Financial results and full-year guidance in line with recently announced preliminary update

MGP Ingredients, Inc. (Nasdaq: MGPI), a leading provider of branded and distilled spirits and food ingredient solutions, today reported results for the third quarter ended September 30, 2024.

“Our third quarter performance was in line with the preliminary results we provided on October 17. In response to the softening American whiskey category trends and elevated industry-wide barrel inventories, in 2025 we plan to further lower our net aging whiskey put away, scale down our whiskey production, and optimize our cost structure to mitigate lower production volumes. While current market dynamics will likely have an even greater impact on our Distilling Solutions segment sales and profitability in 2025, we believe that these actions will strengthen the long-term competitive positioning of our brown goods business. Over the longer term, we remain confident in our Distilling Solutions business as our whiskey inventories remain an important part of the still expanding American whiskey category,” said David Bratcher, CEO and president of MGP Ingredients.

He added, “We are pleased with our progress towards becoming a premier branded spirits company. Though further inventory tightening is a headwind in the near term, we expect our continued investments behind our brands portfolio to deliver attractive organic growth. In addition, we expect our Ingredient Solutions segment to have a stronger 2025 despite current transitory headwinds.”

2024 third quarter financial highlights compared to 2023 third quarter:

• Consolidated sales decreased 24% to $161.5 million. Excluding the impact of the Atchison distillery, consolidated sales decreased by 14%.
• Net income increased 82% to $23.9 million. Adjusted net income decreased 5% to $28.8 million. Net income margin increased 860 basis points to 14.8%. Adjusted net income margin increased by 350 basis points to 17.8%.
• Basic earnings per common share (“EPS”) increased to $1.07 per share from $0.59 per share. Adjusted basic EPS decreased 5% to $1.29 per share from $1.36 per share.
• Consolidated gross profit decreased 10% to $65.8 million. Gross margin increased by 610 basis points to 40.8%. Excluding the impact of the Atchison distillery, adjusted gross margin increased 30 basis points to 40.8% largely due to higher Branded Spirits margins.
• Adjusted EBITDA decreased 9% to $45.7 million. Adjusted EBITDA margin increased by 460 basis points to 28.3%.
• Capital expenditures were $44 million year-to-date.
• Net debt leverage ratio stands at approximately 1.3x as of September 30, 2024.

Consolidated Results

In the third quarter 2024, excluding the impact of the Atchison distillery, consolidated sales decreased by 14% year over year, reflecting lower sales in all three operating segments. Consolidated gross profit decreased 10% to $65.8 million, representing 40.8% of sales. Excluding the impact of the Atchison distillery, third quarter 2024 consolidated gross margin improved approximately 30 basis points from the prior year period primarily reflecting strong margin expansion in the Branded Spirits segment. Third quarter 2024 operating income and diluted EPS increased 64% and $0.49 to $32.6 million and $1.07 per share, respectively. On an adjusted basis, operating income decreased 9% to $39.0 million and diluted EPS decreased by 4% to $1.29.

Distilling Solutions

For the third quarter 2024, Distilling Solutions segment sales decreased 36% to $71.9 million. Excluding the impact of the Atchison distillery, segment sales decreased 18% to $71.9 million mainly due to the 22% decline in brown goods sales, including lower aged and new distillate sales. Segment gross profit, as reported, decreased to $28.6 million, or 39.8% of sales, compared to $33.3 million, or 29.8% of segment sales, in the third quarter 2023.

Branded Spirits

Branded Spirits segment third quarter 2024 sales decreased 6% to $62.6 million, driven primarily by the decline in mid and value priced portfolio sales. Premium plus sales grew 1% as we continue to execute focused initiatives across the American whiskey and tequila categories. Branded Spirits gross profit increased by 12% to $32.4 million, or 51.8% of segment sales, compared to $29.0 million, or 43.5% of segment sales, in the prior year period.

Ingredient Solutions

Ingredient Solutions segment sales decreased 18% to $26.9 million primarily due to the stronger U.S. dollar's continued impact on our specialty protein sales as well as decreased sales volume of commodity wheat starches due to increased domestic competition. Gross profit decreased to $4.7 million, or 17.6% of segment sales, compared to $11.1 million, or 33.8% of segment sales, in the third quarter 2023. Excluding the impact of the Atchison distillery and the associated intercompany credit for the waste starch slurry by-product, gross profit decreased to $4.7 million compared to $9.4 million in the third quarter 2023.

