Eastside Distilling, Inc. of Portland, Oregon, reported fourth quarter and year end 2021 financial results for the period ended December 31, 2021.
Year End 2021 Highlights:
- Raised $4.0 million of cash during the quarter and $3.5 million subsequent to year-end; the proceeds will primarily be used to fund the 3-year strategic growth initiatives
- Improved spirits gross profit over 50% for the year despite challenging business environment
- Significant reduction in operating costs and improved EBITDA performance year over year
- Reduced $13 million of debt and increased working capital by $22 million year over year
“2021 was a difficult year for Eastside. Our businesses were impacted by the pandemic and supply chain challenges, yet we exited the year with a stronger balance sheet,” said Geoffrey Gwin, Eastside’s CEO. “Despite these challenges, we made substantial investments in 2021 to drive growth in 2022.”
Gross sales for the year ending December 31, 2021 decreased to $12.9 million from $14.8 million for the year ending December 31, 2020 primarily driven by a decrease in mobile canning revenue. During 2021, craft brewers have begun to shift sales back to on-premise locations that utilize higher margin kegs. Increased competition in aluminum canning and higher supply chain costs impacted the Company’s ability to achieve its sales and margins targets in its Craft C+B business.
The Company’s spirits division reported lower sales from the prior year due to Azuñia supply chain constraints and a lack of attention from distribution partners resulting in a slower than planned expansion of distribution outside Oregon. In addition, the Company reduced deep discounting, which resulted in lost chain account placements in California and other markets.
Gross profit for the year ending December 31, 2021 decreased to $2.9 million from $3.6 million for the year ending December 31, 2020. Gross margin decreased to 23% for the year ending December 31, 2021 from 26% for the year ending December 31, 2020 primarily due to an improvement in Spirts margins, offset by lower margins for Craft C+B. Spirits margins have improved despite supply chain challenges due to a fourth quarter price increase, focus on higher margin brands and lower production related expenses.
The Company continued to make improvements in lowering operating expenses, which declined for the year ending December 31, 2021 to $9.8 million from $11.8 million for the year ending December 31, 2020. This reduction was due to lower compensation and marketing spend, as well as lower non-cash expenses including depreciation and amortization.
Net loss including discontinued operations for the year ending December 31, 2021 was $(2.2) million and for the year ending December 31, 2020 it was $(9.9) million. The Company accounted for the Redneck Riviera License Termination and closing of its retail tasting room as part of discontinued operations in its 2021 Form 10-K filing. The Company reported adjusted EBITDA of $(4.2) million for the year ending December 31, 2021 and $(5.3) million for the year ending December 31, 2020. (See description of adjusted EBIDTA in “Use of Non-GAAP Measures” below.)
During the fourth quarter, the Company delivered 8,388 cases of spirits, excluding Redneck Riviera. Of that total, Portland Potato Vodka represented over 4,700 cases as the brand did grow distribution outside of Oregon. The Company shipped 2,032 and 1,299 cases of Azuñia and Burnside, respectively. The Company took strategic price increases in the fourth quarter to offset higher cost of goods, which had an impact on sales. The Eastside brand launch was impacted by lack of brand awareness and did not offset legacy brand volume. The following table details cases delivered during the three months and years ending December 31, 2021 and 2020:
|9L Cases||Q4 2021||Q4 2020||Change||%||FY 2021||FY 2020||Change||%|
The Company ended the quarter with $3.9 million in borrowings under its Live Oak and FIB credit facilities and reported cash of $2.8 million. The Company has continued to improve its cash position and has reduced debt while making growth investments. During the fourth quarter of 2021, the Company received $2.5 million in net proceeds from the sale of 2.5 million shares of Series B Convertible Preferred Stock. In addition, the Company sold 579,398 shares of common stock for net proceeds of $1.6 million in at-the-market public placements.
Subsequent to quarter-end, the Company sold 798 barrels of 95% rye whiskey ranging in age from three-year-old to eight-year-old for gross proceeds of $1.5 million and thereby reducing its Live Oak debt to $1.9 million. In addition, the Company entered into a loan of $2.0 million plus an additional, conditional $1.0 million to expand the availability of capital for continued growth investments in working capital and to further its three-year strategic plan.
Expansion of Board of Directors
The Board of Directors appointed Joseph Giansante and Geoffrey Gwin as directors, effective March 28, 2022.
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 other one-time items. The table below provides a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure.