MGPI - Earnings call transcript Q1 2022

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Operator

Good day, and welcome to the MGP Ingredients First Quarter 2022 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, Investor Relations. Please go ahead.

Mike Houston

Thank you. Lambert MGP's with Relations Houston Mike & Investor Company, firm. I'm Gall, of me Chief team, Brandon Finance today joining Officer. their Chief Executive President Financial and are and and And President members management of Colo, including Officer; Vice Dave

with the open questions. prepared remarks We the call and up call will management's begin to then

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

David Colo

March the provide progress made call on begin On the an performance for open metrics our with we performance for the quarter we will you, our of thanks, Thank the line joining XX, Q&A. strategy. updates against discuss call, this overview Mike, and XXXX, will At call, we have financial for ended end today. key and everyone, of the the

off each start our with to for another to segments. of results are business strong year record the X We

that consumer are the gross XX.X%, increased record business operating our income while operating supporting XXX%, and sales our consolidated segments adjusted momentum profit We this Consolidated each sales. remain increased trends a with macro XXX% are very year underlying XX.X% while increased quarter strong. income of representing XXX%. increased believe continued pleased the of Reported for million, $XX.X to

pleased with momentum continues across each to in our for a previously very aged increase the quarter. Products sales segments the quarter changed and be distillate with within The the are was XX.X% our and this We We reflect a for we provide our sustained services whiskey driver better to Distillery segment growth of products segment. Solutions brown Distilling known new to goods our name recently which segment, the reporting this as of customers. demand

the Ingredient segment results also whiskey for and strong results in segment Our our were XX.X% demand gross profit American contributed sales premium, profits, continued offerings record gross for mix, product super ultra-premium brands the which higher sales. quarter, to premium benefited XX% of to priced encouraging Branded Solutions Spirits represented growth our contributors key representing segment, of yielding and the segment strong sales. improved from

aged XX.X%, also whiskey last whiskey from with of in segment greater the as due Aged the margins profit million gross Solutions quarter improved sales to driver the sales the in record grew and premium for million. year to the detail. segment increased We each XX.X% $XX.X another sales. in XX.X% our goods Gross Distilling Sales at $XXX.X sales increase Looking segment, period. new in achieved or beverage to served quarter brown XX.X% distillate alcohol primary of up quarter ending while higher to sales.

capture well trends. as unfilled attributed our each demand. market strong categories, outpaced longer ability demand customer brown term of to of sales the this Our in to again goods the growth as quarter sustained This was our in team's

pricing We expect persist. trends to strong

Our demand inventory compared and also in strong XXXX. prior offered experienced year an period. believe of this the sustained continue as throughout growth increase MGP we posted new a strength, to Sales whiskey aging of of we will distillate for has position the quarter,

robust increased for overall While demand we as us continues. to scale our diverse rates advantage growth demand when us well, American share as believe and long-term consumer whiskey position customer positions We our trend the will more will well and remains align period to uncertain for of mix begin and normalize significant this the remain the with category.

goods. to of away white beverage growth growth and reflected XX.X%, shifts white The pricing from our primarily volume. to volume industrial another alcohol premium with Sales quarter Moving partially towards and products. solid due posted improved goods

As also partially industrial was former ICP, quarter. alcohol sales this third-party sales decline venture our produced products for alcohol attributed partner. XX.X% by The our industrial a result, reduced joint of to decreased

as goods whiskey in both continued As Revenue be customer previously we from fiscal profitability at entered low continue other are the provide. to the barrels continues is services anticipated XXXX growth This industrial for due compared margins white to historical in products these XX.X% the year This which of and in to discussed, warehouses white and industrial we goods that warehouse XXXX. the alcohol digits in the growth anticipate the for market. our services industrial the decline guidance. increased in demand quarter to attributed of and additional as moderate has supply number alcohol and alcohol levels, the can factored the first to this single aging lower into quarter part

as the Turning Spirits. Sales to acquisition. brands of for totaled due primarily $XX.X to Branded the million Luxco acquired of quarter, sales part

segment volume $XX.X growth. ultra-premium benefited a for higher profit our quarter. to premium well super points increased sales increased brands, ultra-premium be premium, or of to our also as case and super consumer a of the from for catalyst for major of margin higher brands, offerings segment the our for premium reflecting these We the brands. Strengthening XX.X% record MGP demand million especially distribution and continues as premium, Gross products strength legacy in continued for

by brands, product as continue encouraged premiumization quarter. experiencing brands demand pricing mix increased as incremental for believe the we contributed family execute our our growth. to growth strategy, this well the on well are us of distribution continue will as We successfully we're record consumer for to improved results and to position We expansive select

Ingredient Solutions. million segment. the for to of which Turning profit $X.X the of represents segment each increased quarter gross for XX% Sales or to XX.X%, record while sales, results increased

in in we temporary last of by the by average gas wheat driven year, experienced and in Solutions XXX prices margin curtailment As gross well production sales primarily some The quarter increased X commodity as and that of higher a to primarily first our a volumes approximately reduced weeks reminder, due approximately which Ingredient XXXX, of basis was wheat selling impacted starches specialty segment increase as softness starches. natural points. proteins

results. needs experienced our another record Our innovation sales, R&D we quarter to collaboratively and of customers' as worked meet achieved teams effectively and

Before I across turn call business want of segments. Brandon, momentum to our for the experienced excitement I this over reiterate quarter my continued each to we the

remarks. product with This to effectively strong initial trends as by customers. offerings grow remain my concludes business Our consumer recruit and evidenced aligned existing new with our ability

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

Brandon Gall

Thanks Dave.

to strong in segments. due Gross of million. basis to to of assumption increased XXXX, $XX.X all Corporate XXX sales expenses administrative advertising and SG&A and in inclusive consolidated of Luxco's promotion segments. primarily XXXX, XXX% the XX.X% profit performance increased income the X million, as the $XX.X $XX.X reporting $XX.X result increased to points, Operating expenses, sales XXX% general of million first the income for due previously to record million by driven discussed. operating as to first each for million the the by gross of margin increased quarter first Gross profits the growth quarter increased primarily XXX% Adjusted $XXX.X $XX and compared by a quarter XX.X%. to increased million For increase to quarter, selling, expenses.

from share, the corporate XXX% of per quarter diluted by income EPS XXXX are from upward tax driven million, $X.XX business quarter each $X.XX $XX.X share and per quarter per $X.XX rate adjusted several Basic the ago million. increased of have to X to share increased from flour all the year for was XX% the increase Our unchanged the EBITDA the remained expenses period. our to $X.XX Net largest for seen while from earnings year wheat prices and first X performance Adjusted was of gas last natural effective solid period, per ago Corn, and for $XX.X share XXX% increased and per the segments. over share. a commodity first quarters.

our products. program same commodities contract in shared with volumes. majority the risk we entered We we extensive an the of corresponding purchased that against pricing fiscal grain year February, volume and includes for purchasing time As the XXXX employ the contracted management at we

Our to through input as objective, inflation as always, much is as price commodity possible.

of do we reasons, sales. our XXX% various for However, contract not

choose example, in For customers that white for our are not products certain there to alcohol and contract advance. goods industrial

Additionally, customers fuel-grade feed and alcohol, purchased related in spot for the market. also our coproducts distillers

assurance result, said, provide where pricing That able these year As to increases open we increases we headwinds. and a that the possible, price inflationary full costs commodity consolidated guidance committed we our customers to our be in contemplates to will cannot through through market. always in remain these

impacts. impact area several Additionally, past supply to monitor operations we But had another chain on disruptions continue this minimal our potential is mitigate a have the quarters. over to

$XX.X goods to premium first our flow Luxco from sales value been strategy, Strong the quarter the $XX.X free previously cash-generating we've up of susceptible the with MGP and from quarter reflecting million. industrial capitalized support $XX.X further strong invest products cash the XXXX, the goods first flows white allowing wide million highlight whose beverage for by MGP's We a are grow. has in sheet to XX.X% $XX totaling quarter operations XX.X% acquisition. term providing customers to capability execution the to of As away industrial well stated, in while approximately balance long-term million, for of significant our to longer strong, was remains of remain Cash the expansionary business for of us and continue $XX.X and debt increased with and strong contribution our in $XXX.X alcohol white which to adequate quarter, cash the migrate projects. million Consistent position also and with first historically our our swings. million. was pricing less to from toward alcohol nature by million those strategy decreased efforts,

