The Boston Beer Company third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. And as a reminder, this conference is being recorded. It is now my pleasure to introduce to you 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 two thousand and twenty-four third quarter earnings call. Joining the call from Boston Beer are Jim Koch, Founder and Chairman, Michael Spillane, our CEO, and Diego Reynoso, our 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 facts 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 Michael, who will provide his view of the business and the actions we're taking to position the company for improvement in twenty twenty-five. Michael will then turn the call over to Diego, who will focus on the financial details of our third quarter results, as well as our updated outlook for twenty twenty-four. Immediately following Diego's comments, we'll open up the line for questions. I'd like to begin my remarks with an overview of the market environment. There continues to be noise in month-to-month volume trends in the alcoholic beverage industry. We expect near-term industry volume trends to continue to move around month to month, given the macroeconomic consumer environment. Importantly, we're seeing the pricing environment remain stable and are achieving price increases of approximately 2%, which was at the high end of our prior guidance range. From a Boston Beer perspective, we mentioned on our last call that we undershipped demand in the second quarter as trends improved late in the quarter, and we were not able to fulfill all orders. By the end of the third quarter, our wholesaler inventories normalized at approximately five and a half weeks, and shipments and depletion trends year to date are consistent at down 3%. We've narrowed our volume guidance for the full year to reflect three quarters of results and a range of outcomes for the fourth quarter, given the near-term consumer environment. From a long-term perspective, we continue to believe that there is a significant opportunity in the fourth category as lines continue to blur beyond the traditional three categories of beer, wine, and spirits, and consumers seek newness and variety. These fourth category beverages are typically sold in a can, need to be available in the cold box, and are closer to beer in terms of pricing and margin structure and production requirements. We believe Boston Beer Company is well positioned to take advantage of this growth, given our proven track record of creating new products and getting them into the hands of drinkers through both our best-in-class sales force and wholesaler relationships. We have strong core brands and a strong innovation pipeline for 2025, including Sun Cruiser and Samuel Adams American Light. Our margin initiatives continue to show strong progress, with gross margin up 190 basis points year to date. The systems and infrastructure we've built to support a diversified portfolio are showing results, and there is significant long-term margin opportunity ahead as we continue to execute on our productivity plans, launching margin-accretive innovation and return to growth. In summary, our priorities are to support our category-leading brands to improve market share, nurture the innovation pipeline in a disciplined manner, and improve our execution to unlock revenue opportunities and lower costs. We're focused on responding to and taking advantage of the trends we can control and implementing operating plans to position the company well in 2025. The highly cash-generative nature of our business and our strong balance sheet allows us to invest to return to long-term growth while continuing to return cash to shareholders. We've generated over $200 million in operating cash flow this year and have a cash balance of $256 million at the end of the third quarter, with no debt. Based on our view of long-term growth prospects for the company and our philosophy of returning excess cash to shareholders, we've repurchased $191 million in shares year to date and recently expanded our share repurchase authorization by $400 million. To close, I'd like to thank our Boston Beer team, our distributors, and our retailers for their continued support. And now I'll pass the call to Michael. Thanks, Jim, and good afternoon, everybody. As Jim just mentioned, we're managing through some headwinds with respect to consumer demand in our categories. In the third quarter, we were focused on rebuilding our inventories, in-market execution for the remainder of the summer season, and continuing to refine our internal processes. ... The work we are doing now to improve end-to-end execution will make us better operators and ultimately lead to more sustainable long-term growth. Our strategic priorities that I discussed on our last call remain unchanged. We'll be focused on nurturing our core brands, developing margin-accretive innovation, leveraging the capital investments we have made in our breweries and IT systems, and driving