MGP Ingredients, Inc. Q4 FY2025 earnings call

Finished 2025 above top end of guidance; 2026 industry likely challenging but confident in future; Branded Spirits segment as primary growth engine, focusing on Premium Plus category with Penelope Bourbon, rationalizing portfolio; Distilling Solutions segment repositioning, broadening premium white goods offerings; Ingredient Solutions segment enjoying consumer-driven tailwinds, focusing on supply side and operational excellence; Enterprise-wide productivity agenda embedded in operations.

Branded Spirits segment: Fourth quarter sales declined 1%, full-year declined 3%; Premium Plus sales growth outperformed overall category by 900 basis points in 2025. Distilling Solutions segment: 2025 full-year sales and gross margin declined significantly; 2026 expected to be another down year with sales down 35% and gross profit down 40%. Ingredient Solutions segment: Fourth quarter sales declined 10%, full-year declined 7%; Equipment outage and higher waste stream disposal costs were key drivers; 2026 expected strong double-digit growth in segment sales and improved gross margins.

2026 net sales expected $480 - $500 million; adjusted EBITDA $90 - $98 million; adjusted basic earnings per share $1.50 - $1.80; first quarter tax rate ~75% due to share-based awards vesting; Distilling Solutions sales down 35% and gross profit down 40% in 2026; Ingredient Solutions expected segment sales $140 - $150 million and mid- to high-teens gross margin.

Operating backdrop challenging for spirits industry; Distilling Solutions facing oversupply situation; Ingredient Solutions facing complex and costly waste treatment and disposal; Penelope earn-out payment and convertible note refinancing impact on net debt leverage.

Q: What are you seeing and expecting regarding pricing in the industry and credit facility limitation on Penelope payment?

A: Pricing rational; credit facility has no limitations on Penelope payment.

Q: Curious if expectations for down year take into account year-to-date scanner data and visibility on brown goods?

A: 2026 guidance reflects industry and visibility; Distilling Solutions has good visibility on contracts.

Q: More visibility on Distilling Solutions guidance building blocks?

A: Aged and new distillate mostly under contract; Ingredient Solutions to improve sequentially.

Q: Rationalizations in Branded Spirits segment impact on guidance and monetization?

A: No impact on 2026 guidance; some divested with recovering packaging and inventory cost.

Q: Impact of mechanical challenges and waste stream cost in Ingredients segment?

A: Waste stream complex and costly, expecting sequential improvement in 2026.