Executive Summary

Q3 2025 was mixed but better-than-feared: revenue fell 19% YoY to $130.9M, gross margin contracted 300 bps to 37.8%, and adjusted EPS was $0.85; management raised FY25 adjusted EBITDA ($110–$115M) and adjusted EPS ($2.60–$2.75) while tightening sales to $525–$535M .
Results beat S&P Global consensus: EPS $0.85 vs $0.60 est; revenue $130.9M vs $128.3M est; Q2 also beat on both metrics, indicating estimate risk was skewed conservatively through mid-year.*
Branded Spirits premium plus grew (+3% YoY) with Penelope’s momentum; Distilling Solutions sales fell 43% YoY but margins benefited from higher-than-expected aged whiskey sales; Ingredient Solutions grew +9% but margin was pressured by an equipment outage and waste starch disposal costs .
Cash generation and balance sheet remain supportive: YTD operating cash flow $92.5M; total debt $268.7M; net debt leverage ~1.8x—adequate flexibility while absorbing the Penelope contingent consideration .

What Went Well and What Went Wrong

What Went Well
- Premium plus portfolio outperformed, led by Penelope; Branded Spirits gross margin expanded 120 bps to 53.0% despite modest sales decline. “Penelope now ranks among the top 30 premium plus American whiskey brands… second fastest growing… over the last 52 weeks.”
- Distilling Solutions margins held better than planned driven by incremental aged whiskey demand and strong cost control as operations were “ramped down” efficiently .
- Raised FY25 adjusted EBITDA and EPS guidance on execution and mix discipline, while maintaining capex/tax/share assumptions, signaling confidence into Q4 .
What Went Wrong
- Ingredient Solutions margin compressed to 10.3% (vs 17.6% LY) due to an unanticipated equipment outage, elevated waste starch disposal costs during the biofuel facility startup, and higher startup costs in textured proteins .
- Distilling Solutions sales down 43% and brown goods down 50% YoY amid elevated industry inventories and pauses from large customers; gross margin declined to 34.7% (–510 bps YoY) .
- Consolidated gross margin fell 300 bps to 37.8% and adjusted EBITDA declined 29% YoY to $32.3M on lower brown goods and ingredient margin headwinds .

Financial Results

Quarterly performance vs sequential and YoY:

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue ($M)	$121.7	$145.5	$130.9
Gross Margin (%)	35.6	40.1	37.8
GAAP EPS	$(0.14)	$0.67	$0.71
Adjusted EPS	$0.36	$0.97	$0.85
Adjusted EBITDA ($M)	$21.8	$35.9	$32.3

Non‑GAAP reconciliation note: Q3 adjusted EPS ($0.85) adds back fair value of contingent consideration ($0.10/sh) and executive transition costs ($0.04/sh) vs GAAP EPS $0.71 .

Segment performance (Q3 2025 vs Q3 2024):

Segment	Q3 2024 Sales ($M)	Q3 2025 Sales ($M)	YoY %	Q3 2024 GM%	Q3 2025 GM%
Branded Spirits	$62.6	$60.7	(3)%	51.8	53.0
Distilling Solutions	$71.9	$40.9	(43)%	39.8	34.7
Ingredient Solutions	$26.9	$29.3	+9%	17.6	10.3

Select KPIs:

KPI	Q1 2025	Q2 2025	Q3 2025
A&P as % of Branded Spirits sales	~16%	~10%	~10%
Capex ($M)	$8.1	$10.6	$7.0
Total Debt ($M)	$297.1	$297.1	$268.7
Net Debt Leverage (x)	1.6x	1.8x	1.8x

Guidance Changes

Metric	Period	Previous Guidance (Q2 report)	Current Guidance (Q3 report)	Change
Sales	FY 2025	$520–$540M	$525–$535M	Tightened
Adjusted EBITDA	FY 2025	$105–$115M	$110–$115M	Raised (midpoint)
Adjusted Basic EPS	FY 2025	$2.45–$2.75	$2.60–$2.75	Raised (floor)
Effective Tax Rate	FY 2025	~25%	~25%	Maintained
Basic Avg. Shares	FY 2025	~21.4M	~21.4M	Maintained
Capex	FY 2025	~$32.5M	~$32.5M	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Distilling inventory reset & customer pauses	Lean-in partnership; distilling sales/GP to be down ~50%/~65% FY; industry production declining; visibility improving but H2 heavier reset	Aged sales mix better than plan; crafts shifting to just-in-time; large multinationals paused; expect headwinds into 1H26 with potential moderation in back half	Stabilizing; slow normalization
Premium plus brands (Penelope, El Mayor, Rebel 100)	+7% in Q1; +1% in Q2; Penelope innovations (Weeded; Peach Old Fashioned)	Premium plus +3% in Q3; Penelope among top 30 and 2nd fastest growing 52W; new Black Walnut Old Fashioned	Positive momentum
Ingredient Solutions execution	Q1 supply challenges; Q2 sequential improvement; biofuel online July	Equipment outage; higher disposal/startup costs; remediation underway; biofuel shipped first tanker Sept; full reliability improving into early 2026	Near-term headwinds; medium-term fix
Tariffs	Not material to outlook; monitoring	Some tariff pressure (mostly dry goods); contemplated in FY guide	Managed risk
AMP discipline	Reallocated to focus brands; A&P –41% in Q2; branded ~10% of sales	A&P –31% in Q3; branded ~10% of sales (FY ~12%)	Efficient spend mix