efficiency and operating expenses. There is significant opportunity ahead for our company despite the current headwinds. As I've reviewed the business for the last two quarters and worked through our operating plans for next year with the team, I see multiple opportunities. First, we will be focused on opportunities to gain market share across the core portfolio. Taking back share will happen over time, but the opportunities are there. Second, we'll continue to adjust the portfolio. In certain cases, like Truly, we have had too many line extensions. Going forward, we'll be more strategic as we add more styles. Third, we will use our powerful innovation engine in a disciplined, fewer things, better way, as I discussed in our last call. Finally, we'll continue to modernize our supply chain and execute on the multiyear productivity initiatives across our three buckets: procurement savings, waste and network optimization, and brewery performance. All these efforts together are designed to position the company for improvement in operational and financial performance in 2025, and to drive quality long-term revenue growth and higher profitability. I'll now provide some color on the brand portfolio. In beyond beer, we play in hard tea, where we have the clear number one hard tea brand in Twisted Tea, the number two player in hard seltzer, in Truly. High-quality, premium canned cocktail products in the early stages of brand building with Sun Cruiser and Dogfish Head Canned Cocktails, and our partner, Hard Mountain Dew. In beer, Samuel Adams has a strong craft legacy, and we continue to focus on our seasonals, adding more on-premise taps into our new light beer innovation, Samuel Adams American Light. We continue to see hard tea as an attractive category, with category volume up 18% and dollars up 20% for the year to date through the third quarter in measured channels. Twisted Tea is a brand that was built over many years in a high-quality way and has strong brand equities and an 85% market share. While many competitors have entered the category, the most successful competitive brand only has low single-digit market share. Twisted Tea's growth has decelerated somewhat naturally, as it must grow off a larger base and contends with the macro consumer environment. But the category remains attractive, and we see multiple areas of growth for the brand. We've increased our investments behind Twisted Tea with our Twisted Tea College Football program that continues to generate excitement for the brand through the fourth quarter. One of the largest opportunity is in points of distribution, particularly for Twisted Tea Light, which is light, highly incremental, and where we are launching more distinct packaging that makes it easier to find on shelf. Additionally, there is still under-penetration in certain consumer demographics. Higher ABV hard tea innovation is always an area of opportunity that is in its early stages, with Twisted Tea Extreme performing well in the market with high repeat rates and lots of room for distribution wins. Twisted Tea Extreme fulfills high ABV occasions that drinkers previously had to exit the brand to purchase. Our vodka-based tea innovation, Sun Cruiser, which was launched late in the summer season, is performing well and bringing new consumers to our hard tea portfolio. Sun Cruiser launched first in the New England and Atlantic regions and continues to expand to additional regions. Sales per point in the early off-premise regions continue to trend positively, and Sun Cruiser is also performing well in the on-premise channel. We're encouraged by the feedback from wholesalers, retailers, and drinkers, and would point out that Sun Cruiser's overall performance trends are not fully reflected in third-party data at this point due to its significant presence in non-measured channels. We expect Sun Cruiser to be an important addition to the portfolio long term, but note from a timing perspective, we are now entering the lower seasonality months. The larger opportunity for distribution wins is in the shelf resets that will occur in the spring of twenty twenty-five. Turning to hard seltzer, we are continuing to see declines in the hard seltzer category, with hard seltzer category declining 11% in category volume in measured channels in the third quarter and Truly underperforming the category. As I mentioned on the last call, there's bifurcation, with the light flavors performing ahead of bolder flavors, and we'll continue to focus the portfolio to those lighter flavors. As example, the Wild Berry 24-ounce can has grown year to date in measured channels, with particularly strong growth in convenience stores. We think there is an opportunity to regain share with our lighter flavors and are continuing our rotator pack strategy. There is also opportunity in the higher ABV segment, which is resonating with consumers and driving traffic in single serve. Truly Unruly, our 8% ABV offering, is showing promise and is expected to be a