Financial Data and Key Metrics Changes - Consolidated sales decreased by 24% to $145.5 million compared to the prior year period [26] - Adjusted EBITDA decreased by 38% to $35.9 million, primarily due to lower gross profits [30] - Basic earnings per common share decreased to $0.67, while adjusted basic EPS decreased 43% to $0.97 [30] - Year-to-date operating cash flows increased to $56.4 million from $29.6 million in the same period last year [10] Business Line Data and Key Metrics Changes - Branded Spirits segment sales decreased by 5%, with a 1% increase in Premium Plus sales [26][10] - Distilling Solutions segment sales declined by 46%, primarily driven by a 54% decline in brown goods sales [26] - Ingredient Solutions sales increased by 5%, driven by a strong rebound in specialty wheat protein sales [26] Market Data and Key Metrics Changes - Overall economic uncertainty, persistent inflation, and higher interest rates continue to weigh on consumer sentiment, which fell to a multi-year low during the quarter [11] - Consumer confidence improved slightly last month, but discretionary spending remains cautious [11] Company Strategy and Development Direction - The company aims to become a premier branded spirits company, focusing on fewer but more attractive growth opportunities [5][12] - Key brands such as Penelope, El Mejor, and Rebel 100 are prioritized for investment [12] - The company is partnering with Breakthrough Beverage Group for distribution in California to drive growth [15] Management's Comments on Operating Environment and Future Outlook - The external environment remains challenging, but the company continues to execute with discipline and make progress on key initiatives [11] - Management expects the Distilling Solutions segment to see stronger sales and profits in the first half of the year compared to the second half [18] - The company remains confident in its ability to build on progress and achieve full-year guidance [32] Other Important Information - The company reaffirmed its 2025 guidance, expecting net sales in the range of $520 million to $540 million and adjusted EBITDA between $105 million and $115 million [23] - The balance sheet remains strong, with net debt leverage under two times and over $600 million in availability under debt facilities [22] Q&A Session Summary Question: Update on new distillate contracts and revenue visibility - Management confirmed that no contracts have been canceled, and most have been confirmed or amended, providing good visibility for the remainder of 2025 [38][40] - The back half of the year is expected to be lighter due to contract resets, but this was anticipated in guidance [40] Question: Insights on branded margins and advertising spending - Branded Spirits margins are strong, primarily due to the Premium Plus portfolio, but may be lighter in the back half of the year [55] - Advertising and promotion expenses were down significantly, with a focus on high-margin brands [56] Question: Inventory rationalization and competitive environment - The company is seeing positive signs in inventory dynamics, but acknowledges that it will take time to fully rationalize [66] - Management believes that partnerships and long-term relationships with customers are crucial in the current environment [68] Question: Clarification on paused purchases versus canceled contracts - Management views paused purchases as temporary, with confidence that they will resume, albeit potentially at lower volumes [76] Question: Update on SG&A expenses and incentive compensation - SG&A expenses are expected to remain elevated due to reinstated incentive compensation, but adjusted SG&A showed an 8% decline [78] Question: Participation in ready-to-drink segment growth - The company is participating in the ready-to-drink segment growth through various offerings, including American whiskey [95] Question: Performance of other brands in the Premium Plus segment - Penelope continues to show strong momentum, while some larger volume American whiskey brands are experiencing declines [98]