Brown Forman Inc

And thank you for standing by. Welcome to the Brown-Forman fourth quarter and fiscal year 2026 earnings call. At this time, all participants are in a listen-only mode. 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 advising that your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Sue Parham, Vice President, Director, 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 Foreman's fourth quarter and fiscal year 2026 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer, and Jim Peters, 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 or future events, or otherwise. This morning, we issued a press release containing our results for the fourth quarter and fiscal year 2026, in addition to posting presentation materials that Lawson and Jim 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 2025 Form 10-K and, from time to time, in our Form 10-Q report 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. I'm pleased to report that Brown Foreman delivered a strong finish to fiscal 2026 with full-year results coming in ahead of our organic expectations. Today, I'll walk through the key drivers of this performance, including the continued success of our innovation pipeline and our momentum in international markets. Then, I'll turn the call over to Jim to discuss our financial metrics and our full-year outlook for fiscal 2027. Before I move to our results, I want to provide a few comments regarding the termination of our discussions with Pernod Ricard. First, Brown Forman regularly explores strategic opportunities in the normal course of business, evaluating every opportunity against the standard of long-term shareholder value. In this particular case, we were unable to reach mutually agreeable terms. Our ultimate goal is to create long-term value for all shareholders, and we intend to do that by focusing on our strategic and operational priorities, which include expanding our geographic footprint, building brands that resonate with consumers, and enhancing operational efficiency. Our strong balance sheet and healthy free cash flow support our long-held capital allocation philosophy of investing in the business, paying increasing regular dividends, pursuing strategic opportunities, and returning cash to shareholders. With that, let's turn our attention to our results. Despite continued volatility and uncertainty, we delivered fiscal 2026 organic net sales and organic operating income above our expectations and performed near the top of our industry. The drivers of our business were very consistent throughout the fiscal year as market conditions remained largely unchanged. Specifically, key emerging international markets and the travel retail channel experienced strong growth supported by solid demand for our brands, while macroeconomic uncertainty continued to pressure discretionary spending in the U.S. and many developed international markets. Substantially lower used barrel sales and the trade dispute between the U.S. and Canada remain persistent headwinds, negatively impacting our full-year organic net sales by more than two points, with a significantly greater impact on our organic operating income. While these external factors were outside of our control, internally, our team remains laser-focused on executing our fiscal 2026 strategic initiatives, including our organizational evolution, a generational U.S. route to consumer transformation, and meaningful innovation, led by the launch of Jack Daniels Tennessee BlackBerry. I'm very proud of the way our people navigated a challenging and dynamic operating environment. They remained resilient and agile while making the necessary changes in how we think, work, and lead. The results Jim and I are sharing with you today are a direct result of their efforts and a testament to their dedication and hard work, and I'm deeply appreciative of their continued focus on our strategic priorities. Now to the numbers. For the year, reported net sales declined 1%, 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. For the first time in decades, Brown Foreman is no longer in the wine or champagne business. From a geographic perspective, the emerging international markets collectively delivered organic net sales growth of 12%, driven by the strong double-digit performance of Numix in Mexico. Numix, Mexico's original tequila RTD, continues to gain market share while leading the fast-growing RTD category in Mexico. This momentum is supported by the consumer trends of flavor, convenience, and value, especially as macroeconomic headwinds continue to impact consumer spending. The travel retail channel delivered 5% organic net sales growth, driven by Jack Daniel's Tennessee Whiskey, which benefited from an increase in the number of travelers, as well as new product launches such as Jack Daniel's Tennessee Blackberry and Jack Daniel's Heritage Barrel. Organic net sales collectively for the developed international markets declined by 3%. This was led by Canada, which decreased nearly 60% as American-made products remain off-shelves in the majority of Canadian provinces. In addition, the macroeconomic landscape within numerous European markets remains under pressure as persistent headwinds continue to weigh on consumer sentiment, resulting in a more cautious approach to discretionary spending. This behavior is notable in Germany and the UK, where total distilled spirits trends remain weak and our organic net sales decline 7% and 9% respectively. Despite the challenging environment in Europe, We're maintaining or gaining share of the whiskey category in six of our top eight European markets, and strategic innovation is delivering growth with Jack Daniel's Tennessee Blackberry continuing to outperform expectations, achieving almost 150,000 nine-liter depletions across