Vintage Wine Estates Reports Nine Month Fiscal 2023 Results
- Revenue in the first nine months of fiscal 2023 increased
3% to$225 million driven by acquisitions - Business simplification and operational improvement plan beginning to yield results
- Second quarter fiscal 2023 non-cash impairment charges of
$139.1 million and third quarter fiscal 2023 inventory adjustment of$10.1 million impacted profitability - Evaluating operational footprint and cost structure to further reduce costs
INCLINE VILLAGE, Nev., May 10, 2023 (GLOBE NEWSWIRE) -- Vintage Wine Estates, Inc. (Nasdaq: VWE and VWEWW) (“VWE” or the “Company”), one of the top wine producers in the U.S. with an industry leading direct-to-customer platform, today reported its fiscal 2023 year-to-date financial results for the first nine months of fiscal 2023 including its fiscal third quarter ended March 31, 2023, fiscal second quarter ended December 31, 2022 and restated fiscal first quarter ended September 30, 2022. Results include Meier's Wine Cellars, Inc. acquired on January 18, 2022, ACE Cider, acquired on November 16, 2021 and Vinesse, acquired on October 4, 2021.
Jon Moramarco, Interim Chief Executive Officer, commented, "We have made solid progress with our plans to stabilize the business while we address the dynamic macroeconomic environment. We are beginning to see the benefits from our cost reduction and price enhancing actions, which are expected to have a
He continued, "We are currently evaluating various options regarding our operations, go-to-market strategy and costs. While we have eliminated nearly 2,000 SKU's thus far, we need to further simplify in order to focus resources where we can deliver the best performance. Everything is on the table as we rethink how we measurably reduce our production footprint and operating costs, generate cash, streamline our channels to market and reinvigorate marketing efforts of our key brands. The business realignment and growth plan we ultimately execute is expected to put us back on track with a stronger balance sheet, solid margins and better-than-market growth."
Fiscal 2023 Nine-Month Period Financial Results Review (compared with prior-year period unless noted otherwise)
Revenue
- Net revenue was
$224.7 million , up$6.5 million , reflecting the$21.0 million in acquired revenue, growth in custom production and$2.6 million increase in bulk distilled spirits sales. Somewhat offsetting the growth was$10.5 million decline in sales from bottled wine and distilled spirits programs for a large retail customer that were less profitable and therefore eliminated and$2.2 million lower revenue related to programming changes for a major television retailer. - Wholesale revenue grew
6.9% to$67.3 million . Per Nielsen's, over the 13-week and 52-week periods ended March 25, 2023, VWE managed wine brand portfolio outpaced the overall U.S. Wine market. However, the distributor channel has been destocking and weakness in third party managed brands somewhat offset consumer takeaway. ACE Cider contributed$9.2 million in acquired revenue and higher Wholesale case volume. - B2B revenue increased
13.2% to$94.4 million driven by the$8.8 million contribution from the Meier's acquisition, growth of
$9.5 million from custom production and$2.6 million from sales of bulk distilled spirits. This was partially offset by
$10.5 million decline related to an eliminated, less profitable, private label sales program for a major retailer. - The year-to-date decline in DTC revenue of
$6.2 million reflected programming changes by a major television retailer which were somewhat offset by$3.0 million in acquired revenue. While wine club sales improved2% , tasting rooms have been faced with slowing consumer discretionary spend, inflated lodging and travel costs and bad weather in wine country.
Terry Wheatley, President, noted, “Our past successes have been the result of our multi-channel approach to selling wine across the country. We believe our innovation and customer relationships are critical to our future success. VWE has the marketing plan, the products and the people to put us back on track to drive growth as we focus on our key brands of Bar Dog, Firesteed, B.R. Cohn, Kunde, Cherry Pie and Photograph.”
Gross Profit and Margin
Gross profit was down
Selling, General and Administrative Expenses (SG&A)
SG&A, which excludes amortization expense, increased
Kristina Johnston, Chief Financial Officer, noted, "Our simplification efforts began to yield results in the third quarter, and we expect will continue to drive improvements as we advance through fiscal 2024. Our initial plans to simplify the business included a
Operating and Net Income
Loss from operations was
Interest expense was
Net loss available to VWE common shareholders was
Year-to-date adjusted EBITDA1 was
[1] As referenced here and throughout the release, adjusted EBITDA is a non-GAAP measure. Please see related disclosures regarding the use of non-GAAP measures in this news release.
Third Quarter Fiscal 2023 Highlights
- Third quarter net revenue of
$69.5 million was down$9.5 million , or12% . Acquired revenue in the quarter was
$0.6 million .- B2B's
$4.1 million increase in custom production and$0.6 million in acquired revenue helped to offset$3.7 million decline from the elimination of bottled wine and distilled spirits programs for a large retail customer and reduced bulk distilled spirits sales of$4.1 million . - In DTC, which declined
$2.4 million , growth from wine clubs, telemarketing and e-commerce helped to offset
a$1.2 million decline related to a major customer's timing of televised programming that was pushed out into the fiscal fourth quarter as well as reduced activity in tasting rooms, mostly as a result of bad weather. - The
$3.7 million decline in Wholesale was primarily related to weakness in third party managed brands that impacted sales by$1.1 million ,$0.5 million lower sales due to the timing of a limited time offer marketing program for a national retailer, and a$0.4 million decline from an eliminated, less profitable product line.
