Boston Beer Company, Inc.

Thank you. Good afternoon and welcome. This is Mike Andrews, Associate General Counsel and Corporate Secretary of the Boston Beer Company. I'm pleased to kick off our 2023 second quarter earnings call. Joining the call from Boston Beer are Jim Cook, Founder and Chairman, Dave Berwick, our CEO, and Matt Murphy, our Chief Accounting Officer and Interim CFO. Before we discuss our business, I'll start with our disclaimer. As we state in our earnings release, some of the information we discuss and that may come up on this call reflects the company's or management's expectations or predictions of the future. Such predictions are forward-looking statements. It's important to note that the company's actual results could differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's most recent 10-Q and 10-K. The company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. I will now pass it over to Jim for some introductory comments.

Thanks, Mike. I'll begin my remarks this afternoon with a few introductory comments. and then hand over to Dave, who will provide an overview of our business. Dave will then turn the call over to Matt, who will focus on the financial details of our second quarter results, as well as our outlook for the remainder of 2023. Immediately following Matt's comments, we'll open the line for questions. Our second quarter depletions decrease of 3% on a fiscal calendar basis and 7% on a comparable week's basis was in line with our expectations. We saw strong performance in our largest brand, Twisted Tea, and we expect its continued success to have an even larger impact on our overall growth rates in the second half. In measured off-premise channels, Twisted Tea continued its strong dollar growth, up 38%, which was offset primarily by continued declines in Truly Hard Seltzer. We are making progress on operational plans to enhance our margins and began to see some benefits this quarter. Our multi-year initiatives to simplify our operations by mastering the complexity of our business and to align our cost structure more closely to volume expectations are progressing well. We are focused on keeping the strong momentum behind Twisted Tea and improving our truly trends. while continuing to invest broadly across our entire portfolio and a new innovation with the goal of returning our company to long-term sustainable growth. Based on our second quarter financial results, we've established plans to invest incrementally in media behind our Twisted Tea and Trulie brands, starting immediately. We are thankful to our outstanding coworkers distributors, and retailers who continue to support our business. We are proud to have just been named the number one beer industry supplier in the Tamaron Survey, the annual poll of beer distributors conducted by Tamaron Consulting, a consulting firm specializing in the alcoholic beverage distribution industry. It is our sixth number one ranking in a row and 13th in the last 15 years. This is a result of the efforts of all Boston Beer co-workers to service and support our distributors' businesses and to the strong relationships we've built with them over many years. We continue to believe that we have the best group of distributors in the beer business. We believe that the Beyond Beer category, where we have an advantaged portfolio, will grow faster than the traditional beer market over the next several years. We expect the operational changes we are making this year combined with our history of innovation, strong brands, and our top-ranked sales force will help lead us to long-term success. Our strong balance sheet enables us to continue to invest in our brands and has allowed us to repurchase over $50 million in stock thus far in 2023. I will now pass it over to Dave for a more detailed overview of our business.

