Green Mountain Coffee's CEO Discusses F1Q12 Results - Earnings Call Transcript
Green Mountain Coffee Roasters, Inc. (
)
F1Q12 Earnings Call
February 1, 2012, 5:00 p.m. ET
Executives
Suzanne DuLong – VP, IR and Corporate Communication
Larry Blanford – President and CEO
John Whoriskey – VP and GM of Keurig’s At Home Division
R. Scott McCreary – President, SCBU
T.J. Whalen – VP of Marketing
Michelle Stacy – President, Keurig
Frances Rathke – CFO
Analysts
Scott Van Winkle – Canaccord Genuity
Akshay Jagdale – Keybanc Capital Markets
Mitchell Pinheiro – Janney Capital Markets
Jon Andersen – William W. Blair & Co.
Mark Astrachan – Stifel Nicolaus & Co.
William Chappell – Suntrust Robinson Humphrey
Gregory Mckinley – Dougherty & Co.
Bryan Spillane – Bank of America Merrill Lynch
Nicole Miller Regan – Piper Jaffray
Anton Brenner – Roth Capital Partners, LLC
Alton Stump – Longbow Research
Mark Rostick – Williams Capital
Presentation
Operator
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Please stand by, we’re about to begin. Good afternoon, and welcome to the Green Mountain Coffee Roasters, Incorporated, Fiscal 2012 First Quarter Conference Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the call over to the company's Vice President of Investor Relations and Corporate Communications, Suzanne DuLong. Suzanne, please go ahead.
Suzanne DuLong
Thank you, Kevin, and welcome everyone. Today's press release is available on our website at
. Consistent with past quarters, our prepared remarks have been furnished in a Form 8-K filed with the SEC and will not be read on today's call.
I also call your attention to several other filings we made today, including our Form 10-Q, and an additional Form 8-K which provides supplemental information to a segment reporting change implemented this quarter, as a result of the form [inaudible] and Canadian at home retailer businesses becoming part of our Canadian business unit.
On today's call, our President and CEO, Larry Blanford will provide some introductory remarks reviewing the quarter's results in our business. Following Larry's remarks we'll open up the call to questions from the sell-side analysts.
Several members of our management team are with us today for the Q&A session, including Fran Rathke, our CFO; Michelle Stacy, President of the Keurig Business Unit; Scott McCreary, President of the Specialty Coffee Business Unit; T.J. Whalen, our VP of Marketing for the Specialty Coffee Business Unit; and John Whoriskey, our General Manager of the Keurig At Home Division.
To ensure we have the opportunity to address everyone's question during the time we’ve allotted for this call, we ask that you limit yourself to one question. We will revisit the queue for follow-up questions.
Finally, I'll remind everyone that certain statements will be made today which are forward looking within the meaning of securities laws. Only to the uncertainties of forward-looking statements, our actual results may differ materially from anything projected in these forward-looking statements. We can give no assurance as to their accuracy and we assume no obligation to update them. For further information on risks and uncertainties, please read the Company's SEC filings and the paragraph in today's press release that begins with the words 'certain statements'.
Now, I'll turn the call over to our President and CEO, Larry Blanford.
Larry Blanford
Thank you, Suzanne, and hello, everyone. We appreciate you joining us today. I’ll speak to our outstanding fiscal first quarter results and business trends. I’ll then discuss competitive aspects of our business and provide a update on our new platform initiatives.
Before I begin however, I wanted to share some personal news with you. I’m pleased to announced I’ve signed a new contract with GMCR, which extends my employment through December 2013.
My current employment contract with the company was set to expire in May of this year, and I’m thrilled to be able to continue to lead this wonderful organization. When my employment commitment ends, I plan to retire from being a public company CEO, and will move on to the next phase of my life and career. I expect to remain on the Board of Directors through my current term, which runs through March of 2014. While I have no specific plans at this time, I know whatever I pursue will be meaningful and all me to make a contribution, consistent with my values.
For now there is no time to contemplate retirement, given all that we’ve got ahead of us. I do want you to know that the board and I will work together to ensure that the eventual transition to a new CEO is a smooth one, and that we will put the very best possible leadership in place to support GMCR’s business success for many years to come.
When appropriate, we anticipate this process will include the engagement of a execute search firm. At present, my top priority is to continue to build our business, our track record of success and our organization.
Now, turning to our first quarter results. North American consumers continue to embrace the convenient choice and consistent experience of a Keurig Single-Cup brewing system. And as evidenced by our strong holiday sales, appear to be encouraging friends and family to do the same. Revenue in Q1 was very strong, more than doubling over the same period in fiscal 2011, and giving rise to GMCR’s first ever billion-dollar sales quarter.
Gross margin was also strong as a result of price increases implemented in 2011, and due to a higher percentage of portion-pack related revenue in the quarter. Non-GAAP operating margin improved to 13.6%, as a result of the strong gross margin as well as SG&A leverage.
And our non-GAAP net income of $96 million increased 264% over the year-ago quarter resulting in non-GAAP EPS of $0.60.
We believe our holiday sales performance was the result of our effort to insure strong in stock positions on store shelves, excellent retail presentation by many of our customers, as well as growing awareness in the Keurig brand, which has been aided by nationwide advertising.
In fact, because we had adequate portion pack supply this year, we were able to promote portion packs during the important holiday season, when interest in the brewing system is typically at its strongest.
Revenue from K-Cup PortionPacks totaled $715.7 million in the quarter, an increase of 115% over the same period in the prior year.
Together with our licensed partners, we shipped 4.2 million Keurig Single-Cup brewers in the first quarter. That total is more than half of the 6.5 million brewers sold in all of fiscal year 2011. Please note that our brewer shipments do not account for consumer returns.
In addition to our brewer shipment info, one of the metrics we’ve used consistently to add relevant color to our business is data on consumer purchase trends from NPD group. On a month-to-month or quarter-to-quarter basis, we see differences between our shipment data and consumer purchase trends reported by NPD. Historically, the two have been generally similar over longer periods of time.
According to NPD, in our first quarter of fiscal year 2012, brewers with Keurig technology including licensed brewers represented 37.5% of all coffee makers sold in the U.S. in the period. Interestingly, NPD reports that for the first time ever in calendar 2011, sales of all single-serve coffee makers accounted for 50% of the total dollars consumers spent in the U.S. coffee maker category.
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