Home Industry News Releases Vintage Wine Estates Reports Revenue Growth of 33% to $84 Million  in...

Vintage Wine Estates Reports Revenue Growth of 33% to $84 Million  in Second Quarter Fiscal 2022 and Raises Guidance 

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  • Delivered net income of $8.6 million or $0.14 per diluted share; adjusted earnings per diluted share1 were $0.17  
  • Achieved record Adjusted EBITDA2 of $20.2 million, or 24.2% of revenue, representing growth of over 135% 
  • Strong results in quarter reflect strong execution of omni-channel, multi-brand strategy and success of  acquisitions  
  • Direct-to-consumer (“DTC”) and business-to-business (“B2B”) grew measurably and delivered over 30%  operating margins in the quarter 
  • Raising revenue guidance for fiscal 2022 to approximately $275 million to $285 million with expected  adjusted EBITDA3 margin in range of $63 million to $66 million 
  • Acquired Meier’s Beverage Group in January 2022; expands production capabilities and provides better  access into East Coast markets for recently acquired ACE Cider

INCLINE VILLAGE, NV, February 14, 2022 – Vintage Wine Estates, Inc. (Nasdaq: VWE) (Nasdaq: VWEWW) (TSX: VWE.U) (TSX: VWE.WT.U)  (“VWE” or the “Company”), one of the fastest-growing wine producers in the U.S. with an industry leading direct-to-customer platform, today reported  its financial results for its second quarter fiscal year 2022 ended December 31, 2021. Results include Vinesse, LLC (“Vinesse”) acquired on October  4, 2021 and ACE Cider, acquired on November 16, 2021.  

Pat Roney, Founder and Chief Executive Officer, commented, “We delivered strong growth of 33%, or $20.6 million, in the quarter which was  complemented with $7.6 million in revenue from the acquisitions of ACE Cider and Vinesse and is a testament to the successful execution of our  growth strategy. Operationally, we are making great strides in our B2B market channel as we execute well for our customers on their exclusive label  programs. We also are excited to have our DTC business continue to expand as the multitude of channels that we use to reach the consumer are all  performing well. Tasting room traffic exceeded pre-pandemic levels, wine club membership continues to expand, customer retention remains strong  and our ecommerce subscriber count keeps increasing. On the Wholesale front, our Bar Dog brand is hitting it out of the ballpark having sold nearly  100,000 cases in calendar 2021 demonstrating a very high velocity of turn and a relatively rare success rate in the wine industry. In terms of  acquisitions, the recent additions of Vinesse, ACE Cider and Meier’s Beverage Group are all highly complementary and our pipeline remains robust.”  

Mr. Roney continued, “While the opportunities for VWE are strong, operationally these are challenging times. We are operating in a tight labor  market as well as facing challenges with the timing of deliveries of dry goods. We are working with our suppliers to prioritize our needs and carefully  managing our customers’ requirements. It takes an agile and resilient team to succeed in this environment. Inflation is impacting the industry and,  while we will not be a leader in price changes, we are seeing the trend and we intend to systematically implement price increases as early as March  to address the inflationary impact on input costs. We also expect to realize significant cost synergies from our acquisitions that should help offset  these headwinds. Its typically about six to nine months following an acquisition that those benefits begin to be realized. Overall, the momentum in  the business remains very strong and, as a result, we are increasing our revenue guidance for fiscal 2022 to a range of $275 million to $285 million  and raising the upper band of our adjusted EBITDA guidance to $63 million to $66 million.” 

  1. Adjusted earnings per diluted share is a non-GAAP measure. Please see related disclosures regarding the use of non-GAAP measures in this  news release. 
  2. Adjusted EBITDA is a non-GAAP measure. Please see related disclosures regarding the use of non-GAAP measures in this news release. 3 Expected Adjusted EBTIDA is a forward-looking non-GAAP measure. Please see related disclosures regarding the inability of reconciling forward looking non-GAAP measures. 

