UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

1201 Dowdell Lane

(707) 302-2658

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒    No  ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

This Quarterly Report on Form 10-Q and other materials filed or to be filed by us with the U.S. Securities and Exchange Commission (“SEC”) contains statements that are or may be considered to be, forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies and other future conditions. Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include, among others, the following:

•    our ability to manage the growth of our business;

•    our reliance on our brand name, reputation and product quality;

•    the effectiveness of our marketing and advertising programs, including the consumer reception of the launch and expansion of our product offerings;

•    general competitive conditions, including actions our competitors may take to grow their businesses;

•    overall decline in the health of the economy and the impact of inflation on consumer discretionary spending and consumer demand for wine;

•    the occurrence of severe weather events (including fires, floods and earthquakes), catastrophic health events, natural or man-made disasters, social and political conditions war or civil unrest;

•    risks associated with disruptions in our supply chain for grapes and raw and processed materials, including corks,barrels, glass bottles, barrels,cork, winemaking additives and agents, water and other supplies;

•    disrupted or delayed service by the distributors and government agencies we rely on for the distribution of our wines outside of California;

•    our ability to successfully execute our growth strategy;

•    decreases in our wine score ratings by wine rating organizations;

•    quarterly and seasonal fluctuations in our operating results;

•    our success in retaining or recruiting, or changes required in, our officers, key employees or directors;

•    our ability to protect our trademarks and other intellectual property rights, including our brand and reputation;

•    our ability to comply with laws and regulations affecting our business, including those relating to the manufacture, sale and distribution of wine;

•    the risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to both domestic and to international markets;

•    claims, demands and lawsuits to which we are, and may in the future, be subject and the risk that our insurance or indemnities coverage may not be sufficient;

•    our ability to operate, update or implement our ITinformation technology systems;

•    our ability to successfully pursue strategic acquisitions and integrate acquired businesses;

•    our potential ability to obtain additional financing when and if needed;

•    our substantial indebtedness and our ability to maintain compliance with restrictive covenants in the documents governing such indebtedness;

•    TSG’sTSG Consumer Partners LLC's (“TSG”) significant influence over us and our status as a “controlled company” under the rules of the New York Stock Exchange;

•    the potential liquidity and trading of our securities; and

•    the future trading prices of our common stock and the impact of securities analysts’ reports on these prices.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events, and trends that we believe may affect our business, results of operations and financial condition and operating results.condition. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk factors”Factors” in Part 1 Item 1A. in our Fiscal 20222023 Annual Report on Form 10-K and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a highly competitive environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements whether as a result of new information, future developments or otherwise. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not rely on our forward-looking statements in making your investment decision. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

The Company'sCompany’s revenue is comprised of wholesalesales to distributors and DTC sales.direct to trade accounts in California (“wholesale”) and direct to consumer (“DTC”). Wholesale revenue is generated through sales directly to California retailers and restaurants, sales to distributors and agents located in other states throughout the United States (“U.S.”) and sales to export distributors that sell internationally. DTC revenue results from individual consumers purchasing wine directly from the Company through club membership, the Company'sCompany’s website or tasting rooms located in Napa Valley, California; Anderson Valley, California; Sebastopol, California; Hollister, California; and Walla Walla, Washington.

The Company owns or controls, through long-term leases, certain high-quality vineyards throughout Northern and Central California and Washington. Vinification takes place at wineries owned, leased or under contract with third parties predominately located in Napa Valley, California; Anderson Valley, California; Hopland, California; Hollister, California; San Luis Obispo, California; Sebastopol, California; and Walla Walla, Washington.

Fiscal year

Secondary offeringOffering

In the first quarter of Fiscal 2022,April 2023, the Company completed a secondary offering where certain existing stockholders sold 12,000,0006,000,000 shares of common stock at a price of $20.50$15.35 per share. In November 2021, an additional 626,467 shares of common stock were sold pursuant to the partial exercise of the underwriters' option to purchase additional shares. The Company did not receive any of the proceeds from the sale of the shares by the existing stockholders. In connection with the offering, the Company incurred costs of $0.6$0.4 million duringin the six months ended January 31, 2022, which are reflected in selling, general and administrative expenses on the Condensed Consolidated Statementthird quarter of Operations.Fiscal 2023.

Basis of presentation

The Condensed Consolidated Statement of Financial Position as of July 31, 20222023 was derived from the Company's audited financial statements for the fiscal year ended July 31, 2022,2023, previously filed with the SEC. The Condensed Consolidated Financial Statements do not include all of the information and note disclosures required by U.S. GAAP and should be read in conjunction with the audited consolidated financial statementsConsolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2022.2023.

Principles of consolidation

The Condensed Consolidated Financial Statements include the accounts of The Duckhorn Portfolio, Inc. and its subsidiaries, including a consolidated VIEvariable interest entity (“VIE”) of which the Company has determined it is the primary beneficiary. All intercompany balances and transactions are eliminated in consolidation.

Accounting estimates

The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, the following: useful lives and recoverability of long-lived assets, inventory obsolescence and reserves, capitalized indirect inventory costs, allowance for credit losses, calculation of accrued liabilities, customer incentive reserves, uncertain tax positions, contingent liabilities, equity-based compensation and deferred revenues. Actual results could differ from those estimates.

