Welcome to the MGP Ingredients third 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, then zero, on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then One, on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Amit Sharma, Vice President of Investor Relations. Please go ahead. Thank you. I'm Amit Sharma, Vice President of Investor Relations, and joining me are members of the management team, including David Bratcher, Chief Executive Officer and President, and Brandon Gall, Vice President of Finance and Chief Financial Officer. We'll 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 risk factors described in the company's most recent 10-K filing 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 compatible 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 our website at 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, Amit. Good morning, everyone. I would like to begin with an overview of our third quarter performance and provide updates on key initiatives. I will then turn it over to Brandon to discuss our quarterly results in greater detail. Lastly, we will wrap up with discussions for our outlook for the full year, as well as brief comments on 2025 before opening it up for your questions. As for the third quarter results, they were in line with the preliminary results we provided two weeks ago and below our prior expectations. Like many in the industry, we are facing challenges our Distilling Solutions segment in regards to the American whiskey category. Consolidated sales decreased 24% from the prior year period. On a pro forma basis, when factoring in the Atchison Distillery closure, consolidated sales decreased by 14%, primarily due to the combination of our weak Brown Goods performance and export headwinds in our Ingredient Solutions business. Brandon will discuss our quarterly results in greater detail, but let me spend a few minutes outlining the actions we are taking to strengthen our Brown Goods business as the market corrects for excess whiskey inventories and increased distilling capacity. As we shared with you on our fourth quarter call at the start of the year, part of our strategic plan has been to actively reduce our exposure to aged sales by increasing our new distillate business. Although our efforts are working, as aged whiskey accounted for less than 20% of our consolidated gross profit in the third quarter, down from nearly half in first quarter of 2021, the aged market appears to be weakening at a faster pace than we originally anticipated. Softening whiskey consumption and elevated industry-wide barrel whiskey inventories are having a larger and quicker-than-expected impact on not only our aged whiskey spot sales, but also on our new distillate volumes. As we moved through the third quarter, our spot sales slowed, and we saw some customers were having difficulties in meeting their contractual obligations to purchase whiskey. This dynamic is more pronounced in our sales to smaller craft customers, who are likely to be more impacted by slower retail sales and ongoing destocking at a wholesale and retail level. To be clear, the American whiskey category is still growing, but slower growth and higher inventories are leading to lower demand, lower prices, and reduced visibility on our contract distilling sales. We believe that the underlying environment will remain challenging and likely put even more pressure on our Brown Goods sales and profitability in 2025. We are disappointed by the impact this faster-than-expected deterioration is having on our financial results. Although the American whiskey category has successfully navigated periods of temporary supply-demand imbalance over the years, we are not sitting idle and waiting for the industry dynamics to improve. Let me highlight four proactive actions to stabilize our Brown Goods business. First, let me begin by reaffirming our commitment to remain a leading supplier of American whiskey to our craft and multinational customers. Our whiskey inventories remain an important part of the still-expanding American whiskey category, and we would believe our ability to provide high-quality aged and new distillate with unique mash bills at our scale is unmatched in the industry, evident in our partnership with several high-profile brands. Second, we are reducing our whiskey production and aging whiskey putaways in 2025 to better align with lower category demand. While we were optimizing our distillery cost structures to mitigate the impact of low production volumes, it likely will be a margin headwind in the near term. Third, we are enhancing our efforts to expand into international markets, particularly Europe and Asia, to leverage the American whiskey category's strong growth potential outside of the United States. Fourth and lastly, our exposure to spot aged sales is down substantially, and we continue to reduce it further by focusing on multi-year new distillate contracts. We believe this is the right strategy in the current environment as we optimize our Brown Goods profits by increasing our volume share at market-based pricing. I am confident that our actions will put Distilling Solutions segment on solid footing over the longer term. However, given the pace of the changes in the Brown Goods contract distilling category, we expect it to be an even bigger headwind in our 2025 results. With respect to brands, I am happy to report that our progress towards becoming a premier Branded Spirits company remains on track. We continue to focus on expanding our Premium Plus price tier portfolio to better align it with consumer preferences and structurally lift our margin profile. In fact, year to date, our Premium Plus sales are up 13% compared to last year. Premium Plus now accounts for approximately half of our branded spirit segment sales, which is up from 30% for the full year 2021. Though our Premium Plus sales growth slowed down to 1% in the