Good morning, and welcome to the MGP Ingredients First Quarter 2023 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mike Houston, Investor Relations at Lambert. Please go ahead.

Thank you. I'm Mike Houston with Lambert, MGP's Investor Relations firm. And joining me today 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 up 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, such as projections of sales, operating income, gross margin, and effective tax rate, as well as statements on the plans and objectives of the company's business and overall consumer and industry trends. The company's actual results could differ materially from any forward-looking statements made today due to a number of factors, including the risk factors described in the company's most recent annual report filed with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements made during the call. Additionally, this call will contain references to certain non-GAAP measures, which we believe are useful in evaluating the company's performance. Reconciliations of these measures to 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 on 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 March 31, 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. Our year is off to another strong start, and we remain encouraged by our continued momentum this quarter. During the first quarter, we achieved our second-best quarterly gross profit and adjusted EBITDA performance in company history. The results this quarter were second only to the first quarter of 2022, which represented a record for the company. The continued strength and value of our business model and long-term growth strategy underpinned our success this quarter. Consolidated sales for the first quarter of 2023 increased 3% to $201 million, while gross profit decreased 3% to $69.8 million, representing 34.7% of consolidated sales. In our Distilling Solutions segment, we achieved record sales of brown goods, resulting in an increase of 10% from the prior year period. The increase was driven primarily by strong new distillate customer commitments, higher pricing across all brown goods, and stronger-than-expected customer demand for spot purchases. In our branded spirits segment, revenue increased 2% for the quarter, while revenue for our Premium Plus price tier brands decreased 14% compared to the prior year quarter. As we mentioned during last quarter's earnings call, our branded spirits premium plus price tier revenue, primarily related to our Yellowstone brand was impacted during the quarter by higher-than-normal inventory levels at distributors. Excluding sales of our Yellowstone brand from current and prior year periods, premium plus brand revenues were up high single-digit percentages compared to the prior year. During the quarter, we completed a realignment of our national distribution capabilities with Republic National Distributing Company or RNDC. Associated with this realignment, we positioned inventory at additional RNDC distribution centers as part of the transition, which resulted in increased shipments primarily related to our mid and value brands toward the end of the first quarter. Turning to our Ingredient Solutions segment, the team has maintained a high level of execution and continues to optimize the product mix to benefit from broader consumer trends, including the shift toward plant-based diets. These continued efforts are reflected by the segment's sales growth of 10% and gross profit growth of more than $4 million during the quarter. Each of these figures represents another record for the segment. Looking at each segment in greater detail, sales for our distilling solutions segment increased 2% to $113.2 million during the quarter. Gross profit decreased to $33 million or 29.2% of segment sales. The decline in gross profit can primarily be attributed to higher input costs for white goods and industrial alcohol as well as our inability to pass through these costs due to excess supply of these products in the market. As expected, planned volume reductions for aged brown goods within the quarter also impacted gross profit, although this was partially offset by increased volume for new distillate and increased pricing across all brown goods. Sales of our premium beverage alcohol increased 2%, with continued strength in brown goods sales this quarter, supported by ongoing solid demand for our new distillate and aged whiskey. We remain confident that our significant share, scale advantage and our aging whiskey inventory position will continue to support the demand within the American whiskey category. We're pleased with the improvement in demand visibility and consistency that we achieved in brown goods as brown goods sales growth continues to outpace longer-term market trends, and is primarily driven by craft as well as multinational customers. In an effort to moderate the impact of increased input costs and excess supply available in the market for industrial alcohol and white goods, as discussed on our previous call, we reduced the volumes produced and sold of our industrial alcohol and white goods products during the first quarter to minimize the negative impact on our profitability. As a result, white goods sales for the quarter decreased by 21% and sales of our industrial alcohol products decreased 9%. As anticipated, industrial alcohol and white goods incurred negative gross margins for the quarter. On a combined basis, when compared to the prior year, industrial alcohol and white goods gross profit decreased $2.8 million, which was in line with our expectations. As stated in our last quarter call, we anticipate these headwinds to persist throughout the year. We continue to believe 2023 industrial alcohol in white goods gross profit dollars, on a combined basis for the full year will decline $4 million to $7 million compared to the prior year. We continue to explore further actions that can be taken with respect to our white goods and industrial alcohol products to minimize the headwinds associated with these products. Turning to branded spirits, segment sales for the first quarter increased 2% versus the prior year period to $56.9 million, driven by increased volume of our mid and value price tier brands resulting from the recent realignment of our national distribution capabilities toward the end of the first quarter, as well as increased pricing. Gross profit decreased slightly to $24.6 million or 43.2% of segment sales. The decline in gross profit can primarily be attributed to decreased shipments of the Yellowstone brand, as described earlier in the call. This was partially offset by the benefit of cycling through lower cost inventory at the start of the year. We anticipate the product mix of our overall branded spirits portfolio to normalize as we cycle through these dynamics over the balance of the year. Sales for our premium plus portfolio decreased by 14% compared to the prior year. As previously mentioned, the decline reflects cycling over a record quarter of premium plus sales last year, as distributors purchased more than expected resulting in a tough year-over-year comparison. We remain encouraged by the ongoing strength in demand for premium plus, American whiskey, and tequila brands, and we'll continue to invest in marketing support to achieve sustainable and profitable organic growth for our brands in these spirits categories. Turning to Ingredient Solutions, sales for the quarter increased 10% to $30.9 million while gross profit increased to $12.2 million or 39.5% of segment sales. The increase in sales was primarily driven by higher sales of specialty wheat proteins, as well as commodity protein and commodity wheat starches, as rising consumer demand for plant-based proteins and food products with lower net carbohydrates continue to gain popularity. Gross profit this quarter also benefited from cycling through lower cost inventory at the start of the year, driving the segment's gross margin higher. The momentum we continue to realize across our specialty ingredients products is driven by ongoing consumer demand for foods containing plant-based proteins and high fiber content. As we continue to align with these trends, the construction of the textured protein extrusion facility that we previously announced remains on schedule with an expected start date during the fourth quarter of 2023. Finally, I want to thank our team for their tremendous efforts and continued execution. Their ability to build on the momentum we generated in 2022 to meet consumer demand and align with long-term trends enabled us to deliver strong results in the first quarter. This concludes my initial remarks. Let me now turn things over to Brandon Gall for a review of the key metrics and numbers.

