MGPI - Earnings call transcript Q3 2024

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Operator

Good morning, and welcome to the MGP Ingredients Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Amit Sharma, Vice President of Investor Relations. Please go ahead.

Amit Sharma

Thank you. I'm Amit Sharma, Vice President of Investor Relations. Financial members Officer management Gall, and of and are Bratcher, including Vice me Finance Executive Chief President; Chief joining of team, the David President And Officer. and Brandon management's We'll begin call questions. remarks then open to prepared the the and with call

factors before company's it my of actual forward-looking differ from inform today's results responsibility The factors, involve certain statements company's call, call update recent any due number no that risk law. could this may during the begin to including made forward-looking we to However, is you described Securities statements. by a most required made to annual in the the today The with and materially obligation as call, any statements report company filed forward-looking Exchange except Commission. assumes

to most will reconciliation measures performance. comparable company's certain measures, call evaluating useful the which A is are anyone a Chief David have turn you release website issued our at in time, this earnings the contain copy to we directly and Officer in to measures www.mgpingredients.com. At earnings non-GAAP today, this release. believe it Additionally, If today's access over MGP's call would at like does the can the not included GAAP I Bratcher. by to David? of Executive these reference President, MGP of already

David Bratcher

initiatives. detail. updates key begin in overview of Brandon results an on with our to discuss will Amit. you, to it our performance I morning, quarterly Good and quarter like Thank to then greater over provide would everyone. third turn I

well for questions. as up outlook for before for as your wrap brief year opening we up XXXX, will Lastly, discussions full it our with comments on the

in the year decreased brown for distillery export the primarily discuss we American in in business were but Distilling inventories business. Brandon pro industry, distilling closure, to XX% to ago from As are factoring sales the whiskey increased sales Solutions results goods our whiskey in combination outlining X period. results many basis, segment by we performance the prior and prior a Solutions corrects our our minutes our and market excess line quarter, a will me few weeks for Ingredient expectations. let taking Atchison facing are forma the detail, category. Consolidated strengthen capacity. in the when preliminary greater spend Like decreased the weak in challenges consolidated results headwinds due our our actions with as and below regards provided On XX%, third the of to we the in quarterly goods brown

on As been at our year, actively plan by we our increasing of has the the to start shared with you distillate exposure to strategic aged call sales our fourth our new reduce part business. quarter of

XX% the aged efforts XXXX, aged consolidated in of profit quarter, than for are half than gross market our down working be less third to accounted Although originally anticipated. pace at QX we a from of the weakening faster appears nearly whiskey as our in

spot larger having industry-wide sales, quicker-than-expected our volumes. on but impact consumption only and barrel whiskey whiskey whiskey on elevated distillate not a aged are Softening new also our inventories and

XXXX. will sales more more through moved even who and purchase sales customers the retail are goods are saw our impacted growth lower likely and the challenging clear, still lower believe and profitability brown spot on craft difficulties be to their underlying in remain contractual reduced by leading meeting more having smaller third We the to higher distilling a we As sales. at and on ongoing wholesale but slower dynamic prices and demand, customers obligations some quarter, level. To slowed, to were and growing, inventories destocking is whiskey. This we put visibility and in category retail sales is our whiskey likely sales that in American be environment our slower to our pressure contract pronounced

having results. deterioration by faster-than-expected impact on our this financial the disappointed are We is

Although we the the dynamics has of not American category and whiskey years, are over successfully for industry waiting idle to sitting improve. imbalance navigated temporary periods supply-demand the

highlight Let actions stabilize proactive business. goods brown X me to our

First, commitment remain American our begin me of and whiskey leading a let supplier by to our reaffirming craft customers. multinational to

at whiskey distillate American to is in and unmatched of our and in part the industry, with inventories builds our Our evident expanding unique aged our category, believe partnership ability remain [ still new brands. several high-quality an the important provide whiskey batch we ] with high-profile scale

in to whiskey and category whiskey lower production demand. with align Second, aging XXXX we our better reducing put-aways are

While distillery were be volumes, the optimizing the it a margin production low term. in of impact our headwind will mitigate we cost near to structures likely

we focusing distillate the we on believe the this put we by right profits as term. lastly, market-based expand whiskey increasing it Distilling efforts continue the strong the aged Solutions footing substantially, our volume our sales our international goods Asia, to the our particularly Europe leverage enhancing and on is our exposure spot environment at share further am States. Fourth, and reduce our in Third, to longer will actions multiyear solid category's into pricing. I current markets, outside and segment potential new strategy to down are United growth to American that by is over of contracts. brown We optimize confident

expect in headwind I that brands, changes report goods However, spirits track. towards distilling am happy to the company XXXX it branded remains becoming respect contract even our the in category, we to our progress of an to given premier pace on be a results. With the bigger brown

