MGPイングレディエンツ 2026年第3四半期決算説明会：売上高10%減も業績予想を維持

主要ポイント

• MGPイングレディエンツが発表した2026年第3四半期の売上高は1億1,790万ドルで、前年同期比10%減少した。調整後EBITDAは33%減の2,150万ドルとなり、調整後基本EPSは54%減の0.39ドルとなった。経営陣は、調整後の両指標ともに社内予想を上回ったと述べた。
• 同社は通期業績予想について、売上高を4億8,000万ドル〜5億ドル、調整後EBITDAを9,000万ドル〜9,800万ドル、調整後基本EPSを1.50ドル〜1.80ドルとする見通しを据え置いた。
• ブランド・スピリッツ部門の売上高は4%減の5,820万ドルとなった。「ペネロピ」の売上高は12%増加したのに対し、「イエローストーン」は23%減少し、「プレミアム・プラス」は1%減少した。
• 蒸留ソリューション部門の売上高は29%減の2,900万ドルとなった。ブラウン・グッズの売上高が47%減少した。背景には供給過剰、高水準の樽在庫、価格低下圧力がある。ホワイト・グッズおよび副産物の売上高は32%増加した。
• 原料ソリューション部門の売上高は5%増の3,080万ドルとなった。特殊コムギタンパク質が15%増となったことが牽引した。セグメント売上総利益率は6%と、廃デンプン処理費用により圧迫された状態が続いた。
• MGPは当四半期中に総負債を2,840万ドル削減し、純負債レバレッジ比率3.6倍で第3四半期を終えました。同社は11月2日に社名をSempreonに変更し、株式はNasdaqにおいてティッカーCASKで取引されると発表しました。

主要財務データ

広告宣伝費は4%減少して640万ドルとなりました。調整後SG&Aは13%増加しましたが、これは主にインセンティブ報酬引当金が増加したためです。同引当金を除くと、調整後SG&Aは1桁台半ばから後半の減少となりました。

事業および業績の状況

ブランド・スピリッツ部門

ブランド・スピリッツ部門の売上高は5,820万ドルとなり、前年同期比4%減少しました。粗利益は2,920万ドルとなり、粗利益率は280ベーシスポイント低下して50.2%となりました。これは主に、ボトリング工場のメンテナンスや効率改善を支援する外部委託業者への費用によるものです。好調な価格設定と製品ミックスがこれを一部相殺しました。

主に海外向けプライベートブランド（PB）ボトリング製品が含まれる「その他」カテゴリーを除くと、ディストリビューター（販売代理店）システムの切り替えがあったものの、売上高は前年同期比で横ばいとなりました。経営陣は、関連する費用が第4四半期も低水準ながら継続すると見込んでいます。

ペネロペの売上高は12%増加しました。前年同期の166%の急増に続く成長です。コア銘柄は35%増加しました。イエローストーンの売上高は23%減少しました。これはシングルバレル・プログラムのタイミングや前年同期のRTD（即飲）製品の発売との比較による影響です。同ブランド内では、イエローストーン・セレクトが11%増加し、トーステッドが38%増加しました。

エバークリアは4%増加し、中価格帯および低価格帯ブランドは全体で1%増加しました。中価格帯ブランドは6%増加しました。エズラ・ブルックス 90プルーフ、エキゾティコとフアレスのテキーラ、セイント・ブレンダンズ、アローが牽引しました。プレミアム・プラス・ポートフォリオは3,500箇所以上の小売販売拠点を当四半期中に追加しました。

蒸留ソリューション部門

蒸留ソリューション部門の売上高は29%減少して2,900万ドルとなりました。粗利益は34%減少して940万ドルとなり、粗利益率は230ベーシスポイント低下しましたへ32.4%。

ブラウン系蒸留酒の売上高は47%減少しました。業界全体の供給過多や高水準の樽在庫が需要と価格設定を引き続き圧迫したためです。経営陣は、全国規模およびグローバル展開をする大手顧客が、新たな長期契約の締結よりも在庫削減と運転資本の確保を引き続き重視していると述べました。

ホワイト系蒸留酒およびその他の副産物の売上高は32%増加しました。大手顧客向けのプレミアムホワイト系蒸留酒が牽引しました。RTDおよびプライベートブランド顧客向けの年初来製品売上高は90%増加し、ブラウン系およびホワイト系蒸留酒製品売上高の25%超を占めました。倉庫サービス収益は3%増加し、セグメント売上高の29%を占めました。

イングリディエント・ソリューションズ

イングリディエント・ソリューションズの売上高は5%増の3,080万ドルとなりました。組織化タンパクを含む高付加価値コムギタンパクの売上高は15%増加した一方、高付加価値コムギデンプンの売上高は12%減少しました。これは計画的な工場停止後に想定以上のダウンタイムが発生したためです。

売上総利益は180万ドルで、粗利益率は6%となりました。廃デンプン処理費用が引き続き重荷となったものの、2025年の設備障害に関連する保険金の初期受取りにより一部相殺されました。

生産量は10%前年同期比で増加しました。経営陣は、高付加価値の食物繊維およびタンパク質製品に対する需要は引き続き堅調であり、生産可能枠は全量予約済みであると述べました。

業績見通し

MGPイングリディエントは、2026年通期の見通しを以下の通り再確認しました：

営業キャッシュフローおよびフリーキャッシュフローのガイダンスには、Penelopeのアーンアウト支払いは含まれていません。経営陣は、約2,140万株の 加重平均普通株式数、および通期の実効税率約23%を見込んでいます。

セグメント別のガイダンスも維持されました。

• 蒸留ソリューション部門： 売上高は前年同期比約 35%減、売上総利益は約 40%減。
• ブランドスピリッツ部門： 売上高は1桁台半ばの減収、うち「プレミアム・プラス」は1桁台前半の増収。
• 原料ソリューション部門： 売上高は1億4,000万〜1億5,000万ドル、売上総利益率は1桁台後半から2桁台前半のレンジを予想。
• ブランドスピリッツ部門の販促・広告費（A&P）： セグメント売上高の約12%〜13%。
• 調整後販管費（SG&A）： 連結売上高の約 16%。

経営陣は第4四半期が第3四半期よりも好調推移すると予想していますが、ディストリビューターの移行やスポット市場への露出が引き続き変動要因であると指摘しました。

リスクと注目点

• 蒸留ソリューション部門は引き続き、供給過剰、樽在庫の高止まり、ならびに熟成ウイスキーおよび新酒の価格圧迫に直面しています。
• 大手多国籍顧客が新酒の新規購入を見送る姿勢を続けており、2027年に向けた見通しの透明性が限られています。
• ブランドスピリッツ部門は、ディストリビューターのシステム切り替えに伴う混乱に直面しました。経営陣は、2026年を脱する頃にはこれらの逆風が解消されると見込んでいます。
• 原料ソリューション部門は、生産の安定性や廃澱粉の処理コストといった課題を依然として抱えているものの、経営陣は8月から10月にかけてスループットが改善したと報告しました。
• 額面2億100万ドルの転換社債（シニア可換社債）の保有者は、11月16日に買い戻しを請求できます。同社は保有者の大部分または全員がこの権利を行使すると予想しており、十分な資金調達能力を有していると説明していますが、市場金利の上昇により第4四半期の支払利息は前四半期比で増加する見込みです。

アナリスト質疑応答の要点

経営陣は、計画を上回る調整後EBITDAおよびEPSを達成した要因として、コスト削減と広告宣伝費の効率化を挙げました。ブランドスピリッツ部門およびブラウン・スピリッツ（熟成酒）の売上高は社内予想を上回った一方、原料ソリューション部門の売上高は長期化した操業停止の影響で計画を下回りました。

ブランドスピリッツ部門の利益率について、経営陣は第3四半期の低下が最大規模のボトリング施設におけるメンテナンス、信頼性向上作業、および追加リソースの投入に起因するものであり、樽在庫の上昇や運賃・燃料費の増加によるものではないと説明しました。これらの費用は年末から第1四半期にかけて減少する見込みで、改善プログラム完了後は利益率の下支えになると期待されています。

原料ソリューション部門について、経営陣は需要が制約要因ではないことを強調しました。工場は予約で満杯であり、追加生産に応じる顧客も存在します。経営陣は、7月の操業停止以降、3ヶ月連続で目標とするピーク稼働水準付近を維持していることを挙げ、これが同部門の通期見通しを裏付ける根拠であると説明しました。

蒸留ソリューション部門に関して、経営陣は、顧客との直接的な関係を維持するために一部の熟成ウイスキーのスポット販売を過去の水準を下回る価格で行ったことを認めました。これらの販売は引き続き利益を確保しており、キャッシュ創出に貢献しました。同社はまた、大口多国籍顧客による新酒需要の低迷を補う要素として、倉庫サービス、プレミアム・ホワイトスピリッツ、プライベートブランド製品、およびRTD顧客の存在を挙げました。

決算説明会 文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning and welcome to the MGP Ingredients Third Quarter 2026 Earnings Conference Call with Julie Francis, President and CEO; and Brandon Gall, CFO. [Operator Instructions] Please also note this event is being recorded today.

In addition, this call may involve certain forward-looking statements. The company's actual results could differ materially from any forward-looking statements due to a number of factors, including the risk factors described in the company's annual and quarterly reports filed with the SEC. The company assumes no obligation to update any forward-looking statements made during the call, except as required by law.

This call will contain references to certain non-GAAP measures, which the company believes are useful in evaluating the company's performance. A reconciliation of these measures to the most comparable GAAP measures is included in today's earnings release, which was issued this morning before the markets opened and is available at www.mgpingredients.com.

At this time, I would like to turn the call over to Julie Francis, President and CEO of MGP Ingredients. Please go ahead.

Julie Francis

Good morning. I'd like to thank you all for joining us today on our third quarter 2026 earnings call. For the third quarter, sales came in at $117.9 million, down versus the prior year and in line with our expectations. Adjusted EBITDA of $21.5 million and adjusted basic EPS of $0.39 also declined versus the third quarter of last year. However, both of these key metrics were ahead of our expectations.

This quarter reinforces 3 themes about our company. First, we have a right to win in each of our 3 businesses. And in a challenging industry, this means taking the actions necessary today to emerge stronger, better aligned and more resilient. Our third quarter performance shows the success of our strategic clarity and road map as our efforts are having positive impacts and are delivering results.

Second, we are doing what we said we would do. As we previously shared, our ownership cost management mindset has helped offset the pressures in our businesses, and those savings, together with more efficient and effective A&P spending, are the key reasons adjusted EBITDA came in ahead of our plan. And today, we are reaffirming our full year guidance.

And third, our financial strength, cash generation and cost discipline give us the staying power to win. We saw that this quarter as we reduced total debt by $28 million and ended the quarter with a leverage ratio of 3.6x. This was ahead of expectations due to better-than-anticipated adjusted EBITDA and strong operating cash flows.

Before turning to our segments, I want to touch on 3 important updates. As we announced on October 15, we will become Sempreon this Monday, November 2, and our shares will begin trading on Nasdaq under our new ticker symbol CASK. This is an important milestone for our company. Since 1941, we have grown from a single distillery into a business spanning 3 separate segments: Branded Spirits, Distilling Solutions and Ingredient Solutions.

Sempreon brings these 3 business segments together under one corporate identity and represents the next chapter in our company's evolution, building on the legacies of MGP Ingredients, Luxco and the many businesses, brands and teams that have joined the organization over time.

Our commitment to tradition looking forward captures that well. We are building on the expertise, relationships and capabilities that have brought us to where we are today while continuing to evolve, innovate and create long-term growth and value. Importantly, our rebrand does not change the 3 reportable segments, how we report our results, our 2026 guidance or our leadership team. Our next earnings call will be our first as Sempreon.

Second, we are also introducing EPIC MASH, our internal leadership and shared values framework for how we work together and lead across the company. It represents 4 leadership attributes, EPIC, which stands for Execution, Performance, Impact and Care; and 4 shared values, MASH: Mindset, Accountability, Shift paradigm and Highest standards. At Sempreon, we will continue building on the strength of our 3 businesses, investing in our capabilities and pursuing opportunities to deliver for our customers and shareholders. That commitment reflects our new mission: Creating moments that matter. Building a legacy that lasts.

Finally, I want to highlight the significant progress we have made on strengthening our distribution network and route to market. During the third quarter, an additional 6 markets transitioned to new distributors. As you may recall, we transitioned 10 markets to a large new distributor in June. As is typical, these distributor transitions included system cutovers, with many of these occurring during the third quarter.

As anticipated, this negatively impacted our Branded Spirits sales volumes in these territories, but we are pleased that our third quarter Branded Spirits sales, excluding our other category, which is primarily composed of international sales of private label bottled products, were consistent with prior year and ahead of our expectations.

Now turning to our business segments. I will begin with Branded Spirits, our primary long-term growth platform. Third quarter segment sales were $58.2 million, down 4% versus the prior year. Excluding our other category, sales were in line with the prior year despite the distributor systems cutover pressures. This performance is consistent with Nielsen industry trends, which were flat for the 13 weeks ending October 3, 2026, and exceeds NABCA trends, which were down 2% for the 3 months ending August 31.

Gross profit was $29.2 million and gross margin was 50.2%, down 280 basis points year-over-year, primarily due to higher costs, partially offset by favorable price and mix. The higher costs largely reflect bottling facility maintenance and outside contractors supporting efficiency improvements. We expect these costs to continue in the fourth quarter, but at a lower rate.

Premium Plus sales were down 1% for the quarter, influenced by a planned shift on the positioning of Ezra Brooks Bourbon, which has moved into the mid-price tier with the reintroduction of a consumer favorite, Ezra 90 Proof. Excluding Ezra Brooks, Premium Plus would have grown by 1.5%.

Penelope sales increased 12%, which is particularly impressive because this growth is building on Penelope's 166% sales growth in the third quarter of last year. In the quarter, Penelope's core expressions, which are composed of the recently introduced Kentucky Straight Bourbon and Rye as well as our Four Grain and Wheated, grew by 35%. Other launches in the quarter included seasonal limited-time offerings: Architects of Golf, Cigar Sessions Chapter 02 and the Estate Collection.

Yellowstone declined 23% in the quarter, influenced by the shift of the single barrel program from the third quarter to the second quarter of 2026 and cycling against last year's ready-to-pour launches. However, Yellowstone's core expressions continue to show positive momentum, with Select growing 11% and Toasted growing 38% as we continue to expand digital paid media investments along with revenue growth management initiatives into more markets.

Everclear grew 4%, building on the momentum shown in the second quarter and reflecting the continued strength in the brand's core positioning as well as increased consumer engagement in key consumption occasions. Our mid- and value-priced brands collectively grew 1% for the second consecutive quarter, comparing favorably to Nielsen-reported declines of 5% and 6% declines reported by NABCA for these categories.

Our mid-priced brands grew by 6%, led by the successful rollout of Ezra Brooks 90 Proof, the continued expansion of Exotico and Juarez tequilas and growth in Saint Brendan's and Arrow. These results show that our stabilization efforts and select investments continue to gain traction as our mid-value portfolio growth was driven by improved execution, targeted price actions and focused brand support. The results also reflect that value-seeking consumers are turning to established brands they can trust, further demonstrating the importance of this price tier to our portfolio.

Innovation remains an important growth lever. This quarter, we also released MGP Chapter 1: Out of the Shadows, a 10-year-old 111-proof straight bourbon that brings our whiskey-making expertise directly to consumers under the MGP brand name for the first time. In addition, expanding distribution remains a key strategic priority and an important source of future growth, particularly within national chains.

