Eastside Reports Third Quarter 2018 Financial Results
Eastside Distilling, Inc. (NASDAQ: EAST), a producer of craft spirits, reported third quarter 2018 financial results.
Financial Highlights for Q3 2018 ended September 30, 2018:
- Gross sales for Q3 2018 were $1,698,848, an increase of 90% compared to $895,182 in Q3 2017, led by the continued launch of Redneck Riviera Whiskey (“RRW”), sales from the Company’s private label and wine canning operations, as well as growth within the Pacific Northwest.
- Total shipments increased to 13,275 cases (8,991 for branded products and 4,284 for private label) during Q3 2018 from 6,162 cases in Q3 (5,462 for branded products and 700 for private label) cases in Q3 2017, an increase of 115%.
- Branded product shipments increased 65% to 8,991 cases in Q3 2018 compared to 5,462 in the year ago quarter.
- Q3 2018 case shipments of Redneck Riviera Whiskey were approximately 4,000, and momentum continues to build in Q4 2018.
- EBITDA during Q3 2018 was $(1,388,078), which compared to $(1,062,977) in Q3 2017 as the company continued to invest in accelerating growth of the Redneck Riviera Whiskey via marketing and sales spending.
- Eastside Distilling has incurred (through the end of September 2018) cumulative sales and marketing expenses to support the rollout of Redneck Riviera Whiskey of over $800,000, of which Eastside will be reimbursed 50% in the event the brand is sold. In addition, beginning October 1st, the Company will be allowed to include a large amount of expenses not previously included in this reimbursable tracking.
- Received $6.1 million in cash and $2.7 million in debt reduction during the third quarter through calling of the publicly-traded Warrants and exercise of the underwriter units.
Recent Operational Highlights:
- Redneck Riviera Whiskey is now distributed in 30 states, though 8 different major distributors.
- Redneck Riviera Whiskey continues to see strong adoption amongst key retailers, including new Q3 2018 authorizations and launches at Albertsons, Safeway, Walmart, Winn-Dixie, Jewel-Osco, Binny’s, and others.
- Redneck Riviera Whiskey is currently located in 4,395 points of distribution (684 on-premise and 3,711 off-premise accounts, which also now include over 1,100 chain-account locations). In addition, already approved authorizations scheduled for rollout in Q1 2019 will substantially add to points of distribution for the chain accounts (with over 1,800 currently planned).
- Costco ordered Redneck Riviera Whiskey for a “road show” test run in two Florida locations in November.
- Formed an LLC in Kentucky as the preliminary step in a partnership with an affiliate of established agricultural company, Caudill Seed, to produce high-grade CBD hemp oil as an ingredient. This is the first step in Eastside developing a U.S. sourced CBD for use in beverages.
- Received TTB approval for the company’s first line of ready-to-drink (RTD) products, “Portland Mule,” based upon Eastside’s award-winning vodka. This will be our Eastside’s first proprietary RTD.
- Took delivery of, and are commissioning, a new 500-gallon still which will enable Eastside to ramp up production of our great gold medal single malt and other products.
- Start of marketing campaign in Oregon to help fuel further growth in Burnside Bourbon case sales.
- Rebranding of the PPV line and release of Marionberry Vodka brand extension.
- The Company celebrated its 10-year anniversary by introducing Burnside Buckman RSV 10-year aged bourbon
- Elected spirits-industry innovator and developer of the Spiked Seltzer Brand, which was sold to ABInbev in 2016, David Holmes to its board of directors. David is currently the CEO of Plant, a company engaged in developing and marketing a beverage based upon hemp derived CBD, a compound that is found in both cannabis and hemp, but that is non-psychoactive.
- Elected Pat Crowley, Hollywood producer of the Bourne films, Jurassic World, and numerous other hit movies to the board of directors to lend his experience with the Company’s celebrity endorsement and co-ownership strategy.
