Greetings, welcome to the Boston Beer Company Q2 2023 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you, Mike. You may begin. Thank you. Good afternoon, and welcome. This is Mike Andrews, Associate General Counsel and Corporate Secretary of the Boston Beer Company. I'm pleased to kick off our 2023 second quarter earnings call. Joining the call from Boston Beer are Jim Koch, Founder and Chairman; Dave Burwick, our CEO; and Matt Murphy, our Chief Accounting Officer and Interim CFO. Before we discuss our business, I'll start with our disclaimer. As we state in our earnings release, some of the information we discuss and that may come up on this call reflects the Company's or management's expectations or predictions of the future. Such predictions are forward-looking statements. It's important to note that the Company's actual results could differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the Company's most recent 10-Q and 10-K. The Company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise. I will now pass it over to Jim for some introductory comments. Thanks, Mike. I'll begin my remarks this afternoon with a few introductory comments and then hand over to Dave, who will provide an overview of our business. Dave will then turn the call over to Matt, who will focus on the financial details of our second quarter results, as well as our outlook for the remainder of 2023. Immediately following Matt's comments, we'll open the line for questions. Our second quarter depletions decrease of 3% on a fiscal calendar basis and 7% on a comparable weeks basis was in line with our expectations. We saw strong performance in our largest brand, Twisted Tea, and we expect its continued success to have an even larger impact on our overall growth rates in the second half. In measured off-premise channels, Twisted Tea continued its strong dollar growth, up 38%, which was offset primarily by continued declines in Truly Hard Seltzer. We are making progress on operational plans to enhance our margins and began to see some benefits this quarter. Our multi-year initiatives to simplify our operations by mastering the complexity of our business and to align our cost structure more closely to volume expectations are progressing well. We are focused on keeping the strong momentum behind Twisted Tea and improving our Truly trends, while continuing to invest broadly across our entire portfolio and in new innovation, with the goal of returning our company to long-term sustainable growth. Based on our second quarter financial results, we've established plans to invest incrementally in media behind our Twisted Tea and Truly brands, starting immediately. We are thankful to our outstanding coworkers, distributors, and retailers who continue to support our business. We are proud to have just been named the number one beer industry supplier in the Tamarron Survey, the annual poll of beer distributors conducted by Tamarron Consulting, a consulting firm specializing in the alcoholic beverage distribution industry. It is our 6th number one ranking in a row, and 13th in the last 15 years. This is a result of the efforts of all Boston Beer coworkers to service and support our distributors' businesses and to the strong relationships we've built with them over many years. We continue to believe that we have the best group of distributors in the beer business. We believe that the beyond beer category, where we have an advantaged portfolio, will grow faster than the traditional beer market over the next several years. We expect the operational changes we are making this year, combined with our history of innovation, strong brands, and our top-ranked sales force, will help lead us to long-term success. Our strong balance sheet enables us to continue to invest in our brands and has allowed us to repurchase over $50 million in stock thus far in 2023. I will now pass it over to Dave for a more detailed overview of our business. Thanks, Jim. Good afternoon, everybody. As Jim mentioned, our second quarter volumes were in line with our expectations. Our fiscal calendar quarter depletions decreased 3%, while our comparable weeks depletions decreased 7%. This is due to the timing of the July 4th holiday relative to our 2023 and 2022 fiscal calendars. We improved our overall financial performance during the quarter and achieved gross margins of over 45%, while generating approximately $120 million in operating cash flow. Matt will discuss the financial results in his remarks, while I'll focus my commentary on our operating performance. Our strategic priorities remain unchanged. We're focusing our resources on sustaining Twisted Tea's industry-leading growth and turning Truly's volume trends- While improving our supply chain performance to enhance our gross margin and provide more funds to invest in our brands and our top-ranked industry sales force. As Jim also mentioned, we're encouraged by our second quarter financial performance, and we're investing in incremental media to further fuel Twisted Tea's growth and moderate Truly declines. We're doing so immediately to create an impact over the next several months. I'll now provide some color on our brands. Twisted Tea accelerated its growth trajectory in the second quarter, with 38% dollar sales growth, while adding $3.3 share points and expanding its overall share leadership to 27% of total FMB dollar sales in measured off-premise channels. The robust demand is a result of balanced efforts at growing both physical availability via improved geographic, channel, and package distribution, and mental availability via a highly effective brand-building campaign, increased media investment, and optimized packaging design that highlights the brand's distinctive assets. While we've struggled to keep up with demand for the Twisted Tea Party Pack, that is now the second largest and the fastest-growing SKU among all FMBs, we've improved our overall service levels versus the first half of last year and can support further growth acceleration. We remain confident that Twisted Tea will sustain its strong double-digit growth for the remainder of 2023 for many reasons. First, there's upside in growing brand awareness and household penetration, and we know our ad campaign's working. Second, the brand is underdeveloped with Black and Hispanic and Latino consumers. We're now seeing large household penetration increases as a result of our marketing efforts. Third, there's still ample room to expand distribution across channels and packages where other FMB competitors have far more presence. This includes on-premise, where Twisted Tea has close to a 60% share of FMBs and has driven the fifth most incremental cases year-to-date of any brand family across total beer. Additionally, Twisted Tea finished the spring space reset season with a 49% increase in shelf space. Those benefits will continue to fuel the business during the balance of the year and into 2024. Fourth, there's opportunity to widen the brand's presence in underdeveloped markets from Florida to Texas to California. Fifth, we're still in the early stages of Twisted Tea Light's national launch, and the sales per point is accelerating and exceeding our expectations, and it's proven to be about 85% incremental to the Twisted Tea portfolio. We've also expanded our light portfolio offerings with a new variety pack available in select, highly developed markets, and we're seeing some early success. Lastly, we recently announced we're testing a higher ABV version of Twisted Tea in select markets this summer. Called Twisted Tea Extreme, it is 8% ABV as part of our efforts to find future pathways to growth for all our brands by increasing occasions and adding new drinkers. Now on to Truly. We launched a major Truly refresh late in the second quarter, including brighter, easier-to-shop packaging that calls out our product improvement with real fruit juice, a new, more emotive and high-scoring ad campaign called Lightly Fantastic, increased media spend with a focus on digital and social, and new wholesaler execution priorities that focus on our lightly flavored lineup. We now have full distribution of the new Truly Hard Seltzer packaging, and our ad campaign has been running for six weeks. Our two new Truly Vodka Soda SKUs and package design hit the market starting in late June and will continue its rollout into early August. Additionally, during the second quarter, we launched the Red, White, and True lightly flavored variety pack, limited time offering, in support of our partnership as the first-ever official hard seltzer of U.S. Soccer, and received strong in-store wholesaler and retailer support. While the brand remains down about 3.3 volume share points year-to-date, we're seeing green shoots that we expect will have an accumulated impact in the balance of summer and into the fourth quarter. For example, our lightly flavored lineup of variety packs has gained both volume and dollar share of hard seltzer in the past four- and 13-week time frames, while 24-ounce single-serve gained 0.6 share points in the second quarter, driven by our lead style, Wild Berry, which grew 16% in the last four weeks. Lemonade and fruit punch share losses stabilized during the second quarter, while the margarita overlap and the iced tea discontinuation from 2022 are still weighing on total brand share and have accounted for about 75% of the brand share losses year-to-date. These overlaps will continue to moderate through the summer and drop off in the fourth quarter. While we're disappointed that we've not yet stemmed Truly's share losses, we believe we made the necessary changes to set the brand up for success and now need to keep our focus on the execution we know our wholesalers are capable of achieving. As evidence of our confidence in our direction, we're increasing our media spend for the balance of the year and will ensure that Truly is on air every single week. We're only eight weeks into the refresh, so we need to keep pushing hard with the initiatives we've put in place. We're encouraged that Truly maintains the second-highest sales per point in hard seltzer, 52% more productive than the number three brand, and the third highest sales per point in all of Beyond Beer. There remains a strong consumer base to build upon. Of note, Truly's share position has improved by one point from March to June. We're trending in the right direction. We recently announced we're testing a new Truly tequila product in several markets this summer as part of our efforts to grow the brand in all the occasions where refreshment, sessionability, and variety intersect. While maintaining Twisted Tea's double-digit growth and improving Truly's trajectory are our top priorities for the year, we have a broad portfolio, and we'll continue to support and build out our smaller brands. Sam Adams is holding its own in a difficult craft beer category, and we'll continue to invest behind our new remastered Boston Lager campaign and our seasonals, in addition to our non-alc portfolio, including Just the Haze and the newly released Gold Rush Pilsner, which grew 94% in dollars in the second quarter in measured off-premise channels. Our Sam Adams Boston Lager remaster program has improved Boston Lager volume trends by 6 points, and the total brand gained 0.3 share points of craft in the second quarter based on Beer Institute numbers. While Truly makes a play in vodka and tequila-based seltzers, Dogfish Head is gaining a foothold in the traditional canned cocktail segment and grew volume approximately 81% in the second quarter across all channels. Turning to our supply chain. We continue to modernize our supply chain through investments in equipment, capacity, and improved systems and processes. I'd like to broadly discuss the status of the three categories we focused on to drive improved margins. The first category is procurement savings. We've targeted savings initiatives across multiple areas, including raw materials and packaging, and achieved some benefit during the second quarter. We continue to review our contracts with our raw pack suppliers with the aim of adjusting these to be more reactive to changing demand. The next category is brewery performance. While we expect to always have a mix of internal and external production, we're focused on moving volume back to our internal breweries where possible, given our production cost advantage. We're evaluating our mix in a disciplined manner and focusing on improving our internal line stability and efficiencies, as well as adjusting contracts with our co-manufacturers as we adapt to changes in our volumes and product mix. The final category is waste and network optimization. We have initiatives to optimize our logistics, which reduce freight and warehousing costs over time. As we discussed on our last call, we're currently implementing systems to improve our forecasting and inventory management, which we expect to reduce inventory obsolescence over the balance of the year. We have multi-year savings plans across each of these categories, which we expect to generate significant long-term gross margin expansion. While it will take time to realize the full benefit, we began to see some benefit in the second quarter, primarily related to procurement savings and expect to see further benefits in the remainder of the year. We're also closely managing our operating expenses. We expect to use the cost savings that these efforts will generate to support