Q1 2019 Gross Sales increase 161% as Redneck
Riviera Whiskey case volume, Craft Canning + Bottling volume and
Pacific NW sales drive growth
Grover Wickersham announces transition to
Executive Chairman, stepping down from his dual role as Chairman
and Chief Executive Officer
Eastside Distilling, Inc. (NASDAQ: EAST) reported first quarter
2019 financial results for the period ended March 31, 2019.
Financial Highlights:
- Gross sales for Q1 2019 were
$3,685,700, an increase of 161% compared to $1,413,182 in Q1 2018,
led by the continued organic growth of Redneck Riviera Whiskey
(“RRW”), sales from the Company’s co-packing and wine canning
operations including the recent acquisition of Craft Canning +
Bottling (CC+B), and organic growth in Oregon and the Pacific
Northwest.
- Branded product shipments increased 76%
to 12,091 cases in Q1 2019 compared to 6,877 in the year ago
quarter.
- Q1 2019 9L case shipments of Redneck
Riviera Whiskey were approximately 6,300.
- Total shipments, including the branded
products and co-packed products (spirits, wine and beer) increased
to 270,447 cases. This included 12,091 for branded products, 18,411
for non-CC+B co-packing, and 239,945 cases for CC+B co-packing
during Q1 2019, compared to 8,305 cases in Q1 2018 (6,877 for
branded products and 1,428 for co-packing).
- Net loss for Q1 2019 was $(2,943,439)
compared to $(1,319,117) in Q1 2018.
- Adjusted EBITDA (see attached table)
during Q1 2019 was $(2,129,283), which compared to $(780,357) in Q1
2018 as the Company continued to invest in key areas, including the
Redneck Riviera Whiskey via marketing and sales spending. EBITDA in
the period was also impacted by approximately $500,000 in one-time,
non-recurring items.
Recent Operational Highlights:
- Acquired Craft Canning + Bottling in
January 2019, a leading provider of mobile canning and bottling
services in Oregon, Washington and Colorado. This is a
transformative acquisition with a high growth co-packing business
and materially increases efficiencies in production of the
Company’s proprietary products.
- Entered into the fast growing
Ready-to-Drink (RTD) market with the introduction of the Portland
Mule RTD Cocktail, Eastside’s first branded RTD.
- Announced Eastside’s Sandstrom-branded
entry into the rapidly growing CBD market with Outlandish
non-alcoholic CBD Beverage, targeting Oregon in Q2 2019.
- Redneck Riviera Whiskey expanded
distribution and is now distributed in 46 states, though 9
different tier-one distributors.
- Launched the first Redneck Riviera
product line extension with the introduction of the “Granny Rich
Reserve,” as well as the introduction of the 1.75 liter
(half-gallon) Redneck Riviera Whiskey bottle.
- Redneck Riviera Whiskey continued
strong adoption amongst key retailers, including recent
authorizations and launches at Kroger, Fred Meyer, QFC, Albertson,
VONS, Pavilions, Safeway, Walmart, Winn-Dixie, Jewel-Osco, Binny’s,
Meijers, WinCo, and others.
- Leveraged strong distribution platform
with the initial launch of Burnside Bourbon into California as the
Company expands beyond its Northwest roots with the lineup.
- Eastside’s subsidiary, Big Bottom
Distilling, was named Whiskey Distillery of the Year at the 2019
Berlin International Spirits Competition and received the
prestigious double gold medal for its Delta Rye Whiskey in both
Berlin as well as the San Francisco World Spirits Competition.
Executive Management Transition
Effective May 10, 2019, Grover Wickersham announced his
transition to Executive Chairman, stepping down from his dual role
as Chairman and Chief Executive Officer. The Company’s Chief
Financial Officer, Steve Shum, has been given the additional title
of Interim Chief Executive Officer. The Company has commenced a
search for a spirit’s industry veteran. Wickersham’s transition
follows the recent appointment of 25-year spirits industry veteran
Robert Manfredonia as Eastside’s President in December 2018. Steve
Shum will also maintain his current role as Chief Financial Officer
and expects to work closely with Robert Manfredonia with respect to
managing daily operations, as well as working closely with the
board of directors and Grover Wickersham.
Since 2016, Wickersham has helped to transition Eastside
Distilling to one of the leading craft spirits companies in the
United States. During the last two years, Eastside has rebranded
its product portfolio lead by Sandstrom Partners, significantly
expanded its production capacity through the acquisition of
Motherlode and Craft Canning + Bottling, launched the highly
successful Redneck Riviera Whiskey, and expanded into the high
growth Ready-to-Drink and CBD markets. Since 2016, revenues have
increased from $3.1 million for the year 2016 to $3.7 million in
the just completed first quarter.
