Brown Forman Inc

Good day and thank you for standing by. Welcome to the Brown Forum year-to-date fiscal year 2026 earnings call. At this time, all participants are listening only in book. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message . To withdraw your question, please press star 1 1 again if your advice at today's conference is recorded. I would like to hand the conference over to your first speaker today, 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 third quarter and year-to-date fiscal year 2026 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 third quarter and nine months ended January 31st, 2026, in addition to posting presentation materials that Lawson and Leanne 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 that you should consider in conjunction with our forward-looking statements. Other significant risk factors are described in our 2025 Form 10-K and, from time to time, in our 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 gap 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. I'm pleased to share our third quarter and year-to-date fiscal 2026 results with you today. First, I'll share the key drivers and highlights of our top line results, including our geographic performance and strategic innovation. Then I'll turn it over to Leanne, who will share additional insights on other financial metrics, including gross margin and operating expenses, and our full year fiscal 2026 outlook, which we have reaffirmed. In general, the key themes we'll share today are very consistent with what we shared in our last several earnings calls, as market conditions have remained largely unchanged. In the current operating environment, which has been challenging and uncertain for some time now, I consider this to be positive. Our global footprint shows a clear divergence in consumer behavior. While macro uncertainty continues to pressure discretionary spending in the U.S. and many developed markets, we see significantly stronger, more resilient consumer trends in key emerging international markets and the travel retail channel. As we've shared in previous calls, used barrel sales and the trade dispute between the U.S. and Canada are persistent headwinds that continue to have a significant negative impact on our year-to-date organic net sales and organic operating income. While we expect the cyclical headwinds to eventually subside, we recognize the highly dynamic nature of our industry and acknowledge that some of the current pressures could persist. Therefore, our primary focus remains squarely on actively managing the factors within our controls. Moving to our year-to-date fiscal 2026 top-line performance. For the first nine months of fiscal 2026, reported net sales declined 2%, with organic net sales flat after adjusting for the unfavorable impact related to the absence of Corbell and Sonoma Gutierrez, as well as the positive effect of foreign exchange. From a geographic perspective, our organic net sales results continued to be led by the emerging international markets and travel retail channel. Both improved sequentially from the first half results, delivering 15% and 7% growth respectively in the year-to-date period. In our emerging international markets, Mexico and Brazil continue to lead our performance, delivering strong double-digit growth. In Mexico, organic net sales grew 15%, driven by NuMix, which led the accelerating RTD category in Mexico, gaining market share and benefiting from consumer trends of flavor, convenience, and value, particularly as the economic environment remains under pressure. In Brazil, organic net sales grew more than 20% in the year-to-date period. Our strategic approach to building the Jack Daniels family of brands through thoughtful geographic expansion, increased distribution, and targeted revenue growth management strategies continues to produce strong results. Jack Daniels Tennessee Apple, Jack Daniels Tennessee Whiskey, and Jack Daniels Tennessee Fire each grew organic net sales at a strong double-digit rate and maintained market share. As we have mentioned previously, we also believe that premiumization is an opportunity in Brazil and are focused on increasing distribution for our super premium whiskey portfolio, which resulted in strong double-digit organic net sales growth for Woodford Reserve and Gentleman Jack. The travel retail channel delivered growth across most of the major regions as we benefited not only from an increase in the number of travelers, but also from the strategic workforce restructuring that we implemented a year ago. The decision to restructure our travel retail team ensured that they are now more closely aligned to our global airport operators and growing transportation channels such as crews and airlines. The efficiency of our new structure also allows us to allocate additional resources to fast-growing regions in the Middle East and India. Now to our developed markets, which collectively declined by 6% in a particularly challenging environment. Canada, of all of our markets, continues to have the most significant impact on our organic results, declining nearly 60% as American-made products remain off-shelves in the majority of the Canadian provinces. Turning to our developed Europe markets, the operating environment remains challenging due to sustained pressure on consumer sentiment and confidence across most European economies. Despite the environment, we are maintaining or gaining share of the whiskey category in six of our eight top European markets. Our organic net sales declined 7% in Germany, where consumers are increasing their savings rates due to the challenging economic conditions, and total-to-sell spirits trends declined at a mid-single-digit rate, fueling heightened competitive promotional activity. We've successfully gained further distribution, especially for our ready-to-drink portfolio, within the Discounter channel. This channel is key as it appeals to consumers who are looking for ways to stretch their budgets, demonstrating our growth even within the current economic climate. In the UK, organic net sales declined 10%. Challenging category dynamics remain the most significant headwind as economic conditions, including increasing excise taxes, are negatively impacting consumer spending and TDS trends. Off-premise takeaway trends for total distilled spirits, as well as the whiskey category, remain in low single-digit decline, although trends continue to improve and Jack Daniel's Tennessee Whiskey continued to outperform the category and gain market share. Even amidst this backdrop, both Germany and the UK benefited from innovation with the strong