MGP Ingredients, Inc.

Good day and welcome to the MGP Ingredients fourth quarter 2025 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 Amit Sharma, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning, and welcome to MGP's fourth quarter earnings conference call. I'm Amit Sharma, Vice President of Investor Relations. And this morning, I'm joined on the call by Julie Francis, our Chief Executive Officer, and Brendan Gall, Chief Financial Officer. We'll begin the call with management's prepared remarks and then open to questions. Before we begin, this call may involve certain forward-looking statements. The company's actual results could differ materially from any forward-looking statements due to a number of factors, including the risk factors described in the company's reports filed with the SEC. The company has no obligations to update any forward-looking statements made during the call, except as required by law. Additionally, this call will contain references 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 is included in today's earnings release, which was issued this morning before the markets opened and is available on our website, at www.mgpingredients.com. At this time, I would like to turn the call over to Julie for her opening remarks.

Thank you, Amit, and good morning, everyone. As we close out 2025, I want to start with a clear message. We are doing what we said we would do. We made progress on each of the five initiatives, and we finished the year above the top end of our guidance. The operating backdrop remains challenging for the spirits industry, and we recognize that 2026 is likely to be another down year for the industry and our company. That said, we are increasingly optimistic about MGP's future. Our confidence is grounded in three things. First, our ability to deliver sustained growth off of our 2026 guidance expectations, which has been accelerated by our proactive self-help action. Second, Our newfound strategic clarity, prioritizing our right to win, which we believe will also position us for solid and sustainable growth. And third, our financial strength, which in this environment is a competitive advantage of increasing magnitude. As I mentioned at our last call, we undertook an exhaustive review of our businesses to create a clear strategic roadmap for the next phase of our growth. This was a well-defined process grounded in an objective, data-driven assessment that We have since shifted from broad strategic discussions to a clear enterprise roadmap, including an organizational structure aligned to the strategic priorities of our business to further enhance our right to win. Strategy and structure are critical, but having the right talent and processes to execute with discipline is what we believe will lead to our ultimate success and sustainable growth. To that end, we recently announced organizational changes across our senior leadership teams. These were difficult decisions, but align with our strategic roadmap and position the company for long-term success. On our last call, I shared the hiring of our new Chief Marketing Officer and Senior Vice President of Operations. Since then, we've also added a Senior Vice President of Strategy and Insights. Each of these leaders brings to MGP track records of success and global best practices. In the coming quarters, they will be at the tip of the spear of building out best-in-class processes that are designed to enable disciplined execution and long-term success. Let me now provide a brief overview of our fourth quarter and full year results before outlining key elements of our strategic roadmap and the progress we are making against our key initiatives in each business. Our fourth quarter and full year 2025 results came in ahead of our expectations as the teams continue to act with diligence and focus. For the fourth quarter, consolidated sales declined 23% compared to a year ago. as double-digit sales growth in our Premium Plus portfolio was more than offset by the expected declines in the rest of our business. Adjusted EBITDA declined to $26 million, while adjusted basic earnings per share reached 63 cents. For the full year, we delivered consolidated sales, adjusted EBITDA, and adjusted basic EPS of $536 million, $116 million, and $2.85 cents. Despite lower earnings, operating cash flows for the year increased by 19% to $122 million. Brandon will provide more detail on our financial results and 2026 guidance, but let me touch on the overall environment and our key niches that will shape our results over the next year. At the broader level, the spirits industry has historically shown great resilience across economic cycles and periods of consumer behavioral changes. While we are confident about the long-term outlook for the industry, We expect near-term category trends to remain below historical levels. Consumer sentiment and spending remain under pressure, with competition from spending from online gambling, gaming, and from cannabis-infused beverages, as well as an increased focus on health and well-being impacting consumer behavior. While we expect the near term to remain challenging, we are starting to see some encouraging signs, including a more balanced public conversation around alcohol and its role in social settings and in overall