increased brand spend, and within brand spend, both converting non-working to working dollars and shifting our mix from traditional to digital and social media. Turning to guidance. Our fiscal week depletion trends for the first 29 weeks of 2023 have declined 6% from 2022. We're reiterating our shipments and depletions expectation of down 2% to down 8% for the full-year of 2023. Where we land within that range is dependent on a variety of factors, including the overall economic environment and consumer demand balance of year. I'll hand it over to Matt to discuss second quarter financials and our full-year guidance. Thank you, Dave, and good afternoon, everyone. As Jim and Dave mentioned, second quarter volumes were in line with our expectations, and we are in the process of implementing our strategies to invest behind Twisted Tea while enhancing the Truly brand proposition and improving our supply chain. Fiscal calendar depletions for the quarter decreased 3% from the prior year, reflecting decreases in our Truly, Angry Orchard, Hard Mountain Dew, and Samuel Adams brands, partially offset by increases in our Twisted Tea and Dogfish Head brands. Shipment volume for the quarter was approximately 2.3 million barrels, a 4.5% decrease from the prior year. We believe distributor inventory as of July 1, 2023, averaged approximately three weeks on hand and was at an appropriate level for each of our brands, except for certain Twisted Tea brand packages that were below targeted levels due to higher than forecasted consumer demand. Our second quarter gross margin of 45.4% increased 230 basis points from the 43.1% margin realized in the second quarter of 2022. This was primarily due to price increases and procurement savings, which more than offset inflationary costs. Advertising, promotional, and selling expenses for the second quarter decreased $5.5 million or 3.6% from the second quarter of 2022, primarily due to decreased freight to distributors, partially offset by an increase in brand and selling costs. General and administrative expenses increased by $6.1 million or 15.6% from the second quarter of 2022, primarily due to increased consulting and legal costs and higher salary and benefits costs. For the second quarter, we reported a net income of $58 million, or $4.72 per diluted share, compared to prior year net income of $53.3 million, or $4.31 per diluted share. This increase between periods was primarily driven by higher gross margins and lower operating expenses, partially offset by lower net revenue and a higher tax rate. Turning to guidance. Based on information of which we are currently aware, we are reiterating our full-year 2023 guidance range of shipments and depletions down 2%-8% and earnings per diluted share of $6-$10. This projection is highly sensitive to changes in volume, particularly related to the hard seltzer category, supply chain performance, and inflationary and recessionary impacts on consumer spending. We project increases in revenue per barrel of between 1%-3%. Full- year 2023 gross margins are expected to be between 41%-43%. Our full-year investments in brand spend within advertising, promotional, and selling expenses are expected to increase between $20 million-$40 million, which is an increase from our previous guidance range of a decrease of $5 million to an increase of $15 million. This guidance does not include any changes in freight costs for the shipment of products to our distributors. We've experienced lower than expected freight costs year-to-date, which in addition to gross margin performance, allows us to further support our brand. We continue to estimate our full-year effective tax rate to be approximately 20%. As you model out the remainder of the year, please keep in mind these factors. First, our guidance on depletions and shipments includes the estimated negative impact of approximately 1 percentage point, due to the fact that fiscal year 2022 had 53 weeks and fiscal year 2023 will have 52 weeks. On a 52-week comparable basis, we expect depletions and shipments to decrease between 1% and 7%. Second, the 53rd week overlap is expected to negatively impact fourth quarter volume trends by approximately 6 percentage points. Also, as we had anticipated, we finished the first half at the lower end of our shipment guidance range on a comparable weeks basis. We estimate that second half shipments will benefit from the expected continued growth of Twisted Tea, which is our largest brand, the lapping of last year's Truly Margarita launch, and additional investments in advertising spend in the second half of the year. Finally, our guidance incorporates an expectation of shortfall fees, which primarily impact the fourth quarter. Therefore, we expect year-over-year gross margin improvement to be lower in the fourth quarter relative to earlier quarters. Turning to capital allocation. We ended the quarter with a cash balance of $208 million and an unused credit line of $150 million, which allows us to invest in our base business, fund future growth initiatives, and return cash to shareholders through our share buyback. For the full-year, we expect capital expenditures of between $100 million and $140 million. These investments will be primarily related to our own breweries to build capabilities and improve efficiencies. During the period from January 3, 2023, through July 21, 2023, the company repurchased 161,000 shares at a cost of $52.5 million. As of July 21, 2023, we had approximately $307 million remaining on the $1.2 billion share repurchase authorization. I will now pass the call back to Dave for some closing remarks. Thanks, Matt. As you may have seen from our announcement a few days ago, we're very excited that Diego Reynoso will be joining us as our new Chief Financial Officer, effective September 5th. Diego has significant financial and operational experience in the consumer industry, particularly the alcoholic beverage category. I'm confident he'll bring valuable perspective to Boston Beer and look forward to introducing him to you on our third quarter call. I'd like to take this opportunity to thank Matt for his leadership of the finance team and his strong partnership with me during the transition period. We're very fortunate to have Matt as a senior finance leader, and we look forward to him playing a significant role in our future success. Now we'll open the line up for questions. Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please, while we poll for questions. Thank you. Our first question is from Nik Modi with RBC. Please proceed with your question. Yeah, thanks. Good afternoon, everyone. I was hoping you can just comment on, obviously, we're in the process of reset discussions with retailers and, you know, there just seems to be a lot of volatility in the industry with what's going on with Bud Light and, you know, potential opportunities for perhaps some shelf space gains. Just want to kind of get your state of the union on how those discussions are going with, with retailers, particularly as it relates to Truly and kind of what's going to go on with the hard seltzer category. You can just provide any updates there. Thanks. Sure. Thanks, Nik. This is Dave. Hey, Nik, are you referring to this fall or next, or next spring? Yeah, fall and spring, because I know sometimes these discussions. Yeah ... tend to overlap, you know, so. Yep. Okay. I mean, spring, it's a little early for spring, so we're not there yet. I think it won't be till really, like, after Labor Day, that retailers have the data that they need to determine what they want to do for spring. As it relates to fall of this year, there will, there will be some changes, but right now, and we know there's a lot of noise out there about what could happen. We're not hearing back from retailers that there's anything significantly different that's gonna happen, you know, this fall. We do know, I mean, as it relates to us, you know, with we mentioned that we finished at + 49% on, on Twisted Tea space, that, you know, that will benefit us as the year goes on, and that we have to, you know, force that and make sure we get compliance and, and make that work. We don't necessarily see anything changing really with Truly or hard seltzer in the fall. Based on what again, based on our conversations we've had with retailers up to this point. Great. Just as it relates to the consumer and, and, you know, seltzer, obviously, you know, seltzer, it tends to be higher priced relative to beer. You know, some of the work we've done would suggest there was some shifting of consumption, especially with older consumers out of seltzer and into beer. Just, you know, promotions seem to be ramping, at least from what I'm hearing in the industry. Just wanted to get your state of the union on, on kind of how you think about the promotional environment right now? Yeah, I think, I mean, if you look at the, the Circana data, you don't see a lot of promotional activity built in. I mean, there is a digital coupon and other things going on to create value that's out there, but I wouldn't say it's extraordinarily different than what it's been in, in prior years. I think you're right, Nik. I think when you look at the pricing on, on hard seltzer, the gap to imports and to premium beer, light beer, has, has increased pretty continually over the last two or three years. The gap, actually, on the other end to RTD cocktails, has actually shrunk. It is in a sort of a place where you probably don't want to see it to go much higher. But in terms of, like, mass promotional stuff happening, we don't see it. I mean, occasionally things will happen in certain markets, but it's fairly limited to this point. Great. Thanks. I'll pass it on. Thank you. Our next question is from Vivien Azer with TD Cowen. Please proceed with your question. Hi. Good evening. Thank you for the question. I'm just trying to reconcile the unchanged guidance on the top and bottom line relative to the $20 million in incremental A&P at the midpoint of the range. Recognizing the top line was expected to improve in 2023, and that was always part of the plan, I'm interested to better understand your confidence in holding the EPS range, given that, you know, if my simple math is correct, $20 million in incremental A&P, just at the midpoint, is a $1.50 headwind to EPS, and certainly, you know, it would be more than that if you took the extremes of old and new guidance. Any incremental color there would be helpful. Thank you. Sure. Hi, Vivien. It's Matt. We feel good about our, our, our overall guidance, certainly on the, on the, on the top line. The range is between the 2% and the 8%, you know, there's no magic in it as far as achieving the middle of the range. If you just keep looking, looking at the trends of Twisted, which is a little less than 30% growth, then Truly, which is probably a little worse than 30% decline. If you, if you extrapolate, extrapolate those out, as Twisted gets to be a bigger, bigger part of the mix, you know, you, you get overall, you know, company decline of a -2 for the back half of the year. That, that probably gets you to the middle of the range. We feel good about, about that. We, we could have tightened it a little bit, but it just felt like, you know, with, with these two brands that are, that are moving in, in different directions and that we still have a couple, couple months left of the peak season, we, you know, we felt that, that, that range was still appropriate. As, as it relates to, to margins, we, we, we, we were at the 40, 42, a little better than 42 for the first half of the year, you know, so, so we're, we're seeing, you know, the same type of achievement during, during the second half. On the, on the operating expenses, just, just the real important, item is, we're seeing a lot of freight savings. To, to keep it real simple, the, the freight savings that we're seeing, both in the first half of the year, which we realized, which is, which is, off the prior year, about $28 million, we're, you know, looking at that, along with, you know, other operating expenses for the, for the second half of the year, and we're, we're investing that in the brand. That's, that's the reason when we give you guidance on, on AP&S, we exclude the freight component. I think, I think the freight component will get you to reconcile that difference. Does that help? That helps a lot. Thank you very much for that clarification. Just quickly, as a follow-up, Dave, as you enumerated the key three strategic priorities in terms of driving, medium to long-term growth margin improvement, have any of those come in quicker than expected? Thanks. I'm sorry, Vivien, which, which, which I'm not sure I, I caught that question. Which priorities are you referring to? Oh, sorry. Yeah. You've laid out kind of three key initiatives to, to drive gross margin improvement over the medium to long term, and I'm just wondering whether any of those are, are hitting a little bit sooner than expected relative to initial guidance? Sure. Sure, sure, Vivien. I'll, I'll, I'll take it. It's Matt again. The, you know, the, the, the three key items, the procurement savings, the brewery performance, the, the waste and network optimization. You know, we, we talked to the, about those as sort of, so equal opportunities that, that, that get us from, you know, around, you know, low forties to, to upper, upper forties over, over the next, you know, three to five years. We've seen