contributor in improving the trajectory of Truly. Overall, we are not satisfied with the performance of Truly and are taking steps to reposition the product portfolio and adjust our marketing strategy to improve the trajectory of the brand in twenty twenty-five and beyond. With respect to Hard Mountain Dew, we saw depletion trends turn positive in the third quarter, although off a small volume base. We're currently selling through our wholesaler network in states where we've transitioned from Blue Cloud and are continuing to work through regulatory approval and distribution agreements in additional states. We continue to believe there is opportunity for Hard Mountain Dew across expanded pack sizes and channels, including convenience stores, but those efforts will take time and have a more positive impact on our twenty twenty-five results. For our Sam Adams brand, we'll support our seasonal offerings and our award-winning non-alcoholic, Just the Haze, while focusing on expanding the successful launch of our distinctly American craft lager, American Light. American Light is made with high-quality American ingredients and recently earned the title of Best Light Beer in America in the World Beer Awards. The product is targeted to craft drinkers who want to drink light beer with quality ingredients and is enjoying a promising consumer acceptance in its early markets of New England, Florida, and Texas. We pursued a measured launch strategy in test markets, starting in independent and moving into large format and on-premise. Based on the encouraging early reads, American Light will be expanding nationally in early 2025. In summary, we're working hard on supporting our core brands, as well as supporting our innovation engine, to drive volume and revenue improvements in a disciplined manner. In addition to our plans to improve volumes and market share, we're also continuing our efforts to modernize our supply chain and expand our margins. We're seeing good progress on our productivity initiatives across the three buckets of priorities that I had mentioned earlier: procurement, savings, waste, and network optimization, as well as brew performance. These efforts allow us to realize gross margin expansion in the third quarter, despite soft volume in a soft volume environment. We expect the investments we've made in systems such as planning tools and automated customer ordering systems, to enable continued progress on inventory management in twenty twenty-five. Line efficiency rates remain a work in progress and will take some time to achieve consistent and reliable performance, particularly in peak periods. The timing and ultimate amount of volume that we insource will be dependent on our progress in our own breweries, as well as the product and geographic mix of our sales. In addition to gross margin, we're focused on investing in our brands. We are focused on improved execution and coordination of our brand investments and sales programs to maximize brand impact through to consumers. With respect to non-advertising, selling, and brand costs, we're continuing our efforts to better align internal costs with revenue. We're committed to supporting all of our brands with appropriate levels of advertising investment for both brand awareness and in-store marketing. Our investments are across the portfolio, with a particular emphasis on Twisted Tea, Sun Cruiser, and Hard Mountain Dew. To summarize, I believe there are multiple areas of opportunity ahead for Boston Beer. I'm pleased with the progress we are making to be more focused, and that we have had delivered gross margin expansion despite weaker volumes. We still have work to do in becoming sharper in our execution. We'll be spending the next few months finalizing our plans to position the company for improved performance in 2025 and return to long-term, high-quality growth. I look forward to discussing our 2025 operating plans and financial guidance with you in February on our fourth quarter earnings call. I'll now pass the call to Diego for a detailed review of the third quarter and our updated 2024 guidance. Thank you, Michael. Good afternoon, everyone. Depletions in the third quarter decreased 3%, and shipments decreased 1.9% from the prior year, primarily due to declines in Truly Hard Seltzer that were partially offset by growth in our Twisted Tea, Sun Cruiser, and Hard Mountain Dew brands. We began the quarter with an average of three and a half weeks of distributor inventories on hand, which, as we discussed in our second quarter call, was lower than our target levels. As of September twenty-eight, twenty twenty-four, distributor inventory was approximately five and a half weeks on hand, which was slightly higher than our target levels of between four and five weeks. We expect to return to our target levels during the fourth quarter, which will be a slight headwind to our fourth quarter shipment volume. Revenue for the quarter increased 0.6% due to price increases and lower returns, partially