Good day, and welcome to the MGP Ingredients First Quarter 2024 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star key and zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star and one on your telephone keypad. To withdraw your question, please press star and two. Please note, this event is being recorded. I would now like to turn the conference over to Mike Houston. Please go ahead, sir. Thank you. I'm Mike Houston with Lambert Global, MGP's investor relations firm, and joining me are members of their management team, including David Bratcher, Chief Executive Officer and President, and Brandon Gall, Vice President of Finance and Chief Financial Officer. We will begin the call with management's prepared remarks and then open the call to questions. However, before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements. The company's actual results could differ materially from any forward-looking statements made today due to a number of factors, including the risk factors described in the company's most recent annual report filed with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements made during the call, except as required by law. Additionally, this call will contain reference to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures is included in today's earnings release. If anyone does not already have a copy of the earnings release issued by MGP today, you can access it at the company's website, www.mgpingredients.com. At this time, I would like to turn the call over to MGP's Chief Executive Officer and President, David Bratcher. David? Thank you, Mike, and thanks, everyone, for joining the call today. On this call, we will begin with an overview of our performance for the quarter ended March 31, 2024, provide updates on key financial performance metrics, and discuss the progress we have made towards our strategic plan. At the end of the call, we will open the line for Q&A. I am pleased with the results we posted this quarter and the progress we have made towards our long-term strategic plan. On a pro forma basis, when factoring in the Atchison Distillery closure, our Distilling Solutions segment achieved sales growth when looking at our business today compared to our prior year period without the Atchison Distillery results. We also had solid sales growth in Ingredient Solutions in our Premium Plus brands within Branded Spirits. All in all, this quarter was in line with our financial expectations as described during our previous earnings call. Other highlights for the quarter include the promotion of Amel Pasalic to the Chief Commercial Officer role, the commissioning of our newly built textured wheat protein facility, and several incredible brand initiatives, each of which we will talk about on the call today. Starting with the promotion of Amel to this newly created role, he will continue to leverage the business intelligence and predictive data insights he developed as CIO and apply them across all three business segments. Amel's wealth of experience and his unique strategic view of our business will be critical in driving the next phase of growth for MGP. We are excited about the insights he will bring to our business and as our commercial leader. Turning to our Distilling Solutions segment, we are pleased to have completed the Atchison Distillery closure in December of 2023, which led to a record quarterly segment gross margin in Q1 of 2024, as well as accomplishing our strategic intent of being brown goods focused in our Distilling Solutions business. As we reported last quarter, we have the vast majority of our anticipated total brown goods volume committed for 2024. Also, as we previously indicated, we expect the last three quarters of 2024 will result in stronger profits as compared to Q1, due to the variation in the timing of customer demand and the timing of our Bardstown, Kentucky, distillery expansion project coming online in April. Turning to Branded Spirits, we are very pleased with the continued growth of our Premium Plus sales, as they represent 42% of segment sales this quarter. This represents a stark improvement from the 33% figure we experienced in the first quarter of 2023. This meaningful improvement was partially offset by lower volumes of our allocated single barrel Premium Plus brands as compared to 2023, due to the seasonal nature of these specialty programs. While the seasonal nature of these special programs put pressure on our gross profits this quarter, we were still able to expand gross margin to 44.9%, which is a testament to our continued investment in premiumization. Our branded spirit strategy remains focused on growing points of distribution by leveraging the expansion of our Premium Plus brand portfolio, with particular focus on our tequila and American whiskey brands. As an example, we shipped Penelope into two new states during the quarter. Our brand marketing initiatives during the first quarter included entering into a sponsorship of Kyle Busch Number 8 car under Richard Childress Racing, which boldly showcases our Rebel Bourbon brand and will continue throughout the racing season. In addition, we had six brands win double gold at the San Francisco World Spirits Competition and successfully launched new innovative items such as Penelope Tokaji, Penelope Rio, and Yellowstone Rum Cask Finish. These are just a few examples of our innovation and marketing efforts to increase the sales velocity of our Premium Plus brands portfolio. Turning to Ingredient Solutions, sales for the quarter were a record and primarily reflect continued rising consumer preference towards high protein, low net carb diets, which drove higher sales of our specialty products. We expect to see this trend continue in upcoming quarters, as can be seen by anyone visiting their local grocery store and seeing the proliferation of keto and low net carb alternatives, which ties well to our Ingredient Solutions growth strategy. In addition, we are extremely proud of the grand opening of our textured protein facility, which was dedicated to Ladd Seaberg, the late husband of our chairman, Karen Seaberg. It was absolutely fabulous to see Karen and her family celebrate his memory and the indelible mark he left on the company with such a beautiful facility dedication. This concludes my initial remarks. Let me turn things over to Brandon Gall for a review of the key metrics and numbers. Brandon? Thanks, David. For the first quarter of 2024, consolidated sales decreased 15% compared to the prior year period to $170.6 million due to the Atchison Distillery closure. Excluding the impact of the Atchison Distillery in both periods, consolidated sales were in line with the prior year period. Also impacting consolidated sales during the quarter, branded sales were down 3%, driven primarily by the temporary shutdown of the Lux Row Distillery in Bardstown, Kentucky, to complete the distillation expansion, as well as expected declines in our Mid and Value Branded Spirits price tiers. As expected, gross profit decreased 10% to $62.8 million, representing 36.8% of sales. This decrease was primarily due to lower sales of Mid and Value price tier brands as a result of the distributor realignment in 2023. Lower sales of allocated single barrel Premium Plus Branded Spirits offerings in Q1 as planned. The temporary shutdown of our Lux Row Distillery in Bardstown, Kentucky, and the incremental costs incurred in Ingredient Solutions related to the drying of the waste starch stream to ready it for commercial sale, as well as our new extrusion manufacturing facility. Excluding the impact of the Atchison Distillery in the current period, gross margin was 37.3%. Advertising and promotion expenses for the first quarter increased $1 million- $8.7 million, primarily driven by increased advertising and promotion investment in support of our Premium Plus portfolio of brands. Branded Spirits-related A&P totaled $7.8 million for the quarter, representing 15.5% of segment sales. This remains consistent with our premiumization strategy. We will continue to invest in marketing spend against our higher margin Premium Plus price tier brands. Operating income for the first quarter decreased 30% to $28.9 million. Adjusted operating income decreased 19% to $33.6 million. Net income for the first quarter decreased 34% to $20.6 million, while adjusted net income decreased 22% to $24.2 million. Basic earnings per common share decreased to $0.92 per share from $1.40 per share, and diluted earnings per share decreased to $0.92 per share from $1.39 per share. Adjusted basic and diluted earnings per common share decreased to $1.07 per share from $1.40 and $1.39 per share, respectively. Adjusted EBITDA for the quarter was in line with our expectations and totaled $40.2 million, a decrease of 17% compared to the year ago period, driven by the factors highlighted on our previous earnings call. In accordance with the applicable accounting guidance, we no longer expect to present the results of the Atchison Distillery as discontinued operations in our financial statements. However, for reference, we have quantified the impact of the Atchison Distillery results in the pro forma schedules included in this morning's earnings release. Moving to cash flow. Cash flow from operations was $24.6 million in the quarter, a record for any first quarter, and up from $5 million in the first quarter of 2023. Our balance sheet remains healthy, and we remain well capitalized, with debt totaling $328 million and a cash position of $19.5 million. Turning to capital allocation. We remain focused on organic and inorganic growth opportunities that align with our long-term strategy, as well as underlying consumer trends, which we believe our business is well positioned to leverage. We will continue to evaluate M&A opportunistically with the goal of accelerating growth and increasing our capabilities and product offerings. Effectively managing whiskey put away, growing future Distilling Solutions and branded spirit segment sales remains a key priority and is critical to our long-term strategy. Our investment in inventory of aging whiskey increased slightly this quarter to $254.5 million at cost, an increase of $4.3 million from the end of the year. Investing in capital expenditures to enhance our operational capabilities is another important capital allocation priority, and it resulted in capital expenditures of $13.1 million for the first quarter. We continue to expect approximately $85.8 million in capital expenditures for the year, which will be used for facility improvement and expansion, such as additional warehouses to support our recent capacity increases, dryer investment to support our Lux Row Distillers expansion, the purchase of our previously leased bottling facility in St. Louis, Missouri, and a mini fuel plant in Atchison, Kansas, to better monetize the waste starch stream in our Ingredient Solutions segment. During the quarter, the board approved a $100 million share repurchase program, and we repurchased 59,084 shares of our common stock for approximately $5 million. The board of directors also authorized a quarterly dividend of $0.12 per share, which is payable on May 31st to stockholders of record as of May 17th. The board continues to view dividends as an important way to share the success of the company with shareholders. We will continue to focus efforts on optimizing product mix across all three of our business segments and invest in areas that we expect to generate the greatest long-term value for our shareholders. We expect the consumer fundamentals that have supported the historical growth in our business to remain intact throughout 2024, while we continue to monitor the potential impact of inventory levels of distributors, overall American whiskey supply and consumption patterns and inflation on consumers. Despite these industry headwinds, we feel uniquely positioned to grow as a company in this dynamic operating environment. These factors, in combination with the strength of our underlying business, support the confirmation of our 2024 financial outlook. Sales are projected to be in the range of $742 million-$756 million, following the closure of the Atchison Distillery. Adjusted EBITDA to be in the range of $218 million-$222 million, inclusive of the impact of share-based compensation expense. Adjusted basic earnings per common share are forecasted to be in the $6.12-$6.23 range, with basic weighted average shares outstanding expected to be approximately 22.3 million at year-end. Now let me turn things back over to David for concluding remarks. Thanks, Brandon. We are pleased with our positioning to achieve our 2024 objectives. Demand for our products in each of the three segments remains strong, and we believe our plans will continue to position the business for long-term success. Despite some reported softening within the Branded Spirits industry, we feel very optimistic about the long-term health of this industry and are encouraged by the continued growth of the Premium Plus category across the industry. Our strategy is to build a portfolio of Branded Spirits through increased our points of distribution, accelerating our sales velocity within those points of distribution through effective marketing, expanding our product offerings through innovation, and closing on meaningful margin-accretive M&A transactions. In closing, I would like to restate what I said last quarter, and that we are committed to evolving our company into a dedicated Branded Spirits company with desirable brands across the price point universe, with a special focus on Premium Plus and higher margin offerings, as well as continuing to supply our market-leading premium American whiskey in bulk to both craft and multinational entities. We believe this is the optimal way to provide desired returns to our shareholders. That concludes our prepared remarks. Operator, we are ready to begin the question and answer portion of the call. We will now begin the question-and-answer session. To ask a question, you may press star and One on your telephone keypad. If you're using a speakerphone, please pick up your handset before making your selections. If you have, at any time, your question has been addressed and you would like to withdraw your question, please press star, then Two. At this time, we will pause momentarily to assemble our roster. The first question comes from Gerald Pascarelli from Wedbush Securities. Please go ahead. Thanks very much. Good morning, guys. Morning. Good morning. On your brown goods business within Distilling Solutions, just I guess this is a housekeeping question, but the down three, I know you said on a consolidated basis, the quarter kind of came in in line with your expectations. Was the low single-digit decline in brown goods in line with your expectation? And then as we look forward, do you continue to expect brown goods to outpace category growth? And then maybe just some commentary on if there's been any change of tone, you know, from your customers regarding the demand for new fill this year. Any color there would be helpful. Thanks. Yeah, Gerald, this is Brandon. The quarter was in line with our expectations. In our prepared remarks, we mentioned or reminded everyone of the closure of the Lux Row Distillery as we prepared it for its expansion and coming online in April. And so we were unable to sell new distillate out of that facility in the quarter. If you take that out of Q1 last year and look at the brown goods growth year-over-year, it's actually up with that in mind. So it was in line with our expectations. We do continue to expect brown goods to grow over the course of the year. And you know, as far as tone underlying from our customers, you know, as we reiterated, we saw the vast majority of our sales committed. We're working very closely with our customers to make that, you know, to make sure that we can execute and, and produce as they need it. And, so we reiterated our outlook, this morning, with that in mind. Yeah, I would add that, as you think about what Brandon and I said last quarter, we have really good visibility into the rest of the year because of the strategy that we put in place at Distilling Solutions. So as you continue on, I mean, we haven't heard or seen or felt anything that's any different than what we had previously stated. Perfect. Thanks very much for the color. Next question is just on Branded Spirits. When we look at your gross margin in that segment, which continues to expand nicely, and we compare that to your profit before tax margin, there's a fairly meaningful delta there, not just this quarter, but even historically speaking. So I guess, like, understanding right now that you're in the process of building out your portfolio and the need to invest. I guess, longer term, can you talk about if there are opportunities or measures you could take, you know, to improve that profit before tax margin, to maybe better align with finished goods peers? It does seem like that would offer a pretty big notable upside to earnings over time. So any color there would be great. Thanks. Yeah, and, great question. So, it did, the profit before tax for Branded spirits, was low in the quarter. I'll remind you that, you know, a big reason for that is gonna be the contingent liability, that hits the SG&A on the branded Spirits side related to the Penelope acquisition. So that was $4.1 million in the period. So that is gonna be, dragging it down. But you're exactly right. Over time, as we continue to execute, on our strategy, specifically the higher margin Premium Plus brands, we expect to, you know, gain leverage from that on both the SG&A, infrastructure we have in place, as well as our A&P investments. Again, just as a reminder, a lot of our brands in Premium Plus are younger in their life cycle, more emergent and regional in nature. As we continue to invest in raising that awareness with the consumer, we expect that to pay off over time. And Gerald, I'd add, you know, we said last quarter, and we said again this quarter, you know, we aspire to evolve to be a Branded Spirits company. And as such, you know, we fully expect that compared to our peer group, we need to have a margin set that's comparable. And this is why we work the strategy that we work. So we, you know, as we continue to evolve and focus on what's meaningful, that's the plan. We should have that accretion ongoing. Perfect. Thanks very much, guys. I'll pass it on. The next question comes from Marc Torrente from Wells Fargo. Please go ahead. Hey, good morning. Thanks for taking my questions, just a couple here. On the guidance from here, Q1 obviously had some headwinds to work through, which you called out at the start of the year. There's some modest upside in the quarter versus expectations. Guidance was maintained. Maybe just some comments on your increased level of comfort on the guide now and how you see the quarterly progression implied through the rest of the year. Yeah, Mark, thanks for the question. Yeah, we shared a lot on the last quarterly call in anticipation of this, just because there were some things to navigate, and we wanted to message that as clearly as possible to you and to the rest of the investor community. But yeah, as you mentioned, Q1 played out exactly how we thought it might, maybe even slightly better in some ways. And you know, our view for Q2 through Q4 are entirely consistent with what we shared on the Q4 call. We expect branded spirit sales to pick up as the year goes on, primarily in Premium Plus, which is typical for our industry. On the Distilling Solutions side, as David mentioned, Lux Row has come online in April, so we can utilize that facility and the expansion we've gotten there on new distillate sales. We also have our customer commitments ramping up for brown goods. And then finally, even within Ingredient Solutions, we've got, you know, a ProTerra facility that just opened and we're really excited for, but we don't necessarily have the sales immediately now to offset and absorb a lot of those costs. As the year goes on and as we further commercialize that facility and that asset, those costs will be absorbed, and over time, probably as we get into next year, that facility and that product line will become more and more accretive to that segment. Yeah, I think as we look at our guidance numbers and think about our business moving forward, from now, from 90 days ago, Brandon and I still feel very comfortable with the guidance and the expectations that we established. Our total team is focused on that, and we are moving in that direction. Okay, great. And then just a few on brown goods demand. Volumes held up pretty well in the quarter. We saw pricing was down 11%. How did the mix of new versus aged trends throughout the quarter? How much of that pricing is due to that underlying mix shift that you conveyed? How much of that is due to actual pricing? And then margins for the total segment also held in quite well, even with the same lower mix. Maybe just how you see volumes versus pricing and margins evolving through the rest of the year. Yeah, great question. So, we can start off with volumes. You know, we expect volumes to increase, as we did in Q1, but throughout the rest of the year. And the reason, the main reason for that is because of the success we've had in attaining new distillate commitments. As far as price, yeah, price mix was down, but that was driven by mix, and that's why we, you know, shared about, you know, kind of our mix evolution within Distilling Solutions, on our last quarterly call. So new distillate sales were very strong in the quarter, as anticipated, and then our aged sales also came in as anticipated. But the reason why the margins held steady in that low 40s as we as we shared it might, is because of the pricing we've been able to get in new distillate. Even though it's a, you know, a larger proportion of our total sales, the, the price and the, and the gross margin contribution is greater, this year and in future years, we anticipate, than it has been in the past. Okay, thanks, guys. I'll pass it along. Thanks, Mark. Thanks, Mark. The next question comes from Sean McGowan from Roth MKM. Please go ahead. ... Yeah, thank you. Morning, guys. A question on margins, but this time on ingredient solutions. Can you talk about what some of the, you know, puts and takes are going on there? And, you know, should we look at what we saw in the quarter as indicative of what the rest of the year might bring? Yeah. So, as you noted, Sean, gross margins for ingredients were in the teens, mid-upper teens in the quarter. And really three main drivers. The first one is the B starch intercompany credit the segment used to receive when the Atchison Distillery was operational, is no longer there. And so that's gonna be an ongoing item. That's gonna be a natural headwind to the margin set of the segment. But the other two items we view as more transitory, the first one being the incremental costs that we're incurring to dry and ready that starch stream for commercial sale. We expect that to continue being a headwind for the course of this year, but once we get the mini fuel plant distillery up and running, then we expect that to be largely offset, and then, in fact, maybe have some positive gross profit to come with it at that point in time. And then the third and final thing, which we also believe is more transitory, are the incremental startup costs associated with the ProTerra facility. As I already noted, we expect as time goes on and we commercialize that asset to have the revenue and the gross profit to absorb those costs. So again, as we get more into 2025, we expect, you know, the margins to be reflective of that. So that being said, we do view Q1 as a low watermark for gross margins for the segment. We expect the segment to finish the year, probably, as we said last call, in the mid-twenties, gross margin-wise. But then as we get into next year, for a lot of those things I mentioned, to start benefiting the segment once again. Okay, thank you. And you, I don't think I heard you talk, as you usually do, about some of the input cost headwinds. Is that because there's been some stabilization there, or you just, you know, kind of cut it out for brevity? Yeah, so some stabilization. Another main reason is the closure of the Atchison Distillery. As you'll recall, the product lines that we've sold primarily out of there, industrial-grade alcohol, white goods and fuel, are much, much more susceptible to even modest swings in underlying input commodity costs. So, with the closure of that facility, corn and the related basis went from being our number one raw material that we purchase, to, you know, fourth or fifth. And with that, a lot of that risk went with it. However, you know, wheat flour, for our Ingredient Solutions segment, which is now our largest input that we buy commodity-wise, was up about 2% in the quarter, whereas rye and natural gas were both down year-over-year. I will remind you that a lot of our pricing on our brown goods, especially for new distillate, is model priced, for what's committed and contracted. So pricing for that, will move up and down with those underlying commodities, so that we're able to lock in our margin. Mm-hmm. Okay. Thank you very much. Yep. The next question comes from Bill Chappell, from Truist Securities. Please go ahead. Thanks. Good morning. Good morning. Hey, just, first question, on the Branded Spirits side, you'll face an easier comparison, certainly in the second quarter, with the kind of destocking distributors last year. Kind of any update on where the distributor inventory levels sit? Are you continuing to see pressure there, or is that for at least MGP, and maybe for the industry, is that largely kind of past, at this stage? I'm not gonna speculate on for the industry, 'cause you do get kind of mixed views on that from what other report. I can tell you, in our business, yes, it's stabilized. We've worked really hard with our distributors and understanding inventory levels and managing those levels with them to meet customer demand. So, you know, destocking for us at a distributor level is not a core issue, no. So you see that as a favorable comp as we... 'Cause the majority of the destocking was this time last year. Is that correct? As a favorable comp, yes. Sorry. Yes. Perfect. And then, just also maybe a little clarification on, you know, the branded growth this year. I know you had talked about rationalizing a few brands. I didn't know if you quantified what that impacted on the quarter or that, you know, what that would impact for the full year. Just, you know, just get an idea of how the brands are growing, excluding that rationalization. Yeah. So, the mid-end value decline in the quarter was primarily driven by the RNDC distributor change and subsequent load-in of the mid-end value brands in Q1 of last year. So that's really what drove the majority of the declines in mid-end value in the quarter. We expect, you know, to have easier comps for those two product lines as the year plays out. And as we shared on our last call, because of the rationalization, the rationalization, the prices we're taking on some of our mid-end value brands, as well as the load-in, we expect a lot of that to largely offset the gains we expect to continue to make growth-wise in Premium Plus. So we still expect our brand and spirits growth for the year to be flattish to low single digits. But we do expect to continue to get gross margin expansion as the year goes on. Yeah, Bill, this ties perfectly with your other question. I mean, at this point last year, we were making a large wholesaler change, and you prep them in inventory. So as on a comparative basis, you know, over time, we've been able to not only successfully make that change, but get that inventory managed to the right level as well. ... Great, and then sneak in one more. David, why do you think you haven't made another acquisition since Penelope in now almost a year? You know, maybe quantify just the number of opportunities you're seeing. Is it price or is it just really looking for the right fit? It's really looking for the right fit, Bill. You know, there are things, you know, obviously, with some of the headwinds you've seen in the overall industry, I think there are some people that would normally be on the larger scale, multinational sellers, sitting tight for the moment, for all the reasons that you know of. But we're starting to see some movement. But the real reason is we wanna do it the right way. We wanna make sure that we're finding something that goes into our portfolio, that's margin accretive, and that helps us evolve to that brand spirits company. So to do that, you know, we have been disciplined, very disciplined in our approach, but I have very, very high confidence that we're gonna be able to do some things in the near future. Great, thanks for the color. The next question comes from Ben Klieve, from Lake Street Capital Markets. Please go ahead. Thanks for taking my questions. Just one quick one for me on the brown goods side. You talked about the vast majority of volume is committed for the balance of this year. In prior earnings calls, you've talked about how your sales force is, you know, looking into not booking to know into 2025. Wondering if you can provide any updates on kind of the, the, you know, longer term, you know, sales funnel coming out of brown goods, you know, looking into 2025? Yeah. Ben, this is Brandon, I'll start. So, you know, that's, you know, something we've highlighted about, what we like about the new distillate business is that those sales and those contracts are multiyear in nature. So we do already have some visibility into 2025. We'll probably quantify that better for you as the year goes on, just as we did last year. But what I will say is, with Mel's leadership, and some other efforts we've been making, you know, we're looking to the US as we always do, but, you know, we're also getting more and more optimistic about opportunity for our brown goods outside the US. So, as the year goes on, we expect to provide updates along the way. Yeah, I would add that, Brandon mentioned Mel, but that really is the key focus of what Mel's folks is really thriving on right now, is this Distilling Solutions business, doing everything that we've already said to you that what we're gonna do, and then all the opportunities in brands. His role here, taking on just the commercial aspect of that, has really given us the platform to properly execute and do the things that we've been talking about, and that is continue to do what we do in the U.S., look at things internationally and how do we continue to maximize the business. Got it. I appreciate that from both of you. Congrats, good start to the year here. I'll get back in queue. Thank you. Thanks. The next question comes from Mitch Pinheiro, from Stifel. Please go ahead. Hey, good morning. Just a couple questions. In the Branded Spirits business, are you seeing—I guess—consumer behavior? Are you seeing trade down? I know you talked—we talked premiumization, but, you know, are we seeing—you know—in other categories, you're seeing the consumer get a little tighter in the spending, and I'm just curious what you're seeing or what you anticipate for the remainder of the year. Yeah, I'll take that. We obviously continue to stay focused on the Premium Plus. Within the Premium Plus, and you look at the price tiers within that, yeah, by category, by product, you do see some shifting and, maybe from ultra to, to a premium or, or vice versa. We still see and believe, and it shows in the data, that that Premium Plus category is still the focus area across the industry. It's where the opportunity lies to grow our business. I do believe, as you said, that as consumer inflation and economic conditions change, people do respond, okay? And they may make that a little, different decision. But here's what's great about our branded businesses, is that we have total representation across those, those price points in all the main categories. So, in summary, yes, I think it's fair to say consumer pricing may shift a little, but I still, and the data supports, it's still a Premium Plus market. Do you have levers, you know, like, that you can pull, you know, you know, should things get maybe, you know, a little tighter? Or, is sort of what, you know, or your plans are in place and they're kind of firm and not much variability there? Yeah, one of the, you know, the best levers we have as a company, and we feel is a little bit unique to us, is points of distribution. We feel like in the states we're in, in the United States, there's a lot of runway there for us to continue to expand our brands out on the shelf, not only on the shelves in the chains and retailers that we're in, but also in the new ones altogether. So that's what our focus is. We talked about it on previous calls, and we're gonna continue to spend a lot of time executing that. I think what Brandon said is right on, because at the end of the day, our growth in that section is about POD expansion, first and foremost. As we expand our PODs, you'll see the increase, you'll see the margin accretion happen, you'll see the sales happen. As you expand those PODs, though, we do, through our marketing efforts and what I had said in the script, we really do focus on velocity, which is a marketing piece of it. So you have to go hand in hand. We are, at this moment, continuing to expand our business on a POD-driven basis, and then back it up with the marketing to get it pulled through. ... Okay, and then I guess last question on branded is, you know, in your view, David, you know, from your long history in the business, it seems, at least from my view, and I'm curious your view, you know, there is a huge influx of just new brands, new, new, new, you know, age classifications, new, you know, toasted and all sorts of stuff. Almost to the point where the proliferation seems overkill and also maybe hurting the category. All right, do you think we're over-branded in the Branded Spirits business, up and down the category? Or, you know, do you expect any kind of pullback in brands or you think the set is gonna stay kinda firm? Well, in 30 years of doing this, what I can tell you, what you're seeing in the catalyst, use American whiskey as an example, that's where you're focused. There are a lot of SKUs. I could go all the way back to the vodka days and go to tequila now. There's still a lot of vodka on the shelves. You see that now on American whiskey. You're gonna see that on tequila. That's kind of the history of the industry, which, if you think about it in business fundamentals, not a bad thing. It means that suppliers like ourselves are shifting to where that consumer demand is. But the challenge is keeping up with that consumer. That is the challenge at the end of the day. That's why when we talk about our business and our Branded Spirits business, yes, we're a leader in American Whiskey, but we can't, we can't sit on, you know, sit on that all the time. You have to have offerings, and you have to be able to go across not only the price point and the portfolios, because like you said, there are a lot of fast followers out there. When people see categories growth, it's a natural tendency for people to go in and bring more SKUs in. What we do is, is what you try to do is we go in and we establish dominance on that particular, try to be the brand of choice, but don't take our eye off the ball of the other categories either. Okay. Thank you for taking the questions. You bet. The next question comes from Robert Moskow from TD Cowen. Please go ahead. Hey, thanks for the question. I wanted to ask about the gross margin dilution in Distilling Solutions, I guess, down 100 basis points on a pro forma basis. Is that because of the mix shift? Is that the main driver of that? It is. And, so if you look at the pro forma for 2023, for Distilling Solutions, the gross margins for last year would have been right around 45%. And we shared this on our last call, but happy to, happy to share it again. The mix shift is gonna result in slightly lower margins. We expect it to be in the low 40s for this segment going forward, which is higher than I think you know a lot of people may have anticipated just because of the pricing we've been able to get on new distillate. So, there is a little bit of a headwind there, Rob, but you know, it's still a very, very you know, nice margin for the segment, and it's one that we feel is sustainable as we go forward. Okay, got it. And then I guess the follow-up to that is, in that, you have price mix down, 11%, and it really is that mix impact. But I don't remember you quantifying how much of that 11% was mix. Like, can you quantify how much price was up- Mm-hmm. ... excluding that factor? Without giving specific numbers, each pricing was up. In new distillate pricing, if you look at it at a customer-by-customer basis, was also up. We did have one of our larger, relatively lower-priced multinational customers in the quarter buy a lot, so they brought the average price, down for new distillate. But like I said, on a customer-by-customer basis, we're very pleased with the pricing and, you know, we expect the same to continue as we go forward. Very helpful. Thank you. Mm-hmm. You bet. As a reminder, if you wish to register for a question, please press star followed by one. We have a follow-up question from Sean McGowan from Roth MKM. Please go ahead. Hi, thanks. I know this gets added back for, you know, the adjusted EBITDA and adjusted net income, but how do we... Is there a way to know what that contingent liability is gonna be, and how long will that be, you know, hanging out on the income statement? Yeah, that's gonna be out there, you know, through 2025. So December 2025 is when the earn out is officially concluded with the Penelope transaction. So you know, we expect it. It's a goofy one, I'll admit, from an accounting standpoint. A lot of Monte Carlo simulation, it's revisited, as you know, every quarter. It's been, you know, ±$4 million, seemingly the last couple of quarters, and we expect it just to continue to ramp up, you know, as the brand continues to perform in line with our expectations, similarly each quarter until we get to the end of 2025. Now, that number, it changes because of volatility in the market, because of interest rates or forecasts or actuals. So there's something, some inputs that we provide, you know, that helps conclude what that number is in a given quarter, but there's also some external volatility measures, as an example, that also impact that. So, I wish I could give you a more clear answer, Sean, but hopefully that helps a little bit in your model. It does, but I just wanna be clear on two things. One, is it eventually going to be cash? And second, is it the kind of thing, like, the better it is, the more the better we should feel about it, because that means that they're outperforming? That's exactly right. It will be a cash outflow by the end of 2025 or sooner, if they hit their metrics sooner, is the way it's drawn up. It can be as much as approximately $110 million. And you're exactly right. It's definitely something, as that number gets bigger, it's a positive for the brand. That means it's performing in line or better than our expectations. Okay, that's what I thought. Thank you. Yep. This concludes the question and answer session. I would now like to turn the conference back over to David Bratcher for any closing remarks. Thank you for your interest in our company and for joining us today for our first quarter earnings call. We look forward to talking with you again after the second quarter. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.