Mitchell Pinheiro

Mitchell Pinheiro asked about anticipated changes in advertising and marketing (A&M) as e-commerce grows, specifically if money could be reallocated or if more focus is required. He also inquired about any changes in private label share in the current environment. Additionally, he asked if growing the eye care business back to prior levels would necessitate a sustained increase in marketing focus for 12 months. Lastly, he sought information on any new product news or extended category focus planned for 2027.

Answer

Ron Lombardi, Chairman, President, and CEO, stated that marketing strategies continuously evolve to connect with consumers, including aligning investments with e-commerce initiatives. He emphasized a focus on efficiency and effectiveness, with any additional funds reinvested in long-term brand building rather than cost savings. Lombardi noted that private label share remains stable, as consumers typically seek trusted brands for infrequent illnesses. He confirmed an increase in marketing for Clear Eyes as supply improves but expects to shift funds internally, avoiding an impact on the overall P&L profile. While generally not discussing products before retail, Lombardi highlighted Compound W's new skin tag product, which has quickly become the number one product in its category at mass and dot-com, showcasing the brand's power.

Mitchell Pinheiro asked about the evolution of advertising and marketing strategies with e-commerce growth, potential for cost savings, and the impact on private label share. He also inquired if increased marketing would be required for Clear Eyes as supply normalizes and sought updates on new product line extensions for 2027.

Answer

Ron Lombardi, Chairman, President, and CEO, stated that marketing evolves to connect with consumers, focusing on efficiency and effectiveness rather than cost savings, with any additional funds reinvested in brand building. He noted stable private label share, as consumers prefer trusted brands for infrequent purchases. Lombardi confirmed increased marketing for Clear Eyes as supply improves, funded by shifting resources without impacting the P&L profile. He highlighted the successful launch of Compound W's skin tag product, which quickly became the number one product in its category at mass and dot-com.

Mitchell Pinheiro asked Ryals McMullian to connect the generational shift in consumer preferences to economic weakness, particularly regarding the evolution of bread towards 'better for you' options. He also questioned the strategic importance of smaller regional brands like Merita and Sunbeam, the complexity they add, and whether the current 44-bakery count is optimal or if further consolidation opportunities exist.

Answer

Chairman and CEO Ryals McMullian explained that economic weakness contributes to trade-down, but the primary shift is a bifurcation of the traditional loaf category into premium differentiated or value, impacting Flowers Foods' concentrated position. He highlighted efforts to redefine traditional loaf with Nature's Own, noting strong unit growth in Canyon (6%) and Dave's Killer Bread (10%), and significant share gains in the small loaf category. McMullian stated that regional brands have been de-emphasized due to retailer consolidation but still play important roles in specific markets. He acknowledged complexity from innovation but views it as a short-term issue that will improve with targeted CapEx. Finally, McMullian confirmed ongoing evaluation of the cost structure and supply chain optimization, with efficiency being a top priority.

Mitchell Pinheiro asked about the interplay between generational shifts and economic weakness impacting the bread category, particularly the bifurcation into premium/value and the challenges for traditional loaf. He also questioned the strategic importance of smaller regional brands, the complexity they add, and the future outlook for bakery consolidation.

Answer

Chairman and CEO Ryals McMullian explained that economic uncertainty drives trade-down, and the category has bifurcated, pressuring traditional loaf. He highlighted efforts to redefine traditional loaf with Nature's Own, noting strong unit growth for Canyon and Dave's Killer Bread, and significant share gains in the small loaf category. He stated that regional brands have been de-emphasized due to retailer consolidation but still play roles in specific markets. He acknowledged that innovation adds short-term complexity and margin pressure but is necessary for consumer demand, with future efficiency gains expected from targeted CapEx. He confirmed ongoing evaluation of the cost structure and supply chain optimization.

Mitchell Pinheiro questioned the timeline for the company's strategic 'transition,' asking if it's a five-year process or if near-term fixes exist. He also asked about levers to protect gross margin amid lower volumes and the company's appetite for M&A given its current leverage.

Answer

Chairman & CEO A. Ryals McMullian described the shift as 'generational' and declined to set a specific timeline, emphasizing patience is needed. He noted that levers to protect margins include bakery optimizations, improving path-to-market efficiencies, and shifting the portfolio to higher-margin business, such as in foodservice. On M&A, he stated the current focus is on debt paydown, suggesting acquisitions are more likely 'over time,' but mentioned that non-cash deals could be an option.

Mitchell Pinheiro asked for a timeline on the company's strategic 'transition,' questioning if it's a multi-year process. He also asked about levers to protect gross margin amid lower volumes and inquired about the company's appetite for M&A given its current leverage.

