Brown Forman Inc

Ladies and gentlemen, thank you for standing by and welcome to Brown Form Incorporation fourth quarter and fiscal year 2025 earnings call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Sue Parham, Vice President, Director of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. I would like to thank each of you for joining us today for Brown-Forman's fourth quarter and fiscal year 2025 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, and Leanne Cunningham, Executive Vice President and Chief Financial Officer. This morning's conference call contains forward-looking statements based on our current expectations. Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements. Many of the factors that will determine future results are beyond the company's ability to control or predict. You should not place undue reliance on any forward-looking statements, and except as required by law, the company undertakes no obligation to update any of these statements, whether due to new information, future events, or otherwise. This morning, we issued a press release containing our results for the fourth quarter and fiscal year 2025, in addition to posting presentation materials that Lawson and Leigh Ann will walk through momentarily. Both the release and the presentation can be found on our website under the section titled Investors, events and presentations. In the press release, we have listed a number of the risk factors you should consider in conjunction with our forward-looking statements. Other significant risk factors are described in our Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. During this call, we will be discussing certain non-GAAP financial measures. These measures, a reconciliation to the most directly comparable GAAP financial measures, And the reasons management believes they provide useful information to investors regarding the company's financial condition and results of operations are contained in the press release and investor presentation. With that, I would like to turn the call over to Lawson.

Thank you, Sue, and good morning, everyone. Thank you for joining us today as we share our fourth quarter and fiscal year 2025 results. Throughout fiscal 2025, Brown Forman navigated the extremely challenging and uncertain operating environment by remaining focused on the long-term, leveraging our strengths, and executing our business strategies with a focus on improving our route to consumer in several markets, evolving our workforce to simplify and streamline our organization, allowing us to become more agile and efficient, and growing our portfolio of brands through sponsorships, media campaigns, and innovations. That said, the fiscal year unfolded largely as we expected. This reflects the continued path to normalization following the significant multi-year disruption related to our supply chain, two plus years of exceptionally high demand, and the impact of higher inflation and interest rates on the consumer and trade over the last two years. For context, in fiscal 2025, our shipments closely matched our depletions for the first time in six years. Our reported net sales decreased 5% in fiscal 25, while organic net sales grew 1% after adjusting for the divestitures of Finlandia and Sonoma-Couture in the prior fiscal year, the negative effect of foreign exchange, and the business model change for Jack Daniels Country Cocktails. Putting our fiscal 25 results into the longer-term view, our five-year organic net sales compound annual growth rate was 6%, reflective of our historic trends. Now, let me share some perspectives on the fiscal 2025 results through our integrated business strategy. I'll start with the performance of our portfolio and provide a few updates on our people. Then Leanne will share more about our geographic performance and our investments, along with other financial highlights and our fiscal 26 outlook. From a brand perspective, Woodford Reserve was the largest driver of organic net sales growth, and if you look at the Nielsen takeaway trends for the top 20 spirits brands by value for the 52 weeks ending in April, Woodford Reserve was one of only three brands growing. This reflects the strength of Woodford Reserve, but also the exceptionally challenging environment our industry is navigating right now. An increase in used barrel sales was the second largest contributor to organic net sales in fiscal 25, followed by growth from Numix and Jack Daniels Tennessee Whiskey. Woodford Reserve delivered organic net sales growth of 8%, driven by higher volume as well as positive price mix, with Woodford Reserve Distiller Select once again leading the growth. Woodford Reserve is also being discovered internationally with very strong performance in markets such as Japan and Turkey A as we continue to position this brand for global growth. Last month, the Kentucky Derby was held in our hometown of Louisville, and Woodford Reserve was once again the presenting sponsor. The 151st Run for the Roses was the most watched Kentucky Derby since 1989, with over 22 million household viewers generating more than 4 billion earned media impressions for the brand. This event creates numerous opportunities for collaborations across spirits, sports, and fashion, enabling Woodford Reserve to engage with current consumers and make new fans of the brand. Innovation and premiumization also contributed to the brand's growth, with the success of Woodford Reserve's largest product launch, Double Double Oaked, along with continued double-digit growth of Woodford Reserve Double Oaked. These craft and luxury expressions reflect our strategic approach to innovation, which enable us to capitalize on growth opportunities in the U.S. whiskey category. New Mix continued its impressive growth in fiscal 25, leveraging innovation to capitalize on consumer trends of flavor and convenience. The brand had another year of double-digit organic net sales growth, surpassing 11 million 9-liter cases and continuing to gain market share in Mexico. In addition, I'm excited to share that Numix will launch two flavors, Numix Paloma and Numix Cantarito RTD in key U.S. states later this summer. With 58% of the U.S. Hispanic population originating from Mexico, this launch offers consumers the opportunity to purchase a brand that is currently only available in Mexico and reflects the authenticity, tradition, and culinary richness of the country. In fiscal 2025, organic net sales for Jack Daniel's Tennessee Whiskey increased 1%. As we have shared throughout this year, we're continuing to engage a new generation of legal drinking age consumers while remaining intently focused on retaining our core consumers through our McLaren, Formula One, and music sponsorships, an evolved on-premise strategy, and a new media campaign. Jack's connection to Formula One and music are on full display in Jack's Garage, which is a bold grand platform that unites race and whiskey fans through the power of music. The momentum of this experience continues to build, with