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VW

Vintage Wine Estates, Inc. (VWE)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 FY2024 net revenue was $73.3M, down 6.2% year-over-year, but up sequentially vs Q4; gross margin improved to 33.7% (up 690 bps vs Q4’s 26.8%) as pricing, productivity and SKU simplification took hold .
  • Diluted EPS was $(0.25); adjusted EBITDA was $0.4M with 0.6% margin, reflecting restructuring costs and higher interest expense; operating loss was $(9.9)M .
  • Management withdrew FY2024 guidance as new CEO Seth Kaufman (joined Oct 30) undertakes a 100-day deep dive and resets the long-term plan; prior guidance (Oct 13) had targeted $260–$270M revenue and ~38% gross margin .
  • Liquidity actions and amended credit agreement (Oct 12) waive certain past defaults, redefine covenants, and require $45M of term loan prepayments in FY2024; interest expense rose to $4.9M from $3.4M YoY on higher rates .

What Went Well and What Went Wrong

What Went Well

  • Sequential margin expansion: gross margin rose to 33.7%, +690 bps vs Q4’s 26.8%, driven by pricing, productivity and Five-Point Plan execution .
  • B2B revenue increased 5.8% YoY to $36.1M, supported by a large private label shipment; DTC showed improved pricing despite lower case volumes .
  • CEO alignment and reset: “These are exciting times… we will continue to execute the Five-Point Plan… driving improved cash generation, simplifying the business, strengthening brand development and marketing” — Seth Kaufman .

What Went Wrong

  • DTC revenue fell 10.0% YoY to $18.0M on weaker digital marketing and sale of The Sommelier Company; Wholesale declined 20.2% to $19.1M with timing headwinds and international softness .
  • Operating loss widened to $(9.9)M, including $4.0M restructuring; adjusted EBITDA fell to $0.4M vs $5.8M prior year .
  • Interest expense increased 45.7% YoY to $4.9M on higher rates; FY2024 guidance withdrawn pending CEO review, adding near-term uncertainty .

Financial Results

Sequential trend (oldest → newest)

MetricQ3 FY2023Q4 FY2023Q1 FY2024
Revenue ($USD Millions)$64.651 $62.096 $73.274
Operating Income ($USD Millions)$(8.182) $(50.167) $(9.861)

Comprehensive comparison (Q4 FY2023 → Q1 FY2024)

MetricQ4 FY2023Q1 FY2024
Revenue ($USD Millions)$62.096 $73.274
Gross Profit ($USD Millions)$16.624 $24.700
Gross Margin %26.8% 33.7%
SG&A (ex amort., $USD Millions)$28.337 $28.749
Operating Income ($USD Millions)$(50.167) $(9.861)
Interest Expense ($USD Millions)$5.085 $4.925
Net Income Attributable to Common ($USD Millions)$(47.849) $(15.058)
Diluted EPS ($USD)$(0.81) $(0.25)
Adjusted EBITDA ($USD Millions)$(10.500) $0.447
Adjusted EBITDA Margin %(16.9%) 0.6%

Year-over-year (Q1 FY2024 vs Q1 FY2023)

MetricQ1 FY2023Q1 FY2024
Revenue ($USD Millions)$78.080 $73.274
Gross Profit ($USD Millions)$29.530 $24.700
SG&A (ex amort., $USD Millions)$31.449 $28.749
Operating Income ($USD Millions)$(3.385) $(9.861)
Net Income Attributable to Common ($USD Millions)$1.532 $(15.058)
Diluted EPS ($USD)$0.03 $(0.25)
Adjusted EBITDA ($USD Millions)$5.777 $0.447
Adjusted EBITDA Margin %7.4% 0.6%

Segment breakdown (Q1 FY2024)

SegmentRevenue ($USD Millions)YoY Change ($)
Direct-to-Consumer$17.983 $(2.009)
Wholesale$19.144 $(4.843)
Business-to-Business$36.148 $1.968
Other/Non-Allocable$(0.001) $0.078
Total$73.274 $(4.806)

Segment operating income (Q1 FY2024)

SegmentOperating Income ($USD Millions)
Direct-to-Consumer$2.214
Wholesale$(1.293)
Business-to-Business$4.898
Other/Non-Allocable$(15.680)
Total$(9.861)

KPIs (case volumes)

KPIQ1 FY2023Q1 FY2024
DTC Case Volume (000s)99 76
Wholesale Case Volume (000s)539 449
Total Case Volume (000s)638 525

