Mgp Ingredients, Inc. · NASDAQ:MGPI
Mgp Ingredients — Investor Day (November 2021)
67 slides from Mgp Ingredients's investor day presentation, Nov 18, 2021
Slide 1: MGP Ingredients Investor Day
MGP INGREDIENTS INVESTOR DAY November 18, 2021 1 *updated June 3, 2022
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Certain of the comments made in this presentation and in the question and answer session that follows may contain forward-looking statements in relation to operations, financial condition and operating results of MGP Ingredients, Inc. and such statements involve a number o
Slide 3: Today's Speakers
TODAY’S SPEAKERS Dave Colo Brandon Gall David Bratcher President, CEO Chief Financial Officer Chief Operating Officer Director, Board of Directors Mr. Colo, a member of the MGP Board of Directors since Mr. Gall joined MGP in January 2012 and has served as Mr. Bratcher joined MGP following the Compan
Slide 4: Agenda
AGENDA 9:00 AM 9:15 AM Overview & Introduction Dave Colo President & CEO 9:15 AM 9:30 AM Ingredients Solutions Mike Buttshaw VP of Ingredient Solutions Sales 9:30 AM 9:45 AM Distillery Products David Dykstra VP of Alcohol Sales 9:45 AM 9:50 AM Branded Spirits History David Bratcher Chief Operating O
Slide 5: Achievements Since 2018 Investor Day
ACHIEVEMENTS SINCE 2018 INVESTOR DAY THE BUSINESS CONTINUES ITS RECORD PERFORMANCE IN 2021 WHILE ALSO INTEGRATING THE LUXCO ACQUISITION Revenue and Growth Gross Profit and Margin 8.2% (3.5%) 9.0% 44.9% 1 22.2% 21.1% 25.0% 31.7% $560.8 $177.9 $376.1 $362.7 $395.5 $98.8 $83.6 $76.5 2018 2019 2020 LTM
Slide 6: Branded Spirits: Luxco Acquisition
BRANDED SPIRITS COMPLETED IN APRIL 2021, THE LUXCO ACQUISITION INCREASES MGP’S SCALE IN BRANDED SPIRITS & ESTABLISHES AN ADDITIONAL PLATFORM FOR FUTURE GROWTH The Luxco Acquisition Offers Numerous Key Benefits National Sales Platform Operational Capabilities Diverse Portfolio of Brands • Sales / Dis
Slide 7: Distillery Products Achievements
DISTILLERY PRODUCTS ACHIEVEMENTS AS ANTICIPATED, OUR AGED WHISKEY INVENTORY HAS DIFFERENTIATED OUR OFFERING, ATTRACTING MORE CUSTOMERS, RESULTING IN OUTPERFORMANCE OF THE SEGMENT Total Brown Goods Customer Count Brown Goods Sales & Segment Gross Margin $180,000 45.0% 267 $165,100 251 $160,000 40.0%
Slide 8: Ingredient Solutions Achievements
INGREDIENT SOLUTIONS ACHIEVEMENTS CONSUMER DEMAND FOR SPECIALTY HIGH FIBER, HIGH PROTEIN, AND PLANT-BASED FOODS LED TO A DOUBLING OF INGREDIENT SOLUTIONS’ GROSS PROFIT IN 2020 AND CONTINUED GROWTH IN 2021 Ingredient Solutions Sales Ingredient Solutions Gross Profit and Margin $100,000 $25,000 30% 26
Slide 9: Our Evolution Over the Last 10+ Years
OUR EVOLUTION OVER THE LAST 10+ YEARS Company Timeline Total Company Revenue $561M Just as MGP strategically entered the American October 2011 Whiskey category with MGP purchases the assets of Lawrenceburg Distillers Indiana, its transformational which was originally founded in September 2021 1847 a
Slide 10: Segment Overview: Ingredient Solutions
SEGMENT OVERVIEW - INGREDIENT SOLUTIONS - DISTILLERY PRODUCTS Mike Buttshaw - BRANDED SPIRITS Vice President of Ingredient Solutions Sales and R&D
Slide 11: Ingredient Solutions Mission
INGREDIENT S0LUTIONS MISSION Remain a strategic business partner of choice by cultivating meaningful relationships through collaboration, innovation and dedication to best-in- class customer service.
Slide 12: Ingredient Solutions Overview
INGREDIENT SOLUTIONS OVERVIEW Historical Revenue by Product Line ($MM) Specialty Wheat Starches MGP is the market leader in wheat-based dietary fiber. Fibersym® is expertly modified to add dietary fiber in foods $88 while reducing calories and net carbs on labels. $78 $62 $66 $2 $56 $2 $3 $10 $1 $3
Slide 13: Strongly Positioned to Serve Growing Markets
INGREDIENT SOLUTIONS STRONGLY POSITIONED TO SERVE GROWING MARKETS • One in four consumers say they are eating more protein from plant sources vs. a year ago1 • Global sales of meat alternatives expected to reach $100B in the next decade2 • Consumption of plant-based meat alternatives is higher for 1
Slide 14: Ingredient Solutions Strategy
INGREDIENT SOLUTIONS INGREDIENT SOLUTIONS STRATEGY EXPAND MARKET SHARE OF 1 FIBERSYM AND ARISE BRAND PLATFORMS EXPAND TEXTURED 2 PLANT PROTEINS UNDER PROTERRA BRAND MAXIMIZE THE VALUE OF CLEAN LABEL 3 STARCHES OPTIMIZE CUSTOMER, MARKET AND CHANNEL 4 TO DRIVE ADDITIONAL PROFITABILITY EVALUATE M&A OPP
Slide 15: Aggressively Expand Fibersym and Arise Platforms
INGREDIENT SOLUTIONS AGGRESSIVELY EXPAND FIBERSYM AND ARISE PLATFORMS What nutrients do consumers Fibersym® RW Overview Strategy see as “healthy”? • Granular RS4-type resistant wheat • Maximize value of existing starch capacities • Allows formulators to boost the • SKU rationalization fiber content
Slide 16: Expand Textured Plant Proteins
INGREDIENT SOLUTIONS EXPAND TEXTURED PLANT PROTEINS Healthfulness among U.S. consumers Strategy Year Plant Protein Animal Protein • Innovate new products to include pea, pulses, soy and combinations of plant proteins under new brand 2017 4th 9th ProTerra. Improve nutrition and function. 2018 4th 8th
Slide 17: Maximize the Value of Clean Label Starches
INGREDIENT SOLUTIONS MAXIMIZE THE VALUE OF CLEAN LABEL STARCHES What influences grocery shoppers at retail? Strategy 50% A “clean label” means zero processed • Develop and market “clean label” drum dried starches platform leveraging the healthier for you trend along 40% of consumers believe non-GMO
Slide 18: Optimize Customer, Market and Channel
INGREDIENT SOLUTIONS OPTIMIZE CUSTOMER, MARKET AND CHANNEL Strategy • Collaborate with the ideal distributor partners to promote continued growth and increased market share; expand into food service • Prioritize the development of more direct customer accounts across ingredient platforms • Drive gro
Slide 19: Evaluate M&A Opportunities to Accelerate Growth
INGREDIENT SOLUTIONS EVALUATE M&A OPPORTUNITIES TO ACCELERATE GROWTH Focus on assets and brands that increase our capabilities & competitive advantage • Accretive to current segment gross margins • Broaden our current in-house product offering (horizontal) • Move up the value chain toward brands (ve
Slide 20: Segment Overview: Distillery Products
SEGMENT OVERVIEW - INGREDIENT SOLUTIONS - DISTILLERY PRODUCTS David Dykstra - BRANDED SPIRITS Vice President of Alcohol Sales
Slide 21: Distillery Products Mission
DISTILLERY PRODUCTS MISSION Cultivate lasting partnerships with customers across all product categories by leveraging our strong sales and operating platform, aging whiskey inventory, and unique product development skills
Slide 22: Distillery Products Overview
DISTILLERY PRODUCTS OVERVIEW Historical Revenue1 by Product Line ($MM) Brown Goods: Premium bourbon and rye whiskeys sold as aged $313 $350 whiskey or unaged new distillate, which is then aged by $290 $312 $294 $17 customers typically for two to four years. $13 $16 $20 $11 $15 $13 $26 $26 $6 $19 $6
Slide 23: Distillery Products Strategy
DISTILLERY PRODUCTS DISTILLERY PRODUCTS STRATEGY FOCUSED MIGRATION AWAY FROM INDUSTRIAL 1 ALCOHOL TO WHITE BEVERAGE ALCOHOL CONTINUE CULTIVATING MULTI-NATIONAL & 2 CRAFT CUSTOMERS FOR AGED WHISKEY SALES 3 ENHANCE OFFERINGS TO BECOME A BEVERAGE ALCOHOL “SOLUTIONS PROVIDER” 4 DEVELOP EXPORT MARKET FOR
Slide 24: Focused Migration Away from Industrial Alcohol to White Beverage Alcohol
DISTILLERY PRODUCTS 1 FOCUSED MIGRATION AWAY FROM INDUSTRIAL ALCOHOL TO WHITE BEVERAGE ALCOHOL 2018 Revenue Mix % LTM 9/30/21 Revenue Mix % 44% 47% 53% 56% White Goods Industrial White Goods Industrial 24
Slide 25: Continue Cultivating Multi-National and Craft Customers
DISTILLERY PRODUCTS 1 CONTINUE CULTIVATING MULTI-NATIONAL AND CRAFT CUSTOMERS FOR AGED BROWN GOODS SALES U.S. Spirits Continue To Gain Share Of Total Beverage Alcohol Growth of American Whiskey Continues To Outperform U.S. Spirits Market Share - Revenue 5-year U.S. American Whiskey Volume CAGR Remai
Slide 26: Enhance Offerings to Become a Beverage Alcohol Solutions Provider
DISTILLERY PRODUCTS 1 ENHANCE OFFERINGS TO BECOME A BEVERAGE ALCOHOL “SOLUTIONS PROVIDER” Before Luxco Acquisition Enhancements • Bulk GNS, Gin • Bottling – key strategic customers • New Distillate • Full blending program and taste profile development • Aged Whiskey (Barrels) • Concept innovation •
Slide 27: Continue Growth of MGP Export Program
DISTILLERY PRODUCTS 1 CONTINUE GROWTH OF MGP EXPORT PROGRAM • Continue to gain momentum in the export market • Hired a UK based employee in 2020 to help develop the bulk EU market • EU tariff on American Whiskey to be lifted January 1, 2022 27
Slide 28: Attract Control Label Customers
DISTILLERY PRODUCTS 1 ATTRACT CONTROL LABEL CUSTOMERS TO BOOST OVERALL BROWN GOODS GROWTH Untapped Potential MGP Opportunities • Growth: Increase aged sales volume • Diversification: Expose MGP to alternative customer set • Volatility Reduction: Enhance predictability of aged sales 28
Slide 29: Luxco History
LUXCO HISTORY David Bratcher Chief Operating Officer - INGREDIENT SOLUTIONS - DISTILLERY PRODUCTS - BRANDED SPIRITS
Slide 30: Luxco History and Provenance
BRANDED SPIRITS 1 LUXCO HISTORY AND PROVENANCE EARLY YEARS BRAND ACQUISITION GROWTH AND ACQUISITION Prior 1958 2000 Mr. Sherman owned and operated Sherman and Lux family sell Paramount Liquor Co to Glazers, latter to be liquor distributors in AR, MO – known as SGWS latter becoming Paramount Liquor 1
Slide 31: Segment Overview: Branded Spirits
SEGMENT OVERVIEW Ryan Earey Vice President of Branded Spirits Sales - INGREDIENT SOLUTIONS - DISTILLERY PRODUCTS - BRANDED SPIRITS Fletcher Buchman Vice President of Marketing
Slide 32: Branded Spirits Mission
BRANDED SPIRITS MISSION MGP Branded Spirits’ mission comes down to one word … PREMIUMIZATION Our mission is to enhance focus on higher-end brands aligned with growing spirits categories and price tiers
Slide 33: Branded Spirits Segment Overview
BRANDED SPIRITS 1 SEGMENT OVERVIEW1 CATEGORY VALUE MID PREMIUM ULTRA Luxco Brand Examples By Price Tier: 9L Vol. Trend -5% +2% +15% +22% UTLRA PREMIUM: Yellowstone Select Bourbon, CORDIALS ≤$9.99 $10-14.99 $15-24.99 $25+ George Remus Bourbon, Blood Oath Bourbon, Minor Case Straight Rye Whiskey, Ross
Slide 34: Expansive Family of Branded Spirits
BRANDED SPIRITS EXPANSIVE FAMILY OF BRANDED SPIRITS ROSSVILLE UNION YELLOWSTONE LIMITED Straight Bourbon Whiskey SRP: $99.99 Barrel Proof Straight Rye Whiskey SRP: $69.99 GEORGE REMUS MINOR CASE Straight Bourbon Straight Rye Whiskey Whiskey SRP: $39.99 SRP: $39.99 YELLOWSTONE Straight Bourbon Whiske
Slide 35: Branded Spirits Strategy
BRANDED SPIRITS BRANDED SPIRITS STRATEGY 1 FOCUS ON THE RIGHT CATEGORIES 2 FOCUS ON THE RIGHT BRANDS 3 FOCUS ON THE RIGHT PRICE 4 FOCUS ON THE RIGHT SIZE 5 FOCUS ON THE RIGHT MARKETING SUPPORT 35
Slide 36: Focus on the Right Categories
BRANDED SPIRITS 11 FOCUS ON THE RIGHT CATEGORIES Narrow the category focus and fish where the growth is … High-End Whiskey and Tequila Nielsen Category Dollar Growth Drivers CATEGORY_MAIN TTL Sales Dollar Change SALES CY/LY CHG ALL TOTALS $2,667,843,070 15% • Whiskey and Tequila are the two largest
Slide 37: Focus on the Right Brands
BRANDED SPIRITS 2 FOCUS ON THE RIGHT BRANDS The mission has been and will continue to be focused on driving Premium+, higher margin, brands within the Branded Spirits portfolio…. • Over the last 5 years, the Premium+ set of brands % of Net Revenue By Price Classification net revenue has grown and no
Slide 38: Focus on the Right Brands
BRANDED SPIRITS 11 FOCUS ON THE RIGHT BRANDS Luxco brands are better positioned to meet consumers’ needs with emphasis on High-End Whiskey & Tequila FA M ILY O F Ezra B R ARebel NDS BARDSTOWN, KY LEBANON, KY JALISCO, MEXICO DERRY, N. IRELAND LAWRENCEBURG, IN WASHINGTON, DC ST. LOUIS, MO & CLEVELAND,
Slide 39: Focus on the Right Price
BRANDED SPIRITS 3 FOCUS ON THE RIGHT PRICE Growth Across Spirits Categories Continues to Recent Innovation Launches are Designed to Capitalize on Outperform in the High-End Fastest Growing Price Segments American 9L Case 52-Weeks Tequila 9L Case 52-Weeks Ezra Brooks Dos Primos Daviess County Bowling
Slide 40: Focus on the Right Price
BRANDED SPIRITS FOCUS ON THE RIGHT PRICE Award-winning brands that support the right price and build authenticity 40
Slide 41: Focus on the Right Size
BRANDED SPIRITS 4 FOCUS ON THE RIGHT SIZE Focus on driving sizes that can produce the largest margin per case 750ML 50ML 375ML 200ML 1.75L 1.0L 41
Slide 42: Focus on the Right Size
BRANDED SPIRITS FOCUS ON THE RIGHT SIZE Recent innovation has focused on the higher margin producing 750mL size George Daviess Bowling & Yellowstone Ezra Brooks Ezra Brooks Dos Primos Remus County Burch Repeal KSBW, Variant Select Old Ezra 7 Gin 99 Proof Blanco Reserve Finishes New World Spirit Bour
Slide 43: Focus on the Right Marketing Support
BRANDED SPIRITS FOCUS ON THE RIGHT MARKETING SUPPORT Full-funnel marketing strategy allows brands to reach new consumers and generate pull at retail • Paid Social (Facebook, Instagram) AWARENESS • • • Online/Streaming (YouTube, Pre-Roll Video) Cable TV OTT Digital Video • Paid Search CRM Strategy CO
Slide 44: Dos Primos Brand Activation
