MGP Ingredients Reports Fourth Quarter and Full Year 2024 Results

Business Wire 26-Feb-2025 7:30 AM

Fourth quarter results in line with expectations; Provides 2025 financial guidance

MGP Ingredients, Inc. (NASDAQ:MGPI), a leading provider of branded and distilled spirits and food ingredient solutions, today reported results for the fourth quarter and full year ended December 31, 2024.

"Despite ongoing industry-wide challenges, our fourth quarter results were in line with our expectations. Elevated industry-wide barrel whiskey inventories continue to weigh on overall brown goods sales and pricing trends, pressuring our financial performance and overshadowing the meaningful strides we continue to make across our Branded Spirits and Ingredient Solutions businesses. Led by Penelope, our premium plus portfolio outpaced category growth in 2024, even as we faced headwinds from the repositioning of certain brands for long-term success. At the same time, the sequential improvement in Ingredient Solutions sales and gross margin reinforces our belief that our specialty wheat ingredients platform is structurally positioned to win in the faster growing 'healthier for me' food segments," said Brandon Gall, Interim President and CEO, and CFO.

He added, "Our 2025 financial guidance, particularly the revised outlook for the Distilling Solutions business, reflects our decisive, proactive actions that are designed to de-risk our brown goods outlook. As we reposition this business to the evolving industry landscape, executing our long-term strategy to establish MGP as a premier branded spirits company remains a top priority."

2024 fourth quarter consolidated results compared to 2023 fourth quarter

• Consolidated sales decreased 16% to $180.8 million. Excluding the impact of the Atchison distillery, consolidated sales decreased by 7%.
• Consolidated gross profit decreased 13% to $74.5 million and gross profit margin increased by 160 basis points to 41.2%. Excluding the impact of the Atchison distillery, gross profit declined by 15% and gross margin decreased 400 basis points to 41.2%.
• Net income decreased to a loss of $42.0 million due to a one-time, non-cash adjustment of $73.8 million to lower the carrying amount of goodwill in the Branded Spirits segment. On an adjusted basis, net income decreased 6% to $34.4 million.
• Basic earnings per common share ("EPS") decreased to $(1.91) per share from $1.39 per share, primarily due to a one-time, non-cash adjustment to goodwill. Adjusted basic EPS decreased 4% to $1.57 per share.
• Adjusted EBITDA decreased 9% to $53.1 million.
• The company repurchased 758,576 shares of its common stock for $36.6 million during the fourth quarter.

2024 full year consolidated results compared to 2023 full year

• Consolidated sales decreased 16% to $703.6 million. Excluding the impact of the Atchison distillery, consolidated sales decreased by 4%.
• Consolidated gross profit decreased 6.0% to $286.3 million and gross profit margin increased by 430 basis points to 40.7%. Excluding the impact of the Atchison distillery, gross profit declined by 7%, while gross profit margin decreased 170 basis points to 40.8%.
• Net income decreased 68% to $34.5 million primarily due to a one-time, non-cash adjustment to goodwill. On an adjusted basis, net income decreased 4% to $125.3 million.
• Basic EPS decreased to $1.56 per share from $4.82 per share primarily due to a one-time, non-cash adjustment to goodwill. Adjusted basic EPS decreased 4% to $5.64 per share from $5.90 per share in 2023.
• Adjusted EBITDA decreased 6% to $196.5 million. Depreciation and amortization remained largely flat at $22.0 million, while share based compensation expense declined by 57% to $3.2 million.
• Capital expenditures of $73.2 million were largely in line with our expectations.
• Operating cash flows increased $18.5 million to $102.3 million.
• The company repurchased 886,936 shares of its common stock for $46.6 million during 2024.
• Net debt leverage ratio stands at approximately 1.5x as of December 31, 2024.

Consolidated results for the 2024 fourth quarter compared to the 2023 fourth quarter

In the fourth quarter 2024, excluding the impact of the Atchison distillery, consolidated sales decreased by 7% as the expected sales declines in the Distilling Solutions and Branded Spirits segments more than offset higher Ingredient Solutions segment sales. Excluding the impact of the Atchison distillery, consolidated gross profit declined by 15% to $74.5 million due to lower gross profits across all three operating segments. Gross margin decreased 400 basis points due to lower gross margins in the Distilling Solutions and Ingredient Solutions segments. Operating income decreased to a loss of $30.4 million, while adjusted operating income decreased 7% to $46.8 million as lower selling, general and administrative ("SG&A") costs partially offset lower gross profits.

During the fourth quarter, we recorded a $73.8 million non-cash adjustment to the carrying value of goodwill in the Branded Spirits segment, primarily due to certain unfavorable macroeconomic factors such as a higher discount rate and lower peer company valuation multiples since the 2021 Luxco acquisition. These charges resulted in a net loss of $42.0 million and basic EPS loss of $1.91 for the fourth quarter. On an adjusted basis, fourth quarter net income and basic EPS were $34.4 million and $1.57 per share.

