Q2 2020 Eastside Distilling Inc Earnings Call

[music].

Good afternoon, and welcome to the East side Distilling reports second quarter fiscal year 2020 financial results Conference call.

All participants will be listen only mode.

Should you need assistance. Please signally conference specialist Pessimist Starkey followed by zero.

After today's presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

To withdraw your question. Please press Star then too.

Please note this event is being recorded.

I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead.

Alright, thanks, so much or good afternoon, everyone and thank you for joining us today to discuss east side. The Stillings financial results for the second quarter 2020 ended June Thirtyth 2020, I'm, Robert Little wasn't partners I'll be your moderator for today's call.

Earlier Eastside issued their second quarter 2020 financial results in a press release.

Joining us on todays call to discuss these results are Mr., Paul block, the company's Chief Executive Officer, Mr. Jeffry, Quinn, Besides Chief Financial Officer.

Following their remarks, well open the call to your questions.

Before beginning with prepared remarks, we submit for the record the following statement.

Certain matters discussed on this conference call by the management of East side Distilling, maybe forward looking statements within the meaning of section 27 eight of the Securities Act of 1933 as amended section 21. He of the Securities Exchange Act of 1934 as amended and such forward looking statements are made pursuant to that.

They've harbor provisions of the private Securities Litigation Reform Act of 1995.

Forward looking statements describe future expectations plans results were strategies and our generally preceded by words, such as May future plan or planned will or should expected anticipates a draft eventually or projected listeners are cautioned that such statements are subject to a multitude of risk.

And uncertainties that could cause future circumstances events or results to differ materially from those projected in the forward looking statements.

Such matters involve risks and uncertainties that may cause actual results could differ materially include but are not limited to the company's acceptance and the company's products in the market success, obtaining new customers success in product development ability to execute business model in strategic plans success and integrating acquired entities an asset.

Ability to obtain capital ability to continues going concern and all the rest and related information described from time to time of the company's filings with the Securities Exchange Commission, including the financial statements and related information for training to the Companys annual report on form 10-K for the year ended December 31.

2019 filed with the Securities Exchange Commission.

Now with that said I like to turn the call over to Jeffry Quinn Jeffrey. Please proceed.

Thanks Robert.

We have a lot of information to cover today, but I would like to begin my remark.

Great simply with four key points, which you should take away from this call.

I will then cover the highlights the quarter and turn it over to Paul who will describe the strategic direction of the company and after his remarks he will take your questions.

First our cash burn has significantly improved despite a quarter, where a large part of a business was negatively impacted due the coca 19 pandemic.

In the quarter, we reported an EBITDA loss of $951000 compared to the first quarter loss of 1.86 million.

Of that 951000 dollar loss, we had approximately $250000, which were onetime charges a sense associated with professional and consulting expenses.

This one time this important metric.

Well continue to improve in the quarters ahead.

Well not in a moment.

Also we ended the quarter with a high cash balance higher cash balance than in the first quarter.

Second.

The quarter highlighted the potential we have to grow dramatically.

In the Pacific Northwest, our craft Kenny business has a dominant market position and is the go to provider kitting services for the craft Brewer.

Perhaps canyon has clearly benefited from consumer changes the pandemic, which I will describe in more detail more detail in a moment.

We anticipate the this business has the potential to generate EBITDA margins ex doesn't 35%. This coming quarter was very low working capital or me Capex requirements, we will grow this business aggressively.

Third we have begun downsizing our overhead have already made cuts reducing expenses by at least $2 million and Paul will refer that moment.

Ought to make sure this is clear.

We will operate.

All spirits brands to maximize the return on invested capital without believing in the future windfall for Brent sale.

Finally.

We continue to optimize the bids which means we are we're continuing to evaluate all options, including selling a strategic asset big or small.

However, we have nothing to report today on that topic.

As we've said public in in the prior call part pause or this year, we're wrapping up our discussions are two different parties on outsourcing production opportunities.

But we will proceed the most efficient production option whether to eat internal or external.

Now, let me getting some deep details on the quarter first we were very grateful to our employees have managed to an extremely difficult environment.

As a pandemic unfolded the company pivoted.

The remote <unk> to a remote working environment and put in place guidelines to keep our employees.

And customer saves.

And as I'm sure you all are aware during April and May the on premise business was almost wholly shut down by the koby, Nike Pandemics, which negatively impacted as soon as results.

As soon as results revenues were down 38% core compared to the prior year, which was a period, where we didn't know the brand.

Same happened with Redneck Redmond, Redneck Riviera missed out on the demand for larger size bottles, such as the the 1.75 liter SK use and the off premise channel due to our historic focus on smaller some 50 bottle sides and as a result.

Rednecks gross revenues were down 30% year over year.

But our other products fared much better.

Well, if its head about guy.

I had an exceptional quarter with revenues up 18% and Burnside held its own with revenues up for.

But clearly the standout performer for the company was craft Canyon, which reported revenue up 20% over the prior year driven by craft Kenyans mobile Canning business.

<unk> customer list has grown faster than sales up over 30% since March alone.

Raft is clearly benefiting from the changing consumer trends in this post pandemic world.

And the best way to describe why this is happening is in the quotas in a quote that I heard from the founder craft. He spoke to this same before the pandemics, 50% of beer was being put in CAG.

Then it wasn't.

I would suggest this change has legs small craft brewers are seeking mobile Kenny expertise as they have rapidly push their product down new channels of distribution in cans.

This development has started before the pending.

But the pickup has been dramatic and we can see that in the second quarter as we talk as we hear talk of an interesting <unk> interest too wide shortage of aluminum cans.

Fortunately the team at Kraft has sourced can supply to meet the growth ahead to that business.

So consolidated sales for the entire company increased 7% up 4.2 4.3 million and this increase was driven by the addition of visiting yeah, which we didn't known at this time last year and it was also driven by the increase in Portland, instead of OCA and craft Ken.

Gross profit in the quarter increase to 1.61 up from 1.4 million in the prior year and even down in the quarter was as I said, a 951000 dollar loss.

That's a significant improvement.

The business continues to improve and you can see it and this and this sequential improvements in cash flow. Despite this extraordinarily difficult core.

For the second quarter net income was a 2.2 million to all loss, which equates to a loss of 22 cents a share still an improvement from last year's loss of 32 cents. This year.

Now turning to the balance sheet.

We ended the quarter with 1.9 million cash versus 1.2 million in the first quarter.

Increase was the result of the PPP loan.

Which that was 1.4 million strong cash flows from craft.

Modest asset sales offset by some operating losses, and our spirits business and cash restructuring expenses.

So now, let's turn to the outlooks.

We are taking additional restructuring actions in the third quarter, which will move the business closer to cash flow breakeven.

Today, we don't intend to issue specific guidance as we have a lot of work to do an uncertain environment. Yes, we are seeing encouraging signs in the market as redneck and isn't yet are showing signs of improvement in July and picking up steam in August.

Craft candy continues to exceed our expectations.

It's important reason, though but it's our intention to operate this business prudently with the philosophy of generating and consuming cash from internal internal operations.

As opposed to external sources.

We intend to finish stabilizing the company and position it for rapid growth in.

The management team is excited about the near term prospects in the company and there are a lot more details in our 10-Q, which we filed today.

And with that I'll hand, it over to Paul Paul.

Great well, thank you, Jeff and good afternoon, everyone.

I'm very encouraged by the actions, Jeff mentioned that further stabilize the cash burn professionalize the company.

And also position he decided to selling for sustainable growth forward.

I just wanted to add to check point and make the following comments.

First of all one of our top priorities will be to manage our brand portfolio to minimize the historic excessive cash burn rate that Jeff mentioned.

And to maximize the net brand contribution.

We will not deficit spend at significant levels to achieve gross.

Especially the superficial grows from a push only strategy.

We will however, detailed brand margin by S.K., you had to allocate appropriate discretionary spend that drives optimal lift based on each skew contribution.

Well focus on those brands in our portfolio that provides the best ROI for each side.

The second priority and in line with some of the comments Jeff made.

Just to achieve the right ratios with SGN, a currently X gene eight for the spirits Division is 55% of net sales and then that sales revenue per employee is about 100000.

Not sure achieve efficiency in S.G.A. and to optimize our structure to achieve scale.

Well refocus scale sales and marketing resources, while simultaneously decreasing overhead by $2 million net.

These changes are complete and the benefit will be partially realized in Q3 and fully realized in Q4 2020.

A third priority, Jeff mentioned is leveraging gross and cash generation from our craft Canning Division.

This boom is not just the result of Cove. It it's a fundamental shifts in consumer preference and we are positioned to participate and capitalize on this package momentum.

Well utilize the craft cash to first and foremost fuel growth in craft.

And then any additional cash generation cast generation to reduce our cash burn rate and assist with growth in our spirit brand portfolio.

The investments in new craft trucks and lines are accretive day one.

And paid back in less than 12 months, making this division extremely valuable.

Jeff also mentioned the focused on outsourcing eastside products to gain efficiency and reduced our cost to goods.

Fourth company priority will be to rapidly optimize our supply chain.

Which may result, in one or all of the phone.

Selling less selling our idle assets in manufacturing.

Reduce our footprint will generate cash.

Increasing automation in our bottom line to immediately improve production efficiency.

Reducing and allocated overhead expenses and RPL at about 80000 per month.

And finally.

And one point that's been mentioned consistently is considering outsourcing production. If it has a net efficiency gain on the supply chain.

And one final priority on one dimension is to balance our capital structure with our operating requirements to maximize shareholder value.

Because this and we will bring a plan for our capital structure forward to our shareholders for their information and support.

We will detail sources and uses and illustrate how we will build shareholder value with a sustainable growth plan.

Now I'd like to turn to some of the macros to strategic shifts that are taking place to out east side to selling to enable and support the priorities I mentioned.

The first shift is evident in the evolution of the company leadership from financing fundraising capability to Branson beverage competency.

If you recall the last three sites CEO is over the past several years that exclusive experience and finance.

The moved to a new management team with experience an alcoholic products.

I'm building and beverage marketing is a significant shift.

And supports the company mission to be a premier craft inspired brand builder.

The shift in leadership or resulted in new strategy and focus for example.

East side will move from a customer focused company pushing product and off premise changed to a consumer centric company pulling volume through loyal user preference and our national distributor network.

The shift in strategy will build stronger brands and drive more sustainable growth.

The second major shaft is to move the company from an entrepreneurial to professional oriented environment to this and the company will focus on three critical areas of proficiency.

Sales and marketing production in finance and by Perficient I mean, how can we be more efficient and more effective and these three areas.

Firstly in reference to sales and marketing, we will shift to a more focus and fiscal approach to brands markets programs and spend.

This required increased attention to brand positioning market segmentation distributor programming to find spending in measured results.

The end objective is to spend that an optimal unsustainable level not to deplete all of our liquidity then to leverage up to fuel and unsustainable cash burn rate.

There will be all about a balanced approach.

Next the seem to best practice in production will shift our approach and supply chain from independent and disciplined function to an integrated supply chain driven by activity cost based accounting.

By building Cogs, if standard and managing variance as we can drive product efficiency without compromising product quality.

The shift in our production practice will require the sale of less sufficient project production assets.

Automation of our bottling line.

Use of craft for our production in Canning.

And reduction of our current facility footprint.

For outsourcing is the most efficient option will certainly we'll consider contract manufacturers internally as I mentioned, we will have opportunity to do Greek decrease idle capacity.

Eliminate unallocated overhead and increase bottle production efficiency.

Ben Best practice in finance will shift our approach from a control and report orientation.

Two more planning and analysis integration.

This shift to allow us to model better analyze cash flow.

You know P.

The activity based cost thing I mentioned production efficiency M&A opportunity, along with budgeting planning and variance analysis.

The third shift is to move from hard at the market focus with change driven off premise distribution.

Two or more craft inspired high margin experience all brands.

That deliver high quality artists and products.

Well utilizing our national distributor network.

This shift will allow us to better utilize scarce resources.

In markets and build both on and off premise.

Now to support this shift will divide our marketing capability into brand building and field marketing.

Brand building will focus on building brand identity that connects with target consumers.

And field marketing will focus on distributor and account programs that will drive sales at the point of purchase.

We believe this combination will create a strong approach for both organic as well as acquisition.

