Executive Summary

Q1 2024 showed mixed progress: net sales fell 15.5% year over year to $2.411M due to the absence of prior-year bulk barrel sales, but gross margin improved to 8% from -6% in Q4 2023 and consolidated net loss narrowed sequentially to $(1.293)M .
Craft printed a quarter-record 4.8 million cans, up +320% YoY, as digital can printing adoption accelerated; Craft gross margin turned positive at 3% while Spirits gross margin held at 23% despite consumer trade-down headwinds .
EBITDA improved YoY (EBITDA $(0.739)M vs $(0.862)M), but adjusted EBITDA declined YoY ($(0.792)M vs $(0.745)M) as non-GAAP items (e.g., stock comp and one-time gains/losses) offset operating gains; sequentially, adjusted EBITDA improved versus Q4’s $(1.342)M .
Management guides to margin improvement in Q2 on Craft (lower can costs, ramp efficiencies, reduced scrap) and is in advanced discussions to push Spirits into profitability in H2 via partnership and cost leadership, which could be near-term stock catalysts alongside evidence of sustained can-printing volume .

What Went Well and What Went Wrong

What Went Well

Accelerating adoption of digital printed cans drove a quarter-record 4.8M cans (+320% YoY), with new wins (e.g., Dodger Stadium beer program), a broader customer base, and strong early BD hires in Seattle contributing to volume and pipeline momentum .
Craft gross margin turned positive (3%) versus negative last year, and Spirits delivered its best operating result without bulk sales in some time, with segment EBITDA near breakeven (loss ~$0.056M) despite consumer trade-downs .
Operating expenses fell meaningfully (Q1 2024 $1.236M vs $1.881M in Q1 2023) owing to 2023 restructuring, supporting sequential improvement in consolidated net loss and adjusted EBITDA .

Selected quotes:

“In the quarter, Craft produced a record number of cans… We expect improved margins in Q2… we see this business growing and evolving very quickly.”
“Our first goal was to hire a salesperson… very skilled at finding how we are a value add… In its first 3 weeks, he has already sold a tremendous number of cans.”
“Spirits had a great quarter… EBITDA for that segment was only a $56,000 loss… despite the clear trend of consumers trading down at retail.”

What Went Wrong

Net sales declined YoY (absence of $0.6M bulk barrel sale in Q1 2023) and gross profit fell to $0.186M, with consolidated gross margin compressed by price investment, transition to lower-priced can contracts, expensed spare parts, extra freight, and ramp scrap .
Working capital constraints and NASDAQ compliance issues remain, creating execution risk (e.g., need for cans to sustain growth and balance sheet fixes to maintain listing) .
Adjusted EBITDA worsened YoY ($(0.792)M vs $(0.745)M), despite better EBITDA, highlighting the impact of non-GAAP items; Spirits net sales fell YoY amid trade-downs and limited investment capacity in tequila/Burnside branding .

Financial Results

Consolidated Quarterly Results (USD Millions unless noted)

Metric	Q3 2023	Q4 2023	Q1 2024
Net Sales	$2.983	$2.002	$2.411
Gross Profit	$0.512	$(0.118)	$0.186
Gross Margin %	17%	-6%	8%
Operating Expenses	$1.174	$1.398	$1.236
Loss from Operations	$(0.662)	$(1.516)	$(1.050)
Net Loss	$(2.156)	$(2.138)	$(1.293)
Basic/Diluted EPS ($)	$(2.00)	$(1.39)	$(0.78)
Adjusted EBITDA	$(0.430)	$(1.342)	$(0.792)

YoY context:

Q1 2024 vs Q1 2023 Net Sales: $2.411M vs $2.853M → -15.5% (bulk barrel sale $0.6M benefitted Q1 2023) .
Q1 2024 EBITDA vs Q1 2023: $(0.739)M vs $(0.862)M → improvement .
Q1 2024 Adjusted EBITDA vs Q1 2023: $(0.792)M vs $(0.745)M → decline .

Segment Net Sales and Gross Margin %

Segment Metric	Q3 2023	Q4 2023	Q1 2024
Craft C+P Net Sales ($M)	$2.177	$1.154	$1.814
Craft C+P Gross Margin %	16%	-26%	3%
Spirits Net Sales ($M)	$0.806	$0.848	$0.597
Spirits Gross Margin %	21%	21%	23%

KPIs

KPI	Q3 2023	Q4 2023	Q1 2024
Digitally Printed Cans (Millions)	4.5+	n/a	4.8
Digitally Printed Cans YoY Change (%)	—	—	+320%
Spirits EBITDA ($M)	—	—	$(0.056)
Craft EBITDA ($M)	—	—	$(0.3)

Balance sheet (selected):

Cash: $0.336M (3/31/24); Stockholders’ equity (deficit): $(0.476)M; Current liabilities rose due to reclassifications and notes payable current portions .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Craft Gross Margin	Q2 2024	None specified	Expect improved margins driven by lower can costs, ramp efficiencies, reduced scrap	Raised (qualitative)
Digitally Printed Can Volume	Q2–Q3 2024	Expect >4.7M in Q1 2024 (preannounced in Q4 call)	Printing “full,” capacity constraints until second machine; doubling installed capacity targeted (timing TBD)	Raised capacity ambition (qualitative)
Spirits Profitability	H2 2024	Break-even target discussed historically	“Advanced discussions” with a group to push Spirits into profitability; focus on cost leadership and marketing around shelf presence	Raised (qualitative)
Balance Sheet/NASDAQ Compliance	2024	Debt reduction via 2023 debt-to-equity; continued work	Pursuing actions to achieve/maintain compliance and extend maturities; liquidity focus to fund cans working capital	Maintained focus

Note: No formal numeric guidance ranges were provided; comments are directional/qualitative from management.

