MGP Ingredients, Inc.

Good day, and welcome to the MGP Ingredients fourth quarter and full year 2021 financial results call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I'd now like to turn the conference over to Mike Houston. Please go ahead.

Thank you. I'm Mike Houston with Lambert & Company, MGP's investor relations firm. And joining me today are members of their management team, including Dave Colo, President and Chief Executive Officer, and Brandon Gall, Vice President of Finance and Chief Financial Officer. We will begin the call with management's prepared remarks and then open the call up to questions. However, before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements. such as projections of sales, operating income, gross margin, and effective tax rate, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today due to a number of factors, including the risk factors described in the company's most recent annual and quarterly reports filed with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements made during the call If anyone does not already have a copy of the press release issued by MGP today, you can access it at the company's website, www.mgpingredients.com. At this time, I would like to turn the call over to MGP's President and Chief Executive Officer, Dave Colo.

Dave? Thank you, Mike, and thanks everyone for joining the call today. We appreciate your interest in MGP Ingredients and hope that you and your families have a safe and healthy 2022. On this call, we will begin with an overview of our performance for the quarter and fiscal year ended December 31st, 2021. Provide updates on key financial performance metrics and discuss the progress we have made against our strategy. At the end of the call, we will open the line for Q&A. By all accounts, 2021 represented a remarkable year for our company. As we executed against our strategy, the strength and value of our business model were on full display. Improved effectiveness in our tactical execution allowed MGP to deliver our most profitable year in company history. The determination and continued focus from our team to meet increased customer demand for our products while achieving strong financial performance resulted in record results across each of our segments this year. We are also very pleased with the continued success of the integration efforts of the Luxco acquisition achieved by the organization. The team has done an impressive job the past few quarters, allowing us to benefit from the strengths of the combined organizations and the creation of a one company high performance culture. The demand for new distillate and aged whiskey remains strong. We continue to optimize our expansive family of brands to meet the shift in consumer demand while positioning us to achieve incremental growth. In addition, the determination of our team to improve throughput and profitability in our ingredient solution segment drove an increase in gross profit for the year. Consolidated sales for the year increased 58.5%, while gross profit increased 101% to a record $199 million representing 31.7% of consolidated sales. Reported operating income increased 133%, while adjusted operating income increased 113%. We are very pleased with the sustained momentum across each of our segments during the fourth quarter and the growth we achieved over the full year. The demand for aged whiskey continues to be a growth driver, with a 28.4% increase in premium beverage alcohol sales for the year. Our American whiskey and tequila offerings contributed to the encouraging results for the branded spirit segment for the fourth quarter and for the year. Ingredient solution segment sales also benefited from strong demand with double digit growth quarter over quarter and were up 16.1% for the year. Looking at each segment in greater detail, We achieved a record year in our distillery product segment, with sales ending the quarter up 3.3%, and full-year sales increased 12.5% to $352.5 million. Gross profit for the year improved to $114.1 million, or 32.4% of segment sales. Full-year sales of premium beverage alcohol increased 28.4%, with record sales of aged whiskey driving growth. Aged whiskey sales also served as the primary driver to the increase in gross margins in the period. Our growth in sales of brown goods this year outpaced the longer-term market trends. This was attributed to the sustained strong demand by each of our customer categories. Our team continues to do a fantastic job capturing market share and unfilled demand. The record performance and growth in sales over the prior year could not have been possible without our sales team's expertise and the relationships we have cultivated across our diverse customer base. We anticipate the strength we have been experiencing to continue as the consumer demand for American whiskey remains robust. We also expect strong pricing trends to persist. Our inventory of aging whiskey and our ability to support a brand's growth regardless of its size has offered MGP a sustained position of strength, and we believe this will continue into 2022. Sales of new distillate also posted strong growth for the quarter and year as we experienced an increase in the demand for new distillate compared to the prior year period. While consumer demand for American whiskey remains robust and our diverse customer mix positions us well, we remain uncertain as to when the growth rates will begin to normalize and align more with the long-term trend for the overall category. We believe our significant share in scale advantage will position us well as this increased period of demand continues. In fiscal 2021, our goal was to increase focus toward achieving volume growth and market share gains in the global American whiskey category and refine how we approach the selling process with potential new or infrequent customers. This initiative resulted in meaningful changes in our go-to-market approach and resulted in additional margin expansion and record gross profit results for the quarter and year. Our record gross profit results confirmed the long-term value of our aging whiskey inventory, further supported by our ability to cultivate solid partnerships with existing customers as well as attract additional aged whiskey and new distillate customers. White Goods sales posted another solid quarter with growth of 23.9% and year-over-year growth of 18.7%, primarily due to improved pricing and volume. The growth partially reflected volume shifts away from industrial alcohol and towards our White Goods premium beverage products. Sales for our industrial alcohol products decreased 22.4% this year. The decline was primarily attributed to reduced third-party sales of industrial alcohol produced by ICP, our former joint venture partner. As previously discussed, we anticipate margins for both industrial alcohol and white goods products to return to lower historical levels, which are in the low single digits, as the demand for industrial alcohol moderates and due to the additional supply that has entered the market. This anticipated decline in the profitability of white goods and industrial alcohol is factored into the fiscal year 2022 guidance that we will speak to later in the call. Revenue from warehouse services increased 12.1% for the year as compared to 2020. This growth can be attributed in part to the growth in the number of customer barrels aging in our whiskey warehouses and other services we provide. Turning to branded spirits, performance for the fourth quarter and full year exceeded our internal expectations. Sales totaled $183.6 million for the year, primarily due to the Luxco acquisition. We also benefited from continued strength by our ultra-premium and premium brands, reflecting higher case volume of these higher margin products, as well as increased distribution on legacy MGP brands and improved pricing and mix on select brands. Gross profit for the segment increased to $62.6 million for 34.1% of segment sales for the full year. Strengthening consumer demand for our brands, especially our American whiskey and tequila brands, has been a major catalyst for growth. as well as the continued return of on-premise demand. We remain focused on improving the profitability of our portfolio and optimizing gross profits and margins to achieve further profitability. We believe consumer demand for our expansive family of brands will continue to position us well for incremental growth. Turning to ingredient solutions, sales for the year increased 16.1% while gross profit increased to $22.2 million, or 24.5% of segment sales. This increase in sales was primarily driven by increased volumes and higher average selling prices of specialty wheat starches and proteins, as well as commodity wheat starches. Our experienced sales, innovation, and R&D teams worked effectively and collaboratively to meet our customers' needs as we achieve these record results for the year. Before I turn the call over to Brandon, I want to recognize and thank all of our employees for their tremendous efforts and dedication this past year. Because of them, we achieved record results for the fourth quarter and full year and ended the year with great momentum. Our product offerings remain aligned with strong consumer trends as evidenced by our ability to effectively recruit new business and grow with existing customers. This concludes my initial remarks. Let me now turn things over to Brandon Gall for a review of the key metrics and numbers. Brandon?