MGP INGREDIENTS INC (MGPI)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered better-than-feared headline results: adjusted EPS $0.97 and adjusted EBITDA $35.9m, with consolidated sales $145.5m; management reaffirmed full-year 2025 guidance and lowered capex to ~$32.5m .
• Against Wall Street consensus, MGPI posted a broad-based beat: revenue $145.5m vs $138.6m*, adjusted EPS $0.97 vs $0.66*, and adjusted EBITDA $35.9m vs $27.5m*; Premium Plus brands grew 1% and Ingredient Solutions returned to growth (+5%) .
• Distilling Solutions remained under pressure (sales -46% YoY; brown goods -54%), but contract visibility improved with no cancellations and customer renegotiations largely confirmed or amended; segment margins compressed to 37.6% and are expected to trend mid-20% in 2H .
• Strategic focus and AMP reallocation toward Penelope, El Mayor, and Rebel 100 continued; Branded Spirits A&P fell 41% YoY (Q2) and stood at ~10% of segment sales, with full-year branded A&P targeted at ~12% (Premium Plus closer to ~25%) .
• Liquidity and balance sheet remain solid (net debt leverage ~1.8x; strong YTD operating cash flow $56.4m); a $0.12 quarterly dividend was declared May 1 .

What Went Well and What Went Wrong

What Went Well

• Premium Plus resilience and brand focus: Premium Plus sales grew 1% with strong Penelope momentum and planned innovation (e.g., Weeded, RTP cocktails); management emphasized “Focus” behind higher-ROI brands .
  “Focus… Penelope, El Mayor, and Rebel 100 are all reacting in a positive way” .
• Ingredient Solutions back to growth: segment sales +5% YoY and sequential improvement across lines; domestic commercialization offset prior export softness; gross margin improved to 21.7% .
• Improved customer visibility in distilling: no contract cancellations; majority confirmed or amended; brown goods volume/pricing in line with expectations; industry discipline (TTB production cuts) supportive for normalization over time .

What Went Wrong

• Brown goods downturn weighed on consolidated results: Distilling Solutions sales -46% YoY, gross profit -56%, gross margin -790 bps YoY; management still expects DS sales down ~50% and gross profit down ~65% for FY25 .
• Mid/value brand softness: combined down nearly 15% YoY (Q2) amid heightened price competition in tequila, liqueur and cordials; full-year mid/value now expected down low double digits (worse than prior mid-high single-digit view) .
• Non-cash/adjustment headwinds: Q2 included an $8.0m increase in contingent consideration (Penelope performance) that pressured GAAP net income; similar dynamic weighed Q1 results .

Financial Results

Quarterly Actuals

Segment Breakdown (Q2 YoY)

Branded Spirits Mix (Q2 YoY)

KPIs

Results vs Consensus (Q2 2025)

Values retrieved from S&P Global.*

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our decisive actions to improve visibility with our customers are working… brown goods volume and price declines were in line with our expectations… we reaffirm our 2025 outlook” — Brandon Gall, CFO .
• “Our goal continues to be delivering sustainable growth and unlocking meaningful, long-term value… strengthen our customer-centric, brands-led approach” — Julie Francis, CEO .
• “Focus… we expect a healthy double-digit percentage increase in AMP for Penelope, El Mayor, Rebel 100 collectively, even as overall AMP spend will be down” — CFO .
• “TTB data… total U.S. whiskey production down 14% LTM, -24% last six months, -28% last three months” — CFO .

Q&A Highlights

• Distilling visibility and trough: Majority contracts confirmed/amended; back-half lighter than first-half; DS sales expected ~-50% in FY25; trough visibility improving but cycle persists into 2026 .
• Aged whiskey dynamics: Craft/regional customers prefer direct MGPI relationships; selective aged sales without discounting; unique position offering both aged and new distillate .
• Branded margin and AMP phasing: Strong Q2 branded margins; AMP down YoY on timing; full-year branded AMP ~12% of sales (Premium Plus ~25%) .
• Ingredient Solutions exports and domestic offset: Japanese Arise demand still present but lower; domestic customers replacing export volumes; specialty protein +13% YoY (Q2) .
• Tariffs: Monitoring; not in outlook; potential tequila/EU impacts; mitigation across supply chain .

Estimates Context

• Revenue beat: $145.5m vs $138.6m*; Adjusted EPS beat: $0.97 vs $0.66*; Adjusted EBITDA beat: $35.9m vs $27.5m* .
• Estimate dispersion: 6 EPS* and 5 revenue* contributors; momentum and reaffirmed guidance suggest near-term estimate stabilization; mid/value softness likely pushes mix/AMP assumptions lower while Premium Plus assumptions move higher .
  Values retrieved from S&P Global.*

Key Takeaways for Investors

• Beats on revenue, adjusted EPS, and adjusted EBITDA with reaffirmed FY25 guidance and reduced capex are likely constructive for sentiment; watch for continued Premium Plus momentum (Penelope RTP, Weeded) .
• Distilling Solutions remains the swing factor: improved visibility (no cancellations) but lighter 2H and margin pressure (mid-20% expected); industry production cuts supportive longer term .
• AMP reallocation is working: lower total spend but higher concentration behind focus brands; sustained high spend vs Premium Plus sales (~25%) could underpin brand equity and mix .
• Ingredient Solutions inflecting: domestic customer onboarding and operational improvements support 2H sales/profitability vs 1H; biofuel facility ramps to mitigate waste starch costs over time .
• Balance sheet and cash generation support flexibility: net leverage ~1.8x, strong YTD CFO; dividend continuity ($0.12) and reduced capex bolster FCF .
• Watch guidance nuances: Premium Plus raised to low-single-digit growth; mid/value cut to low double-digit declines; DS gross profit may be “a little better” than prior -65% expectation .
• Risk monitor: tariff implementation timing (tequila/EU) not in guidance; consumer caution persists; competitive pricing pressure in value tiers .