Eastside Distilling (EAST) 14 Nov 232023 Q3 Earnings call transcript

Good afternoon, and welcome to the Eastside Distilling Third Quarter 2023 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Tiffany Milton, Controller. Please go ahead.

Thank you. thank financial joining quarter results and discuss today of everyone, Distilling's Eastside for afternoon, you us for to XXXX. Good the third Milton, Tiffany Eastside's I'm Controller. Geoffrey to And Bruce and Controller. these today's us Craft company's call joining results Executive on Wells, are Gwin, Officer; the Chief discuss

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

the before with remarks, prepared statement. Now we submit following we begin for the record

plans, of Section preceded The results this Eastside within of could future anticipates, Private forward-looking on Litigation are of a discussed from and conference of risks to, Commission. that subject to will to integrating or of Distilling assets, success the are that limited model uncertainties new cause to for pursuant such and describe the actual be and the and in annual statements matters obtaining to to the product filed acquired its amended, including strategies filings XX, the should, December or circumstances, and may not XX-K of differ that results continue in as and statements call financial XXXX, Act company's and the products multitude statements market, the Commission, on Certain management company's of projected. the Securities XXXX, Securities are the in to to statements in strategic and may ability plan to related Exchange the results success forward-looking with and materially in are are planned, Securities matters statements. meaning as in time going report development, risks those pertaining Act with entities the provision draft, related Act concern ability by of forward-looking include, differ described risks made or projected materially company's ability statements Reform and events business Securities year XXA such XXXX. the Exchange from ended the the acceptance or customers, safe by the the amended, company's capital, but forward-looking and Securities XXXX, Exchange success XXE Section time information harbor expectations, involve Such cause Form the words expected, or Listeners to uncertainties and of plans, all execute eventually and as such future future, the may, obtain cautioned generally information

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

to the outlook conference Tiffany, . third you, discuss and you. our I earnings everyone, the call. quarter appreciate and welcome, Thank opportunity to with performance

strides address. of business we've canning positive to our both are and in operating challenges Craft there we While achieving goal need the our made digital business, flow, spirits cash towards

out do. about to to spoken and, have laid goals, work EBITDA we've to have I income long, collective growth company year both that All deleverage goals towards net invest these to while allows importantly, only public craft but And costs. clear still segments we the for and us spirits not and offset I made it's generate to in the also progress that have

our a end The One external craft and financial to our will the categories. have environment ability the both crucial objectives. spirits be achieve reaching headwinds Unfortunately, significant we're quarter in and navigating towards these challenges intensified targets. to the fall. economic challenge our into role is growing key and beverage in the headwinds the Understanding facing economic these of plays third

with X.X who, consumers. in [ using forefront way, water to printing of quarter demonstrates Ford printing to continued Percy the digital quarter digital services. Craft our demand the showcased such category the by wins notable with positive in million digital segment, can printing customers, market the developments in is new digital ] the Now our at orders Craft's record-breaking for as

some utilization faced and While issues. mobile in of improvements in challenges business, scrap canning the we these offset

As period quarter, we softness, year. approach the fourth same last in we observed anticipate a seasonal trend the

Now a softness significant loss the spirits spirits. previous which We experienced improvement overall a only quarter, historically decline the very Despite tequila spirit to $XX,XXX well, notable compared strong performer. in EBITDA has various categories, we performed and to reduction category, with Potato Portland year. an moving on a line, top including the in of observed Vodka been in

we challenges, strategies by implementing these pricing managed the markets. successful impact Despite to in key mitigate

supply attention the While rightsizing performance. yielding production in positive require more territories, underinvestment, results, chain Azuñia winning on focus as EBITDA Burnside the is and and reflected to strategic improving our improved

and expenses And costs. we've with completed our onetime challenge details some reducing made progress for a loss our remain for Tiffany equity in associated but the company the Corporate G&A provide debt on swap. will size,

those adjusted quarter. So the progress in if shows you meaningful exclude losses, our EBITDA

the we As net flow and across end income. we positive the achieve assets the all of business improvements to need quarter, acknowledge for fourth cash further

Our ongoing for efficiency operational and us about to goals are on We committed opportunities and position challenges that the efforts address capitalize our optimistic future. to remain enhance success.