some benefit in, in procurement savings. You can see from the, the, the Q2 results that we were, you know, realizing some of that, that benefit and that, that as we sort of signaled, that was gonna be our first area where we, where we thought we'd, we'd, we'd see it hit. Then, you know, brewery performance is, you know, we're stabilized. You know, we're not having the same one-off items that we've had in the prior quarters that have kept the margin in the high 30s. You know, achieving the 45 just gives us a sense that things are more stable. Good, good progress on the procurement savings. You know, the both brewery performance and waste to network optimization are a little longer term, but, you know, we're happy to see that they're, you know, not negatively impacting the margins at this point. Absolutely. That's really helpful. Thank you. Thank you. Our next question is from Rob Ottenstein with Evercore. Please proceed with your question. Great, thank you very much. Congratulations to you and your team on another, you know, great result on the Tamarron survey. First, you know, you know, just kind of looking, looking at the hard seltzer category as a whole, are you surprised that the category hasn't seemed to benefit at all from the Bud Light controversy? That would be question number two. Question... I'm sorry, question number one, long day. Question number two is, on the second half margins, if you excluded the shortfall fees, would they be, you know, how would they compare to first half margins? Thank you. Thanks. I can take... When I, when I answer the first one, and then- I'll take the second. Matt and Jim can, Jim may have a point of view on the Bud Light one. I think, I think we're not, we're not that surprised because when you look at the, the, the demographics, the geographies and such, where Bud Light might be struggling, those are, those are really hardcore light beer drinkers. We're not, we're not shocked that it's that it's going basically more, more back into, into light beer. I mean, there's another factor at play on the whole hard seltzer piece as well, which is obviously RTDs. If you throw RTDs in, Rob, into that, into that number, I think, like, according to Circana, like, call it 23% volume decline year-to-date on hard seltzer, RTDs would add, like, probably 6 points of volume on top of that to the benefit. You have a lot of dynamics at play, but, but we're not, we're not really surprised about the volume not coming back straight to hard seltzer. Jim, I don't know, Jim, I don't know if you have any other thoughts on that. If not, we can... Matt can take number two. No, I just second what you said. It seems like the beneficiaries of the Bud Light, you know, issue, I'll call it, are, are near in, you know, Coors Light, Miller Lite, even Pabst, Yuengling. They're the near-in substitutes, and we never had that much interaction with, you know, the, the hardcore light beer drinkers with Truly, and, and I think with the rest of hard seltzer. Great. On the second question, Rob, you can see through our 10-Q filings, the shortfall fees we're estimating for the second half of the year are about $9 million. I guess, you know, that's about a point of margin. We feel like, you know, our progress we've demonstrated in procurement savings and the general inflation commodity environment, will offset that, so that allows us to offset that impact. Just one other on the margins. Did the 4th of July timing impact the margins in the second quarter at all? No. A little bit of benefit on volume and shipments, but no, no, no, no impact on margins. Terrific. Thank you very much. Thank you. Our next question is from Nadine Sarwat with Bernstein. Please proceed with your question. Hi, good afternoon, everybody. two questions from me. One, could you comment on where your capacity utilization is today? Are you still underutilizing both your internal and external capacity? Then curious, I know you called out a number of changes you made to the Truly brand family, in attempts to drive improved performance, although it does look like the brand is still struggling when we look at track channels. It'd be helpful to provide some color behind your conviction that Truly can see improved performance over the remainder of the year. Thank you. Hi, Nadine, it's Matt. I'll, I'll take the first one, and then, Dave, Dave, will take the second. So on internal and external, you know, our model is to, is to fill our internal breweries and... you know, we're, I, I wouldn't say we're at 100% hundred percent capacity, but we try to keep them full and, you know, well over 90%. That, that's the model. What, you know, the, the excess goes to external. That external, you know, given where we were from, from a volume perspective a few years ago, and the expectations, we have, we have significant capacity externally, should we return to growth, which, which is what we intend to do. You know, it, it's hard to put a number on how much external capacity we have available, but, but, but we have quite a bit, and we feel like it's, it's a good insurance policy for, for when the company gets back to growth. We'll have that capacity. We won't, we won't need to enter new contracts or, or go out and try to contract for additional capacity. Hey, Nadine. Okay, Dave here. I'll answer your second one. I think, I mean, the intent of the, of the Truly refresh program was really to slow down on the hyper-innovation behind the brand and make the brand just easier to, easier to understand, quite honestly. So there's a number of things, I won't go through the whole litany, but the, the package redesign to really make it easier to shop and easier to find and deliver those refreshment cues, the new ad campaign. We are stepping up the ads. We have stepped up the advertising investment, and now we're, as we've mentioned on the call, we're gonna step it up further for the balance of the year. Really, the focus has been bringing attention back to the core. The bolder flavors have been important. They're more than half the brand. We spent a lot of time and a lot of effort in the last couple of years trying to lap that innovation and to focus on those flavors. The effort, thus far, over the last, call it eight to 10 weeks, really, in market, has been to focus on those three core 12 packs, the berry, the tropical, the citrus, and also our single serve. If you look at the results, I mean, you don't in a declining category like this, with a lot of change to be done, it doesn't happen overnight. What we do like is when we look at where, where we've been over the last eight weeks or so, and I guess, I'll try not to repeat what I said in the script, but, you know, the, the, those core three 12-packs are actually