Eastside Distilling Inc (EAST)

[FUNMAN]

10Q review. It's a very interesting Q.

They are spending advertising money like crazy to generate sales. "Advertising, promotional and selling expenses during Q2 2018 increased slightly as a percent of sales to 63.7% of sales compared to 62.2% during Q2 2017 ..."
 
They are calling on Warrants to be exercised to raise more than $5 million dollars.
 
""The Common Stock Purchase Warrants are currently exercisable for an aggregate of 1,509,162 shares of common stock.

""Since the end of the second quarter, the company has received exercises totaling 984,087 shares or $5,314,069, with the majority of those occurring since the call was announced on August 3.""
 
They are adding to aged inventory at a very rapid pace.

" The company ended the quarter with $2.4 million in cash and inventories of $7.9 million (at cost) consisting primarily of barrels of light whiskey, bourbon whiskey and rye whiskey stored in third party warehouses. The inventory balance reflects an increase of $2.6 million compared to three months ago as the company continued to purchase multi-year supplies of bulk spirits ... "
 
Gross Margins are 49.9% which is very good.
 
They are happy to be gaining distribution into more states but don't be fooled. Case sales were 18,401. Divided by 28 states where they are distributed now = 657 cases per state. 
 
While they are obviously selling more cases in their original core distribution area, that means that in most of those 28 states, they've sold nearly no cases. They have a distributor who CAN sell the product in those states.
 
I foresee more capital raises and dilution in the near and foreseeable future.

That said, it's interesting to see some of these institutions getting involved pushing the percentage of ownership up.  
 
There are no requirements for institutions to purchase shares based on any indexes.

Eastside has some believers. Not me yet, but they are definitely worth following.
 
 
 
Owner Name   …  Date   …  Shares Held   …  Change (Shares)   …  Change (%)   …  Value (in 1000s)
BLACKROCK INC.  …  2018-06-30  …  10916  …  10916  …  New   …  86
ORCA INVESTMENT MANAGEMENT LLC  …  2018-06-30  …  212734  …  0  …  0  …  1681
SKYLANDS CAPITAL LLC  …  2018-06-30  …  72224  …  2479  …  3.55  …  571
ROYCE & ASSOCIATES LP   …  2018-06-30  …  16925  …  16925  …  New   …  134
CORNERSTONE WEALTH MANAGEMENT LLC  …  2018-06-30  …  3613  …  3613  …  New   …  29
WELLS FARGO & COMPANY/MN   …  2018-06-30  …  1000  …  0  …  0  …  8
UBS GROUP AG  …  2018-03-31  …  1250  …  1250  …  New   …  10
MANATUCK HILL PARTNERS LLC  …  2018-03-31  …  120000  …  0  …  0  …  948
VANGUARD GROUP INC   …  2018-03-31  …  21365  …  21365  …  New   …  169
CRUISER CAPITAL ADVISORS LLC  …  2018-03-31  …  12963  …  0  …  0  …  102
MORGAN STANLEY   …  2018-03-31  …  2000  …  2000  …  New  …  16
Institutional Ownership   …  9.09%  … 
 … 
 … 
 …   
 
 
Eastside Reports Second Quarter 2018 Financial Results
Mon August 13, 2018 8:00 AM
EPS of $-0.37 misses by $-0.54 Revenue of $1.68M (+ 90.9% Y/Y) beats by $0.24M

Gross Sales increase 90% driven by strong Redneck Riviera shipments



PORTLAND, Ore.--(BUSINESS WIRE)-- Eastside Distilling, Inc. (EAST), a producer of craft spirits, reported second quarter 2018 financial results.

Financial Highlights for Q2 2018 ended June 30, 2018:

Gross sales for Q2 2018 were $1,675,067, an increase of 90% compared to $883,522 in the Q2 2017, led by the continued launch of Redneck Riviera Whiskey, sales from our private label and wine canning operations, as well as resumption of growth within the Pacific Northwest of our rebranded Burnside lineup.
Total shipments increased to 18,401 cases during Q2 2018 from 4,928 cases in Q2 2017, an increase of 273%.
Branded product shipments increased 70% to 7,445 cases in Q2 2018 compared to 4,384 in the year ago quarter.
Case shipments of Redneck Riviera Whiskey were approximately the same in Q2 2018 compared to the very strong Q1 initial launch shipments and we have already received orders in excess of this figure in the first 5 weeks of Q3 2018, reflecting an acceleration beginning to occur as a result of new states and strong reorders from many of the Q1-Q2 2018 initial launch states.
Gross margins improved to 49.9% during Q2 2018 compared to 34.8% during Q2 2017.
EBITDA during Q2 2018 was $(1,250,729), which compared to $(771,402) in Q2 2017 as the company continued to invest in laying the foundation for sustainable growth in the Redneck Riviera Whiskey brand.
Recent Operational Highlights:

Redneck Riviera Whiskey is now distributed in 28 states, with 14 states added since the end of he first quarter. Redneck Riviera Whiskey is now available in Texas, California, Louisiana, Alabama, Georgia, Mississippi, Florida, North Carolina, South Carolina, North Dakota, South Dakota, Oregon, Tennessee, Oklahoma, Nebraska, Kentucky, Missouri, Washington, Iowa, Minnesota, Wisconsin, Alaska, Illinois, Michigan, Kansas, Colorado, Nevada and Arizona.
The company continues to add new distribution partners across the U.S., with Redneck Riviera Whiskey now distributed by Republic National Distributing Company (RNDC), Southern Glazer’s Wine & Spirits, Breakthru Beverage Group, Lipman Brothers, West Tennessee Crown Distributing Co., Lohr Distributing Company, Johnson Brothers Liquor Company, and Worldwide Beverage Group.
An impressive line up of retailers now carry Redneck Riviera Whiskey, including Walmart, ABC Fine Wine & Spirits (Florida), Rouses (Louisiana), Spec’s (Texas), Total Wine & More, Albertsons, and Safeway.
Gretchen Wilson, Granger Smith and Colt Ford joined the Redneck Riviera Whiskey team as Brand Ambassadors, adding to the strong promotional support from John Rich.
Eastside introduced its first American Single Malt Whiskey in limited release which saw immediate success with two very prestigious craft spirits industry awards, a Gold Medal from the 2018 Francisco World Spirits Competition and Best of Category (with 93 points) from the 2018 Los Angeles International Spirits Competition.
The company won 21 medals at the 2018 Los Angeles World Spirits Competition, of these 21 medals, 14 were won by Eastside directly and 7 in the Big Bottom Distilling division, while at the San Francisco World Spirits Competition, Eastside won an impressive 14 medals, with 5 of those won by its Big Bottom Distilling division.
The company completed its first full quarter of wine canning operations.
Management Commentary

Grover Wickersham, Chairman and CEO of Eastside Distilling, commented, “I am pleased with the second quarter results and excited by the opportunities in our immediate future. The quarter was highlighted by the expanding footprint of Redneck Riviera Whiskey, growth of our wine canning operations, and the continuing relaunch of our Burnside family of whiskeys. During Q2 and extending to Q3 we invested heavily in laying the foundation for sustainable growth in the Redneck Riviera Whiskey brand, and this is reflected in our EBITDA. Brand investment included hiring a sales team capable of creating a national brand, promotional budgets for supporting distributors as we opened up new states, spending on point of sale and sales promotions as key retailers began carrying product on their shelves, ramping production, and supporting the brand with marketing. These activities carry a major upfront cost, but we believe they will maximize the performance of the brand.

“Redneck Riviera Whiskey is off to a strong start and is accelerating, with shipments during Q3 2018 being particularly encouraging. We are constantly told that the rapid and accelerating adoption of the brand is highly unusual in the industry. This is a testament to the value of our partnership with John Richand the capabilities of the entire Eastside team. We are excited by the prospects of having strong second half of the year,” concluded Wickersham.

