The Duckhorn Portfolio Inc (NAPA) Reports Mixed Fiscal Q1 2024 Results Amidst Pending Acquisition

• Net sales decreased by 5.2% year-over-year to $102.5 million in Q1 2024.

• Gross profit margin increased by 190 basis points to 52.5% despite a slight decrease in gross profit.

• Adjusted EBITDA margin improved by 90 basis points, although net income and adjusted net income saw a decline.

• The Duckhorn Portfolio Inc (NYSE:NAPA) updates Fiscal Year 2024 guidance, excluding the impact from the pending acquisition of Sonoma-Cutrer Vineyards.

On December 6, 2023, The Duckhorn Portfolio Inc (NYSE:NAPA) released its 8-K filing, announcing financial results for the first quarter ended October 31, 2023. The company reported a decrease in net sales of 5.2% to $102.5 million compared to the same period last year. This decline was attributed to lower shipment volumes and an unfavorable brand mix impacting price/mix by 1.8%.

Financial Performance Overview

Despite the decrease in net sales, The Duckhorn Portfolio Inc (NYSE:NAPA) saw an improvement in its gross profit margin, which rose to 52.5% from 50.6% in the prior year, due to cost of sales improvement and lower discounting. However, gross profit decreased slightly by 1.6% to $53.9 million. The company experienced an increase in selling, general, and administrative expenses by 18.4% to $30.5 million, primarily due to transaction costs related to the pending acquisition of Sonoma-Cutrer Vineyards and higher depreciation expense.

Net income for the quarter was $15.5 million, or $0.13 per diluted share, a decrease from $19.8 million, or $0.17 per diluted share, in the prior year period. Adjusted net income also saw a decline to $17.2 million, or $0.15 per diluted share, compared to $20.5 million, or $0.18 per diluted share, in the prior year period. Adjusted EBITDA was $34.7 million, a decrease of 2.7%, but the adjusted EBITDA margin improved by 90 basis points.

Balance Sheet and Cash Flow Highlights

The Duckhorn Portfolio Inc (NYSE:NAPA) ended the quarter with $21.2 million in cash. The balance sheet reflects a leverage ratio of 1.7x net debt to trailing twelve months adjusted EBITDA. The company's total assets increased to $1.453 billion from $1.348 billion at the end of the previous fiscal year, while total liabilities also rose to $494.4 million from $405.3 million.

Operating activities provided $18.1 million in cash, while investing activities used $10.4 million, primarily for purchases of property and equipment. Financing activities contributed an additional $7.2 million in cash, resulting in a net increase in cash of $14.8 million for the quarter.

Management Commentary and Future Outlook

Interim President, CEO, and Chairperson Deirdre Mahlan commented on the results, stating,

We delivered a quarter at the high end of our expectations as we lapped an unseasonably strong first quarter in the prior year. In addition, we generated 90 bps of adjusted EBITDA margin expansion on less discounting and a focus on cost management."

Mahlan also highlighted the growth across multiple brands and the company's anticipation of the Sonoma-Cutrer Vineyards acquisition.

Looking forward, The Duckhorn Portfolio Inc (NYSE:NAPA) updated its Fiscal Year 2024 guidance, projecting net sales between $420 million and $427 million, adjusted EBITDA between $150 million and $153 million, and adjusted EPS between $0.67 and $0.69.

The company will host a conference call to discuss these results and provide further insights into its performance and strategies. Investors and interested parties can find more details on The Duckhorn Portfolio Inc (NYSE:NAPA)'s investor relations website.

For a detailed understanding of The Duckhorn Portfolio Inc (NYSE:NAPA)'s financials and the non-GAAP financial measures used, readers are encouraged to review the reconciliation provided in the company's filing and consider the limitations of such measures.

Investors are reminded that The Duckhorn Portfolio Inc (NYSE:NAPA)'s filings with the SEC are available at www.sec.gov and contain a thorough discussion of risks and uncertainties associated with the company's business.

Explore the complete 8-K earnings release (here) from The Duckhorn Portfolio Inc for further details.

This article first appeared on GuruFocus.