launch of Jack Daniels Tennessee Blackberry. Jack Daniels has a proven track record of leveraging our global footprint and capabilities to extend the impact of new flavor launches, and we will continue executing our strategic phase launch to support scalable and sustainable geographic expansion for the next few years. To date, we have been very pleased with the early stages of the Blackberry launch. In addition to innovation, we're also benefiting from strategic route to consumer decisions we've made with strong growth coming from our most recently launched own distribution markets of Italy and Japan. We've shared in the past that we believe owning our distribution enables us to deepen our collaboration with our trade partners, accelerate growth for our key super premium brands like Diplomatico Rum and Gin Mare, and further strengthen the presence of our iconic American whiskey portfolio led by the Jack Daniels family of brands. Year to date, Italy delivered very strong double-digit organic net sales growth, driven by Gin Mare, Italy's number one super premium gin by value, and Diplomatico, the number three super premium plus rum by value. We also experienced growth across the majority of the remaining brands in our portfolio in Italy, including strong double-digit growth from the Jack Daniels family of brands. In Japan, our strategic decision to distribute the William Grant & Sons portfolio brands combines our renowned spirits portfolios, scales our business in Japan, reinforces our standing with local customers, and further strengthens our commitment to long-term growth and innovation in the world's third-largest whiskey market. Now to the United States, where total distilled spirits continue to decline at a low single-digit rate. Our organic net sales declined 1% in the year-to-date period and remained ahead of both of our depletion-based results and takeaway trends, driven by the benefit from our U.S. distributor changes and the impact of innovation. With regard to our distributor changes, we're also recognizing the benefits of enhanced dedication and focus, increased distributor investment funds, and an improved margin structure. Innovation has been one of the most impactful growth drivers within Total Distilled Spirits, and we have seen continued excitement and outstanding consumer engagement for our newest brand, Jack Daniels Tennessee Blackberry. The launch of BlackBerry continued to exceed expectations and is the second largest new product by value within Total Distilled Spirits and Nielsen. As anticipated, shipments still exceed depletions, though the gap between the two continue to narrow as we move through the year-to-date period. We remain encouraged by the strong launch in the U.S. and are capitalizing on this excitement to maintain momentum and boost consumer take-away. In addition to innovation, RTDs are the other growth driver within Total Instilled Spirits and there has been quite a bit of activity within our RTD portfolio. First, launching NuMix, Mexico's original tequila RTD in the U.S., is an opportunity for us to connect with Mexican American consumers through a highly recognizable brand while simultaneously introducing new consumers to the world's first tequila-based RTD. We are currently testing two flavors in a limited number of states with a focus on growing distribution and awareness before expanding more broadly. While still limited, We believe the initial launch is off to a strong start and look forward to providing you with future updates. Earlier this week, we announced a mutual agreement to conclude our partnership with Pabst Brewing Company, who has managed the supply, sales, and distribution of Jack Daniel's Country Cocktails within the United States and domestic military markets since fiscal 2021. The partnership provided us with greater access to production and variety pack capabilities, along with more efficient access to new distribution channels, and we would like to thank Pabst for the role they have played in helping successfully drive the growth of Jack Daniel's Country Cocktails and in introducing new innovation over the past five years. Ultimately, as we evolved our U.S. distribution network earlier this year and reviewed our long-term growth strategy, we now believe by centralizing the strategic direction of our flavored malt beverage portfolio, we can more effectively unlock its potential and long-term valuation. We are working closely with Pabst on a comprehensive transition plan to ensure seamless product availability for retailers and distributors through the end of the agreement. In summary, as we navigate the dynamic and challenging operating environment, we remain focused on actively managing the factors within our control. We continue to act swiftly and make key strategic decisions, including innovating and focusing on our premium plus brands and ready to drink offerings to strengthen our brand portfolio and align with current consumer trends. making key route-to-consumer transitions, including in the U.S., Japan, and Italy, and streamlining our workforce structure to increase our agility, leverage synergies, and enhance our ways of working with a clear goal to accelerate our growth in an increasingly challenging and competitive environment. Through the nine months of fiscal 2026, our team has demonstrated exceptional resilience and focus and has executed our plans despite the challenging backdrop. As such, our results are largely in line with our expectations, and we believe we remain well-positioned to achieve our full-year guidance. I would like to thank each Brown Forman employee for their contributions to these results. I know this is a challenging time, and I deeply appreciate the commitment and dedication each of you continues to demonstrate. So before I conclude my remarks, I also want to provide an update on our CFO recruitment process, which is in active discussions now. While we're always incredibly thoughtful in our approach to talent and succession, we've intentionally focused our search on potential candidates who possess both depth and breadth of leadership experience across finance and operations and publicly traded multinational organizations. As we look to accelerate growth in key emerging markets, experience leading business segments outside of the U.S. is also a key consideration. While the process has taken a bit longer than we originally preferred, I feel very good about where we are at this point and appreciate the role that Leanne will continue to play between now and her retirement date at the end of the fiscal year, ensuring a smooth transition. With that, I'll turn the call over to Leanne.