to lift plus [ We profile. price ] with portfolio continue margin our align preferences consumer better it structurally and to expanding focus on premium our tier

year plus up our half to period, launch Premium full to for year. plus prior slowed of solid the the as sales, quarter our up of now third sales Branded premium sales Penelope year-to-date, XXXX. continue cycled post which markets of to the premium X% growth plus key many our last XX% accounts rest plus year approximately growth. segment fact, in from in were we in the down compared for In brands Spirits XX% our premium the Though is

distributor at to headwind expect the look the inventory I a further term. level As near ahead, tightening be I in

plus revised premium continue and on hand unit portfolio, brands traction shift me with our That leading including days inventory cost year Penelope, to the I Brandon tightening. it plus our adds let to quarterly balance remain guidance. While of to to our to further that, our expect a customers. With over cases review gain to results sheet, aside, stable, premium higher-priced hand distributors' our Brandon? full for for

Brandon Gall

Thanks, David.

sales to period the quarter the XX% consolidated year $XXX.X prior decreased from For of third XXXX, million.

the periods, by XX%, ] segments. sales reflecting both sales X consolidated Excluding the in impact in distillery [ decreased lower for all operating Atchison

Within the by XX%. Distilling Solutions segment, reported sales declined

Grounded distillery the Excluding ] distillate sales. sales the sales of Atchison to quarter declined impact both by compared prior declined as XX% due to [ year by periods, XX%. the segment lower handy in aged

XX%. sales warehouse-related increased Our by

primarily brands. declined Spirits by lower mid was value X%, consistent to optimization our increased decreased we double-digits, by Branded with sales planned Our certain pricing our segment of mid as year-to-date value portfolio Sales and and due lower-margin sales by value driven on mid trends. the decline and largely volumes collectively brands. for tiered This

tier the American this plus by well. sales price continue brands whiskey and to our increased premium categories tequila perform as Our in X% within

by the protein plus driven XX%, lower third decreased year. Ingredient by markets specialty in quarter as during starch by specialty dollar. sales. volumes as launch commodity declined U.S. Specialty were negatively sales well of stronger impacted primarily and protein sales the we the Penelope sales growth key brand decelerated Solutions the from premium second as of last quarter cycled Our large of the initial

domestic expect customers We to sales. to in specialty quarter protein offset onboard to lower export fourth sales the we return new growth as

dietary food specialty sales, Our categories. the across Fibersym under which starch to large fibers from brand, provide benefit the tailwinds several consumer-driven long-term FDA-approved continue

by of gross sales. consolidated decreased million, XX% quarter $XX.X XX.X% profit to Third representing

Solutions from improved Excluding third Ingredient $X.X consolidated basis in delivered segment of in margin Solutions the period impact XX XX Distilling the segment. Distilling than of we to by and declined million, points. gross as the by gross increased both XX distillery a higher Atchison second million prior margin Branded quarter declined year percentage margin gross $XX.X quarter our and Spirits margins Ingredient and points approximately gross respectively. consecutive profit XX% Solutions gross percentage points periods, Solutions

to third Atchison sales, the primarily due points, Distilling declined to points gross Excluding due brown seek specialty We behind Solutions by behind categories. the percentage to to a XX tequila premium for expenses margin modestly ongoing quarter the million, portfolio. ] segment Branded lower and American our [ while $X.X tier increased and distillery as of brands periods, Ingredient for to commercialize plus whiskey investment $X.X goods higher-margin starch Solutions and related the sales percentage in remain represented by costs both of to million price gross share A&P greater premium the our committed totaled Spirits reflecting lower XX% X impact [indiscernible]. Advertising quarter we the protein investing promotion declined faster-growing, margin of sales. plus incremental capture waste and

for to to to more adjusted operating lower profits share to per decreased share while earnings period, Adjusted quarter than lower ago costs. Net increased year the offset share in million decreased X% million. per income Third while quarter share to period to $XX.X the net million, basic per X% $XX.X third share X% $XX.X increased million. common prior income income XX% decreased period. as share gross while adjusted earnings $X.XX Basic from operating increased the XX% in per $X.XX to $XX compared per $X.XX SG&A $XX.X $X.XX decreased EBITDA per income year adjusted prior the million, to year from

up to inventory million in our away. managing in [ operations lower flow. receivable there continue period, and accounts year cash generation flow tough focus as was quarter a proud the for to from I'm $XX.X Cash ] the from on cash working we including our $XX.X Moving barrel year-to-date prior million put capital, of period.

debt Our of and of million and cash third quarter. with million sheet at end totaling the position well capitalized $XX.X balance $XXX we healthy, the remains a remain

stable million and overall as of $XX the expected of carryover online XXXX costs largely related to of on is reduce some line now Our year-to-date. to We additional of to the with is to net XXXX. plant, million approximately by such quarter. Capital into remained quarter end costs an expected mini now is come up quarter during year and $XX.X now ratio first million carry and of our is $XX.X mitigate the debt and example likely XXXX of were work projects expect at starch the X.Xx which at fuel expenditures needs. The leverage waste the CapEx wheat approximately to treatment better end disposal full

be on year-to-date, below well We CapEx year during our levels, XXXX QX to we'll the $XX.X XXXX call. Net $XX.X levels. was to ago whiskey earnings and million below million expect put-away share and continue more quarter

repurchased we During $X.X November share repurchase year-to-date approximately quarter, a which with bringing authorized million And the first stockholders. of a quarterly an amount stock, success $XX $XXX on our the of $X.XX quarter, November the repurchase company during of dividend Board the Board of also continues share Board share to approved Directors share, million as of approximately program. is million. The third of as to stockholders to record dividends the XXth to XXth. view way per the The important payable common

the year. the full outlook to for Turning

be preliminary million, to the We our million year-end, the quarter to range, XXXX approximately adjusted range includes with tax million of share with at outstanding rate earnings approximately $XXX in reiterating year range full sales basic updated The weighted effective are average guidance shares Adjusted to XX%. to updated ago. the X the $XXX $X.XX an of in million in full XX.X results year $XXX weeks provided along EBITDA basic $X.XX guidance expected third per of $XXX million.

and pressure fourth to profit we ] As the than continue supply-demand anticipated. goods [ spot whiskey we sales category contracted to lead previously under dynamics as quarter, sales our will expect remain lower to look and unfavorable brown to

tightening to inventory While for branded distributors pressure expected to at our is portfolio premium fourth spirits shipments retail quarter. continue our trends plus the improve, in further

specialty as segment continue to the We protein in positive to win to expect return new the Ingredient we quarter business. Solutions sales fourth growth

additional some with will provide results, XXXX color. like to I'd we fourth guidance quarter While provide our

inventories category production dynamics, reducing we constrain in our softer continue align new better to for David American to given and At the and growth the mentioned, are whiskey demand time, demand As goods XXXX. same barrel our brown aged increasingly elevated current significantly distillate. whiskey with

Solutions to distillate impact decline expected our segment new and optimizing nearly cost of Distilling production, mitigate in nearly Solutions in are structure decline lower to lower and the a Distilling a aged sales XX% drive XX% are we segment profits gross sales in XXXX. While

in stabilize the other expect profitable On Solutions return Ingredient growth to we segment hand, XXXX. our to and

line top growth segment Additionally, we margin Branded to back and over expect David expansion turn concluding now, to remarks. Spirits XXXX. And me for our let deliver in things

David Bratcher

Brandon. Thanks,

reset the brown goods discussed importantly, pleased not stabilize business, market earlier business. XXXX proactive While reflects goods our our I to am brown conditions I this more current outlook and with actions for our

are which I our contract We engaging mitigate customer list, further believe sales, rightsize and our reducing terms our aged and exposure risk business. in to contract actively distilling our tightening and spot will

] [ closure. unexpected Our that impacted Ingredient Solutions next be distillery growth Though to well to independently have to segment thrive Atchison the complexities this segment expect return year. positioned we continues transition performance, recent to post from positive

come. I ready to team. for our joins to growth key first challenging enthusiastic but brands thanking of on organization. That to have sales, progress Branded our The primary our branded will that MGP Spirits which by are ahead, call. I only positioning path. premium and attractive Kathleen premier becomes also to a through Most also environment. like Kate add in our Luxco growth mark our talent Finally, growth to Counsel to XXXX plus becoming business about I'd concludes remarks. Operator, not our years engine. to Molamphy portion puts in welcome like biggest I year MGP us spirits focus towards strong General their importantly, question-and-answer runway us to most work firmly team us continue the deliver company. segment this prepared the and our could anticipate by begin would continue the our the as am acquisition hard we close for

Operator

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

William Chappell

for I and that to -- majority the Branded questions Distilling aged? of more expectations then with to quarter, comes couple it actually from miss Or Ingredient the is guess year -- Just the kind there within next of with and it the this into Solutions to that of I were a in year. But miss quarter start visibility and into want was from this and fair on first, guidance? say for line year

Brandon Gall

in. driven. Yes. and miss year chime But, in yes, numbers, Bill, is Distilling brown I'll with start goods the can expectations Dave for the the reduction the then our and Solutions