Financial Results

For the quarter ended June 30, 2018, Eastside Distilling reported record gross sales of $1,675,067, an increase of 90% compared to $883,522 in the second quarter of 2017. The increase in sales is primarily attributable to: the newly launched Redneck Riviera Whiskey product, increased wholesale sales traction within the Pacific Northwest due to the rebranding of our Burnside family of products, strong continuing vodka sales, 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 18,401 cases during Q2 2018 (7,445 for branded products and 10,957 for private label which now includes wine canning) from 4,928 cases in Q2 2017 (4,384 for branded products and 544 for private label which excludes any wine canning), an increase of 273% overall and 70% in branded products.

Gross profit margins (as a percent of Net Sales) were 49.9% during Q2 2018 compared to 34.8% during Q2 2017 and approximately 37% overall in fiscal 2017. The improvement in gross profit margins is primarily due to the combination of our new products which have higher margins than prior legacy products as well as the new, lower federal excise tax. While our goal is to ultimately improve our overall gross margin, it may fluctuate around the current level due to the impact of two key factors: product sales mix and the related customer programs and incentives, both of which are subject to seasonal fluctuations and the competitive environment.

Advertising, promotional and selling expenses during Q2 2018 increased slightly as a percent of sales to 63.7% of sales compared to 62.2% during Q2 2017 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 RRW product launch. General and administrative expenses decreased slightly as a percent of sales, but up on a dollar basis primarily due to increased headcount to support the Redneck Riviera and wine canning launches, as well as higher stock-based compensation.

EBITDA during Q2 2018 was $(1,250,729), which compared to $(771,402) in Q2 2017.

Net loss attributable to common shareholders was $(1,906,625), or $(0.37) per basic and diluted share for Q2 2018, compared $(1,287,651), or $(0.40) per basic and diluted share in the year ago period.

The company ended the quarter with $2.4 million in cash and inventories of $7.9 million (at cost) consisting primarily of barrels of light whiskey, bourbon whiskey and rye whiskey stored in third party warehouses. The inventory balance reflects an increase of $2.6 million compared to three months ago as the company continued to purchase multi-year supplies of bulk spirits in advance of anticipated demand for Redneck Riviera Whiskey and our other products. Supplies of aged spirits remain tight and can command significant premiums from vendors and on the secondary market, as well as suffering from a lack of availability. Bulk spirit prices have in recent history increased at double digit rates. By adding strategically to inventories of younger spirits and buying newly filled barrels, the company seeks to reduce the cost of goods sold (“COGs”) of Redneck Riviera Whiskey, Burnside Bourbon and its other whiskey-based products.

On August 3, 2018, the Company called for redemption of the warrants to purchase shares of common stock, that were sold in its public unit offering in August 2017 and the warrants sold in the note offering between March and June 2018 (collectively, the "Common Stock Purchase Warrants"). The Common Stock Purchase Warrants are currently exercisable for an aggregate of 1,509,162 shares of common stock. If all such currently outstanding warrants are exercised within the call exercise period, then the Company will issue an aggregate of 1,509,162 shares of common stock at $5.40 per share and receive gross exercise proceeds of approximately $8,149,475. On the other hand, if all such Common Stock Purchase Warrants are redeemed by Eastside Distilling, Inc. pursuant to the notice of redemption, then the Company will pay to the registered holders of such Common Stock Purchase Warrants an aggregate of approximately $226,374. Since the end of the second quarter, the company has received exercises totaling 984,087 shares or $5,314,069, with the majority of those occurring since the call was announced on August 3.

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 Monday, August 13, 2018

Call-in Information: Interested parties can access the conference call by dialing [phone] or [phone].

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/.

To Ask a Question: The conference call will be moderated by Lytham Partners, an investor relations firm. There will be three options to ask a question during the call:

Questions can be asked live during the call-in portion of the conference call.
The live webcast will feature an option to submit questions in writing during the event.
If you are unable to attend the event, you can submit a question in advance to [e-mail].
Replay: A teleconference replay of the call will be available for three days at [phone] or [phone], confirmation # 10123140. 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. 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.comor 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.

Q2 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 August 13, 2018 on Form 10-Q for the period ended June 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.



Read the financials here:

https://www.sec.gov/Archives/edgar/data/1534708/000149315218011440/form10q.htm