offset by lower volumes. Our third quarter gross margin of 46.3% increased 60 basis points from the 45.7% margin realized in the prior year. Gross margin primarily benefited from price increases, procurement savings, and lower returns, which more than offset higher inventory obsolescence and increased inflationary costs. Excluding shortfall fees and third-party production prepayments that we've discussed in prior calls, gross margin was 47.4%. Advertising, promotional, and selling expenses for the third quarter of 2024 decreased $4.6 million, or 3% from the third quarter of 2023, primarily due to lower freight costs as a result of both improved efficiencies and lower volumes. Brand spend in the third quarter was consistent with prior years. General and administrative expenses increased $1.6 million, or 3.7% year- over- year, primarily due to increased professional fees. In the third quarter, we recorded a $42.6 million non-cash impairment charge, or $2.49 per diluted share, primarily for the Dogfish Head brand that resulted from the company's annual impairment analysis. The impairment determination was primarily based on the latest forecast of brand performance, which were below our earlier projections. Beginning in the fourth quarter of 2024, we will be amortizing the remaining intangible Dogfish Head brand asset of $14.4 million over a 10-year life, and we do not expect any future impairments related to the Dogfish Head brand. We reported non-GAAP EPS of $5.35 per diluted share, an increase of $0.68 or 15% compared to the third quarter of the last year. Both periods exclude non-cash brand impairments. The year-over-year increase was driven by higher revenue and gross margins and lower rates. Now I'll discuss our 2024 guidance. Our fiscal week depletion trends for the first 42 weeks of 2024 have decreased 2% from 2023. As Jim mentioned in his remarks, we are narrowing our 2024 volume guidance to reflect the first nine months' performance and a range of outcomes for the remaining fourth quarter. As you model out the remainder of the year, please keep in mind that the fourth quarter is typically our lowest absolute gross margin rate of the year. We now expect 2024 depletions and shipments to decrease low single digits versus our prior guidance of a decrease of low single digits to flat. We now estimate price increases of approximately 2%, which is at the high end of our prior guidance. Gross margin of between 44% and 45% versus prior guidance of 43% to 45%, reflecting the progress we have made on delivering productivity. Contractual shortfall fees and production prepayment amortization that we've discussed on previous calls will have a negative impact on full year 2024 gross margins of between 160 basis points and 180 basis points. As these contractual terms expire, we will reassess our capacity needs and commitments with our third-party production partners. Our investments in advertising, promotional, and selling expenses will range from a decrease of $5 million to an increase of $15 million. This does not include any changes in freight costs for the shipment of products to our distributors. Our estimated tax rate will be 30%, which is higher than our prior estimate of 28.5%, and is due to the impact of the third quarter non-cash brand impairment charge, which decreases estimated full year pre-tax income, but did not significantly change our estimated full year nondeductible expense. Our non-GAAP earnings per share guidance of $8 to $10 excludes the impact of the non-cash brand impairment charge of $42.6 million, or $2.49 per diluted share. This projection is highly sensitive to changes in volume projections and supply chain performance. In summary, the changes to our guidance reflect a somewhat softer volume environment, offset by strong gross margin performance. We've been able to maintain the midpoint of our prior EPS guidance while investing in our brands and absorbing a higher tax rate. Turning to capital allocation. We ended the quarter with a cash balance of $255.6 million and an unused credit line of $150 million, which provides us with the flexibility to continue to invest in our base business, fund future growth initiatives, and return cash to shareholders through our share buyback program. For the full year of 2024, primarily due to the timing of spend on current projects, we expect capital expenditures of between $80 million and $95 million, a decrease from our prior estimate of between $90 million and $110 million. These investments will be directed primarily to our own breweries to build capabilities and improve efficiencies. During the thirty-nine-week period ended September twenty-eight, 2024, and the period of September thirty, 2024, through October eighteen, 2024, we repurchased shares in the amount of $176 million and $15 million. We recently increased our share repurchase authorization to $1.6 billion, which is an increase of $400 million. As of October eighteen, 2024, we had approximately $476 million