third quarter as we cycled the launch of Penelope in many key markets in the prior year period, the rest of our Premium Plus brands continue to post solid growth. As I look ahead, I expect further inventory tightening at the distributor level to be a headwind in the near term. While days-on-hand inventory for our unit cases remains stable, our shift to higher-priced Premium Plus brands adds costs to the distributor's balance sheets, leading to further tightening. That aside, I expect our Premium Plus portfolio, including Penelope, to continue to gain traction with our customers. With that, let me hand it over to Brandon for a review of our quarterly results and revised full-year guidance. Brandon? Thanks, David. For the third quarter of 2024, consolidated sales decreased 24% from the prior year period to $161.5 million. Excluding the impact of the Atchison Distillery in both periods, consolidated sales decreased by 14%, reflecting lower sales in all three operating segments. Within Distilling Solutions segment, reported sales declined by 36%. Excluding the impact of the Atchison Distillery in both periods, segment sales declined by 18%. Brown Goods sales declined by 22% as compared to the prior year quarter due to lower aged and new distillate sales. Our warehouse-related sales increased by 12%. Our Branded Spirits segment sales decreased by 6%, primarily due to the planned optimization of our Mid and Value-tiered brands. Sales for our Mid and Value portfolio collectively declined by double digits, largely consistent with year-to-date trends. This decline was driven by lower sales volumes as we increased pricing on certain lower-margin Mid and Value brands. Our Premium Plus sales increased by 1% as our brands being American whiskey and tequila categories within this price tier continue to perform well. Our Premium Plus growth decelerated from the second quarter as we cycled the initial launch of the Penelope brand in key large markets during the third quarter of last year. Ingredient Solutions sales declined by 18%, driven primarily by decreased sales volumes of specialty protein, as well as lower commodity and specialty starches sales. Specialty protein sales were negatively impacted by the stronger U.S. dollar. We expect specialty protein sales to return to growth in the fourth quarter as we onboard new domestic customers to offset lower export sales. Our specialty starches sales, which provide FDA-approved dietary fibers under the Fibersym brand, continue to benefit from the long-term consumer-driven tailwinds across several large food categories. third quarter consolidated gross profit decreased by 10% to $65.8 million, representing 40.8% of sales. Excluding the impact of the Atchison Distillery in both periods, third quarter consolidated gross margin improved approximately 30 basis points from the prior year period as we delivered a second consecutive quarter of higher than 50% gross margins in our Branded Spirits Distilling Solutions and Ingredient Solutions gross profit declined to $28.6 million and $4.7 million, Distilling Solutions segment gross margin increased by 10 percentage points, and Ingredient Solutions gross margin declined by 16 percentage points. Excluding the impact of the Atchison Distillery in both Distilling Solutions gross margin declined by 3 percentage points due to lower Brown Goods sales, while Ingredient Solutions gross margin declined by 11 percentage points, primarily due to lower specialty protein sales and incremental costs to commercialize the wheat starch. Advertising and promotion expenses for the third quarter increased modestly to $9.6 million, reflecting ongoing investment behind our Premium Plus portfolio. Branded Spirits-related a&p totaled $8.7 million for the quarter and represented 14% of segment sales. We remain committed to investing behind our faster-growing, higher-margin Premium Plus price tier brands as we seek to capture a greater share of the American whiskey and tequila categories. third quarter operating income increased 64% to $32.6 million, while adjusted operating income decreased 9% to $39 million as lower gross profits more than offset lower SG&A costs. Net income for the third quarter increased 82% to $23.9 million, while adjusted net income decreased 5% to $28.8 million. Basic earnings per common share increased to $1.07 per share from $0.59 per share in the prior year period, while adjusted basic earnings per share decreased to $1.29 per share from $1.36 per share in the prior year period. Adjusted EBITDA decreased 9% compared to the year-ago period to $45.7 million. Moving to cash flow. Cash flow from operations was $73.5 million for the year-to-date period, up from $48.6 million in the prior year period. I'm proud of our cash generation in a tough quarter as we continue to focus on managing our working capital, including lower accounts receivable and barrel inventory put-away. Our balance sheet remains healthy, and we remain well-capitalized with debt totaling $290 million and a cash position of $20.8 million at the end of the fourth quarter. Our net debt leverage ratio remained largely stable at approximately 1.3x at the end of the quarter. Capital expenditures were $20.9 million during the quarter and $43.5 million year-to-date. We now expect full-year 2024 CapEx of approximately $78 million as work on some projects is now expected to carry into 2025 to reduce overall costs and better line up with our needs. The mono fill plant, which is expected to mitigate additional costs related to treatment and disposal of waste wheat starch, is an example of such carryover and is now likely to come online by the end of the first quarter of 2025. We continue to expect 2025 CapEx to be below 2024 levels, and we'll share more on our fourth quarter earnings call. Net whiskey put-away was $12.1 million during the quarter and $32.7 million year-to-date, well below year-ago levels. During