CBD Launch in Oregon
Eastside recently established its subsidiary, Outlandish
Beverages, LLC, targeting Oregon with a planned new product line
for the cannabidiol (CBD) beverage market in coming weeks of Q2.
The full line of Outlandish CBD beverages, the first of which is a
non-alcoholic seltzer, will initially only be available in the
state of Oregon which legalized CBD in 2014. The Company believes
that Outlandish will be the first CBD beverage produced in a 187 ml
slim line can. The product concept is designed for distribution to
places having on premises alcohol consumption or off premises sale
of alcoholic beverages.
The Outlandish lineup of ready-to-drink (RTD) cans will
initially include three products: a seltzer-based, a ginger-based,
and a quinine-based tonic. Further line extensions are planned.
Outlandish beverages, formulated by Eastside’s award-winning master
distiller, Mel Heim, will include milligrams of CBD. Outlandish CBD
beverages can be used as a component in uniquely designed drinks
limited only by imagination or consumed entirely on their own.
Outlandish LLC makes no claims to health benefits of CBD. We
encourage all our customers to do research of their own.
Management Commentary
Grover Wickersham, Executive Chairman of Eastside Distilling,
commented, “During the first quarter of 2019 we increased our
revenues 161% versus last year, boosted by our acquisition of Craft
Canning + Bottling, which is well on the way to being successfully
integrated. I fully expect we will see increased manufacturing
efficiencies, a corresponding benefit to COGs in Q2 and Q3 and
continued co-packing sales momentum. We also accelerated
authorizations of Redneck Riviera Whiskey into some of the
country’s largest retailers, maintained 50% organic growth in
Oregon of our branded products, and expanded our operations into
high growth categories such as RTD cocktails and CBD
beverages.”
Robert Manfredonia, President of Eastside Distilling, commented,
“We started off 2019 with a very strong start for our Redneck
Riviera Whiskey. The addition of new product extensions, including
the 1.75 liter bottles and Granny Rich Reserve, and authorizations
by a number of tier one retailers, including Walmart, Albertson’s,
Safeway, and Kroger, helped us drive over 6,300 cases during the
seasonally slow first quarter. Looking forward, we are scheduled to
release a Redneck Riviera RTD mid-year, which should drive
continued growth in the brand and are set to receive a number of
new authorizations later this month for the annual June resets.
Historically, the grocery sector takes a minimum of three to four
years for brand entry based upon development, however, Redneck
Riviera has entered the grocery sector in less than a year,
reflecting tremendous retail confidence in the brand as a
whole.”
Steve Shum, Interim Chief Executive Officer and Chief Financial
Officer of Eastside Distilling, added, “Eastside Distilling is in a
strong position to build upon the significant investments and
strategic initiatives over the last three years. The integration of
our newly acquired Craft Canning + Bottling operations has exceeded
our original expectations, contributing more than $1.4 million of
revenue in the first quarter. The platform we have now created at
Eastside allows for us to quickly move product from concept to
store shelves and into customers hands in an expedited format. We
look forward to leveraging this platform and drive improved
efficiencies in the quarters and years to come.”
Q1 2019 Financial Results
For the quarter ended March 31, 2019, Eastside Distilling
reported record gross sales of $3,685,700, an increase of 161%
compared to $1,413,182 in Q1 2018. Wholesale sales ($1,467,189;
+94%) benefited from the rapid launch of the new Redneck Riviera
Whiskey product as well as continued strong sales traction within
the Pacific Northwest. The Company’s co-packing business
($1,993,591; +467%) experienced increased activity from its canning
capabilities and the recent acquisition of CC+B, as well as bulk
spirit sales during the period. Lastly, the Company’s retail
operations ($224,921; -26%) decreased due to continued special
event and retail store rationalizations.
Gross profit margins (as a percent of Net Sales) were 34% during
Q1 2019 compared to 49% during Q1 2018. Gross profit margin change
was primarily due to a change in product and business mix, higher
raw material costs on certain products in the period, and higher
facilities costs. The Company expects gross profit margins to
improve in the future as we generate higher volumes and improve the
production efficiencies in our larger facilities.