Management Commentary
Grover Wickersham, Chairman and CEO of Eastside Distilling, commented, “We continued to make strong progress with the roll-out of our Redneck Riviera Whiskey product, with year-to-date results significantly surpassing our original expectations. During the quarter, we made strong headway with a number of chain accounts, including new authorizations or launches in key stores, including Walmart, Winn-Dixie, Albertsons, Safeway, Jewel-Osco, and Binny’s, amongst others. We anticipate a significant jump in our points of distribution in early 2019 with these chain accounts based on approved authorizations and the various planned rollout schedules. We also will be running our first test with Costco planned for this month. In addition to the continued adoption of the product in key retailers, we are in the process of opening up the Northeast U.S. market during this 4th quarter, the last major geographic territory for the product. We couldn’t be more pleased with the marketing support of John Rich, who continues to bring awareness to the product through television, radio, social media, in-store bottle signings, personal outreach, and concerts. All told, we are on pace to do something very few, if any other, spirit brands have ever done in their first twelve months on the market. This is a great testament to everyone involved.”
Wickersham continued, “While our focus is clearly on the continued rapid adoption of Redneck Riviera Whiskey, we also have an eye towards the future. In that regard, we have strengthened our board of directors with a focus on a few key areas: additional celebrity-endorsed or co-owned products, as well as ready-to-drink and “evolved” and/or “cannabis derived” beverages. The addition of movie producer, Pat Crowley, and spirit-industry innovator, David Holmes, to our board of directors will be instrumental as we continue to evaluate these options.”
“The fourth quarter is always our seasonally highest quarter of the year. I expect us to further accelerate our growth rates in the coming quarter as Redneck Riviera Whiskey benefits from the launch of our holiday ‘Git Down Pack,’ continued adoption by retailers who are placing initial orders, as well as reorders by our early adopters. We are seeing increased momentum in Oregon as a result of initiatives taken within our Burnside and Portland Potato Vodka lines. We look forward to a strong finish to the year, and stage set for an even better 2019,” concluded Wickersham.
Financial Results
For the third quarter ended September 30, 2018, Eastside Distilling reported record gross sales of $1,698,848, an increase of 90% compared to $895,182 in Q3 2017. The increase in sales is primarily attributable to: the newly launched Redneck Riviera Whiskey product, increased wholesale sales traction within the Pacific Northwest, our acquisitions of MotherLode and BBD and related expansion of our private label business and canning abilities, offset by a reduction in retail due to store relocations.
Total shipments increased to 13,275 cases during Q3 2018 (8,991 for branded products and 4,284 for private label which includes wine canning and bulk spirit sales) from 6,162 cases in Q3 2017 (5,462 for branded products and 700 for private label which excludes any wine canning), an increase of 115% overall and 65% in branded products.
Gross profit margins (as a percent of Net Sales) were 40.4% during Q3 2018 compared to 37.9% during Q3 2017 and approximately 37% overall in fiscal 2017. The change in gross profit margins is primarily due to the change in revenue mix and the lower federal excise tax in 2018. Our Q3 2018 margins, however, were lower than what we experienced in the first and second quarters of 2018, entirely due to lower margins in our private label business. Our branded product margins were consistent in the quarter at over 50%.
Advertising, promotional and selling expenses during Q3 2018 to $1,128,593 compared to $563,754 during Q3 2017. This increase is primarily due to our efforts to expand our product sales both regionally in the Pacific Northwest as well as target national markets, particularly with the new Redneck Riviera Whiskey product launch. For the three months ended September 30, 2018, $465,778 in advertising, promotional and selling expenses is attributable to the Redneck Riviera Whiskey marketing and expansion efforts.
General and administrative expenses during Q3 2018 increased to $1,559,833 compared to $1,040,942 during Q3 2017. This increase is primarily due to increased headcount and the associated compensation and benefits in addition to higher stock-based compensation expense in 2018.
Total other expense, net was $540,250 during Q3 2018 compared to $40,536 during Q3 2017, an increase of $499,714. This increase was primarily due to the recognition of $332,483 of debt discount related to the principal paydown of outstanding notes as a result of the exercise of the warrants attached to those notes in addition to higher interest expense on notes payable in 2018.