However, repurpose for large got as Ingredients on this a was had to through expectations you quarter are under domestically. we, as export quarter. planned initial of from performance sales those And couple actually the pushed our know, we sales QX markets trying that fourth

we rebound ] our came in So for in expect QX to Ingredients under [ for but remarks. that QX,

other a isn't segment, more The recent to and bit now our down sales single-digits. in brands down outlook QX to in change, that be distributor a QX the the this for segment Branded resulted the necessarily which in this high for in tightening, now it's change, be of a QX change, taken with little Spirits has seeing numbers is our we're

David Bratcher

] The talked, going to stilling of is we [ roughly business as Yes, on Bill, of lot that up Brandon we lot -- I business contractor I within what is as in I transformation right we disappointing in and would I And in add a think quickly brands of plan I on. reflect wrap line the very you're is what that of a where that think today, to we brown need business. spot here, our Ingredients is, noise this it. There's that thought. goods on script. alluded part have

hand we're an a is as even for sheet, the us, our wholesaler balance people looking physical balance at their continue because everybody, they we them not this, sitting days continue mentioned, at are destocking sheet. like portfolio, we the have Now though there at hear which of inventory is we about as to at Brandon our value why setting on premiumize forcing look just to for same, cases just which to

a in So we alcohol, any point American think But faster in anticipated. we normal did but a beverage it's takeaway than monitor some At than the planned script, that this. deteriorated -- here closely. it always we expected. said is cycle I still we whiskey happen this at category what quicker we category within little the We've

William Chappell

the mean, in in I American or slowdown or now I for XX, look what takeaway whiskey months. it. visibility, And hear data XX as a then we at think Nielsen I of terms often DISCUS, most consumer is, have you, we've in up, following just almost Got seen question consumption government

I the so it, surprise guess just now. And that realizing factor is you're seeing it

-- you any mean, understand it age newer I you -- year? so, cut confidence year do why I and for kind putting not us contracts? things any especially back, not And if especially mean confidence, that goes have us do visibility, why just of X? only have that of new And back to making for what next make where how the aged or gives -- to are you're visibility why just kind next help distillate

David Bratcher

question. great a it's Bill,

If contract script, did not with about have had forward we we much. distillate they few I craft the with. multinationals, moving some a regional mention new you so we've But smaller contractual think obligations. customers the issues type mean business, as in the are our

we therefore, stable know have business. do that, that's visibility So and

time. But back That's and them that for you on and distillate aged it going business our growth, a at seeing I where into I to has we're to forward and in It's now. stalled we're just still can. And you whiskey all our looking view, new American and moment. definitely very, everybody force look whiskey, at buying it is it when think do everything It's buying inventory a spot it. little you has people this, people of why right. buying the see left industry what and It's back to remain softening and -- as out, see but the is is start the been across think branded softened. category, holding some and they this putting bullish go American very very, point, great, my great do

as Now, question. it's into not. a to The great the we -- quick question, 'XX second part of go is, we're your answer

heard X in how in should costs future the we just generate point be we outlined stabilizing cash. related to actions my spent level years a you what think and is We've inventory always the the our are to looking sales. aged last But taken always business, for our put-away year sales I are If the there. that aged and We nice do we've for we next -- how brands. at by run, building looking going we do at cut

One we of put-away put-away the sales biggest this taken in cash outlays inventory. That on is basically that future X XXXX. have inventory in for weâ€™ve for to

William Chappell

Got one last it. just And one. then

see to there, nobody And are want even down As just you for. your I'm pressure aged and you're contracts XX%, so with that? is the I out clarify, that you're I looking to get buy going question pricing to address because going majority it is, you're massive give 'XX, distillery to of the sounds concessions just Can needs other to of, existing have profit like when it much to and what saying new. supply maybe is making

Brandon Gall

start. I'll that's -- And Bill, Yes. exactly right.

something Next year we you'd same driven year imagine. story was of as as And actually goes, year this is pay of -- lot which to, pricing age, next the as the reduction well. attention as a -- far really majority we're is this the that as by

in are a side, place time. new contract put agreements of of lot those On the ahead distillate

the the the have levels age pricing our the obviously, front, ages seeing at year, age for we sales in are we some into are as more that for have good making any we But It's on do at decreases. And point. sales into next volume age pretty the this that outlook. we clearing factored we're price-wise. on existing we do So price look are still contracts, not --

David Bratcher

Yes.

to me let Bill, a think, that little I bit. add

demand. today. time, pricing look capacity excess compression So have we not at as today, expect seeing and we excess though, inventories pressure. We a over we're do do, it's that and of you price supply law When

for color and the commentary profitability we compression. we goods, within brown So in price gave factor on you that did revenue

Operator

The TD with Cowen. Robert next question comes from Moskow

Robert Moskow

pull curious your customers of have kind distillate these to to on I know of aid percent of conversations I had am appreciate effort what XXXX. band the You them. you have the with? But hundreds

today. set? in you your like as that So giving then their I second -- full in from is, possibly are going another question. And not encompassed the outlook they're the have customers the around? Is hit tail stands Like expect you do you've it stay business? you And first of do the small the you feel ones long XXXX be that to may imagine

David Bratcher

question. Great

So I we're commentary. good, you fully calling confidently all to really us them, our customers, been or to our calling has can Either they're color team engaged. because of able wanted give solid be we commercial say

yet, engaged While was we commentary. that And making guidance didn't solid there. we sure of good, customer 'XX you for fiscal with you that give we every gave part out color actively

at markets Rob. far hold of -- the and is speculating That's know retail of this the a time, that, over distilling consistent we segment. crafts on multiyear, feeding company. it an of And reason and would business to most makes business -- in our that It I'm remind as grow look some for brands. going a But future they us that up happens, in also we've to you and saying I business. The I've what new is profitable we this As contract now, we cash if if annuity I Brandon quarters the the it is, said company like couple can the of they that is what this know, disappear. contract provides why our ingredient felt sense don't can't is to been also -- logical distillate in future that the

that have customers. multinational on what intent those contract I the and spot that we customers, to we put those do. the but speculate ones our customers happens XXXX bigger with, basis, into So even that fill all conversation yes, can't out reached to we've to of a that on had we've are the

Robert Moskow

the to maybe branded side. And I'll Okay. pivot

third side the the things but forecasting in on said XXXX. growth slowed quarter, in branded You that yourself you're

carrying and XXXX like the are of growth on back the facing what's further there? tactics for cutting inventory, launch are What lapped you've cost this branded that and higher the in that to Penelope, that get Given also major are to business? distributors path

David Bratcher

moving where It's customers are. to the

We rarely, why is That's look portfolio, I Most dealing tequilas. many, is you're the back across with, many of we I a it, ] good industry during it's has it the to every think tiers. company items to higher-end do. COVID. to can of time and happen today, stops seeing to and knows to pre-COVID the now to But to levels. its item. premium this the said next is the been We're are. Yes, at what the on do to times, goes one has you They're to over you're corrects also [ they whiskey-driven about And other portfolio moving think is. whiskey but to everybody major category our who not big many great focus enjoyed plus products. mean consumer They're what But reason correcting the quality, across whiskey only -- multinationals will what branded going demand. away rest that And customer If business to what going where [ Brandon don't we've It's or react the products move I've have over. It's the softened. away, but of price it industry is we tequila It's only primarily actively themselves. is there. business. Very have research continue players itself, said and diversification. going the and one diversification. What's goes about doesn't correct it overall, happens sales tend customers and adding ]. market to What

customers to whatever that on the I figure We're need calls, focus. lot nimble, researching previous can to I've a up spend portfolio tequilas, think going. where what our what on shore this, they said I question just a do where by [ have, can bureaucratic to a done we quickly We're there's ] lot we and people that's have customer in brand -- time are to especially move of once respond right? system. we advantage is. And and not And we're faster. that we trying not But we think those this have, adding it's of the premium is, in pulled to the do gins, We there We are. plus, get so that's the all whiskey out

Robert Moskow

among I major Okay. for your back, an share? you terms bigger appetite there's they're right? the Because making And -- in [indiscernible] to distributors you market -- cutting a commitment know to for of

David Bratcher

them to rumors say Or cutting you back, their cutting you say referring inventory are when the When or back? heads? about cutting [ you ]

Robert Moskow

The cutting heads. to rumors

David Bratcher

Yes.

you in focus that what primarily laggard on hear wine So been a has a wine the quite business. is because

most hear So of we in what on that is their wine portfolio.

wine optimizing a their in sales, there. You got the firewall had they've bigger okay? They're to there. Once again, sales from they're major structure So to tend spirit companies. wholesalers the two remember, U.S. private impact

can what reported. go only by you hear gets You or

we money into same the big business public take the and to companies, leveraged the not a overall drives but what their All consumption they I it into that's of generate companies. want okay, that both there, going to are sign. Actually, They're read that's them they they're if and ones sector. they're put and energies they're it. don't to And spirit need still what as I the positive in for put going way. -- -- more what profit. energy think a it's hear So that is or They're spirits, true, thing private because in saying

Operator

Our with comes Torrente Marc next Wells question from Fargo.

