Eastside Distilling(EAST) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q1 2020 was $3.7 million, an 8% increase compared to the same period last year [37] - Gross margins decreased to 26% from 34% in Q1 2019, impacted by a shift in sales mix and negative adjustments totaling $300,000 [37] - EBITDA loss improved by $267,000 to a loss of $1.865 million compared to Q1 2019 [38] - Cash position improved to $1.3 million from $342,000 at the end of 2019 due to closing a credit line [39] Business Line Data and Key Metrics Changes - The on-premise business was heavily affected by COVID-19, leading to a significant decline in sales [11] - Redneck Riviera whiskey saw a 54% growth in depletions compared to Q1 2019, although shipments did not match this growth [33] - Craft Canning experienced strong demand, with expectations for continued growth in Q2 [20][21] Market Data and Key Metrics Changes - The shift to off-premise sales resulted in a loss of approximately $1 million in top-line revenue due to the pandemic [12] - Consumers shifted to larger bottle sizes, negatively impacting sales of smaller bottles where the company primarily competes [11] Company Strategy and Development Direction - The company aims to become a leading mid-tier craft spirits company, focusing on acquiring and developing premium brands [24] - Initiatives to improve sales include promotional discounts and reallocating sales resources to support off-premise sales [13][14] - The company is working on outsourcing production to improve margins and reduce costs [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by COVID-19 but expressed optimism about operational improvements and revenue growth in Q2 [22] - The company is adapting to new market conditions and focusing on execution initiatives to drive growth [35] - There is a commitment to managing expenses and improving cash flow while preparing for business normalization [41] Other Important Information - The company has completed the shutdown of unprofitable retail operations, which will positively impact future financial results [15] - A new board member with extensive experience in consumer products has been appointed to help guide the company's transformation [43] Q&A Session Summary Question: Can you provide insights on outsourcing and its impact on margins? - Management indicated that phase 1 of outsourcing will improve manufacturing overhead and reduce freight costs, with more details to come after negotiations [46][48] Question: Will the company de-emphasize on-premise sales in the near term? - The company plans to pivot back to on-premise sales as conditions allow, while currently focusing on off-premise opportunities [50][51] Question: Is there a case volume target for Redneck Riviera in 2020? - Management has not provided specific case volume targets due to the uncertainty of the COVID environment but will reassess after Q2 [56]