PORTLAND, Ore., March 30, 2020 /PRNewswire/ -- Eastside
Distilling, Inc. (NASDAQ: EAST) reported fourth quarter and fiscal
year 2019 financial results for the period ended December 31, 2019.
Financial Results
Gross sales in 2019 were
$17.0 million compared to
$7.2 million in 2018, an increase of
136%. For the fourth quarter of 2019, gross sales were
$4.3 million compared to $2.4 million in the fourth quarter of 2018, an
increase of 79%. The increase in gross sales is attributable to
organic growth in the Company's Redneck Riviera product, as well as
contributions from the Azuñia Tequila and Craft Canning + Bottling
acquisitions completed during the year.
Amounts shown in
thousands
|
YE
2019
|
|
YE
2018
|
|
|
Q4
2019
|
|
Q4
2018
|
|
Amount
|
|
Amount
|
Change
|
|
|
Amount
|
|
Amount
|
Change
|
Total Gross
Sales
|
$
17,021
|
|
$
7,204
|
136%
|
|
|
$
4,337
|
|
$
2,417
|
79%
|
|
|
|
|
|
|
|
|
|
|
|
Branded
Sales
|
$
7,482
|
|
$
4,354
|
72%
|
|
|
$
2,614
|
|
$
1,639
|
59%
|
|
|
|
|
|
|
|
|
|
|
|
Co-Packing
Services
|
$
7,166
|
|
$
405
|
1669%
|
|
|
$
1,321
|
|
$
61
|
2066%
|
|
|
|
|
|
|
|
|
|
|
|
Retail
Sales
|
$
1,113
|
|
$
1,213
|
-8%
|
|
|
$
401
|
|
$
480
|
-16%
|
|
|
|
|
|
|
|
|
|
|
|
Barrel
Sales
|
$
1,261
|
|
$
1,232
|
2%
|
|
|
$
-
|
|
$
237
|
-100%
|
Gross margins on net sales were 35% during 2019 compared to 38%
in 2018. For the fourth quarter of 2019, gross margins on net sales
were 27% compared to 19% during the fourth quarter of 2018. The
reduction in gross margins year over year is primarily attributable
to lower margins on the Company's Azuñia product line, which is
predominately sold in the lower margin on-premise market. The
increase in gross margins for the fourth quarter of 2019 compared
to 2018 was due to the Craft Canning acquisition.
Operating expenses were $19.2
million in 2019, which included $6.8
million of non-cash expenses compared to $10.6 million in 2018, which included
$2.7 million of non-cash expenses.
The increase in non-cash expenses year over year is primarily
related to the revaluation of the Azuñia acquisition, intangible
amortization of the Craft acquisition as well as increased stock
compensation and depreciation. For the fourth quarter of 2019,
operating expenses were $5.7 million,
which included $4.4 million of
non-cash expenses, compared to $3.5
million, which included $1.0
million of non-cash expenses. The change in operating
expenses primarily relates to increased advertising, promotional
and selling expenses to support the Company's national sales
strategy, increased headcount from acquisitions, increased legal
expenses, and acquisition related expenses of approximately
$1.9 million
As part of the Company's agreement with respect to Redneck
Riviera Whiskey, Eastside expects
to be reimbursed 50% of various marketing expenses upon the
eventual sale of the brand by the licensor if the licensing
agreement remains in force. During 2019, the 50% amount eligible
for reimbursement totaled $2.4
million. Cumulatively, the amount is $3.6 million
Net loss was $(16.9) million in
2019 compared to a net loss of $(9.0)
million in 2018. For the fourth quarter of 2019, net loss
was $(7.5) million compared to
$(3.2) million in the fourth quarter
of 2018.
Adjusted EBITDA (see attached table) was $(9.6) million in 2019 compared to $(5.6) million in 2018. For the fourth quarter of
2019, Adjusted EBITDA was $(2.9)
million compared to $(2.1)
million in the fourth quarter of 2018. Adjusted EBITDA is a
non-GAAP figure and is explained and reconciled below.
Case Volume (9-Liter Equivalent)
Amounts shown in
thousands
|
|
|
|
|
|
|
|
|
|
|
|
YE
2019
|
|
YE
2018
|
|
|
Q4
2019
|
|
Q4
2018
|
|
Amount
|
|
Amount
|
Change
|
|
|
Amount
|
|
Amount
|
Change
|
Total Branded Case
Volume
|
62.3
|
|
37.3
|
67%
|
|
|
19.8
|
|
13.9
|
42%
|
|
|
|
|
|
|
|
|
|
|
|
Redneck Riviera
Case Volume
|
27.2
|
|
15.0
|
81%
|
|
|
7.1
|
|
6.6
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
Azunia Tequila
Case Volume
|
5.0
|
|
--
|
--
|
|
|
4.0
|
|
--
|
--
|
|
|
|
|
|
|
|
|
|
|
|
Legacy Non-Retail
Case Volume
|
26.7
|
|
18.8
|
42%
|
|
|
7.4
|
|
6.0
|
23%
|
|
|
|
|
|
|
|
|
|
|
|
Retail Case
Volume
|
3.4
|
|
3.5
|
-3%
|
|
|
1.3
|
|
1.4
|
-7%
|
Inventory Credit Facility
Subsequent to the end of
the year, the Company increased its available working capital
position by closing a new asset-backed inventory facility credit
facility totaling up to $8 million with Live Oak Bank.