Before shift is moving from milking craft Canning as Jeff said to investing in craft candy.

The current EBITDA margin from this business unit is well over 30% in 2020.

We estimate the division can possibly reached 10 million in sales.

Utilizing has tremendous momentum of the marketplace for can packaging with minimal investment.

We believe we could double or triple the business.

Investment is accretive from day, one and pays back in 12 months.

Well not the core focus of branded beverage craft is a meaningful vertically integrated part of our value chain.

Especially as we further build our our T.D. can business.

The company of this nature typically is valued at 1.5 times sales or six times even.

So we're very exciting.

Business Division free side.

The fifth shift in our business is to move from highly dilutive fund raising it depletion of cash resources.

It's sustainable organic growth and accretive bolt on acquisitions.

Well this shift will allow us to manage organic growth in a sustainable manner organic growth will not only account will only account for modest advancement in top and bottom line.

For exponential growth.

We were really.

I need to focus on more accretive bolt on acquisition that will compress timelines and leverage scale.

Well look forward to further discuss our plans for capital structure and exponential growth with each of our sales shareholders in the coming months.

This concludes my formal comments, we thank you for your interest in investment any site distilling, we're very enthusiastic about the side platform in our ability to create extraordinary value forward.

I'll now open the call up for any questions.

We will now begin the question and answer session.

Asking question you May Press Star then one on your telephone keypad.

If you are using a speakerphone please pick up your handset before pressing the key.

To withdraw your question. Please press Star then to.

At this time, we will pause momentarily to assemble our roster.

And our first question will come from David Bain Roth Capital. Please go ahead.

Great. Thank you I'm a lot of good information on this call and and congrats on the cost structure and but the revenue ramp hopefully that looks very nice. So my first question maybe.

Maybe I'll stay with that the unit the gross profit margins exceeded our expectations. I know you said you didn't want to provide guidance, which we can completely understand in today's environment, but if I could just confirmed the cost structure and set up so if EBITDA and the second quarter was a loss of 950, we save another 500.

Her corridor by the fourth quarter does that in and for that you really only need another 500000 of revenue to break even or am I looking at that the wrong way.

[noise] things David's Jeffrey here, Yeah, there's there's a number of moving pieces and this one no.

As Paul mentioned craft is going very very quickly and this is normally that season strong period from Todd Gary and team have their crafts has.

You know the extraordinary Jim job, you know soaking up all the depend this quarter, but what we found is the shoulder season going into the third quarter hasn't tapered off.

And so projecting.

This blood business, where you have a really high marginal fast growing because I mean look sequentially on the principles and see it craft doubled from first quarter to second quarter.

Mentioned, a 20% number for grew up that that's more just the service side of the business and doesn't include the factor that answers. So materials. So you know we we've thought about how the third quarter, we'll look but there's a lot of moving pieces of that said and the other thing I want to make sure that you're clear on is we've taken some restructuring.

Actions that are much bigger than what we didnt second quarter that will come in the third quarter.

And so rather than the then you know give you a number and that a lot of confusion I'd, rather you know, let's see how we end up in the third quarter, but but but our goal and impulse books have spoken to Benson.

I think this is something that we're going to carry through the year this to sequentially improve from here going forward.

And you should be able to see business improving quarterly moving forward.

And then the second piece of that is as Paul was mentioning you know what do it's what do you expect must be on that and that's the exciting part of how we make this a really you know exciting growth story.

Right, Okay, great and.

Maybe Paul maybe if you could bullet point.

And you guys gave a lot of great information, but if you could just bullet point a strategic agenda for the major brands going forward is there like say a strategic shipped to the premium for Zuni, a less emphasis on national expansion for say Burnside or or just give us a big picture vision on on Redneck as Onea and burn.

Inside as brands individually that'd be really helpful.

[noise], yes, sure I think probably the biggest shift is the one I mentioned there is as you said, there's a lot of information so.

Just to highlight it is really our focus on profitable growth.

So.

What we're not gonna do is just expand rapidly although I will say.

The team in the past has done a phenomenal job of gaining distribution.

Getting rapid growth on certain brand, specifically redneck, so they've done a great job well, what we're not gonna do though is just expand to expand and grow to grow we're going to be much more focused segmented and look at profitable growth.

I would say that's the biggest strategic shift what does that look like an action.

All of our sales team now.

What's the Fob they know the Cogs its standard and they know the margin by skier and that's how their programming.

And we're also programming our spend rate.

Just on the margin that each skew generates.

So they can look down the list now.

And they can forecast bare case sales.

And they can immediately know what they can spend and where they can spend what drives the most process. So that is first and foremost the biggest shift.

Secondly, just some overall guidance on strategy.

Of course read that and is there and you will continue to be national.

Redneck is concentrated more on the eastern part of the countries you guys know and assuming you're on the west but both of those lumpy national platforms, and we'll continue to push nationally.

Portland Potato factor is on fire in the northwest.

And we'll look to expand that down the west coast.

Burnside, we're going to try and focus more on the eastern side of the country.

And.

A way way won't be more opportunistic.

So.

There was or just some general.

Thoughts on what's going to change and how we're going to move forward.

Awesome and then is there I guess my final one and that you did say that there's just to confirm July it sounds like outpace Twoq you in general I assume maybe even June in August says is started you know a little bit better than.

July is that did I did I get that right. So the trend here is sequential growth in pretty much every bucket or.

That said I'm misunderstanding.

Correspond to that they made.

[laughter].

Yeah, what Tom what we saw happening is as you know Q2 was a tough quarter for the country. Because you know right around the end of Q1, starting in Q2, the real coated.

Virus hit hard.

And everybody really proceed it.

And and talking to the sales team you know, they're saying it was tough to sell 50 cases.

Now there are the same buyer, they're selling three or 400 cases, so what I can tell you is we're seeing as we speak is a fairly robust orders across all our brands distributors took a an opportunity during cold.

<unk> to our de stock so they took their inventories down.

And now we see them back you know kind of moving back towards.

You know stocking back up to 30, 40, and the target of 45 days.

The other thing you know, we're just saying is up buyers now more interested to talk to us in general.

There in Q2.

There's just we're like now where you were just shut down now there are a bit more open we're starting to do a lot of the programming with the chains.

And with a other retailers you know start before for Q4, but really for Q1 in Q2 and next year.

So the theme is yes, what we're seeing today.

It's a more robust market where are more robust sales in fact, a lot of the off premise accounts are looking to increase their linear footage because of the shift from on premise to off premise and we're taking advantage of that we're also taking advantage of out of stocks by our competitors.

Because things have shifted off premise to specific skews in sizes are several of our competitors are out of stock sell out to two brands really benefiting from that today, our red deck. Riviera is benefiting you know from what we can see as we speak now and as soon as Ben.

<unk>.

Mhm.

Great. Okay excellent. Thank you very much.

Thanks, David.

Again, if you would like to ask a question. Please press Star then one.

And our next question will come from Harold Weber of Aegis capital. Please go ahead.

Hello, guys, Hey, I do and.

And Harold.

HM.

Glad to hear things.

Happening into right direction.

A couple of questions one in relation to the.

The.

Canning situation, what you're doing for others.

Talked a little bit awhile back for example, like putting the Wally Roman cans, what's the story with the then you're going forward with that.

[noise] [noise], yes, well first of all our just to speak to that category. It's not an area that I don't believe east side is really capitalize Darren.

T RTT prepared cocktail, we do a few of them we have how they do we've got to Portland near all.

But there's a we still feel a big opportunity to participate.

At the top end, you know in terms of quality or product and higher price points.

We look we really haven't I'm started to fill our pipeline yet.

Before we jump in we want to have a more thoughtful process.

Where we analyze you know a consumer demand and this isn't analysis paralysis, but required to take a minute to think about these things we want to analyze the feasibility the margin you know the go to market and lastly, we want to make sure we have the resources because we don't want to just start watching products.

That require spend while we're in the midst of kind of professionalizing in turning around the company. So want to talk to your about that going forward. How we can you know improved the capital structure and invest but way way we believe has.

An opportunity in the our to do space.

We also think that.

Organic a margarita both regular and skinny could have a lot of opportunity.

And then there's a number of other products. So we're gonna be filling up the pipeline evaluating these are two days.

And we set up some test test markets in Portland, and Seattle, Although there are lot of control these days.

