The Duckhorn Portfolio, Inc.

And welcome to the DuckCorn Portfolio's third quarter 2022 earnings conference 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. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Sean Sullivan, Executive Vice President, Chief Strategy and Legal Officer. Please go ahead.

Good afternoon and welcome to the Duckhorn Portfolio's third quarter 2022 earnings conference call. Joining me on today's call are Alex Ryan, our President, CEO, and Chairman, and Lori Bedoin, our Chief Financial Officer. In a moment, we will give brief remarks followed by Q&A. Everyone should have access to the earnings release for the period ended April 30th, 2022, the third quarter of fiscal year 2022, that went out at approximately 4.15 p.m. Eastern Time. The press release is accessible on the company's website at ir.duckhorn.com. And shortly after the conclusion of today's call, a webcast will be archived for the next 30 days Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we currently see it, and as such, does include risks and uncertainties. If you refer to Duckhorn's earnings release, as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward-looking statements. Please remember the company undertakes no obligation to update or revise these forward-looking statements in the future. We will make a number of references to non-GAAP financial measures. We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included in our earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. In addition, Please note that all IRI consumption data cited on today's call will refer to dollar consumption for the 13-week period ended May 1st, 2022, and growth versus the same period in the prior year, unless otherwise noted. With that, I will turn the call over to Alex.

Thanks, Sean, and good afternoon, everyone. We really appreciate you joining us today to discuss our strong third quarter financial results and our raised guidance for the full year. As we begin our second year as a public company, I am pleased by the track record we have established for our sustained, sound execution and strong financial performance. Our third quarter results exemplify that, having firmly outperformed our internal expectations. Let me take a moment to highlight a few notable items from the quarter. First, our net sales growth remains strong. When looking at three-year compound annual growth rates, which we believe is indicative of the underlying health of the business, without pandemic-related noise, we continue to deliver double-digit growth supported by broad-based strength across all major metrics, cases, accounts sold, and points of distribution. Second, the story behind our strong top-line growth remains largely a volume-driven one. our three-year volume CAGR was 19.9%. Importantly, our depletions showcase similar growth. This speaks to both the power of our well-known and respected brands and the healthy consumer demand for our high-quality luxury wines. Third, On-Premise continues to provide outsized growth, benefiting both our top line and gross margin profile. In fact, Our on-premise depletions are seeing an accelerated rate of growth on a three-year basis, supported by gains in shipments, accounts sold, and points of distribution. Perhaps most importantly, this on-premise growth is occurring at a time when our off-premise business continues to deliver double-digit growth on a three-year CAGR basis. And that brings me to my fourth point. When looking at IRI consumption data as a proxy for certain types of off-premise sales, the Duckhorn portfolio remains the fastest-growing supplier of scale in the over $15 per bottle U.S. luxury wine segment, having posted mid-teens growth in both dollars and units. This is another point of pride for me as we continue to take share in this growing category. As the primary driver of this robust level of growth, our Decoy Winery brand, the number two brand and the fastest growing among the top ten within the over $15 per bottle U.S. luxury wine segment grew similarly, also up mid-teens growth in both dollars and units. Growth for both our broader portfolio and the Decoy Reiner brand was four to five times faster in dollars and considerably faster in units relative to the over $15 per bottle U.S. wine market. Lastly, we are driving robust top-line growth and at the same time delivering modest margin expansion, all against a backdrop that continues to be a highly demanding operating environment. Our adjusted gross profit margin and adjusted EBITDA margin expanded versus the prior year quarter when fully burdened by public company costs for an apples-to-apples comparison. I would like to make an important point. I'm proud of how the team was able to execute through what we all know to be a very challenged environment. to not only grow top-line, but also expand margins. Laurie will discuss this in a bit more detail in a few minutes. Now I'm going to take a minute to talk about on-premise and off-premise channel dynamics. As noted, on-premise was a primary driver of our growth, and we are seeing no slowdown in our momentum within the channel. In fact, looking at a three-year CAGR, we are seeing accelerating growth on all three key metrics, cases, accounts sold, and points of distribution. Our on-premise velocities continue to strengthen as well. Overall, we continue to make good progress toward returning to our historic proportion of on- and off-premise sales. Interestingly, we are not back to our historical 80-20 ratio of off-premise to on-premise because of the resiliency of the strong off-premise growth we experienced during the height of the pandemic, which has reset the baseline upwards to the off-premise part of the business. Turning to off-premise, it is evident that consumers that tried our luxury wines for the first time during the pandemic or rediscovered an old favorite among our wines have become loyal consumers in the off-premise channel. In the quarter, we observed solid, positive year-on-year growth, and on a three-year CAGR basis, we drove strong and steady double-digit growth across cases, accounts sold, and points of distribution. Our growth between national and independent accounts was balanced and in line with our expectations, which we believe speaks to the appeal of our one-stop luxury wine shop model as well as the quality and brand strength of our portfolio of fine luxury wines. Keeping pace with our level of robust demand can be a challenge for any high-growth company, especially in times where global supply chain is in considerable disarray like today i'm tremendously proud of how our entire organization continues to execute strategically through the team's hard work we have avoided some of the common pitfalls we see elsewhere which include inventory out stocks for core wines shortages of labels corks and glass and significant cost increases our dedication to diversification and focus on consistent supply chain management allows us to supply the consumer's growing appetite for high quality luxury wines wherever fine wines are sold or enjoyed. We believe that this reliability has enabled and will continue to enable our distribution growth and the resulting market share gains. To ensure that we uphold this level of trust with both our trade partners and customers, we have strategically built out a highly diversified and flexible supply chain, our nimble sourcing practices drawing upon grapes from our renowned estate vineyards and the vineyards of more than 200 other long tenured grape growers provides a number of benefits including first our practices ensure that we continue to source ample high quality fruit that meets the specifications needed to produce our luxury wines additionally when coupled with our diversified wine production capabilities in combination with the scale of our platform our approach to sourcing provides us with good line of sight into our cost of goods this not only allows us to manage our margins but it also affords us the ability to offer our trade partners clear visibility into their pricing as well. In the spirit of diversifying our supply and ensuring access to high-quality grapes, we recently purchased 289 acres of a state vineyard in the Paso Robles AVA along California's Central Coast. This exciting purchase marks the 33rd vineyard in our state portfolio and ensure greater access to high-quality fruit to support the continued growth of our luxury wines, most notably decoy. In closing, I'm very pleased with our third quarter performance and the momentum we have shown year to date. However, we believe in continually challenging ourselves, and there remains considerable opportunity to continue to drive distribution and outsized growth, irrespective of the macro environment. and we are focused on doing just that. It is important to remember that we make wine solely in the fastest growing segment of the industry, luxury wine. Additionally, our growth is faster than the luxury wine industry average. The strength of our brands, our stable supply chain, and the sustained commitment we have made to our sales force and DTC business combine to provide a durable and elastic growth, which we believe will continue into the future in any macro environment. Over our 45-year history, we have thoughtfully curated a portfolio of wineries, with each offering unique experience, but all standing for luxury and exceptional quality. Given that backdrop, we are well positioned to capitalize on the growing demand for luxury wine, and I'm confident in our decision to raise our fiscal year 2022 guidance for the second time this year. With that, let me turn it over to Lori to discuss our third quarter performance and updated fiscal year 2022 guidance in greater detail.