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VW

Vintage Wine Estates, Inc. (VWE)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 revenue was $62.10M, down 16.4% YoY; diluted EPS was -$0.81, with gross margin improving to 26.8% from 10.1% a year ago due to operational efficiencies and pricing .
  • FY2024 guidance tightened to revenue of ~$260–$270M, gross margin ~38%, SG&A (ex amort.) ~$98M, with expected restructuring charges of $5–$6M; management concurrently announced a credit agreement amendment to stabilize liquidity and reduce debt .
  • Segment trends: Wholesale $18.8M (-10.3% YoY), DTC $19.9M (-11.7%), B2B $23.4M (-23.4%), reflecting distributor destocking, e-commerce softness, and program eliminations; adjusted EBITDA loss narrowed vs prior-year Q4 (-$10.5M vs -$13.0M) .
  • Wall Street comparison: EPS -$0.81 missed by $0.72; revenue $62.10M missed by $4.77M (S&P Global consensus data was unavailable; consensus sourced from Seeking Alpha) .
  • Stock reaction catalysts: disclosure of the credit amendment and mandatory prepayment schedule, tightened FY2024 guidance, and impairment charges driving operating loss in Q4 .

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin improved to 26.8% (from 10.1% YoY) driven by warehousing/bottling productivity, pricing actions, supply chain efficiencies, and SKU reductions .
    • Operational execution: “Improved throughput in the Hopland bottling facility by over 35%” and “identified ~70% improvement in cost recovery of shipping expenses” .
    • Strategic focus: Interim CEO highlighted progress stabilizing operations and improving customer experience, retention in clubs, and ACE Cider distribution gains: “We have measurably improved efficiencies… instituted appropriate pricing… ACE Cider continues to gain points of distribution…” .

  • What Went Wrong

    • Revenue declined across all segments in Q4: Wholesale (-10.3%), DTC (-11.7%), B2B (-23.4%), with wholesale case volume down 3.5% on distributor/retailer destocking and lower consumer takeaway .
    • Operating loss of $50.2M in Q4 driven by $20.7M goodwill impairment, $9.8M loss on asset sales, and $3.6M intangible impairments despite better gross profit .
    • Interest expense rose to $5.1M (+$2.0M YoY) due to higher rates post-refinancing and swap exits; DTC softness in e-commerce/wine clubs and tasting room traffic weighed on results .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Revenue ($USD Millions)$77.993 $69.478 $62.096
Diluted EPS ($USD)$0.14 -$0.17 -$0.81
Gross Margin %32.9% 23.5% 26.8%
Adjusted EBITDA Margin %5.1% -10.0% -16.9%

Segment revenue breakdown:

Segment Revenue ($USD Millions)Q2 2023Q3 2023Q4 2023
Wholesale$23.083 $20.811 $18.837
Direct-to-Consumer$26.063 $17.174 $19.897
Business-to-Business$28.814 $31.490 $23.358
Total$77.993 $69.478 $62.096

KPIs (case volumes):

KPI (thousands of 9L cases)Q2 2023Q3 2023Q4 2023
Wholesale case volume453 433 472
DTC case volume125 67 70
Total case volume578 500 542

Comparison to consensus (S&P Global consensus unavailable; data from Seeking Alpha):

Metric (Q4 2023)ConsensusActualBeat/Miss
Diluted EPS ($USD)-$0.09 -$0.81 Miss by $0.72
Revenue ($USD Millions)$66.87 $62.10 Miss by $4.77

Guidance Changes

MetricPeriodPrevious Guidance (7/20/2023)Current Guidance (10/13/2023)Change
RevenueFY2024~$250–$270M ~$260–$270M Raised lower bound
Gross margin %FY2024~37–39% ~38% Tightened to mid-point
SG&A (ex amort.)FY2024~$95–$105M ~$98M Tightened to point estimate
DepreciationFY2024N/A~$16M New detail
Non-cash amortizationFY2024~$6–$7M ~$6.1M Tightened
Restructuring chargesFY2024~$6–$7M ~$5–$6M Lowered

Credit agreement context (liquidity and prepayment obligations):

  • Amended credit agreement reduces revolver to $200M and DDTL to $38.1M; requires term loan prepayments of $10M by 3/31/2024, $20M by 6/30/2024 (inclusive), and $45M by 12/31/2024; adds minimum liquidity covenant and equity cure rights; initial rate SOFR + 3% .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 FY2023)Current Period (Q4 FY2023)Trend
Supply chain & operationsInventory write-down ($10.1M) in Q3; cost recovery, freight lane improvements; bottling expansion and solar installation; SKU elimination ~2,000 “Improved throughput… over 35%,” simplified warehousing, personnel realignment, ~70% improvement in shipping cost recovery Improvement sustained
Pricing & margin actionsPrice increases; gross margin Q2 32.9% despite cost allocation changes; restructuring savings targeted Gross margin 26.8% (Q4) with premiumization/pricing; FY2024 gross margin guide ~38% Margin uplift targeted
Wholesale channel dynamicsDistributor destocking and managed brands weakness impact Wholesale case volume down 3.5%; ACE Cider offsets some declines Destocking persists
DTC performanceE-commerce/wine club/tasting rooms softer (weather, consumer discretionary) DTC down 11.7%; Cameron Hughes strength partially offsets e-commerce softness Mixed; focusing on key brands
Product performance (ACE Cider)ACE Cider contributed acquired revenue; expanded sales team “ACE Cider continues to gain points of distribution” Positive momentum
Liquidity & balance sheetDebt refinanced; swaps exited; working capital and asset sales improved liquidity Liquidity ~$54M at FY-end; credit amendment to support plan and asset monetization Liquidity plan advancing
Organizational restructuringAnnounced headcount reduction (~4%), SG&A savings ~$6M annualized Leadership transition to new CEO; continued Five-Point Plan execution Transition ongoing

Management Commentary

  • Interim CEO Jon Moramarco: “We have measurably improved efficiencies in our warehousing and bottling operations… instituted appropriate pricing… Solid shipments and depletion rates on most of our priority brands reflect the strength of the premiumization trend… ACE Cider continues to gain points of distribution…” .
  • CFO Kristina L. Johnston: “We believe the Amended Credit Agreement together with our focused cash management and operational improvements… provide the necessary liquidity… We believe these efforts… will support our ability to make the required principal payments in fiscal 2024 to avoid higher interest rates and achieve our goal to reduce debt” .
  • From the earnings call transcript: “We expect that revenue will be in the range of $260 million to $270 million, and that we can achieve a 38% gross margin… SG&A will decline to $98 million, excluding restructuring costs of about $5 million to $6 million” .

Q&A Highlights

  • Guidance detail: Management reiterated FY2024 ranges (revenue $260–$270M; GM ~38%; SG&A ~$98M ex amort.; restructuring $5–$6M) and emphasized operational drivers behind margin uplift .
  • Channel dynamics: Discussion of distributor/retailer destocking and ACE Cider’s incremental distribution supporting volumes in Wholesale .
  • Liquidity & covenants: Clarified amended credit terms, mandatory prepayments, and liquidity framework to support FY2024 plan execution .

Estimates Context

  • S&P Global consensus data was unavailable for VWE in our system.
  • External consensus indicated EPS -$0.09 and revenue $66.87M for Q4; actual EPS -$0.81 and revenue $62.10M, resulting in misses of $0.72 and $4.77M respectively .
  • Given tightened FY2024 guidance and margin focus, sell-side estimates may need to recalibrate for lower revenue mix (bulk whiskey depletion, discontinued programs) but materially higher gross margins and lower SG&A .

Key Takeaways for Investors

  • Margin recovery is tangible: Q4 gross margin improved to 26.8% with operational throughput, SKU simplification, and pricing; FY2024 guide targets ~38% gross margin on lower volume—an aggressive but specific operational plan .
  • Liquidity and de-leveraging path defined: Amended credit facility sets minimum liquidity, equity cure, and mandatory term loan prepayments; asset monetization plan and working capital discipline underpin covenant compliance .
  • Revenue headwinds are strategic: FY2024 revenue expected lower due to bulk whiskey depletion ($33M), discontinued bottled spirits ($6M), and SKU rationalization ($9M), offset by improved pricing and select brand volume (ACE Cider, Cameron Hughes) .
  • Segment focus matters: Wholesale volume pressure from destocking persists; DTC softness in e-commerce/wine clubs shows sensitivity to macro; prioritization of key brands and tasting room experience aims to stabilize mix .
  • Non-GAAP trajectory: Adjusted EBITDA loss narrowed YoY in Q4; FY2024 SG&A (ex amort.) guided to ~$98M supports improved operating leverage as margin expands .
  • Leadership transition is a catalyst: New CEO and governance actions could accelerate execution of the Five-Point Plan (costs, cash generation, brand focus) .
  • Near-term trading: Headlines on covenant amendments and impairments drive volatility; watch asset sale progress, term loan prepayments, and quarterly margin prints vs the ~38% target for validation .

Notes:

  • Primary sources: Q4/FY2023 earnings press release and financial tables –; credit amendment press release and 8-K details –.
  • Prior quarters for trend: Q3 press release and nine-month results –.
  • Earnings call transcript quotes and consensus: Seeking Alpha transcript (S&P Global estimates unavailable) .