# EDGAR Filing Document

**Accession Number:** 0001835256
**File Stem:** 0001835256-23-000013
**Filing Date:** 2023-3
**Character Count:** 38707
**Document Hash:** 6fcae6bb0b8e1bc3b599f939bf82b9b9
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001835256-23-000013.hdr.sgml**: 20230308

**ACCESSION NUMBER**: 0001835256-23-000013

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 14

**CONFORMED PERIOD OF REPORT**: 20230308

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230308

**DATE AS OF CHANGE**: 20230308

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Duckhorn Portfolio, Inc.
- **CENTRAL INDEX KEY:** 0001835256
- **STANDARD INDUSTRIAL CLASSIFICATION:** BEVERAGES [2080]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 0731

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-40240
- **FILM NUMBER:** 23716211

**BUSINESS ADDRESS:**
- **STREET 1:** 1201 DOWDELL LANE
- **CITY:** SAINT HELENA
- **STATE:** CA
- **ZIP:** 94574
- **BUSINESS PHONE:** 707-963-7108

**MAIL ADDRESS:**
- **STREET 1:** 1201 DOWDELL LANE
- **CITY:** SAINT HELENA
- **STATE:** CA
- **ZIP:** 94574

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Mallard Intermediate, Inc.
- **DATE OF NAME CHANGE:** 20201207

?xml version="1.0" ? napa-20230308

**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 8-K** 

**CURRENT REPORT**

Pursuant to Section 13 or 15(d)

of The Securities Exchange Act of 1934

**Date of Report (Date of earliest event reported): March 8, 2023**

**The Duckhorn Portfolio, Inc.** 

(Exact name of registrant as specified in its charter)

---

| | | |
|:---|:---|:---|
| **Delaware** | **001-40240** | **81-3866305** |
| (State or other jurisdiction of incorporation or organization) | (Commission file number) | (I.R.S. Employer Identification No.) |

---

**1201 Dowdell Lane Saint Helena, CA 94574**

(Address, including zip code, of Principal Executive Offices)

**(707) 302-2658** 

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e- 4(c))

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, par value $0.01 per share | NAPA | New York Stock Exchange |

---

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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. ☐

------

**Item 2.02 Results of Operations and Financial Condition.**

On March 8, 2023, The Duckhorn Portfolio, Inc. (the "Company") issued a press release announcing its financial results for its second quarter ended January 31, 2023. A copy of the press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference into this Item 2.02.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1, shall not be deemed "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

**Item 9.01 Financial Statements and Exhibits.**

(d) Exhibits

---

| | |
|:---|:---|
| **Exhibit Number** | **Description** |
| 99.1 | <u>[Press release dated March 8, 2023](fy23q2-ex991_earningsrelea.htm)</u> |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |

---

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

---

| | | |
|:---|:---|:---|
| | **The Duckhorn Portfolio, Inc.** | **The Duckhorn Portfolio, Inc.** |
| Date: March 8, 2023 | By: | /s/ S.B.A. Sullivan |
|  |  | Sean Sullivan |
|  |  | Executive Vice President, Chief Strategy and Legal Officer |

---

## Exhibit 99.1

**Exhibit 99.1**

![image_0.jpg](image_0.jpg)

**The Duckhorn Portfolio Announces Second Quarter 2023 Financial Results**

***Net Sales of $103.5 million***

***Net Income of $14.9 million; Adjusted Net Income of $21.1 million***

***Adjusted EBITDA of $38.8 million***

***Raises Fiscal Year 2023 Net Sales, Adjusted EBITDA and Adjusted EPS Guidance***

St. Helena, CA, March 8, 2023 – The Duckhorn Portfolio, Inc. (NYSE: NAPA) (the "Company") today reported its financial results for the three months ended January 31, 2023.

