Financial Performance - Sales for the quarter ended June 30, 2025 were $145,494, a decrease of 24% compared to $190,805 in the same quarter of 2024, primarily due to decreased sales in the Distilling Solutions and Branded Spirits segments [97]. - Gross profit for the quarter ended June 30, 2025 was $58,387, a decrease of 30% from $83,232 in the prior year, driven by declines in the Distilling Solutions and Branded Spirits segments [99]. - Operating income for the quarter ended June 30, 2025 decreased to $20,318, down 53% from $43,387 in the same quarter of 2024, primarily due to reduced gross profit in key segments [102]. - Net income for the quarter ended June 30, 2025 was $14,427, a decline of 55% compared to $32,017 in the prior year, reflecting lower operating income [97]. - Year-to-date sales for the period ended June 30, 2025 were $267,147, a decrease of 26% from $361,368 in the same period of 2024, with declines across all segments [108]. - Year-to-date gross profit for the period ended June 30, 2025 was $101,717, down 30% from $146,027 in the prior year, with significant decreases in the Distilling Solutions segment [110]. - Operating income for the year to date ended June 30, 2025, was $19,571, a decrease of 73% compared to $72,304 for the same period in 2024 [114]. - Gross profit for the year to date ended June 30, 2025 decreased by $39,064, or 51%, with a gross margin decline to 38.7% from 43.0% in the prior year [141]. Earnings Per Share - Basic and diluted EPS for the quarter ended June 30, 2025 was $0.67, a decrease of 53% from $1.43 in the same quarter of 2024, reflecting the decline in operating income [105]. - Basic and diluted EPS for the year to date ended June 30, 2025, was $0.53, down 78% from $2.36 for the year to date ended June 30, 2024 [116]. Segment Performance - Total sales of the Branded Spirits segment for the quarter ended June 30, 2025, decreased by $3,521, or 5%, compared to the prior year quarter [121]. - Gross profit for the Branded Spirits segment for the year to date ended June 30, 2025, decreased by $1,983, or 4%, compared to the year to date ended June 30, 2024 [129]. - Total sales of the Distilling Solutions segment for the quarter ended June 30, 2025, decreased by $43,388, or 46%, compared to the prior year quarter [134]. - Gross profit for the Distilling Solutions segment for the quarter ended June 30, 2025, decreased by $23,661, or 56%, compared to the prior year quarter [135]. - Total sales of the Ingredient Solutions segment increased by $1,598, or 5%, for the quarter ended June 30, 2025, driven by increased sales volume of specialty wheat proteins [146]. - Total sales of the Ingredient Solutions segment decreased by $7,484, or 11%, for the year to date ended June 30, 2025, primarily due to decreased sales volume of specialty wheat starches [153]. Expenses - Advertising and promotion expenses for the quarter ended June 30, 2025 were $6,913, a decrease of 41% compared to $11,665 in the same quarter of 2024, due to realignment of spending [100]. - SG&A expenses for the quarter ended June 30, 2025 were $23,156, a slight increase of 2% from $22,759 in the prior year, driven by increased incentive compensation [101]. Tax and Interest Rates - Effective tax rate for the quarter ended June 30, 2025 was 23.0%, down from 24.0% in the same quarter of 2024, primarily due to lower income before taxes [104]. - The effective tax rate for the year to date ended June 30, 2025, was 30.5%, up from 23.7% for the year to date ended June 30, 2024 [115]. - A 100 basis point increase in market interest rates would increase annual interest expense on variable-rate debt by $840 [178]. Cash Flow and Debt - Cash provided by operating activities for the year to date ended June 30, 2025 was $56,357, an increase of $26,775 compared to the prior year [158]. - Cash used in investing activities for the year to date ended June 30, 2025 was $32,167, primarily for additions to property, plant, and equipment [161]. - Cash used in financing activities for the year to date ended June 30, 2025 was $33,103, primarily due to net payments on debt of $24,200 and dividend payments of $5,156 [163]. - Total debt was $297,086 at June 30, 2025, down from $323,541 at December 31, 2024, with net borrowings on debt of $24,200 for the year to date ended June 30, 2025 [171]. - The company has $416,000 available under its credit agreement for additional borrowings as of June 30, 2025 [174]. Shareholder Activities - The company repurchased approximately 92,447 shares of Common Stock for approximately $7,500 during the year to date ended June 30, 2024, with $53,412 remaining under the share repurchase program as of June 30, 2025 [167]. - The company declared a dividend of $0.12 per share on February 26, 2025, and May 1, 2025, totaling $5,156 in dividend payments for the year to date ended June 30, 2025 [168]. Risk Management - The company monitors commodity price and interest rate market risks as part of its overall risk management program [175].