But the protest, but those are the markets that we all once we're convinced internally and we developed a products will bring him into market and see how they do so we'll probably have more to report on that in Q3 right now we're just getting settle Dan.

And in terms of stabilizing the enterprise and you know, having a sustainable pathway, but you'll hear more about those in the near future.

Okay.

What about you were talking about data about in the West coast, what's the situation about bringing that to the east coast.

Well again, I mean, you know we want to be thoughts on our expansion because.

As I said, we wanted to be segmented and we want to be focused and we want to use what we call impact stacking.

So we want to take all of our resources and focusing on specific neighborhoods, Oh or specific geographic areas. So that the scarce resources. We have we can back up with multiple market mix elements and make the greatest impact.

It's what I don't want to do is just expand products across the country.

And then come back to you and tell tell you we can't get the Paul and we've completed our cash and that's kind of the situation I think keysight sound itself.

So we're going to be more thoughtful we want to start on the west we want to see how you expansion works there first a one of those things we're gonna do.

Take advantage of the off premise sales as we're moving to California hammer can actually be able to.

Offer online sales in Oregon in the Pacific Northwest. So we're we're undertaking a number of initiatives. There. Once we see those are successful well start to look at more concentric expansion.

Okay that sounds great.

And in regards to the.

Excuse me you're talking about.

Expanding and the kitting business that you expecting to be buying more I guess, a truck plants vehicles to do that at war is that something that you're looking to do.

Your sounds like that's is something along those lines.

Yes, I can heralded <unk>.

I'm sorry go ahead, no not gone.

We but we've got we've got we've got a substantial investment in new trucks that are coming at the end of the third quarter nerve actually probably.

Third quarter, and so yes, we're buying more trucks and.

But we have a ruled out doing an acquisition as.

We have the yeah, the appropriate stock price to do it with you should know that that as I mentioned in my script crafted down as a dominant player and Pacific northwest.

And there has been in one player on the East coast, it's rolled up a number of the mobile Canyon operators and we don't see any reason why we can't potentially consider doing some somewhere.

Okay, and you give me an idea.

The size of that more you you're talking about them to west Pacific Northwest I'm guessing based on the bear the beer guys into one guys and so forth.

What would you say the size of that market is that you know now and how much of it the we have presently.

[noise] that's a good question I would say that.

You know, it's it's hard to put our put a finger on it.

Just a general idea.

Probably a 10 or 20% share right now I mean, I think that market in general is.

Hi, This is I'm just taking it off the top might had we've had some peripheral conversations we're going to do a detailed plan which on cleared.

Our competitors assessment and we'll have to size of the price I quit 80 to 100 million in general that's just the mobile can market. Some of the bigger guys are 30, 40 50 million so.

It could be in excess of 100 million.

And we're we're probably tracking around 10.

Okay.

Dominant player right now.

And the Pacific Northwest, Yes, we are but I was just throw well add to that Paul that you know Harold if you think about this view it as you walk the grocery store idle and I do this here on the East Coast and you walk and the freeze of section the cold section. The most expensive spot is not dominated by.

Bush with a major labels. It's you know a four packs 16 ounce silver aluminum can with a with a sticky label on it.

And small brewers that are dominating that.

You know area of the of the shelf now in the past when you were walk the aisle I mean together you know the CEO, Rob talked about this and you walk the island. The pass you look at that can set up and you think that's cheap. It's you know it's kind of a thrown together with the shoestring operation now it's a batch of.

Crafts, you know honor to can be found there.

As of the product that way and a lot of these small brewers are growing rapidly in that space. So the challenge with what you're asking is it's changing very very quickly. It's the mobile clan, Kenya operation change and the people that we're serving don't have the resources volumes to put in their own Canyon lines. Initially so when I mentioned that.

The customer growth at the very strong you know number for us because young customers will stay with cracking for awhile, and we'll grow with them and as they get bigger and if they're successful not all of them <unk> will be supers himself, but as the ones that the do get bigger you know and more volume to know built from out of the of the business.

But but right now this is a business, it's really hard to size.

What is it reasonable, but you're saying that the we have maybe 10% at a market or thereabouts. So there's lots and lots of room for us to grow share.