Earnings Call Themes & Trends

Topic	Q3 2023 (Prior-2)	Q4 2023 (Prior-1)	Q1 2024 (Current)	Trend
Digital Can Printing Adoption	>4.5M cans; conversion of mobile customers; focus on printing	Preannounced >4.7M in Q1; 14.1M printed in 2023; capacity expansion (second printer)	Record 4.8M; broader customer base (Dodgers, college NIL)	Accelerating
Craft Margins/Operational Efficiency	Improving utilization; mobile drag; restructuring	Seasonal softness; margins negative; ramp to positive expected	Positive gross margin; margin improvement expected in Q2; spare parts/scrap/freight weighed Q1	Improving
Working Capital/Liquidity	Debt-to-equity; capital scarcity; balancing growth and liquidity	Liquidity risks; need cans; extend maturities	Liquidity remains key; NASDAQ compliance actions ongoing	Ongoing constraint
Spirits Strategy/Profitability	Move to profitable markets; vodka price repositioning; tequila headwinds	Spirits near EBITDA breakeven; cost leadership focus	Best operating result without bulk; partnership discussions to drive H2 profitability; agave prices easing	Improving with potential catalyst
Mobile Canning Footprint	Exiting Seattle/Denver; retain Portland	Continued downsizing; lingering costs	Mobile EBITDA-positive; sized to profitable footprint	Stabilized/contributing
Macro/Consumer Trade-Down	Headwinds intensified into fall; destocking risk	Seasonal/working capital risks	Trade-down persists; Spirits volumes aligned with expectations	Persistent headwind

Management Commentary

Packaging as a “moment of opportunity”: “Consumer beverage marketing has changed and we deliver the opportunity to run circles around national brands… digitally printed cans… can be unique… The opportunities are endless here.”
Craft ramp and margin outlook: “We expect improved margins in Q2, but most importantly, we see this business growing and evolving very quickly.”
Spirits profitability pathway: “We’re in advanced discussions… that really pushes spirits into a new realm of profitability here in the back half of the year.”
Mobile canning now positive: “Mobile was actually positive EBITDA in the first quarter… above breakeven.”
Balance sheet and NASDAQ: “Fixing the balance sheet has been a priority… possible changes… to get our in compliance with NASDAQ.”

Q&A Highlights

Pricing/volume drivers: Slight price investment to win larger customers; breadth of new customers wider than expected (e.g., Dodgers program, college NIL), supporting unique use-cases for digital printing .
Balance sheet/NASDAQ: Continued focus on debt reduction, income statement improvement, and actions to maintain listing; goal to drive Craft to full capability and Spirits to positive cash/net income .
Sales force investment: New Seattle BD hire with beverage marketing experience ramped quickly, selling “a tremendous number of cans” in first 3 weeks .
Mobile canning economics: EBITDA-positive in Q1; footprint rationalized (exit Denver, reduce Seattle/Spokane), Portland remains core; cross-sell opportunity with printing .
Craft margin mechanics: Q1 margin headwinds from spare parts, scrap, extra freight, and transitioning can costs; forward margins expected to benefit from lower can costs, reduced scrap, and scale leverage with second printer .

Estimates Context

Wall Street consensus via S&P Global was unavailable for EAST at this time; one analyst indicated reported revenue was close to his expectations, but no quantifiable consensus was provided on the call .
Given the lack of published consensus, models may need to incorporate: (1) Craft volume trajectory and margin lift from cost reductions and process improvements, (2) Spirits breakeven-to-profit trajectory in H2 contingent on partnership/cost leadership, and (3) working capital constraints affecting throughput .

Key Takeaways for Investors

Digital printing is the growth engine: record 4.8M cans, broadening customer mix, and improving Craft gross margin; monitor Q2 margin trajectory and second-printer timing as catalysts .
Sequential improvement matters: gross margin recovered from -6% (Q4) to 8% (Q1); net loss narrowed; adjusted EBITDA better sequentially—evidence the restructuring is flowing through .
Spirits near an inflection: EBITDA near breakeven without bulk sales; agave cost tailwinds and a potential partnership could push H2 profitability—watch for deal announcements and Oregon-led execution .
Liquidity is the swing factor: growth consumes cans/working capital; capacity additions and sustained volume require cash—track balance sheet actions and NASDAQ compliance steps .
Mobile canning now contributes: EBITDA-positive and strategically important for customer relationships/cross-sell, but capital and management focus will remain on printing .
Trading setup: near-term upside skew if Q2 delivers margin improvements and visible customer wins; risk skew if working capital tightens or second-printer timing slips .
Medium-term thesis: niche leadership in recyclable digital printing with rising adoption and scale economics; Spirits becomes a smaller, profitable, Oregon-focused cash contributor .

All statements and figures are sourced from company filings and transcripts: Q1 2024 8-K press release and financial tables , Q1 2024 earnings call -, Q4 2023 8-K and call - -, and Q3 2023 8-K and call - -.

Eastside Distilling, Inc. (EAST)·Q1 2024 Earnings Summary