Our long-term investment of fourth whiskey $X Solutions Spirits with of one by driven XXXX. increase by growing segment to compared in the during net and putaway million our was aging Distilling priorities and increased of This Branded increased strategies. as at Matching is inventory cost quarter. sales future the quarter whiskey putaway

our continuing to committed in remain also investment operational capabilities. We our

with well in call. share company in to accelerated to earnings trends, Kansas moment. during accelerate We've identified new in believe on competitive well $X.XX as a view strategy in expenditures increase forecast approximate approximately our We authorized serve. focused organic these $XX.X well and business of The XXXX, well The provided texturized an we June construction Dave enhance which as shareholders. XX. new million of last We the over represents capital amount to investment, the the way share, expect as all important speak May capital million allocation and the an share as per above growth believe opportunities to as Board will as more will underlying of the long-term which value the attractive consumer stockholders our long-term. is quarter's strategy, to we continues leverage. such positioned opportunities the acquisitive of projects protein the dividend payable as that in on with We projects, our during on $XX payback returns X should shareholder of to record the Atchison, markets aligns periods Board which these position the and strengthen facility dividends a is success quarterly

to will and to to for product things And conduct remarks. M&A now, growth and back expansionary our pursue accelerate concluding continue Dave We let over offerings. and capabilities turn increase projects me

David Colo

Brandon. Thanks

element for for future our for business foundation as record growth as milestone A a each across building critical strong is another marked announced that on to X growth. quarter foundation well our of recently results expansionary This projects. segments,

Kentucky, the is XX Bardstown, and which the increase reminder, in to distillery expansion capacity operate by a of As an per Row XX%. will day our first hours allow Lux Distillers facility

a of warehouse barrel texturized third facility in facility Williamstown, Kansas. and is our construction the extrusion is Atchison, protein Kentucky; in Second new

our are will for that approval also experiencing have warehouse new of our continued demand Board We Lux additional and the in received Bardstown. on projects at X in in Distillers include customers' and our expansion an Row brands Kentucky brands, we're further support which

have ultra-premium products, us spirits texturized across growth these we investments protein sustainable well demand increased for well the been experiencing as whiskey and the for With aged continued position distillate, our as new brands organization.

to our million meaningfully the they at and the inventory forward. for mash our supportive million mentioned, remain quarter. and various contribute gross the Brandon of the flow moving whiskey of expect of $X increased increased levels quarter As from of of $XXX.X fourth cash to We bills vintages will aging first end continue profit to and library company

anticipate our broader the the segments volatility bring our to in economy confident to strong capabilities believe near-term, market each business and these through remain consumer XXXX. segments trends we value We the that trends continue we in as base. to supporting well of in our global and of our each persist expect macro customer fiscal the underlying strong, we are position, team's While as remain

a deliberate dynamics maintain actions this as navigate the we high operational take all level of will execution year. in and be market will we We

our confirming are year guidance. full XXXX We fiscal

to the expect $XXX of range prior in would rate to to XX% range the of approximately to percentage be million which of XX% approximately XX% to million, million sales from X% percentage $XXX range We $XXX expected would prior to year range growth to of Adjusted the be period. growth which equate is the equate EBITDA to a $XXX million, rate from period. year a in

at $X.XX the with $XX outstanding adjusted We basic are average to basic per expected to forecasting $X.XX earnings weighted be share in be million shares approximately to range, year-end.

sustainability recently emission XXXX. calendar We year policy social this progress our and track disclose the for site. company's of and QX our XXXX responsibility and disclosed environmental under we the information initiative, QX we of gas on on environmental waste ESG our XXXX statement sustainability in our report disclosure during website As section year company's report the to greenhouse remain

journey of company's third to approach our ensure program assessment to We ESG have complete the are working with also party to ESG a we optimized forward. an and a holistic effective going

have committed to the for value question-and-answer execution, our are That objective leverage long-term remarks. deliver of shareholders. of our to refining over concludes are years, sustainable our tactical the ready Operator, the established the prepared we portion we'll foundation effectiveness We the continue to the call. we and with to strong begin

Operator

The first Instructions] Pinheiro question with from [Operator comes Mitch Sturdivant.