six European launch markets in fiscal 2026. Also within the developed international markets, our route to consumer decisions are delivering strong growth in our most recently launched own distribution markets of Italy and Japan. In fiscal 2026, Italy doubled its organic net sales, driven by price and distribution momentum. We experienced growth across the entire portfolio of brands, led by Gin Mare, Italy's number one super premium gin by volume and value, and Jack Daniel's Tennessee Whiskey, which both delivered very strong double-digit growth. In Japan, our distribution of the William Grant & Sons portfolio enables us to leverage our combined premium spirits expertise to scale our Japanese operations and deepen our relationship with trade partners, further reinforcing our commitment to driving growth and innovation within the world's third largest whiskey market. We continue to believe that owning our distribution fosters deeper engagement with our trade partners, drives the expansion of super premium labels such as Diplomatica and Ginmare, and reinforces the strength of our iconic American whiskey portfolio anchored by the Jack Daniels family of brands. Let's turn now to the United States, where we also made significant route-to-consumer decisions, naming 11 new distributors across 25 markets. With these changes, we've engaged with distributors who we believe bring the capabilities, scale, and operational excellence required to drive our next generation of growth, as we recognize the benefits of enhanced dedication and focus, increased distributor investment funds, and an improved margin structure. Organic net sales were flat in the U.S. in fiscal 2026, which remained ahead of both our depletion-based results and takeaway trends, driven by the benefit from our U.S. distributor changes and the ongoing impact of innovation. In general, innovation has been one of the few sources of growth within Total Distilled Spirits. Since the launch of Jack Daniel's Tennessee Blackberry in August of 2025, the brand has continued to exceed expectations, reaching almost 300,000 9-liter depletions by the end of the fiscal year. It's the second largest new product by value within Total Distilled Spirits in Nielsen. We had expected the gap between shipments and depletions of BlackBerry to close during fiscal 2026, but we continue to see excitement and an outstanding consumer engagement for the brand. While shipments of BlackBerry exceeded depletions, the gap between the two continues to narrow. In addition to the strong US launch, we're encouraged by BlackBerry's early performance in markets outside of the United States, where we have launched the brand. Our team is now focused on capitalizing on this momentum as we continue executing our multi-year phased global launch of BlackBerry. But BlackBerry wasn't the only innovation within the Jack Daniels family of brands in fiscal 2026. This year, we made the Jack Daniels Single Barrel Heritage Barrel, the newest permanent addition to the Jack Daniels Single Barrel collection. The expression was originally shared as a special release in 2018 and 2019 and has already received multiple awards. In 2018, it was named Whiskey Advocate's number three whiskey of the year, and just last year it was named Breaking Bourbon's number one whiskey of 2025. Our super premium innovations further strengthen Jack Daniel's craftsmanship and whiskey-making credentials, and we believe they will be continued growth drivers for the Jack Daniel's family of brands in the upcoming years. In addition to innovation, RTDs are the other source of growth within Total Distilled Spirits, and we continue to apply a consumer-first approach to our RTD portfolio. First, the launch of NuMix in select U.S. markets has surpassed our expectations. NuMix 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're also continuing to innovate within the high-growth tequila RTD category in the U.S., where we launched El Hemador Spritz this spring for RTD drinkers seeking a light, refreshing option. Following the brand's initial introduction in Australia last summer, performance has continued to exceed our expectations, giving us confidence in its potential. While still early, we believe the initial launch in the U.S. is off to a solid start and look forward to providing you with future updates. In summary, I'm proud to say that we delivered on our plan in fiscal 2026 by executing our strategic priorities with excellence and managing the factors within our control. We acted swiftly in a challenging and dynamic operating environment with a focus on our brands, geographies, and people as we strategically innovated with a focus on the premium plus brands and ready-to-drink offerings to strengthen our brand portfolio and align with current consumer trends. We made key route to consumer transitions, including Japan, Italy, and the United States, and streamlined our workforce structure with the goal of accelerating growth in an increasingly challenging and competitive environment. With that, after 19 quarters of hosting this conference call with Leanne, we now have a new CFO, and I'm pleased to introduce Jim Peters. Jim is a seasoned financial leader who brings a proven track record of driving operational discipline and resilience. During his 22-year career at Whirlpool, Jim led the company through complex global cycles and navigated margin pressures and volatile global consumer demand. Just as importantly, Jim is a values-based leader with a strong commitment to developing the next generation of talent. While the CFO recruitment process took a bit longer than we originally anticipated, this was not a decision to be rushed. Jim has been with us since the end of March, and as expected, the transition has been smooth. I'll now turn the call over to Jim.