- B2B's
- Third quarter gross profit was down
$11.7 million to$16.3 million which resulted in gross margin of23.5% . Gross profit included the impact of the$10.1 million inventory write-down, which was a 14.5 point impact to gross margin. Gross margin would have been38.0% excluding the inventory adjustment. The inventory write-down included a$6.8 million market value adjustment of bulk inventory which enables the Company to reevaluate inventory usage and drive utilization. The remainder was related to obsolescence of dry and finished goods associated with elimination of odd lot SKUs, which aligns with the Company's strategy to simplify its business. - Third quarter SG&A, which excludes amortization expense, increased
$0.5 million to$25.5 million . Lower stock compensation expense of$3.9 million driven by forfeitures and austere cost discipline were offset by business realignment costs of$1.9 million as well as increased professional and legal fees of$1.1 million , a$1.2 million increase in compensation expense driven by the expansion of the ACE Cider sales team and the additions to the finance team. - Third quarter loss from operations was
$3.8 million compared with income from operations of$0.9 million in the prior year quarter. The loss was primarily the result of the$10.1 million inventory adjustment.
Second Quarter Fiscal 2023 Highlights
- Second quarter net revenue of
$78 million was down$5.6 million , or6.7% . Acquired revenue of$5.7 million was more than offset by a$9.7 million revenue decline associated with bottled wine and distilled spirits programs that were eliminated, a$2.9 million reduction related to programming changes for a major television retailer, as well as changes in consumer discretionary spending during the quarter. - Second quarter gross profit was down
$12.8 million to$25.7 million which resulted in gross margin of32.9% . Impacts to the quarter included$7.8 million related to changes in the allocation methodology of costs of goods sold for custom production and the timing of overhead absorption as well as$1.3 million related to higher carrier costs. - Second quarter SG&A, which excludes amortization expense, increased
$8.4 million to$33.2 million . In addition to increases in stock-based compensation, SG&A was impacted by$1.9 million in costs related to an abandoned acquisition. - Second quarter loss from operations was
$145.6 million primarily reflecting goodwill and intangible impairment losses of$139.1 million . The goodwill impairment loss of$125.3 million was driven by more than expected sales declines in certain categories of the Wholesale and B2B businesses. A$13.8 million impairment of indefinite-lived tradename and trademark assets was primarily the result of revised expectations of future net sales for the Layer Cake brand and the expected future cash flow from the ACE Cider business.
Restated First Quarter Fiscal 2023
The Company today filed its restated Form 10-Q for its first quarter fiscal 2023 which ended September 30, 2022. The resultant changes for the quarter resulted in diluted earnings per share allocable to common stockholders for the three months ended September 30, 2022 as previously reported being reduced by
Debt, Liquidity and Cash Flow
Liquidity
On December 15, 2022, the Company completed the sale of a portion of the Laetitia Vineyard for net proceeds of
As of March 31, 2023, the Company had approximately
As of March 31, 2023, the Company had
Subsequent to the end of the third quarter fiscal 2023, the Company executed an amendment to its lending agreement that adjusted the definition of certain covenants. Under the amended agreement, the Company is in compliance with all financial covenants at March 31, 2023. The Company is continuing to work with its lenders to further amend the agreement in order to maintain compliance of financial covenants in future periods and status as a going concern.
Capital Investments
Year-to-date capital expenditures were
Conference Call and Webcast
The Company will host a conference call and live webcast today at 4:45 PM ET/ 1:45 PM PT, at which time management will review the Company’s financial results for the second and third quarters, as well as the first nine months of fiscal 2023. Management will also provide updates on the status of plans to improve revenue and reduce costs. The review will be accompanied by a slide presentation, which will be available on the Company’s website at ir.vintagewineestates.com. A question-and-answer session will follow the formal discussion.
The conference call can be accessed by dialing 1-412-317-5180. The listen-only audio webcast can be monitored at ir.vintagewineestates.com. A telephonic replay will be available from 7:45 PM ET / 4:45 PM PT on the day of the call through Wednesday, May 17, 2023, and can be accessed by dialing 1-412-317-6671 and entering the conference ID number 10178143. Alternatively, an archived webcast of the call can be found on the Company’s website in the investor relations section. A transcript of the call will be posted to the website once available.
About Vintage Wine Estates, Inc.
Vintage Wine Estates is a family of wineries and wines whose singular focus is producing the nest quality wines and incredible customer experiences with wineries throughout Napa, Sonoma, California’s Central Coast, Oregon, and Washington State. Since its founding 20 years ago, the Company has grown to be the 14th largest wine producer in the U.S., selling more than two million nine-liter equivalent cases annually. To consistently drive growth, the Company curates, creates, stewards, and markets its many brands and services to customers and end consumers via a balanced omni-channel strategy encompassing direct-to-consumer, wholesale, and exclusive brands arrangements with national retailers. While VWE is diverse across price points and varietals with over 60 brands ranging from
Non-GAAP Financial Measures
In addition to reporting net income/(loss) prepared in accordance with accounting principles generally accepted in the United States, VWE uses adjusted EBITDA, adjusted net income/(loss) and adjusted net income/(loss) per share to supplement GAAP measures of performance to evaluate the effectiveness of its business strategies. Adjusted EBITDA is defined as earnings/(loss) before interest, income taxes, depreciation and amortization, stock-based compensation expense, casualty losses or gains, impairment losses, changes in the fair value of derivatives, restructuring related income or expenses, acquisition and integration costs, and certain non-cash, nonrecurring, or other items that are included in net income that VWE does not consider indicative of its ongoing operating performance. Adjusted EBITDA margin is the ratio of adjusted EBITDA to net revenue. Adjusted net income/(loss) is defined as net income/(loss) as reported adjusted for the impacts of amortization of intangible assets, acquisition integration costs, gains or losses on disposition of assets, gain on litigation of proceeds, COVID impact, and inventory acquisition basis adjustment and also adjusted for a normalized tax rate. Adjusted net income/(loss) per share is calculated based on the weighted average shares outstanding for the period.