Mitchell Pinheiro

out so Was same does How distillate this, being did I don't So growth rates? know -- did the with new if strong faster age? talk it the one you Or mentioned in you but sales quarter. about than roughly that balance grow another?

David Colo

saw Yes. sales distillate the Great for new question, Mitch. Thanks for that. in We well our age in quarter. actually double-digit and both the growth

performance age So QX. as the new while distillate with previous is its expanding in we've as quarters, definitely rates has definitely joined in well seen still

Mitchell Pinheiro

talk I a can you sales quarter? might -- I how have added visibility surprised customers. mean mean and strength. -- there changed the to But about mean, did I and much the you into much visibility new with I you Like was XXX% like all? distillate Or have with don't -- get know how where what you at

David Colo

and success starting customers a really as multinational. that to so from earlier it our regional about they customer it's as were our seeing for of more more top bottom really we're now talked just they're prior able have -- new to to It's There's -- tightness and national down we're for craft of maybe capitalized, well. general get just even from And more whether the put seeing lot all more we're in but classes, age, to to capacity to we've Yes. years. distillate than see better

Mitchell Pinheiro

Okay.

brown we relates to think going how about run or eventually goods, next growth X relative these out you'll -- product and continue should mean rates can't I Are As as the to this? it to obviously, to of we quarters for guidance sell.

like So about of quarters? we this again, distillate the balanced aged growth be sort -- should thinking and in where like, type new of a between in remaining

David Colo

Yes, you're right.

we That's up what long-term, the subsequent you we same for reason. overall our out of of the would ongoingly, not anticipate And right? anyone we've For with is remainder north that models quarters the the combined were sales brown goods for not of line and going growth at level else quarter, the new in the XX%. that to more the in year, category. we said consistently fall anything do of aged we're or as over distillate look growth So suggest

So year of lot ours that's and how of lot into coming their about and a thinking the in need into of we're customers businesses. distillate it. the were that growth -- a lot demand There's just of new aged for coming barrels a of or

Mitchell Pinheiro

the Okay. in And queue. one back I'll question, get just more

or one, was terrific the margin affected number growth last On year And think shutdown? at your Solutions right I think business, last gross guess, this the XX%. I much the Is how the seen about amount the that high. year? due it forward was second, year It dollar to Ingredient of close, at point. was what then that to don't I've margin going

David Colo

Yes.

last of We that is capable this been printed percent. upper obviously, XX% the is saw that. mid in the was the percent on your last curtailment So XXX other in of to further There It pretty number of a before a about just to, have to margin gross last answer natural quarters But we this we it XX.X%, QX margin We to of it. year, some what Mitch. first of was point and dampen year, of QX a whereas may it part impact been in and year. year We've question, XXs minor think saw gas happened year consistent. and gross that issues during QX doing. yes, business basis the QX

more capability in the look time. over business has So this the as business to margins that due just products to and see way potential forward, mixed to expanded up we specialty we that and continue

Operator

question Truist next Bill comes from Chappell The Securities. with

William Chappell

regards first popped the any that With year ahead your you're outlook, hedged seeing? up? the at clearly, of of that's you've well well initial the been on quarter offset that appears were they to Street results the expectations, I were major fairly of Anything your maybe green. remainder least said there it and Has ahead expectations. for mean you're

think goods unless baked of initial was into wrong. for I'm and outlook your industrial the white guidance, your -- I kind already

we anything there is up quarters? that So is cropped as the we're next for else few missing look

David Colo

strong reactive X-quarter quarter was habit want the especially maintained, see. certain is over that Yes. in very don't we've and being we But at business, Thanks being to we a a things to clearly quarter, any can get said, the there about Bill. are year. Yes, as you But our always year. really it we're of as as quarter remainder of the first a look thinking of X the