For the third quarter, our Premium Plus portfolio added over 3,500 off-premise points of distribution, led by growing distribution of our Penelope core expressions and ready-to-pour offerings. We also expanded our on-premise chain presence during the third quarter with new programming and distribution in certain national accounts, including menu and cocktail features of our Premium Plus whiskeys and tequilas.

Overall, these results reinforce our confidence that our Branded Spirits portfolio is becoming increasingly stronger, more focused, more balanced and diversified and, equally importantly, able to cater to consumers across the broad economic spectrum.

Turning to Distilling Solutions. Third quarter sales were $29 million, down 29% year-over-year, and gross profit was $9.4 million, was down 34%. Gross margin was 32.4%, down 230 basis points. We continue to make gradual progress on the actions within our control and continue to believe we are well positioned to compete in a very challenging market where the industry remains oversupplied and elevated barrel inventories continue to weigh on both demand and pricing. These dynamics contributed to our own brown goods sales decline of 47% for the quarter. Despite the difficult backdrop and increased reliance on spot sales, our brown goods sales were ahead of expectations for the quarter.

Our large national and multinational customers remain focused on reducing inventory and preserving working capital rather than making new long-term commitments. As a result, we continue to expand our offerings to all customers with opportunistic aged whiskey sales, white goods offerings such as premium GNS and gin, and other value-added services. Premium white goods sales to large national and multinational customers increased during the quarter, driving our 32% year-over-year increase in sales of white goods and other co-products.

As industry dynamics are shifting, our strategy has evolved to focus on expanding into ready-to-drink and private label customers using the breadth of our product offerings and our differentiated value proposition. On a year-to-date basis, total product sales to this customer set have grown 90% versus prior year, representing more than 25% of total brown and white goods product sales, demonstrating the success we are having with this important and emerging customer segment.

In addition, our warehouse services grew 3% compared to the prior year quarter and represented 29% of segment sales. Operationally, for the quarter, the business achieved lower distillation costs driven by higher white goods production volumes and our cost savings initiatives. We continue to believe our long-term customer relationships, reputation for quality and our diverse and expanding product offerings uniquely position us to win as the industry normalizes.

Turning now to Ingredient Solutions. Third quarter sales grew 5% to $30.8 million. Specialty wheat protein sales, which include textured protein sales, grew by 15% and sales of biofuel and other byproducts also increased. Specialty wheat starch sales declined 12%, primarily due to longer-than-expected downtime following our scheduled plant shutdown. Gross profit was $1.8 million and gross margin was 6% due to continued losses in biofuel and other byproducts, where our waste starch stream costs sit. These costs were in line with our expectations for the quarter and were partially offset by an initial insurance recovery payment received during the quarter related to a 2025 equipment outage.

Operational reliability continues to improve in 2026. Our third quarter production volumes were 10% higher year-over-year despite the longer-than-expected downtime during the quarter. Demand remains strong for our specialty fiber and protein products driven by consumer preferences for high-protein, high-fiber and nutrient-dense food products. We also remain confident in our ability to lower waste disposal costs, although it's taking longer than we expected.

Across all 3 businesses, our ownership cost management mindset continues to deliver savings that helps fund our priorities. One example is marketing agency spend where, by the end of the year, we expect to consolidate the number of our primary agency partners, leading to an annual savings of more than $3 million versus prior year. A portion of these savings are being reinvested into working advertising, such as digital media campaigns, with the remaining savings being one of the many initiatives that is contributing to our bottom line.

With that, I will turn the call over to Brandon.

Brandon Gall

Thank you, Julie. Turning now to our financial results. For the third quarter 2026, we reported consolidated sales of $117.9 million, which were down 10% versus the prior year period. Gross profit of $40.5 million was down 18%. Consolidated gross margin of 34.3% declined by approximately 350 basis points, primarily due to higher waste starch stream costs in Ingredient Solutions, higher costs in Branded Spirits and lower brown goods sales volumes.

Advertising & Promotion expenses decreased 4% to $6.4 million. Branded Spirits A&P spend represented 10.9% of segment sales, a 60 basis point increase from the prior year quarter. For the full year, we now expect Branded Spirits A&P to be approximately 12% to 13% of Branded Spirits sales as we realize nonworking advertising savings from outside agency consolidation.

Our total SG&A increased 14% in the third quarter, while adjusted SG&A increased 13%, primarily due to a higher incentive compensation accrual tied in part to the savings delivered by our ownership cost management mindset. When removing the impact from the incentive compensation accrual, adjusted SG&A was down mid- to high single digits. For the full year, we now expect adjusted SG&A to be approximately 16% of sales, a significant improvement from our initial outlook driven by the ownership cost mindset initiative.

Net income of $6.9 million was down 55% versus the prior year, while adjusted net income was $8.6 million. Earnings per share for the third quarter were $0.32 versus $0.71 in the prior year. On an adjusted basis, earnings per share of $0.39 decreased 54% year-over-year. Adjusted EBITDA of $21.5 million decreased 33% over the same period. Our effective tax rate was 22.9% in the quarter, and we continue to expect approximately 23% for the full year.

Turning to cash flow and the balance sheet. Year-to-date operating cash flows, excluding the Penelope earnout payment, were $39.8 million. Q3 operating cash flows were $31.9 million, our highest since Q3 of 2025. Our year-to-date net whiskey putaway was $18.9 million, down from $23.9 million as of June 30. Year-to-date capital expenditures were $11 million. We continue to estimate full year net whiskey putaway in the range of $13 million to $18 million and CapEx of approximately $20 million.

We reduced total debt by $28.4 million during the quarter. As Julie described, we ended the quarter with a net debt leverage ratio of 3.6x, which was ahead of our expectations and in line to where we expect to be at year-end. In August, we amended our debt agreements as a precautionary step to allow us to add back up to $20 million of losses on receivables from specified customers in our covenant calculations through the end of 2027.

We also have elected to take advantage of the elevated leverage ratio period that runs through the first quarter of 2027. Both were fully supported by our lending group, and we remain in compliance with our covenants. Holders of our $201 million convertible senior notes have the right to require us to repurchase their notes on November 16. We expect most, if not all, holders to exercise this right.

We have ample capacity to fund these repurchases through our credit agreement, our note purchase agreement or a combination of both. And similar to what we did in Q2, we may deploy interest rate swaps to manage our exposure to rate fluctuations. Because current interest rates are well above the notes' 1.875% coupon, we continue to expect fourth quarter interest expense to be sequentially higher than Q3 and full year interest expenses of approximately $12 million.

Turning to annual guidance for the full year of 2026. We are reaffirming our expectations for net sales to be between $480 million and $500 million. Adjusted EBITDA is still projected to range from $90 million to $98 million. Adjusted basic earnings per share for 2026 is still expected to be between $1.50 and $1.80 with weighted average basic shares outstanding of approximately 21.4 million. We are maintaining our expectations for full year 2026 operating cash flow of $50 million to $55 million and free cash flow of $30 million to $35 million, both excluding the impact of the Penelope earnout payment.

From a business segment perspective, our full year outlook for all 3 segments is consistent with previously shared estimates. We continue to expect Distilling Solutions sales to be down approximately 35% year-over-year and gross profit to be down approximately 40%; Branded Spirits sales to decline mid-single digits with Premium Plus up low single digits; and Ingredient Solutions sales to be in the $140 million to $150 million range, with gross margins in the high single to low double-digit range for the full year.

As we said last quarter, we expect the fourth quarter to be stronger than the third. And as in prior years, we will provide our 2027 outlook when we report fourth quarter and full year results in February.

To close, cash generation, balance sheet delevering, cost management, capital stewardship and maintaining great support from our lending group are our financial priorities, and we are pleased with the progress we are making against each.

And with that, I'd like to turn the call back over to Julie.

Julie Francis

Thank you, Brandon. Before we wrap up, I want to thank the entire MGP team for another quarter of execution, performance, impact and care. Our strategic road map is designed to drive growth across all 3 businesses, and we are making progress in each.

For Branded Spirits, we will continue to focus on winning in the Premium Plus category and across the mid and value spectrum, prioritizing our best-performing brands, including Penelope Bourbon, increasing our penetration in national accounts and strengthening our digital marketing capabilities. This quarter, Penelope grew 12% and our mid-tier portfolio grew 6%.

For Distilling Solutions, we will remain focused on partnering with our customers across our diverse range of product offerings, growing our private label and ready-to-drink programs, rebuilding our aged whiskey pipeline and expanding our value-added services. This quarter, white goods and co-product sales grew 32%.

And for Ingredient Solutions, our efforts remain focused on growing sales of our high-demand specialty fiber and protein products, sustaining operational reliability and reducing waste starch stream costs. This quarter, specialty protein sales grew 15%.

We have the right to win in each of our businesses. We are doing what we said we would do, and we have the financial discipline and support, which gives us the staying power to win. On November 2, we are excited to begin our next chapter as Sempreon.

And with that, I would like to turn the call over to the operator for any questions.

Operator

[Operator Instructions] The first question comes from Marc Torrente with Wells Fargo.

質疑応答

Marc Torrente

Can we start with the reaffirmed guide? Where did Q3 land versus your expectations for each of the segments? And then Q4 is implied to be stronger, with sales and EBITDA potentially up year-over-year. Any color on the building blocks and confidence there? And how should we think about exit rate into 2027?

Brandon Gall

Yes. Thanks for the question, Marc. I'll start with how the quarter came from a business standpoint versus our expectations. So Branded Spirits sales did come in ahead of where we thought for the quarter. There's a lot of transition going on with our distributor route to market, and there were puts and takes within. But largely speaking, total sales did come in above.

Within Distilling Solutions, brown goods sales also came in above our expectations. A lot of that business is spot-market driven, which we feel is just an added proof point of the importance we play in the industry with our customers.

Ingredient Solutions, due to the prolonged shutdown that we discussed, top-line sales came in below our expectations for the quarter. However, gross margins were still in line for 2 reasons. Number one, our starch waste stream costs were in line to slightly better than we anticipated, which is the first quarter in a little while where we can say that. And secondly, we did benefit a little bit from an insurance recovery in the quarter.

So all in all, top line sales came in a bit below. But due to the cost-savings initiatives and the hard work the team is doing, we were able to come in ahead of expectations on both adjusted EPS and adjusted EBITDA. And our net leverage ratio also came in ahead of expectations, Marc.

Marc Torrente

Okay. And then just the implied sequential progress in Q4, any more color there, again, building blocks to get to the full year guide? And then any early thoughts on exit rates into 2027?

Brandon Gall

Yes. As far as building blocks go, we gave a lot of full year guidelines by business and -- for OpEx. But Q4 is a big quarter for us, which is traditionally typical. But I will say there's a lot of variables we are managing. And just as we've managed all year, the distributor transition being one within Branded Spirits. All that being said, we are very focused on execution and delivering the quarter needed to hit our goals.

Within Ingredient Solutions, we do expect there to be sequential improvement, both from a waste starch cost perspective, but also from a production reliability and throughput and sales perspective. The prolonged shutdown set us back for Q3. But in August, September and month-to-date in October, the throughput and reliability has been top percentile where we want to be. So we believe that we have the right momentum going forward to deliver the quarter needed there.

Within Distilling Solutions, like I already shared, a lot of this business is spot, but we are an important supplier to an expanding customer set. We shared on the call that 25% of our white goods and brown goods sales year-to-date have now gone to ready-to-drink and private label customers. And so these are areas that -- customer sets that are either historically underserved, which creates a good void for us to fill, or they're growing. Ready-to-drink spirits is the fastest-growing category in spirits, and positioning us with them, we feel is a very strategic move.

Operator

Our next question comes from Sean McGowan with ROTH Capital Partners.

Sean McGowan

Kind of following up a little bit on the previous question. You talked about branded being affected by the cutovers in distribution. When do you think that, that impact is over? And would you expect Branded Spirits to pick up when those cutovers are complete?

Julie Francis

Yes. Sean, it's Julie. Thanks for the question. Yes, we've got 6 more markets that transitioned in Q3. That was following the 10 that did in June. So we do have a larger portion of our control states will transition in Q4. But as you probably know, those transitions are very different than system cutovers as they're NABCA, they're control states. So those are state-run systems. So the impact will be far less. So as we're exiting the year, we would expect the transition cutover and the system cutover headwinds that we're having to be disappeared.

We certainly -- our largest distributor that did do the system cutovers, it was a pretty meaningful headwind in Q3. We're on the phone calls with those folks all the time. We do have plans for Q4. We are seeing sequential improvement, but there are some headwinds. But our guidance fully reflects that. But I would say, broadly speaking, that's one large distributor. We are very pleased with our branded performance for the quarter. Premium Plus up 1.5%.

When you take in consideration, we did reposition Ezra. Ezra was positioned as a $24.99 brand at Ezra 99. We saw an opportunity to position it lower. We had a lot of American Whiskey brands at the same price point. And so we went to Ezra 90, which was a fan favorite, it's at $14.99. We think in this economy and with the headwinds that our consumers are experiencing, it's a well-known brand at a really nice price.

And I do want to say, as we switch to the core 10, and so we have focused on core 10 across Premium Plus, mid and maybe there's a value brand in there. Year-to-date September of '25, so 1 year ago before we had this new strategic road map with clarity investments, only 1 of those 10 core brands, 1, which have been Penelope, would have been growing.

Now year-to-date, 6 out of the 10 of those core 10 brands are growing. And the other 4 have shown meaningful sequential improvement. So we're very pleased. Yes, there certainly were significant headwinds in the quarter from our larger distributor, great partnership there. They're great operators, and we certainly expect that headwind to dissipate as the year goes on.

Sean McGowan

That's helpful color. Another question I had was in locations where intoxicating hemp might be expiring in terms of legality or something in limbo, would you expect to see a benefit if that legalization expires?

Julie Francis

Yes. Listen, we definitely think there's -- I would say there's other categories that are probably more -- have higher headwinds than we do in the spirits category. But certainly, the ready-to-drink category, the ready-to-pour category, we do see that this is a switchable category for them. And as you know, we've entered into ready-to-pour and ready-to-drink. Our Penelope products are up over 100% year-to-date.

And then I'd also just say from a spirits perspective, we have expanded our distribution network for best athletes. So we are on -- several of our new regional distributors are also beer. And as you know, most of that system or most of those products goes into those convenience retail, those type of outlets. And so we will now be on those trucks.

And as you expect, we do have innovation coming up in 2027, which you would expect us to target at that same core consumer that we will start testing in Q1, and that certainly will be on a different route to market that we've never been on. So we're certainly prepared. We've got a test market going on the first quarter in a couple of markets on a different route-to-market truck that will go head-to-head and should compete for that consumer.

Operator

The next question comes from Seamus Cassidy with TD Cowen.

Seamus Cassidy

I wanted to ask on Branded Spirits' profitability. Gross margin was down 280 basis points despite sort of the continued mix shift between Premium Plus and some of the RGM and SKU rationalization initiatives you discussed. I was just hoping you could provide a bit more detail on what specifically drove that cost pressure. Is it higher barreled inventory costs flowing through the P&L, in which case it's somewhat unavoidable? Or is it more near-term inflationary pressures like freight and fuel costs? And I guess, how much of that should we expect to persist into 2027?

Julie Francis

No problem. Very good question. These costs are actually associated to our continuous improvement efforts. I think you heard we've launched a new shared values framework and one of our attributes is highest standards. And as we've got a year into a new operations leader, we obviously rolled out a ramped-up maintenance and reliability plan in Atchison. And as we looked at our largest bottling facility, that maintenance and reliability and our downtime and attainment was nowhere near where we would expect.

So what we did is, we took the same external resources that we use from Atchison. We put them in our largest bottling facility. We also have added headcount there. And so we're rebuilding a world-class maintenance and reliability program that down the road will certainly help us. And so we expect these costs to continue into Q4, but at a much lower rate.

And year-to-date, the segment gross margin is still at 50.6%, and our full outlook still has us having slight gross margin improvement and is unchanged. And as you saw, we did have favorable price/mix. So again, it's the maintenance and reliability headwind. It will dissipate towards year-end and into Q1, and we are reaffirming the margins that we shared in our guidance.

Seamus Cassidy

Okay. Understood. So I guess maybe like all else equal, we would expect those improvement plans to sort of be a margin tailwind, I guess, for the back half of '27 once the efforts are complete?

Julie Francis

Very well said.

Operator

The next question comes from Ben Klieve with StoneX.

Benjamin Klieve

First, a question on the price/mix dynamic within brown goods. There's a lot of variables here. And I'm wondering if you can help us understand the degree to which the price/mix dynamic was driven by your comment on elevated spot sales or maybe the switch between aged and new distillate versus kind of true price dynamics? Any comments within that would be helpful.

Brandon Gall

Yes. Thanks, Ben. So pricing in aged and new is under pressure. And that's been the case for, going on 2 years now. And the first 2 quarters of this year, while brown good volumes were down, we actually had a price/mix benefit, if you recall. This quarter, to your point, both volume and price was down, but we did have some mix benefit, but that gets lumped in. And the reason there is we're continuing to have more proportionate sales toward aged rather than new distillate, which you'd expect. And so we're seeing that mix benefit.

However, we've gotten more pointed on our pricing on aged. There have been a lot of spot sales at certain points where we're partially below where we've historically gone. And we've decided to, in certain cases, price match with the right customers to better align with them and form more of a direct relationship. That's still profitable sales and that's probably what you're seeing in the price differential between Q3 and the first 2 quarters, but it's also led to not only higher-than-expected brown goods sales in the quarter, but tremendous free cash flow generation, as you witnessed.

Benjamin Klieve

Okay. Very helpful. And then one more from me on the Ingredients segment and the fourth quarter outlook here. I heard your comments earlier about all the various dynamics around efficiency improvements here and how encouraged you are by the outlook from August, September and quarter-to-date. But I want to double-click on this. The implied outlook here of $140 million to $150 million on a full year basis suggests 30% plus sequential growth out of that segment and record revenue in the fourth quarter here. And I want to really understand the drivers here and especially the degree to which you have a customer base lined up to take this volume off of the facility here now that it is up and running to the degree to which you're hoping for.

Julie Francis

Yes. Thanks, Ben. I'll take that. I'll be really clear. It's not a demand issue. We are fully booked. Every bit of pound, including if we are able to get more pounds, but we do run continuously the entire time, someone -- a customer will take. So that -- there is not a demand. There is no customers. We have every bit of demand for every pound that we have.

And what gives us reasons to believe, again, as you know, it was a year ago that I got on this call and I was very transparent. That plant was not operating anywhere near that we would expect for almost 2 years. Brought in a new operations leader, brought in boots on the ground, and we had a turnaround program that started in November. And we had a very large equipment outage over multiple months that we decided to shut down and to repair. And we've done what we said we're going to do. We came back up on time from there.

The pounds and the attainment that we're now getting; again, to put it in kind of context, our peak performance is at 90% capacity utilization. That's a pretty high one. In 2024 then, we did that one time. In 2025, we did that one time. Since our plant shutdown that we came up out of July, we've done this, including October, 3 straight months. And before that, we did it another 3 months.

So we have a high certainty of our reliability measures, in particular, after the plant shutdown, the extended period that we're able to deliver the pounds and attainment that we want. Using those measurements, and we are on track, that's what gives us the confidence to reconfirm that range.

Operator

The next question comes from Mitch Pinheiro with Sturdivant.

Mitchell Pinheiro

Most of my questions have been asked and answered. I just want to follow up on the Ingredient Solutions segment. So your demand -- you don't have a demand problem, you're selling everything you have. But during your inefficiencies, your customers went elsewhere. How does the competitive outlook look like in Ingredient Solutions? Are you getting all the customers that you had or had to sort of give up a little bit? Are you getting them back? Is pricing as firm as it should be? Or is there any competitive pressures in that?

Julie Francis

Thanks, Mitch. I appreciate it. We did not lose one customer during the span of the last few years. We've been transparent. We've been upfront, and we've worked with all of them to make sure with our inefficiencies and some of our downtime that we've been working with them to ensure that they know about it and they can prepare for it, and they've been able to get through it. So we have not lost a customer.

Now that we do have customer service and reliable customer service, and they can depend and count on when we're getting out the pounds, certainly, there is the ability to capture some of the market value that we haven't been capturing because we haven't had good service.

And then I'd just say, third, our customer funnel. We have a very robust customer funnel. Our R&D and sales teams and the co-creation events that we're having with blue-chip companies, especially ones -- and a lot of them are repeat customers, meaning they have co-created an event, it's in the market, and now they're coming back, and we have multiple other projects in the pipeline.

So we feel very strong with our partnerships, our differentiated value proposition. And obviously, no one is thrilled with the reliability we had in 2024 and 2025, but I certainly can say that we've done what we said we're going to do. We did our plant shutdown. When we extended it, we talked to our customers, and everyone is aligned with our path forward. And it goes back to our differentiated platforms that we have; they are in demand, they taste better, they have better texture, and we continue to be the partner that they would expect and can count on.

