10-Q: Willamette Valley Vineyards Reports Q1 2025 Results: Revenue Declines Amid Strategic Growth Initiatives

• Willamette Valley Vineyards reported a net loss of $728,981 for the three months ended March 31, 2025, compared to a net loss of $521,805 for the same period in 2024.
• Net sales decreased by 14.3% to $7,541,583 from $8,803,080 in the prior year period, driven by a decline in distributor sales.
• Direct to consumer sales increased slightly by $24,318, attributed to higher wine club revenues.
• The company sold 33,080 cases of wine in Q1 2025, a 23.5% decrease from the 43,208 cases sold in Q1 2024.
• Gross profit decreased by 9.7% to $4,759,108, while gross profit margin increased to 63.1% from 59.9% due to higher retail prices.
• Selling, general, and administrative expenses decreased by 4.2% to $5,629,086.
• Interest expense increased by 29.8% to $298,221 due to higher debt levels.
• The company's working capital was $26.7 million with a current ratio of 3.60:1 as of March 31, 2025.
• The company had an outstanding line of credit balance of $1,203,983 at March 31, 2025, at an interest rate of 7.0%.

Score: 4

Explanation: The report indicates a challenging quarter with declining sales and increased losses, offset by some positive trends in direct sales and cost management. The company is investing in strategic growth, which is impacting near-term results.

• Direct to consumer sales increased slightly, indicating strength in the company's direct sales channels.
• Gross profit margin increased due to higher retail prices, suggesting improved pricing strategies.
• Selling, general, and administrative expenses decreased, reflecting cost management efforts.
• The company maintains a strong working capital position with a current ratio of 3.60:1.

• Net sales decreased significantly due to lower distributor sales, indicating potential challenges in the wholesale distribution network.
• Net loss increased, reflecting the impact of lower sales and ongoing strategic growth investments.
• Interest expense increased due to higher debt levels, potentially impacting profitability.
• Wine case sales decreased by 23.5%, indicating a decline in overall sales volume.

• The company's performance is subject to risks related to the availability of financing, grape supply, competition, weather conditions, and consumer demand.
• A reduction in grape quality or supply due to disease or smoke from forest fires could adversely impact the company's operations.
• Changes in wine broker or distributor relations or performance could affect sales and distribution.
• The company's near-term financial results are expected to be negatively impacted by costs associated with preferred stock dividends and strategic planning.

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

• The Company believes its success is dependent upon its ability to: (1) grow and purchase high quality vinifera wine grapes; (2) vinify the grapes into premium, super premium and ultra-premium wine; (3) achieve significant brand recognition for its wines, first in Oregon, and then nationally and internationally; (4) effectively distribute and sell its products nationally; and (5) continue to build on its base of direct to consumer sales.
• The Companys goal is to continue to build on a reputation for producing some of Oregons finest, most sought-after wines.

The wine industry is competitive, with companies focusing on brand recognition, distribution, and direct to consumer sales. Willamette Valley Vineyards is positioning itself for growth through property purchases and development, as well as strategic financing through preferred stock offerings.

• It is difficult to compare Willamette Valley Vineyards directly to global benchmarks without specific data on comparable companies.
• However, other publicly traded wineries such as Duckhorn Portfolio (NAPA) and Treasury Wine Estates (TWE) can be used as a benchmark.
• Duckhorn Portfolio focuses on high-end wines, similar to Willamette Valley Vineyards' premium strategy, and trades at a premium valuation.
• Treasury Wine Estates has a global portfolio and distribution network, providing a comparison for distribution strategies.
• Willamette Valley Vineyards' direct-to-consumer focus aligns with industry trends, as many wineries are increasing direct sales to improve margins.

• Shareholders may be concerned about the increased net loss and declining sales.
• Customers may benefit from the company's focus on producing high-quality wines and expanding direct sales channels.
• Employees may be affected by the company's strategic growth initiatives and cost management efforts.
• Suppliers, particularly grape growers, are important to the company's operations and may be impacted by changes in grape purchase agreements.

• The company will continue to focus on growing and purchasing high-quality grapes.
• The company will continue to vinify grapes into premium wines.
• The company will continue to build brand recognition.
• The company will continue to effectively distribute and sell its products nationally.
• The company will continue to build on its base of direct to consumer sales.

• March 15, 1988: Date of original articles of incorporation.
• December 1999: Sale-leaseback agreement for approximately 79 acres of the Tualatin Vineyards property.
• December 2004: Sale-leaseback agreement for approximately 75 acres of the Tualatin Vineyards property.
• December 2005: The Company entered into a revolving line of credit agreement with Umpqua Bank.
• February 2007: The Company entered into a lease agreement for 59 acres of vineyard land at Elton Vineyard.
• July 2008: The Company entered into a 34-year lease agreement with a property owner in the Eola Hills.
• February 2017: The Company purchased property in the Dundee Hills AVA under terms that included a 15 year note payable.
• March 2017: The Company entered into a 25-year lease for approximately 17 acres of agricultural land in Dundee, Oregon.
• September 2018: The Company renewed an existing lease for its McMinnville tasting room.
• December 2018: McMinnville tasting room lease renewed.
• January 2018: The Company assumed a lease for its Maison Bleue tasting room in Walla Walla, Washington.
• January 2019: The Company extended the lease in January 2019 until January 2025.
• February 2020: The Company entered into a lease for a retail wine facility in Folsom, California, referred to as Willamette Wineworks.
• June 2021: The Company entered into a new 11 year lease for the Elton Vineyard property.
• July 2021: The Company renewed the Credit Agreement until July 31, 2023.
• July 1, 2022: The Company filed a shelf Registration Statement on Form S-3 with the United States Securities and Exchange Commission.
• November 2022: The Company increased the borrowing line up to $ 5,000,000.
• February 2022: The Company entered into a lease for a retail wine facility in Lake Oswego, Oregon.
• May 2022: The Company entered into a lease for a retail wine facility in Happy Valley, Oregon.
• July 2023: The line of credit was renewed for an additional two years.
• January 2023: The Company entered into a lease for a retail wine facility in Bend, Oregon.
• July 2024: The Company extended the lease in July 2024 until January 2030.
• January 2025: The Company amended the renewal options and extended the lease until February 2026.
• March 31, 2025: End of the quarterly period for this report.
• May 13, 2025: Date of report filing.