MGP Ingredients, Inc.

good morning and welcome to the mgp ingredients third quarter 2023 financial results conference call all participants will be in listen only mode should you need assistance please signal 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 your touchdown 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. Please go ahead.

Thank you. I'm Mike Houston with Lambert Global, MGP's investor relations firm. And joining me are members of their management team, including Dave Colo, President and Chief Executive Officer, and Brandon Gull, Vice President of Finance and Chief Financial Officer. We will begin the call with management's prepared remarks and then open 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 based on current expectations. The company's actual results could differ materially from any forward-looking statements made today due to a number of factors, including the risks and uncertainties described in today's earnings release and the company's other SEC filings. The company assumes no obligation to update any forward-looking statements or information included in this call. Additionally, this call will contain reference to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. Reconciliations of these measures to the most directly comparable GAAP measures are included in today's earnings release. If anyone does not already have a copy of the earnings 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 September 30th, 2023, 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. I am proud of the considerable progress we have made toward achieving our targets for fiscal 2023. The strong results this quarter have enabled us to revise our full year guidance upward, increasing the anticipated ranges for adjusted EBITDA and adjusted basic EPS for the second straight quarter. Our continued solid performance throughout the year could not have been possible without our dedicated team. We again achieved our best quarterly sales in company history while also growing consolidated gross profit by 24% to a quarterly record with gross margins expanding across all business segments. Consolidated sales for the third quarter of 2023 increased 5% year over year to $211.6 million while gross profit increased 24% to $73.4 million, representing 34.7% of consolidated sales. Net income decreased 45% to $13.1 million, primarily driven by one-time expenses of $18.3 million related to the planned Adjutant Distillery closure, as well as the increase of $4.2 million in fair value of contingent consideration related to the Penelope acquisition. Excluding these items, adjusted net income increased 28% to $30.2 million. Adjusted EBITDA increased 24% to $48.1 million. We delivered another robust quarter in our distilling solution segment with sales increasing 3% year over year to $111.9 million. Gross profit for the quarter increased to $33.3 million, or 29.8% of segment sales. The increase in gross profit can be attributed primarily to the increase in sales of new distillate and aged whiskey brown goods. Compared to the prior year period, sales of brown goods for the quarter increased 28%, driven primarily by increased pricing due to continued strong demand for both new distillate and aged whiskey. Brown goods sales growth has continued to outpace longer-term market trends and has been primarily driven by craft as well as multinational customers. Our confidence in our brown goods sales visibility for the balance of the year remains high. Looking ahead to fiscal 2024, our visibility is also improving as we believe we now have the vast majority of our expected distilling solution segment brown goods sales for 2024 already committed. We believe we are well positioned to support continued growth in the American whiskey category. We will continue to be strategic with our aged whiskey sales to enable us to meet expected customer needs for the balance of this year, as well as position us to meet anticipated customer needs in the coming years. Turning to white goods and industrial alcohol. We continue to reduce the volumes of our industrial alcohol and white goods products produced and sold during the third quarter. As a result, white goods sales decreased by 30% year over year, and sales of our industrial alcohol products decreased 13% during the third quarter. As expected on a combined basis, these product lines continue to have negative gross margins in the quarter. In July, we announced the planned closure of the White Goods and Industrial Alcohol Distillery in Atchison, Kansas, slated for January 2024. This announcement reinforces our strategy focused on improving profitability by shifting away from industrial alcohol and white goods products to mitigate the continued impact of increased input costs and excess supply available in the market. Brandon will speak in more detail about the financial impact of the closure. Before that, I want to remind our listeners that this strategic decision first required us to solve how to physically decouple the adjuncts and distillery from the ingredients facility. Now that the plan has been identified to successfully decouple the facilities, we are continuing to evaluate the most economically viable options for the waste start stream. As you recall, the waste start stream is a byproduct of the ingredients facility that is purchased by the adjoining distillery and results in an intercompany credit to the ingredient solution segment. We have identified third parties who will utilize our start stream at no cost to the company in fiscal year 2024, which is detailed in the updated pro forma financials found in our earnings release, which Brandon will speak to shortly. We firmly believe these actions will enable us to further align our product categories and their supporting operations toward achieving our long-term strategic objectives. As we continue to assess more creative options to dispose of the waste start stream and their impact on our financial results, we will provide additional details in future earnings calls. Given the recent announcement of the Atchison distillery closure, It is difficult to predict how it might impact the fourth quarter of this year as customers put their respective transition plans into place. But we continue to believe the closure will be accretive to consolidated gross margin percentage beginning in 2024. Turning to branded spirits. Segment sales totaled $66.8 million during the quarter, an increase of 6% versus the prior year period. The increase in year-over-year performance in this segment was primarily driven by the strength of our Premium Plus brands, which grew 33% from the prior year period. We are very pleased with the continued growth of our Premium Plus sales as they represented 46% of segment sales this quarter. This is a meaningful improvement from the 32% of sales our Premium Plus brands represented back in the third quarter of 2021 following the Luxco acquisition. Our focus on investing behind our higher margin premium plus brands resulted in an increase in gross profit to $29 million or 43.5% of segment sales. The increase in gross margin can be attributed to the favorable performance of our higher margin premium plus brands. Additionally, we remain confident that inventory destocking for our brands is close to running its course and we're focused on driving velocity and points of distribution across our portfolio brands. In June of this year, we announced the completion of our acquisition of Penelope Bourbon, a fast-growing brand that improves our ability to further participate in the popular American whiskey category. We continue to believe this brand has meaningful long-term growth potential, which is supported by the results we delivered during the third quarter. We could not be more enthusiastic about the Penelope brand as it supports our long-term strategy focused on premiumization and enhances our portfolio of premium plus price tier brands. We remain pleased with Penelope's continued momentum as we expand its presence to new markets. We expect to be in 37 states by the end of 2023. Our branded spirit strategy remains focused on growing points of distribution by leveraging the expansion of our premium plus brands portfolio with a particular focus on our tequila and American whiskey brands. Turning to ingredient solutions. Sales for the quarter increased 11% to a record $33 million, while gross profit increased to $11.1 million, or 33.8% of segment sales. The increase in sales primarily reflects continued rising consumer preference toward high protein, low net carb diets, which drove higher sales of our specialty wheat proteins and starches, as well as our commodity wheat starches. Finally, I want to thank our team for their tremendous efforts in continued execution. We remain encouraged by our diverse customer base and our product offerings, which continue to align with broader consumer trends. We believe our improved profitability and our proven ability to execute against our long-term strategy continue to provide us with the momentum required to achieve our fiscal 2023 goals. This concludes my initial remarks. Let me now turn things over to Brandon Gall for a review of the key metrics and numbers. Brandon.