Brown Forman Inc · NYSE:BF.A
Brown Forman — Q1 2019 Earnings Presentation
19 slides from Brown Forman's earnings presentation, Aug 29, 2018
Slide 1: 1Q19 Results & FY19 Outlook
1Q19 Results & FY19 Outlook August 29, 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains statements, estimates, and projections that are “forward-looking statements” as defined under U.S. federal securities laws. Words such as “aim,” “anticipate,” “aspire,” “believe,” “can,” “continue,” “could,” “envision,” “estimate,” “expect,” “exp
Slide 3: 1Q19 Highlights and FY19 Outlook
1Q19 Highlights and FY19 Outlook Reported Underlying Operating Fiscal 2019 Outlook Results Net Sales1 Leverage • +6-7% underlying net • Net sales +6% • Underlying net sales +9% • Underlying operating sales growth ◦ Broad-based income +10% • Operating income +7% geographic and • +4-6% underlying ◦ Gr
Slide 4: 1Q19 Results - Continued Momentum in Top and Bottom Line Growth
1Q19 Results - Continued Momentum in Top and Bottom Line Growth Reported New Foreign Estimated Underlying Change Accounting Exchange Net Change In Change (%) Standard* Impact Distributor (%) (+/-) (+/-) Inventories (+/-) Net Sales 6% 1% 2% -1% 9% Gross Profit 6% 2% 2% -1% 9% Advertising 14% 4% —% —%
Slide 5: 1Q19 Reported Growth of 6% Driven by Strong Underlying Net Sales Growth of 9%
1Q19 Reported Growth of 6% Driven by Strong Underlying Net Sales Growth of 9% +6% +1% +2% -1% +9% Reported New Accounting Foreign Estimated Underlying Standard* Exchange Net Change in Distributor Inventories 5 * Adoption of ASC 606 (Revenue from Contracts with Customers)
Slide 6: 1Q19 Net Sales Growth Driven by Broad-based Geographic Gains
1Q19 Net Sales Growth Driven by Broad-based Geographic Gains Reported Underlying +24% +22% +16% +12% +11% 9% +7% +6% +2% —% United Developed Emerging Travel Retail Total United Developed Emerging Travel Retail Total States International States International 6 * See appendix for additional details
Slide 7: Balanced Growth Across Our Top Markets
Balanced Growth Across Our Top Markets 1Q19 Net Sales Growth - Reported (Underlying) United States France 0% (+2%) -1% (+3%) Volume-driven Growth led by JDTW growth against a and JDTH tough comparison United Kingdom Poland +19% (+33%) +8% (+4%) Higher volumes and favorable Volume growth led by mix e
Slide 8: Continued Acceleration in Emerging Markets
Continued Acceleration in Emerging Markets (Two Year Stack*) Underlying Net Sales Growth 20% 15% 10% 5% 0% 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 * "Two year stack" is the two year compounded growth rate of underlying net sales. ** Please see "Note 2 - Non-GAAP Financial Measures" in the accom
Slide 9: Broad-Based Portfolio Growth
Broad-Based Portfolio Growth 1Q19 Net Sales Growth - Reported (Underlying) Jack Daniel's Family Old Forester & Woodford Reserve +7% (+10%) +27% (+29%) Tequilas - Herradura, el Jimador & New Mix +6% (+9%) * See appendix for additional details 9
Slide 10: Modest Reported Gross Margin Expansion in 1Q19
Modest Reported Gross Margin Expansion in 1Q19 +0.4% +0.1% 68.2% 68.1% -0.4% FY18 Underlying Change/ New Accounting Foreign FY19 Other Standard* Exchange 10 * Adoption of ASC 606 (Revenue from Contracts with Customers)
Slide 11: 1Q19 Underlying Operating Income Growth led by Strong Underlying Net Sales Growth
1Q19 Underlying Operating Income Growth led by Strong Underlying Net Sales Growth Three Months Ended July 31, 2018 Reported Change Underlying Change (%) (%) Net Sales 6% 9% Gross Profit 6% 9% Advertising 14% 17% SG&A 4% 5% Operating Income 7% 10% Gross margin 0.1% points Operating margin 0.5% points
Slide 12: Fiscal 2019 Outlook
Fiscal 2019 Outlook Underlying Underlying Net Sales Operating Income Diluted EPS Growth Growth 6 - 7% 4 - 6% $1.65 - $1.75 11 - 18% Growth 12
Slide 13: Fiscal 2019 Outlook
Fiscal 2019 Outlook EPS Prior FY19 EPS Outlook $1.75 - $1.85 Net Change to OI Growth (0.06) Additional FX Headwind and Other (0.04) FY19 Reported EPS Outlook $1.65 - $1.75 YOY Reported EPS Growth 11% - 18% 13
Slide 14: Appendix
Appendix 14
Slide 15: Non-GAAP Reconciliation
Non-GAAP Reconciliation We use certain financial measures in this presentation that are not measures of financial performance under U.S. generally accepted accounting principles (GAAP). These non-GAAP measures, defined below, should be viewed as supplements to (not substitutes for) our results of op
Slide 16: Definitions
Definitions From time to time, to explain our results of operations or to highlight trends and uncertainties affecting our business, we aggregate markets according to stage of economic development as defined by the International Monetary Fund (IMF) and we aggregate brands by spirits category. Below,
Slide 17: Definitions
Definitions Other Metrics. • “Depletions.” We generally record revenues when we ship our products to our customers. Depending on our route-to-consumer (RTC), we ship products to either (a) retail or wholesale customers in owned distribution markets or (b) our distributor customers in other markets.
Slide 18: Reconciliation
Reconciliation 1Q19 Net Sales Growth by Top Markets Three Months Ending July 31, 2018 Estimated Net Change in New Accounting Geographic area Reported % Foreign Exchange (+/-) Distributor Inventories Underlying % Standard* (+/-) (+/-) United States —% 1% —% 1% 2% Developed International 12% 2% 6% -3%
Slide 19: Reconciliation
Reconciliation 1Q19 Net Sales Growth for Aggregated Brands Three Months Ending July 31, 2018 Net Change in Estimated New Accounting Aggregated Brands Reported % Foreign Exchange (+/-) Distributor Inventories Underlying % Standard* (+/-) (+/-) Jack Daniel's Family of 7% 1% 3% -2% 10% Brands Old Fores