MGPI - Earnings call 4 2023 | MGP Ingredients, Inc.

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Operator

Good morning, and welcome to the MGP Ingredients Fourth Quarter and Year-End 2023 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. I am Mike Houston with Lambert Global, MGP's investor relations firm. Chief are Executive their Brandon prepared Officer President Finance today David team, Gall, remarks me begin of Chief will the Bratcher, and and questions. and joining then members with call management of including Vice the open And call Officer.We to management's Financial President; and

basics forward-looking A any David? call copy MGP's measures of the this access to release will Executive are furnished non-GAAP under SEC over included the press are it does www.mgpingredients.com.At company's such you most Form to not overall release company supplemental materially call in may call.Additionally, filed factors, David [ involve the and the the comparable including President, earnings a the believe and However, before consumer it earnings call, EBITDA, this and Chief The company's in today's differ would time, website, ] of X-K. is this industry my adjusted the forward-looking risk company's which on of results gross a that made from If effective reference factors trends.The by statements these business as assumes information company's plans share, to like Bratcher. Officer have to obligation you report statements to we update at to company's certain annual begin no responsibility Exchange during MGP projections sales, described to well contain most already measures, forward-looking and recent turn the issued and objectives evaluating Commission. I profit, measures GAAP could inform today, can due rate, useful number reconciliation anyone actual we tax statements per any of performance. the certain with the the of call directly and today as Securities adjusted and statements to as the in made today's

David Bratcher

and you, the serve and Thank the the will performance of joining of honored this role MGP grateful to everyone, overview the on I and am to our for full President, quarter On with year ended legacy. thanks, and we in call, build and Mike, begin XX, for our truly excited XXXX. call December today. CEO

our We result will provide strength our performance and against for increased end year we XX% and of made strategy. to Q&A.Our each continued XX% our to on team business of of financial gross results updates to metrics and representing while the At strategy. for on increased of the dedication of the the will million, the $XXX.X profit sales.Adjusted focused increased implementing million, we EBITDA key XX.X% X% the discuss million. sales Consolidated the financial for year call, segments the of business quarter $XXX.X $XXX.X a direct have line who our strong were open progress are

and XX% both driven During Solutions quarter year. we the increases volume. whiskey brown increasing for for distillate continued Distilling aged to price the resulted in our goods new XX% for were sales in healthy demand and segment, by experience and which year, the These

cultivated a and brown the XXXX, exceptional at which customer in our customers.Our we base, U.S. whiskey across more both now for craft sales outpaced our diverse by brown sales and customers. strong whiskey offerings trends Our stands American our goods market XXX driven American are multinational result than growth relationships good direct have of

new to our whiskey last business.In our derisk maturing sales commitments bring since X for will our longer-term beyond, Distilling grown continue stability our aged compared new of base Solutions we the distillate this into years, effort. distillate deliberately XXXX accommodate commercial financial the sale XXXX, we our and to Over sales and aged XXXX, exceeded whiskey as to have and and growing visibility anticipate sales first whiskey time we customer and segment

lower age at to new in reminder, are while point advance, provide price a be cash visibility margin, our and sales, contracted and still greater providing have attractive distillate greater reinvested commonly flow As business. years a into gross a profit very

a for whiskey more XX% committed. sales willingness whiskey is As our of distillate to is distillate on in positive sales our to effort, whiskey believe new new result volume category term aged of this sales. customer longer the whiskey committed of American compared a contract XXXX, sign volume than XX% I

in total aged less aged the of result because our longer-term who last to anticipated goods stronger stability timing and than with of of in expansion new vast committed the to quarters and total XXXX longer-term now Bardstown, distillate online. their are will in XXXX strategy with do started of moving XXXX developing distillery our XXXX, brown into distillate timing our majority demand, to expect success customer as market.While of of whiskey the variation expect customers, coming brands for volume whiskey particularly aged Kentucky X have compared be to due We with we of working new the revenues due we whiskey in and our QX project profits craft

Atchison, of schedule. more capacity about alcohol, has to we contract gain the industrial additional announced in closure newly and the beyond white closure our the We're share we speak impact white XXXX, July, for work planned Looking goods to last and Brandon capacity.Turning goods customers created in our closely financial to industrial completed been of to renewals continuing lock existing commitments with closure. that detail alcohol through are the in Kansas. pleased will on the distillery in and

sold in and produced continued our given toward not enable strategic that While to will reduce of lightly, we volumes goods firmly achieving our these long believe align white operations decision objectives.Our their during long-term actions categories the history distillery alcohol the Atchison, we strategy to our a took of us further was industrial and QX. the supporting it product and product

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

a Plus XX% Premium drove and Branded further Spirit on negative basis, full the product the the have grew quarter lines expansion expected, continue for year.Moving which, margin gross turn, As Spirits, XX% portfolio. the year, across these in brands margin our to combined gross for to in

percentage points higher-margin to through portfolio the shelf behind focus investing sales in year the XX.X% Our Branded distribution of profit brands an opportunities focus presence of resulted Branded the of Bourbon margin-accretive full-year to we've $XXX.X acquisitions, our our with or progress increasing throughout Branded brands, to plan our as million, we're Spirits sales on of evaluation increase that proud platform. anticipate enhance made margin as will of continued Spirits of marketing for segment.Speaking and a to as profit acquisition on and well segment further Spirits in sales.We we gross strategy Penelope our our current our through of of integrating expansion continue gross

in pleased component another M&A the leveraging also we on XX hope accretive execute by Spirit that year. margin-accretive our to priority a to our brands portfolio. to strategy, are be This Penelope having illustrates We announce as year. strong and goal in is the to the Solutions, high Spirits distribution end experienced a more key XXXX.Turning points expansion able acquisitions of our growing Branded we achieved focused we of we margin Ingredient to Branded of of states by remain

continued.Before ability trends the our results wheat high-protein record basis, and by and for meet offerings sales growth throughout for we year. delivered XX% turn my specialty the alignment both to I Ingredient proteins Solutions and of build of on were to remarks. gross fourth-quarter continued enabled us over growth sales specialty with concludes the foods our carbohydrate for The momentum primarily deliver have to results, their of generated and gross sales want initial profit XX% of plant-based, Their segment call team strong to on demand effort higher the results year year.This our product record net starches full-year to as tremendous Our profit and execution. I wheat for the the a consumer and strong lower and Brandon, driven continued thank

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

Brandon Gall

Thanks, David.

to our due in business increased For the XX% by XX.X% sales Gross all increased representing profit $XXX.X fourth as XXXX, result performance, segment gross increased X of million, segments. to segments. sales XX% improved sales of business of million, $XX.X quarter each again, X to consolidated a profit

brands in to million, fourth increased sales For the by profit the compared to driven or in reflecting of of to profit grew sales premium $XX or the Penelope year, million of million XX%, the of sales to XX% the in or $XXX increase year, of the million. or in portfolio quarter profit for or premium this $XXX.X XX% XX.X% continued our strength the million.Gross of XX% to $XXX.X segment in segment American for white increased to $XX.X of to million increased company Distillery, of to whiskey sales segment fourth compared segment XX.X% in or for grew increased tier Gross fourth sales, million, XXXX.For Solutions million, In portfolio. the of sales compared in segment year Gross price Atchison $XXX.X the of Spirits X% XXXX.Turning quarter, quarter of Solutions. double-digit in X% our fourth $X.X XX.X% largely increase XX.X% of a plus of sales XXXX.For $XX.X all to reflecting Ingredient faced basis XXXX.Sales to XXXX. sales segment increased premium beverage organic segment increased of a compared quarter Branded of quarter XX.X% $XX new million, sales, $XXX.X profit or to by sales. Branded in sales $XX.X plus of to beverage both in year X tier to XXX Distilling increased the the consolidated to across in $XXX.X XX.X% to the alcohol. in strong premium X% closure reflecting our XX.X% or the $XX.X profit fourth to addressed points Sales the plus and segment our XX% million. compared driven premium in Gross million sales the industrial alcohol which million increased sales profit of the brands. million $XXX.X Spirits XX% to quarter to increased of for Gross million, distillate $XX.X quarter sales brands Gross full were acquisition a sales, segment segment goods XXXX.Sales for we increased XXXX, million, segment XX.X% aged headwinds due increased increased million, margin and improvement XX%. segments. by Despite percentage and sales, to XX.X% price segment quarter segment full spirits sales Sales $XXX.X gross or in alcohol, segment fourth or recent our Solutions Distilling XX.X% million increased continued X% $XX.X the in total XX% to

segment wheat or XX.X% proteins million, by the Solutions of year, segment of to XX% sales sales, For in sales increased and specialty XXXX. the million profit full to segment specialty compared higher for driven to or year Ingredient primarily of $XX starches.Gross XX.X% million $XXX.X sales increased wheat $XX.X

with Spirits expenses We More be see a continued This compared million our center part of brands credit we XXXX. although to for another into the starch on as plans Premium the as increase and to Distillery construction of plan. to million XXXX, fuel moment.Advertising spend XX%, fourth Plus previous XX.X% dilution to the of tier Ingredient our some convert the price profit we on strong as effort year as such, fourth Spirits premiumization or this percent Branded in XXXX mini was Branded a strategy.As $X.X expect increased stream in implementation Solutions, promotion a for to of absorb in stream finalize sales marketing this quarter. and prioritize to and $XX.X our a the reflects Atchison quarter this quarter expect from the segment our for A&P margin

million $X.X XXXX, higher-margin fourth as In million our increased we increased for million to expenses for in administrative that general feel $XX.X brands.Corporate international year promotion XXXX. XX% our Spirits to as Branded the invest the quarter in best to marketing million opportunity and $XX.X promote continue the full tier to the advertising to fourth have XXXX. to or price year, full and the will plus segment For selling, premium compared we quarter compared expenses brands $X.X grow to

throughout share-based incentive quarter, expenses For in compensation of expenses the expenses costs updates certain of and value the adjust to Penelope closure acquisition relating XXXX totaled Penelope value necessary SG&A transition term items, volatility the the driven the full $X.X subsequent the one-time increased ends charges compensation, related consideration of of Distillery other one-time million. Atchison for compared prior acquisition.During financial other the million. consideration in closure totaled as totaled December impairment totaled in million year, $X.X quarters personnel to higher Penelope $XX.X the assets to corporate in year, XXXX to, to related of basis continue of and expenses among discount quarter primarily on assets vast Distillery expenses fair fair the which in of the Atchison to fair and rates to our by change million. the Distillery believe $XX.X impairment the We'll period, full The value fourth the closure of the Atchison the contingent majority of differed was to $XX.X business and incurred assumed.For inclusive earnout quarter to incremental evaluate CEO million, to relating the acquisition one-time quarterly and relating The change liability this XXXX.Additionally, the change million. from acquisition due reflected the to $X.X the relating This the relating results. other the our contingent and contingent in a consideration as we to

increased million. the occur, increased to one-time operating equipment $XX.X $XX.X income related subsequent quarter additional the income Operating quarters. sales million. to However, in XX% may Adjusted to expenses those including XX% for fourth

ETR that in in period. For the the Adjusted $XXX.X driven increased corporate from the from EPS increased for million at our $XX.X $X.XX issued tax quarter allowances during $X.XX and increased of further associated growing priorities convertible and of strategies. to the operating to XXXX, fourth shares for pursue for $XXX.X our per $X.XX fourth operating increase and million whiskey to valuation long-term tax share EPS year.Matching per the EPS of at stood return XX% products year-ago a in again strong XX%, share product strength business. more per XX% per share. of primarily projects full share mitigate decreased are $X.XX additional in for per and year to increased was we and to premium We be per from the Factoring available in Compared million. have our with the the in management full lower EPS us operations Adjusted $XXX.X primarily remains net share rye million increased continued from $X.XX is from $X.XX growth diluted Basic elevated Corn, the opportunities inflation per $XXX.X the share. diluted of flour, to remain $XX and Adjusted per increased the to quarter increased focus $X.XX EBITDA increased performances XX% by year diluted investment even Each of period. million, Strong our share.Adjusted impacts rate Adjusted for EPS XX.X% long-term support adjusted increased support Spirits Solutions notes range prior elevated value from per nature, prior increased growth to $X.XX the X costs, to our all and in gas process income $X.XX business to $XX.X majority segments.Moving flour million. increased fully year, strong opportunities year-end, XXXX quarter $XXX.X shareholders. quarter will effective was basic Adjusted risk the the our year. per Basic November of that XX% and for year Distilling was to year. natural and largest share effective Adjusted tax cash demand was $X.XX to be we tax effective for XXXX.Turning quarter, to On EBITDA XX%, of for the increased corporate as lines.Cash $X.XX future X%, income per increase to flow EPS capability capital Adjusted year-ago from and and represent December share. Inclusive and of full totaling million one increase in from our million. increased and and share at with to decreased consistent million. to expenditures. input from net in flows a of to emphasize the basis, capitalized, well the commodities. The on basic XX% by $XX.X income investment the was per quarter, to credits. cash for The corn million to full the decreased fourth aging the per of believe driven to of XX.X% a compared income $XX.X the in decreased strategy, and EPS the our XX%. the company.Our net reflecting quarter enabled share.Net is record to year an quarter the sheet away increased income whiskey, year to $X.XX this to expenses. with Despite a which fully million, the XX, share expansionary $XX.X of income cash drive to per cost position the increase in gas diluted $XX.X of wheat our for compared debt at our $XXX.X $XXX.X XXXX. Branded fourth balance long-term million. the continues slightly was cash-generating X% this input share share. XX.X% per cost share per $X.XX XX% natural $X.XX share common corporate that in for while to earnings these specialty share. throughout for million.Our the year, The XX.X% full-year prices rates as rate million wheat fourth an XX% in to We from rye, cost quarter from $X.XX per inventory M&A put our anticipate our experience XXXX.Net portfolio XX% $X.XX increase commodity increased

previously-announced Our from and a on remain expansionary projects timing perspective. cost track

focus the our aging Missouri be segment. Louis, and dryer the to our will such starch facility whiskey.We enhance capabilities first resulted million operational deploying facility bottling support recent our capacity of anticipate on Row The and was to stream investment as a waste in Ingredient of vast improvement leased projects our Kansas CapEx majority XXXX. the in continued growth investment capital $XX.X come warehouses used for strategically the increases, Atchison, the year $XX.X which in the approximately Bardstown, online for ProTerra needed Lux such St. as additional is in CapEx support our investments quarter to to Our of in which and in plant this second support acquisition numerous XXXX, Kansas, to previously Distillation our warehouse XXXX, customers in for is Row online to which Atchison, of the Solutions monetize facility XXXX, expected of expansion our Lux expansion, million in quarter expansion, mini coming Kentucky, and in better in in fuel

half unanticipated pursuit building our investment anticipated CapEx warehouses million of our of in some represents Kentucky. we've Our experienced new setbacks months, for in XXXX.In approximately recent land-use $XX.X warehouse

earnings regarding additional work find will to provide and in continue warehouse future to a solution we We calls. our details investment

environmental, an impact to these preliminary XXXX. we as and XX, financial investments, projects invest well pro and look Distillery unaudited the continue basis sustenance ending year facility safety as health, Atchison In projects.Now updated on of the addition forma December the performance in for to at growth a also

for XXX identified as the has increased margin provided reduced are basis in the points.Last increased that follows. Solutions financial profit million, Consolidated earnings will million totaling fiscal the starch commercial costs, $X recently, path a insurance, drying a consistent at by million, in and shared costs pro These cost viability dispose the partner and need sales of no waste the learned further of Excluding result Consolidated Distilling third-party of recouped detail and few.We the the gross to and has forma cost XXXX. sales this increased via search to be to name associated operating revenue More our waste consolidated to from via with additional financials stream we XXXX the quarter, confident that ready in we results by updated utilities found with received the release. we've depreciation, Distillery, incurred a of starch potentially were involve a by impacts million. sale. we'd expenses $X the starch. to $XXX.X commercial are portion will that anticipate in sales $X.X our This of as Atchison be third-party energy, gross of of waste company to is

we are through trials point this that be revenue. in the recouping guarantee will and costs at incremental we underway, still offsetting cannot successful However,

enable our toward such, in incremental such fuel product described. categories beneficial long-term achieving toward options actions mini other, guidance, and offsetting factoring a but not disposing plant are align As we We continue to strategic the us will cost starch, of previously believe these the objectives. further our economically as in revenue.We supporting waste more to operations XXXX investing pursue as their the

later percentage starch category in of the believe that has tiers price to earnings in are in some As the Atchison on on Distilling operations accordance at on we as to Indiana accounting of changes stream items Distillery these forma of incremental company beginning has is our alcohol, included produced waste we present their of expect results, reviewing to in as way co-products goods, quarterly details stockholders. the refer certain the and of we year. white March dispose the business with calls.Despite authorized XXXX. provide discontinued in Please continue segment earnings segment Spirits to we our product offerings, XX, dividend that accretive the line morning's to of to our process dividends across Distillery record in Nielsen fuel of additional this we It's our Branded continue pro product assess stockholders amount of to in Solutions impact Board distillery. impact closure per Due at industrial pricing information.In and the the as to operations our to the on which to the well certain note segments. schedules Distillery ongoing gross closure as The consolidated more presentation options XXXX, more Lawrenceburg, the view financial important guidance, current will will $X.XX with for future accretive as Atchison be times, the share, that circumstances, share to payable the margin success our our a and important tiers, March costs, XX.The are our impact Board continues release an the in Atchison

our that the to organic We growth evaluate acquisitive we investment continue we with across is well X of as to that consumer business the shareholders. all away believe and disciplined segments positioned our accelerate we expect American invest continue our to will well efforts business on capabilities whiskey, of areas product and continue as that projects believe generate mix M&A we our We remain long-term to expansionary increase greatest and and long-term strategy we enter our on are offerings.As trends, XXXX, in conduct leverage. deliberate opportunities, growth focus to as to optimizing value underlying put our for product aligns and well and designed focus

$XXX XXXX, our growth factors, to of this adjusted range This with common outstanding to $X.XX average share in share-based range expected of the compensation inflation the strength add-back the be and share, per to These company reflecting the expense. that industry first consumption the guidance. basic fiscal feel headwinds, expense, closure to financial record into expected shares are the support December for our approximately in already fundamentals result. the $XXX top share-based business to the monitor first to overall of $XXX contemplates million underlying to XX, continue historical Please in million business, dynamic of we the mid- supply to Including range the $XXX a compensation Distillery.Adjusted impact be levels of the following note, the range ending consumer be of whiskey we range let be per adjusted is excludes million, potential million $X.XX EBITDA full following been year-end.With at these are projected XXXX. in million. have outlook supported add-back intact of million, positioned earnings expectations to of distributors, expense, in consumers.Despite quarter the the rate approximately $X.X this share-based share-based XXXX projected $XX.X in in growth compensation year's combination for XXXX discuss expect XXXX. back for EBITDA inventory We year in Atchison uniquely of to this $XXX And factored to compensation in earnings that to in basic adding of on grow previous reporting quarter, the which when remain XXXX.Please of operating lastly, American be a million intend the compensation as backdrop, patterns, while begin $XXX million adjusted for high EBITDA have a with for of to on me morning's and of single-digit adjusted weighted Sales environment. share-based EBITDA release range year expense refer We to expense. to

expansion for concluding quarterly attributed some expect subsequent David things QX, distillation quarters the in come allocated XXXX. offerings profit and Solutions.And to be commitments in and commercialize our opening and now QX. in and customer to remarks. for goods, new the Row needed single-barrel challenges for to X for me part Spirits to back expansion the ProTerra This of offset results facility Timing can turn below sales the Ingredient We Lux Branded Plus time over of let this sales relative international gross brown balance of lower first recent quarter in Premium of year of in

David Bratcher

Thanks, Brandon.

pleased in well-positioned. the We and business our with continue, demand for results Healthy our remains are strong believe delivered products XXXX. very we

thank and for we completion. We facility that extrusion XXXX on support happy prior segment additional and this operations and I offer construction did us will end within our to are to allow to completed facility also our the report as delivering to budget. our of project This us ProTerra congratulate would time by have of planned. team engineering on that brand not we capabilities manufacturing Ingredient like and the our Solutions

within our of to strategy emphasis inventory offerings plan Spirits of distribution we throughout the on industry M&A effective move into offerings.Our alcohol continued closing taking company. innovation, growth the total is add that Branded Spirits of other of higher-margin margin encouraged growth category driving within accretive industry distributors to growth of focused Branded like on build as XXXX, a remain issue while velocity our points premiumization in by trends slowed made transactions.We expanding and the increasing have with those advantage of XXXX. use remain Distilled and Spirits I long-term our distribution product very are Working well such brands meaningful cycle, points at transform reports closely U.S. XXXX, whiskey relative we as categories. capacity inventory Branded COVID industry. broadly to softening recent significant Spirits the points our through is reported segments we industry our through added continued for segments both Spirits as are an optimistic the when and other our progress in velocity destocking company As accelerating segments this with U.S. marketing, our and some In beverage distribution, for interconnectedness about tequila.Additionally, on believe portfolio and super American we level compared alcohol across support Brand in And continued XXXX, in to growth despite team a the Branded the focused capability.In we market, our our managing closing, into indicated portfolio health the Solutions sales to through in spirits a wholesale of to we and feel wholesaler dedicated would within on XXXX, our this sales

new strong am closing, have let established the objective have the the our value add, committed CEO, over to with the opportunity extremely begin and years to leveraging remain of we offered honored the me been Member sustainable for we we as delivering to I As year, shareholders.In foundation take Board long-term serve of Operator, long-term and the concludes are committed of stakeholders the our I team that I the obligations portion The prepared question-and-answer to to business.That continued remarks. I shareholders, employees, very are to growth we call. MGP other January starting our begin of ready and President, seriously. the X. with our have

Operator

[Operator Instructions] from Bill Chappell comes Truist question with Securities. The first

William Chappell

sales of you the the distillate total think on Just 'XX. be go distillate 'XX back wanted was said things new the sales kind would to and in versus of one I down

So if you -- color. maybe some you more give can

that also, whiskey of you're what changes might kind that some like and that.And was you and headwind. a supply the monitoring to you mentioned think but American customer had trying I then be levels, explained understand overall stuff that,

So kind or at that? about new talking help of supply you for maybe are retail distillate? talking understand other players us about you Are coming of

Brandon Gall

I'll opportunity and us thanks Bill, to for clarify. giving that. the Yes, start on Yes,

expect sales new do not we So to year-over-year. decline distillate

of been been as with to that sales expect ], new what broader better grow, our in finance able category is total XXXX. In [ continue that has they're growing, the to fact, proportion bought to and brown than prepared the goods we're But of mentioned call.And in Whiskey to traditionally sales new better get American in as in and trying distillate versus on has to we grow aged or across remarks the the is sales that deliberate, our now distillate. ] that for as continue they customers [ aged mature reason David line

grow we distillate so, the our aged they the leaning attributes change lot than And there's such years. such, versus a flow ] brings.As far we -- cash aged, and that such We're as with overall and visibility grow Whiskey but done industry, of with find And more distillate or category, versus that the we've our recent same plan. outsigning better the customers customers. because continue in at pace mix supply attractive, towards we're provide to as into American that's to new the the greater our to characteristics not as continuing as of the moderating portfolio new [ may greater

David Bratcher

naturally Yes. The understanding I'll better on just really financially of a to it. business. somewhat overall impact the our new supply. to the business. critical for become cycle, our in on arrangements, our no It the is multi-years supply normal some to in to financial for and is category longer-term -- of us plans over us clarification. craft That's grow average. have customers business just they're -- terms previous over too, we bigger, add going focus to moderate no to visibility as that, distillate distillate switch new continues It gives stability It's and a for normal.There also

in online taken heard matter call in major and expanding our a approach, come of this to capacity, the just you our it we we're As Kentucky, that opposite midyear. fact, script, one distilleries we've as expect of basically doubling

very Branded and So with to grow segment. we're the optimistic and expand plan to continue about sales

William Chappell

you Got then naturally the leaning pretty to out past any the hearing of But much And customers, XXX good going kind understand interest have new. you're if Or years? -- helps. the that you just are looking a now X it. the customers? I'm now? be into demand, X aged from I years demand the from the there's of overall been slowdown in as at in worries brown I That years, has your mean, X it that same is kind --

David Bratcher

look pretty obligated, our that that referenced and it being be the we on craft say we what actually to into most if entrants new of aged these think about of that's aged tend I we could number category. high because at is XX% on or discipline, customers

feel the wholesale are unknown brand to level good or subject craft that as craft of and -- the amount relates about the -- craft to anybody. companies how those inventory is So situations we actually, have potential that distilleries any contracted retail, type pretty that we same inventory,

the so, buy could -- their of them in else, And interest piece they and past, the everything we little rates really they being their saw corner with cautious so just more -- a business. they're with higher investment.We

the want to Now operate can them fill to you're shelf, it interest just-in-time know switch more to in. starting see product that type they to They the given transact, and demand. right of get they the rates high

William Chappell

kind Got distributors on that about and do still the overall flat I down most mean, that. Does to impact of the done? of stuff you Penelope? for excluding quarter, some portfolio, And most is you thought destocking a I expect just it. of aged -- first comments in the mean destocking on the that question, half -- Or I your saw branded year, could last we be the at like there's mean, where heavy last of business, sorry,

David Bratcher

the general The industry a about overall. comment on overall. push was destocking There inventory for still in the industry is

and a order, number control As it At data actively business, believe to they wholesalers. manage hand. what the relates inventory, day, We controllable our they is. in it the manage area the hard really in decide our of we've that with the the of we specific to wholesalers end the year worked place do on past that the have

for XXXX. let's good because of set exposure in job us I our on think I think managing peer done really is our smaller than, say, it a it we've

Operator

next with Marc is from Wells The question Torrente Fargo.

Marc Torrente

margin, expectation. forward aged distillate distillate Just likely going is building on aged or that's new We carries outpacing the greater. Bill's question, with even know but a new strong

the implications on So on the renewals, has before side. to aged here? distillate strong pricing there more maybe be contract into you anything you read been cover And mentioned the then that strategic giving new to

more guess, trends continue? any this, And on there? maybe contract color how cycle pricing does So long I

Brandon Gall

you're exactly Mark, yes, And Yes. right.

more price, side more in contracts We have been successful renew. as on the and getting new distillate

very side, this distillate we part David a new lean of customers into perspective. of On opportunity, as we more the like mentioned, from better things demanding it valuable are and still as up said, we us are our that as important term but though, it's longer side feel because business, or using our to the aged sets

David Bratcher

we out I called would our add in I that, Yes. it to and too, think script.

willing overall. our to shift this new think good commitment are multiple is the that's think of years their If people to signal industry look a that to it as out, that attractive our contract a we very, a effort I I sign distillate for a need. we that long-term brings it as at the we is stability new That's in script, for aged Yes, to and has category. It us financial benefit But at -- still I given, talked Brandon the little distillate It's distillate stability, the softer gain it about visibility, exposure distillate way. new has the possible by I a are portfolios. in new a very increasing, that and than from said margin possible margins derisk the that on past. aged. that as category. look a

Marc Torrente

to on just provide then X%. basis more forma growth a growth for if top you X% and calls color buildup core And EBITDA forward QX, little your guide a there amount of Great. any about pro maybe I segment but deceleration. in Okay. could on around there? Was imply clearly on guess, some categories fair and X% a would growth underlying through guidance, color in strong phasing the the year. a pull There's of line

Brandon Gall

we're kind line were on growth no digits. what seeing By if sales your basis Yes, X%, in Distilling of To to long-term point, pro which, mid-single it is apart, X% with our we pull take and you expect the to forma aspirations recall, in segment, forward. grow as a in in is Solutions we the to algorithm.

X to overall larger going been Marc.The at or category to maybe flattish little to low single XXXX. better a because have the value brown expectations be one said, that a as will I we've as to actually category.Brands, digits, in an take will the altogether. although percent, better. revenue very segment it be be but is as decision large in in less gross and the it our create for drink Because a sales more Ingredient or for brands a the consumers a lot incorporated one there value continue strong we expect for mid offset guide, the cases, we some brands the mid-single the headwind grow accretive, a there's first to counter digits do with all X price But year.And goods sales made the either the while to to second would gross well. And or dollar for of and tiers, this, into expect is finally, is added been both what as than growth to which X Premium being, margin to and Plus, be to As and know we result, decline, more year, steady from has than rationalize value as reasons have our mid in to we've we mid on probably volume in better again, identified of price those Solutions, and profit portfolio, then

we a get a our guide. with bit little revenue why we I'm in a lot around little that's bit So And more know past is more is confusion detail that -- Distillery where share of than which I happy to to years. the there closure, Atchison have