**Second Quarter 2023 Highlights**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Net sales were $103.5 million, an increase of $4.8 million, or 4.8%, versus the prior year period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Gross profit was $55.2 million, an increase of $5.7 million, or 11.5%, versus the prior year period. Gross profit margin was 53.3%, up 320 basis points versus the prior year period. Adjusted gross profit was $55.5 million, an increase of $5.7 million, or 11.6%, versus the prior year period. Adjusted gross profit margin was 53.6%, up 320 basis points versus the prior year period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Net income was $14.9 million, or $0.13 per diluted share, versus $17.9 million, or $0.16 per diluted share, in the prior year period. Adjusted net income was $21.1 million, or $0.18 per diluted share, versus $19.5 million, or $0.17 per diluted share, in the prior year period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Adjusted EBITDA was $38.8 million, an increase of $4.5 million, or 13.1%, and margin increased 280 basis points versus the prior year period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;▪ Cash was $7.3 million as of January 31, 2023. The Company's leverage ratio was 1.7x net debt (net of deferred financing costs), to trailing twelve months adjusted EBITDA.

"Our second quarter results are a testament to the successful execution of our growth strategy as we continue to consistently take share and outperform our peers in the high growth luxury subsegment of the wine industry," commented Alex Ryan, President, Chief Executive Officer and Chairman. "Our robust performance in the first half of the year reflects both the strength of our luxury portfolio and the resilience of our customers, who continue to trust and choose our winery brands."

Ryan continued, "On the back of another strong quarter, we are raising and tightening the ranges of our Fiscal 2023 net sales, adjusted EBITDA and adjusted EPS guidance. We have a proven track record of delivering profitable, sustainable growth and remain confident in reaching our upwardly revised financial guidance in 2023 and maximizing shareholder value in the years to come."

------

**Second Quarter 2023 Results**

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| | | |
|:---|:---|:---|
| | **Three months ended January 31,** | **Three months ended January 31,** |
| | **2023** | **2022** |
| Net sales growth | 4.8% | 18.0% |
| Volume contribution | (0.4)% | 24.8% |
| Price / mix contribution | 5.2% | (6.8)% |

---

---

| | | |
|:---|:---|:---|
| | **Three months ended January 31,** | **Three months ended January 31,** |
| | **2023** | **2022** |
| Wholesale – Distributors | 61.3% | 67.2% |
| Wholesale – California direct to trade | 19.1 | 19.8 |
| DTC | 19.6 | 13.0 |
| Net sales | 100.0% | 100.0% |

---

Net sales were $103.5 million, an increase of $4.8 million, or 4.8%, versus $98.7 million in the prior year period. The increase in net sales was driven by positive price/mix contribution, mainly attributable to strong DTC channel performance, including the second quarter Kosta Browne offerings that were met with robust demand. Price increases primarily taken in our wholesale channels further supported price/mix contribution, which more than offset lower volume contribution than the prior year period.

Gross profit was $55.2 million, an increase of $5.7 million, or 11.5%, versus the prior year period. Gross profit margin was 53.3%, improving 320 basis points versus the prior year period. Adjusted gross profit was $55.5 million, an increase of $5.7 million, or 11.6%, versus the prior year period, and adjusted gross profit margin was 53.6%, up 320 basis points versus the prior year period. Margins expanded with the combined effects of favorable brand and channel mix compared to the prior year period, as well as planned price increases.

Total selling, general and administrative expenses were $29.6 million, an increase of $5.7 million, or 24.0%, versus $23.8 million in the prior year period. The increase was largely attributable to higher professional fees incurred in the second quarter. Selling, general and administrative expenses also reflect our previously announced higher compensation costs, driven by strategic investments to bolster our sales team and to support future growth.

Net income was $14.9 million, or $0.13 per diluted share, versus $17.9 million, or $0.16 per diluted share, in the prior year period. Adjusted net income was $21.1 million, or $0.18 per diluted share, versus $19.5 million, or $0.17 per diluted share, in the prior year period. The results for the quarter were driven by higher net sales and gross profit, partially offset by increases in selling, general and administrative expenses, interest expense, and depreciation and amortization expense compared to the prior year period.

