MGP Ingredients, Inc. Q1 FY2026 earnings call

• Focused on areas controllable, sharpening strategic focus and execution. - Maintained momentum in Premium Plus portfolio, solid growth in ingredient solutions. - Announced temporary idling of distilling operations in Kentucky. - For Brand and Spirits: Focus on premium plus category, prioritize best-performing brands, rationalize tail brands, increase national accounts penetration and digital marketing capabilities. - For Distilling Solutions: Rebuild aged whiskey pipeline, broaden premium white goods offerings, attract and retain customers. - For Ingredient Solutions: Drive growth through specialty products, implement new processes for operational excellence, manage waste disposal costs.

Brand and Spirits: First quarter sales down year over year, but premium plus and mid-price tiers saw growth. Gross margin expanded 180 basis points to 47.8%. Premium plus sales increased 1.5%, Penelope bourbon sales up 10% year over year. Yellowstone saw early signs of stabilization and recovery. Mid and value price portfolios combined sales declined 3% but trends improving. Distilling Solutions: Segment sales $28 million, down 40% year over year. Gross profit $8.6 million, down 54%. Brown Good customers expansion efforts taking hold. Premium white goods efforts in progress. Warehouse services made up approximately 30% of segment sales, sales and gross profit up year over year. Ingredient Solution: Sales $34.2 million, up 29% year over year. Gross profit $3.8 million, up 56%. Gross margin 11.2%, up nearly 200 basis points. Operational reliability improved, but fluid disposal costs complex and costly.

• Reaffirm 2026 net sales between $480 million to $500 million. - Adjusted EBITDA projected to range from $90 million to $98 million. - Adjusted basic earnings per share range between $1.50 and $1.80. - Average shares outstanding ~21.4 million for full year. - Annual tax rate expected to be ~27%. - Excluding Penelope earn-out payment, 2026 free cash flows $30 million to $35 million. - White goods sales outlook reduced, expected up mid-single digits. - Ingredient solutions full-year segment gross margins expected in mid-teens. - Branded spirits full-year outlook unchanged.

• Industry backdrop remains challenging. - Temporary idling of distilling operations in Kentucky affects employees but not product availability. - Fluid disposal costs more complex and costly than initially projected for ingredient solutions. - Uncertainty around customer demand and market normalization for distilling solutions.

Q: Get more detail on early learnings from portfolio review in branded spirits, approach to review, investment in brands, impact on capacity, distributor alignment.

A: Discontinued over 30 tail brands, expect 20 basis point annualized improvement. Brought in new marketing capabilities, did comprehensive reviews of portfolios, prioritized best-performing brands, increased digital media investment, Yellowstone saw double-digit growth. Inventory reduction, improved line efficiency, distributor focus on top 10 brands.

Q: More color on gross margin comments, 20 basis point improvement run rate, impact on ingredient solutions gross margin.

A: 20 basis point is annualized run rate. Ingredient solutions operational reliability improved, but gross margin impacted by fluid disposal costs, expect mid-teens by end of year, impact to linger into next year but improve.

Q: Color on distilling solutions, customer needs, timing to demand inflection, 2026 outlook, decision to idle Kentucky distilling, capacity impact, impact on outlook.

A: 2026 likely trough year for distilling solutions, customer conversations active, pragmatic and constructive. Decision to idle due to inventory alignment, impacts modest portion of capacity, no impact on brand or distilling outlook.

Q: Color on onboarding 20 new customers in distilling solutions, customer base, age vs new customers, context, tax line, cash taxes given non-cash expenses.

A: 75% new to industry customers, 25% from competitors, brown goods aged purchases. Cash taxes optimized through OCM initiative, expecting ~27% tax rate for full year, Q1 wonky due to discrete things but cash management mindset in full force.