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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2023

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to______

Commission file number 001-40016

 

img9460647_0.jpg 

 

Vintage Wine Estates, Inc.

(Exact name of registrant as specified in its charter)

 

Nevada

 

 

 

87-1005902

(State or other jurisdiction of incorporation or organization)

 

 

 

(I.R.S. Employer Identification No.)

 

205 Concourse Boulevard

Santa Rosa, California 95403

(Address of principal executive offices) (Zip code)

 

Registrant’s telephone number, including area code: (877) 289-9463

Securities registered pursuant to Section 12(b) of the Act:


Title of each class

 

Trading
Symbol(s)

 


Name of each exchange on which registered

Common stock, no par value per share

 

VWE

 

The Nasdaq Stock Market LLC

Warrants to purchase common stock

 

VWEWW

 

The Nasdaq Stock Market LLC

 

 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

As of March 8, 2024, 62,761,784 shares of the registrant’s common stock were outstanding.

 


 

 

Part I. Financial Information

1

Item 1. Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Income

2

Condensed Consolidated Statements of Stockholders' Equity

3

Condensed Consolidated Statements of Cash Flows

4

Notes to the Condensed Consolidated Financial Statements

6

Note 1: Basis of Presentation and Significant Accounting Policies

6

Note 2: Restructuring

9

Note 3: Inventory

10

Note 4: Intangible Assets

11

Note 5: Fair Value Measurements

12

Note 6: Commitments and Contingencies

13

Note 7: Long-term and Other Short-Term Obligations

14

Note 8: Stockholders' Equity

15

Note 9: Income Taxes

17

Note 10: Related Party Transactions

17

Note 11: Segments

19

Note 12: Subsequent Events

20

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3. Quantitative and Qualitative Disclosures About Market Risk

30

Item 4. Controls and Procedures

30

Part II. Other Information

32

Item 1. Legal Proceedings

32

Item 1A. Risk Factors

32

Item 5. Other Information

35

Item 6. Exhibits

36

Signatures

37

 

 


Part I—Financial Information

Item 1. Financial Statements

VINTAGE WINE ESTATES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

December 31, 2023

 

 

June 30, 2023

 

Assets

 

(Unaudited)

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,412

 

 

$

18,233

 

Restricted cash

 

 

200

 

 

 

-

 

Accounts receivable, net

 

 

22,970

 

 

 

24,561

 

Other receivables

 

 

443

 

 

 

507

 

Inventories

 

 

155,255

 

 

 

201,363

 

Assets held for sale, net

 

 

35,878

 

 

 

511

 

Current interest rate swap asset

 

 

4,048

 

 

 

4,669

 

Prepaid expenses

 

 

11,831

 

 

 

14,895

 

Total current assets

 

 

252,037

 

 

 

264,739

 

Property, plant, and equipment, net

 

 

187,768

 

 

 

215,967

 

Operating lease right-of-use assets

 

 

28,783

 

 

 

32,945

 

Finance lease right-of-use-assets

 

 

516

 

 

 

630

 

Intangible assets, net

 

 

28,117

 

 

 

38,994

 

Interest rate swap asset

 

 

2,092

 

 

 

4,317

 

Other assets

 

 

3,195

 

 

 

3,562

 

Total assets

 

$

502,508

 

 

$

561,154

 

Liabilities, redeemable noncontrolling interest, and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Line of credit

 

$

121,731

 

 

$

115,444

 

Accounts payable

 

 

27,425

 

 

 

20,413

 

Accrued liabilities and other payables

 

 

17,936

 

 

 

19,668

 

Accrued employee compensation

 

 

8,956

 

 

 

6,618

 

Current operating lease liabilities

 

 

6,194

 

 

 

6,243

 

Current finance lease liabilities

 

 

259

 

 

 

304

 

Current maturities of long-term debt

 

 

183,872

 

 

 

14,449

 

Total current liabilities

 

 

366,373

 

 

 

183,139

 

Other long-term liabilities

 

 

351

 

 

 

4,196

 

Long-term debt, less current maturities

 

 

-

 

 

 

173,409

 

Long-term operating lease liabilities

 

 

24,186

 

 

 

26,792

 

Long-term finance lease liabilities

 

 

265

 

 

 

334

 

Deferred tax liability

 

 

465

 

 

 

506

 

Total liabilities

 

 

391,640

 

 

 

388,376

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Redeemable noncontrolling interest

 

 

252

 

 

 

262

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, no par value, 2,000,000 shares authorized, and none issued and outstanding at December 31, 2023 and June 30, 2023.

