MGP Ingredients, Inc.

Good day and welcome to the MGP Ingredients First Quarter 2022 Financial Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Mike Houston, Investor Relations. Please go ahead.

Thank you. I'm Mike Houston with Lamberton 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 up the call 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. On this call, we will begin with an overview of our performance for the quarter ended March 31st, 2022, 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. We are off to another strong start to the year with record results for each of our three business segments. We are very pleased with our continued momentum this quarter and believe the underlying macro consumer trends that are supporting each of our business segments remain strong. Consolidated sales for the year increased 80.2% while gross profit increased 122% to a record $71.8 million representing 36.8% of consolidated sales. Reported operating income increased 144%, while adjusted operating income increased 124%. We are very pleased with the sustained momentum across each of our segments this quarter. The demand for aged whiskey and new distillate continues to be a growth driver, with a 44.4% increase in brown goods sales for the quarter within our distilling solution segment, which was previously known as our distillery product segment. We recently changed the name of this reporting segment to better reflect the products and services we provide to our customers. Our premium, super premium, and ultra premium offerings contributed to the encouraging results for the branded spirits segment. Continued growth in our higher-priced American whiskey brands were key contributors to our strong gross profit results for the quarter, which represented 44.5% of segment sales. Ingredient solution segment sales also benefited from strong demand and improved product mix, yielding record gross profits representing 29% of segment sales. Looking at each segment in greater detail, we achieved another record quarter in our distilling solution segment, with sales ending the quarter up 25.8% to $111.5 million. Gross profit for the quarter improved to $38.9 million, or 34.9% of segment sales. Sales of premium beverage alcohol increased 37.7%, while brown goods sales grew 44.4% from last year due to higher aged whiskey and new distillate sales. 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 quarter again outpaced the longer-term market trends. This was attributed to the sustained strong demand in each of our customer categories, as well as our team's ability to capture unfilled demand. We expect strong pricing trends to persist. Our inventory of aging whiskey has offered MGP a sustained position of strength, and we believe this will continue throughout 2022. Sales of new distillate also posted strong growth for the quarter as we experienced an increase in demand compared to the prior year period. While consumer demand for American whiskey remains robust, and our diverse customer mix positions as 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 and scale advantage will position us well as this increased period of demand continues. Moving to white goods, sales posted another solid quarter with growth of 20.6%, 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. As a result, sales for our industrial alcohol products decreased 33.7% this quarter. The decline was also partially 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 continue at these lower historical levels, which are in the low single digits, as the demand for industrial alcohol continues to moderate and due to the additional supply that has entered the market. This anticipated continued decline in the profitability of white goods and industrial alcohol is factored into the fiscal year 2022 guidance. Revenue from warehouse services increased 36.2% this quarter, as compared to the first quarter 2021. 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, sales totaled $55.8 million for the quarter, primarily due to sales of brands acquired as part of the Luxco acquisition. We also benefited from continued strength in our premium, super premium, and ultra premium brands, reflecting higher case volume of these higher margin products, as well as increased points of distribution for the legacy MGP brands. Gross profit for the segment increased to a record $24.8 million, or 44.5% of segment sales for the quarter. Strengthening consumer demand for our brands, especially our premium, super premium, and ultra premium offerings, continues to be a major catalyst for growth. We are encouraged by the growth we're experiencing as we continue to successfully execute our premiumization strategy. Increased distribution and improved pricing on select brands, as well as product mix, contributed to the record results this quarter. 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 quarter increased 46.2%, while gross profit increased to $8.1 million, or 29% of segment sales, each of which represents record results for the segment. As a reminder, we experienced some temporary softness in our ingredient solution segment in the first quarter of 2021, primarily due to a natural gas curtailment that impacted approximately two weeks of production last year, which reduced gross margin by approximately 400 basis points. The 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 achieved another quarter of record results. Before I turn the call over to Brandon, I want to reiterate my excitement for the continued momentum we experienced this quarter across each of our business segments. 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?