First in the we've Mitch, about goods this we brown on of already in front, XX% commercial subsequent performance all, and to expect sales talked of quarters. repeat with don't

very experienced we American Secondly, shipments in ultra-premium strong premium super whiskey QX for brands. and our pipeline

While to of that depletions QX through throughout this how pipeline. is come something X clip how recurring we we're in don't remainder We're to going the the through distributors look at their anticipate see to going assess, to year. continue this refill and see

the we're commercial items front. are those on X So the watching

headwinds there the On commodities. front, are inflation in real

has up pricing, in we as for seen QX of -- out. despite that business our called so there that And stock parts expectations. are inflation But kept most within our the we've part,

that for industrial there's example, and So contract. white not customers certain for do goods

also And over million market. So coproducts, and on That's alone. the called sales which out, fuel that $XX in market. about Bill, QX represented distillers be the in we grain done in little then and purchasing a they spot all will related spot

prices to finish needed the level year, we're prices. the market So the maintained underlying we are as what up those remainder stock relates in the input of it watching commodity the go as

William Chappell

understand. I Okay.

it's terms kind brown a you assume can kind demand? the looking goods. I driving spirits, of explain that of and get global both mean of that's brown me new I understood of kind customer there's In -- of behavior at U.S. aged, Dave, shortage or the and this

Is customers so how period new years don't short long it time, looking I are say I up was early of the -- that to kind that's you be customers then now and of it that a to for we more that willing are increasing new, accelerate that the just the your want driving load explain do -- X purchases right And aged it or know we're And go the to is going we a net because to on? of from existing our inventory? have short be short behavior is let's for now at now? mean didn't customers kind are environment?

David Colo

think said just is everything Yes, you out. kind Bill, of I playing

continue historically the So customers And from see we last our extremely very in some new as to would we've calls say time. this is into that aged aged said demand customers the tight we as existing particular, in of I strong on think inventory, at well on couple what coming market. point

dynamic So playing out. is that

not of then historically, but well been we're we as a more portion accomplish, of aged significant receptivity our distillate age, well, from as customers side distillate contract forward to to seeing has of contract It's historically, is which, contracted. feat customers our know, portion to even customers On the as as brown of customers as the but mentioned. difficult distillate Brandon in existing new encouraging doing more but business, we're new encouraging our customers, to as brands. current new the distillate been result, whiskey are also, side, very with right, fairly again, it lay again, also we're And protect We're seeing down. a on what And environment. aged on growing And wanting a business this to to a that's new to well. -- their going capacity be you very contract to yet, strong demand, that new appears we're business age significant

William Chappell

post new on the there's brown pandemic is of then that kind X general, years, of kind of going and And of share aged level. in that the why consumer brown past I stay more, sense the And it. in demand? took takeaway and at overall X Got any going to so be seeing fallback that's spirits over just not mean you're of to maybe much that's kind this a leap

David Colo

with part of And the priced base I a the our if whiskey big all higher in categories are well the we're of Yes, portfolio. seeing American our same of driven participates customer think in premium their Spirits mean, it. specific brands, gross at that's the a share Branded whiskey And the data, plus the the primarily performance premium brands. thing and saw brands. you driving our in margin of you Spirits brands Branded part for seeing growth, the We're you if growth. will, sales as I look excellent plus plus was premium quarter, by American that the big

William Chappell

one last And it. Got for me.

Luxco, there -- XXX-plus more on year-over-year the is it just the missed the any was quarter And it And kind of pro of might forma said. well? for if because The color portfolio? it brands. the all of you performance on Just any steady? white brown -- it have growth were really then did -- branded I Was

David Colo

X We didn't at in of quarters margins the the XX% But mid in on the very upper quarter was for in Yes. without having year. Bill, for performance, disclose an at being but it Branded quarter business, the last my strong XXs this fingertips after moment. Spirits definitely gross even north a to pro the forma

the profile seeing we saw margin really super showed quarter. premium that our strong the that we're in and a whiskey ultra-premium pool brands, in for So American and

Operator

from next Lake Markets. Ben The Street with Capital Klieve comes question

Benjamin Klieve

A great few for a on questions quarter. me. really Congratulations

I'm First you spike flatline tail growth, of basis begin can quarter. maybe QX? the the or growth start Or a the of kind of kind access quarter all, during the that cadence into and of of seen throughout the really quarter. on talk at of the wondering excessive the towards then heading growth if on Did did to about a the see quarter? performance was year lot throughout you off the that end

David Colo

Yes.