Advertising, promotional and selling expenses for Q1 2019
increased to $1,333,275, or approximately 107.4%, from $642,977 Q1
2018. This increase is primarily due to our efforts to target
national markets, particularly with the newer Redneck Riviera
product, as well as to accelerate sales of Burnside Bourbon and
other proprietary products in the Pacific Northwest. General and
administrative expenses for the quarter ended March 31, 2019
increased to $2,677,755, or approximately 121%, from $1,212,512 in
Q1 2018. This increase was directly impacted by increased headcount
(and the associated compensation and benefits), higher depreciation
and amortization related to production, and significant one-time
costs that occurred in the period, part of which was related to the
acquisition of CC+B. Other expense, net was $107,410 for Q1 2019,
compared to $56,438 during Q1 2018, an increase of 90.3%, due to
the higher notes payable balance in 2019.
Adjusted EBITDA during Q1 2019 was $(2,129,283), which compared
to $(780,357) in Q1 2018. The Q1 2019 EBITDA was impacted by the
one-time costs in the period.
Net loss attributable to common shareholders was $2,943,439 as
compared to a loss of $1,318,524 during Q1 2018.
The company ended the quarter with $4.2 million in cash with a
positive working capital of $15.2 million. As a result of strong
sales activity right at quarter end, the company also ended with
nearly $2 million in accounts receivables, substantially all of
which is expected to be collected within 30 to 45 days. In
addition, the company ended with inventories of $11.6 million (at
cost) consisting primarily of barrels of light whiskey, bourbon
whiskey and rye whiskey stored in third party warehouses. The
Company had approximately $6.5 million in long-term debt.
Use of Non-GAAP Measures
Eastside Distilling's management evaluates and makes operating
decisions using various financial metrics. In addition to the
Company's GAAP results, management also considers the non-GAAP
measure of adjusted EBITDA. Management believes this non-GAAP
measure provides useful information about the Company's operating
results.
The Company defines adjusted EBITDA as earnings before interest,
taxes, depreciation and amortization, stock based compensation and
the newly implemented lease accounting. The table below provides a
reconciliation of this non-GAAP financial measure with the most
directly comparable GAAP financial measure.
Conference Call
The Company will hold a conference call today to discuss these
results.
Date and Time: 11:30am ET (8:30am PT) on Monday, May 13,
2019
Call-in Information: Interested parties can access the
conference call by dialing (844) 889-4332 or (412) 717-9595.
Live Webcast Information: Interested parties can access
the conference call via a live Internet webcast, which is available
in the Investor Relations section of the Company's website at
https://www.eastsidedistilling.com/investors/.
Replay: A teleconference replay of the call will be
available for three days at (877) 344-7529 or (412) 317-0088,
confirmation #10131481. A webcast replay will be available in the
Investor Relations section of the Company's website at
https://www.eastsidedistilling.com/investors/ for 90 days.
About Eastside Distilling
Eastside Distilling, Inc. (NASDAQ: EAST) has been producing
high-quality, award-winning craft spirits in Portland, Oregon since
2008. The Company is distinguished by its highly decorated product
lineup that includes Redneck Riviera Whiskey, Burnside Bourbon,
West End American Whiskey, Goose Hollow Reserve, Below Deck Rums,
Portland Potato Vodka, Hue-Hue Coffee Rum and a distinctive line of
fruit infused spirits. Eastside Distilling is majority owner of Big
Bottom Distilling (makers of The Ninety One Gin, Navy Strength Gin
and Delta Rye whiskey) and the Redneck Riviera Whiskey Co. All
Eastside, Big Bottom and Redneck Riviera spirits are crafted from
natural ingredients for quality and taste. Eastside’s Craft
Bottling + Canning subsidiary is one of the Northwest’s leading
independent spirit bottlers and ready-to-drink canners. The Company
also owns Outlandish LLC, an Oregon LLC for making and selling
products that do not contain alcohol but include ingredients such
as CBD. For more information visit: www.eastsidedistilling.com or
follow the Company on Twitter and Facebook.
Important Cautions Regarding Forward-Looking
Statements
Certain matters discussed in this press release may be
forward-looking statements. Such matters involve risks and
uncertainties that may cause actual results to differ materially,
including the following: changes in economic conditions; general
competitive factors; acceptance of the Company's products in the
market; the Company's success in obtaining new customers; the
Company's success in product development; the Company's ability to
execute its business model and strategic plans; the Company's
success in integrating acquired entities and assets, and all the
risks and related information described from time to time in the
Company's filings with the Securities and Exchange Commission
("SEC"), including the financial statements and related information
contained in the Company's Annual Report on Form 10-K and interim
Quarterly Reports on Form 10-Q. Examples of forward-looking
statements in this release may include statements related to
release of new products and entering into RTD and CBD markets,
growth prospects, receipt of future authorizations or anticipated
revenues, our expected success in integrating acquired entities and
assets, including expected co-packing sales momentum and production
efficiencies associated with the acquisition of CC+B, and our
strategic focus, product verticals, and expected financial
performance and profitability. The Company assumes no obligation to
update the cautionary information in this release.