growing share. The last four weeks, the last 13 weeks, they're growing share, which is important. It's very important. If you look at our single serve in convenience, it's, it's basically 24 ounce. It's actually gained share, gained share really since April, part of that was really actually fixing the mix. If we had three SKUs in a convenience store, two of them would be bolder flavor, one would be lighter. Now it's two light, one bold. We're, we're getting the mix right. We, we are still down, you know, 3.3 share points year-to-date, but sequentially, we're starting to gain share again since April. We're up, we've gained about a share point. We still have a significant delta between us and number three, so we're 18 share points away from the number three player, which is about exactly where it was one year ago at this time. The last thing I'll say, when you look at the margarita overlap and the discontinuation of tea, year-to-date, that's about 75% of our share loss. Okay. That will definitely moderate, as I mentioned also earlier on the call, as the year goes on, particularly as we get into the fall, it will moderate. For all of the, you know, for those reasons and others, we believe that we will continue to make progress, and we will get this brand back, and ideally, you know, we're not gonna grow share for when the year is over, but ideally, we're close to growing share, you know, as we get into the fourth quarter, based on all of these initiatives. Understood. Thank you very much. Thank you. Our next question is from Bonnie Herzog with Goldman Sachs. Please proceed with your question. All right, thank you. Hi, everyone. I had a quick clarification question on your guidance. I just wanted to clarify if you're reinvesting 100% of the lower-than-expected freight costs and improved gross margin performance that you've mentioned, you know, back into your business in the form of incremental media spend, or do you plan to let some of, you know, those benefits flow to the bottom line? Hi, Bonnie, it's Matt. I would say that the majority of the freight savings are gonna be invested in media. You know, those are decisions that, you know, we'll make over the second half of the year. Certainly, you know, we wanna make sure that we're confident in the investments and the plans that we have. You know, we currently have that, those dollars allocated for that, but, you know, we'll see what we spend and what we bring to the bottom line should that come about. Hey, Bonnie, this is Dave. If I could just build. Just before you ask, I know you're gonna ask another question, I can tell. Before you do, I mean, I think it's we feel really good about this investment because, first of all, Twisted Tea, there's, there's about 100 reasons why we should be investing even further in this brand. It's, it's got the momentum, it's got a great message, there's still a long way to go in terms of household penetration and brand awareness, et cetera. We feel terrific about that. For Truly, we feel like we've got everything lined up now the way it needs to be. Now we just need to bring the message to people. We need to create better, you know, better, better awareness of what, of our changes. We have a campaign that we test pretty rigorously, that also tested very well. We're being very thoughtful about how we're making this investment, and we're thinking about it, you know, and we're breaking it down by geography, by consumer, et cetera, to make sure we get the most... and the best return we can on this investment. We really believe now is, and literally like right now, not in September, but now is the right time to do it, and that's why we're moving forward pretty quickly with this investment. No, that's helpful, and definitely I understand the confidence. In the context that, yes, I did have another question, if I may. You know, just trying to get a sense of, you know, sort of Truly's declines in the quarter and, you know, have those declines moderated versus Q1? I know you've talked about some of the green shoots, but just maybe in total. Definitely wanted to clarify something, because you've talked about this before, about your guidance and what it implies for Truly this year. Could you maybe update us on that, and if that's changed at all? In your press release, you know, you've called out that, you know, your guidance is pretty sensitive to any potential changes for the hard seltzer category. Maybe help frame that for us as well, you know, in terms of your latest expectations for the category. Thanks. Okay. I think the first part of that question was just more about how Truly's changed from it. I think from a share perspective, we're seeing, as I said before, we're seeing that core, the core business of the lighter flavors improving their share position. We're seeing single serve improving its position as well. We're seeing the bolder flavors share loss moderate, and then we're sort of riding that curve on, you know, on margarita, Guava Margarita, which will, which will diminish over time. In terms of total volume change, if you could look at Circana and Nielsen, it probably hasn't changed much Q, you know. Mm-hmm ... between Q2 and Q1. I think it, for balance of year, we're not, you know, on based on the guidance, we're not expecting it to change much either, necessarily, we're not. We don't have some, some high hurdle or, or unrealistic expectation for what's gonna happen in the second half versus what's happened in the first half. We hope to beat that. Again, I think the category is probably gonna be, you know, volume-wise, let's say, -20 to -25, right? Right now, it's -23, so that's probably a fair midpoint for where we'll end up. It's unlikely that we would be, we would be between, you know, we're not gonna be at the category growth rate. I'm gonna be straight with you, because that's, that there's too much ground to be gained here. Mm. We wanna be as close to as we can. We think in the second half, the idea is to basically, by the, the fourth quarter, as I mentioned, we should be at least holding share across the board, ideally in the fourth quarter. Again, that's a little bit aspirational. It depends on where, where the numbers come in, but we're not expecting like a big, a big, huge change in the second half in terms of Truly depletions. Right. That's what's baked in. Then, like you mentioned, as you step up spending, maybe, right? Behind Truly. Well, it's an insu- it is. It's kind of an insu- think of it as an insurance policy- Right ... and a way to help, maybe to nudge it, to nudge it forward. It just gives us more confidence that we're, we're gonna get to the finish line we wanna get to. Okay, sounds good. Thank you for that. Thank you. Our next question is