Additional Highlights

Advertising and promotion expenses increased 1% to $9.6 million as compared to the third quarter 2023.

Corporate selling, general, and administrative (“SG&A”) expenses for the third quarter 2024 decreased $4.4 million, or 20%, to $17.2 million as compared to the third quarter 2023.

During the third quarter 2024, the fair value of the contingent consideration liability related to the Penelope acquisition increased by $2.2 million compared to the third quarter of 2023.

The corporate effective tax rate for the third quarter 2024 was 24.0%, compared with 25.0% from the year ago period.

2024 Financial Outlook

MGP reaffirmed its recently revised consolidated guidance for fiscal 2024:

• Sales in the range of $695 million to $705 million, following the closure of the Atchison distillery in December 2023.
• Adjusted EBITDA in the range of $196 million to $200 million, inclusive of the add back of share-based compensation expense.
• Adjusted basic EPS in the $5.55 to $5.65 range, with approximately 22.1 million basic weighted average shares outstanding at the year end and effective tax rate of approximately 24%.
• Full year capital expenditures of $78 million.

As is customary, we will share our 2025 financial outlook with our fourth quarter 2024 earnings release; however, we will provide additional commentary on our 2025 outlook in our conference call discussing our third quarter results.

Conference Call and Webcast Information

MGP Ingredients will host a conference call today, October 31, 2024, at 10 a.m. ET to discuss these results and current business trends. Investors can dial 844-308-6398 or 412-717-9605 (international) to listen to the live call. A live webcast will be available at “News and Events” section of the company’s Investor Relations website at ir.mgpingredients.com/news-events. A replay of the conference call will be available on the company’s website.

About MGP Ingredients, Inc.

MGP Ingredients, Inc. (Nasdaq: MGPI) is a leading producer of premium branded and distilled spirits, as well as food ingredient solutions. Since 1941, we have combined our expertise and energy aimed at formulating excellence, bringing product ideas to life collaboratively with our customers.

As one of the largest distillers in the U.S., MGP’s offerings include bourbon and rye whiskeys, gins, and vodkas, which are created at the intersection of science and imagination, for customers of all sizes, from crafts to multinational brands. With distilleries in Kentucky and Indiana, and bottling operations in Missouri, Ohio, and Northern Ireland, MGP has the infrastructure and expertise to create on any scale.

MGP’s branded spirits portfolio covers a wide spectrum of brands in every segment, including iconic brands from Luxco, which was founded in 1958 by the Lux Family. Luxco is a leading producer, supplier, importer, and bottler of beverage alcohol products. Our branded spirits mission is to meet the needs and exceed the expectations of consumers, associates, and business partners. Luxco’s award-winning spirits portfolio includes well-known brands from four distilleries: Bardstown, Kentucky-based Lux Row Distillers, home of Ezra Brooks, Rebel, Blood Oath, David Nicholson, and Daviess County; Lebanon, Kentucky-based Limestone Branch Distillery, maker of Yellowstone Kentucky Straight Bourbon Whiskey, Minor Case Straight Rye Whiskey, and Bowling & Burch Gin; Jalisco, Mexico-based Destiladora González Lux, producer of 100% agave tequilas, El Mayor, Exotico, and Dos Primos; and the historic Ross & Squibb Distillery in Lawrenceburg, Indiana, where Penelope Bourbon, Remus Straight Bourbon Whiskey, and Rossville Union Straight Rye Whiskey are produced. The innovative and high-quality brand portfolio also includes Everclear Grain Alcohol, Pearl Vodka, Green Hat Gin, Saint Brendan’s Irish Cream, The Quiet Man Irish Whiskey, and other well-recognized brands.

In addition, our Ingredient Solutions segment offers specialty proteins and starches that help customers harness the power of plants and provide a host of functional, nutritional, and sensory benefits for a wide range of food products.

The transformation of American grain into something more is in the soul of our people, products, and history. We’re devoted to unlocking the creative potential of this extraordinary resource. For more information, visit mgpingredients.com.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation statements about the plans of MGP Ingredients, Inc. (the “Company” or “MGP”) to lower put away, scale down production, and optimize its cost structure; the Company’s sales, profitability, competitive positioning, and confidence in its business; whiskey category expansion; the Company’s ability to transition to becoming a branded spirits company, to grow, and to have a stronger 2025; and the Company’s 2024 outlook, including its expectations for sales, adjusted EBITDA, adjusted EPS, shares outstanding, tax rate, and capital expenditures. Forward looking statements are usually identified by or are associated with words such as “intend,” “plan,” “believe,” “estimate,” “expect,” “anticipate,” “project,” “forecast,” “hopeful,” “should,” “may,” “will,” “could,” “encouraged,” “opportunities,” “potential,” and similar terminology. These forward-looking statements reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, Company performance, Company financial results, and Company financial condition and are not guarantees of future performance.