Adjusted EBITDA, adjusted net income/(loss) and adjusted net income/(loss) per share are not recognized measures of financial performance under GAAP. VWE believes these non-GAAP measures provide investors with additional insight into the underlying trends of VWE’s business and assist in analyzing VWE’s performance across reporting periods on a consistent basis by excluding items that VWE does not believe are indicative of its core operating performance, which allows for a better comparison against historical results and expectations for future performance. Adjusted EBITDA and adjusted net income have certain limitations as analytical tools, and they should not be considered in isolation or as a substitute for analysis of results as reported under U.S. GAAP. Adjusted EBITDA, adjusted net income/(loss) and adjusted net income/(loss) per share, as presented, may produce results that vary from the most comparable GAAP measure and may not be comparable with a similarly defined non-GAAP measure used by other companies.
In evaluating adjusted EBITDA, adjusted net income/(loss) and adjusted net income/(loss) per share, be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. VWE’s presentation of adjusted EBITDA and adjusted net income should not be construed as an implication that future results will be unaffected by the types of items excluded from the calculation of these non-GAAP measures.
Forward-Looking Statements
Some of the statements contained in this press release are forward-looking statements within the meaning of applicable securities laws (collectively, “forward-looking statements”). Forward-looking statements are all statements other than those of historical fact, and generally may be identified by the use of words such as “anticipate,” “believe,” “continue,” “driving,” “eliminating,” “estimate,” “evaluating,” “execute,” “expect,” “future,” “improving,” “intend,” “looking,” “may,” “making,” “plan,” “project,” “should,” “simplify,” “will,” “would” or other similar expressions that indicate future events or trends. These forward-looking statements include, but are not limited to, statements related to future amendments to the Company’s lending agreement, the ability of the Company to remain in compliance with its financial covenants under its lending agreement, estimates and forecasts of financial and performance metrics, projections of market opportunity and market share, business plans and strategies, expansion and acquisition opportunities, potential synergies from prior acquisitions, growth prospects and consumer and industry trends. These statements are based on various assumptions, whether or not identified in this news release, and on the current expectations of VWE’s management. These forward-looking statements are not intended to serve as, and should not be relied on by any investor as, a guarantee of actual performance or an assurance or definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and may differ materially from those contained in or implied by such forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the control of VWE. Factors that could cause actual results to differ materially from the results expressed or implied by such forward-looking statements include, among others: the Company’s ability to continue as a going concern; the Company’s ability to remain in compliance with the financial covenants in its lending agreements; the Company’s limited experience operating as a public company and its ability to remediate its material weakness in internal control over financial reporting and to maintain effective internal control over financial reporting, the ability of the Company to retain key personnel, the effect of economic conditions on the industries and markets in which VWE operates, including financial market conditions, rising inflation, fluctuations in prices, interest rates and market demand; risks relating to the uncertainty of projected financial information; the effects of competition on VWE’s future business; risks related to the organic and inorganic growth of VWE’s business and the timing of expected business milestones; the potential adverse effects of the ongoing COVID-19 pandemic on VWE’s business and the U.S. economy; declines or unanticipated changes in consumer demand for VWE’s products; VWE’s ability to adequately source grapes and other raw materials and any increase in the cost of such materials; the impact of environmental catastrophe, natural disasters, disease, pests, weather conditions and inadequate water supply on VWE’s business; VWE’s level of insurance against catastrophic events and losses; VWE’s significant reliance on its distribution channels, including independent distributors; potential reputational harm to VWE’s brands from internal and external sources; possible decreases in VWE’s wine quality ratings; integration risks associated with recent acquisitions; possible litigation relating to misuse or abuse of alcohol; changes in applicable laws and regulations and the significant expense to VWE of operating in a highly regulated industry; VWE’s ability to maintain necessary licenses; VWE’s ability to protect its trademarks and other intellectual property rights; risks associated with the Company’s information technology and ability to maintain and protect personal information; VWE’s ability to make payments on its indebtedness; and those factors discussed in the Company’s most recent Annual Report on Form 10-K and in subsequent Quarterly Reports on Form 10-Q or other reports filed with the Securities and Exchange Commission. There may be additional risks including other adjustments that VWE does not presently know or that VWE currently believes are immaterial that could also cause actual results to differ from those expressed in or implied by these forward-looking statements. In addition, forward-looking statements reflect VWE’s expectations, plans or forecasts of future events and views as of the date and time of this news release. VWE undertakes no obligation to update or revise any forward-looking statements contained herein, except as may be required by law. Accordingly, undue reliance should not be placed upon these forward-looking statements.
Financial Tables Follow.
Contacts:
| Investors Deborah K. Pawlowski, Kei Advisors LLC dpawlowski@keiadvisors.com Phone: 716.843.3908 | Media Mary Ann Vangrin MVangrin@vintagewineestates.com |
| Vintage Wine Estates, Inc. | |||||||
| Condensed Consolidated Balance Sheets | |||||||
| (in thousands) | |||||||
| March 31, 2023 | June 30, 2022 | ||||||
| (Unaudited) | |||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash | $ | 31,966 | $ | 45,492 | |||
| Restricted cash | - | 4,800 | |||||
| Accounts receivable, net | 41,381 | 38,192 | |||||
| Other receivables | 721 | 3,866 | |||||
| Inventories | 199,268 | 192,102 | |||||
| Assets held for sale, net | 547 | - | |||||
| Current interest rate swap asset | 3,920 | 2,877 | |||||
| Prepaid expenses and other current assets | 23,519 | 13,394 | |||||
| Total current assets | 301,322 | 300,723 | |||||
| Property, plant, and equipment, net | 219,680 | 236,100 | |||||
| Operating lease right-of-use assets | 32,971 | - | |||||
| Finance lease right-of-use-assets | 624 | - | |||||
| Goodwill | 29,666 | 154,951 | |||||
| Intangible assets, net | 45,438 | 64,377 | |||||
| Interest rate swap asset | 3,619 | 6,280 | |||||
| Other assets | 4,701 | 3,464 | |||||
| Total assets | $ | 638,021 | $ | 765,895 | |||
| Liabilities, redeemable noncontrolling interest, and stockholders' equity | |||||||
| Current liabilities: | |||||||
| Line of credit | $ | 114,429 | $ | 144,215 | |||
| Accounts payable | 28,785 | 13,947 | |||||
| Accrued liabilities and other payables | 34,325 | 24,204 | |||||
| Current operating lease liabilities | 6,357 | - | |||||
| Current finance lease liabilities | 286 | - | |||||
| Current maturities of long-term debt | 191,580 | 14,909 | |||||
| Total current liabilities | 375,762 | 197,275 | |||||
| Other long-term liabilities | 1,693 | 6,491 | |||||
| Long-term debt, less current maturities | - | 169,095 | |||||
| Long-term operating lease liabilities | 27,695 | - | |||||
| Long-term finance lease liabilities | 344 | - | |||||
| Deferred tax liability | 5,698 | 29,979 | |||||
| Deferred gain | 10,116 | 10,666 | |||||
| Total liabilities | 421,308 | 413,506 | |||||
| Commitments and contingencies (Note 13) | |||||||
| Redeemable noncontrolling interest | 262 | 1,663 | |||||
| Stockholders' equity: | |||||||
| Preferred stock, no par value, 2,000,000 shares authorized, and none issued and outstanding at March 31, 2022 and June 30, 2022. | - | - | |||||
| Common stock, no par value, 200,000,000 shares authorized, 62,161,553 issued and 59,289,659 outstanding at March 31, 2023 and 61,691,054 issued and 58,819,160 outstanding at June 30, 2022. | - | - | |||||
| Additional paid-in capital | 383,720 | 377,897 | |||||
| Treasury stock, at cost: 2,871,894 shares held at March 31, 2023 and June 30, 2022. | (26,034 | ) | (26,034 | ) | |||
| Accumulated Deficit | (140,601 | ) | (571 | ) | |||
| Total Vintage Wine Estates, Inc. stockholders' equity | 217,085 | 351,292 | |||||
| Noncontrolling interests | (634 | ) | (566 | ) | |||
| Total stockholders' equity | 216,451 | 350,726 | |||||
| Total liabilities, redeemable noncontrolling interest, and stockholders' equity | $ | 638,021 | $ | 765,895 | |||
| Vintage Wine Estates, Inc. | ||||||||||||||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||||||||||
| Three Months Ended December 31, | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||
| Net revenue | ||||||||||||||||||||||||||||
| Wine, spirits and cider | $ | 53,298 | $ | 70,146 | $ | 41,443 | $ | 50,859 | $ | 146,160 | $ | 157,292 | ||||||||||||||||
| Nonwine | 24,695 | 13,465 | 28,035 | 28,074 | 78,540 | 60,939 | ||||||||||||||||||||||
| 77,993 | 83,611 | 69,478 | 78,933 | 224,700 | 218,231 | |||||||||||||||||||||||
| Cost of revenue | ||||||||||||||||||||||||||||
| Wine, spirits and cider | 36,039 | 39,076 | 37,829 | 38,764 | 108,499 | 98,428 | ||||||||||||||||||||||
| Nonwine | 16,283 | 6,072 | 15,303 | 12,152 | 46,524 | 29,886 | ||||||||||||||||||||||
| 52,322 | 45,148 | 53,132 | 50,916 | 155,023 | 128,314 | |||||||||||||||||||||||
| Gross profit | 25,671 | 38,463 | 16,346 | 28,017 | 69,677 | 89,917 | ||||||||||||||||||||||
| Selling, general, and administrative expenses | 33,225 | 24,789 | 25,526 | 24,952 | 92,458 | 66,724 | ||||||||||||||||||||||
| Amortization expense | 1,805 | 1,204 | 1,813 | 2,083 | 5,429 | 3,938 | ||||||||||||||||||||||
| Goodwill impairment losses | 125,285 | - | - | - | 125,285 | - | ||||||||||||||||||||||
| Intangible impairment losses | 13,823 | - | - | - | 13,823 | - | ||||||||||||||||||||||
| Gain on remeasurement of contingent liability | (3,474 | ) | - | - | - | (2,648 | ) | - | ||||||||||||||||||||
| Gain on litigation proceeds | - | - | (884 | ) | - | (1,414 | ) | - | ||||||||||||||||||||
| Loss (gain) on sale leaseback | 117 | (333 | ) | (333 | ) | (333 | ) | (550 | ) | (1,000 | ) | |||||||||||||||||
| Loss (gain) on sale of property, plant, and equipment | 470 | 82 | (5,977 | ) | 431 | (5,625 | ) | 507 | ||||||||||||||||||||
| (Loss) income from operations | (145,580 | ) | 12,721 | (3,799 | ) | 884 | (157,081 | ) | 19,748 | |||||||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||||||
| Interest expense | (5,650 | ) | (3,493 | ) | (4,291 | ) | (3,729 | ) | (13,322 | ) | (10,825 | ) | ||||||||||||||||
| Net unrealized (loss) gain on interest rate swap agreements | (839 | ) | 2,636 | (3,596 | ) | 4,553 | 4,892 | 8,582 | ||||||||||||||||||||
| Loss on extinguishment of debt | (479 | ) | - | - | - | (479 | ) | - | ||||||||||||||||||||
| Other, net | 216 | (51 | ) | (161 | ) | 1,957 | 326 | 1,945 | ||||||||||||||||||||
| Total other income (expense), net | (6,752 | ) | (908 | ) | (8,048 | ) | 2,781 | (8,583 | ) | (298 | ) | |||||||||||||||||
| (Loss) Income before provision for income taxes | (152,332 | ) | 11,813 | (11,847 | ) | 3,665 | (165,664 | ) | 19,450 | |||||||||||||||||||
| Income tax (benefit) provision | (21,709 | ) | 3,261 | (1,673 | ) | 958 | (24,231 | ) | 5,412 | |||||||||||||||||||
| Net (loss) income | (130,623 | ) | 8,552 | (10,174 | ) | 2,707 | (141,433 | ) | 14,038 | |||||||||||||||||||
| Net loss attributable to the noncontrolling interests | (1,046 | ) | (40 | ) | (14 | ) | (73 | ) | (1,403 | ) | (138 | ) | ||||||||||||||||
| Net (loss) income attributable to common stockholders | $ | (129,577 | ) | $ | 8,592 | $ | (10,160 | ) | $ | 2,780 | $ | (140,030 | ) | $ | 14,176 | |||||||||||||
| Net earnings per share allocable to common stockholders | ||||||||||||||||||||||||||||
| Basic | $ | (2.19 | ) | $ | 0.14 | $ | (0.17 | ) | $ | 0.05 | $ | (2.37 | ) | $ | 0.23 | |||||||||||||
| Diluted | $ | (2.19 | ) | $ | 0.14 | $ | (0.17 | ) | $ | 0.05 | $ | (2.37 | ) | $ | 0.23 | |||||||||||||
| Weighted average shares used in the calculation of earnings per share allocable to common stockholders | ||||||||||||||||||||||||||||
| Basic | 58,941,899 | 60,461,611 | 59,289,659 | 61,410,403 | 59,014,915 | 60,773,258 | ||||||||||||||||||||||
| Diluted | 58,941,899 | 60,461,611 | 59,289,659 | 61,410,403 | 59,014,915 | 60,773,258 | ||||||||||||||||||||||
| Vintage Wine Estates, Inc. | |||||||
| Condensed Consolidated Statements of Cash Flows | |||||||
| (in thousands) | |||||||
| Nine Months Ended March 31, | |||||||
| 2023 | 2022 | ||||||
| Cash flows from operating activities | |||||||
| Net (loss) income | $ | (141,433 | ) | $ | 14,038 | ||
| Adjustments to reconcile net (loss) income to net cash from operating activities: | |||||||
| Depreciation | 11,409 | 14,095 | |||||
| Amortization expense | 6,196 | 4,234 | |||||
| Goodwill and intangible asset impairment losses | 139,108 | - | |||||
| Remeasurement of contingent consideration liabilities | (2,648 | ) | - | ||||
| Stock-based compensation expense | 6,971 | 1,943 | |||||
| Provision for doubtful accounts | 677 | 45 | |||||
| Net unrealized gain on interest rate swap agreements | (4,892 | ) | (8,582 | ) | |||
| (Benefit) provision for deferred income tax | (24,281 | ) | 888 | ||||
| (Gain) Loss on disposition of assets | (5,625 | ) | 508 | ||||
| Deferred gain on sale leaseback | (550 | ) | (1,000 | ) | |||
| Loss on extinguishment of debt | 479 | - | |||||
| Deferred rent | (2,079 | ) | 285 | ||||
| Change in operating assets and liabilities (net of effect of business combinations): | |||||||
| Accounts receivable | (3,866 | ) | (21,261 | ) | |||
