MGP Ingredients (MGPI) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong results, led by premium plus branded spirits and solid brown goods sales, despite a 9% sales decrease due to the Atchison distillery closure; excluding this, sales rose 7% year-over-year.

• Continued investments in key brands and innovation expanded distribution and accelerated transition to a premier branded spirits company.

• Net income for Q2 2024 was flat at $32.0M, with adjusted net income up 15% to $38.0M and adjusted basic EPS up 15% to $1.71.

• Gross margin improved to a record 43.6%, driven by higher margins in Branded Spirits and Distilling Solutions.

• Full-year 2024 sales, adjusted EBITDA, and EPS guidance reiterated.

Financial highlights

• Q2 consolidated sales decreased 9% year-over-year to $190.8M due to Atchison Distillery closure; excluding this, sales rose 7%.

• Branded Spirits segment sales up 11% to $64.0M, with Premium Plus portfolio sales up 29% (including Penelope acquisition); gross profit up 29% to $33.6M, margin at 52.5%.

• Distilling Solutions pro forma sales grew 9% (excluding Atchison impact); reported Q2 sales down 20% to $93.4M; gross profit up 10% to $42.5M, margin at 45.5%.

• Ingredient Solutions sales declined 3% to $33.4M; gross profit down 39% to $7.1M, margin at 21.4% due to higher input costs and new facility expenses.

• Adjusted EBITDA up 7% to $57.5M, with a record 30.2% margin; gross profit increased 9% to $83.2M.

Outlook and guidance

• Reiterated full-year 2024 guidance: sales $742M–$756M, adjusted EBITDA $218M–$222M, adjusted EPS $6.12–$6.23, and CapEx ~$85M.

• Expect stronger profits and earnings growth in H2 2024, especially Q4, driven by Premium Plus brands and committed Brown Goods contracts.

• Ingredient Solutions gross margin expected to improve as specialty protein ramps up.

• Management expects sources of cash to be adequate for capital expenditures, M&A, and operating needs for the next 12 months and beyond.