Marc Torrente

You are into your typical contracting season now.

made visibility into comments the I next initial in the is on you think have year. this past when

at security the called committed the you visibility out So have, new You is I you do guess, through renewals? in are multiyear either your contract this those contracts of 'XX, how some or commitments? plan nonperformance think how on just with much And of you point this confident for contract existing quarter.

color So any just there would helpful. be

David Bratcher

Yes.

there, As impact analyzing sales customers through out it earlier, who are, have those of over business confidence on at customers, somebody we revenue did we -- color sales, strong profitability. look as we our gave -- that's and you some what commentary The us all 'XX, when we've asked goes That's the their contract to ones it. contact we weeded I XXXX. in which of history. the

of, let's you we is I say, part that the I deliver. if there give times because think we business not want results have can size the we're we've Brandon visibility a through dropping shrank to and discussed is, good it to is weeded get to down strong core okay? So have is that now, of revenue, of what the we situation lot many we business, there the but

revenue So it's our not we've you that And goods. We're our obligation proud what it, number comes confidence brown in have our XXXX back have analysts, and work. come brown in profit but the confidence based we of to it our good today, our when to in own number go, our for we and investors, only for for on for know we done goods, employees. the our for and not 'XX Board, to confidence

Marc Torrente

can this to to be specifics from, out like do address? Is recently you of much there? brought Are on out are selling more who guess, managing on suppliers actions going hearing in pullbacks? more other Okay. temporary the you sort production comfortable Previously, capacity? I generally you're guess, standpoint. that fixed also with there Any there costs versus have channel then was from And sounded supply? I you what think how be through worked inventory of needs the And it what

David Bratcher

got brokers inventories of of is are good as much out remember, because who they spend who the do time out inventory who's what, inventory are there they have, We a trying question. how question out The holding well. to substantial figure a multinationals, lot there, the Yes.

So Do That's No. have No. sold and that to reports? trying we hear TTB some visibility know we honest. we perfect are looking and we in of it? and into analyze constantly the Yes. see at it. what the we Do what what we've

be it's saying buying reason how I spot -- I So is tremendous if the things waiting. my everybody is offerings. I to think I companies, a going said I'm this Everybody right spot, the a okay? how And you're they'll past, in because want see seeing held. But the of out industry, and why sitting see yet supplier there our brands up see we their seen I but one own sitting degree, plays already not they're now, I'm is it plays in one there, want buying start out. I pricing certain age it of out. now things but will inventory is is if and think may -- inventory pressure that I we not -- -- like, that this may is also here major the people I've have and shelves, to you now, to haven't you and on the

on calls, I longest had this didn't keep the couldn't people the than sell up for with we've we because X-year-old and ] it. For time prior [ know years, anything older

Now they got inventory.

the on barrels? So dump What to XX-year-old the it's you're market see no. Yes the brand XX-year-old, it. invested invested Once I and Those -- a some brand's back Brandon companies said just ] that I've hit see dump it, to X-year-old, they're the the then don't that's that PE-backed to But and in that, one-off. going brokers have many, start you on they many that to the offer that [ catch one-offs. they directly going Theyâ€™re products. speculating will players market. Could I'm speculate, side or sell to as growth. in times, are is

people let's to So we're that? all the look, well, add analyze that back and the and inventory doing on was whiskey. minute, where jobs enough the built are across that breath, going, you And want supply take to anything -- around huge American let's a a at. Brandon, excess industry sitting optimism softened wait their

Brandon Gall

Yes.

exactly as you're the Markus, right. far cost, As

have in net on XX%. we a XXXX, of firstly, north basis, put-away our reduced So

already has work and And there now as on begun that a this that number that of working going So David is to as be team already yes, addressing -- year. And will for mitigate need as to continue fixed absorbed, there's to possible. costs been well. some time the those has much as next year it's said,

Operator

Lake Street. Klieve The from Ben question next comes with

Benjamin Klieve

got business. Ingredient one I've the on

that you and an domestic parts here two I'm of new if to can brought out going that, parse quarter wondering of customers. you those You of the in noted kind as the expectation exports was you some business? headwind about fourth business year-to-date of business kind some improve export help gives sense how in a the been, optimism quarter, talk kind fourth material in not the the really, then has domestic of Can third of you that of that quarter? the success And the in only year-to-date? dissipated but

Brandon Gall

I'll Yes. start. Yes. Ben,

to that's sales high-margin a to exports success tremendous been were specialty And dollar QX to that's a are sale. ] us product while QX a two the some made due time. to it's the were of the the lot gotten to new of business, in anticipating, two for into we still there And purchase, QX, our have as of [ while to a those yen, and we ground business had to for lot something it strength sale it mind for a new with did And line for make pushed that year-to-date. And they're So we've is takes X get X been specifically for in of to great we from a that can headwind product Ingredients And X spec-ed Japan into that cycle quarters year-to-date. those U.S. and take QX. life customers, anywhere planning very relates us, actually now customers protein we historically. the which in

and of well. that, progress news expect is as on we in then lot next a making it good continue into to are year the QX we So and

Benjamin Klieve

question Okay. clarifying or or And domestic those there. one two elsewhere? in Were based customers Japan

Brandon Gall

they right. me them. are let -- That's for Yes, Thanks domestic. Yes. clarify

Operator

question Capital with comes from Sean ROTH McGowan Markets. The next

Sean McGowan

a -- you Would expect First, quick one. me? can hear you

David Bratcher

Yes. Yes, sir.

