Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the MGP Ingredients Second Quarter 2023 Earnings Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mike Houston with Lambert Global. ahead. go Please

Mike Houston

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

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

SEC expectations. this statements begin my could from responsibility of you to and current release that in risks filings. is based results today's forward-looking to uncertainties a the certain it call today's Company's earnings call, we the involve differ before any and other However, made may actual forward-looking number The on today described including inform materially factors, statements due Company's

no forward-looking included any assumes Company statements update to this in obligation information call. or The

will Additionally, reference does in performance. the have we issued copy are GAAP non-GAAP Company's believe the measures, access a not of measures useful the certain by most these release which the to website, Company's If it in of you anyone measures earnings to can release. today, evaluating comparable at Reconciliations this www.mgpingredients.com. are MGP earnings already call directly today's contain included

MGP's like the to this Colo. At I'd time, Chief call President over Executive turn to and Dave? Dave Officer,

Dave Colo

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

fiscal our we the achieving toward XXXX. am progress considerable targets of have I made proud for

Adjusted during second company the achieved quarter quarter best history. record have only the quarter performance Our during We quarter first sales impressive our possible been in the history, and second-best strong of the in was quarterly and company our also resolute EBITDA profit second XXXX. team. not gross without could to performance second

margin the acquisition addition, expected spirits our our has plus expands and In to American price within focused whiskey of brand and accretive presence executing is strategy importantly, be share. the portfolio. as plan basic on of on to points category to in premiumization. brands as an consolidated is well June momentum. which this build price fast-growing earnings a this premium Bourbon, branded gross our Penelope ultra adjusted we on at been of on accretive We segment to acquisition super the closed premium Penelope X, per And against example tier

Consolidated Net net sales. year-over-year sales to quarter representing million, XXXX to $XXX million, income while adjusted X% XX.X% $XX.X XX% income increased Adjusted million. increased of of to increased for while increased EBITDA second gross the XX% XX% profit to $XX increased $XX.X million. million, XX% to consolidated $XX.X

In prior new primarily sales segment, both Solutions aged to demand strong whiskey. grew increased The brown of by goods compared pricing to our for and was driven year continued distillate distilling due period. increase XX% the

due tier year-over-year our declines to decreased price volume mid Spirits branded Our X% and segment value brands. sales in

compared trends achieved significant experienced plus remain we premium XX% price value sales onetime our quarter demand our distributor growth with first for reminder, gains brands, period. in a year the of by to in realignment. brands As our the mid prior encouraged and associated consumer tier the and which volume We specifically, overall

premium American and of grew quarter. remain premium-plus XX% and for Excluding drive to margin expansion. strong demand brands tequila Penelope, plus whiskey gross Consumer sales in the continue north our

Solutions Turning to our Ingredient segment.

increase consumer the profit to trends product second sales quarter prior the with XX% level Further align segment elevated compared XX.X% segment gross in and of sales and to mix team sales. of results profit during continued has an of and year to Our segment execute period. broader record gross an optimization resulted at period the in achieved

in greater the million to increased another and in can gross segment the Gross each posted be million Solutions or in discuss distillate profit to detail. strong The in whiskey. $XXX.X Turning $XX.X We quarter of segment, segment year-over-year. XX.X% to attributed profit primarily sales with aged for quarter increase our increase of sales. increasing new X% distilling to sales

by demand distillate driven year has primarily growth has for aged as Compared brown of whiskey. due and well outpace market by as increased trends Transit primarily continued to driven to both and the customers. quarter multinational sales continued XX%, been period, to increased the new goods craft pricing for sales prior strong longer-term

Our confidence in XXXX our high. remains brown fiscal goods sales visibility through

we ahead Distilling already our form, expected take have sales fiscal the segment committed. our for and year is XXXX, to believe we of majority Solutions to next brown visibility Looking goods beginning

Our significant whiskey American the market us to continued advantages well category. continue to support in growth position

as customer year continue the this will as the to sales to needs anticipated needs with expected customer We us to of aged be us in balance strategic years. meet meet our to position well for coming enable whiskey

Turning industrial to and goods white alcohol.

and industrial the the reduce alcohol volumes white goods our quarter. to produced sold second continue of during and We products

white sales and by XX% decreased result, X% decreased goods products sales during the quarter. year-over-year, alcohol second industrial a of As our

margins product these to As quarter. continue a lines have the gross expected, in on combined basis, negative

lightly. reinforces not input goods away white announced slated goods white January distillery impact in Atchison, mitigate and continued we market. for and increased of in focused closure industrial strategy and Kansas products supply excess from planned announcement This to XXXX. the on the alcohol month, industrial our decision costs the the Last available of made alcohol was shifting The

this is After goods and careful in white determined quarters for margins a industrial alcohol which many consecutive gross consideration, negative. were following necessary step we

two goods product basis to no with the economically the impact of and production additional of of costs industrial market into corn following in past at white the these alcohol the years, be resulted increases the supply Atchison During local lines combined in longer COVID, viable. distillery

well additional as provide basis as financial details on impacts forma pro the about speak will a Brandon shortly.

operations the end decision the the of other this impact the to to facilities, of Company's the through I distillery year. continue at clarify of we operations that, Before production normal Atchison and any plan want will not that

As a strategy, distillery how in this reminder, to to the first assets we an physically effort solve ingredient had to from decouple facility. pursue the in

that Now now the facilities, has we decouple been economically successfully to the a starch options are identified waste stream. most evaluating plan the viable for

facility in objectives. and product As they're long-term segment. these Ingredient [Indiscernible] us byproduct firmly distillery results actions the stream supporting the intercompany recall, We you joint to enable operations toward is ingredient of the Solutions a believe categories align by and is credit strategic the our will purchased our an further to achieving that

Atchison on announcement back will will we clarity half more closure, transition on the we distillery XXXX how this recent of fiscal gain work given decision plans. customers their of However, as with the impact the

Spirits. totaled to million quarter, during the the Branded Segment Turning year $XX.X period. X% a decline sales of prior versus

tier driven lower encouraged of value mid our we Plus price categories, was by the decline in by strong performance and volumes the While are our Premium brands.

on favorable can focus brands, to behind increase million continued an be to premium our higher-margin in in gross $XX increase segment Plus profit investing the brands. resulted attributed plus higher-margin performance Premium or in of margin gross our sales. of Our The XX.X%

we closed potential. which we our category long-term that briefly I second popular brand the to growth has acquisition improves Bourbon, American participate ability believe meaningful the a during and further the As fast-growing mentioned quarter, of Penelope in earlier, whiskey

momentum it our enhances remain we be strategy price premiumization on expand deal as not our more premium this could The enthusiastic continued plus tier portfolio We supports long-term track, with focused Penelope's brands. new as is markets. pleased we process about presence to on of and its integration and

profitability by our our tequila Our of branded Premium with growing spirits focus a leveraging brands. on particular and whiskey the focused brands strategy portfolio Plus American remains expansion on

in and primarily a lower $XX.X to reflects quarter million, a of while Sales to our products plant-based XX% XX.X% with rising sales quarter of $XX.X wheat higher increased for specialty segment consumer sales for million Turning second well wheat gross proteins increased as proteins record Ingredient starches which commodity as The to sales. or drove starches. carbohydrates, of record Solutions. the demand profit and our net increase food

for believe to thank with execution. consumer remain our trends. efforts want and our and tremendous I to improved by encouraged their to provide execute align concludes customer achieve continue my Finally, remarks. initial momentum ability our required us profitability base broader goals. against product continue proven team to with which to our and our long-term diverse strategy, We the We our This continued our offerings, fiscal XXXX

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

Brandon Gall

Dave. Thanks,

prior was sales consolidated expenses and $XX.X the of million X% spirits, XX.X% second Gross prior $X.X sales the branded for to increased to Plus XX% period million. Spirits period. the of amount, Premium increased as the XX% to compared total XXXX, profit toward $X.X Of which to year this $X.X to promotion quarter million sales. quarter. million in branded Advertising our increased XX.X% million, represented $XXX year representing second of segment quarter the compared For in invested

general our quarter premium to increase tier higher-margin to of year-over-year plus on Corporate consistent price marketing to million The and expenses $XX.X strategy, XXXX. compared premiumization administrative the second is to the as spend our million we quarter plan for and with increase the brands. increased continue selling, $X.X

$XX.X income mentioned previously increased the primarily in profit. for Operating million consolidated XX% due to gross second quarter the increase to

associated $XX.X Penelope, costs with million. adjusted operating increased acquisition business income Excluding XX% to

increase with tax second was and the the XX.X% for credits. was compared ago XXXX year lower taxes The effective income due rate tax in before our effective higher income corporate corporate to Our quarter rate tax of primarily period. from XX.X%

for XX% common ago strong second $X.XX per basic share primarily of XX% Net $XX.X segments. share the million, driven compared increased by The was from $X.XX from to net $XX increased share earnings per performance million. increase income all share earnings period. three of increased $XX.X $X.XX income the diluted diluted the for increased Adjusted per Adjusted the business share. and per share. while year EBITDA Basic XX% to per common $X.XX quarter and million, increase to an quarter to per adjusted was to

gas throughout input expenses flower largest the and prior XX%. gas costs flower to an ride increased to update XX%, wheat commodities. for X%, commodity corn increased the quarter. prices second Corn, and experience increased Now period, each continue on Compared increased natural represent our and XX% our year natural wheat [RI] elevated

impacts several Our of that the to and product our and products to specialty of on focus lines. mitigate us risk most our the premium in have nature, quarters inflation process continued past more in over enable are management

any the purchased against any volumes. during we majority Additionally, we with given of year commodities experience disruptions second the Furthermore, quarter do enter of XXXX. chain not significant supply committed the

expenses restructuring we announced XXXX. This including fiscal and the in range $XX asset aggregate in to onetime million and of As for million estimates: incur of Atchison charges the million planned closure includes pretax mentioned, $XX in $XX million in $X to approximately noncash $X Dave such leases. distillery in expect assets, million from $XX the million impairments, cash contract July, fixed our in to $X $X for in following million termination fees expenses and connection in million fees distillery Kansas. capital to Atchison expenditures Solutions to inventory located items costs, severance as also the Atchison with Ingredient facility, decoupling of the and consulting

look fiscal basis for on I'll year-to-date Now impact at the XX, pro June distillery’s a of performance Atchison unaudited ended financial XXXX preliminary and XXXX. the forma

sales Distilling gross For by the were is profit gross points. gross $XXX,XXX million. $X.X by the distilling impact Consolidated million, Consolidated results $XXX.X increased Solutions Solutions and as reduced by Atchison consolidated margin Ingredient is XXXX, fiscal by XXX has are increased sales million. year reduced has profit of increased excluding distillery, basis $X.X Solutions by gross and financial in profit follows:

gross ended increased For increased by $XX.X increased margin sales year-to-date $XXX,XXX as million. June by results Solutions were distillery, Consolidated and the financial gross excluding are consolidated the has profit has Distilling Consolidated basis of by million. Solutions points. gross the impact has follows: $X.X XX, sales reduced XXXX, XXX and distilling Atchison by profit

distillery. from value intercompany start or the byproduct has Ingredient reduced forma no cost of segment value The financials receiving the no corn, from for $X.X million. longer the slurry the Ingredient time. profit in and the the over result waste gross Atchison joined of increased credit sold assume on pro ore slurry credit profit Solutions by of disposal. gain derived The in a intercompany waste an loss fluctuated gross loss is goods purchased Solutions These of credit which is by both for reduction Kansas is of periods the

waste Solutions As decoupling assess already continue mentioned, arch options Ingredient overall Dave impacts respective to consolidated viable we to profitability. the and post stream for their

Additional will releases when information Company as provided becomes results its be more the financial available. information

and for Lawrenceburg, assets to in presentation operations we facility note to pro co-products alcohol forma distillery. are circumstances, for shut is and discontinued at In goods in to available important information. accordance refer with release schedules sold. of this are accounting to the certain times guidance, Please Indiana It's once included qualify some expect that down produced out morning's the more fuel white industrial the earnings be

year-to-date inventory. to by the cash for due flow driven an operations sales the barrel Cash in from and The prior inventory, in increases year-to-date operations from period, flow. as period. to of in Moving accounts our in flow down well receivable $XX.X as million $XX from million distillate increase finished goods was the reduction timing was primarily cash

remains to totaling to debt and $XX $XXX.X million capitalized with continue grow. cash invest million. sheet allowing We us balance remain of Our healthy, position a to well

trends, of our The consumer on long-term earnout upfront. which positioned additional for potential our Penelope to X, potential conditions Bourbon, additional remain $XXX.X consideration met believe up upon and allocation. a we of as is paid contingent which capital measured deal We cash includes total growth XX, in leverage. is December The million. $XXX.X our to through acquisition well well as of up is we being On closed to of additional business structure XXXX. performance focused we well cash certain that organic opportunities million to earnout underlying acquisitive million strategy $XXX with payout to the maximum and an an Turning June align

accounting as The will consideration on earnout and basis quarterly a be liability will remeasured be treated contingent a for purposes.

product and and to evaluate continue increase capabilities will opportunistically accelerate our offerings. to growth We M&A

remains component our matching whiskey growing to strategy remains with spirits of branded a priority future put distilling and segment long-term effectively away allocation solutions capital a away putting Additionally, critical and is strategy. our key critical whiskey sales

XXXX. of inventory compared at in million investment of to increased million first whiskey to quarter the of Our aging cost, $XX increase $XXX.X an

XXXX, of operational capital priority, is second an in Investing versus resulted quarter, another it enhance $XX our and allocation We to capital capabilities quarter. of increase capital expenditures the now million important the associated year prior in expenditures in million $X.X from expenditures approximately the Atchison due last $XX we which planned is to full capital the of the capital decoupling with in million year closure figure the shared expect for the $XX million quarter distillery. up investment

in expansion addition support Kentucky Bardstown, We expenditures Distillers facility be Kansas, continue as capital barrel Lux new our Atchison, Row our and growth Lawrenceburg our distilleries. improvement for whiskey extrusion expansion, at our to expect distillation such continued will used protein at to facility the and of at texturized Bardstown warehouses and

as Additionally, we projects. plan as to prioritize investments safety in facility and environmental substance well projects health

authorized share, share as Directors stockholders. as of dividend the quarterly X, $X.XX record the to Board payable Board XX. of The of important continues of view August stockholders with an The the way of is a dividends to Company which per success September on

consumer from allocation we trends. with to strategy We the and our approach, capital continue aligns to focused well this believe growth underlying business can Leveraging benefit organic position better long-term believe on acquisitive strategy. we our

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

Dave Colo

Brandon. Thanks,

our business success. Demand in to three continue this each actions the We we fiscal performance, pleased our guidance the along the To quarter. our will long-term are full half performance with strong following. our we products and the for Bourbon, year strong, with first for segments strong XXXX Penelope of recent remain of account acquisition position to believe updating the for are

per to to and EBITDA million of to in in upward range range million has the last expected $X be end is shares be to approximately million, high average sales basic revised $XXX been $X.XX expect We provided the million to to year-end. $XXX of of of outstanding reflecting weighted to in million. and the with to Adjusted we share, $XXX increase Adjusted continue per of basic $XX.X low an the expected million be at $XXX now range range share guidance to $X.XX common is expected be earnings quarter. the approximately now

our in X product January is expect distillery portfolio have be business. The gross goods the growth Company. Atchison, and July brands line industrial exits lines acquisition the that grow and our white to branded The on June brand margin accretive to acquiring acquisition for Penelope marked Penelope strategy strong of of by American decisions that announcement close two strategic to and spirits in our at produced key to by our whiskey XXXX, and with location the stated trends alcohol Kansas

The our margins. expansion margin rationalizing closure overall of associated that XXXX, January a Kansas viable of Atchison supports that are white by the efforts drag have distillery goods lines product industrial products at the on by and consolidated exit facility and gross longer provided and economically gross no produced

foundation committed remain of years the the objective sustainable our to for we ongoing solid forward, delivering have the long-term stockholders. over leveraging value we with Going established

That are begin of ready we concludes the our prepared question-and-answer remarks. call. to the Operator, portion

Operator

Wedbush. first Pascarelli with Instructions] comes question [Operator Gerald from The

Gerald Pascarelli

So Obviously, just in close of Kansas. to your commentary. on to some kind start of previous your announcement the distillery

Penelope You of acquired the over urban the quarter. course

maybe that clear to be the recent growth, want aggressive been little margin-accretive getting these past? actions of should been view we drive expect you near to some the fair may And you've in ago that just similar more the specifically, than will acquire? And should looking in a Is we to but specifically, acquisition kind of Company as a of months growth announced drive terms You've this more the Penelope couple in that you're over it what of be you term? to acquisitions [Indiscernible].

Dave Colo

start that what out And the close we facility. generated distillery. figure let's years. business reasons from industrial decouple And do could the two way allow ingredients triggered to the is XX negative out due and the really go business that Thanks, The to last, distillery, impact to figure the not was we start ingredients to stream the that our white really, -- on to Yes. had the that to the us we had which decouple a the distillery we've distillery that been goods last that's about We've over fact and a months there. and Gerald. exit the facility been the of Atchison decision close decision to one is solution batches talking to ahead basically the waste able from the receives for

always what to to ways that's in say a we make the with talking up certainly profile step consistent an solution this engineered in come looking done. that pretty And order now to but with about, which direction. I'd And had margin business. is happen, we're we've positive for that So been improve in our we've

move, I'd aggressive is thought in So have and very have good well place between be occur. the we'll say decoupling an and year to it but now out, end of the we putting to that it allow solutions we that

whiskey, On in brand like we if right to type be continues that Penelope which premium all points, eye growth American price in of and of obviously brands brand, the ultra-premium acquire. spirits. It's will. of of the a the to plus the is It's you American acquisition one front, would categories been in whiskey highest an bull's the high-growth

it's brand that we fits premium how that profile the of and segment brands. our about talking been want So to a business of definitely we've plus grow our

future whiskey brands, we we meet brands margin the forward, to category that we such growth. portfolio feel or as overall the in American of upside as Penelope absolutely, criteria to category, high-growth the go that in has and brands accretive And evaluate tequila continue

is. stating it's signal our aggressive strategy a more know don't consistent being just that what we've versus with I we're been So

Gerald Pascarelli

on still commentary able and out Or on evaluation -- distillery. produce at for goods we planning and it your housekeeping white on. I One your Should is look up that we question. at then in I'll This XXXX, simply other goods is just based just produce unclear point? to more, XXXX? you this are pass still guess, to being potentially on producing white speaking, a When

Brandon Gall

Yes.

all but We we if Lawrenceburg, for customers. Lawrenceburg continue, We be significant. Lawrenceburg, on about So the amount because to was just And worth year-to-date, note. we the things don't whereby volume select significant. to over that right? will the this of white asset will not in shared to likely it for than on example, margin we're this a be this actually swing volume going morning, smaller different asset And you of distillery doing expect, distillery is production -- to do Gerald, the thing just another in $X.X for is to the to in couple that and sales. able exclude be million of So note process, Atchison, It's goods relatively It actual select those expect much positive. use we're sales gross don't a circumstances. Indiana

a couple worth things just noting. of So

Operator

with Vivien question & Cowen next Azer from Company. The comes

Vivien Azer

I'm to is to the when I are any bottom underlying less there So the to that very bit on line? you hold out nice that guidance incorporates gotten to Penelope, the relative line. you see the can offsets wide. on allowing the line. hold given Obviously, you've calling Obviously, in comment plan guidance. positive wanted But a you now top guidance the little start establish top the the constructive on to worth range business reasonably and But are if the revision offset is maybe decision the where Penelope initial February around wondering

Dave Colo

success. other thing leaving is which looking continued our also the guide is up the expansion, reflects emblematic customers as having the guide. look And Ivan, closure From we seeing a uncertainty continued One our EBITDA is and and worth guide an rest at unchanged we're back into it we back Yes. this the of with having continuing plans it's is see. business to that our And our X%. take saw morning, our direction as sales in underlying strong back half. year-over-year margining increase business to to consistent factored year-over-year raise of of trends business. does midpoint, reflect the very the what the the perspective, transition of the first in implies noting, in distillery we're with sales year implies half. in Penelope half so issued our which is Atchison we our We're guidance continued our Vivien, the margin a yes, half But

Vivien Azer

the in Certainly, improvement margin EBITDA and is nice certainly the to adjusted see.

question, follow-up my For please.

made noted of that prior to Can in you any headway timing years? age that you've incremental would on how good offer in relative color more terms and You XXXX. new the very versus benchmark some securing commitments

Brandon Gall

Yes.

are the Dave at majority of our as goes expected So all this goods that committed across year spectrums. And shared point. brown earlier, next sales

So that's multinational representative for side do and whole at Vivien, you'd years distillate it's customers, it out probably new craft and and towards example, -- point aged it this type, time, we customer for distillate, is portfolio. skews expect, and as more new contract in of in because multiple the but customer also distillate our the new set multinational

Operator

The from Sean next with ROTH question MKM. comes McGowan

Sean McGowan

the in the is segments color Plus decline you I the that demand? in just question First How reduced much down it is could. under some versus to of Premium like managing on due mid. that, you if on value

Dave Colo

that once distributor that the gain, speak in got Yes, the to Sean, was in if quarter, revenue, will, our in we initiative the initial with that we're due second to and -- didn't mid realignment announced quarter have see I expecting that in onetime if we fill, distributor realignment. growth you'll that pipeline value recall we in And mid did and is seeing the continue what first the the obviously, outsized the first weren't quarter, brands and quarter. we to past to we we last associated you value think gains had

natural in around actively going letting market on follow what's mid-value of managing our broader the course them down brands. mid- We're and basically not are value We a brands.

we're process active pursuing an to not those it's down. manage So

Sean McGowan

within to much of margin can how on And Brandon, strong. how is then is other be that much my gross particularly follow-up margin the you improvement, quantify, factors? improvement, much pretty that of which How the Plus, -- gross versus continues maybe Premium price of

Brandon Gall

long entire Sean. price more points, that lift, definitely premium going growth and the if at price in plus to the at the It's looking there, get our portfolio looking this saw lift continue brand the Yes. more of indicative of And and natural sales line margin of as quarter. spirits to mix to we we're the looking the of discussed, Plus segment, that naturally that to necessarily going Premium because top you're successful to and not portfolio where we've we really but you're see as take is as we're term gravitate natural

Operator

next The question Wells from with Fargo. comes Marc Torrente

Marc Torrente

more expectations, a then are with detail here. on disclosures synergy release. here? Penelope, additional provision growth et initial expectations, earn-out any you the margin On sizing the cetera? profile, And few any Just Could provide there financial limited from

Brandon Gall

Yes. only noted, existing customer similar that type in start. and admittedly we limited. information on at of on disclose Marc. the as that much a ours. this we deals look we an so necessary disclosed ours, as future, Penelope additional I'll bit we front. one, is already wanted They competitive that margin-accretive And thought to customer as a very reasons. Yes, for also, there brand. It's be With We purpose thanks, are little the provided did a was and of and may

we gain distribution they expect even markets years, coming side. see additional tailwinds and do in we gain as on we're transferred and those the then lot also them. So well, cost And have roll which a some now their as in expect out And the over. was cases, that's synergies of do in, to to to cost, we Marc. further over -- we to quarters the work at what points that the we there as of inventory the markets through sold in is And

Marc Torrente

for immediate Are you a [Indiscernible] And any on way here? then on that focused Europe the more undertaken priority deals. guys? actions in you more for down recent paying [Indiscernible] still have the touched And guys you debt you then is

Dave Colo

Yes.

is prohibitive deals. this us additional to at assessing not for So looking continue

manageable. very net ratio It's leverage is a basis. Xx Our under on

our yes, give And we So lot dry Penelope of lot sense continue to our do trying But XX% definitely outside available and we make facility us your business. for North to here of for brands white to that like United do sense portfolio. of the this see see debt a brand something us and as sales and space America. Marc, also makes we a are in spirits domestically, discussed, powder arrangements the where if see, point, we're take the States.

see portfolio we so And great take that our expand opportunity elsewhere and over time. to

Marc Torrente

one will be this you me. going just Solutions, this then about operational standpoint? now more Ingredient guys forward? how business And for are And from completely thinking an separated

Brandon Gall

Yes. and and end grow very operate process our be of facilities continue been to year, gross of line, of by We ingredients will expanding Once performers decoupling Marc, of part two we'll It's one complete contributing decoupled. business. margins the the our that consistent think to year business, we line. and the still our the the bottom and most after probably growing top year highly

we point, forward. business view the a as going this at key that part So of

Operator

The next with Chappell from comes Bill question Securities. Truist

Bill Chappell

to a half imagine First, just generate leverage. for se. to it a you over the customers back just understand exit they're XX/X, basis, But kind some away facility, which the walk trying operating of I white does understand five pro lower, underseas I I'm per as forma on business, whole adding and is reverse of and four, lower months, that these running trying not underutilized, next the earnings is goods modeling lot XXX

the that's I way works. think it

just how numbers. normalized or you're it and excluding So a guidance your the was get I you're assuming -- accounted that that's don't kind if modeling to or of for how into it how know to business or

Just any color great. there would be

Dave Colo

Yes.

the the committed end our honoring relationships first, to customer and of Bill. commitments we're year, So throughout

for lot XXXX. January are a customers close really transition facility looking happen So These That but just years customers been cases, until with not in that, decades. have being said, fully of not plans customers. we're the to

orderly fully process. So to committed helping we them transition an are in

at this what However, that being said, look like. to we point going know that's don't

that we our So some were we more that we what at back to of on at throughput of of making sales did the the the facility year really felt recall, type out take volatile like moderate beginning the you'll margin. are as

we that the And of so or months moderated of earnings. we'll -- as contemplated some -- in on goes the go, year guide. you updates And is update more as give year, in to we as the of the report But another our continue. so to is rest that's as back first the business far how going for going the have six it

Bill Chappell

But in factored incremental at safe that's your I back the mean, probably say to some losses into they're it's half guidance. that operating

Dave Colo

could much Bill. very They be,

Bill Chappell

And away then replace that you business EPS, next it with a from few business low-margin in terms at easily especially [Indiscernible] year as to but -- growth some from, still profitable growth? other Any or you're of extent like the you away the it's there? do how feel of part walking terms Company's to Do earnings is down power I at of know in you of next as accretive feel you look look the is earnings the Dave, big like can that continue years? a or you Do thoughts walk business. EPS growth step you over parts

Dave Colo

million EPS you lines. same ability waste we will factor help starts to product net back our Once our And that basically profit. the it to, profile with ingredients margin financials look industrial growth think quite the credit over if zero years, we're in and the improve thing $XXX our the actually our in to offset loss gross Bill, the pro I this forma basis. of No, spoke the Brandon had Yes. XXXX, goes then year, think basically, to you -- on year-to-date netting grow I margins, good that a revenue at on because in the out

and generating, from net to margin basis, a We have account industrial all is an no ingredient, back taking again, the on white credit going gross whatsoever. into revenue goods the that's coming

margin going it and to EPS. profile help grow gross So to should our us forward gross actually expand

Bill Chappell

then last one me. And one for

disclosed to determined? is to rough including number Penelope trying into we're as Or that a looking the and that, impact, sure Just is next or year? or there this year you we're next like, be year if not understand I'm

Brandon Gall

Yes.

that Bill, our discussed be in. It's expect and our segment, haven't branded disclosed immediately it a for it we've the share. We earnings reasons and yet, very also deal for is gross we margin accretive accretive per consolidated to to contemplated obviously spirits

closed we little color of was that X. June So that deal did the hasn't on changed. bit we share The

but of Penelope up So that we Premium were in year-over-year plus the was our there sales XX%, premium QX. month to up add if sure a north wouldn't Plus even you of XX%. be performance quarter, in of Penelope sales were exclude

expect to of performing Penelope as really the and we the and well. the But more as add rest is go portfolio years So on, after year it. more to

