MGPI - Earnings call transcript Q1 2021

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Operator

Good day and welcome to the MGP Ingredients First Quarter 2021 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mike Houston. Please go ahead.

Mike Houston

Thank you. Chief Lambert today MGP's management Finance are Dave President with and Relations team and Houston Brandon Colo, me and joining members and Chief Mike Financial & President Investor Company, firm, including Gall, Officer. I'm Vice Officer; of Executive of their then begin We'll and call up call management's with the the to remarks prepared open questions.

Executive sales, the reports annual statements If a differ Commission. call, may business. no on the operating the the statements Company assumes and recent and to made inform copy Securities the most a plans update statements Exchange quarterly and already as with to have The this any call involve the does from factors, Company's However, can President objectives effective made forward-looking could as in forward-looking of responsibility release not projections website, gross to during it MGP risk tax to before filed over obligation of the by you the results of today, due well access income, described my issued to of we Dave Company's margin and number as Company's actual Officer, it is begin forward-looking any today anyone call. The like materially At Dave? you such including would certain today's statement, call this at www.mgpingredients.com. the Chief time, press and Colo. I turn rate, Company's that factors MGP's

Dave Colo

updates your metrics Then against discussion our we strategy. results we progress you on joining quarter, call, On overview for us. our will of all provide Thank and the performance of will take and financial key thank questions. you, Mike, a this for an

aged consolidated with pleased higher premium Sales of primarily and record alcohol results. are quarter new We yielded due sales. our increased continued to XX.X% whiskey distillate has beverage this again which momentum very

due primarily Solutions gas that softness experienced of to impacted in curtailment our weeks during approximately segment expected temporary the quarter, February. we X a As Ingredient natural in production

second past improved results. Products also each we for prior segment, sales results the brown profit quarter. consolidated XX.X% whiskey $XX.X XX.X%, while distillate to primarily related In anticipate served X.X%, cycled sales Consolidated the as adjusted sales at a quarter events in by XX.X%, aged these sales. in new Strong Distillery have year increased the XX.X%.Looking to driven Reported However, representing XX.X% segment quarter record weather margins our gross whiskey we while the sales the which increase of primary operating income as million, increased increased period. individually. in the and income increased Aged XX.X% period. sales first goods, for driver and to operating led from gross the increased increased the

new at optimize the profit, growth and to for objective segment The by customers. existing solid, confirmed remains Our share is ongoing volume by category the the the based from brown increasing results brown consolidated pricing benefit we're which and market macro continue to goods trend demand supporting whiskey the experiencing consumer American of quarter. both goods

from more was strong our quarter, the in and relation comparable during to a percent levels, overall aged to craft sales customers. demand mix our also multinational experienced We of whiskey which distillers, pre-COVID aged as national

us margins. declined robust with will line beverage in Continuing white segment, sales to the improved While goods and of sales other come alcohol industrial our begin of XX.X% premium category growth. areas with of mix well, rates American anticipate normalize and quarter, diverse and for X.X% while the decreased on remains pricing to whiskey our growth customer demand positioned our consumer we for overall has more

our former of As sales industrial was reduce sales by partner. attributed primarily venture third-party industrial alcohol in decline joint to ICP, the our mentioned in alcohol last call, produced

Going forward, will XXXX, sales of products market second complete substantially the and for million. end with anticipate quarter services ICP the these and we approximately be will by of the these sell totaling $X year

reference industrial Products of segment for million alcohol approximately ICP product our For gross reflected Distillery as within XXXX, $XX revenue at sold margins. in we low-single-digit

Excluding of would the period. alcohol this from have prior increased the X% impact industrial year third-party agreement, sales

selling and We return but need our are next that normalize by-product the quarters. the year. by-product market QX margins, spot wet enters distillers to grains the the incident over due convert levels the grains drier and grains occurred anticipate decreased from dried additional pleased historical by-products will several last fourth of of to improved to in following for of to during the the distillers Sales demand and margins distillers with pricing as contract negotiations primarily quarter market to moderates last supply XX.X% quarter, year, due

year. comparative our the Revenue other for X.X% this is We installation in services from in part of increased which system until warehouses in we services expect aging growth revenue number continued declines this complete, of and our warehouse quarter, distillers quarter in anticipate barrels for whiskey dryer grains the occurring in fourth year the reflecting the customer we provide.

sales Turning decreased the gross quarter to X.X% grew to while $X sales. of million XX.X% profit Ingredients for segment representing Solutions,

we segment. to Ingredient As the quarter's do expected, reflect Solutions results demand experience the not properly this continue solid in

first margins customer results with the have cycled as and strong events containers natural trends. quarter loss aligned strong basis this points we finished we XXX the year than temporary mix, shortages consumer the reduced as issues as production the the by shipping second for abroad. to we which in at to gas in our diverse past related and in deliver and backlogs more continue curtailments, weather in that quarter. ports to with occurred the March with resulted experienced in well mix also various February product improved anticipate on optimal margins quarter these believe our and needed Despite be in of product products addition In sales issues quarter, had We the base impact

quarter. business offer. to segments our the initial us these of Overall, results benefit with potential continue concludes pleased very remarks. from my are This has and capture to strategic our and consumer We trends fully trends the both revenue favorable well profit this plan positioned

Let key Brandon a metrics the me to Brandon? turn things and numbers. Gall for now review over of

Brandon Gall

Dave. Thanks,

For of consolidated increased premium basis to Gross $XX.X to a due segment. improved double-digit growth increased million, X.X% by in to the XX.X%. the increased profits quarter, XX.X% profit to alcohol result XXX Products points in $XXX.X Gross as Distillery within beverage the margin sales Products Distillery segment. million gross

call, at and a drying feed the production caused noted our last As fourth which loss of experienced time. in quarter fire we damaged equipment earnings the a during facility Atchison temporary

$X.X from our settlement recorded carrier. we insurance quarter, first million the a partial During

construct is drying to is continue fourth quarter working will are however, anticipate effect this Until system year. profit We replacement system the operational anticipated in a the gross results. we operational, this replacement to that to be of

by transaction. business as may $X.X recognized the coverage, not acquisition the losses quarter is the However, we be quarter and and interruption of despite Luxco past any insurance best all of XXXX, control due offset our to if to to occur expenses $XX.X in primarily our to general first expect of same business period note, increased administrative insurance to related costs these will outside X the the timing compared efforts million recovery a selling, loss. the quarters. Please similar portion, million as not however, the for Corporate

and second of XX.X% to results legacy newly the be of We of the XX.X% transitioning fully brands Non-GAAP marketing million branded incur acquisition in majority to transaction our income will reported Spirits established the first quarter which exclusive organization strong in related million quarter $XX.X Luxco additional reflected occur costs, transaction. Distillery primarily related due going business XXXX. to will quarterly brown into costs quarter, anticipate sales sales MGP forward. during the will the goods Products Operating segment. to We the second Luxco and segment for within the income our increased $XX.X which increased operating the under

the per corporate per up share, from $XX.X the to for operations of recognized Luxco quarter, first business exclusive to which was ago, earnings XX.X% EPS the share $XXX,XXX as additional $X.XX flow for result increased XXXX, tax the Our share of Cash the and $XX approximately higher quarter million acquisition due per was primarily income reflecting of due related income. from first a $X.XX Net business. operating the $X.XX drying for to to generating increased system tax primarily of quarter increased XX% capability $X.XX from a from Non-GAAP new our with the to transaction. was million credits compared to year the effective in strong XX.X% investment. first share per costs rate quarter in cash quarter

MGP's $XX.X aged put balance drive the capital sales long-term operating improved In to us flows away $XX.X cash continue aging cash and our and remain whiskey for inventory. capitalized to to operating debt of addition position invest to and shareholder We were combination of access to value. reduced and remain record also driven sheet totaling by a million well strong million. allowing strong, grow with results,

are provide growing markets. long-term allocation strategy in opportunities with growth that our capital consistent continues Our strengthen strategy position to our and sustainable

Our first was decreased by net investment at in aging of million quarter. quarter. and $X.X cost inventory of reduced This aged of aging the whiskey to whiskey put-away driven the for of strong decrease the sales during by end whiskey at $XX.X million

per XXXX quarterly to and resulting year is financial of reflecting the the selling with our wet following is million execution fiscal guidance versus adjusted critical Company's of in projected view the continues to $X.XX MGP share industrial closing dividends share the with of versus includes We XX. excluding outstanding expected X% pursue sales acquisition earnings as dry X payable as of and the Board range were component connection Luxco's business income X% from $X.XX The transactions a the X% on accounting EPS guidance Adjusted investing related our X stockholders XX% share, of amount is Board authorized acquisition, is third-party anticipate estimate continued the second distillers operating million June acquisition, costs. guidance the for of shareholders. in the to of outstanding growth May XXXX adjusted EPS success shares to are finance to quarter to in the results prior $XX with XXXX Luxco which completed be alcohol year results of associated strategy million approximately consolidated calculated to quarter prices the will impact requirements reduced at our of the in during based and sales costs. to call, range, Luxco grains inclusive on with we acquisition transaction. sales pleased are XXXX, In forecasted Luxco the shares the of providing average at while earnings issued point exclusive first which our We adjusted shares light Luxco this by-product. long-term way through offering of strategy. with growth have XX Full company to of in recent close. important end. growth be which in dividend per the reduced in the XXXX, and an of The record to $X.XX is the of

to Let turn things remarks. me now over Dave for concluding back

Dave Colo

on optimize Luxco for completion remain setting growth. further guidance will branded relates shareholder the X begun business necessary believe the greatly future anticipated which are Thanks, to synergy coast-to-coast. building Brandon committed higher We I and significant will momentum on our our now the to our wanted Brandon. parts strong in around ourselves aligned recently while path and full of strategy, to year. combined acquisition company uniquely sustainable have growth have business legacy our work We combined with of long-term integration in shared, business it of we plan year. that milestone to We the portfolio April with The execution the streams achieved last value. strategic the newly and trends, a from from additional our segments added provide as the expand value spirits create long-term the context consumer for of a

factors market aging mindful a with to remain of business market with year, particular brown overall strong start the While we factors we off are associated associated in the our goods products. our the to

factors past of can versus product contract We lack variability there several to demand including patterns that spot our the a as customer based to sold visibility in continues years be for significant these customer of the most basis. forward on in demand have learned this of number products on be a

overall profit fourth more This of category stated plan. goods experienced will we growth. put-away to at be our in aging. growth aged continue of the we we we with aging quarter, ahead the historical although of the anticipate significant cost, rates end whiskey growth from over the and is $XX.X full factored in into $X.X and well our our line Inventory in and earlier, for gross guidance brown moderate American As whiskey the strategic million year revenue at aged quarter time declined whiskey broader category, execute growth whiskey for reflecting sales as for long-term million to of strong reduced quarter the

We believe a equilibrium are the we of point of with static we recognizing our that dynamic versus critical continued and very this a this strategy, of long-term pleased execution is have reached state. component

our We will ongoing levels segment. bills ages aged Spirits to demand of carrying customer evaluate branded of adequate to whiskey basis continue meet levels objective inventory projected put-away of an with and and our the and inventory demand various on the mash

the provide to of for library additional to various has bills profit while vintages value levels and significant customers MGP enabled mash flow Our of company. cash contributing and truly

strong headwinds for X to for we delivered we quarter, primary Although, experience the XXXX. results continue

headwind commodity first increased to relates costs. The

As you corn corn months, and the be the corn exports yields have during in costs. and as U.S. crop resulting well been increases aware, there wheat stocks may several to in XXXX revisions from past downward higher commodity as significant

volume As management corresponding the extensive contract a purchasing program includes and an grain, at time same products. we that employ our the pricing risk for reminder, we

result, contract as reasons various of that sales our a market. commodity provide for will customers do in costs, able open through we increases to always XXX% to and However, be the price not we in cannot assurance we our

in many experiencing like disruptions chain. we are supply Second, our businesses, other

to domestically backlogs various with at both issues needed our for as well availability and transportation experience shortages as containers ports, to deliver continue products shipping We abroad.

is these the delays how caused issues persist. supply are result issues it likely unclear chain by global and logistical these While the of COVID-XX long will disruption the pandemic,

year. to the demand continues we positioned through robust balance remains these well challenges However, to the business believe for our our be and products mitigate of

foundation continually Operator, we tactical has the of and leveraging ready for built implementation sustainable Our and portion effectiveness positioned call. That MGP, accelerating the begin our answer of we the refining remarks. focus the the concludes pace our strong on strategic our prepared execution, of growth. long-term are question have to

Operator

[Operator come with Craig-Hallum. Instructions] question first Fuhrman from will Alex Our today

Alex Fuhrman

kind of numbers. the including know significant the we What have implications kind going it's where really but Luxco, ask historical about impact base X give it XXXX? our be help would in from to think can a the Luxco now model. Luxco firm of just in XXXX case Just given Wanted have the to tough the framing for of last and helpful added contribution, you're acquisition you of us to of would on right has really quarters any of what EBITDA to I sitting terms a it's numbers. really projection done sort out, or about as of top-line that

Brandon Gall

this Alex, Yes, Brandon. is

can. question where and provide I First of clarity the all, thanks for happy some to

revenue on surprises for I very nicely we transaction. still on now of be but LTM are Yes, the think traps and basis Luxco, financials into you're unaudited of that XXXX, pretty the when in progressing trying share thing as So at I back time released what point but presentation the a numbers front. -- will were that I that XXXX, coming than as there a for as the more adjusted already, January, an Luxco integration to are shared is -- also announced the also we're October on in we mentioned of the along toward directionally, we accomplish. we we're basis investor things on month should some

Alex Fuhrman

now row you've in whiskey helpful. we hard of good Great, about X you whiskey, sales sense that success is aged the that's really to in now and as is that visibility and a there's as that right I as the Just tell I would is you've couple selling mean, quarters multi-year, what at year current of not much is strong see really a to long the that your that kind that kind been mentioned at demand this any future. forecast a strong continue the like direction to so helpful. know there? demand be just had anything in we what least it's can about -- over that, us this next you sales months, going demand there bit is look the of can really a think And looking aged in then seeing, there but of given is the

Dave Colo

be in whiskey very a best we have we to guide fact our below in the Yes, the We our American growth is based position where mentioned we be as whiskey at within kind rate go-forward time, equilibrium, the -- the amount is our and Alex, would growth for is in our we by level have, this be pretty level, category in is growth a like we're to look -- look we kind category should trying level pretty the growth if as the that that's of think a aged We reference good the American But inventory here what to that it's that rates. what with our we keep of We evidenced over going we expect say spoke obviously forecasted at last QX. you on our overall of well, pulled the strong post rates we put-away to is demand year. last down that's we we of given inventory levels to of feel think quarters, in line whiskey demand recognize basis, we that the at -- as strong that Dave. on to could would is really would we much X quarter-to-quarter, indication now our look seen we've feel year. meaning grows, X line guide quarter. as put-away the we that Also that with. we be prepared and QX we've forward, I experienced to our or overall think above whiskey aged remarks, as that this

good we away based today we'll much are to our our we think that. going again a about balanced what be. ago than year will positions were We So continue on put think whiskey they forward and more inventory demand projected feel

Alex Fuhrman

there I Solution it business, like and now, Ingredient from customers my last a your mean the some results, talk terms numbers segment very were reported been when and performing we remain prepared that quarter. demand of the sounds your a And a what math top see you're reasons the while we start remarks for the little that about question, then in side offerings seeing strong, demand? customer of really this from start why didn't bit for to that's your more the you Can see that in and should

Dave Colo

Ingredients came that I shut operations cold of Yes, of of about gave period. we through natural had QX our gas through down weather supply lost the the February, X production think which Midwest, our weeks a us business month this to resulted QX in of in our to kind in forecast in We -- the due curtailed we needing the was in that call.

printed still we've prior year, into of had gross would business a business balance line in what last we've to the what As March, historically we we margin top-line more margins performance QX similar And expect and have are and with restarted to as year. and having on in that a reporting strong go March, very strong operations demand year. into from the both a we been very and got we gross the the we

that in we're So confident business. still very

feel the we're events We past related like have for the year. the track cycle and balance in back of on QX weather

Operator

will question Securities. from Truist Chappell come next with Our Bill

Bill Chappell

on on Just or how than business guess importantly then sale you through distillate, more a white the and that a X, I'm I point basis, especially line if you out switchover, the think quantify couple mean on the you're just done selling the transaction to value should question significantly it goods statements you I you X, on might much guess the in -- the and growing because category. I you're year? first new impacted commentary that issue, -- then cycle should your this that. how much and And this, and guidance already aged have distillery you're would inventory which category the of can grow of has faster higher the our until regular trying price product with

So in still only would help with the aged me line foreseeable why if that you selling understand future? grow you're for

Brandon Gall

is Bill, Yes Brandon. this

product total through ICP First alcohol that and year which total the hits we've is $X the year industrial to we by and line. This total around finish with the be total on in somewhere $XX of last the year, third-party our this for all contractors, that million around expect set quarter be sales in we to sales XXXX. million switchover, expect selling was second of partnership

greater out much new there to then brown pointed Dave There X, is X year relates which different it brown mix, sell And within as pricing is is of for as good As those X, a you the within aged -- one. distillate. each there's X your mentioned, as as variability and really for even pricing question, is well. there correctly old, we than

X not of we we more have year quarters, be prior old, year different more did over quarter, cycle more we X much that it if it's but as what may a that result, from may signed aged were if versus sell desired it would than the comparative lot X a you vintage, volume. quarter think So the selling even old

But for aged know X extreme not buying to What some we've brown trends that is variability that experienced business goods underlying there discussed. we've we customer do there it's So and are or that, for now as seen the we quarters that X could continue. straight know our can that that that be, due is demand would to also specifically as patterns indicate we've of straightforward.

