Mgp Ingredients, Inc. · NASDAQ:MGPI
Mgp Ingredients — Investor Presentation (May 2019)
37 slides from Mgp Ingredients's investor presentation, May 2019
Slide 1: Investor Presentation May 2019
INVESTOR PRESENTATION May 2019
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: A Leading Supplier of Premium Distilled Spirits and Specialty Wheat Proteins and Starches
A LEADING SUPPLIER OF PREMIUM DISTILLED SPIRITS AND SPECIALTY WHEAT PROTEINS AND STARCHES 2018 Sales of $376.1MM • Distillery Products Ingredient • Leading supplier of premium bourbons, Solutions rye whiskeys, distilled gins, and vodkas $62.0MM • Largest U.S. supplier of rye whiskey • Largest U.S. s
Slide 4: Unique Capabilities and Capacities
UNIQUE CAPABILITIES AND CAPACITIES Atchison, KS Operations Lawrenceburg, IN Operations • Company HQ • Distillery • Distillery • Top-5 American Whiskey producer • Gin • Largest supplier of rye whiskey • Grain Neutral Spirits/Vodka • Bourbon • Industrial alcohol • Gin • Proteins & Starches • Grain Neu
Slide 5: Strongly Positioned in Growing Markets
DISTILLERY PRODUCTS STRONGLY POSITIONED IN GROWING MARKETS • Spirits continue to gain share of total • Growth of the American Whiskey category continues beverage alcohol to outperform overall distilled spirits industry in 2018 • Volume up 5.9% to 24.5M cases Spirits Market Share - Revenue • Revenues
Slide 6: Bull Case for American Whiskey
DISTILLERY PRODUCTS BULL CASE FOR AMERICAN WHISKEY • 5-year volume CAGR remains robust • Historical length of trends indicates sustainable growth opportunities 9-LTR Case Volume (millions) American Whiskey 5-year CAGR - Volume 6.3% 6.5% 6.3% 1970 2010 2018 5.7% 5.1% American Whiskey 35.6 15.3 24.5 3
Slide 7: Capacity & Capability Provide Strong Competitive Position
DISTILLERY PRODUCTS CAPACITY & CAPABILITY PROVIDE STRONG COMPETITIVE POSITION • Industry is adding capacity • Strengthening our position • Existing producers to support growth • Scale provides competitive pricing of existing brands • Capacity supports long-term growth • New producers to support grow
Slide 8: Industrial Alcohol Market Dynamics
DISTILLERY PRODUCTS INDUSTRIAL ALCOHOL MARKET DYNAMICS Chronic oversupply of ethanol and industrial has led to a very competitive GNS market Fuel Ethanol Industrial Beverage GNS 16.1 Billion1 320 Million2 72.5 Million3 Market Leaders Market Leaders Market Leaders •Poet •GPC •GPC •ADM •ADM •MGP •Gree
Slide 9: Strongly Positioned to Serve Growing Markets
INGREDIENT SOLUTIONS STRONGLY POSITIONED TO SERVE GROWING MARKETS • Plant based new product launches up 63% since 2012 • Meat substitutes growing at 6.4% CAGR; $5.2B by 2020 • 38% of U.S. consumers eat “meatless” once per week • More than 120M U.S. consumers are considered “flexitarian” • Non-GMO ca
Slide 10: Strategic Growth Plan
STRATEGIC GROWTH PLAN MAXIMIZE VALUE CAPTURE VALUE SHARE INVEST FOR GROWTH OPERATIONAL EXCELLENCE 10
Slide 11: Aged Whiskey Sales and Branded Platform Designed to Drive Future Gross Margin Expansion
MAXIMIZE VALUE AGED WHISKEY SALES AND BRANDED PLATFORM DESIGNED TO DRIVE FUTURE GROSS MARGIN EXPANSION Stage 1 Product and customer mix Stage 2 optimization Stage 3 Continual customer acquisition Leverage economic value of aging whiskey inventory Branded platform Plant efficiencies Effective risk ma
Slide 12: Driving Sales Mix Up the Margin Ladder
MAXIMIZE VALUE DRIVING SALES MIX UP THE MARGIN LADDER MGP Branded Product Brown Goods: Aged Whiskey Brown Goods: New Distillate White Goods: Whiskey Gin White Goods: Vodka Industrial Alcohol 12
Slide 13: Migrating to Premium Beverage Alcohol: Focus on Whiskey
MAXIMIZE VALUE MIGRATING TO PREMIUM BEVERAGE ALCOHOL: FOCUS ON WHISKEY • Strong 2018 sales growth for MGP brown goods reflects robust American % of Total Food Grade Alcohol Sales Whiskey category Brown Goods +11.0% 2015 2018 White Goods (3.1)% Premium Beverage Alcohol +5.9% • MGP continues to grow s
Slide 14: Portfolio of Award-Winning Brands
CAPTURE VALUE SHARE PORTFOLIO OF AWARD-WINNING BRANDS 14
Slide 15: Narrow and Deep Market Expansion Strategy
CAPTURE VALUE SHARE NARROW AND DEEP MARKET EXPANSION STRATEGY 15
Slide 16: Strong Balance Sheet and Cash Flows Provide Investment for Growth
Building barreled whiskey inventory for aging INVEST FOR GROWTH • Investment of $79.5 million as of 3/31/2019 • Aging inventory STRONG BALANCE SHEET AND CASH FLOWS expected to increase in 2019, at cost, partially PROVIDE INVESTMENT FOR GROWTH offset by aged whiskey • Building aging whiskey inventory
Slide 17: A Culture of Continuous Improvement
OPERATIONAL EXCELLENCE A CULTURE OF CONTINUOUS IMPROVEMENT • Improving throughput while maintaining consistency of high quality products • Managing commodity cost risks • Formula-driven pricing • Locking in margins • Passing through significant swings in cost • Implementing new safety initiative – S
Slide 18: 2018 Financial Results
2018 FINANCIAL RESULTS 18
Slide 19: Growth in Premium Beverage and Specialty Ingredients Led to Sales Growth of 8.2%
GROWTH IN PREMIUM BEVERAGE AND SPECIALTY INGREDIENTS LED TO SALES GROWTH OF 8.2% Sales (year ended 12/31/18) Key Drivers Fav / (Unfav) vs Prior Year • Distillery Products growth primarily driven by an 11.0% increase in brown $MM $MM % goods Distillery Products $314.1 $23.0 7.9% Ingredient Solutions
Slide 20: Distillery Sales Mix Shifted to Higher Value Premium Beverage Alcohol
DISTILLERY SALES MIX SHIFTED TO HIGHER VALUE PREMIUM BEVERAGE ALCOHOL DRIVEN BY BROWN GOODS Sales (year ended 12/31/18) Fav / (Unfav) vs Prior Year $MM $MM % Brown Goods $125.9 $12.4 11.0% White Goods 62.6 $(2.0) (3.1) Premium Beverage Alcohol 188.4 $10.4 5.9 Industrial Alcohol 80.7 4.0 5.2 Food Gra
Slide 21: Mix Shift Is Driving Profitability and Margin Growth
MIX SHIFT IS DRIVING PROFITABILITY AND MARGIN GROWTH Consolidated Gross Profit and Margins $90.0 25.0% 22.2% 21.9% $80.0 20.5% 20.0% $70.0 17.9% $60.0 15.0% $50.0 $40.0 $83.6 $76.0 10.0% $65.3 $30.0 $58.5 $20.0 5.0% $10.0 $0.0 0.0% 2015 2016 2017 2018 $MM 21 Gross Profit Gross Margin
Slide 22: Distillery Gross Profit a Key Driver of Operating Income Growth
DISTILLERY GROSS PROFIT A KEY DRIVER OF OPERATING INCOME GROWTH Operating Income Drivers 2017-18 ($MM) $2.6 $(0.3) $50.1 $5.0 $42.9 2017 Distillery Gross Profit Ingredients Gross Profit SG&A 2018 22 Note: Totals in presentation may not foot due to rounding
Slide 23: Strong Operating Cash Flows Enable Growth Investment Opportunities
STRONG OPERATING CASH FLOWS ENABLE GROWTH INVESTMENT OPPORTUNITIES Operating Cash Flow Drivers Year Ended 2018 ($MM) $11.4 $(10.6) INVESTING ACTIVITIES ($MM) $37.3 $(4.5) $33.5 Source / (Use) Amount PP&E additions $(31.0) Net cash provided by $(31.0) investing activities Remaining Cash Flow $2.4 Net
Slide 24: Balance Sheet Remains Strong
BALANCE SHEET REMAINS STRONG Debt to EBITDA ($MM) $65.3 $61.5 $57.3 $51.3 • 2018 YE Debt to EBITDA ratio of 0.52 $36.0 $33.5 $32.0 • $139.0MM available on $24.6 Credit Facility at 12/31/2018 2015 2016 2017 2018 24 Debt EBITDA Note: Calculations as of year-end. See Appendix for GAAP to Non-GAAP Recon
Slide 25: Q1 2019 Financial Results
MGP Q1 2019 FINANCIAL RESULTS
Slide 26: Q1 Sales Were Up 1.3% with Both Segments Reporting Growth
Q1 SALES WERE UP 1.3% WITH BOTH SEGMENTS REPORTING GROWTH Sales (quarter ended 3/31/19) Key Drivers Fav / (Unfav) vs Prior Year • Distillery Products growth primarily driven by an 8.3% increase in white goods $MM $MM % Distillery Products $74.6 $0.2 0.3% • Ingredient Solutions improvement due to Ing
Slide 27: Increased White Goods & Industrial Sales Growth Offset by Brown Goods Volatility
INCREASED WHITE GOODS & INDUSTRIAL SALES GROWTH OFFSET BY BROWN GOODS QUARTERLY VOLATILITY Sales (quarter ended 3/31/19) Fav / (Unfav) vs Prior Year $MM $MM % Brown Goods $24.8 $(3.4) (12.0)% White Goods 17.2 1.3 8.3 Premium Beverage Alcohol 42.0 $(2.1) (4.7) Industrial Alcohol 20.4 1.1 5.7 Food Gra
Slide 28: Business Segment Performance Key Driver of Operating Income Results
BUSINESS SEGMENT PERFORMANCE KEY DRIVER OF OPERATING INCOME RESULTS Operating Income Drivers First Quarter 2018-19 ($MM) $10.4 $(1.7) $(0.6) $0.4 $8.5 Q1 2018 Ingredients Gross Profit Distillery Gross Profit SG&A Q1 2019 28 Note: Totals in presentation may not foot due to rounding
Slide 29: EPS Increase Reflects a Tax Benefit
EPS INCREASE REFLECTS A TAX BENEFIT Earnings Per Share Drivers First Quarter 2018-19 $0.04 $0.57 $0.52 $(0.10) $0.11 Q1 2018 Operations Change in share-based Change in effective tax rate* Q1 2019 compensation 29 *Excludes change in share-based compensation Note: Totals in presentation may not foot d
Slide 30: Guidance
GUIDANCE MGP confirmed on May 1, 2019 the following guidance for fiscal 2019: • 2019 sales growth is projected in the mid-single-digit percentage range versus 2018, subject to some volatility due to the current conditions in the industrial alcohol market. • 2019 gross margins are expected to increas
Slide 31: Excellent Access to Capital
EXCELLENT ACCESS TO CAPITAL Credit agreement provides greater access to capital, improved flexibility and reduced rate risk • Agreement highlights as of 3/31/2019: • $150 million revolving credit facility with Wells Fargo • $20 million 10-year term loan with Prudential Capital at 3.53% fixed rate •
Slide 32: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Working capital • Continue to increase aging whiskey inventory through 2019 year-end Capital expenditures • Warehouse expansion • Invest in capabilities Acquisitions • May be used to accelerate expansion into brands or other strategic initiatives • Key criteria for prem
Slide 33: Why Invest
WHY INVEST • Proven success of implementing long-term strategy to maximize growth and expand margins • Well positioned against favorable macro trends with a strong, competitive position • Sales of aged whiskey sales begin second stage of meaningful sales growth and margin expansion • Third growth st
Slide 34: Appendix
APPENDIX 34
Slide 35: U.S. Spirits Market
U.S. SPIRITS MARKET 9-Liter Cases (000s) 2018 Volume % Change Total Distilled Spirits (TDS) 231,136 +2.2% Total Whiskey 66,098 +3.2% American Whiskey (Bourbon/Rye/Tennessee) 24,516 +5.9% Super Premium 2,848 +16.9% Rye ~1,100 +15.9% Vodka 72,472 +1.6% Super Premium 5,514 -2.6% Gin 9,762 -1.1% Super P
Slide 36: Reconciliation of GAAP to Non-GAAP
RECONCILIATION OF GAAP TO NON-GAAP Reconciliation of GAAP to Non GAAP Measures EBITDA (Dollars in Thousands) 2018 2017 2016 2015 Net Income $ 37,284 $ 41,823 $ 31,184 $ 26,191 Interest 1,168 1,184 1,294 534 Taxes 11,696 10,935 13,533 12,227 Depreciation / Amortization 11,362 11,308 11,253 12,382 EBI
Slide 37: Cash Flow Details
CASH FLOW DETAILS YTD Ended Other operating cash drivers December 31, 2018 Gain on Insurance Recoveries Loss (gain) on sale of assets Share based compensation 3,100 Excess tax benefits related to share based compensation Equity in (earnings) loss Receipt of dividends from JV Deferred income taxes 1,