Adjusted EBITDA was $38.8 million, an increase of $4.5 million, or 13.1%, versus $34.3 million in the prior year period. Adjusted EBITDA margin increased 280 basis points versus the prior year period. These increases were primarily the result of net sales benefitting from favorable brand and channel mix, price increases and the change in cadence of our Kosta Browne offerings. The increase in adjusted EBITDA was partially offset by increases in selling, general and administrative expenses noted earlier.

**Fiscal Year 2023 Guidance**

The Company is raising its previously provided fiscal 2023 guidance.

The Company's upwardly revised guidance ranges are presented below for fiscal year 2023:

------

---

| | | |
|:---|:---|:---|
| (amounts in millions, except per share data and percentages) | **Fiscal year ended July 31, 2023** | **Fiscal year ended July 31, 2023** |
| Net sales | $398 | $404 |
| Adjusted EBITDA | $135 | $138 |
| Adjusted EPS | $0.63 | $0.65 |
| Diluted share count | 115 | 116 |
| Effective tax rate | 25% | 27% |

---

**Conference Call and Webcast**

The Company will host a conference call and webcast today to discuss these results at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Investors interested in participating in the live call can dial 844-200-6205 from the U.S. and 929-526-1599 internationally, and enter confirmation code 690617. A telephone replay will be available approximately two hours after the call concludes through Wednesday, March 22, 2023 by dialing 866-813-9403 from the U.S., or +44 204-525-0658 from international locations, and entering confirmation code 981056. There will also be a simultaneous, live webcast available on the Company's investor relations website at https://ir.duckhorn.com. The webcast will be archived for 30 days.

**About The Duckhorn Portfolio, Inc.**

The Duckhorn Portfolio is North America's premier luxury wine company, with ten wineries, eight state-of-the-art winemaking facilities, seven tasting rooms and over 1,100 coveted acres of vineyards spanning 32 Estate properties. Established in 1976, when vintners Dan and Margaret Duckhorn founded Napa Valley's Duckhorn Vineyards, today, our portfolio features some of North America's most revered wineries, including Duckhorn Vineyards, Decoy, Paraduxx, Goldeneye, Migration, Canvasback, Calera, Kosta Browne, Greenwing and Postmark. Sourcing grapes from our own Estate vineyards and fine growers in Napa Valley, Sonoma County, Anderson Valley, California's North and Central coasts, and Washington State, we offer a curated and comprehensive portfolio of acclaimed luxury wines with price points ranging from $20 to $200 across more than 15 varietals and 31 appellations. Our wines are available throughout the United States, on five continents, and in more than 50 countries around the world. To learn more, visit us at: https://www.duckhornportfolio.com/. Investors can access information on our investor relations website at: https://ir.duckhorn.com.

**Use of Non-GAAP Financial Information**

In addition to the Company's results, which are determined in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company believes the following non-GAAP measures presented in this press release and discussed on the related teleconference call are useful in evaluating its operating performance: adjusted gross profit, adjusted EBITDA, adjusted net income and adjusted EPS. Certain of these non-GAAP measures exclude depreciation and amortization, non-cash equity-based compensation expense, purchase accounting adjustments, casualty losses or gains, impairment losses, inventory write-downs, changes in the fair value of derivatives, and certain other items, net of the tax effects of all such adjustments, which are not related to the Company's core operating performance. The Company believes that these non-GAAP financial measures are provided to enhance the reader's understanding of our past financial performance and our prospects for the future. The Company's management team uses these non-GAAP financial measures to evaluate business performance in comparison to budgets, forecasts and prior period financial results. The non-GAAP financial information is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled non-GAAP measures used by other companies. A reconciliation is provided herein for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with

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GAAP. Readers are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