Financial Summary Tables
The following financial information should be read in
conjunction with the unaudited financial statements and
accompanying notes filed by the Company with the Securities and
Exchange Commission on or before May 15, 2019 on Form 10-Q for the
period ended March 31, 2019, and which can be viewed at www.sec.gov
and in the investor relations section of the Company’s website at
www.eastsidedistilling.com.
Eastside Distilling, Inc. and Subsidiaries Consolidated
Statements of Operations For the Three Months Ended March
31, 2019 and 2018 Three
Months Ended
March 31,2019
March 31,2018
Sales $ 3,685,700 $ 1,413,182 Less excise taxes, customer programs
and incentives 189,401 192,849 Net
sales 3,496,299 1,220,333 Cost of sales 2,321,298
627,523 Gross profit 1,175,001
592,810 Operating expenses: Advertising, promotional and
selling expenses 1,333,275 642,977 General and administrative
expenses 2,677,755 1,212,512 Loss on disposal of property and
equipment - - Total operating expenses
4,011,030 1,855,489
Loss from
operations (2,836,029 ) (1,262,679 ) Other income
(expense), net Interest expense (107,410 ) (56,638 ) Other income
(expense) - 200 Total other expense,
net (107,410 ) (56,438 )
Loss before income
taxes (2,943,439 ) (1,319,117 ) Provision for income taxes
- -
Net loss (2,943,439 )
(1,319,117 ) Dividends on convertible preferred stock
- - Income (loss) attributable to noncontrolling interests -
593
Net loss attributable to
Eastside Distilling, Inc. common shareholders $ (2,943,439 ) $
(1,318,524 )
Basic and diluted net loss per common
share $ (0.32 ) $ (0.27 )
Basic and diluted weighted
average common shares outstanding 9,099,382
4,920,534
Eastside Distilling, Inc. and
Subsidiaries Consolidated Balance Sheets March 31,
2019 and December 31,2018
March 31,2019
December 31,2018
Assets Current assets: Cash $ 4,180,799 $ 10,642,877 Trade
receivables 1,867,871 1,064,078 Inventories 11,565,655 11,017,459
Prepaid expenses and current assets 1,460,879
765,146
Total current assets
19,075,204 23,489,560 Property and equipment, net 4,804,585
1,758,130 Right of use asset 1,180,632 - Intangible assets, net
3,065,039 285,676 Goodwill 28,182 28,182 Other assets
985,685 796,260
Total Assets $
29,139,327 $ 26,357,808
Liabilities and
Stockholders' Equity Current liabilities: Accounts payable $
2,062,039 $ 1,984,690 Accrued liabilities 507,470 386,166 Deferred
revenue 97,345 1,728 Current portion of notes payable 580,647 -
Current portion of lease liability 662,700
Total current liabilities 3,910,201 2,372,584 Lease Liability -
less current portion 712,743 - Secured trade credit facility, net
of debt issuance costs 2,940,971 2,934,106 Notes payable - less
current portion and debt discount 3,615,306
2,300,000 Total liabilities 11,179,221
7,606,690 Commitments and contingencies (Note 10)
Stockholders' equity: Common stock, $0.0001 par value;
15,000,000 shares authorized; 9,110,635 and 8,764,085 shares issued
and outstanding at March 31, 2019 and December 31, 2018,
respectively 911 876 Additional paid-in capital 48,228,617
45,888,872 Stock payable - - Accumulated deficit (30,269,422
) (27,138,630 )
Total Eastside Distilling, Inc.
Stockholders' Equity 17,960,106 18,751,118 Noncontrolling
interests - -
Total Stockholders'
Equity 17,960,106 18,751,118
Total Liabilities and
Stockholders' Equity $ 29,139,327 $ 26,357,808
Three Months Ended March 31 2019
2018 Net Loss $ (2,943,439 ) $
(1,319,117
) Add: Interest Expense 107,410 56,638 Lease Expense 124,270 -
Stock-based compensation 191,856 276,068 Stock issued for services
53,920
125,030
Depreciation and amortization 336,700
81,024
Adjusted EBITDA $ (2,129,283
) $
(780,357
)
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version on businesswire.com: https://www.businesswire.com/news/home/20190513005260/en/
Company Contact:Eastside DistillingSteve Shum, CFO(971)
888-4264inquiries@eastsidedistilling.com
Investor Relations Contact:Lytham Partners, LLCRobert
Blum(602) 889-9700east@lythampartners.com
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