Eastside Distilling, Inc. (EAST)·Q2 2024 Earnings Summary

Executive Summary

• Net sales rose to $2.95M, up 10.9% year over year and 22.5% sequentially, as Craft Canning + Printing (C+P) delivered a quarter-record 6.0M digitally printed cans; consolidated gross margin improved to 5% YoY but declined sequentially from 8% in Q1 due to downtime and scrap in Craft impacting margins .
• Basic EPS improved year over year to $(0.87) from $(1.96); adjusted EBITDA loss narrowed YoY to $(0.93)M vs $(0.99)M, while net loss attributable to common shareholders was $(1.53)M (vs $(1.68)M YoY) .
• Spirits segment gross margin expanded to 26% from 12% YoY, despite a 12% decline in case volumes tied to a reset of the tequila go-to-market strategy; management expects “substantial improvement in margins” through the balance of 2024 .
• No numerical guidance was provided; management highlighted plans to “significantly boost” digital can printing capacity in H2 2024 and indicated Spirits is “very close” to generating positive cash flow; company closed a $1.1M debt facility for working capital in Q2 .
• Wall Street consensus (S&P Global) for Q2 2024 EPS and revenue was unavailable; estimate comparisons are therefore not provided (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

• Digital printing momentum: Craft “digitally printed a quarter-record 6.0 million cans,” driving 22% sales growth in Craft C+P; CEO: “digital can printing is gaining traction, strong traction in the market” .
• Spirits margin expansion and mix: Spirits gross margin rose to 26% (vs 12%), with management citing Azuñia tequila and raw material savings; CEO noted “Spirits… primary goal is to generate positive cash flow. I think we’re very close to that” .
• Cost control: Operating expenses fell to $1.3M (from $1.4M) and corporate expenses decreased quarter-over-quarter, consistent with multi-quarter restructuring progress .

What Went Wrong

• Craft margins pressured: Craft reported 0% gross margin (vs -3% prior year), with management citing machine downtime and scrap impacting margins and operating cash flow in Q2 .
• Spirits volumes declined: Spirits case volumes fell 12% due to the tequila distribution reset, and total Spirits sales decreased to $0.69M (from $0.81M) .
• Sequential margin compression: Consolidated gross margin fell to 5% from 8% in Q1 2024, reflecting operational inefficiencies in Craft in the quarter despite strong volume .

Financial Results

Consolidated Results vs Prior Periods and YoY

Notes:

• Q2 2024 net sales increased 10.9% YoY and 22.5% sequentially .
• Sequential gross margin decline (8% → 5%) was attributed to Craft downtime and scrap .

Segment Breakdown

KPIs

Guidance Changes

Note: No quantitative guidance ranges (revenue, margins, OpEx, OI&E, tax rate, dividends) were provided in Q2 materials .

Earnings Call Themes & Trends

Management Commentary

• “Digital can printing is gaining traction, strong traction in the market… we have a plan in place to significantly boost this capacity, and we’re focused on executing it for the rest of the year” — Geoffrey Gwin, CEO .
• “Case volumes were, in fact, down 12%, but that was driven in part by this reset of our tequila go-to-market strategy… PPV performance in Oregon has been outstanding” — Geoffrey Gwin .
• “Our consolidated gross margins were 5% for ’24 and 1% for ’23… Spirits margins were 26% for ’24 and 12% for 2023” — Tiffany Milton, Controller .
• “Spirits gross profit improved +84% compared to the prior year quarter with substantial improvement in margins expected through the balance of the year” — Q2 press release .

Q&A Highlights

• The Q&A section of the Q2 2024 call transcript was not retrievable due to a document database inconsistency; no additional Q&A highlights can be provided from primary sources .

Estimates Context

• S&P Global Wall Street consensus for Q2 2024 (Primary EPS Consensus Mean, Revenue Consensus Mean, and counts of estimates) was unavailable due to missing CIQ mapping for EAST; as a result, estimate comparisons and beat/miss indicators cannot be provided (S&P Global data unavailable).

Key Takeaways for Investors

• Demand for digital can printing is robust, with sequential volume records (4.8M → 6.0M cans), a full order book, and management intent to add capacity — a key lever for revenue growth and margin scale in H2 2024 .
• Spirits margins expanded meaningfully to 26% despite lower volumes, driven by tequila portfolio actions and raw material savings; management targets cash flow positivity in Spirits near term — supporting consolidated margin trajectory .
• Consolidated gross margin fell sequentially to 5% due to Craft operational inefficiencies (downtime, scrap); execution on throughput, scrap reduction, and uptime is critical for margin recovery and EBITDA improvement in H2 .
• Opex discipline continues (OpEx down to $1.3M; corporate costs lower QoQ), indicating restructuring benefits are sustainable and provide operating leverage if volumes scale .
• Liquidity improved with a $1.1M working capital facility; watch follow-on financing needs as capacity expansion and operating scale-up proceed .
• Without formal quantitative guidance or available consensus estimates, focus on near-term operational KPIs: printed can throughput, Craft gross margin progression, Spirits case trends in key states (e.g., Oregon, Arizona), and adjusted EBITDA trajectory .
• Narrative catalyst: Demonstrable H2 improvements in Craft margins and Spirits cash flow, plus visible capacity expansion, could shift sentiment; failure to address downtime/scrap or delayed capacity additions would be a negative inflection .