Thanks, Dave. For the first quarter of 2023, consolidated sales increased 3% to $201 million, as a result of increased sales in each of the reporting segments. Gross profit decreased 3% to $69.8 million representing 34.7% of sales. Advertising and promotion expenses for the first quarter increased $2.2 million, or 41%, to $7.7 million as compared to the first quarter of 2022. Of this amount, $7.1 million was invested against our Premium Plus branded spirits, which represented 13% of total branded spirits segment sales in the quarter. The increase is consistent with our premiumization strategy and reflects our continued effort to increase marketing spend on our higher-margin premium plus price tier brands. Corporate selling, general and administrative expenses for the quarter increased $4.3 million to $20.5 million as compared to the first quarter of 2022. The increase was primarily driven by planned personnel expenses as well as other miscellaneous expenses for the quarter. Operating income for the first quarter decreased 17% to $41.6 million, primarily due to the previously mentioned decrease in consolidated gross profit as well as higher but planned advertising and promotion and SG&A costs. Our corporate effective tax rate for the first quarter of 2023 was 23.7%, compared with 23% from the year-ago period. The slight increase in ETR was due primarily to lower state tax credits taken in the current year period. Net income for the first quarter decreased 17% to $31 million. Basic earnings per common share decreased to $1.40 per share from $1.69 per share. Diluted EPS decreased to $1.39 per share from $1.69 per share. Adjusted EBITDA for the quarter was $47.1 million, a 15% decrease from the year-ago period. The decrease was primarily driven by increased advertising and promotion, SG&A expenses, as well as gross profit declines year-over-year primarily in our distilling solutions segment. Turning to commodities, corn, wheat flour, rye, and natural gas represent our largest commodity expenses, and each continue to experience elevated prices throughout the first quarter. Relative to the prior year's first quarter, our input cost for corn increased 15%, wheat flour increased 8%, rye increased 61%, and natural gas increased 16%. Despite these elevated input costs, our risk management process and our focus on products that are premium and more specialty in nature have enabled us to mitigate the impact of inflation over the past several quarters in most of our product lines. Additionally, we enter any given year with the majority of commodities purchased against contracted volumes. However, for various reasons, we do not contract 100% of our sales. Furthermore, we did not experience any significant supply chain disruptions in the first quarter of 2023. Cash flow from operations was $5 million in the first quarter, down from $22.2 million in the first quarter of 2022. The reduction in cash flow from operations was driven by an increase in accounts receivable due to the timing of customer sales, lower net income for the quarter, and increases in inventory primarily our barrel distillate. Our balance sheet remains strong allowing us to continue to invest to grow. We remain well-capitalized with debt totaling $229.6 million and a cash position of $31.7 million. Turning to capital allocation, our approach which is focused on organic and acquisitive growth aligns well with our long-term strategy, as well as the underlying consumer trends our business is well positioned to leverage. We plan to continue to pursue M&A and conduct expansionary projects to accelerate growth and increase our capabilities and product offerings. In addition to M&A, laying down whiskey is another capital allocation priority for the company. Matching whiskey put away with growing future distilling solutions and branded spirits segment sales is critical to our long-term strategy. Our investment in inventory of aging whiskey increased $11.6 million at cost, as compared to the fourth quarter of 2022. Investing in CapEx to enhance our operational capabilities is another important capital allocation priority and resulted in capital expenditures of $9.8 million in the first quarter an increase of $4.8 million versus the prior year quarter. We continue to expect approximately $58 million in capital expenditures for the full year 2023, which we anticipate will be used for facility improvement and expansion such as our new textured protein extrusion facility in Atchison, Kansas, our distillation expansion at Lux Row Distillers in Bardstown, Kentucky, and the addition of whiskey barrel warehouses to support continued growth at our Lawrenceburg and Bardstown distilleries. These previously announced expansionary projects remain on track from a timing and cost perspective. Additionally, we plan to prioritize investments in facility subsidence projects as well as environmental health and safety projects. The Board of Directors authorized a quarterly dividend in the amount of $0.12 per share, which is payable on June 2 to stockholders of record as of May 19. The Board continues to view dividends as an important way to share the success of the company with stockholders. We remain deliberate and disciplined as we continue to evaluate M&A opportunities, invest in the put away of American whiskey, and conduct expansionary projects that accelerate growth and increase our capabilities and product offerings. And now, let me turn things back over to Dave for concluding remarks.