from Eric Serotta with Morgan Stanley. Please proceed with your question. Hey, good afternoon, everyone. Couple questions, starting with, a follow-on to Bonnie's on your initial expectations. If I remember correctly, the expectation was that Twisted, growth would moderate somewhat in the second half as you lacked some of last year's distribution gains. You know, given the robust growth that you've had so far, year-to-date and the additional media, how have your second half plans for Twisted changed? Are you still looking for a material slowdown there, or do you think it could maintain this kind of momentum into the second half? Eric, for the first half of the year, I would say that Twisted Tea's exceeded our expectations of growth. We don't foresee, we're not planning that it's gonna sustain the same growth rate balance a year. We don't see a material slowdown. Depends how you define material. We don't see it as material, but we do see a bit of a slowdown. If you look at last year, you know, the fourth quarter of last year, the brand decelerated. You know, it's not like we have a big overlap. We have a reasonable overlap to hit, but we're just gonna keep doing what we're doing, and we'll see where it, it ends up. We're not, we're not gonna be surprised if it slows down a little bit, because you can't sustain... It's unlikely to sustain this 30% growth rate on a larger and larger base like this. Does that make sense? Yeah, that's helpful. I want to come back to the gross margin question. Your first half was a little over 42%. Your guidance for the full-year is 41%-43%, which is a pretty large range, considering the year is half done and you know, you're above the, or slightly above the midpoint for the first half. I guess maybe, can you talk about areas where you have visibility and where you maybe don't, as it pertains to the short-term margin picture? Somebody's gonna, gotta ask about the, you know, confidence in the, in the longer term, getting back to the high 40s, low 50s in gross margins. Figure it's my turn to ask that. Does your progress to date, with respect to the supply chain savings, the procurement savings, increase your confidence to getting there? Or, you know, I guess, what do you see as the key, the key swing factors? Yeah. Hi, Eric, it's Matt. Thanks. You know, overall, we've, we've, we've been through, you know, this is, this is the best margin we've had in two years. We're at, we're at 45%, and that was, that was, that was a lot of work. It took a lot of work to, to, to get there. We've had probably more quarters with high 30%, over the last eight quarters. You know, it's, it, it, it's a great sign that, that our plans are, are working. You know, when we talked on, after Q1, it was, you know, we got a lot of great plans, but we've gotta, we've gotta demonstrate that, that they can be successful. We, we, we feel like this is a, this is a good step forward. Certainly, the procurement savings are probably our best line of sight. You know, in Q2, they offset any of the inflationary impacts, which was, which was good, and let, let, let pricing sort of flow through. You know, we're building our confidence, but it is one quarter, we feel like, you know, the 42 that we demonstrated for the first half is, you know, we can continue that for the second half of the year. You know, we've had, we've had a lot of surprises in the past eight months, and we're just, just trying to be as prudent and, you know, continue to demonstrate some, some slow progress in this area. Great. Thanks. I'll pass it on. Thank you. Our next question is from Brett Cooper with Consumer Edge. Please proceed with your question. Good evening. Just a question on Truly and how you guys think about or frame how extendable the brand is, whether that be in flavors or alcohol levels. I guess, do you take lessons or learnings from what you did on Truly in your phasing or your pace of that extension? Thanks. Okay. Thanks, Brett. We do think I mean, I think Truly can play where, you know, sessionability, refreshment, variety, all intersect. That's why we're in, you know, that's why we're in vodka. That's why we're testing tequila. We think that, we think the brand can, can, can play in those, in those spaces pretty well. I think within the category, the category, as everybody knows, exploded so quickly, it just became a gold rush to get as many SKUs and as many flavors out there as possible. I think in, in the end, it probably wasn't good for a lot of brands, and I think we're preparing, maybe overextending, Truly. I think we would take that learning certainly with us to, to Twisted Tea. I mean, Twisted Tea, we, we have, we have a lot of room to extend. We are, you know, we're testing the high alc version of that. We're doing that very carefully, and we're not. You know, we don't know which way it's gonna go, and we're not necessarily, you know, in our minds, thinking we have to do A, B, or C as it relates to, to, to Twisted Tea, because one of the strengths of Twisted Tea is that it's a very simple idea, and there's always a risk to overextend. I think, yeah, we've learned a lot from the, from the hard seltzer story, and I think we're absolutely applying that every day as we, as we prepare and, and get Truly back on track, as, as well as how we think about Twisted Tea. I think, actually, maybe, and Jim, Jim probably has some good perspective on this because he's seen, he's seen this, he's seen this rodeo or done this rodeo before. Jim, you wanna, do you wanna add to that? Yes. I mean, one of the unique features of hard seltzer that we'd never seen before, and it's fairly rare even in consumer products, is, you know, the core SKUs were all variety packs. That's quite unusual, especially in beer. With Truly, our, you know, our belief was it can go into more varieties. In fact, a part of the appeal of the category is a fair amount of variety. I think that's always going to be there with Truly. It's not exploding anymore, so we don't feel like we need to, you know, bring out a new flavor or two every year. We do think that, you know, the seasonal variety packs will probably be a permanent part of the brand. With Twisted Tea, it's been kind of the opposite. You know, it's always been led by Twisted Tea Original. We're 23 years now into the brand, and we're just beginning to test a different alcohol level. We have introduced other flavors, but, you know, fewer of them in 23 years than we did in the first three years with Truly. I, there are some lessons in each of them that apply, I believe, differently to the two. You know, they're both in FMB-type brands, but the consumer base is much tighter in what they're looking for with Twisted Tea. Great. Thank you. Thank you. Our next