Third Quarter 2026 Financial Results - MGP INGREDIENTS INC

Explicit Guidance:

• FY2026 Net Sales: Reaffirmed range of $480M–$500M.
• FY2026 Adjusted EBITDA: Reaffirmed range of $90M–$98M.
• FY2026 Adjusted Basic EPS: Reaffirmed range of $1.50–$1.80 (based on ~21.4M weighted average shares).
• FY2026 Operating Cash Flow: Expected $50M–$55M (excluding Penelope earn-out payment).
• FY2026 Free Cash Flow: Expected $30M–$35M (excluding Penelope earn-out payment).
• FY2026 Adjusted SG&A: Expected to be ~16% of sales (down from initial outlook due to ownership cost management savings).
• FY2026 Branded Spirits A&P: Expected to be 12%–13% of segment sales (down from higher levels due to agency consolidation).
• FY2026 Effective Tax Rate: Expected to be ~23%.
• FY2026 Interest Expense: Full-year expected ~$12M; Q4 expected to be sequentially higher than Q3 due to rate differentials on convertible notes.
• 4-Year Segment Outlook (FY2027+):
  • Distilling Solutions: Sales expected down ~35% YoY; gross profit down ~40%.
  • Branded Spirits: Sales expected down mid-single digits; Premium Plus up low-single digits.
  • Ingredient Solutions: Sales expected $140M–$150M; gross margins expected high single to low double-digit range.
• CapEx Guidance: Expected ~$20M annually over the next four years.
• Net Whiskey Put-Away: Expected $13M–$18M annually over the next four years.

Business-Segment Outlook:

• Branded Spirits:
  • Gross Margins: Expects slight gross margin improvement in full-year outlook; Q4 costs expected to continue but at a lower rate (maintenance/reliability headwinds dissipating by Q1 2027).
  • Premium Plus: Expected to grow low-single digits; core 10 brands now have 6 growing (vs. 1 a year ago).
  • Mid/Value Portfolio: Expected to continue growth led by Ezra Brooks 90-proof, Exotico, Juarez, and St. Brennan's; focus on national account penetration and digital marketing.
  • Distribution: Anticipates transition headwinds (10 markets in Q2, 6 in Q3) to disappear as year closes; Q4 expected to be stronger than Q3.
  • Innovation: "MGP Chapter 1, Out of the Shadows" (10-year bourbon) launched; additional innovation targeting core consumers planned for Q1 2027 via new route-to-market (beer trucks).
• Distilling Solutions:
  • Brown Goods: Sales down ~35% in 4-year outlook; facing oversupply and inventory drawdowns from large multinationals.
  • White Goods/Co-Products: 32% YoY growth in Q3; strategy focused on expanding RTD and private-label customers (now 25% of brown/white goods sales).
  • Warehouse Services: Represents 29% of segment sales; all contracted revenue expected to renew.
  • Outlook: Anticipates strong recovery in 2027+ as industry normalizes; RTD and private-label expansion viewed as key growth engines.
• Ingredient Solutions:
  • Sales: Expected $140M–$150M for full year; Q4 implied as record quarter following Q3 downtime.
  • Gross Margins: Expected high single to low double-digits; waste starch stream costs expected to decrease (insurance recovery received Q3).
  • Operations: Production reliability and throughput have reached top percentile (90% capacity utilization) since July restart; demand is "fully booked" with no customers lost.
  • Growth: Focus on specialty fiber/protein products; robust R&D and co-creation pipeline with blue-chip partners.

Market and Competitive Outlook:

• Industry Trends: Branded spirits industry trends flat per Nielsen (13 weeks ended Oct 3, 2026); MGP outperforming NACPA trends.
• RTD Category: Identified as the fastest-growing category; MGP positioning to capture share from underserved RTD and private-label customers.
• Hemp/CBD: Ready-to-pour category viewed as "switchable" if intoxicating hemp legality expires; MGP prepared to target this consumer via beer truck distribution in Q1 2027.
• Competitive Dynamics: Distilling solutions facing pricing pressure and inventory oversupply; MGP leveraging "Swiss Army knife" capability to pivot between brown and white goods based on demand.
• Pricing/Mix: Brown goods pricing under pressure for two years; MGP shifting mix toward aged spirits and offering price matches to align with customers on profitable spot sales.