Now provide it ahead. additional debt please and I'll completed Tiffany, turn equity for over our financials the go insights to into swap. to Tiffany

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

third Let's quarter. review the

of for spirits were QX our million sales $X.X printed primarily continue to production. million sales sales. compared we $XXX,XXX in lower million of can 'XX mobile as and million by to to to can Spirits both On and were 'XX $X.X third and gross sales in consolidated 'XX, digital for of Craft improve 'XX growth for $X.X offset for the printing a XXXX. were due $XXX,XXX 'XX, bulk basis, 'XX canning primarily our quarter sales $X.X spirits for due

profit for can for QX QX 'XX to of Craft due improvement gross $XXX,XXX $XXX,XXX XXXX to was printing. consolidated compared Our digital from

'XX and were of Our margins XXXX. XXXX X% XXXX. and for X% for and 'XX XX% consolidated for gross XX% for for Craft Spirits XXXX. margins XX% XX% were negative had margins for

were margins both for 'XX XX% and spirits sales, barrel 'XX. Excluding

XXXX, $XXX,XXX expenses. operating to decreased million Adjusted negative for due primarily was negative EBITDA 'XX for $X.X and

QX EBITDA. loss a we the debt excluded million, to on equity recorded $X.X conversion of of During from which is 'XX, adjusted

potential reach in the to demonstrating point, and turning its EBITDA full Craft have a positive printing yet quarter. delivering operations

However, of to throughout the and streamline avenues we cost-cutting are in be expanded the These remainder measures the to gain year. operating costs. printing sector continue to are momentum set exploring

We open will now Operator? the questions. floor for

[Operator Instructions] The Capital. from of Campbell Matthew Laridae first question is

a down I could the on if continue maybe visibility. was and business to improvement about you better improvement to same mobile the of was digital forecast I on relative basis canning in terms that see talk and, a how growing continued think cost wondering some here, at the being Craft you what time, side. going-forward about business

Mobile about Thanks business. question. it, not easy a if is logistics mean for an I the you it's think business.

moving a line to the remotely You're canning customer. basically

up. it setting You're

their struggling the And product, out pack how to basically not you're is it, temperature it's the customer go carbonation time. you're not it and off great your paying right, a then right, deliver is whole is your you problem can all If for to figure this with product trying home. and and

near something dominant to to critical want did to product we long to time but we not they're be is printers that term. improve, And a not that We so so That's spending mean, fact, that that not a And on PGA, canning in digital the large at can want Northwest. a various things time doing, the part business. know were develop, business invest to Seattle, invest hopefully for time. story that consumer Coca-Cola, print want we the Budweiser, for Craft special-edition utilization That's cans business the digitally in of us of frankly. I digital with And in turned utilization, a that's the we Portland, us in want for printing Denver, but Pacific point on, a we that. the to that's business companies, is -- lot with hours, driving in. that a X well have concentration, some

So time spend on mobile. less we're to going

But that, were print curve almost customers, the customers They is said right last our for mobile the build-out to us. all we right? for having demand critical important digital year, converted now because, mobile of

in involved and customers but mobile Portland serve going to digital, printing. So canning, going to we're we're on we're going there, focus to stay our

it. Got

business how the at look that mobile affected? you like when So business, was much of

expected going going to not capture compete decided and market We we we're any more on there, we'll vigorously. share, largely up to to Seattle, defend be. just and and initially there, We're invest very where in It's give compete that price Seattle. share Portland in that's

we for we the when in looked I the of is to that be demand on digital the in would the we building in the that our of that the initially, convert mobile quarter quarter so more Seattle. third able stronger looking would third the And printing. early part in are opportunity year expecting sense was be and the I for at And was at company, year,

weren't mobile, distracted EBITDA think at it, were to And one restructuring exiting why that for on I Seattle. got we quarter that do generate that's going in segment. able we the I thought we to the focusing Craft, reason