question is from Peter Grom with UBS. Please proceed with your question. Hey, guys. This is Bryan Adams on for Pete. Thanks for taking the question. First, apologies if I missed this in your response to Vivien or one of the other responses for that matter, but are you able to give us a rough like, numeric sense of how much of a benefit you saw in Q2 margin from those procurement savings? Just trying to think about how we should think about those savings in the downhill and looking further out. Yeah. Hi, Brian, it's Matt. you, you probably haven't had a chance to look at the queue, but, but I think we call it out as about an $8 million, benefit, in, in the, first half of the year. that, that's, that's what we've seen, and it, it offset, as we've said, our, our inflationary impact. that, that's, that's the details. Okay. Awesome. One more, longer term, thinking about that march back to 50% gross margin. Obviously, looking at just the complexion of the business, the buckets in terms of the size of Truly versus the size of Twisted Tea have changed pretty meaningfully here over the last couple of years. It's a bit of a Boston Beer one-on-one question, but is there a demonstrably different gross margin you see in those products, or are they pretty comparable? Thanks. Yeah, thanks. It's, it's, they, they have different factors. For Truly, there's, there's, there's more variety packs. For, for Twisted Tea, there's more 24 oz. Generally, they're, they're the same. Some of it just, just depends on the mix, between, you know, the various different packages. You know, we, we, we operate our business, you know, with, with all our products generally in the same, same margin zone. You know, I, I would just think of them as, as having similar margins. Awesome. Thanks, guys. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Our next question is from Filippo Falorni with Citi. Please proceed with your question. Hey, good afternoon, guys. Question on Twisted Tea? Clearly, this year, you made significant gains from a distribution standpoint. As you think about the fall, shelf space resets, what kind of visibility do you have that you can get further shelf space next year, particularly as competition heats up in the hard tea category with new entrants and new launches that have been announced? We're, you know, we're obviously, as I mentioned, we're picking up a lot this year. I think even with that, whatever, that 49% increase, our space to sales is still underrepresented, so we still arguably could, could, could advocate for more. I think and I don't think we're compete more with, more than just the other tea brands, it's really within FMB brand. We'll see how we I mean, if we continue on the same pace of growth, we have a good, we have a good story to take to our, to our retailers next year to, to get, to get more. Got it. Okay, thank you. Then on, kind of the extension of Truly, can you talk about, like, how Truly Vodka Soda, how the launch has, has gone relative to your initial expectations? And like, maybe give us some more color on the tequila experimentation with Truly, like when expected to launch and, your initial expectation for that as well? Was the first question about the mar--? I'm sorry, was it about the margin? Is that, was that the question? No. No, sorry. I was, I was asking about Truly Vodka Soda. Got it. Yeah - the performance relative to your expectations, and then- Sure ... a little more color on the tequila. Yeah, I think, I think if you look at the vodka, it's about, it's sitting about a three share of, of vodka-based spirits, the number four brand. It's a different, you know, it's a different channel. It's independents, it's liquor stores. It's really a new frontier for us. I think we're, we're making progress, but we haven't knocked it out of the park yet. We, we are getting a, a great response to the new products, the, the new, the two new variety packs we put in the marketplace just recently. We feel great about the product, we feel great about the rebrand. Now it's, now it's just the hard work of driving distribution. So far, we're getting good response from consumers, but, but it's not an overnight thing. It's gonna take a while to get there. We're committed to it because the reality is it sources from traditional hard seltzer occasions, and we need to, we need to be in there. The tequila test just started maybe a few weeks ago in a handful of markets. And you know, if you're in Rhode Island or Delaware or Minnesota or L.A. or San Diego, you can find it. Again, it's just this belief that this brand, and I think Brett was asking the question before, this brand can play in certain spaces where it's about refreshment and sessionability and variety. We love the product. We absolutely love this product, and we're, but, you know, we've learned a lot in the last couple of years, one of which is not to launch too many things too quickly, and also to do maybe test a little bit more, to final... You know, to get something to its optimum state before we go national, and that's what we're doing right now. We'll see how it goes. Depending on, you know, depending on the results in these lead markets, we'll determine what, what we do with it next, next year. We're hopeful, and again, this is, the whole spirits piece is a different play for us. We're committed to it, and, you know, we have, of course, we have Dogfish Head out there doing, doing quite well. It's, but it's gonna be, it's like a street fight, is what it is, but we're, we're prepared. I don't know, Jim, I don't know if you have any other thoughts about this, this space. No, it's, it's obviously a crowded and confused space with a lot going on. You know, I think it's probably getting more attention because it's new and nobody's really sure where it's gonna go than the actual volume will merit for it. High Noon certainly done extremely well. After High Noon, the volumes are quite small. You know, there's just all these new brands being thrown at it and, you know, even from big-name spirits brands, but their volumes, at the end of the day, are not gonna be large enough for them to sustain a place in the cold box. There will be a warm shelf with a lot of these brands, and the warm shelf is kind of, it, it's not where you're gonna get any volume. It's in some ways, the kiss, the kiss of death. There will be a big shakeout, I think, next year. Thanks, guys. Thank you. There are no further questions at this time. I'd like to hand the floor back over to Jim Koch for closing comments. Thank you. We look forward to the months with, hopefully some improvement in a bunch of different things. I hope we can continue, and we'll see you in three months. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.