[Executive Summary & Business Update](index=1&type=section&id=Executive%20Summary%20%26%20Business%20Update) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) MGP Ingredients reported a challenging Q2 2025 with consolidated sales down 24% and net income down 55%, yet achieved sequential improvement across segments and reaffirmed its full-year outlook Q2 2025 Financial Highlights (YoY Change) | Metric | Q2 2025 Value | Q2 2024 Value | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | | Consolidated Sales | $145.5 million | $190.8 million | -24% | | Consolidated Gross Profit | $58.4 million | $83.2 million | -30% | | Gross Margin | 40.1% | 43.6% | -350 bps | | Net Income | $14.4 million | $32.0 million | -55% | | Adjusted Net Income | $20.9 million | $38.0 million | -45% | | Basic EPS | $0.67 | $1.43 | -53.1% | | Adjusted Basic EPS | $0.97 | $1.71 | -43% | | Adjusted EBITDA | $35.9 million | $57.5 million | -38% | | Year-to-date Capital Expenditures | $18.7 million | $22.5 million | -17% | | Year-to-date Operating Cash Flows | $56.4 million | $29.6 million | +$26.8 million | | Net Debt Leverage Ratio (as of June 30, 2025) | 1.8x | N/A | N/A | - Consolidated sales decreased **24% to $145.5 million**, primarily due to expected declines in brown goods sales within Distilling Solutions and value/mid-price tiered brands in Branded Spirits[4](index=4&type=chunk)[5](index=5&type=chunk) - Net income decreased **55% to $14.4 million**, and adjusted net income decreased **45% to $20.9 million**[4](index=4&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management acknowledged Q2 results were largely as expected, with solid execution and sequential improvement across all segments, reaffirming the 2025 outlook and focusing on sustainable growth - CFO Brandon Gall stated that Q2 results were largely as expected, with solid execution and sequential improvement across all three business segments, and reaffirmed the **2025 outlook**[2](index=2&type=chunk) - Julie Francis, the new President and CEO, expressed excitement to build on progress, focusing on sustainable growth, unlocking long-term value, and strengthening a customer-centric, brands-led approach[3](index=3&type=chunk) - Decisive actions to improve visibility with customers are working, with brown goods volume and price declines in line with expectations[2](index=2&type=chunk) [2025 Financial Outlook](index=2&type=section&id=2025%20Financial%20Outlook) MGP Ingredients reaffirmed its fiscal year 2025 consolidated guidance for sales, adjusted EBITDA, and adjusted basic EPS, while revising full-year capital expenditures downward to approximately **$32.5 million** Fiscal Year 2025 Consolidated Guidance | Metric | Projected Range | | :-------------------- | :-------------- | | Sales | $520M - $540M | | Adjusted EBITDA | $105M - $115M | | Adjusted Basic EPS | $2.45 - $2.75 | | Weighted Average Basic Shares Outstanding | ~21.4 million | | Effective Tax Rate | ~25% | | Full-Year Capital Expenditures | ~$32.5 million (revised from ~$36M) | - Full-year capital expenditures are now expected to be approximately **$32.5 million**, a reduction from previous expectations of **$36 million**[10](index=10&type=chunk) [Consolidated Financial Performance](index=5&type=section&id=Consolidated%20Financial%20Performance) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The consolidated income statement for Q2 2025 shows significant declines in sales, gross profit, and net income, with operating income decreasing **53.2%** due to lower gross profit and increased contingent consideration liability Condensed Consolidated Statements of Income (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | | Sales | $145,494 | $190,805 | -23.7% | | Cost of sales | $87,107 | $107,573 | -19.0% | | Gross profit | $58,387 | $83,232 | -29.9% | | Advertising and promotion expenses | $6,913 | $11,665 | -40.7% | | Selling, general, and administrative expenses | $23,156 | $22,759 | +1.7% | | Change in fair value of contingent consideration | $8,000 | $5,400 | +48.1% | | Operating income | $20,318 | $43,387 | -53.2% | | Income before income taxes | $18,735 | $42,125 | -55.5% | | Net income | $14,427 | $32,017 | -55.0% | | Basic Earnings per common share | $0.67 | $1.43 | -53.1% | - Operating income decreased to **$20.3 million**, primarily due to lower gross profit and an **$8.0 million** increase in the fair value of the contingent consideration liability related to the Penelope brand[5](index=5&type=chunk) - Advertising and promotion expenses decreased **41% to $6.9 million**, reflecting a realignment of spend towards attractive growth opportunities[6](index=6&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets slightly decreased, driven by lower current assets, while total liabilities increased significantly due to a rise in current contingent