10-Q: Willamette Valley Vineyards Reports Mixed Results in Q3 2024, Direct Sales Growth Offsets Distributor Decline

• Willamette Valley Vineyards reported a net loss of $282,945 for the third quarter of 2024, an improvement from the $326,982 loss in the same period last year.
• Net sales for the quarter were $9,370,713, a slight increase from $9,348,066 in Q3 2023.
• Direct sales increased by $245,797, while distributor sales decreased by $223,150 in the third quarter.
• For the first nine months of 2024, the company's net loss was $608,772, compared to a loss of $963,352 in the same period of 2023.
• The company sold 135,424 cases of wine in the first nine months of 2024, a decrease of 5.5% compared to 143,286 cases in the same period of 2023.
• The company's gross profit margin increased to 62.0% in Q3 2024 from 60.8% in Q3 2023, and to 61.6% for the first nine months of 2024 from 57.8% in the same period of 2023.
• The company's line of credit balance was $3,460,004 at September 30, 2024, with an interest rate of 8.0%.

Score: 5

Explanation: The document presents mixed results, with some positive trends like improved gross profit margins and reduced net loss, but also negative trends like decreased distributor sales and increased interest expenses. The company is also relying on capital raises to fund operations and growth, which adds risk.

• The company's net loss decreased in both the third quarter and the first nine months of 2024 compared to the same periods in 2023.
• Gross profit margin improved due to higher prices and a greater proportion of direct sales.
• Direct sales growth indicates a successful strategy in reaching consumers directly.
• The company received positive recognition through national magazines, regional publications, local newspapers and online bloggers.

• Distributor sales decreased by $223,150 in Q3 2024 and $540,577 in the first nine months of 2024 compared to the same periods in 2023.
• The company experienced a decrease in wine case sales of 5.5% in the first nine months of 2024 compared to the same period in 2023.
• Interest expense increased by $85,920 in Q3 2024 and $290,264 in the first nine months of 2024 due to increased debt.
• General and administrative expenses increased by $384,903 in the first nine months of 2024 primarily due to higher legal costs.

• The company is subject to risks related to the availability of financing for growth, the supply of high-quality grapes, and the impact of competition.
• Adverse weather conditions, disease, or smoke from forest fires could reduce grape quality or supply.
• Changes in consumer spending and demand for premium wines could impact sales.
• The company was out of compliance with a debt covenant as of December 31, 2023, but received a waiver until December 31, 2024.

Management expects near-term financial results to be negatively impacted by costs associated with accrued preferred stock dividends, strategic planning, development, and other growth-related activities.

• The company believes its success is dependent upon its ability to grow and purchase high quality vinifera wine grapes.
• The company's goal is to continue to build on a reputation for producing some of Oregon's finest, most sought-after wines.
• Management expects near term financial results to be negatively impacted by these activities as a result of incurring costs of accrued preferred stock dividends, strategic planning and development costs and other growth associated costs.

The company operates in the competitive wine industry, where success depends on factors such as grape quality, brand recognition, and effective distribution. The company is focusing on direct-to-consumer sales, which is a growing trend in the wine industry, to improve margins.

• The company's focus on direct-to-consumer sales aligns with industry trends, where wineries are increasingly seeking to build direct relationships with customers to improve profitability.
• The company's gross profit margin of 62.0% in Q3 2024 is a positive sign, indicating effective cost management and pricing strategies, but should be compared to other wineries of similar size and product mix.
• The decrease in distributor sales is a concern, as this channel is still a significant part of the wine industry, and the company should evaluate its strategy in this area.
• The company's debt levels and interest expenses should be monitored closely, as they could impact future profitability and growth.

• Shareholders may be concerned about the increased net loss applicable to common shareholders and the reliance on capital raises.
• Employees may be impacted by the company's financial performance and strategic decisions.
• Customers may benefit from the company's focus on direct-to-consumer sales and new tasting room locations.
• Suppliers may be affected by the company's grape purchase agreements and financial stability.
• Creditors may be concerned about the company's debt levels and compliance with debt covenants.

• The company will need to focus on increasing sales through distributors to offset the recent decline.
• The company should continue to monitor and manage its debt levels and interest expenses.
• The company should continue to focus on direct-to-consumer sales and wine club membership growth.
• The company will need to maintain compliance with debt covenants.

• The company is a party to various judicial and administrative proceedings arising in the ordinary course of business.
• Management believes that these matters will not have a material adverse effect on the company's financial position, results of operations, or cash flows.

• 1999-12-01: Initial date of Tualatin Vineyards lease.
• 1999-12-31: End date of Tualatin Vineyards lease.
• 2004-12-01: Initial date of Tualatin Vineyards lease.
• 2004-12-31: End date of Tualatin Vineyards lease.
• 2005-12-31: Date of line of credit agreement with Umpqua Bank.
• 2007-02-01: Initial date of Elton Vineyards lease.
• 2007-02-28: End date of Elton Vineyards lease.
• 2008-07-01: Initial date of Eola Hills lease.
• 2008-07-31: End date of Eola Hills lease.
• 2017-02-01: Date of property purchase in Dundee Hills.
• 2017-09-01: Initial date of Dundee lease.
• 2017-09-30: End date of Dundee lease.
• 2018-01-01: Initial date of Maison Bleue lease.
• 2018-01-31: End date of Maison Bleue lease.
• 2018-12-01: Initial date of McMinnville lease.
• 2018-12-31: End date of McMinnville lease.
• 2020-02-01: Initial date of Willamette Wineworks lease.
• 2020-02-28: End date of Willamette Wineworks lease.
• 2020-02-29: End date of Willamette Wineworks lease.
• 2021-07-01: Renewal of Credit Agreement with Umpqua Bank.
• 2021-09-01: Initial date of Retail Wine Facility lease.
• 2021-09-30: End date of Retail Wine Facility lease.
• 2022-02-01: Initial date of Retail Wine Facility lease.
• 2022-02-28: End date of Retail Wine Facility lease.
• 2022-05-01: Initial date of Retail Wine Facility lease.
• 2022-05-31: End date of Retail Wine Facility lease.
• 2022-11-01: Date of Prospectus Supplement to the July 2022 Form S-3.
• 2022-11-30: Date of Prospectus Supplement to the July 2022 Form S-3.
• 2022-12-31: Fiscal year end.
• 2023-01-01: Initial date of Retail Wine Facility lease.
• 2023-01-31: End date of Retail Wine Facility lease.
• 2023-07-01: Renewal of line of credit agreement with Umpqua Bank.
• 2023-09-30: End of Q3 2023.
• 2023-10-27: Date of Prospectus Supplement to the July 2022 Form S-3.
• 2024-01-01: Start of Q1 2024.
• 2024-03-31: End of Q1 2024.
• 2024-04-01: Start of Q2 2024.
• 2024-06-30: End of Q2 2024.
• 2024-07-01: Start of Q3 2024.
• 2024-09-30: End of Q3 2024.
• 2024-11-11: Date of report filing.