BOSTON BEER REPORTS SECOND QUARTER FINANCIAL RESULTS

July 27, 2023 at 4:15 PM EDT

BOSTON, July 27, 2023 /PRNewswire/ --- The Boston Beer Company, Inc. (NYSE: SAM), today reported financial results for its second quarter that ended July 1, 2023. Key results were:

Second Quarter 2023 Summary:

Depletions decreased 3%
Shipments decreased 4.5%
Net revenue decreased 2.1% to $603.3 million
Gross margin increased 230 basis points to 45.4%
Net income increased 8.8% to $58.0 million
Diluted income per share increased 9.5% to $4.72

Capital Structure

Generated $119.0 million in operating cash flow in the second quarter
Ended the second quarter with $207.8 million in cash and no debt
Repurchased $52.5 million in shares from January 3, 2023 to July 21, 2023

"We saw improvement in our financial performance and our volume benefited from the timing of the July 4th holiday in the second quarter, as we continue to execute our operational plans. We are proud to have just been named the number one beer industry supplier in the Tamarron Survey, the annual poll of beer distributors conducted by Tamarron Consulting, for the sixth year in a row," said Chairman and Founder Jim Koch. "Our highly cash-generative business and strong balance sheet will not only fuel our 2023 brand investments, but have also enabled us to repurchase over $50 million in shares year-to-date."

"As we expected, our second quarter performance reflected strong growth in Twisted Tea, offset by continuing challenges in the hard seltzer category, and we are reiterating our 2023 depletion and shipment expectations as well as our earnings guidance," said President and CEO Dave Burwick. "Based on our second quarter financial performance, we plan to increase our balance of year spend behind both the Truly and Twisted Tea brands as we believe our messaging is effective and the business will respond over the short-and longer-term to these investments. We are focused on enhancing our productivity to continue to improve our gross margin and in turn incrementally invest to further strengthen our brands."

Details of the results were as follows:

Second Quarter 2023 (13 weeks ended July 1, 2023) Summary of Results

Net revenue of $603.3 million decreased 2.1% compared to the prior year.

Depletions in the second quarter decreased 3% from the prior year, reflecting decreases in the Company's Truly Hard Seltzer, Angry Orchard, Hard Mountain Dew and Samuel Adams brands, partially offset by increases in its Twisted Tea and Dogfish Head brands.

Shipment volume for the quarter was approximately 2.3 million barrels, a 4.5% decrease from the prior year, reflecting decreases in the Company's Truly Hard Seltzer, Angry Orchard, Samuel Adams, Hard Mountain Dew and Dogfish Head brands, partially offset by increases in its Twisted Tea brand.

The timing of the July 4th holiday relative to the Company's 2023 and 2022 fiscal calendars resulted in a depletion and shipment volume benefit in the second quarter of 2023. This volume benefit was the most significant factor in the difference between depletions and shipments on a fiscal calendar basis compared to a comparable weeks basis. On a comparable weeks basis, depletions declined approximately 7% and shipments declined 4.8%.

The Company believes distributor inventory as of July 1, 2023 averaged approximately three weeks on hand and was at an appropriate level for each of its brands, except for certain Twisted Tea brand packages that were below targeted levels due to higher than forecasted consumer demand.

Gross margin of 45.4% increased 230 basis points from the 43.1% margin realized in the prior year. Gross margin primarily benefited from strong price realization and procurement savings, which more than offset increased inflationary costs.

Advertising, promotional and selling expenses for the second quarter of 2023 decreased $5.5 million or 3.6% from the second quarter of 2022, due to decreased freight to distributors of $15.7 million from lower rates and volumes, partially offset by an increase in brand and selling costs of $10.2 million, mainly driven by higher salaries and benefits costs, increased consulting costs and increased media investments.

General and administrative expenses increased by $6.1 million or 15.6% from the second quarter of 2022, primarily due to increased consulting and legal costs and higher salaries and benefits costs.

The Company incurred impairment costs for brewery equipment of $1.5 million in the second quarter of 2023.

The Company's effective tax rate for the second quarter was 27.5% compared to 24.7% in the prior year. In the second quarters of 2023 and 2022, the Company recorded a tax benefit of $0.03 and $0.08 per diluted share, respectively, resulting from the Accounting Standard "Employee Share-Based Payment Accounting" ("ASU 2016-09").

Year-to-date 2023 (26 weeks ended July 1, 2023) Summary of Results

Net revenue year-to-date of $1.013 billion decreased 3.2% compared to year-to-date 2022.

Depletions year-to-date decreased 4% from year-to-date 2022, reflecting decreases in the Company's Truly Hard Seltzer, Angry Orchard, Dogfish Head, and Samuel Adams brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands. Comparable weeks depletions year-to-date decreased 7%.

Shipment volume year-to-date was approximately 3.9 million barrels, a 5.8% decrease from year-to-date 2022, reflecting decreases in the Company's Truly Hard Seltzer, Angry Orchard, Dogfish Head, and Samuel Adams brands, partially offset by increases in its Twisted Tea and Hard Mountain Dew brands. Comparable weeks shipments year-to-date decreased 7.6%.

Gross margin year-to-date of 42.4% increased from the 41.9% gross margin realized in year-to-date 2022, primarily due to price increases partially offset by higher inventory obsolescence costs, primarily related to rebranding Truly Vodka Seltzer to Truly Vodka Soda, and a non-recurring payment to a third-party contract brewery. Increased inflationary costs were offset by procurement savings.

Advertising, promotional and selling expenses year-to-date decreased $10.7 million or 3.8% from year-to-date 2022, primarily due to decreased freight to distributors of $28.3 million from lower rates and volumes, partially offset by an increase in brand investments of $17.6 million, mainly driven by increased salaries and benefits costs and higher investments in local marketing.

General and administrative expenses year-to-date increased by $10.0 million or 12.8% from year-to-date 2022, primarily due to increased consulting and legal costs.

In 2022, the Company recorded $5.3 million in contract termination costs, most of which was recorded in the first quarter, as a result of further negotiations with suppliers that eliminated certain future shortfall fees.

The Company's effective tax rate year-to-date was 27.5% compared to 25.1% year-to-date 2022. Year-to-date 2023 and 2022, the Company recorded tax benefit of $0.01 per diluted share and a tax benefit of $0.05 per diluted share, respectively, resulting from ASU 2016-09.

Net income year-to-date of $49.1 million or $3.98 per share, represented a decrease of $2.3 million or $0.17 per diluted share compared to year-to-date 2022. This decrease between periods was primarily driven by lower revenue, partially offset by higher gross margins and lower operating expenses.

The Company expects that its July 1, 2023 cash balance of $207.8 million, together with its projected future operating cash flows and the unused balance on its $150.0 million line of credit, will be sufficient to fund future cash requirements.

During the 26-week period ended July 1, 2023 and the period from July 2, 2023 through July 21, 2023, the Company repurchased its Class A Common Stock in the amounts of $46.7 million and $5.8 million, respectively, for a total of $52.5 million year to date. As of July 21, 2023, the Company had approximately $307.0 million remaining on the $1.2 billion share buyback expenditure limit set by the Board of Directors.

Depletions Estimate

Year-to-date depletions through the 29-week period ended July 22, 2023 are estimated by the Company to have decreased approximately 6% from the prior year fiscal period.

Full-Year 2023 Projections

The Company is maintaining the full year volume and earnings guidance previously communicated in its April 25, 2023 Earnings Release and increasing its Advertising, Promotion and Selling Expense guidance. The Company experienced lower than expected freight costs year to date, which in addition to gross margin performance allows it to further support its brands. The Company's actual 2023 results could vary significantly from the current projection and are highly sensitive to changes in volume projections particularly related to the hard seltzer category and supply chain performance as well as inflationary impacts. The 2023 fiscal year includes 52 weeks compared to the 2022 fiscal year which included 53 weeks.