Distilling Solutions

For the fourth quarter 2024, Distilling Solutions segment sales decreased 25% to $82.0 million and gross profit decreased by 8% to $36.7 million, or 44.8% of segment sales. Excluding the impact of the Atchison distillery, segment sales decreased 6% to $82.0 million as the expected decline in brown good sales more than offset the double digit increase in warehouse services and other sales. Segment gross profit decreased by 16% to $36.7 million, or 44.8% of segment sales, excluding the impact of the Atchison distillery, primarily due to lower sales of higher margin aged whiskey.

For the full year 2024, Distilling Solutions segment sales decreased 26% to $332.2 million. Excluding the impact of the Atchison distillery, segment sales decreased 3% to $330.9 million, as the 8% decline in brown good sales more than offset the double digit increase in warehouse services and other sales. Full year gross profit decreased by 2% to $141.9 million, or 42.7% of segment sales. Excluding the impact of the Atchison distillery, segment gross profit decreased by 9% to $142.4 million, or 43.0% of segment sales, primarily due to weaker brown goods results in the second half of the year.

Branded Spirits

For the fourth quarter 2024, Branded Spirits segment sales decreased 12% to $64.0 million as the double digit decline in mid and value priced brands, consistent with full year trends, was further impacted by lower premium plus sales. Sales of our premium plus portfolio declined by 12% during the quarter primarily due to lapping strong growth in the year-ago period. Gross profit decreased by 11% to $29.6 million while gross margin improved by 60 basis points to 46.2%.

For the full year 2024, Branded Spirits sales decreased 5% to $240.8 million. Our premium plus sales increased by 5% as we continue to execute focused initiatives across our American whiskey and tequila categories; however this growth was partially offset by the negative impact from the planned optimization of our mid and value priced portfolio as we continue to align our portfolio with consumer trends. Full year gross profit increased by 5% to $118.2 million and gross margin improved by 470 basis points to 49.1%, benefiting from the ongoing premiumization of our branded portfolio.

Ingredient Solutions

Ingredient Solutions segment sales increased by 4% to $34.7 million for the fourth quarter 2024. As expected, specialty protein sales posted its first quarterly growth of the year as new business wins offset the stronger U.S. dollar's impact on our international sales. In the fourth quarter, we delivered gross profit of $8.2 million and gross margin of 23.5%, marking the strongest quarterly performance of the year, as we continue to make progress on realizing the full benefits of operating the Ingredient Solutions business independent of the Atchison distillery.

For the full year 2024, Ingredient Solutions segment sales decreased 1% to $130.6 million as headwinds from the stronger U.S. dollar and lower commodity starch sales were largely offset by continued strong growth of specialty starch sales, particularly under the Fibersym brand. Excluding the impact of the Atchison distillery, segment gross profit of $26.2 million and gross margin of 20.1% in 2024 declined from $40.5 million and 30.8% in 2023.

Additional Highlights

Fourth quarter 2024 advertising and promotion expenses decreased 15% to $10.5 million but increased by 6% for the full year 2024 to $40.5 million. Corporate SG&A expenses decreased by 21% and 11% for the fourth quarter and full year to $20.4 million and $81.4 million, respectively, reflecting lower incentive compensation expenses.

The corporate effective tax rate for the fourth quarter 2024 was (31.5)%, compared with 24.0% from the year ago period, primarily due to a one-time, non-tax deductible adjustment to goodwill. Excluding the impact of the goodwill adjustment, the effective tax rate for fourth quarter 2024 was 24.0%.

2025 Financial Guidance

The consolidated financial guidance for 2025 includes:

• Sales are projected to be in the range of $520 million to $540 million.
• Adjusted EBITDA is expected to be in the range of $105 million to $115 million.
• Adjusted basic EPS is expected to be in the $2.45 to $2.75 range, with weighted average basic shares outstanding of approximately 21.3 million, and an effective tax rate of approximately 25%.
• Full year capital expenditures are expected to be approximately $36 million.

Conference Call and Webcast Information

MGP Ingredients will host a conference call today, February 26, 2025, 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 strides in the businesses of MGP Ingredients, Inc. (the "Company" or "MGP"), ability to win in food segments, actions to de-risk its outlook, ability to establish the Company as a premier branded spirits company; and the Company's 2025 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 and any effects of industry dynamics and market conditions; 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; any inability to successfully complete our capital projects or fund capital expenditures or any warehouse expansion issues; our reliance on a limited number of suppliers; work disruptions or stoppages; climate change and measures to address climate change; 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; litigation or legal proceedings; limited rights of common stockholders and anti-takeover provisions in our governing documents; the impact of issuing shares of our common stock; 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 and make any share repurchases; 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, 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 MGP earnings, adjusted EBITDA, 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.

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, goodwill impairment, fair value of contingent consideration, business acquisition costs, executive transition costs, and unusual items costs.

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