Eastside Distilling (EAST) 31 Mar 232022 Q4 Earnings call transcript

Good day everyone and welcome to the Eastside Distilling Fourth Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Amy Brassard, Corporate Secretary. ahead. go Please

Corporate afternoon, today Good the thank for Brassard, you quarter moderator be Thank today's for discuss everyone. Eastside us call. Eastside's Amy I'm to year-end for and Distilling's joining I'll and your you. XXXX. And Secretary, financial fourth results

and Mr. Chief Milton, and on Officer; Chief today's are Ms. discuss Bruce Commercial company's Tiffany the Mr. Amy these to us Gwin, Craft's Controller; Chief Eastside's Officer; [ph] Financial Eastside's Ms. Joining results Lancer, Controller. call Geoffrey Wells, Executive Officer

Following your their call remarks, we will open questions. the to

anticipates, planned, materially of that or differ Reform cautioned from that as of risks describe those results plans, may, could expectations, subject words are of Now of forward-looking for plan in Distilling today Eastside such forward-looking before such and are harbor Listeners by matters to strategies are by following the we discussed to begin projected projected. forward-looking of The and uncertainties amended, or events record cause Certain Exchange meaning provisions of management Private future, are may Securities as with or of Securities statements a statements. results prepared the be to XXA remarks, Section statements And Litigation future we of statement. or call generally expected, multitude such the of the or XXXX statements amended. should, the the safe Act forward-looking future submit on the preceded XXXX. draft, statements Act XXXX Act conference eventually the made pursuant the the the will within as XXE Section Securities circumstances,

and acquired in but plans, to, may business risks materially the ability model going Company's strategic and in market, described report results to Exchange success obtaining not and its from to customers, integrating time December ability XX, in the continue information concern filed products annual and and success uncertainties execute filings product obtain XX-K risks Commission. on and the time Commission, ended assets, Securities Exchange including the capital, for limited Form statements all matters to entities ability with the with to are actual the Company's pertaining and new of to the XXXX, differ cause related in information the Company's development, financial Securities the related the acceptance year involve success Such that the to Company's and and include, in

I'd Geoffrey that with call proceed. Now said, Gwin, to like turn to Geoffrey, please over the

fourth the call. CFO, company. XXXX interest Eastside's conference our Geoffrey your quarter to I'm Gwin, earnings Welcome and and Interim in CEO appreciate

Craft, transformational that Distilling. last was of business is for is The year very we most services our from business. prior. obvious XXXX beverage The Eastside change different or a that year today the have year

we doesn't use design segment built the decorating began everyone Last this a and -- Oregon. shrink sticker out call, can is Portland, in the year, state-of-the-art directed to can past Pacific is To remind new labels. operating on facility extraordinary only digital digital us Northwest. for and XXX% allows or the Craft create plastic in printing operation sleeves beverage plant that can recyclable This the

space. believe, this believe producing been now them. we seeing past our will I've for are I tool now. that And a this marketing proof for tools that customers. important technology, the It's are quarters I transform we cans for stating three beverage critical The the are craft

capabilities they're and at fully XXX% technology, We embraced of many recyclable customers. customer retail. base successfully this Moreover, our nearly using watched we've product, to new really customers all this our of have we've and of number existing as the won new converted a it have

had up Craft it's past a for the over new followed it. We've undertaking. I And a the steep technology; through investment to we you we to ramp-up been product; about projected and new brand-new new faster us. curve huge running a the get build a learning to ability initially, year, It's has past few new huge but been processes. in if quarters impacted a a new getting market full it's capacity, had team, Company year. mean, at Now, plant, to our faced install build a challenge. last this think that scale It's

had in were to our ability other looking performance that XXXX, was among that capacity printing many that as challenging achieve while the we for. has fourth to issues improved were address Now, quarter inhibiting particularly debottlenecking we full

current category, a the not in us gave improve meant printing, our it to achieving that quarter. but chance in Seasonal the in capacity core of and set, our part beer customer the full slowness a fourth quarter processes

So processes in faced, our credit on of We we quarter. challenge team. we that always thing you we the gross the the fourth in solution same our and year, And serve quarter, in during had improved margin though, the negative and the impact that the a the see we customers. sorted can out to numbers. Each always, a did the

we XXXX, the better. I the quarter be our say here sit first on as can of performance will this much now Now last of quarter day

in we've seen month, And alone Although X over and in improvement we February started us. out the this well very of for year, sequential coming January record we March, printed cans January, a million March. low,

year, also and now me there turn But a expect a we've quarter first performance well. our number this of In better to the of improvements spirits in let as mobile, and fourth part we business. made the

to decision all the channels a retail we Like adequate to its in would have be where return on Craft reposition make investment spending. Azuñia did our XXXX, made an able own hard in challenges, we brand Tequilas very

of Now, distribution exiting where a money. losing deals number this we were meant effectively

that we at saw on quarter of time, quarter. in So same volumes they our doing in decline, working the each partnerships last our fourth all focus continued states. But distribution year, the are we improving and

the the hard it's volume, for from away do, long-term of critical was to this but Company. it walking success Now,

an Azuñia a this completed Potato in allow Vodkas year. Azuñia this shift overinvestment completes in that balanced investment have us brands. with portfolio approach first more our other place the of we took in Burnside, and Portland restructuring a actions of opportunity leverage both to from realignment the to this in quarter big And Now

written large In that we've the portion addition, down goodwill of the see a we associated acquisition. with Azuñia

disciplined cost across We target continue exactly brand the we portfolio to our invest attractive capital, is and to look lacked given our scarce in past. this our of And the the segments have capital. approach most high

stay And so, to at it. we're going

is brand. quarter. and Overinvestment in our in improvements. Azuñia has assured, will to underinvestment That reflected their volume performance be increasing there rest meant Oregon in we expect portfolio the we the in Oregon fourth the investment in underinvestment significant But an in see XXXX,

on I've I many And solution is want lot an year. of one December, early year, to you the questions all company not I the consider frustration in not date. And or a wrapping that to bought many those all. been We option I answer of we updating sale heard anticipate the this performance be the the we every all Now, assure complete on that's stakeholders. put myself know Board brands, we of Company, for over course the unlock that process share spirit through of along In to while that believe shortly. And will a up do you process will you, table that in the process completed. all position a topic last potential our today, can in lines, and any gone has be will stock, a once that immediate made the value that general too I'm of frustration. to expressing and the I instructed that you we

would give to I some from guidance you take Now, moment, through to on expect will in you a this like year-end us Tiffany results what our year. rough but first

third both the spirit a be We EBITDA will spirits by likely than for mark that and and Craft sooner positive have set the business to hit craft goal spirits. quarter. --

expect volumes due spirits investment. our printing craft We growth trends improving in digital and to strong in

believe not have achieve place. it it. has will a and we but achieve, Board in easy thorough be goals. The together, we And goals have will we put it, These to plan through execute I these if we approved

more Tiffany, we cover call some can get into I'll to questions. And With will over that turn then said, the who details.

Geoff, again for all today. our you thank you, call joining and Thank

the review quarter. fourth Let's

of mobile and some in can $X.X and 'XX for were challenges Azuñia unexpected discounting the sales. 'XX, our continued basis, printing we $X.X a volume in consolidated million were as compared quarter fourth canning. our sales during reflecting Craft to quarter we On holidays. And the had $X soft reduced for 'XX for softness due gross million were 'XX to to almost 'XX, sales million Spirit fourth $X.X compared for sales million $X.X million over for 'XX. for million the experienced seasonality $X of in holiday

QX QX was $XXX,XXX 'XX for to compared XXXX. profit gross consolidated Our negative positive $XXX,XXX for

for 'XX. to had build of as positive are as 'XX. and Our consolidated earlier. and XX% XX% to Craft XX% were negative negative craft gross Geoff X% margins 'XX improve for XX% for 'XX, margins for Spirits cans, XX% 'XX and volume margins mentioned for for and positive 'XX expected margins continue were of we printed

'XX 'XX due for in million for continued $X.X both negative businesses. million $X.X and to negative was the EBITDA Adjusted softness

we Azuñia of In recorded our million. to impairment an addition, loss $X.X related brand

down of quarter We $X a Turning fourth to the balance net with to ending of fully pay $XXX,XXX sheet. we loans all which debt, we repaid at cash almost raised continue as during the million XXXX, of craft.

reestablished craft, financial but during to on volume we've customers. believe and printed in At now mobile only we spirits focusing we we ourselves we profitable eliminated we X not are are deliver, were These our million and with distributors. as cans results positioned March, expected what unprofitable better

We remainder outstanding the the about of of year. printer are for the the growth excited

are better apparent restructuring we businesses, coming will both said, more in of from Geoff results As expecting be the which quarters. also continued

We floor will Operator? now for open the questions.

comes Please first from Instructions] [Operator Private a Watson, ahead. question go James Our Investor.

three, you EBITDA looking was It's XX%. positive roughly full EBITDA not I wrong. if margin. adjusted year's I'm heard And quarter negative are correctly, the a we by targeting at if I

gives we be will confidence a be big to the breakeven What reach one quite swing us a the So there? will level. that

Sure.

a enough fact the before, operation, super that's So, small, filling saw transitioned craft. new you had in you at a ramp-up customers is look a I a the a the we quarter, which we think call, can my quarter. point get business you've pretty are there of mean, past, canning canning remarks is in that's that and a do I brewery having then where gross we've plant converted Pacific a the the as cans less function seen there. XXX% fourth on And for of to And to people really does I a high-quality, it's and fill mini graphic too. of miss this any our Northwest cans in in plant in Company. pick business, But the the mobile different mobile digital in the printing. not went need printing than a big basically the line We way big having from high-end completely what that only you fourth business digital you to we've than And that to by we the the also margin year. a the didn't than that less in year, referenced

buying And add a a now going customers that, year. cans from and few ramp have who million a you lot up to beyond are more

different the a year. where a we're in we're now million buying cans We're in XX-plus game So game.

I'm it's this get to the million. it over point we're just So, -- printing cans us And close to month, getting doing number we to what three think were X.X things: X.X EBITDA actually the the number, was business mobile month. a a will positive is where I correct million sorry, that to digital

and to to it number depends then and that that and is written source a north because you're number, in hit through at else heading And we of number in it's we're suffice that Now going we on kind there. something see number. EBITDA what say, of what base spirits, and is to. stone craft. that how the But happen We're going cans and moving number positive customer it that's cans not -- in margins generating

we've is And a we've We've really in restructuring by we of turn restructuring And And half. EBITDA. -- headcount production done focused business our quite bit the that spirits. significantly, You'll corporate generate on to the that, to be brands. sales the believe with workforce last our going see reduced some then that's going of around core significantly, and in pretty piece. shrunk also portfolio

the businesses. there. there's plan So, is are I multiple lot the confidence we're a But complicated to is since have business a of size going it This teams get in the focused, for is place.

much to then confidence We But couple this have fully we're to of a I in in. our year and locked a do way things on that every have left spirits we're year. better

follow Canning, Yes. to the gross profit negative I a if just I margin margin at gross because four it's wanted quarter think we for profit look up, been as for Craft well.

be when about at right, happen? to Because not positive to wanting gross breakeven, talk So, addressing how we that point. this we is margins any are going

generating fixed you you enough absorb on expense. a we we're and gross we it's have in to going, that in right? to of place, get fixed large and In year before, function saw a losses enough point Oregon machine the you customers up lease team, a printing have the you putting payment, that right, have cost. staff, that in a that That's facility, to because you team mission didn't the dollars then And the have that a that a support -- and are that us scramble margin have craft get where

out you right, business, supply So, he's goes he back more to to taken disappoint the old you customer, label. come a his goes Or unless right? of for chain back once and going from he and decoration, labels can sell that he's traditional away

We that had haven't happen. any of

utilization to adding building, you gross this slowly the grow change. volume getting on of overhead and the machine, the new we're means up. there, So, loading margin customers, then the see customers onboarding start that dollars the as margin absorb And craft, we're

to margins be where off forward. year is the is statically to this going way this be So [ph] going the looking going window, rear at in

through self-finance great Got it. a positive it's until we get EBITDA know to And I ourselves question that are million quarter, achieving assuming year. My $X also, to $X that how is, a thing think we we we Because we to about level? $X kind perhaps losing million this are us are become going to $X to of we breakeven. until need million about to million take

your are thoughts So what around it?

interesting Well, that us. couple of there's a for going have we things

On is flow. the the free not one cash EBITDA hand, -- we as same

a large and today have more than inventory, We need. we barrel barrels we have

the have bottle it so, vodka, a But selling And sell don't when have and bourbon, go actually in case rebuild raw we material. and replacement we to that of we of to we it. don’t we're

and doing. unless CapEx, which a we cash flow turn lot than a spirits money bigger free on So the is stick of number in on EBITDA, not spend we're

So, that to the sheet. Company. of balance high rationalized Company whiskey very craft. think executed as advantage the year thing And not have other we taking about value, of reflected last of helps that high did survive how in build-out you we the And things prices is the that We've today. that our front throughout really we on with are

So I ways we those think it. can are do some

helped admit, obviously accelerate haven't just caps be are once we the get that, us as And was first equity not said could to markets move faster. year, investment opportunities that Micro hoping we a be years having few they Now would another ago. that I'll the were machine a growth beloved last position I at in there.

So situation that it's hopeful first in believe like be want the if quarter I some degree. growing but the second that feels to crystal we first But this we perform, have multiple where perform and quarter. then a be pursue second -- closed to the we're here is really better to the quarter to than that and And if I'm I avenues to just window -- clear, going Company. going is

back like question-and-answer to session. This I the Geoffrey any [Operator for conference over closing to concludes turn Gwin our would remarks. Instructions]

Yes.

because year excited I excited I'm and a much you. of business see they've I spirits can sides super seeing what businesses on amount of spirits and of I'm to a going both our really craft. in plan team the going investment in am looking heading at this is accomplished to us ahead a our also direction. improved the But both about think services, So, -- thank how to Oregon. we've perform take printing and in a place made craft business to both business architecting beverage that's better much our here, tremendous

So, thank forward and for the you the you to shortly here today, we first talking to look in time quarter.

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

You disconnect. all may now