consideration, despite reduced long-term debt Condensed Consolidated Balance Sheets (as of June 30, 2025 vs. Dec 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change | | :----------------------------------- | :--------------------------- | :----------------------------- | :----- | | **ASSETS** | | | | | Cash and cash equivalents | $17,320 | $25,273 | -$7,953 | | Receivables, net | $117,190 | $148,488 | -$31,298 | | Inventory | $379,702 | $364,944 | +$14,758 | | Total current assets | $520,243 | $546,136 | -$25,893 | | Property, plant, and equipment, net | $325,751 | $316,672 | +$9,079 | | Total Assets | $1,386,060 | $1,405,785 | -$19,725 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | | Current maturities of long-term debt | $6,400 | $6,400 | $0 | | Accounts payable | $41,932 | $66,336 | -$24,404 | | Contingent consideration - current | $108,000 | $0 | +$108,000 | | Total current liabilities | $178,611 | $92,450 | +$86,161 | | Long-term debt, less current maturities | $94,663 | $121,277 | -$26,614 | | Contingent consideration | $0 | $85,300 | -$85,300 | | Total liabilities | $545,931 | $573,242 | -$27,311 | | Total equity | $840,129 | $832,543 | +$7,586 | | Total Liabilities and Total Equity | $1,386,060 | $1,405,785 | -$19,725 | - A significant shift occurred in contingent consideration, with **$108 million** classified as current as of June 30, 2025, compared to zero current and **$85.3 million** long-term at December 31, 2024[19](index=19&type=chunk) - Total current assets decreased by **$25.9 million**, mainly due to lower cash and receivables, partially offset by an increase in inventory[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash from operating activities significantly increased, while financing activities reversed to a net outflow of **$33.10 million** due to increased debt payments Condensed Consolidated Statements of Cash Flows (YTD June 30, 2025 vs. 2024) | Cash Flow Activity | YTD June 30, 2025 (in thousands) | YTD June 30, 2024 (in thousands) | Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :----- | | Net income | $11,370 | $52,601 | -$41,231 | | Change in fair value of contingent consideration | $22,700 | $9,500 | +$13,200 | | Receivables, net | $31,103 | -$14,766 | +$45,869 | | Inventory | -$15,224 | -$11,754 | -$3,470 | | Net cash provided by operating activities | $56,357 | $29,582 | +$26,775 | | Net cash used in investing activities | -$32,167 | -$33,657 | +$1,490 | | Proceeds from long-term debt | $28,000 | $50,000 | -$22,000 | | Principal payments on long-term debt | -$52,200 | -$28,200 | -$24,000 | | Net cash provided by (used in) financing activities | -$33,103 | $6,721 | -$39,824 | | Increase (decrease) in cash and cash equivalents | -$7,953 | $2,623 | -$10,576 | | Cash and cash equivalents, end of period | $17,320 | $21,011 | -$3,691 | - Net cash provided by operating activities increased by **$26.8 million** year-to-date, primarily driven by a positive change in receivables and a higher change in the fair value of contingent consideration[4](index=4&type=chunk)[20](index=20&type=chunk) - Net cash used in financing activities was **$33.1 million**, a significant change from the **$6.7 million** provided in the prior year, mainly due to increased principal payments on long-term debt[20](index=20&type=chunk) [Segment Performance Analysis](index=2&type=section&id=Segment%20Performance%20Analysis) [Branded Spirits Segment](index=2&type=section&id=Branded%20Spirits%20Segment) The Branded Spirits segment saw a **5%** sales decrease to **$60.5 million** in Q2 2025, driven by declines in mid and value-priced portfolios, despite **1%** growth in premium plus sales from the Penelope brand Branded Spirits Segment Performance (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Premium plus sales | $31,099 | $30,707 | $392 | 1% | | Mid sales | $15,493 | $17,061 | -$1,568 | -9% | | Value sales | $8,936 | $11,655 | -$2,719 | -23% | | Total Branded Spirits Sales | $60,520 | $64,041 | -$3,521 | -5% | | Gross profit | $31,984 | $33,633 | -$1,649 | -5% | | Gross margin % | 52.8% | 52.5% | N/A | +0.3 pp | | Operating income | $8,737 | $7,235 | $1,502 | 21% | - Increased focus on American whiskey and tequila categories led to **1% growth** in premium plus sales, with the Penelope brand showing strong above-category sales growth[7](index=7&type=chunk) - Sales of mid and value-priced portfolios declined by nearly **15%** due to lower volumes of certain tequila, liqueur, and cordial brands[7](index=7&type=chunk) [Distilling Solutions Segment](index=2&type=section&id=Distilling%20Solutions%20Segment) The Distilling Solutions segment saw a **46%** sales decrease to **$50.0 million** in Q2 2025, primarily due to reduced brown goods demand and elevated industry barrel inventories, resulting in a **56%** gross profit decline Distilling Solutions Segment