the most recent Jack's Garage in Miami resulting in more social impressions than all of the U.S. Jack's Garage events held in calendar 2024 combined. Also raising awareness, the first members of the Jack Pack, the team of Jack Daniels brand ambassadors, are now in place in key cities such as New York, San Francisco, and Los Angeles. This team is focused on growing our influence in the on-premise channel through relationship building, targeted education, and brand advocacy. I'm also proud to share that our new global campaign for Jack Daniels, entitled That's What Makes Jack Jack, launched a few weeks ago in markets around the world. This campaign is bold, iconic, and unmistakably Jack. It emphasizes the enduring craftsmanship and authenticity that distinguishes Jack Daniels from all other whiskeys. Stemming from our roots in Lynchburg, Tennessee, our signature charcoal mellowing process and the unwavering standards set by Mr. Jack himself. Reinforcing Jack Daniel's status as a renowned and iconic brand, we believe the creative work will strengthen our position as a symbol of independence for current consumers and a new generation. Innovation also elevates Jack Daniel's relevance to existing consumers while extending the brand's appeal to new consumers and occasions as evidenced by the growth and success of the launches of Jack Daniel's Tennessee Honey in 2011, Tennessee Fire in 2014, and Jack Daniel's Tennessee Apple in 2019. Today, I'm excited to announce the launch of Jack Daniel's Tennessee Blackberry later this summer. Blackberry is a globally recognized, well-established flavor trend and naturally complements the flavor of Jack Daniel's Tennessee Whiskey. In consumer testing, Jack Daniel's Tennessee Blackberry had high consumer appeal, resonating with a broad audience. We've been strategic and purposeful with our innovation, using consumer insights and trends to give consumers the opportunity to explore and discover within the Jack Daniels family. I look forward to sharing more about the launch of this exciting new innovation in the months ahead. Before moving to our people, I'll share some comments on a few other brands that had an impact on the company's top-line performance. Diplomatico delivered very strong double-digit organic net sales growth, led by France and Germany, along with the travel retail channel. Within the super premium and above price tier, Diplomatico is the world's third largest rum by value globally, sold in over 100 countries, and is known for its rich heritage and rum-making tradition. In fiscal 25, we benefited from having a full year of growth from this brand, and we continue to expect Diplomatico to be a meaningful growth contributor over the long term. Organic net sales for Ginmare grew 1%, with growth from Spain, Germany, and France partially offset by a decline in Italy, the brand's largest market, as we transitioned to our own distribution. In the fourth quarter, we recognized a $47 million non-cash impairment charge for the Genmare brand name and reduced Genmare's contingent consideration liability by $43 million. The impairment and liability reduction reflect a decline in our financial forecast assumptions due to the more challenging macroeconomic environment in Europe where the brand has a strong presence. While the brand had a slower start than we'd planned, we continue to expect that Genmare will contribute long-term growth to our portfolio of brands. Corbell and our tequila brands partially offset our organic net sales growth in fiscal 25. As we shared a few weeks ago, Brown Forman and Corbell Champagne Cellars will end our sales, marketing, and distribution relationship at the end of the month. We appreciate the years of partnership with Corbell, as well as the Brown Forman employees who played a role in building Corbell into the respected and well-loved brand it is today. To our tequila portfolio, organic net sales for El Jimeno and Heredera declined double digits as the environment for the tequila category in the U.S. remained competitive and Mexico's economy continued to face a challenging macro environment, though their performance improved sequentially each quarter. We believe consumers desire brands with heritage, authenticity, and craftsmanship, so we remain focused on sharing and celebrating Herradura's 155-year history, including its heritage as the world's first Reposado, which is the fastest-growing expression within the tequila category. We also continue to innovate with the successful launch of Peridura Cristal in Mexico, which builds upon the accelerating Cristalino trend. El Jimidor has also launched a Cristalino expression in the U.S. El Jimidor Cristalino is priced above the parent brand and is the first expression within the family of brands to be bottled in its new premium packaging, further supporting the brand's premiumization journey. IWSR projects the tequila category will reach almost $20 billion in retail value in the next five years, with almost half the growth coming from outside the U.S. and Mexico. We continue to ensure that El Jimeno and Arradura are well-positioned to capitalize on the growth. Before turning the call over to Leanne, I want to take a moment to provide an update on our people. In fiscal 25, we announced and implemented a number of strategic initiatives, which included a workforce reduction and cooperage closing. Collectively, these initiatives should deliver approximately $70 to $80 million in annualized savings. As a result, we incurred $63 million in aggregate charges, including the separate early retirement benefit offered to qualifying U.S. employees. Throughout our history, Brown Foreman has continually evolved and adapted over the decades, and we believe these strategic initiatives will ensure the company continues to endure for generations to come. I want to thank all of our employees for their resilience, as well as their continued commitment to our brands, our business, and most importantly, to each other. In summary, fiscal 2025 was a year unlike any other that I've seen in the past three decades. I'm often reminded that this great company has existed for more than a century and a half and has faced many uncertainties and unknowns. During these times, we remain focused on the long term and leverage our greatest strengths, our people, and our brands. This has enabled us to deliver positive organic net sales and operating income growth in fiscal 25, which we believe is at the top of our industry. As Leanne will share, we're entering fiscal 26 with a healthy mix of realism and optimism as we anticipate that the year ahead will continue to be challenging. Despite headwinds, we believe that we have tremendous opportunities for long-term growth. And while we cannot control the external environment, we will focus on what is within our control and on the strategic initiatives that will unlock growth for our business, our brands, and our people. With that, I'll turn the call over to Leanne, and she'll provide more details on our Fiscal 25 results.