MGPI - NASDAQ

Good morning. And welcome to the MGP Ingredients Third Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mike Houston. Please go ahead.

Thank you. I am Mike Houston with Lambert Global, MGP’s Investor Relations firm; and joining me are members of their management team, including Dave Colo, President and Chief Executive Officer; and Brandon Gall, Vice President of Finance and Chief Financial Officer. We will begin the call with management’s prepared remarks and then open the call to questions. However, before we begin today’s call, it is my responsibility to inform you that this call may involve certain forward-looking statements based on current expectations. The company’s actual results could differ materially from any forward-looking statements made today due to a number of factors, including the risks and uncertainties described in today’s earnings release and the company’s other SEC filings. The company assumes no obligation to update any forward-looking statements or information included in this call. Additionally, this call will contain reference to certain non-GAAP measures, which we believe are useful in evaluating the company’s performance. Reconciliations of these measures to the most directly comparable GAAP measures are included in today’s earnings release. If anyone does not already have a copy of the earnings release issued by MGP today, you can access it at the company’s website www.mgpingredients.com. At this time, I would like to turn the call over to MGP’s President and Chief Executive Officer, Dave Colo. Dave?

Thank you, Mike, and thanks everyone for joining the call today. On this call, we will begin with an overview of our performance for the quarter ended September 30, 2023, provide updates on key financial performance metrics and discuss the progress we have made against our strategy. At the end of the call, we will open the line for Q&A. I am proud of the considerable progress we have made toward achieving our targets for fiscal 2023. The strong results this quarter has enabled us to revise our full year guidance upward, increasing the anticipated ranges for adjusted EBITDA and adjusted basic EPS for the second straight quarter. Our continued solid performance throughout the year could not have been possible without our dedicated team. We again achieved our best quarterly sales in company history while also growing consolidated gross profit by 24% to a quarterly record with gross margins expanding across all business segments. Consolidated sales for the third quarter of 2023 increased 5% year-over-year to $211.6 million, while gross profit increased 24% to $73.4 million, representing 34.7% of consolidated sales. Net income decreased 45% to $13.1 million, primarily driven by one-time expenses of $18.3 million related to the planned Atchison distillery closure, as well as the increase of $4.2 million in fair value of contingent consideration related to the Penelope acquisition. Excluding these items, adjusted net income increased 28% to $30.2 million. Adjusted EBITDA increased 24% to $48.1 million. We delivered another robust quarter in our Distilling Solutions segment, with sales increasing 3% year-over-year to $111.9 million. Gross profit for the quarter increased to $33.3 million or 29.8% of segment sales. The increase in gross profit can be attributed primarily to the increase in sales of new distillate and aged whiskey brown goods. Compared to the prior year period, sales of brown goods for the quarter increased 28%, driven primarily by increased pricing due to continued strong demand for both new distillate and aged whiskey. Brown goods sales growth has continued to outpace longer term market trends and has been primarily driven by craft, as well as multinational customers. Our confidence in our brown goods sales visibility for the balance of the year remains high. Looking ahead to fiscal 2024, our visibility is also improving as we believe we now have the vast majority of our expected Distilling Solutions segment brown goods sales for 2024 already committed. We believe we are well positioned to support continued growth in the American whiskey category. We will continue to be strategic with our aged whiskey sales to enable us to meet expected customer needs for the balance of this year, as well as position us to meet anticipated customer needs in the coming years. Turning to white goods and industrial alcohol. We continue to reduce the volumes of our industrial alcohol and white goods products produced and sold during the third quarter. As a result, white goods sales decreased by 30% year-over-year and sales of our industrial alcohol products decreased 13% during the third quarter. As expected, on a combined basis, these product lines continue to have negative gross margins in the quarter. In July, we announced the planned closure of the white goods and industrial alcohol distillery in Atchison, Kansas, slated for January 2024. This announcement reinforces our strategy focused on improving profitability by shifting away from industrial alcohol and white goods products to mitigate the continued impact of increased input costs and excess supply available in the market. Brandon will speak in more detail about the financial impact of the closure. Before that, I want to remind our listeners that this strategic decision first required us to solve how to physically decouple the Atchison distillery from the ingredients facility. Now that the plan has been identified to successfully decouple the facilities, we are continuing to evaluate the most economically viable options for the waste starch stream. As you recall, the waste starch stream is a byproduct of the ingredients facility that is purchased by the joint distillery and results in an intercompany credit to the Ingredient Solutions segment. We have identified third parties who will utilize our starch stream at no cost to the company in fiscal year 2024, which is detailed in the updated pro forma financials found in our earnings release, which Brandon will speak to shortly. We firmly believe these actions will enable us to further align our product categories and their supporting operations toward achieving our long-term strategic objectives. As we continue to assess more accretive options to dispose of the waste starch stream and their impact on our financial results, we will provide additional details in future earnings calls. Given the recent announcement of the Atchison distillery closure, it is difficult to predict how it might impact the fourth quarter of this year as customers put their respective transition plans into place, but we continue to believe the closure will be accretive to consolidated gross margin percentage beginning in 2024. Turning to Branded Spirits. Segment sales totaled $66.8 million during the quarter, an increase of 6% versus the prior year period. The increase in year-over-year performance in this segment was primarily driven by the strength of our Premium Plus brands, which grew 33% from the prior year period. We are very pleased with the continued growth of our Premium Plus sales as they represented 46% of segment sales this quarter. This is a meaningful improvement from the 32% of sales our Premium Plus brands represented back in the third quarter of 2021 following the Luxco acquisition. Our focus on investing behind our higher margin Premium Plus brands resulted in an increase in gross profit to $29 million or 43.5% of segment sales. The increase in gross margin can be attributed to the favorable performance of our higher margin Premium Plus brands. Additionally, we remain confident that inventory destocking for our brands is close to running its course, and we are focused on driving velocity and points of distribution across our portfolio of brands. In June of this year, we announced the completion of our acquisition of Penelope Bourbon, a fast growing brand that improves our ability to further participate in the popular American whiskey category. We continue to believe this brand has meaningful long-term growth potential, which is supported by the results we delivered during the third quarter. We could not be more enthusiastic about the Penelope brand as it supports our long-term strategy focused on premiumization and enhances our portfolio of Premium Plus price tier brands. We remain pleased with Penelope’s continued momentum as we expand its presence to new markets. We expect to be in 37 states by the end of 2023. Our Branded Spirits strategy remains focused on growing points of distribution by leveraging the expansion of our Premium Plus brands portfolio with a particular focus on our tequila and American whiskey brands. Turning to Ingredient Solutions. Sales for the quarter increased 11% to a record $33 million, while gross profit increased to $11.1 million or 33.8% of segment sales. The increase in sales primarily reflects continued rising consumer preference toward high protein, low net carb diets, which drove higher sales of our specialty wheat proteins and starches, as well as our commodity wheat starches. Finally, I want to thank our team for their tremendous efforts and continued execution. We remain encouraged by our diverse customer base and our product offerings, which continue to align with broader consumer trends. We believe our improved profitability and our proven ability to execute against our long-term strategy continue to provide us with the momentum required to achieve our fiscal 2023 goals. This concludes my initial remarks. Let me now turn things over to Brandon Gall for a review of the key metrics and numbers. Brandon?

Thanks, Dave. For the third quarter of 2023, consolidated sales increased 5%, compared to the prior year period to $211.6 million. Gross profit increased 24% to $73.4 million, representing 34.7% of sales. Advertising and promotion expenses for the third quarter increased $2.2 million to $9.5 million, as compared to $7.3 million in the prior year period. Of this amount, $8.2 million was invested towards our Premium Plus Branded Spirits. This advertising and promotion spend represented 12.3% of total Branded Spirits segment sales in the quarter. The year-over-year increase remains consistent with our premiumization strategy and we plan to continue to invest marketing spend against our higher-margin Premium Plus price tier brands. Corporate selling, general and administrative expenses for the quarter increased $3.7 million to $21.6 million, as compared to the third quarter of 2022, primarily due to higher personnel expenses. During the quarter, we also incurred $18.3 million in one-time expenses related to the planned closure of our Atchison distillery. Of this amount, $17.1 million were related to non-cash asset impairments. We believe the vast majority of these one-time charges related to the closure were accounted for in the third quarter. However, there will be additional one-time occurrences relating to severance and equipment sales as examples in subsequent quarters. These one-time expenses have been excluded from our adjusted financial metrics, as well as our full year 2023 guidance. Also during the quarter, we increased the fair value of the contingent consideration liability related to the Penelope acquisition by $4.2 million. This is a non-cash expense related to the earn-out consideration associated with the expected positive performance of the Penelope brand following the acquisition in June of this year. We will continue to evaluate this contingent consideration liability in subsequent quarters and adjust as necessary on a quarterly basis throughout the term of the earn-out period, which ends in December 2025. This non-cash expense has been excluded from our adjusted financial metrics, as well as our full year 2023 guidance. Operating income for the third quarter decreased 41% to $19.8 million, due primarily to the previously mentioned asset impairments and other one-time expenses related to the planned closure of our Atchison distillery, as well as the change in fair value of the contingent consideration related to the Penelope acquisition. Excluding these items, adjusted operating income increased 26% to $42.7 million. Our corporate effective tax rate for the third quarter of 2023 was 25%, compared with 24.2% from the year ago period. The increase in our corporate effective tax rate was due primarily to a reduction of state tax credits during the period. Net income for the second quarter decreased 45% to $13.1 million, while adjusted net income increased 28% to $30.2 million. Basic and diluted earnings per share decreased to $0.59 per share from $1.07 per share and $0.58 per share from $1.06 per share, respectively. Adjusted basic and diluted earnings per common share increased to $1.36 per share from $1.07 per share and $1.34 per share from $1.06 per share, respectively. Adjusted EBITDA for the quarter was $48.1 million, an increase of 24% compared to the year ago period. The increase was primarily driven by the strong performance of all three business segments. Now an update on commodities, corn, wheat flour, rye and natural gas represent our largest commodity expenses and each continue to experience elevated prices throughout the quarter. Compared to the prior year period, our input cost for corn increased 4%, wheat flour increased 24%, rye increased 40% and natural gas increased 30%. Our risk management process and our focus on products that are premium and more specialty in nature, have continued to enable us to mitigate the impacts of higher input costs over the past several quarters in most of our product lines. As we have mentioned previously regarding the planned closure of our Atchison distillery, we continue to expect to incur one-time aggregate pretax charges of approximately $23 million to $31 million in fiscal 2023. Of that amount, we anticipate $6 million in capital expenditures in connection with the decoupling of the Atchison distillery from the Ingredient Solutions facility also located in Atchison, Kansas. Now an updated look at the financial impact of the Atchison distillery’s performance on a preliminary pro forma unaudited basis for year-to-date ended September 30, 2023. Excluding the financial impact of the Atchison distillery, results were as follows. Consolidated sales and Distilling Solutions sales are reduced by $87 million, consolidated gross profit is increased by $2.4 million and consolidated gross margin is increased by 620 basis points. As Dave already mentioned, we continue to assess viable options for the Ingredient Solutions waste starch stream post decoupling and their respective impact to overall consolidated profitability. Additional information will be provided when the company releases its financial results as more information becomes available. In accordance with accounting guidance, we expect to present the Atchison distillery operations as discontinued operations once the facility is shut down and assets are available to be sold. It’s important to note that in some circumstances, white goods, industrial alcohol, fuel and at times certain co-products are produced at our Lawrenceburg, Indiana distillery. Please refer to the pro forma schedules included in this morning’s earnings release for more information. Moving to cash flow. Cash flow from operations was $48.6 million for the year-to-date period, down from $72.3 million in the prior year-to-date period. The reduction in cash flow from operations was primarily driven by a decrease in accounts payable and an increase in our barrel distillate and finished goods inventory. Our balance sheet remains healthy, allowing us to continue to invest to grow. We remain well capitalized with debt totaling $316.7 million and a cash position of $28 million. Turning to capital allocation. We remain focused on organic and acquisitive growth opportunities that align well with our long-term strategy, as well as underlying consumer trends, which we believe our business is well positioned to leverage. We will continue to evaluate M&A opportunistically with the goal of accelerating growth and increasing our capabilities and product offerings. In addition, continuing to put away whiskey for aging remains a critical component of our capital allocation strategy, effectively matching whiskey put away with growing future Distilling Solutions and Branded Spirits segment sales remains a key priority and is critical to our long-term strategy. Our investment in inventory of aging whiskey increased to $239.1 million at cost, an increase of $4.5 million compared to the second quarter of 2023. Investing in capital expenditures to enhance our operational capabilities is another important capital allocation priority and it resulted in capital expenditures of $36.9 million for the first nine months of the year, an increase of $8.4 million versus the prior year period. We continue to expect approximately $63 million in capital expenditures for the full year 2023, which is up from the figure we shared during the first quarter’s call due to the decoupling capital investment associated with the planned closure of the Atchison distillery. We continue to expect our capital expenditures will be used for facility improvement and expansion, such as our distillation expansion at Lux Row Distillers in Bardstown, Kentucky, the addition of whiskey barrel warehouses to support continued growth at our Lawrenceburg and Bardstown distilleries, and our new texturized protein extrusion facility in Atchison, Kansas, which is still expected to come online in the first quarter of 2024. Additionally, we plan to prioritize investments in facility sustenance projects, as well as environmental health and safety projects. The Board of Directors authorized a quarterly dividend of $0.12 per share, which is payable on December 1st to stockholders of record as of November 17th. The Board continues to view dividends as an important way to share the success of the company with stockholders. We continue to believe our capital allocation strategy focused on organic and acquisitive growth aligns well with our long-term strategy. Leveraging this approach, we believe we can better position the business to benefit from underlying consumer trends. And now, let me turn things back over to Dave for concluding remarks.

Thanks, Brandon. We are very pleased with the strong performance this quarter and continued momentum throughout the year. Demand for our products in each of the three segments remain strong and we believe our actions will continue to position the business for long-term success. To account for these continued strong results, we are again updating our full year fiscal 2023 guidance to the following; we continue to expect sales to be in the range of $815 million to $835 million; adjusted EBITDA is now expected to be in the range of $192 million to $197 million, reflecting an increase of approximately $5 million to the low and high end of the guidance range we provided last quarter; adjusted basic earnings per common share has been revised upward and is now expected to be in the range of $5.50 per share to $5.65 per share, with basic weighted average shares outstanding expected to be approximately $22.1 million at year-end. Before we open up the call for questions, I’d like to welcome David Bratcher to the call this morning. As you saw in this morning’s press release, David will be promoted to CEO and President on January 1, 2024, following my retirement. I have had the pleasure of working closely with David for more than two years and we are fortunate to have such a talented and capable leader to be the next CEO of MGP. It has been a privilege to work with the Board of MGP and a talented and passionate group of employees throughout the company altogether who have achieved significant results in a number of areas in the past few years. As our Chief Operating Officer and President of Branded Spirits, David has played a critical role in supporting the company’s growth over the past several years and we are looking forward to his continued leadership across the organization. He is the right leader to help MGP leverage the solid foundation we have established over the years and see the significant opportunities that lie ahead of us for many years to come. I will be staying on in an advisory capacity through April 30th to assist David and our Board in ensuring a smooth and seamless transition. That concludes our prepared remarks. Operator, we are ready to begin the question-and-answer portion of the call.

[Operator Instructions] Our first question will come from Marc Torrente with Wells Fargo. You may now go ahead.

Hey. Good morning. Thank you for taking my questions. First off, I want to say congrats to Dave on the retirement and to David on the new promotion. Maybe we could start there. This is coming at a time of some strategic shifts in the portfolio and David is coming from the Branded side. Should we expect much of the same in terms of portfolio direction or maybe any other tweaks to the strategy, perhaps, in other areas of the portfolio? Dave and David have worked closely together since the acquisition.

Yeah. Mark, thanks for the comments. This is Dave. Yeah. I think our strategy has been pretty well thought out over the last few years and we just completed our next five-year strategy here recently. And our direction will remain pretty consistent. I mean we are -- as you well know, we are on a path to migrate the business in the portfolio to more and more of a Branded Spirits position business. We have made some pretty strategic moves over the last few years to enable us to do that. For the most part, I think, you will see David -- under David’s leadership and I will let him speak to this as well that that’s our broader strategy and I think we are well positioned to continue to pursue that.

No. I would add that, I have had the privilege of working hand-in-hand with Dave and Brandon and the rest of the executive team in developing the strategic plan that we have in place today. Our -- we laid a solid foundation for the future and we are going to continue to build on that foundation.

Okay. Great. And then on the guidance, Q3 had some upside, at least, to street expectations and while you raised EBITDA for the year, you held sales guide rather wide. Is that just a function of the Atchison transition process, and perhaps, some potential variability around how those sales will land?

Yeah. Mark, that’s the primary reason for that. So far, the Atchison transition has progressed pretty much how we expected. We are at the point now where we are receiving final orders from customers for the balance of the year. But there’s -- you never know, right? There could still be some uncertainty around customers as they transition, getting their supply from us to other suppliers that there could be some potential exits earlier than we planned, but we think we have accounted for that in the revenue guidance that we provided.

Okay. And then, just lastly, on visibility into next year, I think, the comment was, a vast majority of brown good sales for next year are already committed. How is this tracking compared to this point last year, is there any underlying shift in mix of aged versus new and any other color on how those negotiations have been progressing, I assume pricing ability remains quite strong?

Yeah. I think -- compared to last year, I think, we are pretty much on track. The team has done an outstanding job of getting forward commitments in place. More on new distillate as we discussed in the past, but we also have excellent progress on our aged brown goods sales for 2024. So I think we feel like we are in a great position as we go into 2024 and the team is already working on 2025 as well. So, very similar, if not ahead a bit of where we were last year.

Okay. Thanks, guys.

Thanks, Marc.

Our next question will come from Gerald Pascarelli with Wedbush. You may go ahead.

Great. Good morning, and David, congratulations on your promotion. Dave, congrats on the retirement. It’s been great working with you and wishing you all the best.

Thank you.

Thank you.

Sure. Thanks. First one is just on Branded Spirits. I think the revenue growth came in certainly better than we had been modeling for. Understanding this was the first full quarter benefit from Penelope. Can you broadly quantify how much of the 6 points that brand specifically drove on the growth in this segment or just any color on how we should think about the contribution going forward? Thanks.

Yeah. Gerald, this is Brandon. So the Penelope brand is right in line, if not exceeding our expectations to-date. So we are seeing great performance and contribution from Penelope. Going forward, we are not going to break out individual brand performance. But what I will say is that, especially as it relates to our Premium Plus price brands in our portfolio, we are seeing contribution up and down that whole list of brands. So we are very happy with the performance turned in by the segment in the quarter.

Understood. Thank you. My next question is on the Distilling Solutions segment. Brandon, I guess it’s for you and it’s really more of a housekeeping question. But when we look at the historical margin profile in Distilling Solutions, gross margin and your income before tax margins are fairly closely aligned historically. Looking out to 2024, once the Atchison distillery closes and then considering the gross margin enhancements you are going to get in that segment, is there any reason why gross margin and income before tax margins would not continue to remain fairly closely aligned? This is obviously excluding any non-recurring items or impairments, et cetera. Any color there would be great. Thank you.

Yeah. So excluding all the impairments you mentioned is important. But on a go-forward basis and we do have this listed in our schedules of our earnings release. But, yeah, so on a pro forma basis, excluding the Atchison distillery, our gross margin profile of Distilling Solutions increases about 1,340 basis points to around 44.1% on a pro forma year-to-date basis. So that impact to margin is going to be quite noticeable for not only for the Distilling Solutions but for the consolidated business as well.

Right. And just a follow-up on the income before tax, would you expect a lot of the margin enhancements to continue to flow through to your income before tax or is there -- are there any considerations to be mindful of once the distillery closes just in terms of income before tax?

Yeah. No. We would expect that flow-through to be consistent with what you are seeing at the gross profit and gross margin level.

Okay. Thank you very much.

Our next question will come from Bill Chappell with Truist Securities. You may now go ahead.

Thanks. Good morning and my congratulations as well, Dave, on the retirement.

Thanks, Bill. Thank you.

A couple of questions. I guess, first on the Branded Spirits business, you talked that you were still working through some of kind of the excess inventory within channels and I think the whole industry is. I mean, any way to quantify like what sales could have been or how much that impacted branded sales, because still 6% year-over-year is pretty solid. So just trying to understand or did it really was a very small impact and no impact is expected going forward?

Yeah. I think, Bill, we discussed this a little bit on the last quarter call, but we feel like we are pretty much through any issues with excess inventory at the distributor level. There may be a few brands that we still have a little bit to work through, but there was really, I don’t think our revenue was materially impacted due to any excess inventory issues in the channel.

Got it. And then only half kidding, but what do your brown spirits distillate salespeople do over the next six months? If you have presold so much of the business for 2024, and I guess, one, talk about like, is there excess capacity where you can continue to sell more beyond your plan and is there some optionality there? And then two, we hear a lot of things be it GLP, be it just overall sluggish -- slowdown on spirits in general, about incremental demand for brown goods over the next few years and your new distillate sales are probably the best leading indicator there. So maybe you can just talk about what you are hearing and seeing from your customers in terms of expectations, in terms of getting better, getting worse, cooling down. Help us understand, I guess, one, can they sell more next year than they have already committed and do you have the capacity for that? And two, kind of what you are hearing from your customers in terms of demand three years, four years, five years from now? Thanks.

Yeah. No. Our sales team in brown goods, they have done a fabulous job, as we have mentioned earlier, getting us into the position that we are in with having forward commitments on both new distillate and aged. And once they have 2024 as an example, the vast majority of those sales committed and obviously, they are working on 2025 and beyond. So we don’t give them a break. They don’t get to take the year off once they get 2024 books. So they are working diligently on 2025 and beyond on sales. The capacity question is, as you know, we have had some pretty good increases in throughput in our Lawrenceburg distillery. We are bringing on additional capacity in Bardstown, as we plan for 2024 and beyond and this is part of our strap plan and this will be spoken to more when we give guidance for 2024. All of those capacity increases, et cetera, are factored into the guidance that we will provide in for 2024, Bill. There will be some additional capacity as we continue to drive continuous improvement and bring the capacity on in Bardstown. So we will make sure that we are selling that in the most profitable manner to keep driving the improvement in the business. From a consumer demand point of view in this whole GLP drug issue, our -- we don’t really see currently, it’s not really an impact to our business. I think it’s very early innings with what is the true impact going to be from a consumer perspective on whether it’s food or beverage consumption. But as we sit here today, we don’t see that having a meaningful impact on our business. Certainly, it hasn’t year-to-date, and I personally wouldn’t anticipate it having a significant impact on our business going forward, to be honest. Our customers continue to want to forward book commitments with us, because what they are trying to do obviously is, make sure they have certainty of supply around liquid for their brands. So we really -- the biggest change we have seen there is not necessarily in customers committing but more -- I am going to say more on the craft side of things is trying to push payables out because of the higher interest rates and impact that has on their businesses. But overall, the demand that we are seeing remains pretty solid for the new distillate and aged.

Great. Thanks so much.

Thank you.

[Operator Instructions] Our next question will come from Vivien Azer with TD Cowen. You may now go ahead.

Hi. Thank you. Good morning and I’d like to echo my congratulations to Dave. My first question is on the Distillery Products segment, another very nice quarter of price mix realization in premium beverage alcohol, of course, volumes are under pressure. I was wondering whether you could offer some commentary on kind of the volume dynamics between brown goods and white goods in the quarter, please? Thanks.

Yeah. Vivien, this is Brandon. So, yeah, in our Q, we do break out premium beverage alcohol, which includes both brown goods and white goods, and within that, we share that sales are up 13%, but volume to your point is off 15% and that 15% downdraft is all directly related to white goods and industrial alcohol. So our demand for our brown goods from a volume standpoint remains intact, but I will share the majority of the 28% growth in brown goods in the quarter was price driven.

Got it. That’s really helpful. And then just kind of thinking about the brown goods category and the whiskey category more broadly, we have the access finally to TTB, which is publishing its data again. It looks like inventory building. We are hearing anecdotally that the third-party whiskey pricing might be under pressure. So I was wondering if you could just comment at all on what you are seeing in terms of other whiskey pricing in the market? Thanks.

Are you speaking to our distilling, our bulk whiskey business in particular…

Yeah.

… or the -- yeah. Yeah. I think from our perspective, on our inventories, et cetera, what we try to do is balance particularly on our aged side. Our inventory needs and build of inventory with our anticipated future customer needs and demand. And we still are in that position today, we make our laydown decisions based on those anticipated needs and we are not seeing anything today that would tell us that we, as a company, are imbalanced in that particular regard. As far as pricing pressure in the market, what we are seeing is we have continued to attract pretty healthy pricing, as Brandon just discussed and the majority of the increase in our brown goods revenue this quarter was driven by pricing versus volume. Going forward, I think, what we are anticipating, and I think, a lot of our competitors are anticipating is that the global demand for American whiskey is going to continue to remain strong as will domestic whiskey. But as you look at the rest of the world, the share that American whiskey has globally, it’s still very underpenetrated. So through the combination of continued demand domestically and the significant potential that we feel is available globally, we still feel like we are in a solid position and to continue to grow this business.

Got it. Thanks very much.

Yeah.

It appears there are no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Dave Colo for any closing remarks.

All right. Thank you for your interest in our company and for joining us today for our third quarter earnings call. We look forward to talking with you again after the fourth quarter.