MGPI Q1 Earnings Call: Revenue Tops Expectations, Margin Pressures Remain Amid Strategic Refocusing

Food and beverage supplier MGP Ingredients (NASDAQ: MGPI) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, but sales fell by 28.7% year on year to $121.7 million. The company expects the full year’s revenue to be around $530 million, close to analysts’ estimates. Its non-GAAP profit of $0.36 per share was 3.3% below analysts’ consensus estimates.

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StockStory’s Take

MGP Ingredients delivered first quarter results that management described as in line with expectations, emphasizing early progress on its core initiatives to stabilize the brown goods (whiskey) business and focus on premium brands within its Branded Spirits segment. Interim CEO and CFO Brandon Gall highlighted that while industry-wide whiskey inventories remain elevated and consumer demand is cautious, targeted investments in premium products like Penelope, El Mayor, and Rebel 100 led to growth within the company’s Premium Plus portfolio. Gall noted, “These early signs of stabilization are encouraging and give us confidence that the proactive steps we’re taking are beginning to take hold.”

Looking ahead, management reaffirmed its full-year revenue and profit guidance, citing ongoing productivity initiatives and cost controls as central to achieving its targets. Gall reiterated that operational execution, particularly in ingredient production and customer partnerships, will be key for the remainder of the year. The company believes its pipeline of innovation and efficiency projects, along with a strengthened balance sheet, position it to navigate current market headwinds. Management stated it would continue to monitor the industry’s inventory correction and supply chain challenges, maintaining a focus on shareholder value creation.

Key Insights from Management’s Remarks

MGP Ingredients’ management attributed first quarter performance to a mix of consumer and industry trends, as well as disciplined execution of strategic initiatives. The quarter’s deviations from analyst expectations were primarily linked to a sharper decline in year-over-year revenues, offset by better-than-expected cost controls and working capital management.

• Premium Plus brands drive growth: The Branded Spirits segment’s Premium Plus portfolio, including Penelope, El Mayor, and Rebel 100, posted 7% growth, fueled by targeted brand investment and product innovation such as Penelope Wheated and ready-to-serve cocktails.
• Distilling Solutions stabilization efforts: Management focused on recalibrating customer contracts and production volumes in Distilling Solutions, leading to more collaborative customer relationships and extended agreements, though overall brown goods volumes and pricing were down as anticipated.
• Ingredient Solutions execution challenges: Sales in the Ingredient Solutions segment were impacted by adverse weather and the Atchison distillery closure, but management cited progress on operational projects like the Deep Well and biofuel facilities, expected to improve efficiency and margin in future quarters.
• Cost structure and productivity: The company’s ongoing productivity agenda, including scheduling optimization and supply chain efficiencies, helped mitigate margin pressures from lower whiskey volumes and ingredient production issues.
• Leadership and governance updates: The ongoing CEO search continues, but recent Board of Directors changes are intended to strengthen oversight and support execution of growth initiatives, with Gall emphasizing that strategic projects are moving forward despite interim leadership.

Drivers of Future Performance

Management’s outlook for the remainder of the year is shaped by ongoing efforts to optimize product mix, improve operational reliability, and navigate an industry-wide inventory reset, with a focus on margin discipline and targeted brand investments.

• Premiumization strategy: The company believes continued emphasis on premium spirits brands and innovation will support revenue stability, even as mid- and value-tier brands face ongoing declines and promotional pressures.
• Operational improvements: Projects in ingredient production, such as the new biofuel facility and increased maintenance investment, are expected to improve reliability and reduce costs, positioning the Ingredient Solutions segment for sequential improvement.
• Risks from market dynamics: Management acknowledged the risk of prolonged elevated whiskey inventories across the industry, as well as potential supply chain disruptions and consumer caution, which could affect timing and magnitude of any recovery.

Top Analyst Questions

• Marc Torrente (Wells Fargo): Asked about the visibility and progress in recalibrating customer contracts in Distilling Solutions. Management said 75% of customer negotiations are complete, with most adjustments reflected in current guidance and further extensions possible.
• Bill Chappell (Truist Securities): Sought more detail on stabilization actions for mid- and value-tier spirits brands and improvement plans for Ingredient Solutions. Management pointed to price support strategies and operational investments, expecting gradual improvement but emphasizing execution risk.
• Seamus Cassidy (TD Cowen): Questioned whether Premium Plus growth exceeded expectations and how pricing actions will impact segment margins. Management confirmed a strong start from Penelope but maintained a cautious full-year outlook, noting that price reductions do not always translate to lower margins.
• Sean McGowan (ROTH Capital): Inquired about any demand shifts related to tariff concerns and the sustainability of Penelope’s improved performance. Management reported no evidence of tariff-driven customer behavior and reiterated optimism about Penelope’s growth trajectory.
• Mitch Pinheiro (Sturdivant): Asked about production timing, inventory management, and the effect of lower throughput on cost structure. Management explained that higher Q1 branded barrel put-away was due to scheduling and affirmed productivity initiatives are designed to maintain competitiveness despite volume reductions.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be monitoring (1) the pace and success of renegotiated customer contracts and inventory management in the Distilling Solutions segment, (2) operational reliability and throughput improvements in Ingredient Solutions as new projects come online, and (3) the ability of premium brands to offset declines in mid- and value-tier spirits. Execution on cost-saving and productivity initiatives, as well as the ongoing CEO search, will also be key indicators of future performance.

MGP Ingredients currently trades at a forward P/E ratio of 12.2×. Is the company at an inflection point that warrants a buy or sell? See for yourself in our free research report.

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