Full Year 2023	Current Guidance	Prior Guidance
Depletions Decreases	(2%) to (8%)	(2%) to (8%)
Shipments Decreases	(2%) to (8%)	(2%) to (8%)
Price Increases	1% to 3%	1% to 3%
Gross Margin	41% to 43%	41% to 43%
Advertising, Promotion, and Selling Expense YoY Change *($ million)*	$20 to $40	($5) to $15
Effective Tax Rate	28 %	28 %
EPS	$6.00 to $10.00	$6.00 to $10.00
Capital Spending *($ million)*	$100 to $140	$100 to $140

Underlying the Company's current 2023 projections are the following full-year estimates and targets:

The Company's guidance on depletions and shipments includes the estimated negative impact of approximately 1.0 percentage point due to the fact that fiscal 2022 had 53 weeks and fiscal 2023 will have 52 weeks. On a 52-week comparable basis the Company expects depletions and shipments to decrease 1% to 7%.
As anticipated, the Company finished the first half at the lower end of shipment guidance range on a comparable weeks basis. The Company estimates that second half shipments will benefit from the expected continued growth of Twisted Tea which is its largest brand, the lapping of last year's Truly Margarita launch and additional investments in advertising spend in the second half of the year.
The Company's guidance incorporates an expectation of shortfall fees, which primarily impact the fourth quarter. Therefore, the Company expects year-over-year gross margin improvement to be lower in the fourth quarter relative to earlier quarters.
The advertising, selling and promotional expense projection does not include any changes in freight costs for the shipment of products to the Company's distributors.

Forward-Looking Statements

Statements made in this press release that state the Company's or management's intentions, hopes, beliefs, expectations or predictions of the future are forward-looking statements. It is important to note that the Company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings, including, but not limited to, the Company's report on Form 10-K for the year ended December 31, 2022 and subsequent reports filed by the Company with the SEC on Forms 10-Q and 8-K. Copies of these documents are available from the SEC and may be found on the Company's website, www.bostonbeer.com. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements.

About the Company

The Boston Beer Company, Inc. (NYSE: SAM) began in 1984 brewing Samuel Adams beer and the Samuel Adams brand is currently recognized as one of the largest and most respected craft beer brands. Our portfolio of brands also includes Truly Hard Seltzer, Twisted Tea, Angry Orchard Hard Cider, Dogfish Head Brewery, Hard Mountain Dew, and Jim Beam Kentucky Coolers, as well as other craft beer brands such as Angel City Brewery and Coney Island Brewing. For more information, please visit our investor relations website at www.bostonbeer.com, which includes links to all of our respective brand websites.

Thursday, July 27, 2023

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
	(unaudited)
	Thirteen weeks ended				Twenty-six weeks ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Revenue	$	641,333	$	655,022	$	1,076,489	$	1,112,310
Less excise taxes		38,029		38,779		63,185		65,954
Net revenue		603,304		616,243		1,013,304		1,046,356
Cost of goods sold		329,141		350,468		583,479		607,629
Gross profit		274,163		265,775		429,825		438,727
Operating expenses:
Advertising, promotional, and selling expenses		149,362		154,883		274,790		285,498
General and administrative expenses		44,899		38,849		88,593		78,547
Contract termination costs and other		—		578		—		5,330
Impairment of brewery assets		1,532		80		2,016		121
Total operating expenses		195,793		194,390		365,399		369,496
Operating income		78,370		71,385		64,426		69,231
Other income (expense):
Interest income		1,855		83		3,499		50
Other expense		(122)		(601)		(224)		(701)
Total other income (expense)		1,733		(518)		3,275		(651)
Income before income tax provision		80,103		70,867		67,701		68,580
Income tax provision		22,068		17,518		18,622		17,186
Net income	$	58,035	$	53,349	$	49,079	$	51,394
Net income per common share – basic	$	4.73	$	4.33	$	3.99	$	4.18
Net income per common share – diluted	$	4.72	$	4.31	$	3.98	$	4.15
Weighted-average number of common shares – basic		12,268		12,319		12,288		12,309
Weighted-average number of common shares – diluted		12,276		12,341		12,304		12,341
Net income	$	58,035	$	53,349	$	49,079	$	51,394
Other comprehensive income (loss):
Foreign currency translation adjustment		126		(71)		144		(21)
Total other comprehensive income (loss), net of tax		126		(71)		144		(21)
Comprehensive income	$	58,161	$	53,278	$	49,223	$	51,373

