Eastside Distilling, Inc. (NASDAQ: EAST) reported fourth quarter and year end 2018 financial results for the period ended December 31, 2018.
- Q4 2018:
- Gross sales for Q4 2018 were $2,417,205, an increase of 104% compared to $1,183,009 in Q4 2017, led by the continued launch of Redneck Riviera Whiskey (RRW), sales from the Companys private label and wine canning operations and growth within the Pacific Northwest.
- Total shipments increased to 18,765 cases (13,949 for branded products and 4,816 for private label and co-packing) during Q4 2018 from 6,444 cases (5,924 for branded products and 520 for private label and co-packing) cases during Q4 2017, an increase of 191%.
- Branded product shipments increased 135% to 13,949 cases in Q4 2018 compared to 5,924 in the year ago quarter.
- Q4 2018 case shipments of Redneck Riviera Whiskey were approximately 6,500.
- Adjusted EBITDA during Q4 2018 was $(2,129,970), which compared to $(930,472) in Q4 2017 as the company continued to invest in key areas, including the Redneck Riviera Whiskey via marketing and sales.
- Eastside Distilling has incurred (through the end of December 2018) cumulative sales and marketing expenses of over $1.5 million to support the rollout of Redneck Riviera Whiskey and build a national distribution platform.
- Fiscal Year 2018:
- Gross sales for 2018 were $7,204,302, an increase of 90% compared to $3,791,382 in 2017.
- Total shipments increased to 58,746 cases (37,262 for branded products and 21,484 for private label and co-packing) during 2018 from 23,471 cases (19,567 for branded products and 3,904 for private label and co-packing) cases during 2017, an increase of 150%.
- Branded product shipments increased 90% to 37,262 cases in 2018 compared to 19,567 in 2017.
- Adjusted EBITDA during 2018 was $(5,573,138), which compared to $(3,370,320) in 2017.
- Net loss in 2018 was $(9,047,669) compared to $(5,277,917) in 2017.
Recent Operational Highlights:
- Branded products, including Redneck Riviera Whiskey:
- Redneck Riviera Whiskey is now distributed in 39 states through 9 different tier-one distributors.
- Redneck Riviera Whiskey continues to see strong adoption amongst key retailers, including recent authorizations and launches at Albertson, VONS, Pavilions, Safeway, Walmart, Winn-Dixie, Jewel-Osco, Binnys, Meijers, WinCo, and others.
- Redneck Riviera Whiskey is currently located in over 8,000 points of distribution as the brand continues to expand its presence.
- 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.
- Planning to launch Outlandish CBD Beverage in the State of Oregon in March 2019 as Eastside enters the rapidly growing CBD market that is expected to increase to $625 million by 2020.
- Entered into the fast growing Ready-to-Drink (RTD) market with the introduction of the Portland Mule RTD Cocktail, Eastside first branded RTD.
- Co-Packing and private label:
- Company acquired Craft Canning + Bottling (CC+B) in January 2019, a leading provider of mobile canning and bottling services in Oregon, Washington and Colorado with annualized 2018 revenue of $5.9 million and adjusted EBITDA of $1.2 million.
- Eastside now has capacity to produce over 500,000 cases of bottled product, or 2.7 million cases of canned products per year.
- Strong demand trends continue to drive growth in private label, particularly for canning services.
Grover Wickersham, Chairman and CEO of Eastside Distilling, commented, I am pleased with the progress that has gone into elevating Eastside into a true scalable platform. Our ˜brand factory approach to building this business, which includes our ability to leverage our award-winning blending and branding, increasingly efficient production and canning, regional and national distribution, localized retail, and effective marketing techniques, allows us multiple opportunities for long-term success. Redneck Riviera Whiskey has tested and proven that the platform works as one of the more successful first year launches of a spirit. We are rapidly developing and rebranding additional products, including the introduction of new product categories such as RTD cocktails and CBD beverages that further enhances our opportunities for success.
Robert Manfredonia, President of Eastside Distilling, commented, We continue to build wide spread support for Redneck Riviera Whiskey amongst the largest retailers in the U.S. Over the past few months alone, we have substantially increased the points of distribution as retailers have come to understand the growth that Redneck Riviera Whiskey provides them, and the mission that John Rich and Eastside have undertaken to bring the product to their shelves and support a tremendous cause in the Folds of Honor. Throughout 2019, we are looking to further introduce Redneck Riviera product extensions that should further bolster our shelf presence.