Vintage Wine Estates Reports Revenue Growth of 33% to $84 Million in Second Quarter Fiscal 2022 and Raises Guidance February 14, 2022 

Second Quarter Fiscal 2022 Highlights and Financial Results Review (compared with prior-year period unless noted otherwise) Highlights 

  • Strong DTC revenue growth of $11.7 million, or 50.8%, to $34.8 million driven by increased customer engagement in tasting rooms and at events and a $4.6 million contribution from acquisitions. Tasting room traffic increased 11% from the prior year quarter. DTC also  benefitted from gains in wine club membership, strong average retention rates, increased subscribers in eCommerce and digital  channels. Combined Average Order Value (AOV) grew 8% across all DTC channels. 
  • B2B revenue increased $4.6 million, or 22.2%, to $25.2 million reflecting timing of customer projects, execution on previous delayed  shipments and strong responses and pull through on private label brands.  
  • Wholesale revenue increased $2.9 million, or 15.1%, to $22.2 million mostly from acquired revenue of $2.9 million and a 93% increase in case volume. Across brands, VWE achieved depletion volume growth of 5.5% over the prior-year period, whereas for the  Company’s priority brands, which represent approximately 52% of total depletion volume, depletions grew 10.6%. Case volume  increases were primarily driven by the ACE Cider acquisition. 

Revenue and Volume (See additional segment data in the attached tables) 

Net revenue in the quarter of $83.6 million was up $22.5 million, or 32.8%, over the prior-year period driven by significant increases in volume across  all segments. Acquisitions contributed $7.6 million in net revenue for the period.  

Three Months Ended December 31, (in thousands) 2021 2020 Unit Change % Change Wholesale 506 262 244 93.1% B2B 212 141 71 50.4% DTC 160 135 25 18.5% Total case volume 878 538 340 63.2% 

Case volume was up 63.2% for the quarter. Wholesale volume increases were primarily driven by the ACE Cider acquisition and success with the  Company’s priority brands. Volume growth was also the result of strong growth in B2B, which included shipments that had been delayed in the  trailing first quarter, and solid performance in the DTC channel. 

Gross Profit and Margin 

Gross profit was up $15.0 million to $38.5 million, an increase of 63.9%. Gross margin expanded 873 basis points to 46.0% from the leverage  gained from higher volumes and improved efficiencies from the new bottling and packaging facilities.  

Operating Expenses 

Operating expenses increased $13.6 million, or 111.7%, to $25.8 million. Higher selling, general and administrative expenses reflected  approximately $1.8 million of higher professional fees primarily related to public company costs, as well as investments in marketing and talent. In  addition, variable selling expenses, which increase with volume and are typically approximately 10% of revenue, were $3.7 million in the quarter.  Incremental SG&A from the acquisitions was $2.3 million and does not yet represent expected synergies. 

Operating and Net Income 

Income from operations during the quarter increased $1.4 million, or 12.5%, to $12.7 million in the second quarter of fiscal 2022. Operating margin  for the quarter was 15.2%, compared with 18.0% in the prior-year period. Higher operating income of $6.5 million from the three primary operating  segments did not fully offset the $5.1 million of incremental costs related to the public company structure reflected in the Corporate and Other  segment. The Company plans to invest further in its operating infrastructure to enable growth and scale, but expects certain initial costs related to  the being public will be reduced in fiscal 2023. This includes approximately $0.9 million in unusually high D&O insurance and professional fees. 

Interest expense for the second quarter fiscal 2022 was $3.5 million, up $1.5 million, or 79.1%, as a result of higher rates and borrowings.  

Net income available to VWE common shareholders for the quarter was $8.6 million, up from $7.8 million in the prior-year period. On a per diluted  share basis, net income available to VWE common shareholders was $0.14 for the quarter compared with $0.27 per diluted share in the prior-year  period. 

Adjusted Non-GAAP cash net income, which excludes amortization of intangible assets related to acquisitions, was $10.0 million, or $0.17 per  diluted share. NOTE: Adjusted non-GAAP cash net income and adjusted non-GAAP cash net income per diluted share are non-GAAP metrics.  Please see the relevant disclosures and reconciliations of GAAP to non-GAAP measures in the tables that accompany this release. 

Vintage Wine Estates Reports Revenue Growth of 33% to $84 Million in Second Quarter Fiscal 2022 and Raises Guidance February 14, 2022 

Adjusted EBITDA 

Adjusted EBITDA increased 137% to $20.2 million, or 24.2% of net revenue, from $8.6 million, or 13.6% of net revenue, reflecting the overall strong  performance of VWE in the quarter. The incremental benefit of ACE Cider and Vinesse were minimal for the quarter as synergies were not yet  realized.  

NOTE: Adjusted EBITDA and adjusted EBITDA margin are non-GAAP metrics. Please see the relevant disclosures and reconciliations of GAAP to  non-GAAP measures in the tables that accompany this release.  

Strong Balance Sheet with Financial Flexibility Liquidity 

At quarter end, the Company had approximately $274.2 million in liquidity available for organic investments and acquisitions. This included  $75.1 million in unrestricted cash, approximately $99.1 million available under its revolving line of credit and $100.0 million available under the  accordion feature of the lending agreement for acquisitions.  

