Eastside Distilling (ticker: EAST) has released its financial results for the third quarter of 2024, highlighting a turnaround in its spirits division with positive EBITDA before corporate expenses and an increase in gross profit. The company reported sales of $783,000, with its vodka sales performing well. However, the tequila brand Azuñia faced challenges due to distribution changes.
Eastside also raised $440,000 through a direct equity placement and announced the acquisition of Beeline Financial Holdings, Inc., a digital mortgage technology company. The company is in the process of consolidating Beeline's operations and will provide more detailed information in the future.
Key Takeaways
- Eastside Distilling reported Q3 sales of $783,000 and an improvement in gross profit.
- The spirits division generated a positive EBITDA of $46,000 before corporate expenses.
- Vodka sales were strong, while the tequila brand Azuñia struggled due to distribution changes.
- Corporate expenses increased due to professional fees related to the merger transaction.
- Eastside raised $440,000 through a direct equity placement.
- The company acquired Beeline Financial Holdings, a digital mortgage technology firm.
- Detailed information on Beeline will be provided after the consolidation is complete.
Company Outlook
- Eastside Distilling is in the process of consolidating operations with the recently acquired Beeline Financial Holdings.
- The company expects to benefit from favorable market conditions, including lower interest rates and a thriving mortgage origination business.
- Eastside's Board had initiated a strategic review two years ago to enhance shareholder value, leading to the acquisition of Beeline.
- Beeline is positioned for growth, focusing on innovating the mortgage origination sector with advanced technology.
Bearish Highlights
- The tequila brand Azuñia continues to face challenges in the market.
- There was an increase in corporate expenses due to merger-related professional fees.
Bullish Highlights
- Eastside's spirits division achieved positive EBITDA, marking a significant turnaround.
- The acquisition of Beeline presents a new opportunity in a market exceeding $1.5 trillion annually.
- Beeline has a track record of innovation and is expected to align with Eastside's public company objectives.
Misses
- No specific financial misses were discussed during the call.
Q&A Highlights
- The traditional Q&A session was forgone this quarter due to the ongoing finalization of the Beeline transaction and adherence to corporate governance practices.
In summary, Eastside Distilling's third-quarter performance indicates a positive shift in its spirits business, with a focus on restructuring and achieving profitability.
The strategic acquisition of Beeline Financial Holdings is set to bring new opportunities to the company, leveraging technology to innovate in the mortgage origination sector.
While facing some challenges, Eastside is optimistic about the future growth and alignment with its objectives as a public company. Further details on Beeline's contributions and plans for the upcoming year will be disclosed at the end of the year and in subsequent public filings.
InvestingPro Insights
Eastside Distilling's recent financial results and strategic moves can be further contextualized with data from InvestingPro. The company's market capitalization stands at a modest $2.63 million, reflecting its current position as a small-cap player in the spirits industry.
Despite the reported improvement in the spirits division's EBITDA, InvestingPro data reveals some concerning financial metrics. The company's revenue for the last twelve months as of Q2 2024 was $10.35 million, with a revenue growth rate of -4.19%. This decline aligns with the challenges mentioned in the article, particularly regarding the Azuñia tequila brand's distribution issues.
InvestingPro Tips highlight that Eastside Distilling "operates with a significant debt burden" and "may have trouble making interest payments on debt." These tips are particularly relevant given the company's recent equity placement to raise $440,000, suggesting a need for additional capital.
The company's gross profit margin for the last twelve months stands at a low 7.08%, which corresponds with the InvestingPro Tip indicating that Eastside "suffers from weak gross profit margins." This metric underscores the importance of the company's efforts to improve profitability in its spirits division.
It's worth noting that InvestingPro offers 14 additional tips for Eastside Distilling, providing a more comprehensive analysis for investors interested in delving deeper into the company's financial health and market position.
The acquisition of Beeline Financial Holdings represents a significant strategic shift for Eastside Distilling. However, investors should consider the InvestingPro Tip that the company is "quickly burning through cash," which may impact its ability to fully capitalize on this new venture without additional financing.
As Eastside Distilling continues its transformation and integration of Beeline, investors will be watching closely to see if these strategic moves can address the financial challenges highlighted by InvestingPro's data and tips.
Full transcript - Eastside Distilling Inc (NASDAQ:EAST) Q3 2024:
Operator: Good evening, and welcome to the Eastside Distilling Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tiffany Milton. Please go ahead.
