PORTLAND, Ore., Nov. 14, 2016 /PRNewswire/ --Eastside Distilling, Inc. (OTCQB: ESDI), a producer of award-winning master-crafted spirits, reported financial results for the third quarter ended September 30, 2016.
Gross sales increased to $796,000 during third quarter of 2016, compared to $492,000 in the year ago period, an increase of 62%;
Net sales (excluding excise taxes) for the third quarter of 2016 increased 73% to $607,000 compared to the third quarter of 2015;
Third quarter total shipments increased 81% to 3,974 cases from 2,191 cases in the year ago quarter, bringing trailing twelve-month case shipments to 14,712;
42% of sales during the third quarter came from outside the Company's home state of Oregon compared to 23% in the year ago period as orders expand;
The Company's Burnside 'Oregon Oaked' Bourbon received a double gold medal, while its Barrel Hitch 'Oregon Oak' American Whiskey earned a silver medal at the prestigious 2016 New York Wine and Spirits Competition;
The Eastside Board of Directors expanded to five directors, of which four are "independent" as defined by the SEC as the Company prepares for growth as a business and as a public company; and
In efforts to gain access to an increasing number of investors, while striving to meet minimum listing requirements of a national exchange such as the NASDAQ or NYSE, the Company instituted a reverse stock split with a record date of October 17, 2016. Following the split, the Company now has approximately 4.8 million shares outstanding.
Third Quarter 2016 Financial Results
Gross sales in the third quarter of 2016 increased 62% to approximately $796,000 from $492,000 in the year-ago period. Gross sales for the first nine months of 2016 were up 52% to approximately $2.0 million. On a net sales basis (less excise taxes), sales were up 73% to approximately $607,000 in Q3 2016 versus the year-ago quarter, and up 61% to approximately $1.6 million in the first nine months compared to the nine months ended September 30, 2015. The increase in both periods was primarily due to expanded distribution into new states along with continued growth in the Company's home Oregon market. Case sales in Oregon increased 19% during the third quarter of 2016. However, wholesale case sales in Oregon grew 61% while the Oregon retail sales declined 34%, primarily due to fewer Company-owned retail locations operating during the quarter. Case sales outside of Oregon grew 182% compared to the year ago period, as the Company's efforts to expand distribution beyond Oregon continued to gain momentum.
Gross profit margins were 38.9%, compared to gross margins of 52.4% in the same year-ago period. The change in gross margin is attributed to the fluctuation in sales mix from quarter to quarter as well as higher raw material costs incurred during the quarter. As a result of improved material purchases since quarter end, the Company expects gross profit margins to improve going forward.
Net loss totaled $1.4 million or ($0.31) per diluted share versus a loss of $1.4 million or ($0.62) per diluted share in the same year-ago period. Included in the third quarter of 2016 were certain unusual non-operating expenses, including certain legal and professional fees of approximately $220,000. Additionally, on November 10, 2016, the Company filed an 8-K referencing certain cost cutting initiatives.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, stock based compensation and gain on spin-off) totaled a loss of $1.2 million in Q3 2016 compared to a loss of $0.7 million in the year-ago quarter (see discussion about the presentation of adjusted EBITDA, a nonGAAP term, and reconciliation to the nearest GAAP metric, below). As previously mentioned, the third quarter also included certain unusual non-operating expenses.
"I am pleased with the transformation taking place within the operations of our business, as well as the structure of our company, to drive value on a go forward basis," said Eastside president and chief executive officer, Steven Earles. "We continue to see tremendous acceptance of our unique spirits throughout the country as our national rollout campaign continues, having shipped a 3rd quarter record 3,974 cases during the third quarter, and 14,712 during the last 12 months. Our objective to drive case volumes through expanded distribution agreements and strong marketing support continues to gain traction.
"Eastside's products are now available in 22 states across the country, including all five of the largest liquor consumption states. Recently, we shipped our largest single order to date of approximately 2,000 cases to the East Coast (or approximately 1,000 adjusted for 12-pack cases), where shipments have been increasing since we entered the market back in Q3 of 2015. With approximately 42% of our sales now coming from outside our home state of Oregon, the success of our national rollout strategy is evident as we enter our strongest quarter of the fiscal year.