BRANDED SPIRITS FOCUS ON THE RIGHT MARKETING SUPPORT Dos Primos tequila brand activation illustrates strong marketing strategy Traditional Media + Experiential + Social + Digital Retail + eCommerce PR Tour Support CONVERSION 44
Slide 45: Yellowstone Select National TV Support
BRANDED SPIRITS FOCUS ON THE RIGHT MARKETING SUPPORT In 2020, Yellowstone Select expanded 2021 National TV support has marketing efforts to include expanded to include additional National TV support High-End brands Brand Flighting Yellowstone Select Q1 - Q4 Ezra Brooks 99 Q2 – Q4 Daviess County Q2 –
Slide 46: 2021 Yellowstone Select TV Spot
BRANDED SPIRITS 5 FOCUS ON THE RIGHT MARKETING SUPPORT 2021 Yellowstone Select TV Spot (:30) CONVERSION 46
Slide 47: Environmental & Sustainability Initiatives
ENVIRONMENTAL & SUSTAINABILITY INITIATIVES Dave Colo President, CEO Director, Board of Directors
Slide 48: Environmental & Sustainability Vision
ENVIRONMENTAL & SUSTAINABILITY VISION Responsibly grow our brands and products, while fostering a sustainable future for the environment on which we depend.
Slide 49: Aspirational Ambitions
ENVIRONMENTAL & SUSTAINABILITY INITIATIVES 1 ASPIRATIONAL AMBITIONS • As a small public company, MGP has begun its ESG journey • As an organization, we are making our own commitments to: • Promoting a positive role for alcohol • Promoting diversity, equity and inclusion initiatives • Preserving natu
Slide 50: Environmental Focus
ENVIRONMENTAL & SUSTAINABILITY INITIATIVES 1 ENVIRONMENTAL FOCUS Environmental Compliance • 100% regulatory and reporting compliance Environmental Sustainability Focus areas: Water, Waste, Energy, Greenhouse Gas Emission, Packaging, and Reporting • Improve water usage efficiency • Improve energy usa
Slide 51: Social Responsibility Focus
ENVIRONMENTAL & SUSTAINABILITY INITIATIVES 1 SOCIAL RESPONSIBILITY FOCUS • Focus areas: • Diversity, Equity, and Inclusion (DEI) • Alcohol Responsibility • Community Responsibility • Lay the groundwork: Benchmarking 2021 – 2022 • Integrate Brands Division with inclusion into ESG reporting • Adopt a
Slide 52: Financials Review
FINANCIALS REVIEW Brandon Gall Chief Financial Officer
Slide 53: Record Results in All Business Segments
THE COMPANY HAS DELIVERED RECORD RESULTS IN ALL BUSINESS SEGMENTS Revenue ($MM) Adjusted EPS ($) $4.05 $615 $3.75 $570 $396 $2.35 $2.51 $376 $363 $2.17 2018 2019 2020 2021 2018 2019 2020 2021 Adjusted EBITDA1 ($MM) FY 2021 Guidance $135 Sales are projected to be in the range of $570 million to $615
Slide 54: Strong Balance Sheet and Excellent Access to Capital
STRONG BALANCE SHEET AND EXCELLENT ACCESS TO CAPITAL • Convertible Note • $175 million of convertible senior notes due 2041 • Fixed interest rate of 1.875%; conversion premium 37.5% • Net proceeds intended to reduce outstanding balance on the revolving credit facility • Credit Agreement Debt to Adju
Slide 55: Strong Track Record of Cash Flow Generation
STRONG TRACK RECORD OF CASH FLOW GENERATION Free Cash Flow and Conversion 1 • MGP has seen strong, consistent improvement in free cash Free Cash Flow Free Cash Flow Conversion flow and free cash flow conversion since 2018 • In recent quarters, improvement in operating cash flow $83.6 was driven by r
Slide 56: Capital Allocation Priorities Remain Focused on Growth