The Company used this new credit facility to pay off and replace
the two existing inventory facilities of $5
million capacity with KFK and TQLA and to fund general
working capital. In addition to the increased availability of up to
$3 million, the new credit facility
offers a number of potential advantages to Eastside, including a reduction in the
interest rate.
In addition to the credit facility, Eastside has reduced its cash expenses by
reducing headcount substantially from 138 to 89 and has lowered
operating expenses in other areas in an effort to lower its
breakeven point.
COVID-19 Impact and Outlook
The first quarter of 2020
started strong. However, starting in mid-February through the end
of March, there has been a slowdown in sell-through as a result of
COVID-19. Additionally, the off-premise retailers have delayed the
commencement of the planned Burnside Bourbon and Hue-Hue Coffee Rum
national launch as a result of COVID-19. The Company has enacted a
series of initiatives to improve sell-through, including offering
deep promotional discounts on Redneck Riviera Whiskey and Azuñia
Tequila, as well as a focus towards online sales. Further, with
on-premise shutdown throughout much of the country, Eastside has been ramping up support efforts
for local off-premise independent stores and wholesalers by
creating several programs aimed to energize the local marketplace.
Likewise, as the shutdowns diminish, Eastside plans to expand upon these programs
to support its off-premise accounts.
The Company's Craft Canning operations is experiencing strong
demand from the craft beer and wine industry as brewers and
wineries have batches that they have made and need to get them into
cans. Between workforce issues and the closure of the
on-premise business, this has pushed demand towards the Company's
mobile canning business.
Management Commentary
"In 2020, our focus is on
transforming Eastside Distilling from a company with one primary
lead product, Redneck Riviera Whiskey, to a 'House of Brands' that
leverages our national distribution capabilities to also distribute
our recently acquired Azuñia Tequila, as well as our Burnside
Bourbon and Hue-Hue Coffee Rum brands," said Lawrence Firestone, CEO. "While COVID-19 is
having a near-term disruption in our business, we have remained
nimble and are adapting to the rapidly changing environment
impacting all smaller spirits companies. Importantly however, we
are simultaneously focused on driving the long-term improvements
and initiatives in our business that we believe will be drivers to
long-term value."
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
as a supplement to GAAP results. Management believes this non-GAAP
measure provides useful information about the Company's operating
results and assists investors in comparing the Company's
performance across reporting periods on a consistent basis by
excluding items that it does not believe are indicative of its core
operating performance.
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: 5:00pm ET
(2:00pm PT) on Monday, March 30, 2020
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
#10140659. 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 and companion brand Granny
Rich Whiskey, newly acquired Azuñia Tequilas, Burnside Bourbons and
Rye, Hue-Hue Coffee Rum, and Portland Potato Vodkas. All
Eastside 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. 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; the impact of COVID-19 and related business
disruption, the Company's ongoing financing requirements and
ability to achieve any financing, 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 our strategic focus, product verticals, anticipated
revenue and profitability, anticipated ability to recoup certain
marketing expenses under our Redneck Riviera licensing agreement,
the effects of COVID-19, including the impact on sales, and the
success of initiatives implemented to address the business
disruption resulting from COVID-19 and any guidance or expectations
regarding future results. 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 Form 10-K for the
period ended December 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
Balance Sheets
|
December 31, 2019
and December 31, 2018
|
|
|
|
|
|
December 31,
2019
|
|
December 31,
2018
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
343,293
|
|
$
10,642,877
|
Trade
receivables
|
1,326,067
|
|
1,064,078
|
Inventories
|
12,393,235
|
|
11,017,459
|
Prepaid expenses and
current assets
|
407,524
|
|
765,146
|
Total current
assets
|
14,470,119
|
|
23,489,560
|
Property and
equipment, net
|
4,773,528