remaining on the authorization. This concludes our prepared remarks, and now we'll open the lines for questions. Thank you. We will 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 that your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. And the first question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question. ... Thank you. Good evening. Just wanted to come back to how to think about 4Q. I know you've got the full year volume guidance that gives us a good, some guardrails on how to think about it, but you have been talking about some new distribution pipeline fill for Hard Mountain Dew, driving some potential upside against sell-through. It sounds like the inventory build in 3Q more than makes up for that and maybe some of the other new innovation getting ready to go out in early 2025. Is that the right way to think about it? And can you just talk about some of the puts and takes besides just the current inventory level? Yeah, I think as we've laid out before, Q4 is our smallest quarter, and therefore is very sensitive to volume moves. So we're currently on our planning, our 2025 plan right now. We'll come back and talk about it next quarter. But as we look at that, we're looking at what are the dates that we're launching in different markets, Hard Mountain Dew, what the growth of Sun Cruiser is, at the beginning of the year. So those would be the two branded driven pieces that might change the volume between Q4 and Q1 a little bit. And then the third one is the one you mentioned. Our inventories are a little bit long, not a lot, but that can drive a handful of points up and down. So those three things are the reason why you see a little bit of a bigger, kind of a bigger range in Q4, just because of the relative size of Q4 versus those three things. Okay, that's helpful. That makes sense. And can I just follow up on Twisted Tea Extreme and Truly Unruly? You've got a few things that are going from 5% to 8% ABV with some of these extensions. I think you mentioned some competitive offerings that drove some of the thinking there. But is that also just a consumer that's seeking value and wants the bang for the buck? Or how do you think about just where the consumer's head is and how they approach that, and what the, you know, initial read is on the traction? You know, we're very pleased with the results of the product that we have in the market, and the consumer is reacting in a very positive way. So it's probably a little bit of everything, but we see that definitely as an important part of our growth as we go forward. Okay, thanks. I'll pass it on. The next question comes from the line of Rob Ottenstein with Evercore ISI. Please proceed with your question. Great. Two questions. One, just wondering if you could give us any kind of early sense of how October looks, things getting a little bit better. I understand some pricing came into the market in certain areas. Any reactions to that? And then, second, if you can kind of go into Twisted Tea in a little bit more depth, at least in the scanner data, you know, it's slowed a bit. Velocities seem to be down, and wondered what your kind of diagnostic is for that. And maybe we're not reading the data right, but that's what we're seeing. And, you know, how do you think about the momentum of the brand going into 2025? Thank you. So, perfect. So, on the first part, I think as we laid out, the last forty-two-week number has us at 2%, so it's a little bit better than the year to date at the end of the quarter. That being said, just given, again, the relative seasonality and the low side of Q4, I think it's a little bit too soon to tell, but it's a little bit better if you look at the two numbers we've laid out. Yeah, and on the second part of the question, regarding Twisted Tea, one, we're working off a much larger base this year. But secondly, it was a year that a fair amount of competition came into the space, seeing the great success that we've had, and we've built this brand over a long period of time. It's built in a very sustainable way. We feel like what's ahead for us is to claw back that long tail that had kind of come in. There was a lot of trial and moving on. So we feel confident that going into next year, we'll be on track with Twisted Tea for growth. Thank you. And as a reminder, if you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. The next question comes from the line of Eric Serotta with Morgan Stanley. Please proceed with your question. Yes. Good afternoon, everyone. Hoping you could talk a bit about Sun Cruiser. Maybe talk a bit about what your expectations are in terms of shelf space for next year, and where do you expect that space to come from in accounts that are able to sell both malt-based and spirits-based? And then at the consumer level, what are you seeing in terms of interaction between Sun Cruiser and Twisted? Obviously, it's significantly incremental, but for the part that does overlap, what kind of trade-off are you seeing at the consumer level? And then a quick follow-up. So we see it as an incremental proposition to Twisted. We haven't seen any really cannibalization of that franchise with it. It's. We're looking at both from a product standpoint. It's a higher margin product for us, which is, you know, as we've talked about in past calls. ... We're looking to introduce innovations that's margin accretive, which it is. It's part of a highly focused canned cocktail strategy. And so, you know, we're looking at this as it's taking from other, vodka-based, canned beverages. So as you look around the store, you can see who the dominant players there are, and we feel confident that we can grow our business at the expense of others versus ourselves. Great. And then just a quick follow-up for Diego or a housekeeping item. I think you called out higher obsolescence costs. What was that related to in terms of, product line or brand? And what's your picture on that going forward? Yeah, look, so we-- if you look at quarter by quarter, we're still kind of in line to what we think, so it's not a key driver. I think as we are moving some of the innovation to have a lower piece, it's not a branded piece. So from a branded point of view, we're kind of where we want. Now, the only specific thing in the quarter that we called out was hops obsolescence, that's very specific of us just looking at the types of beers going forward and rebalancing our hops portfolio. So that's it. It's not brand related, it's hops related. Great, very helpful. I'll pass it on and come back to the queue. Thank you. The next question comes from the line of Bonnie Herzog with Goldman Sachs. Please proceed with your question. All right, thank you. Hi, everyone. I had a question on Truly. You mentioned, you know, you're not satisfied overall with Truly's performance, so I guess I'm hoping for some more color on some of your initiatives. You know, first, you know, you mentioned adjusting your marketing strategy, so I'd love to hear maybe some of the changes you might be making. And then second, you mentioned success with lighter flavors. So could you give us a sense of, you know, what percentage of Truly's mix is lighter right now? And then, I guess finally, you also talked about possible pruning. So, you know, again, hoping maybe for a little bit more color on that and what percentage of Truly's volume you might consider discontinuing. Thanks. Yeah. Thanks, Bonnie. I think, one, we've basically taken twenty-four as a year to reassort the flavor profile of what's in front of the consumer, and we're driving more lighter flavor. We're also seeing, as we've mentioned, the higher AB, Truly Unruly, has some nice momentum. We're looking to drive those as well as really focusing on the convenience store channel. In terms of, I wouldn't necessarily break down the numbers in terms of where we are. I would say we're heading in the right direction, and you know, in terms of the marketing spend, we're elevating our spend, and we also won't announce yet. It'll probably be for fourth quarter, but some kind of dynamic partners that we think can help charge the business. Okay, and then maybe a quick follow-up. If you're, I guess, if I, you know, thinking about Truly, so if you're unable to stabilize or revive it, do you think Twisted and then, you know, possibly Sun Cruiser next year will be enough to offset and your volumes can return to growth? Is that, you know, I'm just trying to think through this, if some of these efforts aren't successful on Truly. Thank you. Well, I mean, our expectation is that we're gonna be successful with Truly, and our expectation is for all of our businesses to grow. One of the things we've been talking about is all of our businesses reaching their potential and really driving our full portfolio, and we think there's opportunity across our entire business. Okay, I'll pass it on. Thank you. The next question comes from the line of Filippo Falorni with Citi. Please proceed with your question. I wanted to ask a broader question about the beer industry. We've clearly seen some softness this year into the summer, particularly a bit of an improvement, even if you include the fourth category, as you guys talk about. How are you seeing the evolution for the balance of the year and into next year? You think this was, like, more of a temporary headwind in 2024 that we might lap into 2025, or do you see any more structural headwinds that might continue into next year? Thank you. Yeah, there are structural headwinds to the beer industry. None of them is very big. It's hard to isolate and measure any one of them, but you've got things like, you know, cannabis, Ozempic, you know, moderation, health concerns and pricing over the last four years that has been in excess of inflation. You know, and none of them is big enough, but you put them all together, and you've got a beer industry that's down 2%, maybe 2.5%, whatever the number of the week happens to be, but it's between 2% and 3%, and that's about where, you know, our depletions have been for the year. I don't see any of those necessarily going away, except the pricing. At this point, beer pricing looks like it's actually, at least for us, and it's been below inflation, even at 2%. So we've been able to recover our cost increases, and also have our price come down in real terms. I believe that the beer industry will get disproportionate volume from the fourth category. I think, you know, the fourth category is kind of in the wheelhouse of beer for a bunch of reasons that, you know, that I talked about. So I see that coming back. I can -- you know, the rhythms of our volume over 2024, the beginning of the year, the first three or four months was pretty good. And then the industry went into a slump, kind of, after Easter. And you look at the same syndicated data I do. It's come back over the last six weeks. These aren't huge movements, a point or two, but we are at this point on an upswing over the last six weeks. And as Diego mentioned, you know, our shipments with the year to date, going backwards from today, are a little bit higher than they were at the end of the third quarter. So, almost mathematical necessity, our October numbers are coming in better. I don't have a crystal ball. I don't know whether that will continue. There are headwinds, they're not major, for the beer industry, and I'm hoping that, as an industry, you know, we can pick up share of alcohol as the fourth category becomes more important, and if we can outcompete wine and spirits for that volume. Great. Thank you. I'll pass it on. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the queue. The next question comes from the line of Bill Kirk with Roth Capital. Please proceed with your question. Hi, so I'm trying to understand the earnings outlook a bit better. I have year-to-date adjusted EPS at $10.76. And so at the midpoint of the $8-$10 guided range, that would imply almost negative $2 in EPS for 4Q. Looking back at the model, that's one of the lowest 4Qs I can see. Is that math right? Am I missing something in the comparables or something? Or, if it is right, can you help us better understand some details that would drive such a, such a loss in 4Q? First of all, the reason we have a range is, again, as I mentioned before, Q4 is relatively small and therefore very susceptible to movements, short-term movements back and forth, right? That's why we don't love seeing our business in a Q by Q point of view, because any movements in between inventories, orders, loading in products, yes or no, makes a big difference. And we're still laying out when we're going to ship out some of the innovation next year, for example, what pieces we're going to move. That's one. The second one is, Q4 is usually when we have our shortfall fees, and therefore, that is a direct hit to the margin profile of Q4 versus the rest of the quarters. That's something that consistently will happen because that's where we tend to fill in our factories instead of using some of our external capacity. There's not an underlying reason that changes either the trends of the brands or any specific one-time things coming in. It's more of the sensitivity to the volume, the shortfall fees, reducing the margin, and just how sensitive it is to those pieces. On that external, you know, capacity comment, year to date, it shows that 68% of your needs have been in-house production. I think the full year goal was 76% in-house production. So is there a big step up in in-house production in 4Q, or is 76, or I guess, asked differently, is 76 still achievable? So two pieces. So first of all is, again, and I think I said it last in the last call, we adjust what we want to do internally and externally, partially where the orders come. So we might have a goal, but given our forecast, if we have more volume, for example, in California, than where we don't have our own facilities, we'll move product into the other facilities. So the goal missing the goal is not necessarily good or bad, it's just that we made an adjustment. The second part of the answer is yes, we have a significant piece of the volume in Q4 in our facilities, because that's when we have a kind of a lower volume, therefore, we can do a bigger percentage of that volume. So yes, is the answer, but the fact that we're off the goal doesn't necessarily mean it's a good or bad thing. It just means that our regional mix has changed. The other piece is, as we've grown international, like, that is a piece that's also a little bit separate, because it grows, and we're doing it outside our facilities. So overall, we're very happy with our plan. Thank you, Diego. There are no further questions at this time, and I would like to turn the floor back over to Jim Koch for any closing comments. Thank you all for joining us this afternoon, and we look forward to telling you how the year closed out in February. Thanks. Thank you, ladies and gentlemen. That does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.