Answer

CEO A. Ryals McMullian described the shift as 'generational' and declined to set a specific timeline, advising that patience is needed. To protect margins, he pointed to levers like bakery closures, supply chain efficiencies, and portfolio optimization to replace lower-margin business. Regarding M&A, McMullian stated the current focus is on debt paydown, making significant acquisitions more likely 'over time,' but noted that non-cash transactions remain a possibility.

Mitchell Pinheiro of Sturdivant & Company asked for a breakdown of the reduced EBITDA margin guidance between gross margin and SG&A. He also questioned the company's confidence in achieving its long-term 12-14% EBITDA margin target and inquired about consumption patterns of lower-income consumers.

Answer

CFO Steve Kinsey explained that the majority of the EBITDA margin pressure would impact the gross margin line, driven by weaker category trends and tariff impacts, with some SG&A cost savings planned for mitigation. CEO Ryals McMullian reaffirmed confidence in the long-term margin targets but acknowledged the current environment is a setback that may extend the timeline. Regarding consumers, McMullian noted an overall pullback in consumption across all income groups.

Mitchell Pinheiro of Sturdivant & Co. inquired about the full-year outlook, asking why revenue guidance was withheld while EBITDA is expected to grow. He also sought details on the visibility for the fall turnaround season, the persistent weakness in the midstream business, the practical meaning of a 'proactive partnership' with customers, and the drivers behind increased bid activity, particularly in the power generation sector.

Answer

CEO Natalia Shuman explained that revenue guidance is uncertain due to ongoing portfolio reviews, the impact of exiting unprofitable labs, and market volatility. She confirmed a strong fall turnaround backlog provides good visibility for the second half. Shuman acknowledged that the midstream business faced competitive and pricing challenges but noted a leadership change has been made to address this. She defined a 'proactive partnership' as a shift from transactional relationships to strategic alignments that showcase Mistras' full integrated service portfolio. She attributed increased bid activity to a strengthened sales team and expressed strong optimism for growth in the power generation market, driven by demand from data centers.

Mitchell Pinheiro of Sturdivant & Co. asked for specifics on how tariffs are affecting customer decisions, the impact of oil prices below $60, the reasons for continued weakness in the midstream business, and for clarification on the full-year adjusted EBITDA outlook.

Answer

CEO Natalia Shuman explained that the tariff impact is indirect, causing customers to pause spending, but could be a long-term positive. She noted that midstream weakness was due to temporary customer budget restrictions and that the business model is built to flex with oil prices. Shuman confirmed the company expects full-year 2025 adjusted EBITDA to at least meet or exceed 2024 levels. CFO Ed Prajzner added that this outlook implies revenues will not be far off from the prior year, given the company's focus on cost controls.

Mitchell Pinheiro of Sturdivant & Company asked about the potential impact of U.S. foreign tariffs, the rationale for delaying 2025 guidance, the persistent weakness in the midstream oil & gas business, the strategy for the data analytics segment, and the sustainability of the Q4 SG&A expense run rate.

Answer

Executive Chairman Manuel Stamatakis clarified that the delay in guidance is to allow new CEO Natalia Shuman time to conduct a full business review, not solely due to tariffs, which SVP and CFO Edward Prajzner noted are still being assessed. President and CEO Natalia Shuman explained that while midstream saw project delays in 2024, she expects growth in 2025 driven by pending regulatory changes. She also reaffirmed the strategy for data analytics is to continue investment and expand its integrated offerings. Edward Prajzner confirmed that the Q4 SG&A level is a sustainable run rate for modeling going forward, reflecting internalized cost discipline from Project Phoenix.

Mitchell Pinheiro of Sturdivant & Company asked about the cause of the decline in the midstream oil and gas segment, the potential impact of falling oil prices, the specific reasons for project pushouts in data analytics and aerospace, the connection between project delays and high accounts receivable, the rationale for lowering EBITDA guidance more than revenue guidance, and the status of the company's reorganization efforts and associated costs.

Answer

Executive Edward Prajzner explained the midstream decline was due to a tough comparison against a large, non-recurring project in the prior year. He stated that falling oil prices are not expected to impact 2025 plans and that aerospace delays stem from supply chain issues. Prajzner also clarified there is no link between project pushouts and high AR, which is a collections issue, not a customer credit issue. The lower EBITDA guidance reflects an unfavorable sales mix from delays in higher-margin businesses. Executive Manuel Stamatakis added that data analytics delays were due to customer timing but expects a return to mid-teen growth in 2025. He described the reorganization as being in the 'sixth or seventh inning,' with more efficiency improvements planned for 2025.