| Other receivables | 3,145 | 376 | |||||
| Inventories | (5,466 | ) | 4,244 | ||||
| Prepaid expenses and other current assets | (10,125 | ) | (2,457 | ) | |||
| Other assets | 602 | (6,215 | ) | ||||
| Accounts payable | 10,511 | (8,106 | ) | ||||
| Accrued liabilities and other payables | 16,934 | 2,836 | |||||
| Net change in lease assets and liabilities | 1,087 | - | |||||
| Net cash used in operating activities | (3,846 | ) | (4,128 | ) | |||
| Cash flows from investing activities | |||||||
| Proceeds from disposition of assets | 19,707 | 105 | |||||
| Purchases of property, plant, and equipment | (11,318 | ) | (15,723 | ) | |||
| Acquisition of businesses | - | (74,268 | ) | ||||
| Net cash provided by (used in) investing activities | 8,389 | (89,886 | ) | ||||
| Cash flows from financing activities | |||||||
| Repurchase of common stock | - | (2,833 | ) | ||||
| Principal payments on line of credit | (136,358 | ) | (67,210 | ) | |||
| Proceeds from line of credit | 111,863 | 126,591 | |||||
| Financing costs incurred from line of credit | (1,975 | ) | - | ||||
| Outstanding checks in excess of cash | 4,327 | 2,900 | |||||
| Principal payments on debt | (73,195 | ) | (13,178 | ) | |||
| Proceeds from debt | 74,640 | - | |||||
| Loan fees | (377 | ) | - | ||||
| Principal payments on finance leases | (205 | ) | - | ||||
| Distributions to noncontrolling interest | (66 | ) | - | ||||
| Repurchase of public warrants | (172 | ) | - | ||||
| Payments of minimum tax withholdings on stock-based payment awards | (976 | ) | - | ||||
| Payments on acquisition payable | (375 | ) | (226 | ) | |||
| Net cash (used in) provided by financing activities | (22,869 | ) | 46,044 | ||||
| Net change in cash and restricted cash | (18,326 | ) | (47,970 | ) | |||
| Cash and restricted cash, beginning of period | 50,292 | 123,679 | |||||
| Cash and restricted cash, end of period | $ | 31,966 | $ | 75,709 | |||
| Vintage Wine Estates, Inc. |
| Segment Data |
| ($'s in thousands) |
| Segment Revenue |
| Fiscal Year 2023 | Three months ended | Nine months ended | |||||||||||
| Net Revenue | September 30, 2022 | December 31, 2022 | March 31, 2023 | March 31, 2023 | |||||||||
| Wholesale | $ | 23,366 | $ | 23,083 | $ | 20,811 | $ | 67,260 | |||||
| Direct to Consumer | 19,863 | 26,063 | 17,174 | 63,101 | |||||||||
| Business to Business | 34,081 | 28,814 | 31,490 | 94,385 | |||||||||
| Corporate and Other/ Non-Allocable | (81 | ) | 33 | 3 | (46 | ) | |||||||
| Total | $ | 77,229 | $ | 77,993 | $ | 69,478 | $ | 224,700 | |||||
| Fiscal Year 2022 | Three months ended | Nine months ended | |||||||||||
| Net Revenue | September 30, 2021 | December 31, 2021 | March 31, 2022 | March 31, 2022 | |||||||||
| Wholesale | $ | 16,203 | $ | 22,171 | $ | 24,549 | $ | 62,923 | |||||
| Direct to Consumer | 14,915 | 34,806 | 19,595 | 69,316 | |||||||||
| Business to Business | 24,467 | 25,225 | 33,657 | 83,349 | |||||||||
| Corporate and Other/ Non-Allocable | 102 | 1,409 | 1,132 | 2,643 | |||||||||
| Total | $ | 55,687 | $ | 83,611 | $ | 78,933 | $ | 218,231 | |||||
| Year-Over-Year $ Change | |||||||||||||
| Three months ended | Nine months ended | ||||||||||||
| Net Revenue | September 30 | December 31 | March 31 | March 31 | |||||||||
| Wholesale | 7,163 | 912 | (3,738 | ) | 4,337 | ||||||||
| Direct to Consumer | 4,948 | (8,743 | ) | (2,421 | ) | (6,215 | ) | ||||||
| Business to Business | 9,614 | 3,589 | (2,167 | ) | 11,036 | ||||||||
| Corporate and Other/ Non-Allocable | (183 | ) | (1,376 | ) | (1,129 | ) | (2,689 | ) | |||||
| Total | $ | 21,542 | $ | (5,618 | ) | $ | (9,455 | ) | $ | 6,469 | |||
| Year-Over-Year % Change | ||||||||
| Three months ended | Nine months ended | |||||||
| Net Revenue | September 30 | December 31 | March 31 | March 31 | ||||
| Wholesale | 44.2 | % | 4.1 | % | (15.2 | %) | 6.9 | % |
| Direct to Consumer | 33.2 | % | (25.1 | %) | (12.4 | %) | (9.0 | %) |
| Business to Business | 39.3 | % | 14.2 | % | (6.4 | %) | 13.2 | % |
| Corporate and Other/ Non-Allocable | (179.4 | %) | (97.7 | %) | (99.7 | %) | (101.7 | %) |
| Total | 38.7 | % | (6.7 | %) | (12.0 | %) | 3.0 | % |