Tiffany Milton: Good evening, everyone. Thank you for joining us today to discuss Eastside Distilling's financial results for the Third Quarter of 2024. I'm Tiffany Milton, Eastside's Chief Accounting Officer. And joining us on today's call to discuss these results is Geoffrey Gwin, the company's Chief Executive Officer. Certain matters discussed on this conference call by the management of Eastside Distilling may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements describe future expectations, plans, results or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft, eventually or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those projected in the forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially include, but are not limited to, the company's acceptance and the company's products in the market, success in obtaining new customers, success in product development, ability to execute the business model and strategic plans, success in integrating acquired entities and assets, ability to obtain capital, ability to continue its going concern 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 pertaining to the company's annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission. Now with that said, I welcome you all to our third quarter conference call. The agenda for our call today is to review the third quarter numbers, and then Geoffrey Gwin, our CEO, will discuss the results for the third quarter and the recently announced Beeline's transaction. Now let's discuss our third quarter performance. We have classified craft as a business held for sale, so today's results reflect only our Spirits and Corporate segments. For the quarter, we reported sales of $783,000 and an improvement in gross profit. Our spirits division generated $46,000 in positive EBITDA before corporate expenses, a notable turnaround from a loss in the previous year. This improvement highlights the progress we've made in restructuring our spirits business despite facing challenges in the broader spirits market. Our vodka sales performed well, while our tequila brand, Azuñia, continues to struggle due to distribution changes we've previously mentioned. We did see an increase in corporate expenses due to significant professional fees related to the merger transaction. Additionally, we raised $440,000 through a direct equity placement. For a detailed discussion on the merger and debt exchange, please refer to the subsequent events section of our Form 10-Q. Now I'd like to turn the call over to Geoffrey Gwin. Geoffrey, please proceed.
Geoffrey Gwin: Thank you, Tiffany. As previously disclosed in our SEC filings, we recently acquired Beeline Financial Holdings, Inc., a digital mortgage technology company. Since we are in the process of consolidating Beeline's operations with our own, we believe it would be premature to provide incomplete information about Beeline until the consolidation is complete. We intend to file additional information concerning Beeline in the future, including audited financial statements, which will be included in a current report on Form 8-K and will be filed here shortly. That said, I'm delighted to welcome the Beeline management team, Nick Luizza, Chris Moe and Jess Kennedy, as well as all the Beeline employees. This is an exceptional team of people, exceptional leadership group that brings a unique vision and extensive experience that we are thrilled to have them on board here at Eastside. And nearly 2 years ago, Eastside's Board initiated a strategic review to explore avenues for enhancing shareholder value. Initially, we considered focusing on our spirits business, including the potential sale of one or more brands. Our immediate objective was to restructure the spirits division to achieve profitability. During this period, we successfully transformed Craft too from a small regional mobile canning operation into a digital can printing operation in the Pacific Northwest. Earlier this year, it became clear that to meet our business objectives for both companies to maintain our status as a public company, we needed to reassess the opportunities available to each of these businesses, particularly in the light of the constraints, which are not unique just to Eastside, but also more broadly affecting all small public companies these days. This led us to pursue a potential sale of Craft and to reduce our debt, ultimately creating the opportunity to acquire Beeline. As you will learn in the coming days, Beeline is a great opportunity in my view. In summary, it's a dynamic company focused on innovating the mortgage origination sector through advanced technology. Beeline is well positioned for significant growth, aligning seamlessly with our public company objectives, especially in the context of a favorable market conditions such as those that we expect going forward with lower interest rates and a thriving mortgage origination business. I firmly believe that the mortgage opportunity we are pursuing is extraordinary. The annual mortgage origination market in the U.S. exceeds $1.5 trillion. It represents one of the last segments of personal finance yet to be fully transformed by modern technology. The Beeline team has a proven track record of innovation in this field with lower rates, pent-up demand and new technologies designed to enhance sales and reduce costs, Beeline's business model is particularly compelling. Now turning to our spirits business. I'm very pleased to report that we did achieve positive EBITDA in the quarter, a milestone for the company. While we still face a number of challenges in the business, including substantial headwinds, which are on the -- we are on the right path, I think, and I expect continued improvement in spirits through the year with most of the restructuring activities now behind us. In conclusion, I'm very excited about the future and encourage you to review our public filings as we approach the end of the year. At the appropriate time, we'll outline our plans for the upcoming year, including Beeline's contributions. Given that we are in the process of finalizing this transaction, as I said earlier, and maintain best practices of corporate governance and fair disclosure, we'll forgo our traditional Q&A session this quarter. And we will obviously resume that at our next meeting. Thank you for your continued interest in Eastside, and we look forward to sharing more of our vision with you soon.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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