Mitchell Pinheiro from Sturdivant & Co. questioned how improved visibility in the Distilling Solutions segment benefits the company, particularly on margins. He also asked about the composition of the net barrel put away, participation in the RTD trend, and which brands in the portfolio were underperforming relative to Penelope's strength.

Answer

CFO Brandon Gall explained that visibility provides confidence and allows for better operational planning, which helps margins. He stated most of the $15-20M net put away is for MGPI's own brands like Penelope, with some for long-term customer agreements and opportunistic market purchases. He confirmed participation in the RTD trend via white goods and American whiskey sales. Gall noted that weakness in the Premium Plus portfolio was primarily in a couple of larger volume American whiskey brands, which the company is addressing with pricing and innovation.

Mitchell Pinheiro asked for clarification on the barrel distillate put away, questioning if the increase was solely for Branded Spirits. He also inquired if lower production volumes would lead to higher costs for newly aged distillate and sought commentary on promotional pricing trends in the whiskey category.

Answer

Mark Davidson, VP & Corporate Controller, confirmed the Q1 increase in net whiskey put away was solely for the Branded Spirits business and was front-loaded due to production scheduling, with the full-year put away still expected to decrease significantly. Brandon Gall, Interim CEO & CFO, acknowledged that lower production volumes impact overhead absorption but stated that productivity initiatives are in place to keep costs competitive. He also noted that instead of direct price cuts, the industry, including MGP's Penelope brand, is offering value through innovation at accessible price points.

Mitchell Pinheiro of Sturdivant & Co. asked about the 2025 whiskey putaway plans, the fungibility of inventory between wholesale and branded use, and which customer segment is expected to lead the eventual recovery in distilling. He also questioned if this downturn accelerates MGP's strategic shift to a branded spirits company and inquired about the M&A outlook.

Answer

Brandon Gall, Interim President, CEO, and CFO, confirmed that the 2025 net putaway is primarily for MGP's own brands and that inventory is fungible between segments. He suggested the recovery will be driven by larger national/multinational customers and strong craft brands. Gall agreed that the downturn accelerates the strategic shift to a branded spirits company, reinforcing the rationale for the Luxco and Penelope acquisitions. While stabilizing the business is the top priority, he stated M&A remains part of the long-term strategy.

Mitchell Pinheiro of Sturdivant & Co. inquired about the composition of the barrel distillate inventory, asking if the recent increase was for MGP's own brands and if the average age of inventory was rising. He also questioned if the Luxco facility expansion would create negative leverage in 2025 and asked for commentary on whether the industry slowdown was caused by on-premise vs. off-premise shifts or consumer pantry destocking.

Answer

CFO Brandon Gall clarified that net whiskey put-away is down year-over-year and that in 2025, all new barrels will be for MGP's own brands. CEO David Bratcher added that while the average age of the total inventory remains relatively young, they have intentionally grown aged inventory for their own brands to support premiumization. Gall stated they do not expect the Luxco expansion to be a material headwind. Bratcher attributed the market slowdown to a broader correction to pre-COVID trends and macro pressures, rather than a specific on-premise/off-premise shift.

Mitchell Pinheiro of Sturdivant & Co. inquired about several key areas, including the pineapple supply outlook through 2026, the distribution and supply constraints of PinkGlow pineapples, drivers of growth in the fresh-cut fruit business, the impact of Black Sigatoka on banana supply and pricing, the company's vessel fleet strategy, and the source of recent equity earnings and foreign exchange impacts.

Answer

Chairman & CEO Mohammad Abu-Ghazaleh confirmed an ongoing pineapple supply shortage and detailed global expansion plans, with meaningful increases expected in 2-3 years. He noted PinkGlow supply is constrained but acreage is expanding, with strong international demand. For fresh-cut fruit, growth is driven by retail and convenience stores globally, with innovation like fresh guacamole showing strong results. He elaborated on the severe impact of Black Sigatoka on banana supply, which is down over 20% in Costa Rica. Regarding the fleet, he clarified the two vessels being sold serviced Asia and are being replaced by container lines. SVP & CFO Monica Vicente detailed the positive impact of the Euro and Pound, while Abu-Ghazaleh highlighted the offsetting headwind from the strong Costa Rican Colón.

Mitchell Pinheiro of Sturdivant & Co. asked about consumer demand trends amid economic pressure, competitive advantages from logistical disruptions, the market's handling of tariffs, performance in the avocado and fresh-cut categories, and the supply-demand dynamics in the core pineapple business.