| Vintage Wine Estates, Inc. |
| Segment Data |
| ($'s in thousands) |
| Segment Operating Income |
| Fiscal Year 2023 | Three months ended | Nine months ended | |||||||||||||
| Operating Income | September 30, 2022 | December 31, 2022 | March 31, 2023 | March 31, 2023 | |||||||||||
| Wholesale | $ | (100 | ) | $ | (127,694 | ) | $ | (1,637 | ) | $ | (129,331 | ) | |||
| Direct to Consumer | 1,977 | 995 | (2,929 | ) | 43 | ||||||||||
| Business to Business | 12,180 | (1,297 | ) | 5,562 | 16,445 | ||||||||||
| Corporate and Other/ Non-Allocable | (21,759 | ) | (17,684 | ) | (4,795 | ) | (44,238 | ) | |||||||
| Total | $ | (7,702 | ) | $ | (145,680 | ) | $ | (3,799 | ) | $ | (157,081 | ) | |||
| Fiscal Year 2022 | Three months ended | Nine months ended | |||||||||||||
| Operating Income | September 30, 2021 | December 31, 2021 | March 31, 2022 | March 31, 2022 | |||||||||||
| Wholesale | $ | 4,188 | $ | 5,196 | $ | 3,270 | $ | 12,654 | |||||||
| Direct to Consumer | 2,539 | 11,379 | 916 | 14,834 | |||||||||||
| Business to Business | 7,514 | 8,303 | 10,457 | 26,274 | |||||||||||
| Corporate and Other/ Non-Allocable | (8,098 | ) | (12,157 | ) | (13,759 | ) | (34,014 | ) | |||||||
| Total | $ | 6,143 | $ | 12,721 | $ | 884 | $ | 19,748 | |||||||
| Year-Over-Year $ Change | |||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||
| Operating Income | September 30 | December 31 | March 31 | March 31 | |||||||||||
| Wholesale | $ | (4,288 | ) | $ | (132,890 | ) | $ | (4,907 | ) | $ | (141,985 | ) | |||
| Direct to Consumer | (562 | ) | (10,384 | ) | (3,845 | ) | (14,791 | ) | |||||||
| Business to Business | 4,666 | (9,600 | ) | (4,895 | ) | (9,829 | ) | ||||||||
| Corporate and Other/ Non-Allocable | (13,661 | ) | (5,527 | ) | 8,964 | (10,224 | ) | ||||||||
| Total | $ | (13,845 | ) | $ | (158,401 | ) | $ | (4,683 | ) | $ | (176,829 | ) | |||
| Year-Over-Year % Change | |||||||||||||||
| Three months ended | Nine months ended | ||||||||||||||
| Operating Income | September 30 | December 31 | March 31 | March 31 | |||||||||||
| Wholesale | (102.4 | %) | (2,557.5 | %) | (150.1 | %) | (1,122.1 | %) | |||||||
| Direct to Consumer | (22.1 | %) | (91.3 | %) | (419.8 | %) | (99.7 | %) | |||||||
| Business to Business | 62.1 | % | (115.6 | %) | (46.8 | %) | (37.4 | %) | |||||||
| Corporate and Other/ Non-Allocable | 168.7 | % | 45.5 | % | -65.2 | % | 30.1 | % | |||||||
| Total | (225.4 | %) | (1,245.2 | %) | (529.8 | %) | (895.4 | %) | |||||||
| Vintage Wine Estates, Inc. |
| Segment Data |
| (in thousands) |
| Segment Case Volume |
| Fiscal Year 2023 | Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2022 | December 31, 2022 | March 31, 2023 | March 31, 2023 | ||||||||||||
| Wholesale | 539 | 453 | 433 | 1,425 | |||||||||||
| B2B | * | * | * | * | |||||||||||
| DTC | 99 | 125 | 67 | 291 | |||||||||||
| Total case volume | 638 | 578 | 500 | 1,716 | |||||||||||
| Fiscal Year 2022 | Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, 2021 | December 31, 2021 | March 31, 2022 | March 31, 2022 | ||||||||||||
| Wholesale | 209 | 379 | 484 | 1,072 | |||||||||||
| B2B | * | * | * | * | |||||||||||
| DTC | 60 | 160 | 87 | 307 | |||||||||||
| Total case volume | 269 | 539 | 571 | 1,379 | |||||||||||
| Year-Over-Year Unit Change | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30 | December 31 | March 31 | March 31 | ||||||||||||
| Wholesale | 330 | 74 | (51 | ) | 353 | ||||||||||
| B2B | * | * | * | * | |||||||||||
| DTC | 39 | (35 | ) | (20 | ) | (16 | ) | ||||||||
| Total case volume | 369 | 39 | 330 | 8 | |||||||||||
| Year-Over-Year % Change | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30 | December 31 | March 31 | March 31 | ||||||||||||
| Wholesale | 157.9 | % | 19.5 | % | (10.5 | %) | 32.9 | % | |||||||
| B2B | * | * | * | * | |||||||||||
| DTC | 65.0 | % | (21.9 | %) | (23.0 | %) | (5.2 | %) | |||||||
| Total case volume | 137.2 | % | 7.2 | % | 57.8 | % | 0.6 | % | |||||||
*B2B segment sales are primarily not related to case volumes, therefore the Company has elected to eliminate case volumes for this segment as it would not be indicative of the underlying performance of the business.
