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MI

MGP INGREDIENTS INC (MGPI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $121.7M, down 29% YoY, with gross margin 35.6% (-120 bps YoY); adjusted EPS was $0.36 and adjusted EBITDA $21.8M as brown goods demand remained pressured and Ingredient Solutions faced supply challenges .
  • Versus S&P Global consensus, MGPI modestly beat revenue ($121.7M vs $117.2M*) and was roughly in line on EBITDA ($21.8M adjusted vs $19.5M* for EBITDA), while adjusted EPS was slightly below ($0.36 vs $0.374*) . Values with asterisks retrieved from S&P Global.
  • Management reaffirmed FY2025 guidance: sales $520–$540M, adjusted EBITDA $105–$115M, adjusted EPS $2.45–$2.75, capex ~$36M; liquidity improved via upsizing the revolver to $500M and extending the notes shelf to 2028 .
  • Key near-term stock narrative centers on: stabilization signs in Premium Plus brands (Penelope, El Mayor, Rebel 100), proactive contract resets in Distilling Solutions, and execution-driven recovery in Ingredient Solutions; risks include elevated industry barrel inventories and a cautious consumer backdrop .

What Went Well and What Went Wrong

What Went Well

  • Premium Plus portfolio sales rose 7% YoY, led by Penelope’s stronger-than-expected performance; brand innovation included Penelope Wheated and Penelope ready-to-serve cocktails, with distribution expansion planned .
  • Distilling Solutions gross margin held flat YoY at 39.8% despite a sharp sales decline, reflecting cost discipline and production optimization; management highlighted partnership-first actions and amended/extended contracts with customers .
  • Operating cash flow improved to $44.7M (+$20.1M YoY) and net debt leverage stayed ~1.6x; credit facility upsized to $500M with maturity extended to 2030, providing flexibility for contingent liability settlement and potential convertible note refinancing .

What Went Wrong

  • Consolidated sales fell 29% YoY to $121.7M and adjusted EBITDA fell 46% YoY to $21.8M, driven by a 49% decline in brown goods and lower specialty starch/protein volumes amid supply issues and Atchison closure complexities .
  • GAAP net income swung to a loss of $(3.1)M; change in fair value of the Penelope contingent consideration (+$14.7M) materially impacted GAAP results this quarter .
  • Ingredient Solutions gross margin compressed to 9.3% (from 17.4%), with execution and commercialization timing headwinds; management expects sequential improvement as projects come online and order patterns normalize .

Financial Results

Consolidated Performance vs Prior Quarters

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$161.5 $180.8 $121.7
Gross Margin %40.8% 41.2% 35.6%
EPS (Basic, GAAP)$1.07 $(1.91) $(0.14)
Adjusted EPS$1.29 $1.57 $0.36
Adjusted EBITDA ($USD Millions)$45.7 $53.1 $21.8

Year-over-Year (Q1 2025 vs Q1 2024)

MetricQ1 2024Q1 2025YoY Change
Revenue ($USD Millions)$170.6 $121.7 (29%)
Gross Margin %36.8% (implied from data)35.6% -120 bps
EPS (Basic, GAAP)$0.92 $(0.14) NM
Adjusted EPS$1.07 $0.36 (66%)
Adjusted EBITDA ($USD Millions)$40.2 $21.8 (46%)

Actuals vs S&P Global Consensus (Q1 2025)

MetricConsensus*Actual
Revenue ($USD Millions)$117.2*$121.7
EPS (Adjusted)$0.374*$0.36
EBITDA ($USD Millions)$19.5*$21.8 (Adjusted)

Values with asterisks retrieved from S&P Global.

Segment Breakdown (Q1 2025 vs Q1 2024)

SegmentQ1 2024 Sales ($M)Q1 2025 Sales ($M)YoY %Q1 2025 Gross Profit ($M)Q1 2025 Gross Margin %
Branded Spirits$50.1 $48.2 (4%) $22.2 46.0%
Distilling Solutions (Total)$84.9 $46.9 (45%) $18.7 39.8%
- Brown goods$66.3 $33.7 (49%) ——
- Warehouse services$8.0 $8.1 2% ——
- White goods & co-products$10.6 $5.2 (51%) ——
Ingredient Solutions$35.6 $26.5 (26%) $2.5 9.3%

KPIs and Cash/Liquidity

KPIQ1 2024Q1 2025
Advertising & Promotion ($M)$8.68 $8.17
Operating Cash Flow ($M)$24.62 $44.68
Capital Expenditures ($M)$13.1 (quarter to date capex from cash flow add’ns) $19.93 add’ns; $8.1 referenced as “declined 38%” (quarterly capex context)
Net Debt Leverage (TTM)~1.5x (Dec 31, 2024) ~1.6x (Mar 31, 2025)
Effective Tax Rate (GAAP)23.3% (28.1)%
Adjusted Effective Tax Rate23.3% 43.0%
Dividend Declared$0.12/sh (May 30 payable) $0.12/sh (declared May 1)

Guidance Changes

MetricPeriodPrevious Guidance (Feb 26, 2025)Current Guidance (May 1, 2025)Change
SalesFY 2025$520–$540M $520–$540M Maintained
Adjusted EBITDAFY 2025$105–$115M $105–$115M Maintained
Adjusted EPS (Basic)FY 2025$2.45–$2.75 $2.45–$2.75 Maintained
Shares (Basic Wtd Avg)FY 2025~21.3M ~21.3M Maintained
Effective Tax RateFY 2025~25% ~25% Maintained
CapexFY 2025~$36M ~$36M Maintained
Liquidity ActionsN/A—Revolver upsized to $500M; maturity to 2030; notes shelf to 2028 Increased flexibility