 

 

-

 

 

 

-

 

Common stock, no par value, 200,000,000 shares authorized, 62,761,784 issued and 59,889,890 outstanding at December 31, 2023 and 62,234,028 issued and 59,362,134 outstanding at June 30, 2023.

 

 

-

 

 

 

-

 

Additional paid-in capital

 

 

384,260

 

 

 

381,689

 

Treasury stock, at cost: 2,871,894 shares held at December 31, 2023 and June 30, 2023.

 

 

(26,034

)

 

 

(26,034

)

Accumulated deficit

 

 

(246,717

)

 

 

(182,308

)

Total Vintage Wine Estates, Inc. stockholders' equity

 

 

111,509

 

 

 

173,347

 

Noncontrolling interests

 

 

(893

)

 

 

(831

)

Total stockholders' equity

 

 

110,616

 

 

 

172,516

 

Total liabilities, redeemable noncontrolling interest, and stockholders' equity

 

$

502,508

 

 

$

561,154

 

See notes to unaudited condensed consolidated financial statements.

1


VINTAGE WINE ESTATES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

(in thousands, except per share amounts)

 

 

Three Months Ended December 31,

 

 

Six Months Ended December 31,

 

 

 

2023

 

 

2022

 

 

2023

 

2022

 

Net revenue

 

 

 

 

 

 

 

 

 

 

 

Wine, spirits and cider

 

$

46,838

 

 

$

53,706

 

 

$

99,501

 

$

105,976

 

Nonwine

 

 

21,151

 

 

 

24,695

 

 

 

41,762

 

 

50,505

 

Total revenue

 

 

67,989

 

 

 

78,401

 

 

 

141,263

 

 

156,481

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

Wine, spirits and cider

 

 

67,393

 

 

 

36,655

 

 

 

102,328

 

 

69,676

 

Nonwine

 

 

15,579

 

 

 

16,000

 

 

 

29,218

 

 

31,529

 

Total cost of revenue

 

 

82,972

 

 

 

52,655

 

 

 

131,546

 

 

101,205

 

Gross (loss) profit

 

 

(14,983

)

 

 

25,746

 

 

 

9,717

 

 

55,276

 

Selling, general, and administrative expenses

 

 

25,262

 

 

 

32,139

 

 

 

54,011

 

 

63,588

 

Amortization expense

 

 

1,888

 

 

 

1,805

 

 

 

3,524

 

 

3,616

 

Goodwill impairment losses

 

 

-

 

 

 

125,285

 

 

 

-

 

 

125,285

 

Intangible impairment losses

 

 

4,742

 

 

 

12,643

 

 

 

4,742

 

 

12,643

 

Gain on remeasurement of contingent liability

 

 

(6,179

)

 

 

(3,474

)

 

 

(5,208

)

 

(3,289

)

Restructuring (benefit) expense

 

 

(158

)

 

 

-

 

 

 

3,844

 

 

-

 

Loss (gain) on insurance and litigation

 

 

148

 

 

 

-

 

 

 

148

 

 

(530

)

(Gain) loss on sale of assets

 

 

(2

)

 

 

4,430

 

 

 

(799

)

 

4,430

 

Loss from operations

 

 

(40,684

)

 

 

(147,082

)

 

 

(50,545

)

 

(150,467

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(6,119

)

 

 

(5,650

)

 

 

(11,044

)

 

(9,031

)

Net (loss) gain on interest rate swap agreements

 

 

(2,726

)

 

 

(839

)

 

 

(2,821

)

 

8,488

 

Loss on extinguishment of debt

 

 

-

 

 

 

(479

)

 

 

-

 

 

(479

)

Other, net

 

 

(53

)

 

 

216

 

 

 

(26

)

 

487

 

Total other (expense) income, net

 

 

(8,898

)

 

 

(6,752

)

 

 

(13,891

)

 

(535

)

Loss before provision for income taxes

 

 

(49,582

)

 

 

(153,834

)

 

 

(64,436

)

 

(151,002

)

Income tax (benefit) provision

 

 

(199

)

 

 

(23,652

)

 

 

45

 

 

(22,178

)

Net loss

 

 

(49,383

)

 

 