Answer

Chairman and CEO Mohammad Abu-Ghazaleh stated that consumer demand remains solid and that FDP's integrated supply chain provides a key advantage over competitors. He explained that tariffs are being mitigated cooperatively with buyers. Abu-Ghazaleh also highlighted strong growth in avocados and fresh-cut guacamole, and attributed pineapple supply tightness to rising consumer demand due to its value and health benefits.

Mitchell Pinheiro of Sturdivant & Co. inquired about the company's core growth drivers, specifically asking about pineapple supply constraints and pricing, fixed cost leverage in fresh-cut fruit, and the potential impact of tariffs on the avocado business. He also questioned the strategy for diversifying avocado sourcing beyond Mexico and the long-term plan for the lower-margin banana segment, given new production initiatives in Somalia and Brazil.

Answer

Chairman and CEO Mohammad Abu-Ghazaleh explained that Fresh Del Monte is expanding pineapple production globally, including a new patented disease-resistant variety in Brazil, and that any potential avocado tariffs would be passed on to consumers. He affirmed the high quality of avocados from alternative sources like Peru and Colombia. Regarding bananas, he detailed how the new Somalia operation will significantly reduce transit times to the Middle East and Europe, improving margins for what remains a core business. SVP and CFO Monica Vicente added that pineapple pricing is expected to remain strong or improve.

Mitchell Pinheiro of Sturdivant & Co. inquired about the specifics of the Mann Packing restructuring, including the nature and timing of the projected $15-20 million in annual savings. He also asked about the drivers behind the strong performance in the Fresh and Value-Added segment, questioning the mix of volume versus price and the sustainability of its double-digit gross margin. Additionally, Pinheiro sought details on the sales contribution from new pineapple innovations, the outlook for the Banana segment's volume and pricing, and an update on new ventures like biofertilizers.

Answer

SVP and CFO Monica Vicente confirmed the $15-20 million annual profitability improvement from the Mann Packing consolidation would begin in 2025, clarifying it's a further consolidation of three facilities into one. Chairman and CEO Mohammad Abu-Ghazaleh added that this streamlines logistics and reduces fixed costs. Regarding the Fresh and Value-Added segment, Vicente stated that growth was primarily volume-driven and that double-digit margins are the new baseline, with a long-term goal of low-teens. Abu-Ghazaleh explained that achieving this goal will be a gradual process, similar to the multi-year development of the fresh-cut business, and will be aided by new biomass ventures. For the Banana segment, Vicente reiterated the full-year guidance for lower volume and pricing, while Abu-Ghazaleh provided context on rising global production costs and disease pressure, explaining the company's strategy to prioritize margins over volume. He also confirmed the new biofertilizer plant in Kenya has begun trial production.

Inquired about the drivers of the strong Q4 e-commerce performance, the mix of new versus recurring customers, learnings from the NIAGEN IV launch, the pace of clinic additions, and confidence in the supply chain.

Answer

E-commerce growth was driven by improved performance on both Amazon and Shopify, plus increased general awareness of NAD. Growth was primarily from new customers. The NIAGEN IV launch has been well-received by patients who prefer it over traditional NAD IV. The company is now in about 500 clinics and expects to double that by year-end. Initial supply chain hiccups related to logistics and paperwork have been resolved, and the company is confident in its ability to meet future demand.

Mitchell Pinheiro asked about the impact of private label on the potato chip category, noting anecdotally improved quality. He also questioned if the strong Q3 gross margin performance is sustainable or if it's at risk from the promotional environment.

Answer

CEO Howard Friedman explained that private label struggled in Q3 when branded competitors discounted down to private label price points, which he believes affirms the power of brands. CFO Ajay Kataria addressed the margin question, stating the strong performance will continue, with full-year gross margin expansion expected to exceed 250 basis points. He credited strong productivity programs, which are offsetting price and mix investments.

Mitchell Pinheiro from Sturdivant & Co. questioned if the decision to lower the dividend and cut CapEx signaled that the recovery to historical EBITDA levels, like those in fiscal 2019, is further off than previously expected. He also asked about any structural changes in the Grown business and the outlook for gross margin improvement in the Prepared segment.

Answer

President and CEO Brian Kocher responded that progress towards their EBITDA goals has slowed due to market conditions, but the situation has not worsened. He explained the dividend and CapEx adjustments reflect fiscal discipline and aligning metrics with peers, not a cash flow crisis. He expressed confidence in the Grown segment's model to deliver target margins over time despite volatility. CFO Shawn Munsell added that sticky retail prices also compressed wholesale margins. Both confirmed that Prepared gross margins are expected to improve gradually through the year.