**Forward-Looking Statements**

This press release includes forward-looking statements. These forward-looking statements generally can be identified by the use of words such as "anticipate," "expect," "plan," "could," "may," "will," "believe," "estimate," "forecast," "goal," "project," and other words of similar meaning. These forward-looking statements address various matters including statements regarding the timing or nature of future operating or financial performance or other events. For example, all statements The Duckhorn Portfolio makes relating to its estimated and projected financial results or its plans and objectives for future operations, growth initiatives or strategies are forward-looking statements. Each forward-looking statement contained in this press release is subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statement. Applicable risks and uncertainties include, among others, the Company's ability to manage the growth of its business; the Company's reliance on its brand name, reputation and product quality; the effectiveness of the Company's marketing and advertising programs, including the consumer reception of the launch and expansion of our product offerings; general competitive conditions, including actions the Company's competitors may take to grow their businesses; overall decline in the health of the economy and the impact of inflation on consumer discretionary spending and consumer demand for wine; the occurrence of severe weather events (including fires, floods and earthquakes), catastrophic health events, natural or man-made disasters, social and political conditions, war or civil unrest; risks associated with disruptions in the Company's supply chain for grapes and raw and processed materials, including corks, glass bottles, barrels, winemaking additives and agents, water and other supplies; risks associated with the disruption of the delivery of the Company's wine to customers; the impact of COVID-19 and its variants on the Company's customers, suppliers, business operations and financial results; disrupted or delayed service by the distributors and government agencies the Company relies on for the distribution of its wines outside of California; the Company's ability to successfully execute its growth strategy; decreases in the Company's wine score ratings by wine rating organizations; quarterly and seasonal fluctuations in the Company's operating results; the Company's success in retaining or recruiting, or changes required in, its officers, key employees or directors; the Company's ability to protect its trademarks and other intellectual property rights, including its brand and reputation; the Company's ability to comply with laws and regulations affecting its business, including those relating to the manufacture, sale and distribution of wine; the risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to both domestic and to international markets; claims, demands and lawsuits to which the Company is, and may in the future, be subject and the risk that its insurance or indemnities coverage may not be sufficient; the Company's ability to operate, update or implement its IT systems; the Company's ability to successfully pursue strategic acquisitions and integrate acquired businesses; the Company's potential ability to obtain additional financing when and if needed; the Company's substantial indebtedness and its ability to maintain compliance with restrictive covenants in the documents governing such indebtedness; the Company's sponsor's significant influence over the Company, and the Company's status as a "controlled company" under the rules of the New York Stock Exchange; the potential liquidity and trading of the Company's securities; the future trading prices of the Company's common stock and the impact of securities analysts' reports on these prices; and the risks identified in the Company's other filings with the SEC. The Company cautions investors not to place considerable reliance on the forward-looking statements contained in this press release. You are encouraged to read the Company's filings with the SEC, available at www.sec.gov, for a discussion of these and other risks and uncertainties. The forward-looking statements in this press release speak only as of the date of this document, and the Company undertakes no obligation to update or revise any of these statements. The Company's business is subject to substantial risks and uncertainties, including those referenced above. Investors, potential investors, and others should give careful consideration to these risks and uncertainties.

------

**<u>Contacts</u>**

*Investor Contact*

Chris Mandeville, ICR

ir@duckhorn.com

707-302-2635

*Media Contact*

Jessica Liddell, ICR

DuckhornPR@icrinc.com

203-682-8200

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**THE DUCKHORN PORTFOLIO, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