(130,182

)

 

 

(64,481

)

 

(128,824

)

Net loss attributable to the noncontrolling interests

 

 

(32

)

 

 

(1,047

)

 

 

(72

)

 

(1,221

)

Net loss attributable to common stockholders

 

$

(49,351

)

 

$

(129,135

)

 

$

(64,409

)

$

(127,603

)

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share allocable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.83

)

 

$

(2.19

)

 

$

(1.08

)

$

(2.17

)

Diluted

 

$

(0.83

)

 

$

(2.19

)

 

$

(1.08

)

$

(2.17

)

Weighted average shares used in the calculation of earnings per share allocable to common stockholders

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

59,721,395

 

 

 

58,941,899

 

 

 

59,567,221

 

 

58,880,529

 

Diluted

 

 

59,721,395

 

 

 

58,941,899

 

 

 

59,567,221

 

 

58,880,529

 

See notes to unaudited condensed consolidated financial statements.

2


VINTAGE WINE ESTATES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(in thousands, except share amounts)

 

 

Redeemable Non-Controlling
Interest Amount

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-In Capital

 

 

Accumulated
Deficit

 

 

Non-Controlling
Interests

 

 

Total Stockholders' Equity

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2023

 

$

262

 

 

 

62,234,028

 

 

$

-

 

 

 

2,871,894

 

 

$

(26,034

)

 

$

381,689

 

 

$

(182,308

)

 

$

(831

)

 

$

172,516

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,269

 

 

 

-

 

 

 

-

 

 

 

1,269

 

Vesting of restricted stock

 

 

-

 

 

 

233,311

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

129

 

 

 

-

 

 

 

-

 

 

 

129

 

Taxes paid related to net share settlement of equity awards

 

 

-

 

 

 

(29,655

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(23

)

 

 

-

 

 

 

-

 

 

 

(23

)

Net loss

 

 

(7

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(15,058

)

 

 

(33

)

 

 

(15,091

)

Balance, September 30, 2023

 

$

255

 

 

 

62,437,684

 

 

$

-

 

 

 

2,871,894

 

 

$

(26,034

)

 

$

383,064

 

 

$

(197,366

)

 

$

(864

)

 

$

158,800

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,277

 

 

 

-

 

 

 

-

 

 

 

1,277

 

Vesting of restricted stock

 

 

-

 

 

 

413,522

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Taxes paid related to net share settlement of equity awards

 

 

-

 

 

 

(89,422

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(81

)

 

 

-

 

 

 

-

 

 

 

(81

)

Net loss

 

 

(3

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(49,351

)

 

 

(29

)

 

 

(49,380

)

Balance, December 31, 2023

 

$

252

 

 

 

62,761,784

 

 

$

-

 

 

 

2,871,894

 

 

$

(26,034

)

 

$

384,260

 

 

$

(246,717

)

 

$

(893

)

 

$

110,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable Non-Controlling
Interest Amount

 

 

Common Stock

 

 

Treasury Stock

 

 

Additional
Paid-In Capital

 

 

(Accumulated Deficit) Retained
Earnings

 

 

Non-Controlling
Interests

 

 

Total Stockholders' Equity

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2022

 

$

1,494

 

 

 

61,691,054

 

 

$

-

 

 

 

2,871,894

 

 

$

(26,034

)

 

$

376,099

 

 

$

(1,092

)

 

$

(735

)

 

$

348,238

 

Adoption of ASC 842

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,752

 

 

 

-

 

 

 

7,752

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,440

 

 

 

-

 

 

 

-

 

 

 

3,440

 

Repurchase of public warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(172

)

 

 

-

 

 

 

-

 

 

 

(172

)

Shareholder distribution

 

 

(66

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income (loss)

 

 

(146

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,532

 

 

 

(28

)

 

 

1,504

 

Balance, September 30, 2022

 

$

1,282

 

 

 

61,691,054

 

 

$

-

 

 

 

2,871,894

 

 

$

(26,034

)

 

$

379,367

 

 

$

8,192

 

 

$

(763

)

 

$

360,762

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,250

 

 

 

-

 

 

 

-

 

 

 

3,250

 

Vesting of restricted stock

 

 

-

 

 

 

755,880

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Taxes paid related to net share settlement of equity awards

 

 

-

 

 

 

(285,381

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(976

)

 

 

-

 

 

 

-

 

 

 

(976

)

Net income (loss)

 

 

(1,023

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(129,135

)

 

 

(24

)

 

 

(129,159

)

Balance, December 31, 2022

 

$

259

 

 

 

62,161,553

 

 

$

-

 

 

 

2,871,894

 

 

$

(26,034

)

 

$

381,641

 

 

$

(120,943

)

 

$

(787

)

 

$

233,877

 

See notes to unaudited condensed consolidated financial statements.

