Mgp Ingredients, Inc. · NASDAQ:MGPI
Mgp Ingredients — Q3 2020 Earnings Presentation
32 slides from Mgp Ingredients's earnings presentation, November 2020
Slide 1: Investor Presentation November 2020
INVESTOR PRESENTATION November 2020
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 2019 Sales of $362.7MM • Distillery Products Ingredient • Leading supplier of premium bourbons, Solutions rye whiskeys, distilled gins, and vodkas $65.5MM • 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 • U.S. spirits continue to gain share of total • Total distilled spirits have experienced 10 straight beverage alcohol years of market share gains in the U.S. • 2019 volume up 3.3% to 239M cases U.S. Spirits Market Share - Revenue • 2019 rev
Slide 6: Bull Case for American Whiskey
DISTILLERY PRODUCTS BULL CASE FOR AMERICAN WHISKEY • 5-year U.S. volume CAGR remains robust • Historical length of trends in the U.S. indicates sustainable growth opportunities 6.3% 6.5% 6.3% 6.5% 9-LTR Case Volume (millions) 5.7% 5.1% 1970 2010 2019 American Whiskey 35.6 15.3 26.6 3.7% Vodka 18.8 6
Slide 7: Capacity & Capability Provide Strong Competitive Position
DISTILLERY PRODUCTS CAPACITY & CAPABILITY PROVIDE STRONG COMPETITIVE POSITION • Scale provides competitive pricing • Capacity supports long-term growth • Capabilities to meet diverse customer needs • Library of different mash bills and ages • Broad base of premium beverage offerings • Leveraging age
Slide 8: Industrial Alcohol Market Dynamics Have Led to a Very Competitive GNS Market
DISTILLERY PRODUCTS INDUSTRIAL ALCOHOL MARKET DYNAMICS HAVE LED TO A VERY COMPETITIVE GNS MARKET Fuel Ethanol Industrial Beverage GNS 15.8 Billion1 375 Million2 74.2 Million3 Market Leaders Market Leaders Market Leaders •Poet •GPC •GPC •ADM •ADM •MGP •Green Plains •MGP •ADM •Equistar 8 1Source: Rene
Slide 9: Strongly Positioned to Serve Growing Markets
INGREDIENT SOLUTIONS STRONGLY POSITIONED TO SERVE GROWING MARKETS • Plant based new product launches up 65% since 20121 • Global sales of alternative meats expected to reach $100B in the next decade2 • 16% of U.S. consumers eat “meatless” once per week1 • Meat substitute products introduced in the U
Slide 10: Strategic Growth Plan
STRATEGIC GROWTH PLAN MAXIMIZE VALUE CAPTURE VALUE SHARE INVEST FOR GROWTH OPERATIONAL EXCELLENCE 10
Slide 11: Driving Sales Mix Up the Profit Ladder
MAXIMIZE VALUE DRIVING SALES MIX UP THE PROFIT LADDER Branded Spirits Brown Goods: Products Aged Whiskey Brown Goods: New Distillate White Goods: Whiskey Gin White Goods: Vodka Industrial Alcohol 11
Slide 12: Aged Whiskey Customer Economics Benefits
MAXIMIZE VALUE AGED WHISKEY CUSTOMER ECONOMICS BENEFITS • Shortens timeline to cash flow • Reduces working capital investment • No need to build additional distillation capacity or warehouses • Enables M&A-related growth and brand expansion • MGP provides a reliable long-term supply chain solution 1
Slide 13: American Whiskey Accounts for 65 Percent of All U.S. Spirits Exports
MAXIMIZE VALUE AMERICAN WHISKEY ACCOUNTS FOR 65 PERCENT OF ALL U.S. SPIRITS EXPORTS • The European Union is the top export market for • American Whiskey is underdeveloped outside the U.S. American Whiskey Despite current tariffs, exports will be a key driver of long-term growth Total American Whiske
Slide 14: Migrating to Premium Beverage Alcohol: Focus on Whiskey
MAXIMIZE VALUE MIGRATING TO PREMIUM BEVERAGE ALCOHOL: FOCUS ON WHISKEY % of Total Food Grade Alcohol Sales 2015 2019 26% 25% 32% 43% 31% 43% Brown Goods Premium Beverage White Goods Premium Beverage Industrial Alcohol 14 Alcohol Alcohol
Slide 15: Portfolio of Award-Winning Brands
CAPTURE VALUE SHARE PORTFOLIO OF AWARD-WINNING BRANDS 15
Slide 16: Narrow and Deep Market Expansion Strategy
CAPTURE VALUE SHARE NARROW AND DEEP MARKET EXPANSION STRATEGY 16
Slide 17: 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 sales • Evaluating M&A opportuniti
Slide 18: 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 19: Q3 2020 Financial Results
MGP Q3 2020 FINANCIAL RESULTS
Slide 20: Q3 Sales Were Up 13.5% with Both Segments Reporting Double Digit Growth
Q3 SALES WERE UP 13.5% WITH BOTH SEGMENTS REPORTING DOUBLE DIGIT GROWTH Consolidated Sales Key Drivers (quarter ended 9/30/20) Fav / (Unfav) vs Prior Year • Distillery Products growth primarily due to strong sales of new distillate and aged $MM $MM % brown goods. Distillery Products $81.6 $8.3 11.4%
Slide 21: Double-Digit Sales Growth of Aged Whiskey and New Distillate Despite Pandemic Uncertainty
DISTILLERY PRODCUTS DOUBLE-DIGIT SALES PERCENTAGE GROWTH OF AGED WHISKEY AND NEW DISTILLATE DESPITE PANDEMIC UNCERTAINTY Distillery Products Sales (quarter ended 9/30/20) Fav / (Unfav) vs Prior Year $MM $MM % Brown Goods $34.4 $7.8 29.2% White Goods 16.4 1.0 6.5 Premium Beverage Alcohol 50.7 8.8 20.
Slide 22: Sales Growth of 22.7% Represents Strong Demand for Specialty Wheat Products
INGREDIENT SOLUTIONS SALES GROWTH OF 22.7% REPRESENTS STRONG DEMAND FOR SPECIALTY WHEAT PRODUCTS Ingredient Solutions Sales (quarter ended 9/30/20) $MM Fav / (Unfav) vs Prior Year $MM % Specialty wheat starches $11.6 $3.2 37.6% Specialty wheat proteins 8.0 1.8 29.6 Commodity wheat starches 1.6 (0.7)
Slide 23: Operating Income Up 17.7% Due to Strong Ingredient Solutions and Distillery Products Performance
OPERATING INCOME UP 17.7% DUE TO STRONG INGREDIENT SOLUTIONS AND DISTILLERY PRODUCTS PERFORMANCE Operating Income Drivers Third Quarter 2019-20 ($MM) $1.4 $(2.3) $3.0 $13.7 $11.6 Q3 2019 Ingredients Gross Profit Distillery Gross Profit SG&A Q3 2020 23 Note: Totals in presentation may not foot due to
Slide 24: EPS Reflects Strong Performance in Operations
EPS REFLECTS STRONG PERFORMANCE IN OPERATIONS Earnings Per Share Drivers Third Quarter 2019-20 $0.03 $0.01 $0.61 $0.09 $0.48 Q3 2019 Operations Change in income tax Change in weighted average Q3 2020 shares outstanding 24 Note: Totals in presentation may not foot due to rounding
Slide 25: Excellent Access to Capital
EXCELLENT ACCESS TO CAPITAL Credit agreement provides greater access to capital, improved flexibility and reduced rate risk • Access to capital highlights as of 9/30/2020: • $300 million revolving credit facility with a syndicate of lenders led by Wells Fargo • $100 million accordion option subject
Slide 26: Balance Sheet Remains Strong
BALANCE SHEET REMAINS STRONG Debt to EBITDA ($MM) $65.3 $61.5 $57.3 $58.8 • 2019 YE Debt to EBITDA $41.1 ratio of 0.7 $36.0 $32.0 • $300.0MM Credit Facility $24.6 at 2/14/2020 2016 2017 2018 2019 26 Debt EBITDA Note: Calculations as of year-end. See Appendix for GAAP to Non-GAAP Reconciliation
Slide 27: Capital Allocation Priorities
CAPITAL ALLOCATION PRIORITIES Acquisitions • May be used to accelerate expansion into brands or other strategic initiatives • Key criteria for potential acquisitions: • Enhance position in growing markets • Strong financial returns Working capital • Continue to maintain a broad offering of aging whi
Slide 28: 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 • Continued sales of aged whiskey to provide sales growth and margin expansion opportunities • Enhancing focus on
Slide 29: Appendix
APPENDIX 29
Slide 30: U.S. Spirits Market
U.S. SPIRITS MARKET 9-Liter Cases (000s) 2019 Volume % Change Total Distilled Spirits (TDS) 238,701 +3.3% Total Whiskey 69,289 +4.8% American Whiskey (Bourbon/Rye/Tennessee) 26,569 +8.4% Super Premium 3,481 +22.2% Rye ~1,200 +14.7% Vodka 74,148 +2.3% Super Premium 5,126 -7.0% Gin 9,758 0.0% Super Pr
Slide 31: Reconciliation of GAAP to Non-GAAP – Operating Income
RECONCILIATION OF GAAP TO NON-GAAP – OPERATING INCOME Reconciliation of GAAP to Non GAAP Measures Operating Income (Dollars in Thousands) Quarter Ended September 30, Year to date Ended September 30, 2020 2019 2020 2019 Reported GAAP Operating Income $ 13,652 $ 11,604 $ 38,698 $ 30,991 Adjusted to re
Slide 32: Reconciliation of GAAP to Non-GAAP
RECONCILIATION OF GAAP TO NON-GAAP Reconciliation of GAAP to Non GAAP Measures EBITDA (Dollars in Thousands) 2019 2018 2017 2016 Net Income $ 38,793 $ 37,284 $ 41,823 $ 31,184 Interest 1,305 1,168 1,184 1,294 Taxes 7,144 11,696 10,935 13,533 Depreciation / Amortization 11,572 11,362 11,308 11,253 EB