***(Unaudited, amounts in thousands, except shares and per share data)***

---

| | | |
|:---|:---|:---|
| | **January 31, 2023** | **July 31, 2022** |
| **ASSETS** | | |
| **Current assets** | | |
| &nbsp;&nbsp;&nbsp;Cash | $7292 | $3167 |
| &nbsp;&nbsp;&nbsp;Accounts receivable trade, net | 48324 | 37026 |
| &nbsp;&nbsp;&nbsp;Inventories | 327024 | 285430 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 13125 | 13898 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total current assets** | **395765** | **339521** |
| **Long-term assets** |  |  |
| &nbsp;&nbsp;Property and equipment, net | 271217 | 269659 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets | 21777 | 23375 |
| &nbsp;&nbsp;&nbsp;Intangible assets, net | 188006 | 191786 |
| &nbsp;&nbsp;&nbsp;Goodwill | 425209 | 425209 |
| &nbsp;&nbsp;&nbsp;Other long-term assets | 5487 | 1963 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total long-term assets** | **911696** | **911992** |
| **Total assets** | $**1307461** | $**1251513** |
| **LIABILITIES AND EQUITY** | **LIABILITIES AND EQUITY** | **LIABILITIES AND EQUITY** |
| **Current liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable | $18410 | $3382 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 29071 | 29475 |
| &nbsp;&nbsp;&nbsp;Accrued compensation | 9224 | 12893 |
| &nbsp;&nbsp;&nbsp;Deferred revenue | 3285 | 272 |
| &nbsp;&nbsp;&nbsp;Current operating lease liabilities | 3603 | 3498 |
| &nbsp;&nbsp;&nbsp;Current maturities of long-term debt | 9721 | 9810 |
| &nbsp;&nbsp;&nbsp;Other current liabilities | 3056 | 672 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total current liabilities** | **76370** | **60002** |
| **Long-term liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;Revolving line of credit, net |  | 108674 |
| &nbsp;&nbsp;&nbsp;Long-term debt, net of current maturities and debt issuance costs | 215633 | 105074 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 18000 | 19732 |
| &nbsp;&nbsp;&nbsp;Derivative instrument | 1537 |  |
| &nbsp;&nbsp;&nbsp;Deferred income taxes | 90483 | 90483 |
| &nbsp;&nbsp;&nbsp;Other long-term liabilities | 387 | 387 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total long-term liabilities** | **326040** | **324350** |
| **Total liabilities** | **402410** | **384352** |
| **Equity** |  |  |
| &nbsp;&nbsp;Common stock, $0.01 par value; 500,000,000 shares authorized; 115,219,396 issued and outstanding at January 31, 2023 and 115,184,161 issued and outstanding at July 31, 2022 | 1152 | 1152 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 734763 | 731597 |
| &nbsp;&nbsp;&nbsp;Retained earnings | 168556 | 133824 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Total The Duckhorn Portfolio, Inc. equity** | **904471** | **866573** |
| &nbsp;&nbsp;Non-controlling interest | 580 | 588 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total equity** | **905051** | **867161** |
| **Total liabilities and equity** | $**1307461** | $**1251513** |

---

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**THE DUCKHORN PORTFOLIO, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

***(Unaudited, amounts in thousands, except shares and per share data)***

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Three months ended January 31,** | **Three months ended January 31,** | **Six months ended January 31,** | **Six months ended January 31,** |
| | **2023** | **2022** | **2023** | **2022** |
| Net sales (net of excise taxes of $1,469, $1,507, $3,052 and $2,983, respectively) | $103488 | $98736 | $211659 | $202917 |
| Cost of sales | 48302 | 49259 | 101763 | 101030 |
| **Gross profit** | **55186** | **49477** | **109896** | **101887** |
| &nbsp;&nbsp;&nbsp;Selling, general and administrative expenses | 29579 | 23845 | 55318 | 47052 |
| **Income from operations** | **25607** | **25632** | **54578** | **54835** |
| &nbsp;&nbsp;&nbsp;Interest expense | 2684 | 1636 | 4846 | 3242 |
| &nbsp;&nbsp;&nbsp;Other expense (income), net | 2743 | (338) | 2656 | (1431) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total other expenses, net | 5427 | 1298 | 7502 | 1811 |
| **Income before income taxes** | **20180** | **24334** | **47076** | **53024** |
| Income tax expense | 5265 | 6407 | 12352 | 13784 |
| **Net income** | **14915** | **17927** | **34724** | **39240** |
| Less: Net loss (income) attributable to non-controlling interest | 2 | 5 | 8 | (35) |
| **Net income attributable to The Duckhorn Portfolio, Inc.** | $**14917** | $**17932** | $**34732** | $**39205** |
| **Net income per share of common stock:** |  |  |  |  |
| &nbsp;&nbsp;Basic | $0.13 | $0.16 | $0.30 | $0.34 |
| &nbsp;&nbsp;Diluted | $0.13 | $0.16 | $0.30 | $0.34 |
| **Weighted average shares of common stock outstanding:** |  |  |  |  |
| &nbsp;&nbsp;Basic | 115191575 | 115049395 | 115187868 | 115048094 |
| &nbsp;&nbsp;Diluted | 115327660 | 115389502 | 115424809 | 115391011 |