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
	(unaudited)
	July 1, 2023		December 31, 2022
Assets
Current Assets:
Cash and cash equivalents	$	207,755	$	180,560
Accounts receivable		117,067		56,672
Inventories		155,702		148,450
Prepaid expenses and other current assets		34,798		27,461
Income tax receivable		1,748		10,126
Total current assets		517,070		423,269
Property, plant, and equipment, net		656,359		667,909
Operating right-of-use assets		39,817		43,768
Goodwill		112,529		112,529
Intangible assets, net		76,197		76,324
Third-party production prepayments		46,827		61,339
Other assets		43,754		35,635
Total assets	$	1,492,553	$	1,420,773
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	120,780	$	84,248
Accrued expenses and other current liabilities		133,060		111,153
Current operating lease liabilities		8,967		8,866
Total current liabilities		262,807		204,267
Deferred income taxes, net		95,415		96,592
Non-current operating lease liabilities		40,755		45,274
Other liabilities		6,386		6,091
Total liabilities		405,363		352,224
Stockholders' Equity:
Class A Common Stock, $0.01 par value; 22,700,000 shares authorized; 10,160,485 and 10,238,009 issued and outstanding as of July 1, 2023 and December 31, 2022, respectively		102		102
Class B Common Stock, $0.01 par value; 4,200,000 shares authorized; 2,068,000 issued and outstanding as of July 1, 2023 and December 31, 2022		21		21
Additional paid-in capital		646,086		629,515
Accumulated other comprehensive loss		(66)		(210)
Retained earnings		441,047		439,121
Total stockholders' equity		1,087,190		1,068,549
Total liabilities and stockholders' equity	$	1,492,553	$	1,420,773

THE BOSTON BEER COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
	(unaudited)
	Twenty-six weeks ended
	July 1, 2023		June 25, 2022
Cash flows provided by operating activities:
Net income	$	49,079	$	51,394
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		43,602		39,909
Impairment of brewery assets		2,016		121
Gain on disposal of property, plant, and equipment		(195)		(39)
Change in right-of-use assets		3,844		3,990
Stock-based compensation expense		8,266		7,730
Deferred income taxes		(1,177)		2,557
Other non-cash (income) expense		(88)		54
Changes in operating assets and liabilities:
Accounts receivable		(60,307)		(64,469)
Inventories		(9,376)		(13,014)
Prepaid expenses, income tax receivable, and other current assets		1,041		46,715
Third-party production prepayments		14,512		14,067
Other assets		(5,995)		295
Accounts payable		38,872		48,337
Accrued expenses, other current liabilities, and other liabilities		21,354		(13,275)
Operating lease liabilities		(4,311)		(2,866)
Net cash provided by operating activities		101,137		121,506
Cash flows used in investing activities:
Purchases of property, plant, and equipment		(34,809)		(50,804)
Proceeds from disposal of property, plant, and equipment		195		506
Net cash used in investing activities		(34,614)		(50,298)
Cash flows (used in) provided by financing activities:
Repurchases of Class A common stock		(45,887)		—
Proceeds from exercise of stock options and sale of investment shares		9,466		4,610
Cash paid on finance leases		(797)		(870)
Line of credit borrowings		—		30,000
Line of credit repayments		—		(30,000)
Payment of tax withholding on stock-based payment awards and investment shares		(2,110)		(3,468)
Net cash (used in) provided by financing activities		(39,328)		272
Change in cash and cash equivalents and restricted cash		27,195		71,480
Cash and cash equivalents and restricted cash at beginning of year		180,560		66,321
Cash and cash equivalents at end of period	$	207,755	$	137,801

*Copies of The Boston Beer Company's press releases, including quarterly financial results,*
*are available on the Internet at www.bostonbeer.com*

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SOURCE The Boston Beer Company, Inc.

Investor Relations Contact: Jennifer Larson, (617) 368-5152, jennifer.larson@bostonbeer.com; Media Contact: Dave DeCecco, (914) 261-6572, dave.dececco@bostonbeer.com

News Release Details

BOSTON BEER REPORTS SECOND QUARTER FINANCIAL RESULTS