Performance (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Brown goods sales | $35,057 | $75,443 | -$40,386 | -54% | | Warehouse services sales | $8,001 | $8,392 | -$391 | -5% | | White goods and other co-products sales | $6,942 | $9,553 | -$2,611 | -27% | | Total Distilling Solutions Sales | $50,000 | $93,388 | -$43,388 | -46% | | Gross profit | $18,812 | $42,473 | -$23,661 | -56% | | Gross margin % | 37.6% | 45.5% | N/A | -7.9 pp | | Operating income | $17,741 | $41,528 | -$23,787 | -57% | - Sales and profitability were pressured by reduced customer demand for brown goods due to elevated industry-wide barrel inventories[8](index=8&type=chunk) - Proactive engagement and visibility with customers helped keep brown goods sales volume and pricing largely in line with expectations[8](index=8&type=chunk) [Ingredient Solutions Segment](index=2&type=section&id=Ingredient%20Solutions%20Segment) The Ingredient Solutions segment returned to positive growth in Q2 2025, with sales increasing **5% to $35.0 million**, driven by new domestic customers and enhanced operational execution, leading to a **7%** gross profit increase Ingredient Solutions Segment Performance (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Specialty wheat starches sales | $18,474 | $19,203 | -$729 | -4% | | Specialty wheat proteins sales | $12,612 | $11,200 | $1,412 | 13% | | Commodity wheat starches sales | $3,061 | $2,973 | $88 | 3% | | Commodity wheat proteins sales | $827 | $0 | $827 | n/a | | Total Ingredient Solutions Sales | $34,974 | $33,376 | $1,598 | 5% | | Gross profit | $7,591 | $7,126 | $465 | 7% | | Gross margin % | 21.7% | 21.4% | N/A | +0.3 pp | | Operating income | $6,290 | $5,784 | $506 | 9% | - Sales improved sequentially from Q1 2025 for each product line, reflecting commercialization of new domestic customers and improved operational execution[9](index=9&type=chunk) - Specialty wheat proteins sales increased by **13%**, and commodity wheat proteins saw significant growth from a low base[29](index=29&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) [Explanation of Non-GAAP Items](index=4&type=section&id=Explanation%20of%20Non-GAAP%20Items) MGP Ingredients provides non-GAAP measures to offer a clearer view of core performance, excluding items like fair value changes of contingent consideration, executive transition costs, and other non-recurring expenses - Non-GAAP measures are used by management to evaluate operating results, assess financial trends, and for forecasting, providing useful information to investors[16](index=16&type=chunk) - Key adjustments include fair value of contingent consideration (related to Penelope Bourbon acquisition), executive transition costs, professional service fees (goodwill impairment valuation), restructuring costs (reduction in force), impairment of long-lived assets (Atchison distillery closure), business acquisition costs, and unusual items costs[23](index=23&type=chunk) - Reconciliation to GAAP measures is provided for historical data, but not for full-year 2025 guidance due to the inability to predict certain GAAP items with reasonable certainty[16](index=16&type=chunk) [Reconciliation of GAAP to Adjusted Non-GAAP Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Adjusted%20Non-GAAP%20Measures) The reconciliation details Q2 2025 adjustments, including **$8.0 million** for contingent consideration and **$0.38 million** for executive transition costs, increasing GAAP net income of **$14.4 million** to an adjusted non-GAAP net income of **$20.9 million** Reconciliation of GAAP to Adjusted Non-GAAP Measures (Q2 2025) | Metric | Reported GAAP Results (in thousands) | Fair value of contingent consideration (b) (in thousands) | Executive transition costs (c) (in thousands) | Adjusted Non-GAAP results (in thousands) | | :-------------------- | :----------------------------------- | :---------------------------------------- | :------------------------------------ | :--------------------------------------- | | Operating Income | $20,318 | $8,000 | $376 | $28,694 | | Income before Income Taxes | $18,735 | $8,000 | $376 | $27,111 | | Net Income | $14,427 | $6,160 | $290 | $20,877 | | MGP Earnings (a) | $14,267 | $6,097 | $287 | $20,651 | | Basic and Diluted EPS | $0.67 | $0.29 | $0.01 | $0.97 | - Adjustments for Q2 2025 primarily include **$8.0 million** for fair value of contingent consideration and **$0.38 million** for executive transition costs, significantly impacting adjusted operating income and net income[21](index=21&type=chunk) - For the year-to-date period ended June 30, 2025, total adjustments increased GAAP net income of **$11.37 million** to an adjusted non-GAAP net income of **$28.31 million**[21](index=21&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA](index=10&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) Adjusted