Eastside Distilling Reports 3rd Quarter, 2017.

PORTLAND, Ore.–(BUSINESS WIRE)–

Eastside Distilling, Inc. (ESDI), a producer of award-winning craft spirits, reported third quarter 2017 financial results.

Q3 2017 Financial Highlights:

• Q3 2017 gross revenues were $895,182, an increase of 12% over the $796,222 reported in Q3 2016, resulting primarily from increased wholesale and retail sales in our Pacific Northwest core market;
• Case volume of 6,162 in Q3 (5,462 for branded products and 700 for private label), represented an increase of 55% from the previous year’s shipments of 3,974 cases (all branded products), led by record sales of our Portland Potato Vodka;
• General and administrative expenses decreased 14% from Q3 2016, as we continue to seek improved efficiencies; and
• Adjusted EBITDA improved to $(1,062,977) compared to $(1,158,393) in the year ago quarter.

YTD 2017 Financial Highlights:

• Gross revenues for the nine months ended September 30, 2017 increased 28% to $2,608,373 compared to $2,045,568 in the year ago period;
• YTD case volume of 17,027 (13,850 for branded products and 3,177 for private label), represented an increase of 62% from the previous year’s shipments of 10,496 cases (all branded products);
• YTD adjusted EBITDA improved to $(2,398,873) compared to $(2,823,753) in the year ago 9-month period.

Recent Operational Highlights:

• In October 2017, the company launched its long-awaited rebranding efforts by Sandstrom Partners of its Burnside Bourbon line of products, including its West End Blend American Whiskey, Burnside Oregon Oaked Bourbon, and Goose Hollow Reserve;
• Launched new speciality products, including “Hot Potato Vodka” in collaboration with Secret Aardvark and “Kachka Horseradish Vodka” in collaboration with Troika Spirits;
• Launched the Company’s new canning line of Ready-to-Drink (RTD) products, primarily designed for the wine and pre-mixed alcoholic drink industry;
• Several Big Bottom products won awards at the 2017 Best of the Northwest spirits competition, including taking Double Gold and Gold in the Best Whiskey category for its Barlow Trail Port Cask Finish and Delta Rye products, respectively, and taking Bronze for its Navy Strength Gin.

Management Commentary

Grover Wickersham, Executive Chairman of Eastside Distilling, commented, “The launch of our new line of Burnside Bourbon, with branding by Sandstrom Partners, is undoubtedly Eastside’s most significant development so far in 2017. With the launch taking place the first week of October, we believe it will have a significant positive effect on our fourth quarter results and into the future. In addition to the boost it will provide to Burnside, it likewise impacts our entire IP of existing and contemplated products. The remake of the Burnside brand is only the first of many Sandstrom brand innovations that are already in the pipeline for release.”

Mr. Wickersham continued, “The third quarter was driven by 217% growth of our Portland Potato Vodka, offset by limited shipments of our Bourbon products until the rebranding was completed. Our primary sales focus in 2017 has been on our core markets in the Pacific Northwest, where we have experienced strong growth. This growth has more than compensated for sales declines outside of our core markets, especially since the comparable quarter in 2016 contained an unusually large order to our East Coast distributor. During the quarter, in a difficult environment for micro-cap companies, we also completed a follow-on public offering of approximately $6.2 million, and uplisted to the Nasdaq Capital Market exchange. We at Eastside believe that we have the products, the branding and the resources to end the year on a high note and have 2018 be our best year yet.”

Redneck Riviera Whiskey Co, LLC

Eastside Distilling has formed a wholly owned subsidiary, Redneck Riviera Whiskey Co, a Tennessee LLC. This subsidiary is slated to hold intellectual property associated with a proposed line of Redneck Riviera branded spirits. Both Eastside Distilling and John Rich, the licensor of the brand, will share equity in the brand itself and benefit from the increased value of the brand, if any, through the sale of licensed product. Further details about this agreement, including the Company’s strategic plans, will be announced in due course.

Financial Results

For the quarter ended September 30, 2017, Eastside Distilling reported record gross sales of $895,182, an increase of 12% compared to the year ago third quarter of $796,222. Sales growth was driven by increased wholesale sales traction within the Pacific Northwest, especially with our Vodka product as we strategically invested in programs to promote the Vodka product while waiting for our new Burnside Bourbon branding launch (which will occur in the upcoming fourth quarter), the acquisitions of MotherLode and Big Bottom Distilling, and the expansion of our private label business, as well as the addition of three retail locations.

Total shipments increased to 6,162 cases during the third quarter of 2017 from 3,974 cases in the year ago period, an increase of 55%.

Gross profit margins (as a percent of Net Sales) were 38% during the third quarter of 2017, compared to 33% in the third quarter of the previous year. Gross margins during the period improved primarily due to a combination of product mix and lower introductory pricing on a large East Coast order in the third quarter of 2016.

Advertising, promotional and selling expenses increased by $244,363; however, general and administrative expenses decreased by $169,553 as the Company focused on driving sales growth, while tightening cost controls.

Adjusted EBITDA during the third quarter of 2017 was $(1,062,977), which compared to $(1,158,393) in the year ago quarter.

Net loss attributable to common shareholders was $(1,411,161), or $(0.34) per basic and diluted share for the third quarter of 2017, compared to $(1,456,049), or $(0.92) per basic and diluted share in the year ago period.

The company ended the third quarter with $4.2 million in cash compared to $1.3 million at the beginning of the quarter as the company raised $6.2 million in gross proceeds from a follow-on public offering during August 2017.

Conference Call