well-being. The recently released U.S. Dietary Guidelines place greater emphasis on moderation and individual occasions for alcohol consumption rather than the no safe level guidance of the past. As we know, across generations, cultures, and geographies, shared moments and occasions of celebrations have included a drink among families and friends. In addition, a recent study from the American Heart Association concluded that low levels of alcohol consumption may not increase cardiovascular risk. The shift in overall tone is constructive and reinforces our long-term confidence in the category, but these developments are not expected to drive an immediate inflection in industry trends, and our 2026 outlet does not assume a return to historical growth rates for the overall industry. Shifting to our brand and spirit segment, we believe this segment will continue to be our primary growth engine and the foundation of our long-term value creation strategy. In 2025, we executed well against our initiative to concentrate on more attractive growth opportunities. Our Nielsen reported sales growth for the 52-week period ending December 27th came largely in line with the category, while our Premium Plus sales growth outperformed the overall category by 900 basis points during that same time period. As we look ahead, our focus here is clear. Win in the Premium Plus category with Penelope Bourbon, strengthen our focus brands, increase penetration in national accounts, and strengthen our digital marketing capabilities. Penelope is a key driver within this strategy. While Premium Plus American Whiskey Nielsen reported dollar sales declining 3.5% during the 52-week period ending December 27th, Penelope's reported dollar sales increased by 80%, making it the second fastest-growing brand during this time period among the top 30 Premium Plus American Whiskey brands. This growth was fueled by innovation and distribution gains. with Penelope Weeded and Penelope Ready to Pour Cocktails being two of our biggest new product launches in 2025. These products were very well received and helped deliver a 100% growth in points of distribution and a 12% increase in velocity. Our focus is on sustaining this ongoing momentum while strengthening our core by making incremental targeted investments designed to drive brand awareness, improving in-store execution, and filling distribution gaps. Beyond Penelope, we have a portfolio of high-quality brands evidenced by Yellowstone and Lux Rose inclusion in Whiskey Advocates' prestigious Top 20 Whiskies of 2025. We are the only company to have two brands in this year's Top 20 list. This external validation reinforces the strength across our portfolio and highlights the unrealized potential of a focused portfolio. To achieve this potential, we have established a comprehensive, cross-functional portfolio management review process which will take a deeper look at the long tail of our brand and spirits portfolio, reduce complexity, and rationalize skews and brands. As a first step, we are targeting a rationalization of 20% of the portfolio's tail brands. We believe this new rigorous portfolio review process will help us make even clearer decisions about where we invest and where we protect to better position our brands across targeted consumer segments, channels, price points, and consumption occasions. Another key priority for the brand spirit segment is to increase our penetration in national accounts across both retail and on-premise accounts. We believe that having a greater presence with these customers not only creates additional distribution opportunities, but also drives greater scale, visibility, and recognition of our brands. Our continued commitment to invest behind our most attractive growth opportunities underpins these initiatives. We ended the year with Brand and Spirits A&P spend at 12.5% of segment sales and expect it to increase modestly in 2026 to roughly 13.5%. We're also prioritizing investing in digital media, analytics, and tools designed to drive awareness and consideration for our key brands to bring greater discipline to how we track and improve brand health and allow us to connect more precisely with consumers around specific consumption occasions and social moments. Our distilling solutions segment saw sales and profitability reset in 2025, as many large customers paused purchases in an effort to balance their whiskey inventories and manage working capital. Full year 2025 sales and gross margin declined significantly from 2024, but came in modestly ahead of our expectations. As our initiatives to strengthen our partnership with key customers led to improved visibility and alignment, We continue to stay close to these customers and expect to gain greater clarity on their brown good needs for 2026 and beyond towards the end of the second quarter. Overall, domestic whiskey production continues to decline sharply, and we continue to see media reports about closing or idle distilleries. According to the latest available TTP data through October of 2025, domestic whiskey production was down 26%, 29%, and 27% for the trailing 12% six and three-month periods. In this environment, we are focused on creating a differentiated value proposition to better position MGP as a long-term strategic partner for both large and small customers. That means broadening our premium white good offerings to complement our brown goods portfolio, rebuilding our aged whiskey pipeline, and attracting and retaining a wider pool of customers by offering greater value-added services. Our increasing focus on premium white goods is designed to leverage the scale, heritage, and quality of our Indiana distillery to produce premium gin and G&S spirits that are customized for our customers. This would allow us to move beyond commoditized offerings to not just generate more attractive economics and better asset utilization, but also serve as a bridge to longer-term, deeper relationships with strategic customers. With respect to our aged whiskey strategy, producing and storing various vintage and mash bills is critical. And after taking a pause in 2025, we are committed to prudently building our aged whiskey offering. MGP is one of the few distillers with the technical depth and operational expertise to consistently produce high-quality whiskey at precise specifications of our customers, and that capability continues to differentiate ourselves. Our focus is on broadening our customer base, better leveraging the depth of our aging whiskey inventories, and capturing a greater share of aging whiskey sales. We also see meaningful opportunities to expand aged whiskey sales to both domestic and international private label whiskey customers, an area that has historically been under-penetrated for our brown goods business. While the industry-wide aged whiskey dynamic is unlikely to improve meaningfully in the near term, the strategic repositioning of our distilling solutions business and the actions initiated by our team give us confidence that our distilling solutions segment sales and profitability will approach trough levels in 2026. Turning to our ingredient solution business, as expected, the outage of a key piece of equipment that impacted Q3 results remained a sales and profit headwind in the fourth quarter. The equipment came back online in the last part of November as planned. As I look ahead, I continue to draw confidence as our ingredient solution business continues to enjoy consumer-driven tailwinds. Commercially, we continue to focus on driving growth through our three core platforms, especially Fiber with Fibersense, specialty protein with a rise, and exclusion protein through Proterra. Each of these platforms serves large and growing end markets. Consumer demand for high-protein and high-fiber products remains strong, and we are leveraging our R&D and innovation capabilities to make MGP an even more integral part of our key customer supply chain. In our texture protein business, the continued commercialization of a large multinational customer is a clear example of our ability to build strategic, growing and sustainable relationships with leading food companies. With the commercial demand side of the green solutions on solid footing, our focus remains squarely on the supply side and returning to operational excellence. To that end, we are adding people, increasing capital investment, and implementing new processes to return operational execution back to historical levels. As a result, we are seeing early signs that these efforts are paying off in the form of reduced unplanned outages and more consistent throughput. This improved reliability gives us confidence to deliver strong double-digit growth in segment sales and improved gross margins in 2026. As I have spent more time focusing on this business, it's become clear that waste treatment and disposal is more complex and more costly than initially expected. The commercialization of the biofuel plant, along with our other waste stream handling initiatives, is helping to reduce these costs, but a portion of these costs will persist in the near to medium term and is reflected in our full-year guidance. Managing high disposal costs remains a key priority. We're evaluating additional measures and continue to expect to remove these costs over the long term. Finally, I want to highlight the progress we are making on our enterprise-wide productivity agenda, which was one of our five key initiatives in 2025. We are proud of our teams for delivering against all of our 2025 initiatives, and more importantly, productivity is becoming embedded in how we operate at MGP. We're reinforcing an ownership cost mindset by incorporating productivity and cost discipline into our operating routines, performance management, and compensation metrics. Productivity and a cost management focus is becoming a part of our regular management routines, helping us uncover and track opportunities to eliminate waste and operate more efficiently and effectively across the organization. As we look ahead, we are encouraged by the progress we are making. Across all three businesses, our strategy is grounded in focus, execution, and discipline. and we're actively evaluating all available levers to operate more efficiently. I am committed to addressing our challenges directly, focusing on discipline, execution, and accountability, while positioning MGP to emerge better aligned, more resilient, and well-positioned for long-term value creation. With that, let me hand it over to Brandon for a more detailed review of our financial results and 2026 guidance.