---

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**THE DUCKHORN PORTFOLIO, INC.**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

***(Unaudited, amounts in thousands)***

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| | | |
|:---|:---|:---|
| | **Six months ended January 31,** | **Six months ended January 31,** |
| | **2023** | **2022** |
| **Cash flows from operating activities** |  |  |
| &nbsp;&nbsp;&nbsp;Net income | $34724 | $39240 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 13290 | 11047 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on disposal of assets | 93 | (13) |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of derivatives | 2061 | (957) |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt issuance costs | 593 | 804 |
| &nbsp;&nbsp;&nbsp;&nbsp;Equity-based compensation | 2985 | 2875 |
| &nbsp;&nbsp;&nbsp;Change in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable trade, net | (11298) | (9755) |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventories | (39881) | (28187) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 26 | (361) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other long-term assets | (555) | (217) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 15020 | 6377 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | 830 | 6621 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued compensation | (3669) | (4129) |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 3013 | (2960) |
| &nbsp;&nbsp;&nbsp;&nbsp;Other current and long-term liabilities | 865 | (1557) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 18097 | 18828 |
| **Cash flows from investing activities** |  |  |
| &nbsp;&nbsp;&nbsp;Purchases of property and equipment, net of sales proceeds | (12388) | (23336) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | (12388) | (23336) |
| **Cash flows from financing activities** |  |  |
| &nbsp;&nbsp;&nbsp;Payments under line of credit | (119000) | (52000) |
| &nbsp;&nbsp;&nbsp;Borrowings under line of credit | 9000 | 63000 |
| &nbsp;&nbsp;&nbsp;Issuance of long-term debt | 225833 |  |
| &nbsp;&nbsp;&nbsp;Payments of long-term debt | (115166) | (5696) |
| &nbsp;&nbsp;&nbsp;Proceeds from employee stock purchase plan | 181 |  |
| &nbsp;&nbsp;&nbsp;Payments for debt issuance costs | (2432) |  |
| &nbsp;&nbsp;&nbsp;Payments of deferred offering costs |  | (270) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash (used in) provided by financing activities | (1584) | 5034 |
| **Net increase in cash** | 4125 | 526 |
| **Cash - Beginning of period** | 3167 | 4244 |
| **Cash - End of period** | $7292 | $4770 |
| **Supplemental cash-flow information** |  |  |
| &nbsp;&nbsp;&nbsp;Interest paid, net of amount capitalized | $1649 | $2479 |
| &nbsp;&nbsp;&nbsp;Income taxes paid | $10621 | $8014 |
| **Non-cash investing activities** |  |  |
| &nbsp;&nbsp;&nbsp;Property and equipment additions in accounts payable and accrued expenses | $467 | $193 |

---

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&nbsp;&nbsp;&nbsp;&nbsp;**THE DUCKHORN PORTFOLIO, INC.**

**RECONCILIATION OF NON-GAAP FINANCIAL MEASURES**

Adjusted gross profit, adjusted net income, adjusted EBITDA and adjusted EPS, collectively referred to as "Non-GAAP Financial Measures," are commonly used in the Company's industry and should not be construed as an alternative to net income or earnings per share as indicators of operating performance (as determined in accordance with GAAP). These Non-GAAP Financial Measures may not be comparable to similarly titled measures reported by other companies. The Company has included these Non-GAAP Financial Measures because it believes the measures provide management and investors with additional information to evaluate business performance in comparison to budgets, forecasts and prior year financial results.