CAPITAL ALLOCATION PRIORITIES REMAIN FOCUSED ON GROWTH OPPORTUNITIES Capital Use Priority Change Commentary M&A will continue to be an important lever to increase our capabilities, margin up our M&A ↑ portfolios, and accelerate growth. With our inventory in balance, matching put-away with growing fu
Slide 57: M&A Considerations by Segment
M&A CONSIDERATIONS BY SEGMENT Distillery Products Branded Spirits Ingredient Solutions Assets that increase our Spirits brands that are accretive Assets that increase our capabilities & competitive to current segment gross capabilities & competitive advantage margins advantage • Accretive to current
Slide 58: Concluding Remarks
CONCLUDING REMARKS Dave Colo President, CEO Director, Board of Directors
Slide 59: Strong and Evolving Financial Model Drives Organic Value Creation
STRONG AND EVOLVING FINANCIAL MODEL DRIVES ORGANIC VALUE CREATION 2018 – 2021F Long-term Goals $215 Million Increase Net Sales Low-to-Mid Single Digit Growth $570 million to $615 million in 2021 900 bps Expansion Gross Margin Continued Expansion* Contributions by all Segments More than 100% Growth i
Slide 60: Q&A
Q&A
Slide 61: Today's Speakers
TODAY’S SPEAKERS Dave Colo Brandon Gall David Bratcher President, CEO Chief Financial Officer Chief Operating Officer Director, Board of Directors Mr. Colo, a member of the MGP Board of Directors since Mr. Gall joined MGP in January 2012 and has served as Mr. Bratcher joined MGP following the Compan
Slide 62: Appendix
APPENDIX
Slide 63: Reconciliation of Operating Income to Adjusted Operating Income
RECONCILIATION OF OPERATING INCOME TO ADJUSTED OPERATING INCOME LTM Q1 LTM Q2 LTM Q3 ($ in millions) 2018 2019 2020 2021 2021 2021 Operating Income $50.1 $47.2 $54.2 $61.0 $77.4 $96.6 Inventory Step-Up – Branded Spirits - - - - 2.5 2.5 Business Acquisition Costs - - 0.9 2.8 9.5 9.8 CEO Transition Co
Slide 64: Reconciliation of Net Income to Adjusted EBITDA and Free Cash Flow
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA AND FREE CASH FLOW LTM Q1 LTM Q2 LTM Q3 ($ in millions) 2018 2019 2020 2021 2021 2021 Net Income $37.3 $38.8 $40.3 $45.9 $57.5 $70.8 Interest 1.2 1.3 2.3 2.1 2.8 3.3 Taxes 11.7 7.1 12.3 13.6 17.5 22.3 Depreciation and Amortization 11.4 11.6 13.0 13.1 1
Slide 65: Reconciliation of Quarterly Adjusted Operating Income
RECONCILIATION OF QUARTERLY ADJUSTED OPERATING INCOME ($ in millions) Q3’19 Q3’20 Q3’21 Operating Income $11.6 $13.7 $32.9 Inventory Step-Up – Branded Spirits - - - Business Acquisition Costs - - 0.3 CEO Transition Costs - 0.0 - Adjusted Operating Income 1 $11.6 $13.7 $33.2 65 Source: Company filing
Slide 66: Reconciliation of EPS to Adjusted EPS
RECONCILIATION OF EPS TO ADJUSTED EPS ($ in millions) 2018 2019 2020 EPS $2.17 $2.27 $2.37 Business Acquisition Costs - - 0.05 CEO Transition Costs - - 0.09 Adjusted Operating Income 1 $2.17 $2.27 $2.51 66 Source: Company filings 1 Non-GAAP figure
Slide 67: Reconciliation of Quarterly Net Income to Adjusted EBITDA
RECONCILIATION OF QUARTERLY NET INCOME TO ADJUSTED EBITDA ($ in millions) Q3’19 Q3’20 Q3’21 Net Income $8.2 $10.4 $23.7 Interest 0.4 0.6 1.1 Taxes 3.0 2.9 7.7 Depreciation and Amortization 2.9 3.3 5.2 Equity Method Investment - - 0.4 Inventory Step-Up – Branded Spirits - - - Business Acquisition Cos