Bill Chappell

in Sorry, way. I'm to it a different meant ask

some seems any widely [Luxco] Yellowstone states. other that I there said like in to XX metrics pretty how brands? you of give that imply you -- -- Can you've Penelope other it's I your of kind Is that think to of mean, or to compares distributed. have an just other us idea

Dave Colo

Yes.

just a up in, distribution, think to a growing markets they've just a in one Bill, points going, states there brand. it XX runway few lot young been markets there couple but that's and we in in more years. there's lot cases, very of some it's of go It's you're to the the in given of And mentioned, so your we're point, states I just in of only see very you where those is as months, a And fastly. very, well, and to

not account lot a we from of but see So only from market runway. an also perspective, a perspective,

quantifying as do or point. not we'll how take far this maybe to into portfolio [Indiscernible] rest to it As forward. at moving our the prepared that consideration of But that compares

Operator

comes The Mitch with question Pinheiro from Sturdivant. next

Mitch Pinheiro

Just follow-up.

distillate it one sales Penelope -- Was there end of your did any or quarter? So the of have in month barreled for on quarter. finished goods figures the impact the had

Brandon Gall

Yes, Good Mitch. point.

due are of it's but a to demand, just organic inventory million. away barreled to efforts our for half to match about the put So More of quarter to improvement increase also, that efforts continuous put in million our balance part $XX lot facility. so future acquisition reflected was away due as our due But the $XX sheet. and our were are that on under of out that the being across just barrels came our that, to of that especially number remainder Indiana seeing, been than now of is Penelope of Lawrenceburg, we've

Mitch Pinheiro

goods any as is well or? there And finished

Brandon Gall

Yes. in finished goods. There's our an increase definitely

the that you'd as part So imagine. of as as acquisition well came

an increase So was there. there

Mitch Pinheiro

question branded spirits. And then just the on a

it's like Plus in consumers value look segments. bit? realize problems. volume obviously, and the down, little without your Volumes Is Can price any they it significant Premium the increases in that mix about So were a Are quarter. you flat? what price categories? these accepting XX% the in does the the talk mid- But and

Brandon Gall

volume the in as actually The was well Yes. for Plus up Premium quarter.

that very, on earlier half back spirits strong we very the acquisition, half. announced really price positioned, So for the the QX. the feel our out that all RNDC we first Plus have it a momentum really quarter And we're momentum in branded Premium relationship car there -- was in strong with fronts, We really quarter of when segment. two. back Mitch, the the we and into in to a couple And was we're Penelope you -- and seemed quarter well entered a with like to come really deliver of

Dave Colo

Mitch, spoke QX level. brands what at other general. destocking was the thing what call you've relative spirits in was the felt in we excess to on reading I to add about said is sure distributor I'm And Brandon would there we the in our market of inventory occurring the been

brands. pick to Plus again, we to that. we Premium quarter, we as specifically So back of pretty feel the our second And mid seeing in of cycled got shipments up kind through like started much we half

the those the to a quarter. show were consumer we've I great brands, price in we is of first battling points worked sign shipments overall, pull because see back feel on the to have we we're through like well kind starting brands overstock the key pick those a we on as So which it up, that through issues continues think as

Mitch Pinheiro

question And the last Solutions. on then Ingredient one just

there So it's higher just with And curious trends of X%. the was how that down fiber. whether the I'm also or volume longer-term plant-based alternatives fits

a could If that talk it. appreciate little just I'd you bit. about

Dave Colo

Yes.

ingredient the distributors on heavy United the States. on of are customers into our side, a a spirits their And well. year large here lot entering Dave So inventory as the the side they just entered coming in destocking were branded on year, little food our

So QX, the than were QX expected. the purchase lighter little and bit patterns a a into had even we beginning of little

more from an inventory as However, Mitch standpoint. or been up has rightsized picked that's less

the for Solutions. expect great it So strong the we and for half was Ingredient a back a year segment, to quarter

Operator

to closing question-and-answer any for conference remarks. Colo concludes This back session. Dave to our turn like I would the over

Dave Colo

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

Operator

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

disconnect. You may now

MGP Ingredients (MGPI) 3 Aug 232023 Q2 Earnings call transcript