Non-GAAP Financial Measures are adjusted to exclude certain items that affect comparability. The adjustments are itemized in the tables below. You are encouraged to evaluate these adjustments and the reason the Company considers them appropriate for supplemental analysis. In evaluating adjustments, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments set forth below. The presentation of Non-GAAP Financial Measures should not be construed as an inference that future results will be unaffected by unusual or recurring items.

***Adjusted EBITDA***

Adjusted EBITDA is a non-GAAP financial measure that the Company calculates as net income before interest, taxes, depreciation and amortization, non-cash equity-based compensation expense, purchase accounting adjustments, casualty losses or gains, changes in the fair value of derivatives and certain other items which are not related to our core operating performance. Adjusted EBITDA is a key performance measure the Company uses in evaluating its operational results. The Company believes adjusted EBITDA is a helpful measure to provide investors an understanding of how management regularly monitors the Company's core operating performance, as well as how management makes operational and strategic decisions in allocating resources. The Company believes adjusted EBITDA also provides management and investors consistency and comparability with the Company's past financial performance and facilitates period to period comparisons of operations, as it eliminates the effects of certain variations unrelated to its overall performance.

Adjusted EBITDA has certain limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Some of these limitations include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adjusted EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debt;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• other companies, including companies in the Company's industry, may calculate adjusted EBITDA differently, which reduce their usefulness as comparative measures.

Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including net income and the Company's other GAAP results. In evaluating adjusted EBITDA, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company's presentation of adjusted EBITDA should not be construed as an inference that the Company's future results will be unaffected by the types of items excluded from the calculation of adjusted EBITDA.

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***Adjusted Gross Profit***

Adjusted gross profit is a non-GAAP financial measure that the Company calculates as gross profit excluding the impact of purchase accounting adjustments (including depreciation and amortization related to purchase accounting), non-cash equity-based compensation expense and certain inventory charges. We believe adjusted gross profit is a useful measure to us and our investors to assist in evaluating our operating performance because it provides consistency and direct comparability with our past financial performance between fiscal periods, as the metric eliminates the effects of non-cash or other expenses unrelated to our core operating performance that would result in fluctuations in a given metric for reasons unrelated to overall continuing operating performance. Adjusted gross profit should not be considered a substitute for gross profit or any other measure of financial performance reported in accordance with GAAP.

***Adjusted Net Income***

Adjusted net income is a non-GAAP financial measure that the Company calculates as net income excluding the impact of non-cash equity-based compensation expense, purchase accounting adjustments, casualty losses or gains, impairment losses (including certain inventory charges), changes in the fair value of derivatives and certain other items unrelated to core operating performance, as well as the estimated income tax impacts of all such adjustments included in this non-GAAP performance measure. We believe adjusted net income assists us and our investors in evaluating our performance period-over-period. In calculating adjusted net income, we also calculate the following non-GAAP financial measures which adjust each GAAP-based financial measure for the relevant portion of each adjustment to reach adjusted net income:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Adjusted SG&A* – calculated as selling, general, and administrative expenses excluding the impacts of purchase accounting, transaction expenses and equity-based compensation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Adjusted income tax* – calculated as the tax effect of all adjustments to reach adjusted net income based on the applicable blended statutory tax rate for the period.

Adjusted net income should not be considered a substitute for net income or any other measure of financial performance reported in accordance with GAAP.

***Adjusted EPS***

Adjusted EPS is a non-GAAP financial measure that the Company calculates as adjusted net income divided by diluted share count for the applicable period. We believe adjusted EPS is useful to us and our investors because it improves the comparability of results of operations from period to period. Adjusted EPS should not be considered a substitute for net income per share or any other measure of financial performance reported in accordance with GAAP.