Guidance Changes

MetricPeriodPrevious Guidance (Oct 13, 2023)Current Guidance (Nov 14, 2023)Change
RevenueFY2024~$260M–$270M Withdrawn Lowered/Withdrawn
Gross Margin %FY2024~38% (on lower volume) Withdrawn Lowered/Withdrawn
SG&A (ex amort.)FY2024~$98M (ex restructuring) Withdrawn Lowered/Withdrawn
DepreciationFY2024~$16M Withdrawn Lowered/Withdrawn
AmortizationFY2024~$6.1M Withdrawn Lowered/Withdrawn
RestructuringFY2024$5M–$6M Withdrawn Lowered/Withdrawn

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 FY2023)Previous Mentions (Q4 FY2023)Current Period (Q1 FY2024)Trend
Five-Point Plan executionFocus on simplifying SKUs, improving bottling throughput and pricing Continued SKU reductions, cost containment; margin lift despite declines CEO reiterates priorities: cash generation, simplification, brand building, distribution Improving execution
Liquidity & credit agreementWorking amendments and lender discussions Amended agreement filed; covenant changes; required prepayments In compliance at 9/30; 4th Amendment executed; borrowing base adjustments expected Stabilizing but restrictive
Segment dynamicsB2B benefits from custom production; private label mix shift; e-comm softness Wholesale destocking; DTC softness; B2B impacted by discontinued programs B2B up on large shipment; DTC down on digital; Wholesale pressure from timing and international Mixed; B2B near-term boost
Pricing & productivityEmphasis on pricing recovery; throughput improvements Margin recovery vs prior year; throughput improved in Hopland Gross margin up sequentially; efficiency gains cited Positive momentum
Guidance/tonePreliminary FY2024 framework (July update) Tightened guidance announced Guidance withdrawn pending CEO review; cautious near term Reset/neutral

Management Commentary

  • “These are exciting times for VWE… we will continue to execute the Five-Point Plan… driving improved cash generation, further simplifying the business, strengthening brand development and marketing, and increasing points of distribution.” — Seth Kaufman, President & CEO .
  • “Given that I have only just begun these efforts, we are withdrawing previously provided guidance for fiscal 2024.” — Seth Kaufman .
  • CFO noted compliance with covenants at 9/30 and described amended credit terms and expected borrowing base adjustments supporting incremental availability .

Q&A Highlights

  • Guidance: Management clarified withdrawal of FY2024 guidance while CEO completes a 100-day review, signaling a strategic reset and focus on long-term earnings power .
  • B2B outlook: Private label shipments boosted Q1 but are expected to decline quarterly through the rest of the year, normalizing segment mix and margin drivers .
  • Restructuring and savings: 4% workforce reduction expected to deliver ~$6M annualized savings; restructuring costs were $4.0M (with $2.3M in Wholesale) in Q1 .
  • Liquidity and covenants: Credit amendment requires $10M prepayment by 3/31/24, $20M cumulative by 6/30/24, and $45M by 12/31/24, with excess cash sweep above $20M; company was covenant compliant at Q1-end .

Estimates Context

  • S&P Global consensus estimates for Q1 FY2024 were unavailable for VWE due to data mapping constraints, so we cannot provide an apples-to-apples comparison to Wall Street consensus at this time. Values retrieved from S&P Global (consensus) were unavailable.

Key Takeaways for Investors

  • Sequential margin recovery is the key positive surprise; 690 bps improvement to 33.7% suggests pricing and productivity actions are taking hold despite lower volumes .
  • Near-term revenue volatility likely as B2B private label shipments normalize and Wholesale timing effects persist; watch mix-driven margin trends and case volumes .
  • Balance sheet constraints and amended covenants create execution urgency; mandatory term loan prepayments and excess cash sweeps prioritize asset monetization and cash generation .
  • Guidance withdrawal reduces visibility but aligns with CEO’s strategic reset; expect updated framework after the 100-day review, with focus on brand concentration and DTC profitability .
  • DTC remains a lever with pricing gains; addressing digital marketing weakness and retention should support mix and margin improvement over time .
  • Interest expense pressure from higher rates is a headwind; hedges cover ~40% of debt at 2.3% through 2025, partially mitigating rate risk .
  • Stock reaction catalysts: bold execution updates from the CEO, evidence of sustained margin expansion, asset sales progress, and revised guidance could drive re-rating as visibility improves .