Wickersham continued, As we enter 2019, we are well positioned to grow our business and begin to drive efficiencies. The acquisition of Craft Canning + Bottling in January 2019 will not only help us meet the anticipated production ramp from our branded products but will drive revenue and cash flow through their own co-packing business as well. To this point, CC+B had been capacity constrained as they relied strictly on mobile canning operations, and so the ability to leverage our well-equipped fixed production facility in Portland should allow for additional sales synergies and operational efficiencies for both operations. In addition, due to the sizeable market demand and the very short pay-back period, we intend to add additional equipment and hence further add to our capacity and growth in this area.
We enter 2019 in the best position the company has ever been. We have built a scalable platform that allows us to bring products to market quicker and more efficiently than ever before. Redneck Riviera continues to grow at tremendous rates with many new store authorizations coming on line in the first half of this year. Our balance sheet is in a strong position as we have recently made the necessary investments in bulk spirits inventory and production CapEx to meet near-term demands, and expect to continuously drive improvements in our operating results as we move through 2019. With the addition of CC+B, growth in our other areas, and a focus on driving efficiencies and improving operating performance, we look forward to an exciting 2019 for Eastside, concluded Wickersham.
2018 Financial Results
For the year ended December 31, 2018, Eastside Distilling reported record gross sales of $7,204,302 an increase of 90% compared to $3,791,382 in 2017. Increases in wholesale sales and co-packing primarily contributed to the overall 2018 sales increase. Wholesale sales benefited from the rapid launch of the new Redneck Riviera Whiskey product as well as continued strong sales traction within the Pacific Northwest. The Companys private label business experienced increased activity from its new canning capabilities, and also benefited from periodic bulk spirit sales during the year. Our retail operations experienced a decline due to a reduction in event activities and the relocation of a store as part of our efforts to rationalize this area of the business.
Gross profit margins (as a percent of Net Sales) were 38% during 2018 compared to 37% during 2017. Gross profit margins in 2018 benefited by the Craft Modernization and Tax Reform Act of 2017 (the Tax Act) enacted by Congress as part of the 2017 tax legislation package, which was offset by certain low margin private-label transactions, an increase in our production facilities (resulting in lower relative utilization rates) and higher raw material costs experienced during the year (especially in the fourth quarter of 2018).
Advertising, promotional and selling expenses for the year ended December 31, 2018 increased to $4,345,210 or approximately 96% from $2,219,168 for the year ended December 31, 2017. This increase is primarily due to efforts to expand the Companys product sales nationally. General and administrative expenses for the year ended December 31, 2018 increased to $6,225,998, or approximately 76%, from $3,546,659 for the year ended December 31, 2017. This increase is primarily due to added headcount and other expenses to support the planned expansion along with higher non-cash expenses (such as stock-based comp and depreciation and amortization costs). Other expense, net was $789,362 for the year ended December 31, 2018, compared to $448,042 for the year ended December 31, 2017, an increase of 76%. This increase was primarily due to an increase in interest expense. During the year ended December 31, 2017, the Company expensed an impairment of $25,000 of the intangible assets and $193,374 of the goodwill initially recorded in the second quarter 2017 acquisition of Big Bottom Distillery, LLC.
Adjusted EBITDA during 2018 was $(5,573,138), which compared to $(3,370,320) in 2017.
Net loss attributable to common shareholders was $(9,047,669), or $(1.49) per basic and diluted share for 2018, compared $(5,277,316), or $(1.42) per basic and diluted share in the year ago period.
The company ended the year with $10.6 million in cash compared to $4.9 million at the conclusion of the preceding quarter. The company ended with inventories of $11.0 million (at cost) consisting primarily of barrels of light whiskey, bourbon whiskey and rye whiskey stored in third party warehouses. The Company had approximately $5.2 million in long-term debt. The inclusion of CC+B will add approximately $800,000 of additional (mostly) long-term debt. Also, inclusive of the shares issued in connection with the acquisition of CC+B in January 2019, the company had 9.1 million basic shares outstanding as of March 28, 2019.
The Company will hold a conference call today to discuss these results.
