MGP Ingredients Reports First Quarter 2025 Results

Encouraging first quarter results; Reaffirms full year 2025 financial outlook

MGP Ingredients, Inc. (NASDAQ:MGPI), a leading provider of branded and distilled spirits and food ingredient solutions, today reported results for the first quarter ended March 31, 2025.

"We are pleased with first quarter results that keep us on track to meet our full-year guidance. While elevated industry-wide barrel whiskey inventories and a cautious consumer environment remain as headwinds, we saw signs of positive progress across all three of our business segments. These early signs of stabilization give us confidence that the proactive actions we are taking are beginning to take hold," said Brandon Gall, Interim President and CEO, and CFO.

He added, "We are focused on our most impactful initiatives, leaning harder on our competitive strengths, and executing with greater discipline in the current environment. We remain confident in the trajectory and positioning of our business, enabling us to reaffirm our 2025 outlook and continue to make progress towards our goal of establishing MGP as a premier branded spirits company."

2025 first quarter financial highlights compared to 2024 first quarter:

• Consolidated sales decreased 29% to $121.7 million.
• Consolidated gross profit decreased 31% to $43.3 million. Gross margin decreased by 120 basis points to 35.6%.
• Net income decreased 115% to a loss of $3.1 million primarily due to the change in fair value of the contingent consideration liability related to the improved performance of the Penelope brand. On an adjusted basis, net income decreased 68% to $7.8 million.
• Basic earnings per common share ("EPS") decreased to $(0.14) per share from $0.92 per share. Adjusted basic EPS decreased 66% to $0.36 per share, inclusive of a $(0.07) per share unfavorable tax impact related to the vesting of share based awards granted in prior years during periods of higher stock prices.
• Adjusted EBITDA decreased 46% to $21.8 million.
• Capital expenditures declined 38% to $8.1 million in the first quarter, while operating cash flows increased $20.1 million to $44.7 million.
• Net debt leverage ratio stands at approximately 1.6x as of March 31, 2025.

On April 24, 2025, we successfully upsized our credit facility from $400 million to $500 million and extended its maturity to 2030. We also increased the size of the accordion feature from $100 million to $200 million. In addition, we extended our shelf for issuing up to $250 million of senior secured promissory notes to 2028. These increased commitments are a testament to the strength of our balance sheet and further enhance our liquidity and financial flexibility.

Consolidated Results

First quarter 2025 consolidated sales decreased by 29% compared to the year ago quarter, primarily due to expected declines in brown goods and specialty ingredients sales within our Distilling Solutions and Ingredient Solutions segments, respectively. Lower brown goods and specialty ingredients sales also pressured profitability, leading to a 31% decline in first quarter gross profit. Operating income decreased to a loss of $0.7 million due to lower gross profit and a $10.6 million increase in the fair value of the contingent consideration liability related to the improved performance of the Penelope brand. Adjusted operating income decreased to $15.3 million as reduced gross profit was partially offset by lower operating expenses.

Branded Spirits

Branded Spirits segment sales decreased 4% to $48.2 million. Our premium plus portfolio sales increased by 7% reflecting increased focus on our most impactful initiatives across the American whiskey and tequila categories, particularly the stronger than expected performance of the Penelope brand. Sales of our mid and value priced portfolios each declined by double digits due to lower sales of certain tequila, liqueur, and cordial brands. Branded Spirits gross profit decreased by 1% to $22.2 million, or 46.0% of segment sales, compared to $22.5 million, or 44.9% of segment sales, in the prior year period.

Distilling Solutions

Distilling Solutions segment sales and gross profit decreased by 45% to $46.9 million and $18.7 million, respectively. As expected, lower quarterly sales and gross profit were driven by reduced customer demand for brown goods resulting primarily from elevated industry-wide barrel inventories. Our warehouse services sales were up slightly, while white goods and other co-products sales declined in-line with expectations due to the phasing out of a number of white goods customer contracts in the wake of the Atchison distillery closure, as well as reduced production volumes of dried distillers grain. Distilling Solutions segment gross margin of 39.8% was largely flat compared to the year-ago quarter.

Ingredient Solutions

Ingredient Solutions segment sales decreased 26% to $26.5 million primarily due to lower specialty starch and specialty protein sales during the quarter. As expected, quarterly sales were impacted by supply challenges resulting from adverse weather and complexities associated with the closure of the Atchison distillery as well as timing of the commercialization of new customers. Segment gross profit decreased to $2.5 million, or 9.3% of segment sales, compared to $6.2 million, or 17.4% of segment sales, in the first quarter 2024.

Additional Highlights

First quarter advertising and promotion expenses decreased 6% to $8.2 million as compared to the first quarter 2024. Branded Spirits advertising and promotion spend was nearly 16% of segment sales in the first quarter due to timing of planned initiatives.

The first quarter effective tax rate was (28.1)%, compared with 23.3% in the year ago period. Adjusted effective tax rate increased to 43.0% from 23.3% due to the unfavorable tax impact related to the vesting of share based awards granted during periods of higher stock prices.

2025 Financial Outlook

MGP reaffirmed its consolidated guidance for fiscal 2025:

• 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, May 1, 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) has been formulating excellence since 1941 by bringing product ideas to life across the alcoholic beverage and specialty ingredient industries through three segments: Branded Spirits, Distilling Solutions, and Ingredient Solutions. MGPI is one of the leading spirits distillers with an award-winning portfolio of premium brands including Penelope, Rebel, Remus, and Yellowstone bourbons and El Mayor tequila, under the Luxco umbrella. With distilleries in Indiana and Kentucky; a tequila distillery in Arandas, Mexico; and bottling operations in Missouri, Ohio, and Northern Ireland, the company creates distilled spirits for customers including many world-renowned spirits brands. In addition, the company's high-quality specialty fiber, protein, and starch ingredients provide functional, nutritional, and sensory solutions for a wide range of food products. To learn more 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 ability of MGP Ingredients, Inc. (the "Company" or "MGP") to meet guidance and becoming a premier branded spirits company; and the Company's 2025 outlook, including its expectations for sales, adjusted EBITDA, adjusted basic 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 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, 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 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 2025 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), fair value of contingent consideration, executive transition costs, professional service fees, impairment of long-lived assets and other, business acquisition costs, and restructuring and other costs.

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

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

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For More Information

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Media:

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