EBITDA for Q2 2025 was **$35.89 million**, a **38%** decrease from Q2 2024, reflecting overall profitability decline and key adjustments from net income Reconciliation of Net Income to Adjusted EBITDA (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | Net Income | $14,427 | $32,017 | -$17,590 | -55.0% | | Interest expense | $1,897 | $2,205 | -$308 | -14.0% | | Income tax expense | $4,308 | $10,108 | -$5,800 | -57.4% | | Depreciation and amortization | $5,830 | $5,329 | $501 | 9.4% | | Fair value of contingent consideration | $8,000 | $5,400 | $2,600 | 48.1% | | Adjusted EBITDA | $35,889 | $57,532 | -$21,643 | -37.6% | - Adjusted EBITDA for Q2 2025 was **$35.89 million**, down from **$57.53 million** in the prior year, reflecting the overall decline in profitability[4](index=4&type=chunk)[24](index=24&type=chunk) - Year-to-date Adjusted EBITDA decreased from **$97.76 million** in 2024 to **$57.65 million** in 2025[24](index=24&type=chunk) [Net Debt Leverage Ratio](index=11&type=section&id=Net%20Debt%20Leverage%20Ratio) As of June 30, 2025, MGP Ingredients reported a net debt leverage ratio of approximately **1.8x**, calculated using net debt of **$279.77 million** and TTM Adjusted EBITDA of **$156.39 million** Net Debt Leverage Ratio (as of June 30, 2025) | Metric | Value (in thousands) | | :-------------------- | :------------------- | | Total debt | $297,086 | | Cash and cash equivalents | $17,320 | | Net debt | $279,766 | | TTM Adjusted EBITDA | $156,386 | | Net debt leverage ratio | 1.8x | - The net debt leverage ratio stands at approximately **1.8x** as of June 30, 2025[4](index=4&type=chunk)[27](index=27&type=chunk) - TTM Adjusted EBITDA, used in the leverage ratio calculation, was **$156.39 million**[27](index=27&type=chunk) [Dilutive Shares Outstanding Calculation](index=14&type=section&id=Dilutive%20Shares%20Outstanding%20Calculation) For Q2 2025 and year-to-date, convertible senior notes had zero impact on dilutive shares outstanding, as the average share price was below the conversion price, making them anti-dilutive Dilutive Shares Outstanding Calculation (Q2 2025) | Metric | Q2 2025 | | :-------------------- | :------ | | Principal amount of the bonds | $201,250,000 | | Initial conversion rate | 10.3911 | | Conversion price | $96.23620 | | Average share price | $29.73403 | | Impact of conversion | $0 | - The average share price for Q2 2025 (**$29.73**) was below the conversion price (**$96.24**), rendering the convertible senior notes anti-dilutive and thus excluded from diluted EPS calculations[33](index=33&type=chunk) [Corporate Information](index=3&type=section&id=Corporate%20Information) [About MGP Ingredients, Inc.](index=3&type=section&id=About%20MGP%20Ingredients%2C%20Inc.) MGP Ingredients, Inc. (Nasdaq: MGPI) is a leading provider of branded and distilled spirits and food ingredient solutions, operating since 1941 across three segments with an award-winning portfolio - MGP Ingredients operates in three segments: Branded Spirits, Distilling Solutions, and Ingredient Solutions[12](index=12&type=chunk) - The company's premium spirits brands include Penelope, Rebel, Remus, Yellowstone bourbons, and El Mayor tequila under the Luxco umbrella[12](index=12&type=chunk) - MGP also provides high-quality specialty fiber, protein, and starch ingredients for a wide range of food products[12](index=12&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights that forward-looking statements are subject to various risks and uncertainties, including changes in consumer preferences, market competition, and regulatory changes, with no obligation to update them - Forward-looking statements are identified by words like 'intend,' 'plan,' 'believe,' 'expect,' and similar terminology, reflecting management's current beliefs and estimates[13](index=13&type=chunk) - Risks and uncertainties include changes in consumer preferences, competitive landscape, damage to reputation, failure to introduce successful new brands, reliance on distributors, operational interruptions, and regulatory changes[14](index=14&type=chunk) - The company undertakes no obligation to update any forward-looking statements, except as required by law[15](index=15&type=chunk) [Conference Call and Investor Relations](index=3&type=section&id=Conference%20Call%20and%20Investor%20Relations) MGP Ingredients hosted a conference call on July 31, 2025, to discuss Q2 results and business trends, with access details for investors and contact information for inquiries - A conference call was held on July 31, 2025, at 10 a.m. ET to discuss results and current business trends[11](index=11&type=chunk) - Investors can access a live webcast and replay via the company's Investor Relations website[11](index=11&type=chunk) - Contact information for investor relations (Amit Sharma) and media (Patrick Barry) is provided[17](index=17&type=chunk)

