Brown-Forman Corporation Q4 FY2024 earnings call

• Fiscal 2024 was challenging with organic net sales down 1% and organic operating income down 2%, but depletion-based results aligned with long-term growth. - Gross margin expanded 150 basis points due to favorable price mix, super-premium brand growth, offsetting higher input costs. - Jack Daniel's Tennessee Apple, super-premium expressions, New Mix, and Glenglassaugh showed growth; Jack Daniel's Tennessee Whiskey faced declines but has long-term positive outlook. - Portfolio evolved with integration of Gin Mare and Diplomático, divestiture of Finlandia and Sonoma-Cutrer, strengthening key categories.

Jack Daniel's Tennessee Apple: Delivered strong double-digit organic net sales growth, now nearly 900,000 9-liter cases. Jack Daniel's super-premium expressions: Including Sinatra, Single Barrel Rye Barrel Proof, Bonded Rye, and American Single Malt, saw strong double-digit organic net sales growth. New Mix: Second largest positive contributor to organic net sales, growing to over 10 million 9-liter cases with double-digit growth. Glenglassaugh: Third largest positive contributor, driven by cask sales, especially in Asia. Jack Daniel's Tennessee Whiskey: Declined 5% due to lower volumes in Japan, US, UAE, and Sub-Saharan Africa. Gin Mare and Diplomático: Integrated into the portfolio, both achieved strong double-digit organic net sales growth.

• Fiscal 2025 expects organic net sales growth 2%-4% driven by emerging and developed int'l markets. - Anticipates organic operating income growth 2%-4%. - Capital expenditures estimated $195M-$205M. - Effective tax rate 21%-23%. - Expect distributor inventory levels to remain consistent with current levels.

• Volatile operating environment due to global macroeconomic and geopolitical uncertainties. - Unexpected drops in US distributor inventories in Q4 2024, though majority of inventory movement believed behind us. - Inflationary pressures on glass, transportation, wood, partially offset by lower agave prices.

Q: Clarification on ingredient costs A: Leanne discussed agave, grain, glass, and transportation costs, noting agave prices fluctuating, grain prices still above pre-pandemic, glass expected 2%-3% increase in US, and transportation in low single digits Q: Inventory comparison vs prior call, inventory levels today A: Leanne and Lawson discussed inventory movements, with unexpected Q4 US distributor inventory drop, but majority of movement believed behind us Q: U.S. spirits growth, industry supply A: Lawson discussed industry trends, stating TDS has been soft but not structurally changed, and supply-demand balance not overly disconnected Q: Jack Daniel's brand building, promotional activity A: Lawson discussed brand building with Jack Daniel's, noting no long-term slowdown, and competitive pricing in US showing positive trends Q: Developed vs emerging markets, second half growth A: Leanne and Lawson discussed market performance, with developed markets having mixed results and emerging markets like Brazil showing growth, expecting second half improvement due to comps