David Bratcher

want value. And to about Yes. what emphasize I mid Brandon said and the

is drive we're to flow, of with have some you, it's company being on growing that it have then many, as Plus more on substantial in when impacted other Premium at impacted And to is than what than price that, and a our drive different of the the margin which to to focus a first experienced, quite you area. we're impacted always the on Plus are been and and do? doing some before -- going said and it business. And no spent to we And strategically Most [ have the that overall that our that for to ] And you probably great you've relook our that, many has and value, it it's ones Having years price. we the you was Premium pick try we mid time, in with on do and focus do build We be Brandon have accretive. to categories. number, margin thing seen focus of choose products that is company what that -- that a generate in that to the is exactly time, why really one were honest dilutive. basis cash MGP, points. pushing and business And guidance on and you're portfolio right.We

Brandon Gall

shared last is Marc, David X%, talked growth on said, that, But which it EBITDA EBITDA, high again in yes, we EBITDA on to on about long-term from top on midpoint our is piece line our an a of with single-digit perspective. also QX. sale. our as segment starch is the we in million adjusted in stream was to from $X incur $X million That What we operating is what incremental basis. the for a prepared to remarks that line The costs Solutions going Ingredient to knew in growth ready change aspirations mid-

a until that have for X.X% only cost And X%, growth [ get going that incur to that an away that that on solution is ] to in mind, because longer-term in closer or take you we're to were is back adjusted we add basis place, so, our to EBITDA. if a temporary

happy to I'm provide that you. additional to So color

Operator

with Gerald Wedbush The next Pascarelli question from Securities. is

Gerald Pascarelli

Great.

out you've to started conservatively. back historically, going the guidance, but Just don't to want here, point the you have belabor I

backdrop beating And around You that have I guess, is I the there raises. like concern in say et consistent, that inventory building, cetera. increasing

year initial that of talk just conservatism and degree So may to that embedded can to how the guidance you just the X your be about maybe in past. years compares start maybe

helpful? be that think I would

David Bratcher

end. then Yes, the Brandon in sure. and chime I'll start at let

at know any we we All time. given right. guidance, make that numbers we want as at our as accurate sure we're to As look providing

in numbers, for preparing looking business that demand.And say, Brandon impact on price provided consumer various deliver. for hours, lot at our feel and I those we for at always a scenarios, through what going going Brandon strongly me, and business do at of what shifts scenarios. a we're can hours I better, year. provided Brandon starch the talked to I really and time, trust us in inventory team better. personally that we to looking What why But at be and in long we number realistic of the guidance. If levels, our lot and spent is stream spent just the grow able should looking about, So we shift when through looking we we is that we provided, That's a going back our feel our grow do points,

Brandon Gall

Yes. and we of the to kind share percentages for aged question. address this distillate to commitments And year add exact the to that, help of new

of Whiskey have confident our XX% to aged, category, still very sales we're for. in still go While we find the American

on EBITDA are and multiple confident single-digit year guiding that, that of XX% the get already number, mentioned, to more in.But in that so, growth. mid- we'll we years as top of after coming than factor And off I we still to growth as more adjusted goes on, high Gerald,

retrospect, bigger this been right conservative, keep feel to David to like is in said, the trying while and So this base. we year, we historically approach as as grow bigger from we've a

David Bratcher

healthy -- industry, it if 'XX, COVID looking an confident XX-plus have Yes. -- industry. reset you general. that it's bit very industry.And super going talk it a But great ] very, industry [ growth, a peers on compare about all had may it, compared it I for we on reset what going to I'm to might cycle, the still will are saw across in pre-COVID, add normalizing, question. thing years now, hear what be it to mean, hard, our of it's solid in little the there that in you belief to -- one is versus given to industry is while off the in slowed years I'm we as the overall year-on-year. will 'XX and the last closing after as and start a yes, it's But as a those you you start start at that's industry. doing are my We of that get

because to size our optimism velocity our and as And for think opportunities, compared factored we our also there's peer mentioned, I for. in of excited opportunity and we're into set we our us pods guidance. that that

Gerald Pascarelli

Perfect.

accounts your stretched like some kind item, It they It's all-time among a Just one be more receivable continue looks but on increase housekeeping highs. to me. days. color and for of

color any can receivable you your there's provide so, that? And if anything to from on or accounts glean

Brandon Gall

kind with more where customers Yes. to the beginning and they can environment, high-rate days the Gerald, of to that this not from and QX ones and also have this of Good away. then of do them offset between in the shared combination, our don't look try DPO, end and which to metrics, about was it need are we terms, But days extend paying that lot slowly. they a prior smaller especially do a prepay. on commitments, take are at lot last they our We their as do, can they right craft XX days of of cash point. one-on-one calls, of them of And X if they're Accounts at that year. terms looking XX stood at which from other the year, receivable some one increased But conversion in of impact. help year being those up

So bad it actually is up to look debt if But to at inability your history of you good. and point. it's collect, our pretty

generally feel we speaking, So it. about pretty good

Operator

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

Benjamin Klieve

me. for quick A couple of ones

them? have comment or of meeting laid you and Are the with on the earnout are metrics you that relative Or schedule guidance all, Penelope. of to Can that you XXXX First the guiding relationship earnout the to guiding above below into kind the the out earnout, that? for on you with contribution that baked year? are throughout in your guidance

Brandon Gall

of And better in to than expectations. or continues very perform to our Yes. performance Penelope. We're pleased relative with the underwriting line assumptions, it those

to expectations we the as as brand guide for look this better. the too that for continues it at incorporates hope we, in those fact, so, And year, perform,

Benjamin Klieve

that while In more comment remarks, Brandon. all for can I'm wondering to understand me, Brandon. or Thanks, kind at help some this quantitatively if And qualitatively internationally. your significant is? Okay. of then how challenges us the prepared noted you within one Ingredient segment, on you

Brandon Gall

and that near was things. mid- highlighting term confidence full my Mike we're to were what X in solution. Buttshaw, but term, a prepared team find Yes. remarks I to that long really in something at, But looking It's

So commodity imports for which EU, and starches which segment firstly, Australia of wheat of label for at is sales we've in from XX% in increases seeing in our the begun resulting about pressure own commodity represented now clean pricing XXXX. some starches, Canada,

specialty export headwind of exchange one -- unfavorable the the of protein that's one currency headwinds.The we're due seeing is to international into some rates. of products Japan, second that's headwinds our So also mostly

our in doing counter efforts the So and sales is what commercial domestic to protein wheat on really we're these U.S. specialty here focusing maximize challenges to starch our

and we seeing So signs bit -- are to work here, the of will little we're take a year, we're out going of success over time. early but some it's the confident of course it

David Bratcher

Yes. And I'll add to that.

label year, our focus commodity of by And we really exactly and continue to is are our and commodity demand. yes, brands. pricing well starches imports We of type it's the commodity what starch starch They're in on Spirits. and look products.The to similar business run or want on as of type Commodity of to on. we is is we those a things upper, we for focus really a supply but stuff model subset what to model sell products is want products. obviously Ingredient for it's do very of we more piece our the in, specialty created pressure. our clean do specialty upside we works higher-end Branded focus business, that. that margin this run what We are with that the we coming and Those And driven. at premium type of Ingredient It

Operator

Rob next question is with Moskow Cowen. TD The from

Seamus Cassidy

on a Cassidy for on deeper little Seamus volumes. is goods brown Rob bit I Moskow. This drill to wanted just

mentioned, were was year, mentioned full you side. the driven So for called selling up which, better the contract quarters, being X of as negative around you more visibility of the by volumes, but for aged they new given that barrels, sort on you selective out brown the first

of Solutions' on XQ So mid-single-digit sales maybe as the called for your think any growth, embedding outlook beat. could in that spot you higher-than-expected wasn't sort offer And in we that forward XXXX? just pull out? you Distilling And in there maybe commentary but if about should drove how sales that

Brandon Gall

in Yes. play question, the volume And course QX, volumes And were although quarters, so thanks QX the less sales our did than the yes, XXXX, of big the And earlier it part yes, a throughout of role in growth. for price. so a Seamus. of especially

And so quarters. of that we the was where the were a making lot in point,

And to type lot play of do of we're in because a 'XX expect moving new As we model. larger more a towards look that role. is though, volume to we distillate that

driver continue So that the while distillate see main expect expect this at volume is, do new be in we to we level of year. sales XXXX, aged see good the pricing this into year, and the to growth we

David Bratcher

Yes. I'd add that. that, to too,

Spirits other we're QX on the into lot the selling Brandon look numbers online, people capacity of industry, expansions be category. capacity. the it going the as expansion And And when in on of coming distillery other this because thing, anticipate especially a putting everything our go we that the the with are of model expansion, we is the is mentioned, we we look and start XXXX, Brandon brands little look everything of Branded a focused of putting should our The other they distillate that traditionally, our on as numbers, I than people provided, to talked at our we guidance But available.The as piece at that it is a would better, and are add our the stuff QX, and general that on in additional the QX we that margin The we business, you the the average new to in on to aged quarter really back in then are with customers, shelves. a factor in to at be that [indiscernible]. slower half as side, we normalized. might more indicated look craft if tends capacity other there, were subtract the back quarters.And we've about have

Seamus Cassidy

for more one just then And me.

sort you bit sort offer that a customers through, on elevated. Could more how for core and will you just of connect of us lot more that new detail lot a you're this of flows your remain be of more on like contracted that volumes little Given with distillate costs commodities how of your that model, moving you out inflation sort towards given and a called these that side?

Brandon Gall

that's are agreements input in And Yes. advantage of -- the another having they based. longer-term place because the pricing is

off the so, factor new rye, addition year-over-year, also to And having pricing distillate, it's a corn, is in our incorporate malt, it's inflation raw based whether material inputs, what for contracts whether typical into cetera. et gas, barrel, natural we of

as margins, environment. forward those go we are insulate to our us our there So of help in that in mechanisms contract type within

David Bratcher

that. Especially -- out on Yes. multiyear, to because Brandon reflect we true of grain based commodity they're barrel. all including want as contracts current alluded, distillate may that the when be, on go the whatever new the it's price People all

future. not on you at But aged at those and we things, because picture they to, the we like margin stuff. when the can look put alluded are of big the our as significant vary super reflect of As our point impacting aged, commodities well overall our in pricing in -- inventory and the the that capability age, those guys costs as future in have, away, it's that obviously,

Operator

with Mitch question Sturdivant. The from is next Pinheiro

Mitchell Pinheiro

of leaning how own what questions. their Do ample kind Just related that And interpret to they couple follow-up that of the point... this is customers levels a does of new age? are aged? have One distillate, I should into the at we -- if inventory mean,

Brandon Gall

say think ]. [ would -- Well, balance that age I their would yes, and mean, that they're managing I I

them time Our to really Spirits This an strategy into strategy. MGP evolution new category over time. brand strategy a be customer entrant distillate. American for new bridging a new a and Branded Whiskey the It's always isn't has to taking wants that and been long an

to additional sales to what that -- doesn't and get to go a but age, on in build same well.So new the transition new in choose the aged because of it a And It's costs so, going inventory make ] those which preclude to lot happens be it as more distillate larger as because shape put and of a carry able to new be those those that customers customers that but it. when be also customers they distillate, in own aged what they of their on in [ will to naturally plan they're financial our distillate, aged to with able easier need on side larger is better it's pick And side, you're going market. on to come to and the why have the brands. need they the reflection contract they're customers need away products doing

Mitchell Pinheiro

I gets up XX% when distillate at barreled And when then, -- so year-over-year. look your it increasing, us Okay.

obviously that distillate earmarked correct? that's growth Penelope. as imagine of grows, your own is I but And Some Row, brands, for Lux cetera. -- Is Penelope, that that that et would really barrel Remus,

Brandon Gall

both. it's Yes,

distillate flow selling date, to it's for as we of is But So own Mitch, our more part going impact. been brands. more Solutions other And cash the go of Distilling and outweighted new evolve. the that is with to capacity forward, benefit

that And demand so, as $XX to at a our year. less future away to we'll our line this for than segments, We're put we the in be put invest net the continue one we will see up year. move forward, going is million this year but with of away example, good cost benefits of is that to both experienced last

Mitchell Pinheiro

then question. And final Okay. just

about seen wholesale have event. -- what talk consumer studies, seems any to pantry your destocking, you surveys If that inventory you me own have seen significant you destocking, be on to a

Brandon Gall

flattish Yes. as probably you No but is that despite the we American industry specific to resilient A broader growth lot in we is anecdotal. that. and continue. that, pretty to know, speak And expect XXXX, in what seen have on surveys being Mitch, -- Whiskey, of of

David Bratcher

Yes, I agree. would

with to pantry set destocking, be haven't I think honest on data I seen any you.

And wholesalers. on their I retail watching mean, carrying big they're same you've seen the than wholesale we well. when at that. think our that that's you're had the can higher I a cost level. they've And pressure retailers, speculation. even emphasis What with they're understand as dollars dealing is

XXXX. our of do compared we opportunity that I distribution is to But of industry, to I in at that it's earlier an as you increase peers, the reflective something own going our our our that So we're as guidance. that's -- think is business, still see to what points look to in said continue is

Operator

with Roth Sean is The question next from McGowan MKM.

Sean McGowan

A couple of questions.

shifts at you've of So in et the the were time, Atchison, you're margins same high stripping margin, terms talked fourth extremely segments, out cetera. if to at about lower some But quarter levels. potential margin

So give you expect XXXX? how in margins gross us you color can some trend on to overall

Brandon Gall

very the for would consolidated to accretive actually. our gross overall thought we going for be the to to I it anticipate it's But yes, of margin Distillery, earlier we Sean. glad closure question, the Atchison structure. get Thanks got Yes. I'm this. we so

pro morning were the would in XX.X% last XXXX. year, -- we as be in provided this for example, So margins formas that consolidated an

a Going margins in XX%. on to forward this expect a a pro in basis.By bit forma mid-XX% on little basis, low year, Solutions right we north to Distilling be consolidated there that of it's segment,

expect not -- partly might in brown as Branded the just sales strong you described.Within this year. as Spirits, low expansion is expansion mix We expect more that's to to be it due to anticipate we to going be do The goods that mid-XXs. that we've but

the we for is near challenged there's million a we're Proterra have on the and bit it facility also, though to figure So to that. [ That's to and temporarily in mid- get drying to we ], is of until XXXX.Ingredients be in in to not year upper additional potentially solution the million commercially, mid-XXs our going $X be finished one to out. in that segment this going cost Number main -- the new out [ year to a sold longer-term XXs $X expect the starch more weigh and slurry. going the we're place in reasons little ] X XXXX. ramping in really we But term, up

be to going that. there's absorb, part more So to as of overhead

for reasons, So Ingredient actually we for the [ in be year. margins the mid-XXs] X expect to Solutions those

I'm So -- or that Mitch question. hopefully, answers sorry, Sean, your

Sean McGowan

typically helpful. think year first lower that's other but forma trying thing. to quick a than clarification the on about first quarter could that One quarter pro subsequent X the and a last basis? be the Very you then quarters, the are housekeeping I actually case, being below talked you imply Yes. When

Brandon Gall

to X all that, spans main is some That that reasons Yes. X touched them what we've we're there's and on. And of segments, implying.

of brands. the in and that those is look we experienced excuse we're the forward And this our even magic, in me. And QX. the delays in our to One X weighted that's year-over-year That did gross come get isn't the and within getting fact, of as operationally. usually out of the items on in -- less do of And Spirits QX the out, the pick we the a so. seasonality is year with of bigger result Plus in allocated in and time ideal to some QX. the products single Branded Branded ones, going those reason really even quarters. But them.So segment, last biggest those products this to is we're driver towards the last for of timing really, attached than market -- our to can year, be lot Premium barrel year, basis, going profit it's QX year And a then our last more back when you more items, half

QX out them And accidentally of so, some of year. into trickled this

the feel to going alluded be towards second committed. really while goods and good of those year, across David we QX be about as more through So going It's vast having lapping the so we're to be equal that.Brown not majority commitments going one, weighted the that's were to QX. to,

distillery the also -- Whiskey We in in of Lux QX year. Row mentioned going American to expansion, this take Kentucky. Whiskey our That's is off which

not year but but at we And QX the sales have the goes well. offset, out in as but once all as first so, be to already will international year up, on. we Ingredients, out take facility to in as for we the then, commercialization chance place, quarter, And get the expect I that new plays a will the distillate remainder headwinds of for not as we're then those handle the going seeing, these as we Proterra, year.And discussed, to ramp of again, of will mentioned that's the

Sean McGowan

do quick you to the be for the What Okay. And housekeeping. effective rate expect then tax year?

Brandon Gall

between QX. here, and we're through In in while this Yes, clicking A&P, XX.X% XX%, and XX.X% promotion was about Sean, for year. Branded Spirits, XX.X% another note, advertising

Branded that on goes Penelope, We reason advertising is, the reasons expect our same sales that into low the And I year. described, and XXXX. for but really again, for ramping for up year to be to as flattish Spirits already around promotion investment this single-digit in the the

Operator

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

David Bratcher

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

Operator

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

You may now disconnect.

MGP Ingredients (MGPI) 22 Feb 242023 Q4 Earnings call transcript