the first quarter, the board approved a $100 million share repurchase program, and during the third quarter, we repurchased approximately $2.5 million of our common stock, bringing the year-to-date share repurchase amount to approximately $10 million. The board of directors also authorized a quarterly dividend of $0.12 per share, which is payable on November 29 to stockholders of record as of November 15. The board continues to view dividends as an important way to share the success of the company with stockholders. Turning to the outlook for the full year, we are reiterating the updated full-year guidance provided along with our preliminary third quarter results two weeks ago. The updated 2024 guidance includes full-year sales in the range of $695 million-$705 million, adjusted EBITDA in the range of $196 million-$200 million, adjusted basic earnings per share in the $5.55-$5.65 range. With basic weighted average shares outstanding, expected to be approximately $22.1 million at year-end, an effective tax rate of approximately 24%. As we look to the fourth quarter, we continue to expect our Brown Goods sales and profit to remain under pressure as unfavorable category supply-demand dynamics will lead to lower spot and contracted whiskey sales than previously anticipated. While retail trends for our Premium Plus portfolio continue to improve, further inventory tightening at distributors is expected to pressure our Branded Spirits shipments in the fourth quarter. We expect the Ingredient Solutions segment to return to positive sales growth in the fourth quarter as we continue to win new specialty protein business. While we will provide 2025 guidance with our fourth quarter results, I'd like to provide some additional color. As David mentioned, given the current category dynamics, we are significantly reducing our Brown Goods production to better align with demand in 2025. At the same time, softer American whiskey growth and elevated barrel inventories continue to constrain demand for aged whiskey and increasingly our new distillate. While we are optimizing our cost structure to mitigate the impact of lower production, lower aged and new distillate sales are expected to drive a nearly 35% decline Distilling Solutions segment sales and a nearly 50% decline Distilling Solutions segment gross profits in 2025. On the other hand, we expect our Ingredient Solutions segment to stabilize and return to profitable growth in 2025. Additionally, we expect our Branded Spirits segment to deliver top-line growth and margin expansion in 2025, and now let me turn things back over to David for concluding remarks. Thanks, Brandon. While I am not pleased with our 2025 outlook for the Brown Goods business, this reset reflects current market conditions and, more importantly, our proactive actions I discussed earlier to stabilize our Brown Goods business. We are actively engaging our customer list, tightening our contract terms, and further reducing our exposure to spot and aged sales, which I believe will right-size and mitigate risk in our contract distilling business. Our Ingredient Solutions segment continues to be well-positioned to thrive independently post the Atchison Distillery closure. Though unexpected complexities from that transition have impacted recent performance, we expect this segment to return to positive growth next year. Finally, I am most enthusiastic about our progress towards becoming a premier Branded Spirits company. The Luxco acquisition firmly puts us on that path. I anticipate 2025 could mark the first year in which our Branded Spirits business not only becomes our biggest segment by sales but also our primary growth engine. Most importantly, our key Premium Plus brands continue to have growth runway ahead, positioning us to deliver attractive growth for years to come. I would like to close by thanking the MGP team for their hard work and focus in this challenging environment. I'd also like to welcome Keith Walsh to our MGP team. Keith joins us as General Counsel and will continue to add strong talent through our organization. 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 then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If 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. First question comes from Bill Chappell with Truist Securities. Please go ahead. Thanks. Good morning. Morning, Bill. Hey, just, I guess, want to start with kind of this year and then a couple questions on visibility into next year. But first, this year for the fourth quarter, is it fair to say that Ingredients and Brandon were actually in line with expectations and majority of the miss comes Distilling Solutions and within that miss from aged, or was there more to it for the fourth quarter into the guidance? Yeah, I'll start with the numbers, Bill, and then Dave can chime in. But yes, the miss and the reduction in our expectations for the year is Distilling Solutions driven. However, Q3 performance for Ingredients was under our initial expectations as we, as you know, are trying to repurpose sales from export markets domestically. And a couple of those large sales that we had planned on this fourth quarter actually got pushed into the fourth quarter. So Ingredients came in under for third quarter, but we expect that to rebound in fourth quarter for our remarks. The other change, and this isn't necessarily a Q3 change, more of a Q4 change, is the distributor tightening that we're now seeing in the brand spirits segment, which has resulted in our Q4 outlook for brands to now be taken down a little bit in our recent numbers with sales for the segment to be down in the high single digits. Yeah, Bill, I would add that I think you're spot on. The disappointing part of this is the contract distilling Brown Goods business. Ingredients, as I reflect on what Brandon and I've talked, is roughly within line of what we thought. There's a lot of