I business, look ingredients. I think each start if you mean at with I'll

throughout quarter. very business Our ingredients the was consistent

And And consistent same products it ingredients. is performance business, some year pretty Ben, very the see can distillery each demand, see the In are I'd peaks excellent the and brown is then month-to-month. in our brown month-to-month. we distillate consistent pretty balance goods and was business, for see goods deviation to continue brown in valleys darn we say of expect month-to-month. new goods. white in can in of where see that consistent quarter. our that to we month And We kind

the So would would fairly of couple drove month-to-month the Distilling Solutions. consistent American our Brandon said, pattern whiskey pretty and that's although month-to-month, a QX, view even that it's in as had for how the quarter shipments then I But really describe in And a revenue we brands, strong some typically in I potentially brands pretty that kind business of as in that overall, refilling pipeline is some quarter-to-quarter. demand. strong consistent revenue

Benjamin Klieve

or driver refilling of I just and And it. you touched of the kind implicitly the don't exports specifically. around explicitly this that around it. helpful. on if That's Got Got recall pipeline

And Spirits that think seem the quarter. tailwind the both segment? was really did across my degree a provided uniformly December quarter, XX, did a segment kind that see lifting more so you if the the materially and one Branded it question provide of than what on in the do to EU is, Or in the tariff other? tailwind Distillery And

David Colo

Yes. The revenue a Distilling our impact Branded lifting We tariffs internationally, part ships Solutions our or the in on have it's of had large Spirits. that segment an immaterial don't of us. tariff -- whether

tariffs had a tariffs the reduction in suspension there's but -- impact the upside really we minimal of quarter. tariff in the the Now good long-term, think or

Benjamin Klieve

group specifically, really the guess just -- don't question Then that going visibility and of follow-up that Okay. was I -- international to that in guys quick know you shipping product would in up do Distillery you that a that. domestic within end markets? customers of. Or is have you segment to I for mean that, something visibility to have

David Colo

liquids we mean don't of that have obviously, I they're up brands ending going we internationally But that. branded domestic. to customer then we U.S. that -- percent which brand exporting some product clear internationally, don't that the staying and the then versus know visibility is Yes. but to of international markets, in their assumption we're a in shipping if

Benjamin Klieve

Okay.

Brandon Gall

just Distilling our Solutions. we developing And Yes. that, have to add international to reach been on

customer to So base, a developing that's Asia. base for going that's Europe or include example, parts Western of

specifically have as into access as Dave's don't what yes, But brand there. just that's we greater to. something point, it have to So visibility going we far

Benjamin Klieve

and Fair back right. And one I'll enough. All last for queue. me, Okay. in get

quarter. ingredient around from uniformly? here, can but product just expanded any kind the And kind or provide like a there's seen again, Or categories? I growth in new of excess curious you growth if context categories that been just any customers, broken really has broad side, exceptional growth On feel the seen this was record rate new of any I'm if

David Colo

Yes. growth The latter, Ben. primarily existing with customers, much pretty uniform

again, continue high-quality the as product they're have strong talked in this customers' grow plant-based, products we past, selling we high-protein, in demand to that in in our business, fibers. starches, the So lines about into that we're excellent They're nicely.

So seeing you're this that's drivers business. revenue what as the in in increased primary the

Benjamin Klieve

really congratulations groups. all Well, excellent it. quarter X just across Got on the

Operator

Chief back I like Colo, This concludes Dave to over turn conference Executive session. Officer. our to question-and-answer would the President and

David Colo

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

Operator

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

may disconnect. now You

MGP Ingredients (MGPI) 7 May 222022 Q1 Earnings call transcript