EBITDA during Q3 2018 was $(1,388,078), which compared to $(1,062,977) in Q3 2017.
Net loss attributable to common shareholders was $(2,626,991), or $(0.42) per basic and diluted share for Q3 2018, compared $(1,411,461), or $(0.34) per basic and diluted share in the year ago period.
The company ended the quarter with $4.9 million in cash compared to $2.4 million at the conclusion of the preceding quarter. The company ended with inventories of $10.2 million (at cost) consisting primarily of barrels of light whiskey, bourbon whiskey and rye whiskey stored in third party warehouses, compared to $7.9 million (at cost) at the conclusion of the preceding quarter.
Conference Call
The Company will hold a conference call today to discuss these results.
Date and Time: 11:30 am ET (8:30 am PT) on Wednesday, November 14, 2018
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 #10126311. 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 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 and Big Bottom spirits are crafted from natural ingredients for quality and taste. Eastside’s MotherLode Bottling 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; 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. 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.
The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, stock based compensation and gain on spin-off. The table below provides a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure.
Q3 2018 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 November 14, 2018 on Form 10-Q for the period ended September 30, 2018, 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 | ||||||||||
| September 30, 2018 and December 31, 2017 | ||||||||||
|
September 30, |
December 31, |
|||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash | $ | 4,856,389 | $ | 2,586,315 | ||||||
| Trade receivables | 725,091 | 315,321 | ||||||||
| Inventories | 10,175,031 | 4,051,282 | ||||||||
| Prepaid expenses and current assets | 475,716 | 649,749 | ||||||||
| Total current assets | 16,232,227 | 7,602,667 | ||||||||
| Property and equipment, net | 1,482,313 | 728,506 | ||||||||
| Intangible assets, net | 298,227 | 325,668 | ||||||||
| Goodwill | 28,182 | 28,182 | ||||||||
| Other assets | 453,820 | 343,942 | ||||||||
| Total Assets | $ | 18,494,769 | $ | 9,028,965 | ||||||
| Liabilities and Stockholders' Equity | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 1,306,873 | $ | 1,267,189 | ||||||
| Accrued liabilities | 185,299 | 156,163 | ||||||||
| Deferred revenue | 980 | 1,579 | ||||||||
| Current portion of notes payable | 169,005 | 293,726 | ||||||||
| Total current liabilities | 1,662,157 | 1,718,657 | ||||||||
| Secured trade credit facility, net of debt issuance costs | 1,948,108 | - | ||||||||
| Notes payable - less current portion and debt discount | 2,300,000 | 2,161,760 | ||||||||
| Total liabilities | 5,910,265 | 3,880,417 | ||||||||
| Commitments and contingencies (Note 10) | ||||||||||
| Stockholders' equity: | ||||||||||
| Common stock, $0.0001 par value; 15,000,000 shares authorized; | ||||||||||
| 7,202,648 and 4,889,745 shares issued and outstanding at | ||||||||||
| September 30, 2018 and December 31, 2017, respectively | 720 | 489 | ||||||||
| Additional paid-in capital | 36,511,301 | 23,223,435 | ||||||||
| Accumulated deficit | (23,942,464 | ) | (18,090,961 | ) | ||||||
| Total Eastside Distilling, Inc. Stockholders' Equity | 12,569,557 | 5,132,963 | ||||||||
| Noncontrolling interests | 14,947 | 15,585 | ||||||||
| Total Stockholders' Equity | 12,584,504 | 5,148,548 | ||||||||
| Total Liabilities and Stockholders' Equity | $ | 18,494,769 | $ | 9,028,965 | ||||||