|
|
1,758,130
|
Right of use
asset
|
742,808
|
|
-
|
Intangible assets,
net
|
14,674,790
|
|
285,676
|
Goodwill
|
28,182
|
|
28,182
|
Other
assets
|
1,176,436
|
|
796,260
|
Total
Assets
|
$
35,865,863
|
|
$
26,357,808
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
2,937,426
|
|
$
1,984,690
|
Accrued
liabilities
|
896,059
|
|
386,166
|
Deferred
revenue
|
1,734
|
|
1,728
|
Current portion of
notes payable
|
1,819,172
|
|
-
|
Current portion of
lease liability
|
483,211
|
|
|
Total current
liabilities
|
6,137,602
|
|
2,372,584
|
Lease Liability -
less current portion
|
387,623
|
|
-
|
Secured trade credit
facility, net of debt issuance costs
|
2,961,566
|
|
2,934,106
|
Deferred
Consideration for Azunia acquisition (Long Term)
|
15,451,500
|
|
|
Notes payable - less
current portion and debt discount
|
3,594,254
|
|
2,300,000
|
Total
liabilities
|
28,532,545
|
|
7,606,690
|
|
|
|
|
Commitments and
contingencies (Note 10)
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.0001
par value; 15,000,000 shares authorized;
|
|
|
|
9,675,028 and
8,764,085 shares issued and outstanding at
|
|
|
|
Dec 31, 2019 and
December 31, 2018, respectively
|
967
|
|
876
|
Additional paid-in
capital
|
51,566,438
|
|
45,888,872
|
Stock
payable
|
-
|
|
-
|
Accumulated
deficit
|
(44,234,087)
|
|
(27,138,630)
|
Total Eastside
Distilling, Inc. Stockholders' Equity
|
7,333,318
|
|
18,751,118
|
Noncontrolling
interests
|
-
|
|
-
|
Total
Stockholders' Equity
|
7,333,318
|
|
18,751,118
|
Total Liabilities
and Stockholders' Equity
|
$
35,865,863
|
|
$
26,357,808
|
|
|
|
|
Eastside
Distilling, Inc. and Subsidiaries
|
Consolidated
Statements of Operations
|
For the Three and
Twelve Months Ended Dec 31, 2019 and 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
December 31,
2019
|
|
December 31,
2018
|
|
December 31,
2019
|
|
December 31,
2018
|
Sales
|
|
$
4,336,554
|
|
$
2,417,205
|
|
$
17,021,484
|
|
$
7,204,302
|
Less excise taxes,
customer programs and incentives
|
|
566,247
|
|
527,762
|
|
1,424,860
|
|
1,080,792
|
Net sales
|
|
3,770,307
|
|
1,889,443
|
|
15,596,624
|
|
6,123,510
|
Cost of
sales
|
|
2,736,914
|
|
1,535,190
|
|
10,139,663
|
|
3,813,309
|
Gross
profit
|
|
1,033,393
|
|
354,253
|
|
5,456,961
|
|
2,310,201
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Advertising,
promotional and selling expenses
|
|
3,106,190
|
|
1,506,793
|
|
7,500,501
|
|
4,345,210
|
General and
administrative expenses
|
|
2,396,599
|
|
1,958,167
|
|
11,538,438
|
|
6,225,998
|
Loss on disposal of
property and equipment
|
|
147,283
|
|
-
|
|
133,179
|
|
-
|
Total operating
expenses
|
|
5,650,072
|
|
3,464,960
|
|
19,172,118
|
|
10,571,208
|
Loss from
operations
|
|
(4,616,679)
|
|
(3,110,707)
|
|
(13,715,157)
|
|
(8,261,007)
|
Other income
(expense), net
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
(184,792)
|
|
(85,459)
|
|
(523,391)
|
|
(789,362)
|
Other income
(expense)
|
|
(2,670,408)
|
|
-
|
|
(2,669,556)
|
|
2,700
|
Total
other expense, net
|
|
(2,855,200)
|
|
(85,459)
|
|
(3,192,947)
|
|
(786,662)
|
Loss before income
taxes
|
|
(7,471,879)
|
|
(3,196,166)
|
|
(16,908,104)
|
|
(9,047,669)
|
Provision for income
taxes
|
|
-
|
|
-
|
|
-
|
|
-
|
Net
loss
|
|
(7,471,879)
|
|
(3,196,166)
|
|
(16,908,104)
|
|
(9,047,669)
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to Eastside Distilling, Inc. common
shareholders
|
|
$
(7,471,879)
|
|
$
(3,196,166)
|
|
$(16,908,104)
|
|
$
(9,047,669)
|
|
|
|
|
|
|
|
|
|
Basic and diluted
net loss per common share
|
|
$
(0.78)
|
|
$
(0.40)
|
|
$
(1.82)
|
|
$
(1.49)
|
|
|
|
|
|
|
|
|
|
Basic and diluted
weighted average common shares outstanding
|
|
9,632,672
|
|
7,891,776
|
|
9,275,696
|
|
6,074,489
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Year Ended
|
|
|
|
December
31
|
|
December
31
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
|
$
|
(7,471,879)
|
|
$
|
(3,196,166)
|
|
$
|
(16,908,104)
|
|
$
|
(9,047,669)
|
Add:
|
|
|
|
|
|
|
|
|
Interest
Expense
|
184,792
|
|
85,459
|
|
523,391
|
|
789,362
|
Loss on disposal of
property and equipment
|
147,283
|
|
-
|
|
133,179
|
|
-
|
Loss on remeasurement
of deferred consideration
|
2,670,408
|
|
-
|
|
2,670,408
|
|
-
|
Stock-based
compensation
|
156,723
|
|
383,822
|
|
667,397
|
|
1,370,015
|
Stock issued for
services
|
852,440
|
|
102,040
|
|
1,653,759
|
|
558,111
|
Depreciation and
amortization
|
565,843
|
|
494,875
|
|
1,696,755
|
|
757,043
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
|
(2,894,390)
|
|
$
|
(2,129,970)
|
|
$
|
(9,563,215)
|
|
$
|
(5,573,138)
|
|
|
|
|
|
|
|
|
|
|
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SOURCE Eastside Distilling, Inc.