"While we maintain our efforts on driving case volumes and sales, we are simultaneously focused on doing the things we believe are necessary to improve the structure of the Company to drive long-term value. Recently, we expanded our board of directors to meet SEC independence requirements, made some improvements to our cost structure, and have enacted a reverse stock split we believe will help expand our reach to new investors, while setting the stage for a potential uplisting to a national exchange such as the NYSE or NASDAQ."
Mr. Earles concluded, "We believe there is a strong foundation in place to take advantage of some significant industry trends, specifically the boom taking place within bourbons and whiskeys. We believe there is an opportunity for significant value creation as we strive towards our near term goals, which will be driven by exceptional products, expanded distribution and strong marketing support. With a strong and energized team and tremendous distribution partners in place, we look forward to the future with great optimism."
Conference Call The Company will hold a conference call today, Monday, November 14, 2016, at 4:30 p.m. Eastern time to discuss these results.
Date: Monday, November 14, 2016 Time: 4:30 p.m. Eastern time (1:30 p.m. Pacific time) Toll-free dial-in number: (877) 317-6789 International dial-in number: (412) 317-6789
Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Lytham Partners at (602) 889-9700.
A telephone replay of the call will be available until November 17, 2016: Toll-free replay number: (877) 344-7529 International replay number: (412) 317-0088 Replay ID: 10095652
About Eastside Distilling Eastside Distilling, Inc. (OTCQB: ESDI) is located in Southeast Portland's Distillery Row and has been producing high-quality, master-crafted spirits since 2008. Makers of award winning spirits, the Company is unique in the marketplace and distinguished by its highly decorated product line-up that includes Barrel Hitch American Whiskies, Burnside Bourbon, Below Deck Rums, Portland Potato Vodka and a distinctive line of infused whiskeys. All Eastside spirits are master crafted from natural ingredients for unparalleled quality and taste. The Company is publicly traded under the symbolOTCQB: ESDI. For more information, visit: www.eastsidedistilling.com
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 Company's ability to continue as a going concern; acceptance of the Company's products in the market; the Company's success in obtaining new customers; the Company's ability to obtain additional capital, 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, including the financial statements and related information contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on April 13, 2016. Examples of forward-looking statements in this release may include statements related to our strategic focus, product verticals, anticipated revenue and profitability. Further, such forward looking statements in this press release include but are not limited to: that the Company's growth will continue on its current trajectory; the stage is set for significant growth and improved bottom line performance ahead and beyond; that the second half is traditionally our busiest of the year, when the Company typically generates close to 70% of its annual business. 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.
Three Months Ended
Nine Months Ended
Gain on Spin-off
Provision for Income taxes
Stock issued for services
Depreciation and amortization
Third Quarter 2016 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 November 14, 2016 in its Quarterly Report on Form 10-Q for the period ended September 30, 2016, 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 Subsidiary
Condensed Consolidated Statements of Operations
For the three and nine months ended September 30, 2016 and 2015
Three Months Ended
Nine Months Ended
September 30, 2016
September 30, 2015
September 30, 2016
September 30, 2015
Less excise taxes
Cost of sales
Selling, general, and administrative expenses
Loss from operations
Other (expense) income - net
Loss before income taxes
Provision for income taxes
Dividends on convertible preferred stock
Net loss available to common shareholders
Basic and diluted net loss per common share
Basic and diluted weighted average common shares outstanding
Eastside Distilling, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
September 30, 2016 and December 31, 2015
September 30, 2016 (unaudited)
December 31, 2015
Total current assets
Property and equipment - net
Liabilities and Stockholders' Deficit
Current portion of notes payable
Related party note payable
Convertible notes payable - net of debt discounts
Total current liabilities
Notes payable - less current portion and debt discount
Commitments and contingencies (Note 9)
Series A convertible preferred stock, $0.0001 par value; 100,000,000 shares authorized; 972 and 0 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively (liquidation value of $2,430,000 at September 30, 2016)
Common stock, $0.0001 par value; 45,000,000 shares authorized; 4,766,659 and 2,309,750 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively