Eastside Distilling (EAST) 15 May 232023 Q1 Earnings call transcript

Good day, and welcome to the Eastside Distilling First Quarter 2023 Financial Results 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, this event is being recorded.

I would now like to turn the conference over to Amy Lancer, Chief Commercial Officer. ahead. go Please

Commercial afternoon, today Good the thank for Eastside's you quarter Thank discuss everyone, Eastside us Chief Lancer, Amy to XXXX. for Distilling's joining of you. I'm and Officer. financial first results

Joining Financial Mr. Chief Gwin, are these Geoffrey Wells, Tiffany Ms. today's Milton, us and and the Chief Craft’s Mr. call Bruce on Officer discuss results to Executive Officer; Company's Eastside’s Controller; Controller.

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

record, Eastside the and following prepared the Litigation call Reform Section within of remarks, be of as the Securities XXA we Securities matters Exchange XXXX safe the Section Act Now, on statements. are forward-looking of Private XXXX. of of the XXE before we discussed for Certain begin of with by submit made pursuant forward-looking harbor such the Distilling statements as statements the provisions to Act amended, this conference amended, meaning management the of Act Securities of XXXX may

statements plans, The Listeners or are such plan future, describe strategies expected, projected. draft, as may, eventually by and results generally anticipates, or preceded or or words forward-looking should, will expectations, plans, future multitude cautioned differ projected cause are are statements to risks forward-looking statements. results subject the could in such uncertainties and materially that future a or that events those circumstances, of to from

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

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

joining made for to progress first today. quarter. during all call I'm you pleased first announce the quarter great Thank we the

Let's performances then review talk at finally, gave consolidated and the just our about a guidance call. two we businesses’ ago weeks and individual look few the results year-end on the

the in we craft, now you section MD&A will information of our XX-Q, the segment out As see XX-Q. breaking corporate and are from results on spirits

Q So the turn can and front if have get we section you, you the in of with segment to started. then me information

have quarter. is sales and as printing XX% more digital our canning business printing growth saw strong up businesses, significantly. That Craft, digital in year-over-year reported which mobile than the revenue increased

line strong what's holidays. However, the sequential we that after quarter. is start despite the achieved growth beyond the We strong month encouraging of these slow each results top the had

printing March’s twice sales of fact, January. In that were

those undergone we call weighed restructuring including across on actions As businesses, on a and few discussed in the all have craft, ago, we results mobile. weeks some

Now we March, does by two. quarter gross utilization margins, saw quarter, strong for we in craft’s be profit driven not lower the current to reported quarter and where performance expect In rates. the scrap gross improvements in reflect higher

production of business can printing our summary, has improved and efficiency. digital significantly In its rate

year. growth We expect throughout strong the sales

will we craft are guidance maintaining QX, EBITDA. our report for that Now positive

number last talked high the margins wholesale the about barrel in in due Volumes sold but over our of year. quarters. year-over-year of sales. The last net spirits lower sold, gross of spirits because cases generated about value this were we've barrels barrel Now we quarter business. year flat sales. these which because inventory, to than of lower million are a quarter inventory we more bulk this the bulk year-over-year. we And reflects And XXX let's that this abnormally the were but over first quite we margins did income largely talk $X.X kept Spirits gross sales the in bit we the year-over-year, of

it's remember, the we've distribution brands and this entire Now, important calls, of we've last channels. over exited we the portfolio price increases of unprofitable said have taken to and number across also

last Now, but those affected us they progress. significant headwinds. year, made all are And we've

lower costs year. to make the sales and the to we our production expect there throughout took quarter, During restructuring incremental actions improvements and

and volume So for on calendar, moving second QX, an And into for see we that spirits, have for this our to we're report our we'll quarter will improvements. important promotional as expect call. quarter be more

by progress year. Lastly, operating expenses last made X a cutting our over corporate third we

summary, generate all And cost for board. So EBITDA. we've a happen positive improving Company improving. the a lead will helped milestone spirits, the long in corporate expect for performance this Craft, company, us overhead can our us we year. the a in position are of These improvements set waiting been consolidate That's growth, which the we that to across will all later eventually cost for. I where public foundation

So good weaker start, against to it's fighting although a off early, a we're economic environment, is I am but QX and optimistic.

but Company's leave in thoughts. more the through to with you take will few like some you detail, performance I'd Tiffany a Now, more

have out. our it we of With a The with the company. risks number growth. In is XX-K, invest a associated the highlighted this for operations, of a NASDAQ-listed we critical accelerate remain improvement is specific to to opportunity and us and determined real this, called statement we've risk has Board in that one

for We that: announced us a that allow that are tangible we reverse stock split specific care and take issue. the week will Last two the of Board net share price worth. of approved had to first issues with compliance out

issue be Tiffany the actively to your I'll to quarter. details tangible are deadline. the more on on the We gives of answer worth questions net working second NASDAQ addressing happy prior after us

over it and Tiffany get to some turn Tiffany? let's now, specifics. But

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

first review quarter. Let's the

$X.X sales ‘XX, barrel to our basis, for $X.X million Craft of to can sales, 'XX and last gross as 'XX for are changes first capacity. in $XXX,XXX to million which million seeing first consolidated $X.X Spirits sales, digital were were for totaled compared gain compared due versus for due continues $X.X as ‘XX multiple it $X.X quarter for we bulk printing to $XXX,XXX from primarily million the in quarter finally in million 'XX orders 'XX. sales a 'XX for the traction On 'XX year. excluding $X.X of distributor million to initial were

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

to XXXX. negative X% negative improved for margins margins and of consolidated consolidated volume margins printed XXXX as Our sequentially we X% 'XX. XX% XX% Spirits basis Craft had for XXXX. XX% gross and 'XX QX cans. were margins of for Craft were for for for a build continued 'XX through XX% on and

EBITDA margins XX% for million XXXX. XX% expenses. and to decreased negative primarily Adjusted was spirits were and sales, 'XX 'XX negative $X operating for for barrel Excluding $XXX,XXX for XXXX, due

digital of are as have a we XXXX continued to the which quarterly expenses the growth results improved remainder of the have beginning excited the of QX significantly basis on as since see to Our printer, strength sequentially operating see we and can for year. reduced are

quarters. restructuring both our better QX We and more for XXXX this are businesses, beginning also results of to the become apparent will see coming in

floor now open questions. the Operator? will for We

go come Sean Our from [Operator of ahead. McGowan MKM. today question Roth will first Instructions] Please

we of that A day. prior breakout questions. are for Good it's that going you. able can we figures a set going comparable to Thank shows comparable great But Are so periods to see full -- be of get couple to numbers? corporate. that we to have

Yes.

section, -- that's MD&A that we've D&O, just understand with something Corporate one I to year, to is. to you a very I businesses. while, really and is think like those corporate. public two out highlight a go company and costs, we working the -- be myself, Sean. had so Tiffany, So, questions that is now section, been we added into we if the businesses third so for cost report different year, profitable better wanted each how includes a everybody things wants clear, real is And we see this of I what public started you -- could XX-Q, the craft, segment this company, into the you mean, spirits our business go people breaking this, that. on that understand Last of the because

and can kind go back something it. a There's give and we we try consolidated of on with see Tiffany if can work you you that So, you with we've together you I some guidance. is follow can that so that get that, to of something put information -- this and here, lot

That's helpful.

what and but all terms margin could bit, craft, great how to at we been and see the guess, that to ahead scale? great margins bound going to the just second talking of I've where expect what's gross it's myself I to of the about percentage profit and and assuming upper What on be of volume machine, as maybe on you little it's gross is absorption that sales? a Now existing increase, the the what is a not calls limit getting of we can gross could everything improvement. be? of high in sort listening be could humming that of of really have sort upper and the see machine, If but

to customers new printing. And not of on is part been that a mean, I get big that's take is And customers question. I customers part. a to it been Great depends we're all happen. to the our take Right. hard hard up that's the now, really mean, mobile what to there. had printing seeing We've Right happens answer that our mix only. -- I number -- that's an core our and customers honest don't digital in know. up

and SKU to the the type it offer are crappy can't end can start away imperative. really and going you having to that seen And of change. Some with you've happening you see at today markets can, end it's are need into and market services when with cans, by compete that sleek all other is beverages the the So, in in labeling. because printing and business, what's But that craft by right? digital margins sleek specialty the can you of mix get we that day,

machine single breakeven with absorbing I'm this alluded cost degree facility into So, this. machine get first profitability high high goes to the with margin If to you tell you on of second fixed the that goes question, volume because but changes up and you two the to plan business second between one gross trying growth facility, are we would execute the that is a our lower. as humming our of high the machines there's on And fixed this, in of dramatically and then the a single not cost, I you're machine a able type can second value the machine with dramatically the going up do along. all machine strategy value of the and avoid and

our use digital printing And be Pacific Seattle Northwest craft leader starting and can in is at So, market beverage for Portland we're think leader we this machines. X a in easily our think customers. our see space. is retail to the market a tool critical I

there's keep just think Because to back going with put one we start these keep up looks And I the through machine, should end and can pan point rate for get a as see the sales, but able a at final like. next lot really that this know and to circle that a picture we good So, how throughput going to we're margin the margins out to of cans a into We real will chain of footprint. if we see, quarters volume I'll what be machine need proxy going so. high by this. couple it, the keep the the gross we're supply then on and

QX say. what QX, is I'd So

split Okay. point May that is that And right? one clarification to be All of XXth. Is reverse right. a Thanks. supposed

a is was back trading today to good I have what That timing but it on a to exactly question. see that… get the -- you we'll as that on

Okay.

Yes.

come [Ph] go will with Campbell Lourde Instructions] question from next ahead. Capital. [Operator Our Matt Please

the by trading way, for -- if Sean, -- it's yes, now XX. the for stock today, So split X

at you do going sales, spirits So, barrel to start excluding we're look to see accelerate we year-over-year? when think

Yes.

by distributors of you If the if spirit to business into previous take to out, we the all out core stocking we that CEO, grow? see starting start those peel orders were made that are your

Right.

X segments. about in So, let's spirits talk

then, we Let's talk portfolio of business about about the is really our of outside tequila And talk our products. which Oregon. Azuñia, can Oregon

I of of the sell Now get markets, number that, it mean, outside and into doesn't Vodkas last we've, we've and move Portland. without takes to tried Oregon move to price going into years, help. it of over markets. a other is seen lot not Portland to realized California to right? We've Potato it different products what

about talk markets. So, we'll different the two

with Starting Portland.

for have a Vodka. didn't the work. We adjustments across And reset first we of -- Burnside, our has off retail. we're And number promoting promotional we we strategy set Portland past, Potato a words, entire helping calendar. SKUs on were any price price in and of at surprise in points In pursuing do constantly the the and and quarter, price Company largely market. the made We've didn't sales distributor drive really in where the promoting, and promoting, then been the a at opportunity other not

work for this -- pricing, year, a last have year, is TPRs, think strategies. going well And we to year we where we, calendar tested us. different this So, a tested some that's

second quarter, optimistic. And the based we're seeing what in on we're

And halfway we're activity beginning of at promotional encouraged started that think I'm May. through our I May. -- the through

see would think how in going have quarter. the I I'm that Oregon results spirits. quarter tell we now, we'll good the to But so, second in we're encouraged, you end right And I for

a mean, a tequila, category, and if is we some to higher of meaningfully really border bottle had up where a function south points see just walk going the Azuñia in aisle happening of are price you're Azuñia spirits importing across what's the really points situation. out portfolio. other than right? the a to that's Mexico. gave, And Now you of there of move the agave down particularly spirits, I price different the you pick place

acid, still Now, a that diffuser, traditional an with produce product. isn't through hydrochloric a not put tequila it's cooked outstanding we

mass distribution. this through everybody. the to to going all talked alongside not the have I suffered up, So, take with year, from crappy ourselves We know and same it points last upon taken tequilas. we it price markets the you other walk sell about Matt. at time, We're away

there we so, And volume lost year. last

But, And reinvestment there, we on so, we to it seeing start what distribution. won have that's we're and you're some working some solution for the some going improvement. a year-over-year comparisons. we're really we see Azuñia in where think and We've to see

selling of ago, and University selling couple in we're Stadium Texas down other other Baylor a in Texas high-end was weeks I Black places. products and in We're Just and of Stadium. some

So look see it's I I'm market story. another about the the up. that big the individual I things think you're some going start improvements. SKUs But you're encouraged, then we you need to to traction talk by here, Matt, and think to a to And picking into than see get and whole of going story if a couple converted

see let's tuned the But the second get So, Oregon. in particularly stay I'm encouraged, in and quarter. what can accomplished we

for Is of characteristics you take do follow-up, opportunity see The one margins margin gross gross there an the may. a I Just process? of if business, where basis? going-forward on out cost you spirits some to that

Yes.

in is we take for footprint. One key our to strategies of of out us cost the Portland need

that needed something obviously, you was to we that As down volume, in come do.

We've built just -- left you a how we business teams larger have easy set Riviera. I your your Redneck this working the former this and volume, think facility We down unit And as with mean, business. lower volume of same. on in about for the cost size have and the not it's management be past much right, production volume. built on much to keep been

Company. the big a been challenge to that's So,

line see in get think take EBITDA I before a I it's on in last And to going that's on volume -- craft a to why breakevens going spirits one our little us for said quarter, we're reason Team's EBITDA be while because to a work adjusted done there's to see I we'll that I everywhere on margins attacking some think great results. side But some And we can. space. done. spirits side. But the be contribution job healthy better more think can production

secondary can -- spirits margins, product. spirits that, aged much the of other have, you the at Now, having this wholesale prices the calls, the that I if we other up mean, said impact sell a on value have I've times for seeing at take The that in of couple market. moved you we look of market's bulk the been and just you're quarterly show and said fact how the

nobody fill and the environment. want is it, capital And where and rate this age wants interest -- particularly up, to have right? business a don't take higher take new They in to tied this

this also think tequilas. aged talking going where I valuations whiskey, just a is So to I'm market be for not stay aged we're see high about to for going I'm about talking product.

that. excited So I'm about

in else, we're think in position. have it's good keep that people mind. we Obviously, in everybody an aged like that have think I to just I important tequila, to but a point invest

appreciate Great. you're and like starting then the that have Thanks done that this can the a you're see spirits you getting I very time. hopefully through craft in guys the turnaround. And seems good more especially business, It visibility, reinvest and little work business, in that to much. bit grow -- you in

Thanks, Matt.

Showing further conference this question-and-answer Gwin turn any the to back like we session. to for questions will no over remarks. our I'd conclude time, at Geoffrey closing

Well, interest the team. I a activities really encouraged This We've as our end really the number business number Company. where recent fourth And the make year, Great. of of also year. restructuring more of we've to the this at call, everybody's had quarter actions really it is year year quarter last taken by of important in in profitable. first this a changes a -- appreciate the Company. is for the I said, a in I'm

has the the team a and getting side but it's down spirits where really there's term, like and come on side. together, really, challenging money, you're times at think to where look it the craft making just feels you I every the point both long road to

my go with day. pleased watching really it at teammates and I'm so, every them And

year, the know second a for people. I tuned half of have time of outperform to and you'll of Company, this because first a reengage the going that and going we're we hope rest company surprise to think some think this to year great and stay And quarter. I lot So the get the take is

you today. the thank for time again, So,

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

You may now disconnect your lines.