Boston Beer Co., Inc. Q4 FY2024 earnings call

• Depletion trends improved in 2024 with 200 basis points of gross margin expansion, supporting non-GAAP EPS growth of 31%.
• Business is cash generative with $173M free cash flow in 2024, allowing share repurchases of $239M.
• Focus on core brands: Twisted Tea continues to grow share, with Twisted Tea Light and Extreme offering growth opportunities. Sun Cruiser is being nationally expanded with increased marketing investments. Samuel Adams, Dogfish Head, and Hard Mountain Dew have specific brand plans.
• Changed compensation programs to incentivize selling across brand families and channels instead of total volume targets.
• Supply chain productivity initiatives in procurement savings, network optimization, and brewery performance to support brand investments and gross margin expansion.

In 2024, the company saw depletion trends improve with multiyear margin enhancement plans delivering 200 basis points of gross margin expansion. Twisted Tea remained the clear leader in the hard tea category with an 84% market share and over 50% of the dollar growth of the category in 2024. Sun Cruiser, launched late in 2024, is performing well and expected to be fully national in H1 2025. Truly Hard Seltzer faced headwinds but its Unruly offering was a key contributor. Samuel Adams focused on national launch of American Light, and Dogfish Head launched Grateful Dead Juicy Pale Ale. Hard Mountain Dew saw depletion trends turn positive in H2 2024 but is a multiyear effort. Revenue was up slightly in 2024 driven by price realization and lower product returns, with non-GAAP EPS up 31%.

• 2025 depletions/shippments expected to be between low single digits decrease to increase.
• Price increases expected to be between 1% and 2%.
• Full year 2025 reported gross margins expected to be between 45% and 47%.
• Advertising, promotional, and selling expenses expected to increase $30-50M, mostly in H1 2025.
• Full year 2025 earnings per diluted share targeted between $8 and $10.50.
• Capital expenditures expected $90-110M in 2025, primarily for brewery infrastructure.

• Inflation impacting near-term consumer behavior.
• Intense competition in the beyond beer category.
• Health and wellness concerns and perceptions affecting alcohol consumption, with advocacy needed to counter negative narratives.
• Cannabis legalization and its potential impact on alcohol sales, with varying state regulations and channel to market challenges.
• Tariffs on aluminum and other commodities potentially affecting costs, though currently not a significant component of cost structure.

Q: Kaumil Gajrawala asked about the new compensation plan focusing on incentivizing across brands.

A: Michael Spillane said the new incentive plans align with business objectives to drive equal effort across all brands and sales across the portfolio.

Q: Robert Ottenstein inquired about Twisted Tea volume vs scanner data.

A: Michael Spillane stated there's significant business not covered by Circana, and depletions are a better forecast.

Q: Michael Lavery asked about cannabis impact on alcohol categories.

A: James Koch and Michael Spillane discussed cannabis legalization varying by state, channel to market challenges, and the industry's advocacy efforts.

Q: Eric Serotta asked about Twisted Tea growth expectations and health and wellness advocacy.

A: James Koch talked about health and wellness advocacy challenges, and Michael Spillane discussed Twisted Tea's growth plans with new products and brand support.

Q: Bonnie Herzog asked about advertising spend step-up.

A: James Koch and Michael Spillane discussed targeted advertising spend, migration to social and digital channels, and expectations of payback from investments.

Q: Filippo Falorni asked about Sun Cruiser distribution and margin puts/takes.

A: Michael Spillane said Sun Cruiser distribution is incremental, and aluminum tariffs are not a significant component of cost structure currently.

Q: Bill Kirk asked about Sam Adams reinvigoration and industry marketing.

A: James Koch talked about Sam Adams American Light's potential and industry marketing perspectives.

Q: Gerald Pascarelli asked about Sun Cruiser's longer term runway.

A: Michael Spillane said Sun Cruiser is being carefully built with a solid rollout plan and is expected to be a long-term part of the portfolio.

Q: Peter Grom asked about gross margin phasing and marketing spend phasing.

A: Michael Spillane discussed gross margin improvement through multiyear programs and marketing spend flexibility with better view by end of Q1.