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 & Q4 2024)Current Period (Q1 2025)Trend
Brown goods inventories & demandRaised concerns; planned production cuts and cost optimization; DS sales down; industry inventories elevated 49% brown goods decline; proactive contract resets; 100% of contracted customers contacted; modifications to volume, mashbill, pricing/timing; stronger H1 than H2 expected Industry rationalization ongoing; visibility improving
Premium Plus brand momentumPremium Plus +1% in Q3; mix-led margin expansion; Q4 softness vs strong prior-year comp Premium Plus +7% YoY; Penelope outperformed; innovation launches (Wheated, ready-to-serve) Improving
Ingredient Solutions executionFX headwinds in Q3; Q4 margin improvement; restructuring post-Atchison closure Supply challenges from weather/Atchison closure; execution theme; deep well operational; biofuel facility on track H2 2025 Recovery expected sequentially
Productivity & cost actionsAnnounced plans to optimize cost structure; lower put-away in 2025 Productivity initiatives taking hold; operational scheduling changes; targeted vendor savings Ongoing improvement
Liquidity & balance sheetNet leverage ~1.3x (Q3); ~1.5x (FY) Net leverage ~1.6x; revolver upsized to $500M; shelf to 2028 Strengthened flexibility
Tariffs/macroMonitoring; category softening No material impact expected on FY results; monitoring consumer behavior Neutral currently

Management Commentary

  • “We are pleased with first quarter results that keep us on track to meet our full-year guidance… We saw signs of positive progress across all three of our business segments” — Brandon Gall, Interim CEO/CFO .
  • “Our Premium Plus portfolio continues to be the growth engine… Penelope, El Mayor, and Rebel 100… were the primary drivers of the 7% growth… innovation continued with Penelope Wheated and ready-to-serve cocktails” .
  • “We are taking decisive, proactive actions designed to derisk our brown goods business… amending and extending supply contracts” .
  • “Our key initiative [for Ingredient Solutions] is execution… deep well project is fully operational, and our new biofuel facility is on track to go live in the second half of 2025” .
  • “Given the encouraging first quarter results, we are reaffirming our 2025 guidance… sales $520–$540M; adjusted EBITDA $105–$115M; adjusted EPS $2.45–$2.75” .

Q&A Highlights

  • Distilling Solutions visibility: 100% of contracted customers engaged; majority modified orders; guidance contemplates pricing and volume resets; expect stronger H1 than H2; full-year DS: sales down ~50%, gross profit down ~65% .
  • Brown goods trajectory: Industry production declines (TTB data) suggest rationalization; plateau still hard to call, but overhang may persist into 2026; proactive actions aim to pull forward stabilization .
  • Branded mid/value stabilization: Price support and discounting in competitive categories (tequila, cordials, liqueurs) rolling out; agave cost declines temper margin trade-off .
  • Penelope: Q1 performance ahead of expectations, driving contingent liability increase; optimism sustained, innovation broadening consumer access points .
  • Whiskey put-away & inventory: Q1 put-away heavier due to production timing for brands; full-year net put-away expected to be $15–$20M, down from $33M in 2024; aged sales reduced DS inventory .

Estimates Context

  • Q1 2025 comparisons: Revenue beat ($121.7M vs $117.2M*), adjusted EPS slightly below ($0.36 vs $0.374*), EBITDA broadly in line ($21.8M adjusted vs $19.5M* EBITDA). Street tracks EBITDA (not adjusted EBITDA); management emphasizes adjusted EPS/EBITDA in guidance . Values with asterisks retrieved from S&P Global.
  • Forward consensus snapshot (S&P Global, quarterly):
    MetricQ2 2025Q3 2025Q4 2025
    EPS (Primary)0.65833*0.60333*0.48667*
    Revenue ($USD)138.58M*128.33M*133.60M*
    EBITDA ($USD)27.47M*25.56M*22.62M*

Values with asterisks retrieved from S&P Global.

Where estimates may need to adjust:

  • Branded Spirits Premium Plus momentum and higher A&P focus for Penelope/El Mayor/Rebel could support mix and margin assumptions vs prior models .
  • DS cadence skewed to H1 strength and H2 resets; consensus for H2 may need to reflect sharper contract modifications and volume timing .
  • Ingredient Solutions sequential recovery from execution projects and commercialization timing may lift H2 volumes/margins vs current run-rate .

Key Takeaways for Investors

  • Reaffirmed FY2025 guidance despite DS headwinds signals confidence in brand momentum and execution in Ingredients; liquidity actions reduce financing risk around contingent consideration and potential convert refi .
  • Early stabilization across segments with Premium Plus growth (+7%) and disciplined DS margin preservation (39.8%) underpin mix quality improvement despite revenue declines .
  • Proactive DS customer renegotiations (100% engaged) and contract amendments enhance visibility; expect H2 softness vs H1 as modifications phase in; monitor brown goods demand normalization .
  • Ingredient Solutions is an execution story: deep well online; biofuel in H2; expect sequential improvement as orders normalize; watch specialty starch (Fibersym) and protein commercialization .
  • Cash generation remains strong ($44.7M OCF), net leverage ~1.6x; revolver upsized to $500M boosts flexibility to manage near-term obligations and growth investments .
  • Brand innovation and value-access (Penelope Wheated at ~$35–$39, ready-to-serve at ~$20–$30) broaden the consumer funnel in a cautious spending environment, supporting Premium Plus resilience .
  • Near-term trading lens: Revenues/EBITDA beats vs consensus were modest; the narrative catalyst is guidance reaffirmation plus clear DS contract reset progress; risk remains H2 DS volume/pricing trajectory and Ingredients margin recovery .