All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. Factors that could cause actual results to differ materially from our expectations include without limitation any effects of changes in consumer preferences and purchases and our ability to anticipate or react to those changes; our ability to compete effectively; damage to our reputation or that of any of our key customers or their brands; failure to introduce successful new brands and products or have effective marketing or advertising; changes in public opinion about alcohol or our products; our reliance on our distributors to distribute our branded spirits; our reliance on fewer, more profitable customer relationships; interruptions in our operations or a catastrophic event at our facilities; decisions concerning the quantity of maturing stock of our aged distillate; warehouse expansion issues; our reliance on a limited number of suppliers; work disruptions or stoppages; climate change and measures to address climate change; our closure of our Atchison, Kansas distillery; regulation and taxation and compliance with existing or future laws and regulations; tariffs, trade relations, and trade policies; excise taxes, incentives and customs duties; our ability to protect our intellectual property rights and defend against alleged intellectual property rights infringement claims; failure to secure and maintain listings in control states; labeling or warning requirements or limitations on the availability of our products; product recalls or other product liability claims; anti-corruption laws, trade sanctions and restrictions; class action or other litigation; higher costs or the unavailability and cost of raw materials, product ingredients, energy resources, or labor; failure of our information technology systems, networks, processes, associated sites, or service providers; acquisitions and potential future acquisitions; interest rate increases; reliance on key personnel; commercial, political, and financial risks; covenants and other provisions in our credit arrangements; pandemics or other health crises; ability to pay any dividends; limited rights of common stockholders and anti-takeover provisions in our governing documents; the impact of issuing shares of our common stock; and the effectiveness or execution of our strategic plan. For further information on these risks and uncertainties and other factors that could affect the Company’s business, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and its Quarterly Reports on Form 10-Q for the quarter ended March 31, June 30, and September 30, 2024, as well as the Company’s other SEC filings. The Company undertakes no obligation to update any forward-looking statements or information in this press release, except as required by law.

Non-GAAP Financial Measures

In addition to reporting financial information in accordance with U.S. GAAP, the Company provides certain non-GAAP financial measures that are not in accordance with, or alternatives for, GAAP. In addition to the comparable GAAP measures, the Company has disclosed measures excluding the impact of the Atchison distillery, adjusted operating income, adjusted income before income taxes, adjusted net income, adjusted net income margin, adjusted MGP earnings, adjusted EBITDA, adjusted EBITDA margin, net debt, net debt leverage ratio, and adjusted basic and diluted EPS, as well as guidance for adjusted EBITDA and adjusted basic EPS. The presentation of these non-GAAP financial measures should be reviewed in conjunction with operating income, income before income taxes, net income, net income used in earnings per common share calculation, debt, and basic and diluted EPS computed in accordance with U.S. GAAP and should not be considered a substitute for the GAAP measure. We believe that the non-GAAP measures provide useful information to investors regarding the Company's performance and overall results of operations. In addition, management uses these non-GAAP measures in conjunction with GAAP measures when evaluating the Company’s operating results compared to prior periods on a consistent basis, assessing financial trends, and for forecasting purposes. Non-GAAP financial measures may not provide information that is directly comparable to other companies, even if similar terms are used to identify such measures. The attached schedules provide a full reconciliation of historical non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure. Full year 2024 guidance measures of adjusted EBITDA and adjusted basic EPS are provided on a non-GAAP basis without a reconciliation to the most directly comparable GAAP measures because the Company is unable to predict with a reasonable degree of certainty certain items contained in the GAAP measures without unreasonable efforts. Such items include without limitation, acquisition related expenses, restructuring and related expenses, and other items not reflective of the Company's ongoing operations.

MGP INGREDIENTS, INC.

Description of Non-GAAP items

The non-GAAP adjusted EBITDA measure is defined as earnings before interest expense, income tax expense, depreciation and amortization, share based compensation, equity method investment loss (gain), impairment of long-lived assets and other, fair value of contingent consideration, business acquisition costs, executive transition costs, and unusual items costs.

See "Reconciliation of selected GAAP measure to adjusted non-GAAP measures" and "Description of Non-GAAP items" for further details.