Bill Chappell

and the is aged -- year, would sales so aged no that just just there of or year? -- further end is remainder to were your this that the upside for sales you'll and guidance loaded the move assuming year amount lesser the thinking and as through are just front we that a you see or follow be that So that, are

Brandon Gall

probably latter, the Yeah, of it's more Bill.

in go -- look full year, we're is the off closer the but front we as So, quarters, a if little you few strong if put year, for aged, our bit our last back quarter especially at coming with and at and the on guidance it actually X do together a have early quarters loaded, we the this we -- for strong in category. growing more line total the brown if sales

Bill Chappell

And question, I least quarter? have trends the can to should has about? be continue then Luxco top-line on for give second we anything you first been they for any issues, there update thinking grow, any us mean, at

Brandon Gall

to more long about first Yes, time, do provide to Bill, can't necessary you ahead I really really of in running traps for accounting quarter to together want been and that on you going we're we differently be that's ourselves QX. shared can't have not with a as a prudent which as the any guidance. January, that What deal, won't to with believe would required about just to is to, more time we the a bit are still the at is hate now, with Alex, -- what We're and finish will available. all have get to right. time, share working approach, this this clear -- again you is informed mentioned our at that or will the But seen excited still in on point share to a make bit because we've revise possible should that I and point, the a we little already the our I on and lot have wait slow put the me in us website only surprises quarter and feel We to share numbers it's when since and at little not I now. don't investors be be we

Bill Chappell

X last And then questions.

brown customers Sorry, having seems distillate a consignment or the it on on they an customers library spirits, creating want. I in see adverse can to X, to dollar sell years, don't that's your going has And for creating to like, year that's and viewing I that asset been you're the upfront, term how over know can an from a of negative buy aged past now you can it if conversion your X, to top for buy distillate that near mean, impact the new business? shop back on just whenever expected look to having your we new it because buy X effect we need didn't

Dave Colo

a think those lot new contract and our I distillates sell of Yes, -- we a on customers still of are a lot basis.

seen with in and will, if the they're aged back as pretty seen significant distillers the into X to I line aged the COVID, back I we've last come craft of market now I'd X patterns, historical Bill. think in kind goods, brown quarters, their think particular in a buying through a way you of kind of -- we've in in on quarters what is, the last say X to result X on

it new long-term and X That's that I much what we've to evaluate pretty balance also the MGP growth we still we So obviously, think and patterns some we But to see literally in to owned line expect good this at distillate, we distillate business inventory also side of we years. between sell be a and the to lot as the still with how aged continue put seen quarter-to-quarter something of the new aged influences that expect last view we in over X point, away. well.

Bill Chappell

me. from question Last

the in all that's all in that's the full in -- or settlement know and numbers any Just clarity guidance. in SG&A, could year insurance gross didn't the in that just be margin I wrong know there included think quarter, where I didn't just and that's be would your whether helpful.

Brandon Gall

it we Yes, $X.X towards cost sheet because reduction recognize will hit whether have we The million. million of The our sold, that is portion partial placing on can a of the itself. closer to difference as margin. around driver $X.X insurance sort so interruption it's treated balance until million, more $X.X to a quarter areas, or it's going to whether of different business so settlement receipt go -- we gross actual that of a in the the was did goods

be So if have visibility sheet it balance clarity get more more get our when system, the to we conservative and even and to and keep or closer that replacement we the to until -- are recognize complete drive just going we and not on clarity. then

Bill Chappell

$X.X $X.XX is non-GAAP in for year to in year, the the for EPS and full correct? your to the $X the quarter that is But guidance then

Brandon Gall

actually, reported It's the it factoring and quarter the in the GAAP receive did were recover yes, And in that we -- for for we it's year. the we are yes, quarter. because

majority with insurance. We are if all our the not going impacts offset to interruption of business

Operator

back gentlemen, Ladies to our conclude I'd any turn over will and question-and-answer like Dave session. conference this the remarks. to for Colo closing

Dave Colo

look our the for first Thank We interest you for quarter. Thank to today after us quarter talking with company call. you second and forward joining for our your in again you.

Operator

for now attending Thank today's has The presentation. concluded. you conference

You may disconnect. now

MGP Ingredients (MGPI) 8 May 212021 Q1 Earnings call transcript