Capital Investments 

Capital expenditures in the fiscal 2022 second quarter were $3.4 million primarily for ongoing maintenance and barrel purchases. Capital  expenditures for fiscal 2022 are expected to be approximately $12 million to $14 million, which includes approximately $5.4 million related to the  bottling and warehouse facility expansion. The total estimated spend for capital expenditures excludes spend for newly acquired entities.  

Fiscal Year 2022 Outlook 

Mr. Roney noted, “We are executing well on our strategy for growth and are raising our expectations for fiscal 2022 even as we address headwinds  associated with the pandemic and resulting supply chain and labor constraints. I am extremely encouraged about VWE’s future. We have a strong  acquisition pipeline, we are delivering robust growth, and we anticipate we will be able to capture price to overcome the inflationary headwinds. We  will continue to invest in our digital marketing strategies, channels to market and talent to build a much larger, more profitable enterprise over time.  

Our acquisition pipeline remains robust as we continue our strategy to identify and acquire complementary “tuck-in” businesses.” 

The Company is increasing its revenue guidance for fiscal year 2022 and refining adjusted EBITDA expectations to reflect impacts of inflation and  supply chain challenges. Margin expectations also accommodate for the costs of consolidation for acquisitions which create a short term drag on  margins until synergies start to be realized after about six months of ownership. The Company now expects results to be in the following  approximate ranges:  

Updated Guidance 

  • FY22 Net Revenue: $275 million to $285 million 
  • FY22 Adjusted EBITDA: $63 million to $66 million 

Note regarding forward looking non-GAAP metrics: VWE cannot provide a reconciliation between its forecasted Adjusted EBITDA and net revenue  metrics to the nearest GAAP measure without unreasonable effort or expense due to the inherent difficulty of forecasting and providing reliable  estimates for certain items. These non-GAAP financial measures are preliminary estimates and are subject to risks and uncertainties, including,  among others, changes in connection with quarter-end and yearend adjustments. These items reside outside the Company’s control and may vary  greatly between periods and could significantly impact future financial results. For more information regarding the use of non-GAAP measures,  please see discussion provided under Non-GAAP Financial Information in this news release and the Company’s filings with the SEC. 

Conference Call and Webcast 

The Company will host a conference call and live webcast today at 4:45 PM ET/ 1:45 PM PT, at which time management will review the Company’s  financial results and strategy. The review will be accompanied by a slide presentation, which will be available on the Company’s website at https://ir.vintagewineestates.com/. A question-and-answer session will follow the formal discussion. 

The conference call can be accessed by dialing from the U.S.: +1.844.200.6205 or International: +1.929.526.1599 and entering the passcode  178539. The listen-only audio webcast can be monitored at https://ir.vintagewineestates.com. The telephonic replay will be available from 7:45 PM  ET / 4:45 PM PT on the day of the call through Monday, February 21, 2022, and can be accessed by dialing +1.866.813.9403 and entering the  conference ID number 517337. Alternatively, an archived webcast of the call can be found on the Company’s website in the investor relations  section. A transcript of the call will be posted to the website once available. 

About Vintage Wine Estates, Inc. 

Vintage Wine Estates is a family of wineries and wines whose mission is to produce the finest quality wines and provide incredible customer  experiences with wineries throughout Napa, Sonoma, California’s Central Coast, Oregon and Washington State. Since its founding 20 years ago,  the Company has grown to be the 15th largest wine producer in the U.S. selling more than two million nine-liter equivalent cases annually. To  consistently drive growth, the Company curates, creates, stewards and markets its many brands and services to customers and end consumers via  a balanced omni-channel strategy encompassing direct-to-consumer, wholesale and exclusive brand arrangements with national retailers. While  VWE is diverse across price points and varietals with over 50 brands ranging from $10 to $150 at retail, its primary focus is on the fastest growing 

Vintage Wine Estates Reports Revenue Growth of 33% to $84 Million in Second Quarter Fiscal 2022 and Raises Guidance February 14, 2022

premium segment of the wine industry with the majority of brands selling in the $10 to $20 price range. The Company regularly posts updates and  additional information at www.vintagewineestates.com

Non-GAAP Financial Measures 

In addition to reporting net income prepared in accordance with accounting principles generally accepted in the United States, VWE uses Adjusted  EBITDA and Adjusted Net Income to supplement GAAP measures of performance to evaluate the effectiveness of its business strategies. Adjusted  EBITDA is defined as earnings before interest, income taxes, depreciation and amortization, stock-based compensation expense, casualty losses or  gains, impairment losses, changes in the fair value of derivatives, restructuring related income or expenses, acquisition and integration costs, and  certain non-cash, nonrecurring, or other items that are included in net income that VWE does not consider indicative of its ongoing operating  performance. Adjusted net income is defined as net income as reported adjusted for the impacts of amortization of intangible assets, acquisition  integration costs, gains or losses on disposition of assets, gain on litigation of proceeds, COVID impact, and inventory acquisition basis adjustment  and also adjusted for a normalized tax rate.  

Adjusted EBITDA and Adjusted net income are not a recognized measure of financial performance under GAAP. VWE believes these non-GAAP  measure provides investors with additional insight into the underlying trends of VWE’s business and assists in analyzing VWE’s performance across  reporting periods on a consistent basis by excluding items that VWE does not believe are indicative of its core operating performance, which allows  for a better comparison against historical results and expectations for future performance. Adjusted EBITDA and Adjusted net income have certain  limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of results as reported under U.S.  GAAP. Adjusted EBITDA and Adjusted net income, as presented, may produce results that vary from the GAAP measure and may not be  comparable with a similarly defined non-GAAP measure used by other companies. 

In evaluating Adjusted EBITDA and Adjusted net income, be aware that in the future the Company may incur expenses that are the same as or  similar to some of the adjustments in this presentation. VWE’s presentation of Adjusted EBITDA and Adjusted net income should not be construed  as an implication that future results will be unaffected by the types of items excluded from the calculation of these non-GAAP measures. 

Forward-Looking Statements 

Some of the statements contained in this press release are forward-looking statements within the meaning of applicable securities laws (collectively,  “forward-looking statements”). Forward-looking statements are all statements other than those of historical fact, and generally may be identified by  the use of words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “future,” “intend,” “may,” “model,” “outlook,” “plan,” “pro forma,”  “project,” “seek,” “should,” “will,” “would” or other similar expressions that indicate future events or trends. These forward-looking statements include,  but are not limited to, estimates and forecasts of financial and performance metrics, projections of market opportunity and market share, business  plans and strategies, expansion and acquisition opportunities, growth prospects and consumer and industry trends. These statements are based on  various assumptions, whether or not identified in this press release, and on the current expectations of VWE’s management and are not guarantees  of actual performance. These forward-looking statements are provided only to provide information currently available to us and are not intended to  serve as and must not be relied on by any investor as, a guarantee, assurance or definitive statement of fact or probability. Actual events and  circumstances are difficult or impossible to predict and may differ materially from those contained in or implied by such forward-looking statements.  These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the control of VWE. Factors that  could cause actual results to differ materially from the results expressed or implied by such forward-looking statements include, among others: the  Company’s ability to remediate its material weakness in internal control over financial reporting and to maintain effective internal control over  financial reporting, the effect of economic conditions on the industries and markets in which VWE operates, including financial market conditions,  fluctuations in prices, interest rates and market demand; risks relating to the uncertainty of the projected financial information; the effects of  competition on VWE’s future business; risks related to the organic and inorganic growth of VWE’s business and the timing of expected business  milestones; the potential adverse effects of the ongoing COVID-19 pandemic on VWE’s business and the U.S. economy; declines or unanticipated  changes in consumer demand for VWE’s products; the impact of environmental catastrophe, natural disasters, disease, pests, weather conditions  and inadequate water supply on VWE’s business; VWE’s significant reliance on its distribution channels; potential reputational harm to VWE’s  brands from internal and external sources; possible decreases in VWE’s wine quality ratings; integration risks associated with recent acquisitions;  changes in applicable laws and regulations and the significant expense to VWE of operating in a highly regulated industry; VWE’s ability to make  payments on its indebtedness; and those factors discussed in the Company’s Annual Report on Form 10-K and in future Quarterly Reports on Form  10-Q or other reports filed with the Securities and Exchange Commission. There may be additional risks including other adjustments that VWE does  not presently know or that VWE currently believes are immaterial that could also cause actual results to differ from those expressed in or implied by  these forward-looking statements. In addition, forward-looking statements reflect VWE’s expectations, plans or forecasts of future events and views  as of the date and time of this press release. VWE undertakes no obligation to update or revise any forward-looking statements contained herein,  except as may be required by law. Accordingly, undue reliance should not be placed upon these forward-looking statements.

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