| Vintage Wine Estates, Inc. | |||||||||||||
| Reconciliation of Net Income to Adjusted EBITDA | |||||||||||||
| (Unaudited, in thousands) | |||||||||||||
| Fiscal Year 2023 | Three Months Ended | Nine Months Ended | |||||||||||
| September 30, 2022 | December 31, 2022 | March 31, 2023 | March 31, 2023 | ||||||||||
| Net (loss) income (GAAP Measure) | $ | (636 | ) | $ | (130,623 | ) | $ | (10,174 | ) | $ | (141,433 | ) | |
| Interest expense | 3,381 | 5,650 | 4,291 | 13,322 | |||||||||
| Income tax provision | (849 | ) | (21,709 | ) | (1,673 | ) | (24,231 | ) | |||||
| Depreciation | 3,215 | 4,093 | 4,101 | 11,409 | |||||||||
| Amortization | 1,811 | 1,805 | 1,813 | 5,429 | |||||||||
| Stock-based compensation expense | 4,651 | 4,328 | (2,008 | ) | 6,971 | ||||||||
| Net (gain) loss on interest rate swap agreements | (9,327 | ) | 839 | 3,596 | (4,892 | ) | |||||||
| Goodwill and intangible asset impairment losses | (118 | ) | 139,226 | - | 139,108 | ||||||||
| Loss (gain) on disposition of assets | - | 352 | (5,977 | ) | (5,625 | ) | |||||||
| Gain on litigation proceeds | (530 | ) | - | (884 | ) | (1,414 | ) | ||||||
| Adjusted EBITDA | $ | 1,598 | $ | 3,961 | $ | (6,915 | ) | $ | (1,356 | ) | |||
| Revenue | $ | 77,229 | $ | 77,993 | $ | 69,478 | $ | 224,700 | |||||
| Adjusted EBITDA margin | 2.1 | % | 5.1 | % | -10.0 | % | -0.6 | % | |||||
| Fiscal Year 2022 | Three Months Ended | Nine Months Ended | |||||||||||
| September 30, 2021 | December 31, 2021 | March 31, 2022 | March 31, 2022 | ||||||||||
| Net income | 2,779 | 8,552 | 2,707 | $ | 14,038 | ||||||||
| Interest expense | 3,603 | 3,493 | 3,729 | 10,825 | |||||||||
| Income tax provision | 1,193 | 3,261 | 958 | 5,412 | |||||||||
| Depreciation | 3,568 | 4,487 | 6,040 | 14,095 | |||||||||
| Amortization | 651 | 1,204 | 2,083 | 3,938 | |||||||||
| Net (gain) on interest rate swap agreements | (1,393 | ) | (2,636 | ) | (4,553 | ) | (8,582 | ) | |||||
| Loss (gain) on disposition of assets | (340 | ) | (251 | ) | 1,099 | 508 | |||||||
| Deferred rent adjustment | 128 | 110 | 47 | 285 | |||||||||
| Adjusted EBITDA | $ | 10,189 | $ | 18,220 | $ | 12,110 | $ | 40,519 | |||||
| Revenue | $ | 55,687 | $ | 83,611 | $ | 78,933 | $ | 218,231 | |||||
| Adjusted EBITDA margin | 18.3 | % | 21.8 | % | 15.3 | % | 18.6 | % | |||||
| Year Over Year Changes | Three Months Ended | Nine Months Ended | |||||||||||||
| September 30 | December 31 | March 31 | March 31 | ||||||||||||
| Net (loss) income | $ | (3,415 | ) | $ | (139,175 | ) | $ | (12,881 | ) | $ | (155,471 | ) | |||
| Interest expense | (222 | ) | 2,157 | 562 | 2,497 | ||||||||||
| Income tax provision | (2,042 | ) | (24,970 | ) | (2,631 | ) | (29,643 | ) | |||||||
| Depreciation | (353 | ) | (394 | ) | (1,939 | ) | (2,686 | ) | |||||||
| Amortization | 1,160 | 601 | (270 | ) | 1,491 | ||||||||||
| Stock-based compensation expense | 4,651 | 4,328 | (2,008 | ) | 6,971 | ||||||||||
| Net (gain) loss on interest rate swap agreements | (7,934 | ) | 3,475 | 8,149 | 3,690 | ||||||||||
| Goodwill and intangible asset impairment losses | (118 | ) | 139,226 | - | 139,108 | ||||||||||
| Loss (gain) on disposition of assets | 340 | 603 | (7,076 | ) | (6,133 | ) | |||||||||
| Deferred rent adjustment | (128 | ) | (110 | ) | (47 | ) | (285 | ) | |||||||
| Gain on litigation proceeds | (530 | ) | - | (884 | ) | (1,414 | ) | ||||||||
| Adjusted EBITDA | $ | (8,591 | ) | $ | (14,259 | ) | $ | (19,025 | ) | $ | (41,875 | ) | |||
| Revenue | $ | 21,542 | $ | (5,618 | ) | $ | (9,455 | ) | $ | 6,469 | |||||
| Adjusted EBITDA margin | -16.2 | % | -16.7 | % | -25.3 | % | -19.2 | % | |||||||