Company Overview - MGP Ingredients, Inc. (MGPI) is scheduled to report its Q2 results on July 31 [1] - The company operates in the spirit ingredient and branded spirit production sector [1] Industry Insights - There is a noted weakening demand affecting the company's performance [1]

Core Insights - Rebel Bourbon has announced the annual release of its award-winning Rebel 10-Year Single Barrel Bourbon, which is aged for a decade and bottled one barrel at a time, creating a unique flavor profile for each barrel [1][2][3] - The bourbon is bottled at 100 proof (50% ABV) with a limited allocation of 2,600 cases of 750mL bottles available at a minimum suggested retail price of $99.99 [1][2][3] Product Details - Rebel 10-Year Single Barrel is handcrafted according to a wheated recipe dating back to 1849, featuring a mash bill of 68% corn, 20% wheat, and 12% malt [4] - The bourbon presents a golden amber color with aromas of vanilla and dark fruits, complemented by flavors of caramel, citrus, and a smooth finish with a hint of spice [4] Industry Recognition - Rebel 10-Year Single Barrel has received multiple prestigious awards, including the Single Barrel American Whiskey of the Year at the 2025 Bartender Spirits Awards and double gold medals at the 2025 San Francisco World Spirits Competition [6][7][9] - The product has also earned a double platinum medal at the 2025 ASCOT Awards, showcasing its high quality and industry acclaim [9] Company Background - Rebel Bourbon is distilled in Bardstown, Kentucky, by Lux Row Distillers, with a focus on a wheated mash bill that celebrates bold originality and a rebellious spirit [7] - Luxco, the parent company, has been a leading producer and supplier of beverage alcohol products since 1958, operating multiple distilleries and offering a diverse portfolio of award-winning brands [8][10]

Core Insights - Luxco, Inc. has launched Cortada Smoked Tequila, a premium tequila available in Blanco and Reposado varieties, exclusively in Denver and through e-commerce [1][2][3] - The retail price for Cortada Smoked Tequila Blanco is $49.99 and for Reposado is $54.99 [1][2][3] Product Details - Cortada Smoked Tequila is crafted using hand-selected, estate-grown 100% Blue Weber Agave, smoked with Mesquite and Mexican Oak, resulting in a unique flavor profile [4][5] - The Blanco variant offers a pure agave experience with notes of ripe pineapple and a wood-fired spiciness, while the Reposado variant is aged in bourbon barrels, featuring hints of dark chocolate, pepper, and clove [6] Market Positioning - The launch city, Denver, is highlighted for its rich cultural history and innovative spirit, making it an ideal location for introducing Cortada [5] - The brand manager emphasizes the creativity that smoked spirits bring to the cocktail scene, positioning Cortada as a must-try for those seeking a spicier sipping experience [8] Company Background - Luxco, founded in 1958, is a leading producer and supplier of beverage alcohol products, operating under MGP Ingredients Inc. since its acquisition in 2021 [11]

Core Concept - Penelope Bourbon has launched Cigar Sessions Chapter 1, a limited-edition whiskey crafted specifically to enhance the experience of medium-bodied cigars, marking the beginning of an annual series aimed at cigar enthusiasts [1][4][5] Product Details - Cigar Sessions Chapter 1 is available in a limited allocation of 7,500 cases, with a suggested retail price of $79.99 per 750mL bottle [2][4] - The whiskey blend includes Straight Bourbon, 100% American Single Malt, and American Light Whiskey, aged for six years with a mash bill of 72% corn, 15% rye, and 13% malt, bottled at 101 proof (50.5% ABV) [4][6] - The flavor profile features notes of milk chocolate, vanilla, candied apple, chocolate, dried peach, tobacco, warm caramel, toffee, dark fruit, and light oak [6][7] Collaboration and Innovation - The product was developed in collaboration with renowned cigar blenders Cynn Coburn and Lee Marsh, leveraging their expertise to create a whiskey that complements medium-bodied cigars [5][6] - The blending process involved exploring 19 different mash bills to achieve a balanced flavor profile suitable for cigar pairing [7] Brand Background - Founded in 2018, Penelope Bourbon has quickly become a recognized premium whiskey brand, winning over 40 industry awards, including double platinum at the 2024 ASCOT Awards [9] - The company continues to innovate with its Limited Releases and other expressions, aiming to solidify its position among top premium whiskey brands [9][10] Market Engagement - Consumers can follow Penelope Bourbon on social media for updates on Cigar Sessions Chapter 1, including special tastings and events with the cigar blenders [8]

Core Points - Rebel Bourbon has launched a limited-edition bourbon called Rebel 100 Childress Vineyards Cabernet Franc Barrel Finish, in collaboration with Childress Vineyards [1][2] - The bourbon is aged for four years, finished in Cabernet Franc barrels, and bottled at 100 proof (50% ABV), featuring unique flavor notes [1][3] - An allocation of 500 cases will be available at North Carolina ABC stores and Lux Row Distillers, with a suggested retail price of $39.99 per 750mL bottle [1][5] Company Overview - Rebel Bourbon is distilled in Bardstown, Kentucky, and follows a wheated mash bill recipe dating back to 1849, emphasizing a smooth and original bourbon experience [7] - Lux Row Distillers, the producer of Rebel Bourbon, is part of Luxco, a leading beverage alcohol company founded in 1958, which operates multiple distilleries and has a diverse portfolio [9] - Childress Vineyards, located in North Carolina's Yadkin Valley, is a family-owned winery known for its award-winning wines and commitment to quality, featuring over 70 acres of vineyards [10] Industry Context - The collaboration between Rebel Bourbon and Childress Vineyards represents a trend in the beverage industry where partnerships are formed to create unique products that appeal to both bourbon and wine enthusiasts [4][5] - The bourbon market continues to grow, with limited-edition releases generating significant consumer interest and engagement, particularly among racing fans and collectors [5][11]

Financial Data and Key Metrics Changes - Consolidated sales decreased by 29% to $121.7 million compared to the prior year period [23] - Adjusted EBITDA decreased by 46% to $21.8 million, primarily due to lower gross profits [26] - Adjusted earnings per common share declined to $0.36, while operating cash flows increased by nearly 82% to $44.7 million [8][27] - Gross profit decreased by 31% to $43.3 million, with gross margin declining by 120 basis points to 35.6% [24] Business Line Data and Key Metrics Changes - Branded Spirits segment sales declined by 4%, but the Premium Plus portfolio posted solid growth of 7% [23][9] - Distilling Solutions segment sales declined by 45%, primarily driven by a 49% decline in brown goods sales [23] - Ingredient Solutions sales decreased by 26%, impacted by supply challenges and decreased sales volume of specialty wheat starches and proteins [24][20] Market Data and Key Metrics Changes - The overall American whiskey category saw a production decline of 4% for the full year and 15% in the last three months of 2024 [15] - The company noted that the elevated inventory of barrels in the industry is expected to persist into 2026 [56] Company Strategy and Development Direction - The company is focusing on fewer but more attractive growth opportunities within its Branded Spirits portfolio [9] - Key initiatives include stabilizing the brown goods business, repositioning branded spirits for growth, and enhancing productivity [5][6] - The company is taking proactive actions to strengthen partnerships with customers in the Distilling Solutions segment [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the proactive steps being taken to stabilize the business and improve performance throughout the year [6] - The company reaffirmed its 2025 guidance, expecting net sales in the range of $520 million to $540 million [22] - Management acknowledged the challenges posed by elevated barrel inventories but remains optimistic about the future [56] Other Important Information - The company has made substantial progress in fortifying its balance sheet, including upsizing its credit facility and extending its private placement shelf [21][28] - The company is increasing investments in its ingredients facility to improve throughput and reliability [20] Q&A Session Summary Question: Visibility into the outlook for Distilling Solutions - Management confirmed discussions with 100% of contracted customers, leading to modifications in orders and pricing [34][35] Question: Outlook for Distilling Solutions segment and margins - Expectations for the Distilling Solutions segment remain unchanged, with anticipated sales down 50% and gross profit down 65% for the year [39] Question: Quantification of new distillate negotiations and customer demand - Management expects to conclude negotiations with the remaining 25% of customers soon, with no negative feedback impacting guidance [45] Question: Optimism for Ingredient Solutions despite challenges - Management highlighted operational improvements and upcoming projects that should enhance performance in the second half of the year [48][49] Question: Impact of anticipated tariffs on customer demand - Management did not observe any significant pull forward in demand due to anticipated tariffs [75] Question: Performance of Penelope brand - Management noted that Penelope's performance exceeded expectations, leading to an increase in contingent liability [64][78] Question: Ongoing CEO search and its impact on strategic initiatives - The CEO search is ongoing, but the company is making strides in leadership and executing strategic initiatives [106][108]