Thanks, Brandon. We are pleased with the solid results delivered this quarter, despite increased costs and broader macroeconomic uncertainty. Demand for our products in each of our three segments remains strong, and we believe our business continues to be well positioned. We expect to maintain a high level of operational execution and remain deliberate in our actions, as we navigate the market dynamics this year, which is why we are reconfirming our full-year fiscal 2023 guidance. We expect revenue to be in the range of $815 million to $835 million. Adjusted EBITDA is expected to be in the range of $178 million to $183 million and adjusted basic earnings per common share is expected to be in the range of $5.05 to $5.20 per share, with basic weighted average shares outstanding expected to be approximately $22.2 million at year-end. At MGP, our commitment to sustainable development is underpinned by a core value, respect for people and nature. We take great pride in our craft and refuse to settle for anything less than exceptional, which is why we embarked on the difficult but important work to establish an ESG strategy that would help hold ourselves accountable in all areas of our business and operations. As a result, we are proud to announce that we released our inaugural sustainability report for calendar year 2022 earlier this April. This follows the comprehensive ESG materiality assessment we completed last year to better align our priorities with those of our stakeholders. This work ensures we are focusing our time and resources on the areas that matter most and help us to establish the four main pillars of our ESG strategy: people, planet, products, and process. Our approach to ESG is based on a commitment to a culture of continuous improvement, in which our stockholders, employees, and the communities where we operate, all benefit from a business platform based on sustainable growth. While we are early in our sustainability journey, we are proud of the progress we have made to date, and our progress on other ESG initiatives. This report is available for download under the Sustainability section of our website. We remain committed to leveraging the solid foundation we have established over the years, with the ongoing objective of delivering sustainable long-term value for our stockholders. 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. The first question comes from Bill Chappell with Truist Securities. Please go ahead.

Thanks. Good morning.

Good morning, Bill.

I know it's early in the year, but everything seems to be going according to plan. I'm wondering why you decided not to change the full year guidance. Are you seeing any developments in the industrial sector that give you concern for the next few quarters, or is it just a typical early year outlook?

Yes, Bill, it's the latter. It's early in the year. And as you know, following us for a while now, one quarter does not make a year, but we do not see at this point any major red flags for the balance of the year. It's primarily just related to the timing within the year.

And with that I guess on the brown side, I mean, I know you have that scheduled out, but was there any for lack of better terms pull forward of sales in 1Q that will take away from 2Q, or was that largely in line with your plan?

Yes. I mean, it was largely in line with our plan. I think towards the end of the quarter, we had a little bit of stock purchases come in that we weren't anticipating, but overall, very close to being in line with our expectations for the quarter.

Got it. And then one last for me. On the food ingredient side, industrial-grade side, we certainly hear you read about some softness or some I guess slowing demand for plant-based protein type products, be it Beyond Meat or Impossible or others. Are you seeing that in your customers? I know you don't have a whole lot of finished products, but I mean in terms of customer demand? And does that give you any pause on the new extrusion plant that's being built?

Yes. I mean, the majority of our ingredients are specialty wheat proteins and starches that are sold into the bakery channel, for baked goods, snacking, and pasta. So, quite a bit of a different customer set or base still versus like the Impossible Foods, if you will. On the ProTerra side of things, which is our texturized protein that's also a different product format than what some of the Beyond Meat or Impossible Foods product lines and the consumers are targeting. Our ProTerra is more of a shelf-stable texturized protein that can be utilized in a number of finished products, whether it's meat alternatives or enhancing the protein in other food products. So, I would say that we're probably seeing a little softness in that market versus what we had anticipated, but not near kind of what the trends you're seeing in the Beyond Meat and Impossible food-type product lines.

Got it. Thanks for the clarification.

You bet.

The next question is from Vivian Azer with TD Cowen. Please go ahead.

Hi, thank you. Good morning. I was hoping to just start by following up on Bill's question or your response to it in terms of the spot market coming in a little bit better than you expected. Can you comment at all around kind of how the pricing has evolved for your spot offerings? I recognize maybe some of that is competitively sensitive, but any incremental color there would be helpful.

Yes. I think pricing, Vivien has remained very strong on both, new distillate and aged. Obviously, with our contracted volumes, we have very good pricing there. And on the spot market, we're seeing the pricing stay very firm.

It's great to hear that. For my follow-up, I would like to ask about inventories. I appreciate the additional insight into what your top line would have looked like without Yellowstone. Can you share your thoughts on how comfortable your wholesalers are with their inventory levels? As we’ve progressed through earnings season, there's been noticeable caution around the US consumer, which aligns with your commentary. I'm curious about your wholesalers' current comfort level with inventories, as well as your own comfort with your inventories. Thank you.

Yes. I think in general, I'd say that the distributors may be hearing a little more inventory at this point than normal. However, kind of the other thing that I think, we're anticipating at the distributor level is with interest rates continuing to rise, and at the level they are now. It wouldn't surprise us if some of the distributors maybe carried less inventory going forward because their carrying costs are going to be significantly higher than they were even a year ago. But that's kind of a different issue than the demand side of the equation really to inventory, Vivien. But those are a couple of our observations in the market right now.

That's a really interesting consideration to call out. Is that factored into your full year guidance?

It is at this point, yes.

The next question is from Marc Torrente of Wells Fargo. Please go ahead.

Hey good morning. Thank you for taking my questions. First, Brandon's margins were quite strong even with the mix headwind which you communicated could happen given the comp, right? Ultra was down 28%, super premium down 3%. And then also record gross margins in Ingredient Solutions by far and well ahead of the sort of 30% bar. Maybe just a little more color on puts and takes on both of these. You called out cycling lower inventory costs. Anything else driving this? And then go-forward outlook from here?

Thanks for your question, Marc. This is Brandon. Yes, total company gross margins were 34.7% in the quarter, which is the second best only to the first quarter of last year. We benefited from using lower cost inventory that was on hand at the end of the year, especially in Ingredient Solutions and branded spirits. The gross margin was also positively impacted by a decrease in sales of white goods and industrial alcohol. Looking ahead, we anticipate continued margin growth year-over-year. For Q2, Q3, and Q4, we expect gross margins in all our segments to be equal to or slightly above last year's levels.

Okay. Great. And then the realignment with your distributor, what does that process look like? Is that fully complete? Did that have any impact to Q1 or Q2 on shipment timing or product availability of the channel?

We discussed this earlier, Mark. We initiated the process at the end of the first quarter, which did affect the volume of mid and value brands that we shipped. This is a realignment rather than an expansion. When transitioning from one distributor to another, there's an initial need to transfer products to the new distributors' distribution centers, resulting in a short-term advantage. This was what we observed at the end of the first quarter, mainly concerning our mid and value brands. However, it ultimately balances out because the new distributor purchases the inventory from the previous distributor in those regions. So, while we see a temporary increase, it becomes neutral from a sales standpoint as the year progresses. We're still finalizing this transition, but the initial changes and their associated processes are almost complete as we move through the second quarter.

Okay. Great. And then just lastly on the Branded side, maybe talk about some of the new launches and initiatives you have going on this year, the phasing of that growth? And how we should think about margin progression through the year both as mix improves and advertising support ramps?

Yeah. I mean, we've got a number of innovative items that will be launched this year. The Yellowstone Single Malt was launched earlier in the year and then we have some new expressions of existing brands that will be coming out as the year goes on, as well as continued evolution of our single barrel programs associated with certain brands. As Brandon mentioned, our gross margins for Branded Spirits in the first quarter were a bit elevated due to the kind of the one-time benefit of the lower inventory cost that we cycled over at the start of the quarter. But we do anticipate for the full year, a bit of gross margin expansion for the Branded Spirits segment versus the prior year.

Thanks guys.

You bet.

The next question is from Sean McGowan of Roth MKM Partners. Please go ahead.

Thank you, guys. Good morning.

Good morning.

Question on inventory, would you expect inventory levels to stay somewhat elevated in relation to sales as the year progresses, or will that be worked down to kind of be more in line with the sales growth at the end of the year?

That's our expectation. We believe that as the year continues, considering the carrying costs in the current interest rate environment, inventory levels will align closely with completions, which is how the industry ideally operates. We anticipate that as the year unfolds, inventories will normalize accordingly.

Okay. And then, my follow-up is on the ingredients gross margin. Have we seen the full effect of that lower cost inventory, or could that linger beyond the first quarter?

Yeah. Thanks for the question, Sean. We have seen the full effect of that play out in Q1. As the year goes on we expect to see continued expansion in gross margins slightly above where we finished prior year which is in the mid-upper 20s. So, we're not going to see that full effect in subsequent quarters but we do expect all else things being held equal to continue to show expansion.

All right. Thank you very much.

The next question is from Gerald Pascarelli with Wedbush Securities. Please go ahead.

Hi. Good morning. Thanks very much for the question. First one is just a housekeeping question. So just on the distributor realignment to RNDC when we look at the P&L, should we expect any incremental termination fees or anything that might impact your operating expenses maybe than it would have had you not realigned, or is this fair to assume like status quo from here?

Yeah. I think it's fair to assume status quo Gerald. We do not anticipate any significant expenses related to the transition.

Got it. And then just on Branded Spirits a lot of my questions have been answered, but just understanding that you're going to continue to invest behind your brands over the course of this year. Any type of color you could provide on a cadence of your marketing spend, if there's any one quarter where you think you're going to spend more or less just for us to be mindful of. Thank you.

Thank you for the question. We expect that as the year progresses, particularly closer to the holidays and during the fall, there will be an increase in demand for American Whiskey and Bourbon. Consequently, we anticipate that our marketing and promotional spending to enhance brand awareness, encourage trial, and drive sales will be relatively higher during those months and quarters.

Perfect. Thanks very much guys.

The next question is from Ben Klieve of Lake Street. Please go ahead.

Hi. Thanks for taking my question. I wanted to ask kind of a high-level question Brandon you noted the flexibility that you have and the ability to invest in growth really kind of across the board. I'm hoping you can kind of provide a bit of an update on how your thought process has evolved over the last couple of quarters as all the macro dynamics that have been discussed here have evolved. Given the backdrop across all three of your segments, are there aspects of growth that you guys think are increasingly compelling or increasingly uninteresting as macro conditions have evolved here? And any color you can provide behind that would be helpful.

Yes, thank you for the question. Our primary investment priorities remain focused on mergers and acquisitions, the inventory storage of aging whiskey, and our capital expenditure plans. M&A continues to be a top priority for the company, particularly in the branded spirits segment where we are looking at margin-accretive brands in growing categories. We also see significant international opportunities to expand our brand spirits portfolio beyond the United States. Regarding whiskey inventory, we put away more than $10 million this quarter, which is impressive considering it coincides with a record sales quarter, showing a 10% increase from last year. This effort supports our continuous improvement initiatives to meet customer and brand demands for whiskey, as well as to prepare for future growth. Lastly, in terms of capital expenditures, we see great investment opportunities across all three segments. We expect our TruTex facility in partnership with ProTerra to launch in the fourth quarter, which offers considerable potential. Additionally, we are increasing distillation capacity at our Lux Row Distillers facility in Kentucky and will continue to invest in warehouses for aging whiskey products to support growth for both our customers and our own brands.

Very helpful. Thanks Brandon. Congratulations on a really solid start to the year and I’ll get back in line.

Thank you, Ben.

The next question is from Mitch Pinheiro of Sturdivant & Company. Please go ahead.

Yes. Good morning. Most of my questions have already been addressed. Following up on the barrel distillate question, was there an increase in inventory costs? It's up $10 million, but some of that increase is related to the higher cost embedded in the units.

Yes, you're correct, Mitch.

And what would that higher cost be? Is it 20% higher than…

Yes. So we shared that our main commodities were up year-over-year. As it relates to a barrel of distillate corn is a big component there, corn is up 15% in the quarter. Rye is another big component of our match build for American whiskey that was up over 60%. But American whiskey on a bulk basis to our customers for new distillate and aged, given its specialty sure through higher price and a higher margin, we are able to pass through this cost as seen in probably some of our gross margin numbers historically as our brown goods grow rise. So relative to other product lines such as industrial alcohol and white goods, it's not the concern there.

Okay. Would you expect the barrel distillate at year-end to be higher or lower from current levels?

Yes. We're still investing for growth, Mitch. And so just to be clear, and I think a lot of us are aware of this but our put away is not only to sell it as bulk sales later on to our distilling solutions customers but also for our own brands. And we see good growth in both areas. And so we expect over time over the course of the year for the inventory level to continue being added to.

Okay. And then when it comes to the Ingredient Solutions side volume was down 12%. What is that just a tough comp from last year?

Yeah. That's right Mitch. Tough for comp, but we were able to get price and really return a really strong quarter which is evident in 10% sales growth and also 50% gross profit growth. Additionally, it's also a record for the segment for gross margin percent.

Is the pricing at all having any elasticity impact or because it's sort of a needed sort of ingredient in your customers' end product that it's just accepted.

Yeah. It's the latter. It's accepted. As we've shared our relationships with our customers are very important and very close and long-lasting and as a result pretty sticky. One issue that we have seen has to do more with exchange rates around the world. The ingredient segment business is more of an international business relative to our other two and we have seen a little bit of issue with some of those customers just given the relative strength of the dollar in some instances. But all in all, given the third quarter and kind of how that segment is positioned we feel really good about the performance.

Okay. And then just a final question on the premium beverage alcohol. With the distributor transition and the Yellowstone inventory, specifically regarding branded spirits, are we expecting a flat volume in Q2, or will it continue at a high single-digit level?

Yeah. No, we're expecting to continue from a sales perspective low single-digits level. As we discussed, the portfolio of our Branded Spirits segment is pretty representative of total distilled spirits which in the Premium Plus recent trends have been growing. But with mid and value they've actually been declining as consumers drink less but better. So as a result we're pretty consistent in that the top line or even the volume isn't necessarily the right indicator for that segment as much as it is the premium plus sales and gross margin percent that we're getting and expanding in this segment.

Okay. So the Yellowstone has sort of leveled itself in terms of inventory you'll see sort of normal purchasing behavior after that?

Yeah. I think once we cycle through that more fully which I think we'd anticipate that will all play out through the end of Q2 here. We would then expect to see basically shipments match depletions on Yellowstone.

Okay. Thank you. That's all I have.

Thanks, Mitch.

Thanks, Mitch.

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

Thank you for your interest in our company and for joining us today for our first-quarter earnings call. We look forward to talking with you again after the second quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.