GAAP EPSFY 2025N/A$8.00–$10.50 New
Gross MarginFY 2025N/A45%–47% New
Price IncreasesFY 2025N/A1%–2% New
Ad/Promo/Selling YoY IncreaseFY 2025N/A$30–$50M New
Effective Tax RateFY 2025N/A29%–30% New
Capital SpendingFY 2025N/A$90–$110M New
Shortfall Fees ImpactFY 2025N/A60–80 bps (gross margin) New
Third‑Party Prepayments ImpactFY 2025N/A40–60 bps (gross margin) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2, Q-1)Current Period (Q4 2024)Trend
Advertising/brand investmentWeighted to 2H; support Twisted Tea, Sun Cruiser, HARD MTN DEW Step‑up $30–$50M in 2025; test-and-scale, shift to digital/social; local activation across top markets Increasing investment discipline
Supply chain and margin planProcurement savings, systems, internal vs external mix improvements Internal/external mix 74%/26% in 2024; margin headwinds from contracts fall to 100–140 bps in 2025; pathway to high‑40s to 50% over time Structural improvement progressing
Twisted Tea trajectorySlowing off larger base; still strong; distribution opportunity Plan for single‑digit growth; focus on underpenetrated demos; incremental Light/Extreme; sponsorships (DraftKings, Top Rank Boxing) Mature growth; broaden demographic reach
Truly repositioningShift to lighter flavors; launch Truly Unruly; c‑store focus Conservative 2025; expect decline near‑term; trends improving; Barstool partnership to energize brand Gradual stabilization targeted
Sun Cruiser vodka iced teaEarly launch regions, positive velocity; spring 2025 reset opportunity National expansion in 1H 2025; triple TDPs; new SKUs/pack sizes; TV/digital sports media Accelerating rollout
HARD MTN DEWComplex network transition; impact mainly in 4Q shipments/2025 Positive depletions off small base; Code Red launch in March; multiyear build Slow multi‑year ramp
Cannabis/Delta‑9 beveragesStructural headwind among several (Q3) More serious challenge vs dispensary weed given mainstream retail access; too early to quantify Emerging risk to beer occasions
Tariffs/aluminumNot discussedPass‑through exposure; expected limited earnings impact from potential aluminum tariffs Watchful, minimal expected impact

Management Commentary

  • “We achieved…200 basis points of gross margin expansion, which supported our non‑GAAP EPS growth of 31%…while increasing advertising investments” (Chairman Jim Koch) .
  • “We are entering 2025 as a stronger company focused on end‑to‑end execution…diversified portfolio…and increased advertising investment” (CEO Michael Spillane) .
  • “Excluding shortfall fees and third‑party production prepayments, [Q4] gross margin was 42.9%…contract settlement costs of $26M…provide increased production flexibility and more favorable termination rights” (CFO Diego Reynoso) .
  • “Excluding contractual items, the midpoint of our 2025 gross margin guidance would be ~47.2%…we have a strong pathway to improve our gross margin over time to high‑40s to 50%” (CFO) .

Q&A Highlights

  • Compensation and incentives: Shift away from total volume targets to brand‑family incentives (Angry Orchard, Twisted Tea, Sun Cruiser, beer families) to drive balanced portfolio execution .
  • Scanner data vs depletions: Mgmt emphasized depletions as better coverage (Circana misses non‑measured/on‑premise), noting flat depletions YTD into Feb 21, 2025 .
  • Advertising phasing: “Significant step‑up in Q1,” already visible around Super Bowl and major sports moments; outcome‑based funding with tighter attribution/ MMM and single‑source data .
  • Twisted Tea deceleration: Planning single‑digit growth on larger base; incremental Light/Extreme; reclaim shelf space as long tail pruned .
  • Sun Cruiser runway: Triple TDPs by peak season; incremental to Twisted Tea; expanded packs and national media; mgmt confident on repeat though withheld specific rates .
  • Aluminum tariffs: Pass‑through, limited impact magnitude; no hedging .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS and revenue was unavailable at time of request due to SPGI rate limits; therefore beat/miss vs consensus cannot be assessed. Estimates comparisons should be revisited when access is restored.
  • Implication: Absent consensus anchors, focus near‑term on mgmt guidance and margin trajectory; reported non‑GAAP loss reflects discrete contract settlement and seasonal Q4 dynamics .

Key Takeaways for Investors

  • Margin trajectory remains the core story: procurement, network optimization, and brewery efficiencies support 45–47% FY25 gross margin, with contractual headwinds diminishing; excluding those, margins approach ~47% at mid‑point, with longer‑term potential high‑40s to ~50% depending on volume/mix .
  • Brand‑building cycle underway: Elevated 2025 ad/promotional investment ($30–$50M) across Twisted Tea, Truly/Unruly, Sun Cruiser, and HARD MTN DEW aims to reaccelerate share/volume; expect heavier spend in 1H and outcomes to guide pacing .
  • Sun Cruiser is the 2025 growth lever: National expansion in 1H, tripling distribution, new SKUs, and sports‑anchored media; importantly incremental to Twisted Tea, reducing cannibalization risk .
  • Truly remains a swing factor: Repositioning to lighter flavors and high‑ABV is gaining traction but mgmt guides conservatively; c‑store and cultural partnerships (Barstool) could aid stabilization .
  • Expect seasonality and Q1/Q4 margin noise: Q4 is typically lowest absolute margin; shortfall fees/prepayments are concentrated in Q4; shipments likely at high end in 1H due to brand timing and inventory .
  • Capital allocation supportive: $212M year‑end cash, no debt, unused $150M revolver, and $398M remaining repurchase authorization provide flexibility to invest and return cash .
  • Risk monitor: Cannabis beverages (Delta‑9) pose a growing competitive challenge in some states; keep watch on regulatory shifts and retailer adoption; aluminum tariffs currently viewed as low earnings impact .

Additional Relevant Press Releases (Q4 2024)

  • 12/20/2024: Guidance update reflecting $26M Rauch contract settlement; FY24 GAAP EPS range lowered; tax rate raised to ~34% .
  • 12/10/2024: Emerald Hour NA line launch (category innovation context) .
  • 11/11/2024: Twisted Tea holiday activation (brand support context) .
Note: Consensus estimates from S&P Global were unavailable due to rate limits; beat/miss vs consensus should be reassessed upon access restoration.