Macro / Industry Outlook:

• Economic Environment: Acknowledges consumers are facing economic headwinds; response is strategic price-tier adjustment (e.g., Ezra Brooks shift to $14.99 mid-price tier).
• Consumer Behavior: Value-seeking consumers shifting to established trusted brands in mid/value tiers.
• Regulatory/Legal: Monitoring "intoxicating hemp" expiration timelines; prepared to enter new distribution channels if regulatory shifts occur.
• Debt Covenants: Amended agreements in August to allow adding back up to $20M of receivables losses through end of 2027; elevated leverage period extended through Q1 2026.

Strategic Initiatives:

• Rebranding: Company name changing to "Semperon" effective Nov 2, 2026; ticker symbol changing to "CASC" on NASDAQ.
• Leadership Framework: Introduction of "Epic MASH" framework (Execution, Performance, Impact, Care / Mindset, Accountability, Shift Paradigm, Highest Standards).
• Route-to-Market Expansion:
  • Branded Spirits: Transitioning 6 additional markets to new distributors in Q3; additional control state transitions planned for Q4.
  • Ingredient Solutions: Leveraging increased reliability to recapture market share; expanding R&D co-creation with blue-chip partners.
  • Distribution: Expanding into national chains (off-premise) and beer trucks (Q1 2027 testing).
• Cost Management: Consolidating marketing agency partners by year-end to save >$3M annually; reinvesting portion into digital media.
• Operational Improvements: Major maintenance and reliability upgrades at bottling facilities (Atchison and largest bottling facility) to reduce downtime and costs.
• Note Repurchases: Expect most holders of convertible senior notes to exercise put rights on Nov 16, 2026; funded via credit agreement/note purchase agreement; may use interest rate swaps to manage exposure.

Risks and Headwinds to Outlook:

• Operational Reliability: Ingredient Solutions plant downtime in Q3 delayed recovery; potential for further delays if waste starch stream costs remain elevated.
• Distribution Transitions: System cutovers in transition markets caused Q3 volume declines; headwinds expected to dissipate but remain a variable.
• Distilling Market Oversupply: Continued elevated inventory levels at large multinational customers delaying long-term commitments for new distillate.
• Cost Inflation: Higher bottling facility maintenance, outside contractor, and waste starch stream costs impacting Q3 margins; expected to ease in Q4 but persist partially.
• Debt/Financials: Potential for higher interest expense in Q4 due to rates exceeding note coupon; reliance on future cash flow for note repurchases.
• Regulatory: Uncertainty regarding intoxicating hemp laws and potential impact on RTD sales channels.

Management Tone on the Future:

• Confidence Level: High confidence in "right to win" across all three segments; emphasized "strategic clarity" and "execution."
• Sentiment: Optimistic regarding the recovery of Ingredient Solutions and the pivot to RTD/Private Label in Distilling Solutions.
• Key Themes: "Stabilization," "Resilience," "Financial Discipline," and "Staying Power."
• Guidance Stance: Firm in reaffirming full-year guidance despite Q3 headwinds; expects Q4 to be stronger than Q3; anticipates 2027 exit rates to improve as maintenance costs normalize and distributor transitions complete.

Miscellaneous:

• Rebranding Note: The rebrand to Semperon does not alter reportable segments, 2026 guidance, or leadership team.
• Share Count: Weighted average basic shares outstanding expected at ~21.4M for FY2026.
• Dividend/Buyback: No new dividend or buyback programs announced; focus on deleveraging and cost management.
• 2027 Guidance: Will be provided in February 2027 upon Q4 and full-year results.