| Eastside Distilling, Inc. and Subsidiaries | |||||||||||||||||||
| Consolidated Statements of Operations | |||||||||||||||||||
| For the Three and Nine Months Ended September 30, 2018 and 2017 | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
|
September |
September |
September |
September |
||||||||||||||||
| Sales | $ | 1,698,848 | $ | 895,182 | $ | 4,787,097 | $ | 2,608,373 | |||||||||||
| Less excise taxes, customer programs and incentives | 209,801 | 276,845 | 553,030 | 772,525 | |||||||||||||||
| Net sales | 1,489,047 | 618,337 | 4,234,067 | 1,835,848 | |||||||||||||||
| Cost of sales | 886,828 | 384,265 | 2,278,119 | 1,101,803 | |||||||||||||||
| Gross profit | 602,219 | 234,072 | 1,955,948 | 734,045 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||
| Advertising, promotional and selling expenses | 1,128,593 | 563,754 | 2,838,417 | 1,499,751 | |||||||||||||||
| General and administrative expenses | 1,559,833 | 1,040,942 | 4,267,831 | 2,615,810 | |||||||||||||||
| Loss on disposal of property and equipment | - | - | - | 40,975 | |||||||||||||||
| Total operating expenses | 2,688,426 | 1,604,696 | 7,106,248 | 4,156,536 | |||||||||||||||
| Loss from operations | (2,086,207 | ) | (1,370,624 | ) | (5,150,300 | ) | (3,422,491 | ) | |||||||||||
| Other income (expense), net | |||||||||||||||||||
| Interest expense | (540,250 | ) | (41,436 | ) | (703,903 | ) | (184,998 | ) | |||||||||||
| Other income (expense) | - | 900 | 2,700 | 5,385 | |||||||||||||||
| Total other expense, net | (540,250 | ) | (40,536 | ) | (701,203 | ) | (179,613 | ) | |||||||||||
| Loss before income taxes | (2,626,457 | ) | (1,411,160 | ) | (5,851,503 | ) | (3,602,104 | ) | |||||||||||
| Provision for income taxes | - | - | - | - | |||||||||||||||
| Net loss | (2,626,457 | ) | (1,411,160 | ) | (5,851,503 | ) | (3,602,104 | ) | |||||||||||
| Dividends on convertible preferred stock | - | - | - | 5,037 | |||||||||||||||
| Income (loss) attributable to noncontrolling interests | (534 | ) | 301 | (637 | ) | (1,174 | ) | ||||||||||||
| Net loss attributable to Eastside Distilling, Inc. common shareholders | $ | (2,626,991 | ) | $ | (1,411,461 | ) | $ | (5,852,140 | ) | $ | (3,605,967 | ) | |||||||
| Basic and diluted net loss per common share | $ | (0.42 | ) | $ | (0.34 | ) | $ | (1.07 | ) | $ | (1.08 | ) | |||||||
| Basic and diluted weighted average common shares outstanding | 6,256,459 | 4,142,632 | 5,462,070 | 3,342,332 | |||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, |
September 30, |
|||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Net Loss | $ | (2,626,457 | ) | $ | (1,411,160 | ) | $ | (5,851,503 | ) | $ | (3,602,104 | ) | ||||||
| Add: | ||||||||||||||||||
| Interest Expense | 540,250 | 41,436 | 703,903 | 184,998 | ||||||||||||||
| Loss on disposal of property and equipment | - | - | - | 40,975 | ||||||||||||||
| Provision for Income taxes | - | - | - | - | ||||||||||||||
| Purchase accounting adjustments | - | 1,933 | - | 23,358 | ||||||||||||||
| Stock-based compensation | 334,913 | 206,872 | 986,193 | 486,194 | ||||||||||||||
| Stock issued for services | 259,993 | 74,216 | 456,071 | 413,936 | ||||||||||||||
| Depreciation and amortization | 103,223 | 23,726 | 262,168 | 53,770 | ||||||||||||||
| Adjusted EBITDA | $ | (1,388,078 | ) | $ | (1,062,977 | ) | $ | (3,443,168 | ) | $ | (2,398,873 | ) | ||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20181114005320/en/
Company Contact:
Eastside Distilling
Steve Shum, CFO
(971)
888-4264
[email protected]
or
Investor
Relations Contact:
Lytham Partners, LLC
Robert Blum, Joe
Diaz or Joe Dorame
(602) 889-9700
[email protected]
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