PORTLAND, Ore., May 14, 2020 /PRNewswire/ -- Eastside Distilling,
Inc. (NASDAQ: EAST) reported first quarter 2020 financial results
for the period ended March 31,
2020.
Financial Results
Gross sales for the first quarter of 2020 were $3.7 million compared to $3.5 million for the first quarter of 2019, an
increase of 8%. The increase in gross sales is primarily
attributable to contributions from the Azuñia Tequila brand which
were acquired in September 2019,
offset by a decrease in sales of Redneck Riviera Whiskey products
and Co-Packing Services. Gross sales exclude Retail / Special
Events sales that have been classified as Discontinued
Operations.
Amounts shown in
thousands
|
|
|
|
|
|
Q1
2020
|
|
Q1
2019
|
Change
|
|
|
|
|
|
Total Gross
sales
|
$
3,746
|
|
$
3,460
|
8%
|
|
|
|
|
|
Redneck Riviera
Sales
|
616
|
|
877
|
-30%
|
|
|
|
|
|
Azuñia Tequila
Sales
|
994
|
|
-
|
-
|
|
|
|
|
|
Burnside Whiskey
Sales
|
199
|
|
196
|
2%
|
|
|
|
|
|
Portland Potato
Vodka Sales
|
352
|
|
279
|
26%
|
|
|
|
|
|
All other
brands
|
90
|
|
114
|
-21%
|
|
|
|
|
|
Co-Packing
Services and Barrel Sales
|
1,495
|
|
1,994
|
-25%
|
Note: Retail / Special Events sales moved to Discontinued
Operations
Gross margins on net sales were 26% for the first quarter of
2020, compared to 33% during the first quarter of 2019. The
reduction in gross margins year over year is primarily attributable
to an increase in sales in the Azuñia and Portland Potato
Vodka product lines, both of which carry lower margins than the
company average as well as $0.1
million of unabsorbed manufacturing overhead related to
lower wholesale production levels and $0.2
million adjustment to inventory in the quarter. The Company
is focused on improving overall gross margins by evaluating
outsourced production as a means to lower cost of goods sold and
increasing efficiency while reducing overhead of its production
facilities.
Operating expenses were $3.9
million for the first quarter of 2020, which included
$1.1 million of non-cash expenses,
compared to $3.8 million, which
included $0.6 million of non-cash
expenses for the first quarter of 2019. The change in operating
expenses consisted of a $0.8 million
decrease in cash general and administrative expenses, specifically
a reduction in compensation and benefits, legal and professional
fees and rent, insurance and other costs offset by a $0.4 million increase in non-cash general and
administrative expenses and a $0.5
million increase in sales and marketing expenses.
Marketing expenses related to Redneck Riviera Whiskey for the
first quarter were $0.3
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
the first quarter of 2020, the eligible amount for 50%
reimbursement was $0.1 million. The
cumulative reimbursement amount is $2.5
million.
During the first quarter of 2020, the Company focused its sales
and marketing efforts on the distribution of its brands through the
national platform, resulting in the decision to close all four of
its retail stores in Portland,
Oregon by March 31,
2020. The retail stores lost $0.2
million during the first quarter. This decision meets
the criteria for reporting the retail operations as discontinued
operations in the accompanying unaudited condensed consolidated
financial statements. In the current year, the income, expense and
cash flows from retail operations during the period they were
consolidated have been classified as discontinued operations. For
comparative purposes amounts in the prior periods have been
reclassified to conform to current year presentation. Additionally,
the assets and liabilities from retail operations are shown on the
balance sheet as assets and liabilities for discontinued
operations.
Net loss was $(3.5) million for
the first quarter of 2020, compared to $(2.9) million in the first quarter of 2019.
Adjusted EBITDA was $(1.8) million
for the first quarter of 2020, compared to $(2.1) million in the first quarter of 2019.
Adjusted EBITDA is a non-GAAP figure and is explained and
reconciled below.
In April 2020, the Company entered
into loan agreements with Live Oak Banking Company under the
Paycheck Protection Program of the Coronavirus Aid, Relief, and
Economic Security Act totaling approximately $1.4 million in aggregate. The final loan
agreements were filed in a Form 8-K with the Securities and
Exchange Commission.
