MGP Ingredients, Inc.

Good morning and welcome to the MGP Ingredients fourth quarter and year end 2023 financial results conference call. All participants will be in 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 your telephone keypad. 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 Lambert Global, MGP's investor relations firm. And joining me today are members of their management team, including David Bratcher, Chief Executive Officer and President, 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 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, adjusted EBITDA, adjusted basics earnings per share, gross profit, and effective tax rate, as well as statements on the plans and objectives of the company's business and overall consumer and industry trends. 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 report filed with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements made during the call. Additionally, this call will contain reference to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. 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 Chief Executive Officer and President, David Bratcher. David?

Thank you, Mike, and thanks everyone for joining the call today. I am honored and grateful to serve in the role of CEO and President and truly excited to build on the MGP legacy. On this call, we will begin with our overview of our performance for the quarter and full year ended December 31, 2023. We will 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. Our strong financial results for the quarter and year were a direct result of the continued strength of each of our business segments and the dedication of our team who are focused on implementing our business strategy. Consolidated sales for the year increased 7% to $836.5 million, while gross profit increased 20%, to $304.7 million, representing 36.4% of sales. Adjusted EBITDA increased 20% to $202.5 million. During the year, we continued to experience healthy demand for new distillate and aged whiskey in our distilling solution segment, which resulted in brown goods sales increasing 39% for the quarter and 26% for the year. These increases were driven by both price and volume. Our brown goods sales growth outpaced U.S. market trends for American whiskey in 2023, driven by both our craft and multinational customers. Our strong sales are a direct result of our exceptional American whiskey offerings and the relationships we have cultivated across our diverse customer base, which now stands at more than $840 million. Brown Good customers. Over the last two years, we have deliberately grown our new distillate whiskey commitments compared to aged whiskey sales to bring longer-term financial stability and visibility to our distilled solutions segment of our business. In 2023, new distillate sales exceeded aged whiskey sales for the first time since 2020, and we anticipate this will continue into 2024 and beyond as we accommodate our maturing and growing customer base and de-risk our commercial sales effort. As a reminder, new dissonant sales, while at a lower price point in age, still have a very attractive gross profit margin, are commonly contracted years in advance providing greater visibility and provide greater cash flow to be reinvested into our business. As a result of this effort, more than 90% of our new distillate whiskey sales volume is committed in 2024, compared to 50% of our age whiskey sales volume committed. I believe customer willingness to contract longer term on new distillate whiskey is a positive sign for the American whiskey category sales. We expect total aged whiskey revenues in 2024 to be less than 2023 due to our strategy of developing longer-term stability with new distillate and because of our success in working with longer-term craft customers who started their brands with aged whiskey and are now moving into the new distillate market. While we do have the vast majority of our anticipated total brown goods volume committed for 2024, We expect the last three quarters of 2024 will result in stronger profits as compared to Q1 due to the variation in timing of customer demand, particularly of aged whiskey, and timing of our Bardstown, Kentucky distillery expansion project coming online. Looking beyond 2024, we are continuing to work closely with our customers to lock in existing capacity through contract renewals and gain additional commitments for our newly created capacity. Turning to white goods and industrial alcohol, last July we announced the planned closure of the White Goods and Industrial Alcohol Distillery in Atchison, Kansas. We're pleased to share that the closure has been completed on schedule. Brandon will speak in more detail about the financial impact of the closure. While it was not a decision that we took lightly given the long history of the distillery in Atchison, 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. Our strategy to reduce the volumes of our industrial alcohol and white goods products produced and sold continued during Q4. As a result, white goods sales for the year decreased by 21% and the sales of our industrial alcohol products decreased 19% year over year. As expected, on a combined basis, these product lines continue to have negative gross margin for the year. Moving to branded spirits, our premium plus spirit brands grew 50% in the quarter and 24% for the full year. which in turn drove further gross margin expansion across the portfolio. Our focus on investing behind our higher margin brands throughout the year resulted in an increase in full-year gross profit to $112.8 million, or 44.4% of segment sales. We plan to continue to focus on margin expansion through our strategy of increasing our points of distribution and shelf presence with our current portfolio of margin-accretive brands, as well as through continued evaluation of Branded Spirits acquisition opportunities that we anticipate will further enhance our gross profit as a percentage of sales for the Branded Spirits segment. Speaking of Branded Spirits acquisitions, we're proud of the progress we've made integrating Penelope Byrd into our sales and marketing platform. We are also pleased to announce that we achieved our goal of having Penelope in 37 states by the end of the year. This illustrates a key component to our branded spirits strategy as we remain focused on growing points of distribution by leveraging the expansion of our margin accretive brands portfolio. M&A is a high priority and we hope to be able to execute more margin accretive branded spirits acquisitions in 2024. Turning to ingredient solutions, we experienced another strong year. Our ingredient solution segment delivered record results both on a fourth quarter and full year basis, with sales growth of 14% and gross profit growth of 49% for the year. The record sales and gross profit results were driven primarily by higher sales of specialty wheat proteins and specialty wheat starches, as strong demand for our plant-based high-protein and lower-net carbohydrate foods continued. Before I turn the call over to Brandon, I want to thank our team for their tremendous effort and continued execution. Their ability to build on the momentum we have generated throughout the year and the continued alignment of our product offerings to meet consumer trends enabled us to deliver strong results for the year. This concludes my initial remarks. Let me turn things over to Brandon Gall for a review of the key metrics and numbers. Brandon?