transformation going on in that business today, a lot of noise in that business that we plan to wrap up very quickly here, as we alluded to in our script, and I think brands is right where we need it. Now, as we mentioned, as we continue to premiumize our portfolio, even though our days on hand of physical cases are the same, the value at which we're setting at an inventory wholesaler is forcing them to look at their balance sheets, not just for us, for everybody, which is why we continue to hear this about destocking because they have people just like Brandon sitting there looking at a balance sheet. So we monitor that closely. But still, I think the takeaway here is what we said in the script. The American whiskey category deteriorated faster than we expected. We'd always planned at this at some point. It's a normal cycle in any category within beverage alcohol, but it did happen a little quicker than we anticipated. Got it. And then just following up, I mean, in terms of visibility, I think the question I hear most often is, as we look at consumer takeaway and Nielsen or government data or DISCUS, what have you, we've seen a slowdown in American whiskey consumption now for 12, almost 18 months. And so I guess the surprise factor is that you're just realizing it, seeing it now. And so do you not have that kind of visibility, especially to the newer distillate contracts? And what gives us confidence that, I mean, why make any aged for next year? If things are putting back, why only just do cut it back where you're just making new and age goes to zero? I mean, help us understand kind of how you have any visibility or confidence, especially for next year? You know, Bill, it's a great question. If you think about the new distilling contract business, as we did mention in our script, we have a few smaller craft regional type customers we've had some contractual issues with, but the multinationals, not so much. I mean, they are moving forward with the obligation. So therefore, we do have visibility and know that that's stable business. I think as you look forward into this, I think everybody, this is my view, people across the industry remain very, very, very bullish on American whiskey. And we're buying inventory and buying new distillate and buying this left and right. It's been a great, great time. But at some point, when you do see a little softening, and you do see American whiskey in the branded category still has growth, but it has definitely softened, it's going to force all of them to go back and start looking at it. And that is what we're seeing now. It's just people putting everything out, holding it back to where they can. That's why our aged and our spot business is, you know, it's stalled for the moment. Now, to the second part of your question, as we go into 2025, it's a great question. The quick answer is, we're not. You know, if you heard in my point that our put-away for next year is related just to our brands. We've spent the last two years building a nice inventory for future aged sales. We always think the aged sales are always going to be there. But in looking at and stabilizing the business, we've taken the actions I outlined by looking at what level should we run, how do we cut costs, and how do we generate cash. One of the biggest cash outlays that we have is put-away in inventory. That put-away in inventory for future sales on this, we've basically taken to zero for 2025. Got it. And then just one last one. As I'm looking to 2025, and I just want to clarify, it sounds like the majority of when you're saying that distillery profits down 50% is aged. Because the other question I get is, with so much supply out there, nobody needs to buy new. And even your existing contracts are going to see massive pricing pressure, and you're going to have to give concessions of what you're making it for. Can you maybe just address that? Yeah, Bill, I'll start, and that's exactly right. Next year, the majority of the reduction next year is driven by aged, which is actually the same story as this year as well, and as far as pricing goes, this is something that we're really, you know, we pay a lot of attention to, as you'd imagine. On the new distillate contract side, a lot of those agreements are put in place ahead of time. So on the existing contracts, obviously, we're not seeing any price decreases, and on the aged front, the aged sales we are making are still clearing at pretty good levels price-wise. It's more volume at this point, but as we look into next year, we do have some pricing factored into that for the aged sales we do have in our outlook. Yeah, I think, Bill, let me add to that a little bit. So as we look at today, we're not seeing that price compression today. We do, though, with the laws of supply and demand. When you have excess inventories and excess capacity over time, we do expect pricing pressure. So within the color commentary that we gave you on revenue and profitability for Brown Goods, we did factor in price compression. Great. Thanks so much. Thank you. The next question comes from Robert Moskow with TD Cowen. Please go ahead. Hi, thanks for the question. You know, I appreciate the effort to kind of pull the Band-Aid on 2025. But I am curious to know, you know, what percent of your distillate customers have you had these conversations with? You have hundreds of them. So I imagine that they're giving you their outlook as it stands today. And do you feel like you've encompassed the full set is the first question. And then the second is, are the small ones going to stay in business? Do you expect another hit possibly in 2025 from the long tail of your customers that may not be around? Great question, so I can confidently say all of our customers, our commercial team has been fully engaged. Either they're calling us or we're calling them because we really wanted to be able to give you good solid color commentary. While we didn't give you physical guidance for 2025 yet, we gave you good solid color commentary, and part of that was making sure that we actively engaged with every customer out there. As far as speculating on some of the crafts and what happens, I don't know. It makes logical sense that over time, if they can't hold up in the retail markets, that they disappear. But that also, I'm going to remind you that that is also what Brandon and I have said for a couple of quarters now. This is the reason why we felt like if we can contract new distillate a multi-year, it provides an annuity to the business. The future of this company is in brands. That's the future of this company. And I know we've been consistent in saying we look at our contract distilling business and our Ingredients business as feeding the cash to grow the most profitable segment. So yes, we've reached out to all of our customers. I can't speculate on what happens to those customers, but the ones that we put into 2025 are bigger multinational contract customers and those that we feel, even on a spot basis, that we've had the conversation with that have the intent to do. Okay. And maybe I'll pivot to the branded side. You said yourself that things slowed in third quarter, but you're forecasting growth on the branded side in 2025. Given that the distributors are cutting back and are facing higher cost of carrying inventory, and also that you've lapped this major launch on Penelope, what's the path to further growth in 2025 for that branded business? What are the tactics to get there? It's moving to where the customers are. You know, if you look at our Premium Plus portfolio, it's primarily whiskey driven today, but we've actively been adding products to it, good quality, higher-end tequilas. But I don't think it stops there. We're not going to rest on this whiskey business. It's about moving where the customers are. Yes, overall, the industry has softened. It's back to pre-COVID levels. We've said many, many times that everybody enjoyed the sales during COVID. But now the market is correcting itself, and you're seeing players across the industry too correct themselves. What will also happen, and it happens every time, is the consumer corrects. You know, they're going to move to other products. Doesn't mean whiskey goes away or tequila goes away, but who knows what the next category is. What we tend to research and focus is what Brandon and I have said over and over. It's diversification. What's great about the branded business is its diversification. Very rarely, I can only think of one major company that has only one item. Most of the big multinationals you're dealing with have a portfolio of items across many price tiers. And the reason why they do is to react to customer demand. That's what we have to continue to do. We have to shore up our brand portfolio so that it's not, especially in the Premium Plus, just whiskey focused. We're adding tequilas, gins, whatever we need to do to move where the customer is. And I think that's what we have, and I've said this in previous calls, the advantage that we have. We're nimble. All right? right? We're not pulled in by a bureaucratic system. We can respond quickly to what those customers are. And I think the question is, a lot of people trying to figure out where they are going. But once that's all done, and we do spend a lot of time researching this, we can get there faster. Okay. And there's an appetite among the major distributors for making a bigger commitment to you in terms of market share. Because I know they're cutting back, right? Yeah. Well, when you say cutting back, are you referring to their inventory or the rumors about them cutting heads or when you say cutting back? The rumors of cutting heads. Yeah. So what you hear on that primarily is a wine focus because wine has been quite a laggard in the business. So most of what we hear on that is in their wine portfolio. You got to remember the two major wholesalers in the U.S. tend to firewall spirit sales from wine sales. Okay? So they've had a bigger impact there. They're optimizing their structure there. Once again, they're private companies. You can only go by what you hear or get reported. So I don't read that as a sign. Actually, if what they're saying or what we hear is true, I think it's a positive thing for spirits, okay, in overall consumption because they're going to put more energy into what drives in profit. They're not public companies. They're private companies, but they want that money the same way. Both of them, the big ones are leveraged, and they need to generate it, and they're going to take their energies and put it into the business that's still there, and that's the spirit sector. Okay. Great. Thank you for that. Thank you. Thank you, John. The next question comes from Marc Torrente with Wells Fargo. Please go ahead. Hey, good morning. Thank you for taking my question. You are into your typical contracting season now. I think this is when you have in the past made initial comments on visibility into the next year. So I guess how much of your plan do you think is committed at this point for 2025, either through existing multi-year contracts or new contract renewals? And just on this visibility you have, how confident are you with the security of those commitments? You called out some contract non-performance in the quarter. So just any color there would be helpful. Yeah. As it goes for 2025, when we gave you some of the color commentary on revenue and profitability, that's through us analyzing all the business that's there, who those contract customers are, which ones we've weeded out over it, the impact of sales. As somebody asked earlier, did we contact our customers? We look at their sales history. I have strong confidence in 2025. I think the visibility we have there is strong now. But if you're dropping revenue, part of it is we've shrank that size of the business. Okay? So we've weeded through a lot of, let's say, not the good situation there to get down to the core business. Because what Brandon and I have discussed many times is we want to give you results that we can deliver. So it's our obligation to come back to you and go, "We've done our work. Based on what we know today, that we have good confidence in 2025 in our Brown Goods. We're not proud of the revenue number and the profit number for 2025 when it comes to Brown Goods, but we have confidence in it. And not only confidence for our analysts, for our investor, for our board, for our own employees. Okay. And then how much inventory do you think needs to be worked through out there? Previously, it sounded like you were generally comfortable with what was sort of out there in the channel from, I guess, the selling standpoint. Any more specifics on managing production versus supply? Is this going to be temporary pullbacks? Are there more fixed costs that you can address? And I guess, what are you hearing from actions of other suppliers who have also recently brought on capacity? Yeah. The question of how much inventory out there is a good question. We do spend a lot of time trying to figure out who's holding what, who are the brokers out there, who are the multinationals' inventory gap, because remember, they've got substantial inventories as well. So we constantly are looking at that and trying to analyze it. Do we have perfect visibility into it? No. No. That's the honest. Do we know what we've sold and what we hear and what we see in some of the TTB reports? Yes. So there is inventory out there, and it's held. But one of the things that people, and the reason why we have, I think we haven't seen tremendous pricing pressure yet, is because everybody's sitting and waiting. Everybody is sitting here going like, "If I'm buying spot, I may not be buying spot right now, but I want to see how this plays out. I want to see how my own inventory plays out." I think I've said this in the past, but now I'm saying it now, is if you're a major supplier in our industry, you know they're brand companies. Okay? And one of the things that you will start seeing on the shelves, and you already see it to a certain degree, is they'll age up their offerings. You know, for a long time for years, and I know we've had this on prior calls, people couldn't sell anything older than a four-year-old because we couldn't keep up with it. Now they got inventory. So you're going to see the players on the brand side start to offer seven-year-old, 10-year-old, 12-year-old products. I don't speculate, and I'm just speculating, that they're going to dump that on the market. Could they sell some barrels? Yes or no. What you will see hit the market is PE-backed companies that have invested in it, brokers that have invested in it. But as Brandon and I have said many, many times, that's a one-off. Those are one-offs. Once they dump that, then it's back to the attached directly to the brand growth. So look, the supply, the excess inventory was built all around huge optimism across the industry on American whiskey. And that's softened enough that people are sitting back and doing their jobs and going, "Oh, wait a minute. Let's take a breath. Let's analyze where we're at." Brandon, anything you want to add to that? Yeah. As far as the cost markers, you're exactly right. So firstly, in 2024, we have reduced our put-away on a net basis, you know, north of 30%. So that work's already begun this year. And as David said, it's going to continue next year as well. And there is, yeah, there's a number of fixed costs that will need to be absorbed. And the team has been working now for some time already on addressing that to mitigate those as much as possible. Okay. Thanks, guys. Thanks, Marc. Thank you, Marc. The next question comes from Ben Klieve with Lake Street. Please go ahead. All right. Thanks for taking my questions. I've got one on the Ingredients business. You noted an expectation that that business was going to improve here in the fourth quarter as some of the export ones kind of dissipated, and you brought in some new domestic customers. I'm wondering if you can kind of help parse out those two parts of the business. Can you talk about the kind of success year to date of the domestic business that gives you a sense of optimism in the fourth quarter? And then really how material that export headwind has been, not only the third quarter, but year- to- date? Yeah. Ben, I'll start. Yeah. So for our specialty protein business, which is a very high-margin product line for us, a lot of those sales were in exports specifically to Japan historically. And that's been, due to the strength of the U.S. dollar as it relates to the yen, that's been a tremendous headwind for us year to date. And while we did have some success in first quarter and second quarter, the life cycle of a new sale for the Ingredients business takes time. And it can take anywhere from two to three to four quarters to get something spec'd into a new product and to actually make that sale. And there were two customers we had in mind for third quarter that we were anticipating, that we've made a lot of great ground with year to date. And those two customers, while they're still planning to purchase, it's now gotten pushed into fourth quarter. So the good news is we are making a lot of progress on that. And we expect it to continue into fourth quarter and then into next year as well. Okay. And one clarifying question there. Were those two customers based in Japan or domestic or elsewhere? Yeah. Thanks for letting me clarify that. Yeah, they are domestic. That's right. Okay. All right. Very good. Okay. I appreciate you taking my question. Plenty more to talk about, but I'll leave it there. I'll get back in here. Thank you, Ben. The next question comes from Sean McGowan with Roth Capital Markets. Please go ahead. Hi. Thanks. First, a quick one. Would you expect, given yes? Can you hear me? Yes. Yes, sir. Okay. Yeah. Would you expect, given the headwinds that you've described, that advertising as a percentage of revenue in 2025 would be at a higher level than what we've seen in 2024 so far? Yeah. We'll give more detailed guidance, Sean, in fourth quarter. But right now, I can tell you our plan and expectation is still to continue investing for Branded Spirits between 14% and 16% of net sales into advertising and promotion. We still feel that that's a good level, knowing that a lot of that spend is going towards our Premium Plus portfolio, which is about, as David said on the prepared remarks, about half of our Branded Spirits sales. So right now, there's no change in thinking there. That is still, as we view it, the future of this company and where we plan to grow in the future. Okay. Thank you. And then kind of a more general question. Given not only the change in the landscape and your outlook, but also the change in the stock price, do you see a change in your capital allocation plans regarding share repurchases or acquisitions? Just general commentary there. Has there been a shift? Yeah. So yeah, great question. We talked to some of this already, but so M&A remains a very high priority for us. We're always looking to do something that's going to strengthen our position within Branded Spirits. For CapEx, we've said on these calls before, Sean, as you know, that we view 2024 as the high watermark for capital expenditures. This year, we're now expecting $78 million. We'll share more specifically what our outlook is for 2025 on the fourth quarter call, but it will be reduced from this year. We're being consistent there. And another big capital allocation priority has been put-away. And David's already said that that's going to be driven down to really be what we need for our own brands next year. So yeah, it is shifting. From the CapEx and from the put-away standpoint, both of those should be free cash flow accretive, all the things being equal. As it relates to dividend, we feel the dividend we're paying today is manageable, and it's still a good way to reward shareholders over time. And then, yeah, for repurchasing, as we've discussed, the board did approve a $100 million share buyback plan in the first quarter. There's no end date to that, so that's open-ended. We bought about $10 million worth of shares to date. But when we look at the future of this company and where to add shareholder value, we like some of our other priorities ahead of the share buybacks, but it's still something we're going to continue to watch. Okay. Thanks for that clarity. Appreciate that, Brandon. You bet. Thank you. Thanks, Sean. The next question comes from Mitch Pinheiro with Sturdivant. Please go ahead. Yeah. Hey, good morning. Good morning, Mitch. So getting to the barrel distillate that you've put-away, it's up like $40 million, roughly, year over year. And I know there's some inflation in those numbers. But is all that related to your own branded spirit brands? Yeah. Just to clarify, year to date, we've put-away, on a net basis, Mitch, approximately $32 million worth of inventory. Last year, for the full year of 2023, we put-away north of $51 million. So we are down more than 30% this year. We expect that year-end put-away to be $30 million-$35 million, which is up a little bit from what we've talked on previous calls. But really, that has less to do with our put-away in production and more to do with our lower priced sales coming in on the spot market. Yeah, as we move forward, we feel really good about our inventory position. We feel like we've put-away record amounts in the last, say, two to three years. So we feel like we're in a unique position where we can hit pause for some time, as we plan to do in 2025, Distilling Solutions, speculative put-away, and monetize some of the inventory we have. Historically, the majority of our put-away has been Distilling Solutions. that relationship has become less of a proportion to brands put-away in 2024, and as David said, next year, our plan is any barrel we put-away at this point in time is going to be for our own brand spirits portfolio. Yeah. I mean, that's good color. Thank you for that, but I would have to imagine you would never disclose this, but the average age of your barrel distillate has, I guess, that's been increasing over the years. I know you've put in a lot more away now, but you still had a fair amount before your accelerated put-away. I mean, the age only gets more valuable, generally speaking, and all your premium whiskeys are all higher-aged products, and that's what's growing in the Premium Plus, so is it fair to assume that your barrel distillate is higher-aged in inventory now? Yeah. It's a little tricky because the aged barrels we sell in bottles tend to be three, four, or more years old. So meanwhile, anything we put-away, for example, this year, is starting off at zero years old. So it's going to keep that average age and right, Mitch, we don't disclose that for competitive purposes, pretty low in terms of less than four or three years. But yeah, I think, as David said, the tendency right now in the market is to age up. That's a really good way to resonate your brand with consumers in this market and to differentiate yourself. And to your point, these barrels tend to grow in value with age, not the other way around. It's just distinct to our industry. So we've been here before. There's a number of years ago where we slowed our put-away. That was pretty short-lived, as you all recall, because this market can be dynamic and fluid, but that's the beauty is we can plan as we are now for 2025, and if things change, then we'll change with them. Yeah. Mitch, I'd add just one piece to that. If you look at the brand side of the business that we did, we've intentionally grown our age, okay, because of what I said earlier. We want to be able to age up. So what Brandon's referring to is the MGP put-away for future sales. And yes, I mean, we've been fortunate that we were able to sell those off so we're reselling as fast as we can. So you've got two years ago, one year ago in there. But I do think, to your point, that that only gets better with time. Again, this market is not going away. It's going to push down. It's going to consolidate a little, but it's there. And this is why we were able to say we remain committed to this section of our business. It's a good cash-generating piece of our business. It's just not going to be our growth engine of the future. Yeah, and just one other thing on that, and David said this, but we do view ourselves, and we believe ourselves to be one of the only contract suppliers that can offer the scale of age and the distillate as we can, and so David shared that one of our strategies is selling barrels internationally, and a lot of what they're looking for is aged, and they also want that assurance that they can have more age to come in the future, so our ability to both have age to sell, but also distill today to sell to them again in the future, we feel really differentiates us in the future as we go forward. Thank you for that. And then you expanded Luxco this year. With a little bit of the slowdown, is that going to have some fixed cost negative leverage in 2025? Yeah. Good question. Right now, we reserve the right to maybe share a little bit more on the fourth quarter call, but that type of headwind is not anything that we anticipate at this point in time is going to be material. Okay. Then getting back to this, it does surprise me that industry-wide, everybody sort of missed the slowdown. I'm curious whether any of that has to do with any on-premise, off-premise trends that may have been missed. And then the second question is what also may have been missed, which I've been seeing for a while, is consumer liquor cabinet destocking. Once you're able to get your favorite brand back during the COVID era, it was hard to find it. And if you found a bottle or two, you bought two or three or four bottles because you weren't sure you were ever going to see them again. And I guess at some point, consumers decided they felt more comfortable with starting to see their favorite brands on the shelves and starting to, instead of buying it, just going through their own cabinet and reducing their own inventory. I guess there's no way, have you done any research on that part of the equation as far as the slowdown in consumption is concerned? And just also the comments on the on-premise versus off-premise missing the slowdown here? Okay. And I'll take that one. So in general, if you think about on-premise versus off-premise, the mix is roughly the same. But the problem post-COVID, there's not as many on-premises as there was. So you're still seeing that being relaunched over time. I'm not going to attribute that mix to the industry's view on why it happened. I tend to take more of a macro view on this. I tend to think that we're in the middle of an election. We've had all kinds of interesting things going on in the environment. Consumer spending is a little bit slower than this. I think there's a lot of external pressures going on here that is making that consumer make different choices, all right? And so I don't want to speculate on they're selling more there or not selling more there. I'm attributing it to that consumer. I also bring it back to this COVID piece. Having done this for 30 years in the brands, what we're selling back to is about what we should be in the industry. COVID was great for our industry for the period of time, and now when we all reflect back and we look at these last few years of correction, and it is inventory destocking at a wholesaler. It is inventory destocking in a pantry, and you've got multitudes of variables coming to a head. Those too shall pass. Now, what we all are terrible at doing, myself and everybody else in the industry, is telling you exactly when that's going to pass. You know why? Because we can't read the consumer's minds. We can only watch what they're doing and react to their needs. Okay. Thank you. Appreciate the answers. Thank you, Mitch. This concludes our question and answer session. I would like to turn the conference back over to David Bratcher for any closing remarks. Thank you very much, everybody, for listening. As we said, we're not pleased with our results, but what I'd like to take a moment to remind everybody, the MGP is a transformation story, all right? We've clearly said what we intend to be in the future. We intend to become a premier Branded Spirits company. Transformation for MGP is nothing new. If you go back 10 years ago, MGP was a white goods producer. The margins were thin, very skinny. They transformed it into a contract Brown Goods distilling. Their timing was perfect. They rode the wave up. Now, and started with the acquisition of Luxco, they transformed it into a Branded Spirits company. And since the day I took the seat on January 1, we have consistently said every earnings call, everything, starting with the very first release of what we believe we will become. That is the plan for the future. Yes, our Brown Goods business deteriorated faster than we anticipated. I think it deteriorated, to some of the questions, faster than anybody across the industry anticipated. But thank goodness we have a vision of what we want to become, all right? And that is a premier Branded Spirits company. That's what I want our analysts, our investors, our employees, our board, everyone to know it's a transformation story, and we're going to accomplish that mission. So with that, thank you for your interest in our company and for joining us today for our third quarter call. And we definitely look forward to talking to you in the fourth quarter.