Management Commentary

Strategic focus and portfolio discipline: “We are conducting an exhaustive strategic review… prioritizing the brands with the greatest potential… while trimming persistent underperformers.”
Brand momentum: “Our premium plus portfolio once again outperformed… Penelope… now ranks among the top 30 premium plus American whiskey brands… second fastest growing… 52 weeks.”
Customer engagement and recognition: “Diageo North America named MGP Ingredients as one of its distinguished suppliers” underscoring long-term partnership .
Operations remediation: “Decisive actions to strengthen operational reliability… increased plant staffing, raised maintenance capital, engaged an external engineering firm… implementing predictive analytics and enhanced preventive maintenance.”
Financial stance and guidance: “We ended the quarter with total debt of $269 million and a net debt leverage ratio of 1.8x… we are raising our full year adjusted EBITDA and adjusted EPS guidance…” .

Q&A Highlights

Distilling margins outperformed expectations due to a larger volume of aged whiskey sales and tight cost management while ramping down production; crafts are increasingly buying aged barrels to innovate at different price points .
Customer pauses: Large multinationals have paused whiskey purchases; visibility into 2026 expected by spring; crafts shifting from “just‑in‑case” to “just‑in‑time,” increasing volatility but supported by MGP’s broad customer base .
Ingredient Solutions recovery: Key dryer rebuilt and due back online by end of October; execution improvements (staffing, maintenance capex, analytics); remediation to extend into early 2026; biofuel shipped first tanker in September, expected to offset disposal costs over time .
Tariffs: Some tariff pressure (dry goods/materials); impact contemplated in FY guide; uncertainty persists for customers with international exposure .

Estimates Context

Actual vs S&P Global consensus—preceding quarters show a consistent beat pattern in Q2 and Q3:

Metric	Q1 2025	Q2 2025	Q3 2025
EPS (Actual vs Cons)	$0.36 vs $0.374*	$0.97 vs $0.658*	$0.85 vs $0.603*
Revenue ($M, Actual vs Cons)	$121.7 vs $117.2*	$145.5 vs $138.6*	$130.9 vs $128.3*

Values retrieved from S&P Global.*

Key Takeaways for Investors

Guidance raise with sequential execution supports a positive near-term narrative; the bar is now set at $110–$115M adjusted EBITDA and $2.60–$2.75 adjusted EPS for FY25 .
Mix quality is improving: premium plus margins are offsetting volume pressure; watch continued Penelope momentum and ready‑to‑pour extensions into Q4 .
Distilling Solutions normalization remains a 2026 story; aged barrel monetization supports margins near-term while industry works down inventories—monitor crafts’ aged demand and large multinats’ re‑entry timing .
Ingredient Solutions is the swing factor for Q4: outage remediation and biofuel ramp should curb disposal costs, but management flagged lingering headwinds into Q4; early 2026 targeted for full performance recovery .
Balance sheet flexibility (~~1.8x leverage) and lower capex (~~$32.5M FY) enable continued brand investment while servicing contingent consideration and working capital needs .
Non‑GAAP optics matter: Q3 adjusted EPS excluded $0.14/sh of items (contingent consideration and transition costs), making underlying earnings clarity a focus into Q4 .
Trading setup: estimate risk appears skewed neutral‑to‑positive near term following beats in Q2/Q3 and a guidance raise; medium‑term rerating hinges on visible distilling demand recovery and restored ingredient margins .

Appendix: Additional Press Releases (Q3 2025 timing)

Pre‑announcement: MGP to report Q3 results on Oct 29, 2025 (call at 10 a.m. ET) .
Product and brand continuity: Ross & Squibb/Remus seasonal release (context to premium plus pipeline; not financial) (see also product launches cited on the call ).

Notes on non-GAAP adjustments and impact: Q3 adjusted EPS bridges to GAAP EPS by adding back fair value change of contingent consideration ($0.10/sh) and executive transition costs ($0.04/sh). Adjusted EBITDA similarly excludes these items and other infrequent costs as defined in the company’s reconciliation schedules .

MGP INGREDIENTS INC (MGPI)·Q3 2025 Earnings Summary