Sean McGowan

the given a you level of Do 'XX higher you've that be that in described, advertising so a Yes. 'XX revenue far? at we've expect, would as headwinds in percentage Okay. than seen what

Brandon Gall

give to for sales net in XX% our right Sean, advertising I Spirits But a of still half in spend said towards now, of is about detailed plus of feel a can as sales. good between the Spirits and Branded which expectation premium lot QX. portfolio, tell XX% is plan guidance, continue that investing Yes. Branded you still our more level David about and that's We'll and remarks, prepared going promotion. on that, is -- that knowing our We

That is the still this plan there's now, right of we we company where view future So to it, and change no as grow thinking in there. in the future.

Sean McGowan

more And kind question. then Okay. a general of

the landscape plans commentary a the in do your regarding your also only general capital not there change or Has Just see acquisitions? the share but allocation shift? been repurchases change outlook, Given you stock price, there. change the in and in a

Brandon Gall

Yes.

looking us. question. our great this some -- high so for yes, strengthen of to always [ So M&A Branded -- talked We ] to that's to position priority remains do something within going We're Spirits. already, but theyâ€™re

on we're away. to really already for For that is This be we what going what own XXXX reduced will these we've down there. And big -- view next $XX know, being the capital put expenditures. said from we year. to more share as been We'll year, to you for call, our allocation said David year. Sean, be capital brands consistent CapEx, has that that's high but another going has as before, on XXXX outlook for -- driven million. we're now And calls our the need the We're this priority specifically watermark expecting it QX

cash all the the equal. put-away So things being of from from both it standpoint, those should and accretive, shifting is yes, the CapEx flow be free

plan we're still shareholders over repurchasing, million As way discussed, to Board first quarter. -- no the today as time. a and we've it is still date did it's relates paying approve for we There's manageable, then, we yes, the buyback a to And reward $XXX to end share the dividend, in good feel dividend that.

But the this of million shareholder some value, watch. ended. we're look going add to where when continue $XX priorities to we buybacks, of we worth like bought of the about open future something and our share it's at that's company We but other So date. of ahead shares to still to

Operator

The next Pinheiro question with comes Sturdivant. from Mitch

Mitchell Pinheiro

to that roughly own inflation numbers. like year-over-year, and So to But distillate the know I related Spirit away, there's in you've all getting brands? those put some up your Branded that it's is barrel million $XX

Brandon Gall

Yes.

inventory. the worth year-to-date million Last put $XX of away approximately year, on full clarify, away north to Just we've million. year of $XX net XXXX, put basis, of for a Mitch, we

So good like our to on [ we position. [ more we to has $XX is in X sales up calls, which we as our bit XX% that to and from what put production amounts more spot to expect record forward, little to the previous on put-away And in are this away be really, but about million, coming we a $XX talked with we say, really feel our last, year-end million than down with in less put-away year. inventory market. And that do feel ] X move We ] yes, do the less years. age we've

less put-away some speculative is some barrel in own said, where the brand David spirits our in is, become to as has as away feel our been majority we and Solutions. for we we next of And That of Distilling time any our at in proportion year, be this position inventory Solutions do have. Historically, going Distilling of monetize XXXX. relationship a we XXXX, point the to pause has in brands put we for plan portfolio. for So for put-away like we're time, can put-away a unique our to hit plan

Mitchell Pinheiro

in that's the over disclose years. I I I Yes. never been would -- average a and your what's you whiskeys are away age know now, but generally valuable before more I had you're but -- good growing still lot premium -- the age mean in that's your this, accelerated has the and all mean, to increasing more speaking, barrel a gets the color. premium have guess, higher of But I you plus. your imagine, only that's products, putting all amount would fair the put-away. age distillate

now? distillate age, higher [ fair barrel it that inventory your is assume to is your ] in age So

Brandon Gall

little barrels and age a more years X or be we bottle because tricky X, It's sell the Yes. to old. tend

meanwhile, example, we is put-away -- off for X this years at So anything starting year old.

in years. But the age, average now said, David that right, to terms X, as the that keep is and market to disclose I going age you're right less we competitive really tendency up. in it's low pretty So way is than X which for your not Mitch, purposes, value think, good to way yes, the yourself. grow don't resonate consumers differentiate this in these your to point, and barrels brand and tend in industry. other to age distinct around, That's to market a our to with And with of

But now a before. was been pretty where we've the change with beauty here all is can slowed was There are and as our we And for change, ago put-away. we'll recall, can that's we things plan this them. be then That number as fluid. you XXXX. we market of because dynamic So years if short-lived,