Got And for seeing It more Why why Vodka. on sounds bounce like a around to Potato it. just you. that's That's little occurring? helpful. a little Portland that color we're And that. color bit back starting then is just

few tequila then brands, Azuñia, Potato about Burnside, talk brands, and we are and X years brand brands focused and Portland in purchased a major those but X Northwest; lot Portland our ago. let's major a we and the So that have have Vodka of are the Pacific we

for to lot the of structure it leverage hot is operates. X-tier a the "Why investment of a extremely and company cases, that? it's do, space been more concentrated brands is that's in do distribution hot of the us California a do we've shifting the in printing. difficult matter with volume, with you've volume system way segment to really And that fixed compete, ask base. digital is be supposed is Vodka to can We What the category." we you expense me, is lot our the a this doing to Spirits but from a the because place category, a can where can spirit of of Portland. critical with And seen volume, deliver can the a we and people more are lot truth footprint

who need demand to a a partner or reluctant That's going amount fact. capital that's tremendous I going of a through challenge. You're to can real or a need someone pull you're a mean distributor. celebrity

in position limits that state have a we leverage taking on market thankfully, us. strong in a has margin the from and Oregon, the gross control distributor However,

growing will right? more back when critical. expand have first. Potato we Oregon in And is the we partners, So then business Vodka leverage our Portland with I'm spirits So

there improve rebuilt. Liquid margins. We've is costs, sized we we've the the have cost has to lowered packaging, process bottle, whole what the So manufacturing there done been significantly. that

And PPV. put going volume at to the we're going through that's see facility to And our we're be Oregon. going driver. margins so those Milwaukee, And more growth in to improve

what on were in main you've down. is with economy, in got and seen summer with we units. we did aggressive okay. what mid-single-digit weren't happy But the based We So our Portland, in competitors seeing I'm we're in the that. positive We

position Now a Burnside's Burnside. the next a disappointment. is to mentioned, in you really We're grow as Burnside. thing,

It of In growth. we believe an that which fact, X one outstanding about think need Burnside X there. this Azuñia we But and more are the Burnside we're on, restructuring And get in out in products Buckman. some for a it's challenge. roll and bourbon that's And and brands. get interest working we and been we is and those line one have in that brand that to investment. Burnside have has I the turnaround slowed And reducing think products things that opportunity has XX-year some that underinvestment of the unique costs company the been brands some outstanding. that

market this the they It's expensive a to a But that don't there. borrow at the the our to is We point. the did capital market, debt stock equity capital, us just makes of for decision. this here, cost swap. where is, is funds small-cap telling have invest where extremely In

saw You that.

grow because capital a we we to we're And that's digital this customers immediate public investment having and can amount to the impact company who the That's to of package. it's and So have pick seeing made invest, and we carefully printing limited our retain use. because where are transitioning we're very have areas immediate. status to

things drive execute term, in it, is now, a a and the is able with thing in we're way. volume to When in the progress Burnside more some plan we awareness to we that are to going same then unique Azuñia. have bit to and we place have Portland. little we think, think So a be going and in capital, near But we're work in do right leading going Burnside, the PPV

That's I deck mean been of completely handed helpful, Geoff. cards I you've here. appreciate the

you've nice and to cost the the it's see business, adjustments so get it's continue structure this improvement I can made in to to we some business around. the think smart, turned all

work work, I the that future. for applaud see lot realize will a I the and is but to So it's pay dividends today, of hard us work the in

Matt. Thanks,

you're be clear, Just seeing the now. to progress

down Our there came corner. based in and Craft. gross margins distance significantly. be first first EBITDA spirits there be in turn to even the striking we spirits. But we would to thought start We're improved, within break on might in this, I

is down. quarter had reactions not our retailers definitely have see. weakness Notwithstanding chain in the People everywhere. across retail. to system let's big Consumers because supply is scared. big going take a looking easy So underinvest impact there out happens I think There's going Fourth there's see clearly be Diageo and you're today, People a quarter it That the the challenges. that. the to in an market to a board, down supply destocking inventory chain. going environment. have in this on blob got to

we're a encouraged. growth year where with But we that. a need in And digital I'm in to in So we're much for better be category into feel spirits. printing, going we're position next to so going

over There This closing are no like conference to would the Gwin concludes questions question-and-answer to our remarks. I back at this for turn time. Geoffrey session.

lower We know, is A third Great. is need it to December for all this for on accomplished share quarter. to in we working increase we on to it, we increase year exchange to things approval because, with have debt and I and of of are equity, in shareholder going you balance note Along XX equity the to the our the on virtually. you appreciate important pushed end been annual thank this sheet for going the count. meeting that, as which be listening. year that debt the also couple the our

for annual our we're critical continuing XX, us as going I'll encourage so vote and individually to shareholders increase shares, And in the be and directly a is for the operate reaching out public have company. to meeting which to on in to them

And free in call. if I feel guys appreciate you again Tiffany. have participating me call So Thanks. the you to any or questions,

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

may now You disconnect.