Preferred stock

The Company has 100,000,000 shares of $0.01 par value preferred stock authorized, none of which are issued and outstanding.

Variable interest entities

Recently adopted accounting pronouncements

No other new accounting pronouncements issued or effective as of January 31, 20232024 have had, or are expected to have, a material impact on the Condensed Consolidated Financial Statements or the related disclosures.

3.    Revenue

Disaggregated revenue information

The following table presents the percentages of consolidated net sales disaggregated by sales channels:

Contract balances

When the Company receives payment from a customer, prior to meeting the performance obligation under the terms of a contract, the Company records deferred revenue, which represents a contract liability. The Company’s deferred revenue is primarily comprised of cash collected from wineswine sold through our DTC channels,channel ahead of the wine shipment date. The Company does not recognize revenue until control of the wine is transferred and the performance obligation is met.

Deferred revenue in the Condensed Consolidated Statements of Financial Position was $3.3$5.2 million and $0.1 million at January 31, 2024 and July 31, 2023, respectively. The Company recognized revenue of $11.1 million and $12.1 million during the three months ended January 31, 2024 and 2023, included in the opening contract liability balance for the corresponding period. The Company recognized revenue of $0.1 million and $0.3 million at January 31, 2023 and July 31, 2022, respectively. Induring the three and six months ended January 31, 2023, the Company recognized revenue of $12.1 million2024 and $0.3 million, respectively, which was2023, included in the opening contract liability balance for the corresponding period.

Inventories are stated at the lower of cost or net realizable value and are primarily measured on a first-in-first-out basis. The Company records valuation adjustments to the carrying value of its inventories based on periodic reviews of slow-moving, obsolete and excess inventory to determine the need for reserves by comparing inventory carrying values with their net realizable values upon ultimate sale or disposal. The Company'sCompany’s estimates of net realizable value are based on historical experience as well as Management'sManagement’s judgments with respect to future market conditions. In the period the Company determines a reserve is required, the Company recognizes a

charge to cost of sales for the excess of the carrying value over net realizable value. The inventory reserve was $0.4$0.8 million and $5.1$0.9 million at January 31, 20232024 and July 31, 2022,2023, respectively.

Effective November 4, 2022, the Borrowers entered into the New Credit Agreement which amends and restates, in its entirety, the Original Credit Agreement. The New Credit Agreement provides for $675.8 million in first lien senior secured credit facilities consisting of (i) a $425.0 million revolving credit facility, (ii) a $225.8 million term loan facility and (iii) a $25.0 million delayed draw term loan facility. The maturity date for loans borrowed under the New Credit Agreement is November 4, 2027.

The New Credit Agreement allows the Borrowers, at any time, to request additional term loans, revolver commitments and delayed draw term loan commitments in an aggregate amount of up to $400.0 million (the “Incremental Facility”). The lenders are not under any obligation to provide the Incremental Facility, and the Incremental Facility is subject to certain customary conditions precedent and other limitations.

Borrowings under the revolver portion of the New Credit Agreement generally bear interest based on the sum of the forward-looking term rate based on the Secured Overnight Financing Rate (“Term SOFRSOFR”) plus a loan margin based on average availability as follows: (a) less than or equal to 33% of average availability, a loan margin of 1.50%, (b) greater than 33% and less than or equal to 66% of average availability, a loan margin of 1.25%, and (c) greater than 66% of average availability, a loan margin of 1.00%. Borrowings under the term loan and delayed draw portions of the New Credit Agreement generally bear interest based on the sum of (i) Term SOFR plus (ii) a credit spread adjustment of 10 basis points for 1-month and 3-month interest periods and 15 basis points for a six-month interest period plus (iii) a loan margin of 1.625%.

The New Credit Agreement also includes an unused line fee and contains customary representations and warranties and affirmative and negative covenants for agreements of this type. In addition, the New Credit Agreement requires compliance with the following financial covenants, in each case commencing from fiscal quarter ending January 31, 2023: (i) a debt to capitalization ratio not to exceed 0.55:1.00, measured at the end of each fiscal quarter and (ii) a fixed charge coverage ratio not to be less than 1.15:1.00, measured at the end of each fiscal quarter. As of January 31, 2024, the Company was in compliance with all covenants.

As discussed in Note 10 (Commitments and contingencies),of January 31, 2024, the Company held the following interest rate swap agreement, which fixed the interest rate on the applicable notional amount of outstanding variable rate debt:

The Company manages annual barrel purchases by engaging domestic and foreign cooperages to provide specified barrel quantities on agreed delivery dates. SomeA significant portion of these invoices are paid in Euros. In order to reduce the foreign exchange risk associated with the Euro to U.S. Dollar conversion rate, the Company enters into foreign currency forward contracts, generally aligning settlement dates with expected barrel deliveries and the anticipated timing of payments to various coopers.

Results of period derivative activity

The estimated fair value and classification of derivative instruments on the accompanying Condensed Consolidated Statements of Financial Position for January 31, 20232024 were as follows: