Overview

Willamette Valley Vineyards is one of the largest wine producers in Oregon by volume. The company’s success is dependent on its ability to grow and purchase high-quality grapes, vinify them into premium wines, achieve brand recognition, effectively distribute and sell its products, and continue building its direct-to-consumer sales.

The company’s goal is to build a reputation for producing some of Oregon’s finest, most sought-after wines. It has focused on strategic growth through property purchases, development, and the issuance of its Series A Redeemable Preferred Stock. However, these activities are expected to negatively impact near-term financial results due to costs associated with preferred stock dividends, strategic planning, and other growth-related expenses.

Willamette Valley Vineyards generates revenue from the sale of wine to wholesalers and direct-to-consumers. Direct-to-consumer sales, which include tasting rooms, telephone, internet, and wine club, have higher profit margins than wholesale sales. The company continues to emphasize growth in direct-to-consumer sales through existing and new tasting room locations, as well as growth in its wine club membership.

Financial Performance

Revenue:

• Sales revenue for the three months ended September 30, 2024 was $9,370,713, an increase of 0.2% over the same period in 2023.
• Sales revenue for the nine months ended September 30, 2024 was $28,506,151, an increase of 0.4% over the same period in 2023.
• The increases were driven by growth in direct-to-consumer sales, which offset declines in sales through distributors.

Cost of Sales:

• Cost of sales for the three months ended September 30, 2024 was $3,562,599, a decrease of 2.8% from the same period in 2023.
• Cost of sales for the nine months ended September 30, 2024 was $10,953,625, a decrease of 8.5% from the same period in 2023.
• The decreases were primarily due to reduced product sales.

Gross Profit:

• Gross profit as a percentage of net sales was 62.0% for the three months ended September 30, 2024, up from 60.8% in the same period in 2023.
• Gross profit as a percentage of net sales was 61.6% for the nine months ended September 30, 2024, up from 57.8% in the same period in 2023.
• The increases were due to higher prices, a greater proportion of direct-to-consumer sales, and changes in product mix.

Selling, General and Administrative Expenses:

• SG&A expenses for the three months ended September 30, 2024 were $5,944,620, a decrease of 0.4% from the same period in 2023.
• SG&A expenses for the nine months ended September 30, 2024 were $17,754,703, an increase of 2.3% from the same period in 2023.
• The increase was primarily due to higher legal costs.

Net Loss:

• Net loss for the three months ended September 30, 2024 was $282,945, a decrease of 13.5% from the same period in 2023.
• Net loss for the nine months ended September 30, 2024 was $608,772, a decrease of 36.8% from the same period in 2023.
• The decreases were primarily due to higher product prices.

Net Loss Applicable to Common Shareholders:

• Net loss applicable to common shareholders for the three months ended September 30, 2024 was $846,195, an increase of 0.9% from the same period in 2023.
• Net loss applicable to common shareholders for the nine months ended September 30, 2024 was $2,298,448, a decrease of 8.0% from the same period in 2023.
• The decrease was due to a lower net loss, partially offset by higher accrued preferred stock dividends.

Liquidity and Capital Resources

• As of September 30, 2024, the company had a working capital balance of $22.6 million and a current working capital ratio of 2.85:1.
• The company had a cash balance of $303,195 as of September 30, 2024, up from $238,482 as of December 31, 2023.
• Cash used in operating activities for the nine months ended September 30, 2024 was $2,159,828, primarily due to reduced grapes payable and increased inventories.
• Cash used in investing activities for the nine months ended September 30, 2024 was $1,655,152, consisting of purchases of property, equipment, and vineyard development.
• Cash generated from financing activities for the nine months ended September 30, 2024 was $3,879,693, primarily from proceeds from the issuance of Preferred Stock and debt, partially offset by debt repayments.
• The company has a $5 million revolving line of credit with Umpqua Bank, of which $3,460,004 was outstanding as of September 30, 2024.
• The company believes its cash flow from operations and available credit facilities will be sufficient to meet its short-term needs.

Outlook

Willamette Valley Vineyards continues to focus on strategic growth through property acquisitions, development, and direct-to-consumer sales initiatives. While these activities are expected to negatively impact near-term financial results, the company believes it is well-positioned to build on its reputation for producing high-quality, sought-after wines in Oregon.