David Bratcher

add I'd piece that. Mitch, Yes. just of one

to we at we've look business said age I aged, what earlier, the we because of grown that have, it of be our brand want If okay, you able side [ up. intentionally the ] to

able future So as And can fortunate what sell the Brandon we can. is so were sales. off, we as we've yes, for referring put-away to to that I fast mean, those we been refill MG is them

point, that, there. in I to the is say better So future. consolidate only you've this business. to do were got cash-generating It's a little, It's remain of our a of not business. X able going with going It's ago, to But X market we push year engine why away. good we ago but time. Again, gets piece years section down. It's this just our to our your committed going think, this that is to be of it's going not there. And to growth

Brandon Gall

are and ourselves And can we and offer ourselves we be that ] contract thing [ can. David we to this, on that, other one and the only believe distillate said one of age view but the as just new suppliers -- of scale do we

also our come in one for have is and that of can what they're that shared more want a lot internationally. they of the barrels they looking age And David aged, selling that so to assurance is And strategies future.

sell future, differentiates really feel we our So in also again sell, have future both today them to to we the in as to the forward. ability us age go distill but

Mitchell Pinheiro

Luxco expanded that going bit XXXX? year. slowdown, negative leverage little is you Is have of cost some a the to with then And fixed this that in --

Brandon Gall

point on be QX Yes, anything reserve going to -- at little of now not Right in right we question. material. that more time, a bit headwind maybe call, the we the good type is to is share anticipate that this but

Mitchell Pinheiro

consumers I on their own with see some their which shelves through do back buying bottle to the a your bottles brands X missed, is, you of favorite the to COVID because were And you that I've it to getting of may and to any off-premise or it, the cabinet going -- favorite -- any everybody the you're to -- weren't starting to trends more And just ever X felt guess then been comfortable see at Then they going that comments decided as does the what or the instead again. And missed that Okay. on-premise, liquor of found their starting them point, the sure and as the you for X, I'm you bought consumer slowdown. may during missed? with industry-wide guess been no is, -- off-premise consumption on versus has whether while once missing done sort have have equation question me here? And the surprise research on-premise concerned? inventory, just any Have of been get second -- own way to is also on you or reducing able find if brand seeing it part -- back Once in I cabinet that destocking. the a can was it. far error, premise versus also slowdown hard slowdown there's you X curious

David Bratcher

And one. take I'll Okay. that

the same, in problem So on-premises the there's as as but many on-premise roughly was. versus is if the not post-COVID, general, about mix there off-premise, you think

environment. you're an that happened. not of view why going that spending the in over time. I'm this. bit view interesting all on election. to is this. kinds going Consumer I think to being relaunched the So industry's a we're little attribute it of tend on take slower to the middle than We've a on more I things had in of seeing mix still to macro that tend

more what different and bring don't for we here And in make making is it I piece. reflect that more it industry. be of period pantry. to these pressures I lot is a to to a they're what is there. consumer think this in inventory look a is back back external it in I'm there time. And few selling the it great destocking that wholesaler, Having was I going so on the there's back destocking we're COVID at that this want and selling of years for speculate the to selling not of last inventory XX industry at brands, COVID choices, attributing should right? on also years or consumer. our when we about all for all now correction, we done

variables coming shall Those a You've got multitudes head. pass. X of to

telling we pass. all when you at else going doing, and the that's are terrible Now everybody to what exactly is myself industry in

know can't doing the we what and read watch to react can consumers' You why? their they're minds. Because We only needs.

Operator

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

David Bratcher

you much, All right. listening. Thank for very everybody,

Transformation We've we what MGP intend our moment remind All the said, we for with in to everybody, company. nothing to pleased spirits we're to the take right? clearly what become not results, MGP like to intend a be is said As We future. new. premier is transformation story. a branded but I'd a

was The skinny. perfect. timing They it were very up. wave white brown If contract the ago, transformed They a into you distilling. XX a margins Their go producer. back years MGP good goods thin, was roll

company. we first for we it the anticipated. is day plan with the we business of earnings And on started they will acquisition were of very with deteriorated January call, have a X, and become. since consistently the brown said I our That the starting than into goods Now, what release everything every branded faster we Luxco, future. Yes, believe, the the seat transforming took spirits

a across accomplish That's of goodness, a the mission. I what industry I to and that faster is vision to anybody that company. questions deteriorated we want But investors, transformation know our become. to we're what of our going And the think our premier thank analysts, everyone anticipated. to Board, spirits story, we employees, want it a our than it's some have branded

third that, for us for and look our your today you forward company quarter. talking fourth to for call, interest to So quarter joining we in our thank with in definitely you the and

Operator

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

may now disconnect. You

MGP Ingredients (MGPI) 31 Oct 242024 Q3 Earnings call transcript