Case Volume (9-Liter Equivalent)
Amounts shown in
thousands
|
|
|
|
|
|
Q1
2020
|
|
Q1
2019
|
Change
|
|
|
|
|
|
Redneck Riviera
Case Volume
|
4.4
|
|
5.7
|
-23%
|
|
|
|
|
|
Azuñia Tequila
Case Volume
|
4.1
|
|
-
|
-
|
|
|
|
|
|
Burnside Whiskey
Case Volume
|
1.0
|
|
1.1
|
-5%
|
|
|
|
|
|
Portland Potato
Vodka Case Volume
|
4.5
|
|
3.7
|
24%
|
|
|
|
|
|
All other
brands
|
0.7
|
|
1.0
|
-27%
|
|
|
|
|
|
COVID-19 Impact to Q1 2020
As previously reported on March 30,
2020, the first quarter of 2020 started strong. However,
starting in mid-February through the end of March, there was a
slowdown in sell-through as a result of COVID-19. Additionally, the
off-premise retailers delayed the commencement of the planned
Burnside Whiskeys and Hue-Hue Coffee Rum national launch as a
result of COVID-19.
The Company enacted a series of initiatives to improve
sell-through, including offering promotional discounts on Redneck
Riviera Whiskey and Azuñia Tequila, as well as a focus towards
online sales. Further, with the shutdown of on-premise accounts
throughout much of the country, Eastside began 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. Additionally, brewers have shifted to canned beer
instead of kegs as the on-premise market is not likely to return to
normal operations soon. All of these factors have pushed
demand towards the Company's mobile canning business.
Management Commentary
"I am pleased with our depletions, as we saw a 54% improvement for
Redneck Riviera Whiskey through April, compared to the same period
a year ago," said Lawrence
Firestone, CEO. "I believe our rapid pivot during this
unique period of time towards activations and rate of sale will be
rewarded in the months and quarters to come as distributors and
retailers recalibrate their inventory levels which will better
align shipments and depletions."
"We continue to focus on ways to become more efficient across
our entire organization," Mr. Firestone continued. "We have
decreased our inventory levels by $1.3
million since the end of the year, shut down our retail
operations, and progressed with our outsourcing initiatives. These
changes, coupled with a return to a more normal operating
environment in the off-premise business allows us to continue to
drive our growth initiatives."
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 Thursday, May 14, 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
#10143717. 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 Whiskeys, newly acquired Azuñia Tequilas, Burnside
Whiskeys, 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 earnings guidance for the
first quarter of 2020. 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-Q for the period ended March 31,
2020, 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
|
March 31, 2020 and
December 31, 2019
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash
|
$
1,255,329
|
|
$
342,678
|
Trade
receivables
|
1,170,444
|
|
1,324,333
|
Inventories
|
11,056,022
|
|
12,331,133
|
Prepaid expenses and
current assets
|
243,608
|
|
397,083
|
Current assets from
discontinued ops
|
-
|
|
74,892
|
Total current
assets
|
13,725,403
|
|
14,470,119
|
Property and
equipment, net
|
4,226,576
|
|
4,687,469
|
Right of use
assets
|
455,093
|
|
577,856
|
Intangible assets,
net
|
14,546,253
|
|
14,674,790
|
Goodwill
|
28,182
|
|
28,182
|
Other assets,
net
|
1,203,831
|
|
1,165,581
|
Non-current assets
from discontinued operations
|
120,803
|
|
261,866
|
Total
Assets
|
$
34,306,141
|
|
$
35,865,863
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
2,211,591
|
|
$
2,881,185
|
Accrued
liabilities
|
987,233
|
|
888,296
|
Deferred
revenue
|
51,375
|
|
-
|
Secured trade credit
facility - less debt issuance costs
|
6,301,775
|
|
-
|
Current portion of
lease liability
|
352,584
|
|
423,671
|
Current portion of
notes payable
|
961,664
|
|
1,819,172
|
Current liabilities
of discontinued operation
|
28,794
|
|
125,278
|
Total current
liabilities
|
10,895,016
|
|
6,137,602
|
Lease Liability -
less current portion
|
200,305
|
|
274,863
|
Secured trade credit
facility, net of debt issuance costs
|
-
|
|
2,961,566
|
Deferred
Consideration for Azuñia acquisition (Long Term)
|
15,451,500
|
|
15,451,500
|
Notes payable - less
current portion and debt discount
|
3,381,534
|
|
3,594,254
|
Long term liabilities
of discontinued operations
|
96,535
|
|
112,760
|
Total
liabilities
|
$
30,024,890
|
|
$
28,532,545
|
|
|
|
|
Commitments and
contingencies (Note 12)
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $0.0001
par value; 15,000,000 shares authorized; 9,765,826 and 9,675,028 shares issued and outstanding
at March 31, 2020 and December 31,
2019, respectively
|
976
|
|
967
|
Additional paid-in
capital
|
52,022,911
|
|
51,566,438
|
Accumulated
deficit
|
(47,742,636)
|
|
(44,234,087)
|
Total Eastside
Distilling, Inc. Stockholders' Equity
|
4,281,251
|
|
7,333,318
|
Total Liabilities
and Stockholders' Equity
|
$34,306,141
|
|
$
35,865,863
|
Eastside
Distilling, Inc. and Subsidiaries
|
Consolidated
Statements of Operations
|
For the Three
Months Ended March 31, 2020 and 2019
|
|
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2020
|
March 31,
2019
|
Sales
|
|
$
3,745,951
|
$
3,460,779
|
Less customer
programs and excise taxes
|
|
362,387
|
105,069
|
Net sales
|
|
3,383,564
|
3,355,710
|
Cost of
sales
|
|
2,508,798
|
2,254,726
|
Gross
profit
|
|
874,766
|
1,100,984
|
Operating
expenses:
|
|
|
|
Sales and marketing
expenses
|
|
1,698,761
|
1,219,176
|
General and
administrative expenses
|
|
2,184,763
|
2,596,236
|
Loss on disposal of
property and equipment
|
|
1,221
|
-
|
Total operating
expenses
|
|
3,884,745
|
3,815,412
|
Loss from
operations
|
|
(3,009,979)
|
(2,714,428)
|
Other income
(expense), net
|
|
|
|
Interest
expense
|
|
(303,595)
|
(107,410)
|
Total
other expense, net
|
|
(303,595)
|
(107,410)
|
Loss before income
taxes
|
|
(3,313,574)
|
(2,821,838)
|
Provision for income
taxes
|
|
-
|
-
|
Net loss from
continuing operations
|
|
(3,313,574)
|
(2,821,838)
|
|
|
|
|
Net income (loss)
from discontinued operations
|
|
(194,975)
|
(121,601)
|
|
|
|
|
Net loss
attributable to Eastside Distilling, Inc. common
shareholders
|
|
(3,508,549)
|
(2,943,439)
|
|
|
|
|
Basic and diluted
net loss per common share
|
|
$
(0.36)
|
$
(0.32)
|
|
|
|
|
Basic and diluted
weighted average common shares outstanding
|
|
9,754,850
|
9,099,382
|
|
|
|
Three Months
Ended
|
|
|
|
March 31
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
Net Loss
|
$
(3,508,549)
|
|
$
(2,943,439)
|
|
Add:
|
|
|
|
|
|
Interest
Expense
|
303,595
|
|
107,410
|
|
|
Loss on disposal of
property and equipment
|
1,221
|
|
-
|
|
|
Loss from
discontinued operations
|
194,975
|
|
121,601
|
|
|
Stock-based
compensation
|
497,599
|
|
245,776
|
|
|
Depreciation and
amortization
|
645,276
|
|
336,700
|
|
|
|
|
|
|
Adjusted
EBITDA
|
$
(1,865,883)
|
|
$
(2,131,952)
|
View original
content:http://www.prnewswire.com/news-releases/eastside-reports-first-quarter-2020-financial-results-301059731.html
SOURCE Eastside Distilling, Inc.