Thanks, Jim. Good afternoon, everybody. As Jim mentioned, our second quarter volumes were in line with our expectations. Our fiscal calendar quarter depletions decreased 3%, while our comparable weeks depletions decreased 7%. This is due to the timing of the July 4th holiday relative to our 2023 and 2022 fiscal calendars. We improved our overall financial performance during the quarter and achieved gross margins of over 45% while generating approximately $120 million in operating cash flow. Matt will discuss the financial results in his remarks, while I'll focus my commentary on our operating performance. Our strategic priorities remain unchanged. We're focusing our resources on sustaining Twista T's industry-leading growth and turning Trulia's volume trends while improving our supply chain performance to enhance our gross margin and provide more funds to invest in our brands and our top-ranked industry sales force. As Jim also mentioned, we're encouraged by our second quarter financial performance, and we're investing in incremental media to further fuel Twista T's growth and moderate Trulia's declines. We're doing so immediately to create an impact over the next several months. I'll now provide some color in our brands. Twisted Tea accelerated its growth trajectory in the second quarter with 38% dollar sales growth while adding 3.3 dollar share points and expanding its overall share leadership to 27% of total F&B dollar sales in measured off-premise channels. Robust demand as a result of balanced efforts at growing both physical availability via improved geographic, channel and package distribution, and mental availability via a highly effective brand building campaign, increased media investment, and optimized packaging design that highlights the brand's distinctive assets. While we've struggled to keep up with demand for the Twisted Tea Party Pack that is now the second largest and the fastest growing SKU among all FMBs, we've improved our overall service levels versus the first half of last year and can support further growth acceleration. We remain confident that Twisted Tea will sustain a strong double-digit growth for the remainder of 2023 for many reasons. First, there's upside in growing brand awareness and household penetration, and we know our ad campaign's working. Second, the brand is underdeveloped with Black and Hispanic and Latino consumers, but we're now seeing large household penetration increases as a result of our marketing efforts. Third, there's still ample room to expand distribution across channels and packages where other F&B competitors have far more presence. This includes on-premise, where Twisted Tea has close to a 60 share of F&Bs and has driven the fifth most incremental cases year-to-date of any brand family across total beer. Additionally, Twisted Tea finished the spring space reset season with a 49% increase in shelf space, and those benefits will continue to fuel the business during the balance of the year and into 2024. Fourth, there's opportunity to widen the brand's presence in underdeveloped markets from Florida to Texas to California. Fifth, we're still in the early stages of Twisted Tea Light's national launch and the sales per points accelerating and exceeding our expectations and it's proven to be about 85% incremental to the Twisted Tea portfolio. We've also expanded our Light portfolio offerings with a new variety pack available in select highly developed markets and we're seeing some early success. Lastly, we recently announced we're testing a higher ABV version of Twisted Tea in select markets this summer. called Twisted Tea Extreme. It has 8% ABV and is part of our efforts to find future pathways to growth for all our brands by increasing occasions and adding new drinkers. Now on to Truly. We launched a major Truly refresh late in the second quarter, including brighter, easier to shop packaging that calls out our product improvement with real fruit juice, a new more emotive and high scoring ad campaign called Lightly Fantastic, Increased media spend with a focus on digital and social and new wholesaler execution priorities that focus on our lightly flavored lineup. We now have full distribution of the new truly hard seltzer packaging and our ad campaign has been running for six weeks. Our two new truly vodka soda SKUs and package design hit the market starting in late June and will continue its rollout into early August. Additionally, during the second quarter, We launched the Red, White & True Lightly Flavored Variety Pack limited time offering in support of our partnership as the first ever official hard seltzer of U.S. soccer and received strong in-store wholesaler and retailer support. While the brand remains down about 3.3 volume share points year to date, we're seeing green shoots that we expect will have an accumulated impact in the balance of summer and into the fourth quarter. For example, Our Lightly Flavored lineup of variety packs has gained both volume and dollar share of hard seltzer in the past four and 13 week time frames, while 24 ounce single serve gained 0.6 share points in the second quarter, driven by our lead style wild berry, which grew 16% in the last four weeks. Lemonade and fruit punch share losses stabilized during the second quarter. while the margarita overlap and the iced tea discontinuation from 2022 are still weighing on total brand share and have accounted for about 75% of the brand share losses year to date. These overlaps will continue to moderate through the summer and drop off in the fourth quarter. While we're disappointed that we've not yet stemmed truly share losses, we believe we've made the necessary changes to set the brand up for success and now need to keep our focus on the execution we know our wholesalers are capable of achieving. As evidence of our confidence in our direction, we're increasing our media spend for the balance of the year and we'll ensure that Trulia is on air every single week. We're only eight weeks into the refresh, so we need to keep pushing hard with the initiatives we put in place. We're encouraged that Trulia maintains the second highest sales per point in hard seltzer, 52% more productive than the number three brand, and the third highest sales per point in all of Beyond Beer, so there remains a strong consumer base to build upon. Of note, Truly's share position has improved by one point from March to June, so we're trending in the right direction. We recently announced we're testing a new Truly tequila product in several markets this summer as part of our efforts to grow the brand in all the occasions where refreshment, sessionability, and variety intersect. While maintaining Twisted Tea's double-digit growth, and improving Truett's trajectory are our top priorities for the year, we have a broad portfolio and will continue to support and build out our smaller brands. Sam Adams is holding its own in the difficult craft beer category and will continue to invest behind our new remastered Boston Lager campaign and our seasonals, in addition to our non-alcoholic portfolio, including just the Haze and the newly released Gold Rush Pilsner, which grew 94% in dollars in the second quarter and measured off-premise channels. Our Sam Adams Boston Lager remastered program has improved Boston Lager volume trends by six points and the total brand gained 0.3 share points of craft in the second quarter based on Beer Institute numbers. While it truly makes a play in vodka and tequila based seltzers, Dogfish Head is gaining a foothold in the traditional canned cocktail segment and grew volume approximately 81% in the second quarter across all channels. Turning to our supply chain. We continue to modernize our supply chain through investments in equipment, capacity, and improved systems and processes. I'd like to broadly discuss the status of the three categories we've focused on to drive improved margins. The first category is procurement savings. We've targeted savings initiatives across multiple areas, including raw materials and packaging, and achieved some benefit during the second quarter. We continue to review our contracts with our raw pack suppliers with the aim of adjusting these to be more reactive to changing demand. The next category is brewery performance. While we expect to always have a mix of internal and external production, we're focused on moving volume back to our internal breweries where possible, given our production cost advantage. We're evaluating our mix in a disciplined manner and focusing on improving our internal line stability and efficiencies as well as adjusting contracts with our co-manufacturers as we adapt to changes in our volumes and product mix. The final category is waste and network optimization. We have initiatives to optimize our logistics, which reduce freight and warehousing costs over time. Also, as we discussed on our last call, we're currently implementing systems to improve our forecasting and inventory management, which we expect to reduce inventory obsolescence over the balance of the year. We have multi-year savings plans across each of these categories, which we expect to generate significant long-term gross margin expansion. While it will take time to realize the full benefit, we began to see some benefit in the second quarter, primarily related to procurement savings and expect to see further benefits in the remainder of the year. We're also closely managing our operating expenses. We expect to use the cost savings that these efforts will generate to support increased brand spend and within brand spend, both converting non-working to working dollars and shifting our mix from traditional to digital and social media. Now turn into guidance. Our fiscal week depreciation trends for the first 29 weeks of 2023 have declined 6% from 2022. We're reiterating our shipments and depletions expectation of down 2% to down 8% for the full year 2023. Where we land within that range is dependent on a variety of factors, including the overall economic environment and consumer demand balance of year. Now I'll hand it over to Matt to discuss second quarter financials and our full year guidance.