Craft Brew Alliance, Inc. (NASDAQ:BREW) Q3 2018 Earnings Conference Call Transcript

Nov 08, 2018 • 11:30 am ET

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Craft Brew Alliance, Inc. (NASDAQ:BREW) Q3 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen. And thank you for standing by. Welcome to the Third Quarter 2018 Craft Brew Alliance Earnings Conference Call. At this time, all participants are in a listen-only mode.

(Operator Instructions)

Later, we will have a question-and-answer session and the instructions will be given at that time. And as a reminder, this conference is being recorded.

Now it's my pleasure to turn the call to Mr. Andy Thomas, CEO. Please go ahead.

Executive
Andy Thomas

Thank you, Carmen. And good morning, everyone. It's my pleasure to present the Craft Brew Alliance investor conference call to discuss our results for the third quarter of 2018. This morning, I'm joined on this call by two other members of the CBA leadership team, our CMO, Ken Kunze and our COO, Scott Mennen. But before we begin, I'll ask Ed Smith, our Corporate Controller, to read our safe harbor statement.

Executive
Ed Smith

Thank you, Andy.

(Forward-Looking Cautionary Statements)

Andy?

Executive
Andy Thomas

Thanks, Ed. Q3 2018 was a particularly busy quarter, with much to discuss, both operational and strategic. So let's jump right in. As I generally do, I'll begin with some high-level thoughts on our third quarter results before having the team provide a more in-depth look and some color on their respective areas of accountability. In the absence of our CFO, I'll bring the call to a close with both some detailed financial numbers as well as provide some thoughts on CBA strategy looking forward. I'll also update our CFO search.

Reflecting on Q3 2018. While the quarter certainly wasn't as optically appealing as Q2, it was, nevertheless, solid across a number of key dimensions, as volumes, particularly Kona, in rates both in revenue and gross margin, developed in line with management's expectations. To that end, in framing this call, let me offer three complementary themes which emerged for us in Q3. Those themes are control, confidence and energy. And I'll use them to offer some high-level thoughts before handing off to the team to provide some details.

As for the first theme, control. The quarter delivered largely in line with management's expectation and was another quarter void of any significant surprises, such as those that have plagued our results in years past. This fact is best evidenced by the tightening of our full year guidance within the parameters of our original ranges, with the exception of SG&A, which I'll discuss later.

As we find ourselves three-quarters of the way to the annual calendar turn on December 31, comparing our performance with the same period last year, we see that Kona volumes are accelerating and, after starting the year up only three, are again approaching double digits. Overall CBA shipments are up slightly, despite maintaining lower wholesaler inventory levels. Our beer revenues are up over 3%, in concert with our beer revenue rate, which has also improved over 3%. Our beer and total company gross margin are both up over 200 basis points, even after absorbing anticipated brewery and brand shift mixes in Q3. And while our