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**THE DUCKHORN PORTFOLIO, INC.**

**RECONCILIATION OF NON-GAAP FINANCIAL MEASURES** 

**Three months ended January 31, 2023 and 2022**

***(Unaudited, amounts in thousands, except shares and per share data)***

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Three months ended January 31, 2023** | **Three months ended January 31, 2023** | **Three months ended January 31, 2023** | **Three months ended January 31, 2023** | **Three months ended January 31, 2023** | **Three months ended January 31, 2023** | **Three months ended January 31, 2023** |
| | **Net <br>sales** | **Gross <br>profit** | **SG&A** | **Adjusted EBITDA** | **Income <br>tax** | **Net <br>income** | **Diluted <br>EPS** |
| **GAAP results** | $**103488** | $**55186** | $**29579** | $**14917** | $**5265** | $**14917** | $**0.13** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*Percentage of net sales* |  | *53.3 %* | *28.6 %* | *14.4 %* |  |  |  |
| &nbsp;&nbsp;Interest expense |  |  |  | 2684 |  |  |  |
| &nbsp;&nbsp;Income tax expense |  |  |  | 5265 |  |  |  |
| &nbsp;&nbsp;Depreciation and amortization expense |  | 116 | (1904) | 7533 |  |  |  |
| **EBITDA** |  |  |  | $**30399** |  |  |  |
| &nbsp;&nbsp;Purchase accounting adjustments |  | 65 |  | 65 | 17 | 48 |  |
| &nbsp;&nbsp;Transaction expenses |  |  | (3596) | 3596 | 939 | 2657 | 0.02 |
| &nbsp;&nbsp;Change in fair value of derivatives |  |  |  | 2429 | 634 | 1795 | 0.02 |
| &nbsp;&nbsp;Equity-based compensation |  | 96 | (1468) | 1564 | 400 | 1164 | 0.01 |
| &nbsp;&nbsp;Debt refinancing costs |  |  |  | 760 | 198 | 562 |  |
| **Non-GAAP results** | $**103488** | $**55463** | $**22611** | $**38813** | $**7453** | $**21143** | $**0.18** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*Percentage of net sales* |  | *53.6 %* | *21.8 %* | *37.5 %* |  |  |  |
|  | **Three months ended January 31, 2022** | **Three months ended January 31, 2022** | **Three months ended January 31, 2022** | **Three months ended January 31, 2022** | **Three months ended January 31, 2022** | **Three months ended January 31, 2022** | **Three months ended January 31, 2022** |
|  | **Net <br>sales** | **Gross <br>profit** | **SG&A** | **Adjusted EBITDA** | **Income <br>tax** | **Net <br>income** | **Diluted <br>EPS** |
| **GAAP results** | $**98736** | $**49477** | $**23845** | $**17932** | $**6407** | $**17932** | $**0.16** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*Percentage of net sales* |  | *50.1 %* | *24.2 %* | *18.2%* |  |  |  |
| &nbsp;&nbsp;Interest expense |  |  |  | 1636 |  |  |  |
| &nbsp;&nbsp;Income tax expense |  |  |  | 6407 |  |  |  |
| &nbsp;&nbsp;Depreciation and amortization expense |  | 143 | (1933) | 6280 |  |  |  |
| **EBITDA** |  |  |  | $**32255** |  |  |  |
| &nbsp;&nbsp;Purchase accounting adjustments |  | 99 |  | 99 | 26 | 73 |  |
| &nbsp;&nbsp;Transaction expenses |  |  | (1024) | 1024 | 267 | 757 | 0.01 |
| &nbsp;&nbsp;Change in fair value of derivatives |  |  |  | (515) | (134) | (381) |  |
| &nbsp;&nbsp;Equity-based compensation |  |  | (1199) | 1416 | 338 | 1078 | 0.01 |
| &nbsp;&nbsp;Wildfire costs |  |  |  | 31 | 8 | 23 |  |
| **Non-GAAP results** | $**98736** | $**49719** | $**19689** | $**34310** | $**6912** | $**19482** | $**0.17** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*Percentage of net sales* |  | *50.4 %* | *19.9 %* | *34.7 %* |  |  |  |

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Note: Sum of individual amounts may not recalculate due to rounding.

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