Date and Time: 11:30 am ET (8:30am PT) on Thursday, March 28, 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 #10129350. 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. Eastsides Craft Bottling + Canning subsidiary is one of the Northwests leading independent spirit bottlers and ready-to-drink canners. The Company also owns Outlandish LLC, an Oregon LLC for making and selling products that don’t have 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 that involve estimates, assumptions, risks and uncertainties that cause actual results to be materially different. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. Forward-looking statements may be preceded by words such as may, future, plan or planned, will, should, expected, anticipates, continue, eventually, believes, or projected. Forward-looking statements include statements concerning: the market for CBD, achieving a scalable platform, leveraging the Companys brand, making product extensions, continuing to grow and ramp the Companys business and products, adding equipment and capacity, becoming efficient and driving improvements in operating and financial results, among others. 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. The Company assumes no obligation to update the cautionary information in this release.
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 and liquidity and can enhance an overall understanding of financial results and trends.
The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, stock based compensation and gain on spin-off, as may be further adjusted as disclosed below. The table below provides a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure. This measure should not be a substitute for those financial measures reported in accordance with GAAP.
Financial Summary Tables
The following financial information should be read in conjunction with the audited financial statements and accompanying notes filed by the Company with the Securities and Exchange Commission on March 28, 2019 on Form 10-K for the period ended December 31, 2018, and which can be viewed at www.sec.gov and in the investor relations section of the companys website at www.eastsidedistilling.com.
|Eastside Distilling, Inc. and Subsidiaries|
|Consolidated Balance Sheets|
|December 31, 2018 and 2017|
December 31, 2018
December 31, 2017
|Prepaid expenses and current assets||765,146||649,749|
|Total current assets||23,489,560||7,602,667|
|Property and equipment, net||1,758,130||728,506|
|Intangible assets, net||285,676||325,668|
|Liabilities and Stockholders’ Equity|
|Current portion of notes payable||–||293,726|
|Total current liabilities||2,372,584||1,718,657|
|Secured trade credit facility, net of debt issuance costs||2,934,306||–|
|Notes payable – less current portion and debt discount||2,299,800||2,161,760|
|Commitments and contingencies (Note 10)|
|Common stock, $0.0001 par value; 15,000,000 shares authorized;|
|8,764,085 and 4,889,745 shares issued and outstanding at|
|December 31, 2018 and December 31, 2017, respectively||876||489|
|Additional paid-in capital||45,888,872||23,223,435|
|Total Eastside Distilling, Inc. Stockholders’ Equity||18,751,118||5,132,963|
|Total Stockholders’ Equity||18,751,118||5,148,548|
|Total Liabilities and Stockholders’ Equity||$||26,357,808||$||9,028,965|
|Eastside Distilling, Inc. and Subsidiaries|
|Consolidated Statements of Operations|
For the Twelve Months Ended December 31, 2018 and 2017
|Twelve Months Ended|
December 31, 2018
December 31, 2017
|Less excise taxes, customer programs and incentives||1,080,792||1,180,386|
|Cost of sales||3,813,309||1,634,069|
|Advertising, promotional and selling expenses||4,345,210||2,219,168|
|General and administrative expenses||6,225,998||3,546,659|
|Loss on disposal of property and equipment||–||40,975|
|Total operating expenses||10,571,208||5,806,802|
|Loss from operations||(8,261,007||)||(4,829,875||)|
|Other income (expense), net|
|Other income (expense)||2,700||(212,989||)|
|Total other expense, net||(786,662||)||(448,042||)|
|Loss before income taxes||(9,047,669||)||(5,277,917||)|
|Provision for income taxes||–||–|
|Income (loss) attributable to noncontrolling interests||–||601|
|Net loss attributable to Eastside Distilling, Inc. common shareholders||$||(9,047,669||)||$||(5,277,316||)|
|Basic and diluted net loss per common share||$||(1.49||)||$||(1.42||)|
|Basic and diluted weighted average common shares outstanding||6,074,476||3,717,956|
|Three Months Ended||Fiscal Year End|
|December 31||December 31|
|Loss on disposal of property and equipment||–||40,975||–||40,975|
|Provision for Income taxes||–||–||–||–|
|Purchase accounting adjustments||–||–||–||23,358|
|Impairment of intangible assets||–||218,374||–||218,374|
|Stock issued for services||102,040||228,373||558,111||642,309|
|Depreciation and amortization||494,875||130,402||757,043||184,172|
Steve Shum, CFO
Investor Relations Contact:
Lytham Partners, LLC