Mitchell Pinheiro

In the white goods, that was post-COVID and all of the industrial alcohol and white goods production capacity that was out there. What's changed? Why is your white goods growing again and growing profitably versus that prior period?

Julie Francis

Well, listen, when you don't have an oversupply of whiskey, you focus on whiskey. And so our sales teams were maniacally focused on delivering on American Whiskey. The differentiated value proposition and the Swiss Army knife of MGP distillery was focused on brown goods. Now that obviously ready-to-drink and that portfolio is out there and growing, and obviously now we do have the production time to focus on providing quality premium white goods.

And I want to say premium white goods -- we're going back and talking to large and small multinational customers. And I'd say the majority of our customers that we're getting that are delivering the 32% increase are all large customers we had on the brown side. Now that they know that that opportunity is there for MGP, they're absolutely taking us up on it. And so we're certainly pleased.

And then again, it goes back to our partnership approach, working and being very agile and very transparent on what we can bring, and they've been pretty happy with us.

Brandon Gall

Yes. And if I could add to that, Mitch, we've talked a lot about how aged brown is an on-ramp into new distillate with customers. And we view premium white goods the same way. And we don't just view it that way; we've seen it play out.

So for example, one of our private label relationships in American Whiskey launched in the last 12 months this American Whiskey brand with us. But they had been a premium white goods gin customer for years before that. So seeing this transition, and it's not anything new or novel. In fact, once they get used to our high level of quality, our customer service, it becomes quite easy for them to consolidate even more and more of their business with us, which is why having success with private label and with ready-to-drink is becoming more and more important for us because it really best demonstrates and utilizes all of our capabilities.

Julie Francis

Yes. And Mitch, since you brought up MGP, I do want to take a chance to share we're very pleased with our new innovation that came out of MGP distillery. It's called MGP Chapter 1: Out of the Shadows, a 10-year, 111-proof straight bourbon that brings our whiskey-making experience out of that distillery directly to consumers under the MGP brand name for the first time.

And I can tell you, consumer industry on-premise reaction, I was out in the market last week. And admittedly, it was within 60 miles of the MGP distillery, but an on-premise and a liquor store customer -- owner certainly shared that it won't hit the shelf. So we're pleased to, again, take that differentiated MGP distillery and use it in multiple ways. And certainly, that's one example that we're very pleased with.

Mitchell Pinheiro

Okay. And by the way, how are the margins, white goods versus brown goods?

Brandon Gall

Yes. White goods margins are accretive to overall segment margins. So when we say premium, that's what's different. What we're producing out of Lawrenceburg for these customers on the whole is differentiated from typical white goods or industrial-grade alcohol like we're producing out of Atchison.

Mitchell Pinheiro

Okay. Then just final question. On the brown goods and new distillate, I know your customers have paused, they have inventory that they want to maintain a tight control over. But at some point, formulas and the products they're taking the new distillate for, ultimately, they do need to buy new distillate, I would think. And this has been going on for what seems like 2 years where we've had major customers pausing. When do they have to start to buy new distillate just for their own product consistency?

Brandon Gall

Yes. We shared -- we kind of reaffirmed all that on the Q2 call, Mitch, which is our large multinational new distillate customers are in a holding pattern. And it's not anything MGP or even American Whiskey specific as much as it is broader enterprise mandated from their corporate office. We're still in that holding pattern. And when are they going to come back? We're having those conversations as often as we can. And the more business we do with these customers in premium white goods and other, the more opportunities we have to have those conversations.

But absent of that, that's a lot of new distillate brown goods visibility that we don't have going into next year that we've had historically. However, we still have increasing confidence in 2027 and beyond. And here's why.

Firstly, 1/3 of our revenue in distilling today is warehouse services revenue. That is all contracted. If it's not -- if anything that's up for renewal, we fully expect to recontract again with those customers. So that's 1/3 of our top line, very -- it's gross margin accretive to the segment, but it's also very free cash flow generative. So that's 1/3 of the business.

When we look at the rest of it, Q3 is a really good proof point for white goods and brown goods. So, as we've talked about, the emergence of private label in RTD customers has the potential to serve as an important source of growth and shock absorber for those large multinationals. We shared that they're now 25% of those white and brown goods sales and growing.

It's typical for these customers to purchase across the portfolio, as we've shared. Private label customers are having brand success to the point where we do have orders for aged through Q3 of next year. The ready-to-drink customers, they've only more recently become a focus, but what we are seeing is that their volumes and frequency of purchase are increasing. Then there's our craft customer base, which traditionally does not contract, and they're not today either. However, they continue to purchase on a spot basis and remain a very important part.

So going back to the multinationals and the pausing, we're working with them on these other projects, such as premium white goods, gin and so on. We're keeping them close while expanding the relationship. And this is important because our unique ability to produce white goods means that we don't have to be at 70% whiskey capacity to be cost competitive; we can cut over as demand dictates. So we feel this positions us well to re-partner on new distillate with these larger customers when they are ready as well as attract new customers in the future.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Julie Francis for any closing remarks.

Julie Francis

Thank you, everyone. We appreciate your engagement, and we look forward to talking with you again next quarter as Sempreon. Take care.

Operator

Thank you. The conference has now concluded. You may now disconnect.