MGP INGREDIENTS INC (MGPI)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 results landed broadly “in line with expectations,” but were pressured by industry-wide elevated barrel whiskey inventories; revenue fell 16% to $180.8M, gross profit fell 13% to $74.5M (margin 41.2%, +160 bps y/y), adjusted EBITDA declined 9% to $53.1M, and GAAP EPS was $(1.91) due to a $73.8M non-cash goodwill impairment in Branded Spirits; adjusted EPS was $1.57 .
• 2025 guidance signals a reset in Distilling Solutions: consolidated sales $520–$540M, adjusted EBITDA $105–$115M, adjusted EPS $2.45–$2.75, capex ~$36M, tax ~25%, with a revised assumption that Distilling Solutions sales and gross profit decline approximately 50% and 65% respectively (vs prior color of ~35% and ~50%) as contracts are proactively renegotiated to market pricing and production is reduced .
• Branded Spirits remains the strategic growth engine: premium-plus brands led full-year growth (Penelope, El Mayor), though Q4 premium-plus sales declined 12% on tough comps; for 2025, management targets flattish premium-plus sales while reallocating A&P toward highest-ROI opportunities and reducing single-barrel programs; A&P as % of Branded Spirits sales guided to ~12% in 2025 (~25% of premium-plus sales) .
• Ingredient Solutions inflected sequentially: Q4 sales +4% with specialty protein returning to growth and Fibersym specialty starches remaining strong; cost relief expected in 2H25 when the biofuel facility comes online; management also executed a double-digit % corporate headcount reduction to offset pressures, supporting cash generation (FY24 operating cash flow $102.3M, net leverage ~1.5x) .

What Went Well and What Went Wrong

What Went Well

• Premium-plus momentum and portfolio premiumization: full-year premium-plus sales rose 5% with Branded Spirits gross margin up 470 bps to 49.1%; management highlighted strong 2024 growth for Penelope and El Mayor and improved marketing ROI (e.g., Rebel 100 NASCAR sponsorship) .
• Ingredient Solutions improved sequentially: Q4 sales +4%, specialty protein posted first quarterly growth of the year, and specialty starches (Fibersym) benefited from a “healthier for me” food trend; Q4 gross margin reached 23.5% (strongest of the year) .
• Cost control and cash generation: Q4 corporate SG&A down 21% y/y to $20.4M, A&P down 15% to $10.5M, FY24 operating cash flow rose to $102.3M (+$18.5M y/y), and the company repurchased ~759k shares ($36.6M) in Q4 (886,936 shares; $46.6M for FY24) .

What Went Wrong

• Distilling Solutions under pressure: Q4 segment sales declined 25% to $82.0M; within that, brown goods -10% and white goods & co-products -77% as elevated barrel inventories and soft consumption hurt demand and pricing; segment gross profit declined 16% excluding Atchison .
• Non-cash impairment drove GAAP loss: a $73.8M goodwill impairment in Branded Spirits (reflecting higher discount rate and lower peer multiples since the 2021 Luxco deal) led to a Q4 net loss of $42.0M and $(1.91) basic EPS, despite adjusted EPS of $1.57 .
• Branded Spirits near-term softness: Q4 premium-plus sales fell 12% on tough comps; mid/value portfolios continued to decline double-digits, and distributor inventory tightening weighed on shipments into year-end .

Financial Results

Consolidated performance

Note on estimates: We attempted to retrieve SPGI consensus for Q4 2024 but it was unavailable due to provider limits at query time; as a result, we cannot quantify beat/miss vs Street for this quarter. Management stated results were “in line with expectations” .

Segment sales mix (Q4 2024 vs Q4 2023)

Segment profitability (Q4 2024)

KPIs and other items

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our 2025 financial guidance… reflects our decisive, proactive actions that are designed to de-risk our brown goods outlook.” — Brandon Gall, Interim President & CEO/CFO .
• “Due to… proactive actions… guidance now assumes approximately 50% decline in Distilling Solutions segment sales and a 65% decline in segment gross profit… relative to our previous estimate of 35% and 50% declines.” — Brandon Gall .
• “Rebel 100’s strong sales performance is benefiting from… our sponsorship of Kyle Busch’s #8 car… We see potential to employ a similar playbook with other brands.” — Brandon Gall .
• “Sequentially improving sales and gross margin performance in the fourth quarter [Ingredient Solutions] reinforced our confidence… completion of the B Starch fuel plant should provide cost relief… in the second half of 2025.” — Brandon Gall .
• “We’ve accelerated our productivity initiatives… including a double-digit percentage reduction in our corporate headcount.” — Brandon Gall .

Q&A Highlights

• Aged whiskey strategy & contract risk: Management is proactively renegotiating pricing and volumes with contracted customers to align to market and reduce risk; Distilling Solutions is expected to be down ~50% sales/~65% GP in 2025 despite cost saves .
• Branded portfolio near-term: Premium-plus expected to be flattish in 2025, with reduced single-barrel offerings and targeted price support; mid/value to be down mid-to-high single digits, improving sequentially as comps normalize .
• Cash flow priorities: Despite lower EBITDA, 2025 free cash flow expected to be strong driven by capex reduction (~$36M) and lower net whiskey putaway ($15–$20M) .
• Tariff exposure: Potential EU tariffs and tequila import exposure noted; not embedded in 2025 outlook; contingency plans in place .
• Inventory valuation: Confident carrying value of distillate remains below market; inventory fungible between wholesale and branded to optimize mix .

Estimates Context

• Street consensus (S&P Global) for Q4 2024 revenue/EPS/EBITDA was unavailable at query time due to provider rate limits; as a result, we cannot assess beat/miss quantitatively this quarter. Management stated results were “in line with expectations” .
• Given the revised 2025 outlook (notably the deeper Distilling Solutions reset), we expect Street models to move lower on revenue/EBITDA/EPS and reflect greater reliance on Branded Spirits and Ingredient Solutions for consolidated profitability .

Key Takeaways for Investors

• The cycle reset is deeper and longer: management now embeds ~50% sales/~65% GP declines in Distilling Solutions for 2025, with production cuts extending into 2026; proactive contract repricing/volume alignment should derisk execution but lowers near-term earnings power .
• Strategy pivots toward branded: Branded Spirits is expected to be the largest segment by sales and gross profit in 2025; resource reallocation (A&P at ~12% of segment sales) and reduced single-barrel programs should focus spend where returns are highest .
• Ingredients improving: Specialty protein has turned to growth and Fibersym remains strong; 2H25 cost relief from the biofuel plant should further support margin .
• Balance sheet and cash generation provide buffer: FY24 operating cash flow reached $102.3M; capex and putaway reductions in 2025 bolster FCF and keep net leverage manageable (~1.5x exiting 2024) .
• Near-term prints likely hinge on execution against revised DS assumptions (contract renegotiations and cost saves), premium-plus sell-through, and Ingredient Solutions onboarding pace; tariff risk is an out-of-model overhang, particularly for tequila .
• Dividend maintained ($0.12), and buybacks remain a tool; however, capital allocation priority tilts to stabilizing Distilling Solutions and investing behind premium brands .

Additional references and full financial schedules are available in the company’s Q4 2024 8‑K and press release .