3


VINTAGE WINE ESTATES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 

 

Six Months Ended December 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(64,481

)

 

$

(128,824

)

Adjustments to reconcile net loss to net cash from operating activities:

 

 

 

 

 

 

Depreciation expense

 

 

8,126

 

 

 

7,856

 

Non-cash operating lease expense

 

 

2,799

 

 

 

2,638

 

Amortization expense

 

 

3,680

 

 

 

3,742

 

Amortization of deferred loan fees and line of credit fees

 

 

862

 

 

 

220

 

Goodwill and intangible assets impairment losses

 

 

4,742

 

 

 

137,928

 

Stock-based compensation expense

 

 

2,546

 

 

 

6,690

 

(Benefit) provision for credit losses

 

 

(84

)

 

 

360

 

Provision for inventory reserves

 

 

32,474

 

 

 

497

 

Deferred income tax provision (benefit)

 

 

(41

)

 

 

(22,212

)

(Gain) loss on disposition of assets

 

 

(799

)

 

 

4,430

 

Loss on extinguishment of debt

 

 

-

 

 

 

479

 

Remeasurement of contingent consideration liabilities

 

 

(5,208

)

 

 

(3,289

)

Net loss (gain) on interest rate swap agreements

 

 

2,821

 

 

 

(8,488

)

Change in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

1,353

 

 

 

1,485

 

Other receivables

 

 

64

 

 

 

3,066

 

Inventories

 

 

7,484

 

 

 

(4,837

)

Prepaid expenses and other current assets

 

 

3,064

 

 

 

(12,186

)

Other assets

 

 

(421

)

 

 

619

 

Accounts payable

 

 

5,386

 

 

 

12,001

 

Accrued liabilities and other payables

 

 

4,329

 

 

 

2,081

 

Net change in lease assets and liabilities

 

 

(1,291

)

 

 

(3,206

)

Net cash provided by operating activities

 

 

7,405

 

 

 

1,050

 

Cash flows from investing activities

 

 

 

 

 

 

Proceeds from sale of assets

 

 

1,366

 

 

 

8,692

 

Purchases of property, plant and equipment

 

 

(6,348

)

 

 

(8,312

)

Net cash (used in) provided by investing activities

 

 

(4,982

)

 

 

380

 

Cash flows from financing activities

 

 

 

 

 

 

Principal payments on line of credit

 

 

(10,791

)

 

 

(120,820

)

Proceeds from line of credit

 

 

17,078

 

 

 

101,903

 

Payment of deferred financing costs

 

 

-

 

 

 

(1,975

)

Change in outstanding checks in excess of cash

 

 

1,685

 

 

 

(467

)

Loan fees

 

 

(564

)

 

 

(377

)

Principal payments on long-term debt

 

 

(3,986

)

 

 

(58,497

)

Proceeds from long-term debt

 

 

-

 

 

 

72,619

 

Principal payments on finance leases

 

 

(156

)

 

 

(133

)

Payments of minimum tax withholdings on stock-based payment awards

 

 

(103

)

 

 

(976

)

Distributions to noncontrolling interest

 

 

-

 

 

 

(66

)

Repurchase of public warrants

 

 

-

 

 

 

(172

)

Payments on acquisition earnout

 

 

(2,207

)

 

 

(334

)

Net cash provided by (used in) financing activities

 

 

956

 

 

 

(9,295

)

Net change in cash, cash equivalents and restricted cash

 

 

3,379

 

 

 

(7,865

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

18,233

 

 

 

49,558

 

Cash and cash equivalents, and restricted cash, end of period

 

$

21,612

 

 

$

41,693

 

4


 

 

Six Months Ended December 31,

 

 

 

2023

 

 

2022

 

Supplemental cash flow information

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

Increase in operating lease assets and liabilities upon adoption of ASC 842

 

$

-

 

 

$

37,759

 

Increase in finance lease assets and liabilities upon adoption of ASC 842

 

$

-