Financial Data and Key Metrics Changes - Consolidated sales decreased by 29% to $121.7 million compared to the prior year period [23] - Adjusted EBITDA decreased by 46% to $21.8 million, primarily due to lower gross profits [26] - Adjusted earnings per common share decreased to $0.36 per share, while operating cash flows increased by nearly 82% to $44.7 million [8][27] Business Line Data and Key Metrics Changes - Branded Spirits segment sales declined by 4%, but the Premium Plus portfolio posted a solid growth of 7% [23][9] - Distilling Solutions segment sales declined by 45%, driven by a 49% decline in brown goods sales [23] - Ingredient Solutions sales decreased by 26%, impacted by supply challenges and decreased sales volume of specialty wheat starches [24] Market Data and Key Metrics Changes - The overall American whiskey category is responding to the current environment with deeper production cuts, with total whiskey production down 4% for the full year [15][16] - The company expects net whiskey put away to be down materially in 2025 compared to 2024, reflecting a decision to right-size excess inventory [14] Company Strategy and Development Direction - The company is focusing on fewer but more attractive growth opportunities within its Branded Spirits portfolio [9] - Key initiatives include stabilizing the brown goods business, repositioning branded spirits for growth, and enhancing productivity [5][6] - The company is taking proactive actions to strengthen partnerships with customers in the Distilling Solutions segment [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the proactive steps taken to stabilize the business and improve performance throughout the year [6] - The company reaffirmed its 2025 guidance, expecting net sales in the range of $520 million to $540 million [21] - Management noted that while industry-wide barrel whiskey inventories remain elevated, early signs of stabilization are encouraging [6][31] Other Important Information - The company has made substantial progress in fortifying its balance sheet, including upsizing its credit facility and extending its private placement shelf [20][28] - The board of directors is taking steps to strengthen its ranks in anticipation of the next chapter of growth [31] Q&A Session Summary Question: Visibility into the outlook for Distilling Solutions - Management confirmed that discussions with 100% of contracted customers have led to modifications in volume and pricing, providing greater visibility for 2025 [35][36] Question: Outlook for the Distilling Solutions segment and margin expectations - Management expects sales for the Distilling Solutions segment to be down 50% for the year, with gross profit down 65% [41] Question: Quantification of new distillate negotiations and branded spirits stabilization - Management indicated that they expect to conclude negotiations with the remaining 25% of customers soon and are implementing price support for mid and value brands [47][49] Question: Optimism for Ingredient Solutions despite challenges - Management highlighted ongoing operational improvements and key projects that are expected to enhance performance in the second half of the year [51][54] Question: Impact of anticipated tariffs on customer demand - Management noted that there has been no significant pull forward in demand due to anticipated tariffs [79] Question: Performance of the Penelope brand - Management acknowledged that Penelope's performance exceeded expectations, leading to an increase in contingent liability on the balance sheet [68][84]

Core Insights - MGP reported a revenue of $121.65 million for the quarter ended March 2025, reflecting a 28.7% decline year-over-year, with EPS at $0.36 compared to $1.07 in the same quarter last year [1] - The revenue exceeded the Zacks Consensus Estimate of $113.26 million by 7.41%, while the EPS surpassed the consensus estimate of $0.31 by 16.13% [1] Financial Performance - MGP's branded spirits sales were $48.23 million, slightly below the estimated $48.51 million, marking a year-over-year decrease of 3.8% [4] - Ingredient solutions sales reached $26.48 million, exceeding the estimated $26.11 million, but showing a significant decline of 25.5% compared to the previous year [4] - Distilling solutions sales were reported at $46.94 million, surpassing the average estimate of $38.64 million, yet reflecting a substantial year-over-year drop of 44.7% [4] Market Performance - Over the past month, MGP shares have returned 4.2%, contrasting with a 0.7% decline in the Zacks S&P 500 composite [3] - MGP currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]