Winc, Inc. (NYSE American: WBEV) posted its Q3 earnings after the bell yesterday. They didn’t disappoint. In fact, they delivered a strong operating performance that reached the high end of its prior guidance. And the takeaway for those that listened to the call is simple- WBEV preserves its status as one of the fastest-growing at-scale beverage companies in the United States. And in an uber-competitive landscape, that’s indeed an impressive accomplishment.
As noted, WBEV delivered as intended, which translates to business being better across the board compared to comparative periods. Well, one decline. They dropped some percentage points in DTC revenues. But considering that comparison is against a 2020 COVID backdrop where physical access to liquor stores was almost nill, losing only about 12% in that segment is still a pretty good score. Moreover, WBEV made up for that decline in other places.
At least five things from its Q3 report should inspire the bulls, and in turn, send share prices higher in the near and long term.
Revenues Growth Is Appreciable
First, total net revenues are in growth mode, rising 3.4% to $18.5 million. It may not be an earth-shattering increase, but keep in mind that any consumer market growth, especially last quarter, is good.
Even Walmart (WMT) and Target (TGT) had a rough go of late as preliminary holiday sales don’t look as robust as expected. Moreover, while the large caps are leading indexes to post triple-digit gains, making the markets appear strong, the mid and small cap stocks have been considerably weaker. Thus, chalk up revenue growth as a significant win. Managed revenue growth, like what Winc reported, tends to trump all in the long run.
Wholesale Growth Surges
Second, and this is a great number, wholesale revenues soared by 106.9% to $5.5 million. And that jump is a continuation of strength. In fact, Winc’s wholesale channel has been in hyper-growth mode throughout 2021. In addition to the surge in comparative Q3 revenues, sales are higher by 96.4% in the first nine months of 2021 compared to last year’s same period. Better still, sales are up 200% on a two-year stack basis.
The more excellent news is that guidance calls for more of the same. Even better, Winc is putting the pieces in place to accelerate the trend. That leads into the third highlight.
Retail Channel Relationships Reach 11,476
There, Winc’s new retailer relationships result in an accelerating expansion of the number of locations where customers can find its products. By the way, those new relationships combine with improving performance at their existing retail partnerships. Thus, that sales channel is performing at a high level. Moreover, recent placements put Winc brands at some of the highest volume retailers in the country, including Walmart, Target, and Trader Joe’s.
Of course, that’s just a few. Winc noted they now have an active retail account base of 11,476. Still, while impressive, Winc calls it a starting point, with investment in those relationships a conduit to Winc reaching its goal of 50,000 active retail accounts within the next few years. Notably, scoring that 11,476 level was a 53% spike compared to Q2 2020. And that surge leads into the next item on the list.
Additions To Core Brands
Also attracting the right kind of attention is that Winc’s five core brands grew to a total of 44,797 cases, a 34% increase over the comparative period. And Winc says it expects to add to that list with solid performances from its Pizzalto, Les Hauts De Lagarde, and Cherries and Rainbows, leading Winc to believe those three brands can add to its core brand list by the end of 2022.
If so, the additional scale of adding the three products would bring Winc’s growing and diversified suite of proprietary core brands to a total of eight. Keep in mind that its flagship Summer Water brand also continues to see strong overall sales and retail placement growth.
Even better, Winc noted that of all rosé wines reported in the Nielsen Wine Report, its Summer Water brand has the 4th highest sales growth rate and second smallest all-commodity volume. That suggests that the brand is under-penetrated and could accelerate growth through door expansion, especially considering its highly competitive growth rate at existing placements.
Hence, the update there is excellent there as well.
Strong Guidance Is The Bullet Point
Last but not least, guidance is strong. And that matters. In addition to Winc’s average order volume being higher by about 15% compared to 2020, Winc is heading into 2022 with a revenue-generating tailwind.
Also, after completing its $22 million IPO last month, its balance sheet is strong, with more than $18 million in cash and less than $7 million in total debt. Further, Winc’s capital structure is investor-friendly, with only 13,159,170 shares of common stock outstanding and 14,125,942 shares outstanding on a fully diluted basis. That keeps the trading float tight as well.
The best part of the guidance- Winc says it’s positioned for growth despite logistical headwinds. They said they have secured the glass for bottling, had a great harvest, and have adequate labor to meet rising demand. Hence, all systems are go for next year. And from an investor’s perspective, especially the savvy ones that don’t look back, Winc’s forecast to better already impressive results should inspire investor confidence going forward.
Solid Quarter With Better To Come
Here’s the most excellent news. Any of the above would be an impressive quarterly delivery. But, combining all five make Winc’s Q3 an outstanding quarter indeed. Thus, while history can guide, current and future performance will provide a more appropriate valuation. And except for maybe some end-of-year portfolio maneuvering, that valuation should come with a considerable upside bias.
Indeed, give credit where it’s due. Consumer markets have been anything but ordinary for the past 24 months. Yet, even in the face of market adversity, Winc delivered a solid Q3. And better still, set the 2022 stage for more good to come. Thus, calculating the sum of its parts, the report should do well to provoke a buy-the-news consideration.
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