Yes.

Okay. That's important to its I'm just trying to get an idea and this is something you said, you're getting trucks to live it and you could start to scale that right away.

Yes.

Okay. So that should it means that the should show at least contributing additional revenues from these new the portable plants I guess right.

That's correct.

Okay very good.

Thank you guys.

Thanks.

Our next question comes from that Daniel Hurst, a private investor. Please go ahead.

Paul and not just a good afternoon here from a <unk> from the East coast.

I guess the last questioner got a.

Got in here of a craft a before me, but just one last thing.

Thing on craft I'm doing a quick search here. It that's currently on the web site.

And it's only a Oregon, Washington and Colorado.

I mean I.

I mean, obviously you guys want I want to grow that is that still how that stands today.

Those particular states.

That's correct.

And so the additional so the additional trucks would be for growing share in the existing markets are growing in in new new markets are or both.

Well actually I'm right now we have not 11 trucks. We just brought one new one on my thinking about past couple of months, so that took us to 12.

And we just started to new ones, which takes us to 14 does too nuanced wonderful go in Washington, and one more going Portland, because the backlog there is a pretty extensive so once we put those trucks on the street you know the truck is aligned and align goes in a truck and then they go off.

So the customer once we put them on the street.

The ceiling of the management there is that they'll be you don't fully utilized up to their their capacity.

And then after that.

I think those were kind of easy because we just deploy them and they start creating revenue and profit pick one.

But then I think we need to be a little bit more thoughtful and where we wanted to point, there's still other markets.

Then Denver has been a good market, we can start to either creep to the southwest or to the Midwest.

Where we made yet be able to add a truck or two trucks.

As we grow it's not going to be as easy. So we'll have to do a little more marketing and be a little more creative and be more thoughtful in where we go.

Simultaneously, we'll be looking at acquisition, there's probably about I would say five or six significant players.

In the mobile Canning and bottling business and there may be some that could be interesting.

So our plan, we really don't always only chests and I've been here a few weeks you know we want to get into the craft Canning plan will start doing our planning and budgeting.

At the end of the summer.

And then we'll start to look at the competitive set for looks the size of the price might start to lay out our strategy and our operating plan and a lot more to report back in Q3.

And just one last thing on this I mean is there any is there any additional market that that jumps out that you guys are currently.

Well I mean, the east coast is getting doing a tremendous amount of business one of the biggest star bulk handling operations is on the east so.

You know there's different ways to look at this weekend expand concentrically from the west or we can jump over to the east and start to you know close in from eastern West and into the mid West So [noise].

You know, we'll look at the entire picture and.

You know, we'll look at different scenarios and will choose to one that's that's got the highest return so at least amount of resources for that for the highest amount driver of return.

And we don't have one to one tentative right now okay, and just one more I you touched on it up a little bit here, but any.

Any additional info on your Oh online platform and I'll online sales have been growing.

[noise], Yeah, I mean online has been robust we haven't really.

Focus there at least I happened in the short time I've been here, but but online sales for wine and spirits is you can imagine or are really increasing and.

We're going to dig into that we haven't yet.

And again, we'll have more to report back there the only thing I can report on now that I know we're actively pursuing.

Is setting up Portland potato vodka, so that it can be available on the west coast online.

Well.

Alright, I I appreciate it guys.

Thank you. Thank you.

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Our next question is a follow up from David Bain of Roth Capital. Please go ahead.

Okay, great. Thank you I just you know just based on their prepared remarks now the additional.

Well there on the accounting I just wanted to make sure that I understand the accounting business.

While synergistic nicely trending cash flow business.

Get all that but that the main business is still a you know what your main mandate is still to build craft.

Express like the brands the.

The premium spirits and what have you I just wanted to make sure that were not you know I'm changing from the overall premise what what we are but I understand we're expanding that business line and then the other was where you got the.

These businesses trade at 1.5 times revenue.

Is that like a public market comp or just something you're seeing in the M&A market. Thank you.

Yeah, I mean, I can answer that no our focus is still on.

Just on spirits, and then of course, we talked about the potential to.

Develop our two days that's our focus I think we're just excited that we have this jam that can grow and provide cash flow [laughter] yeah. No. It's fantastic I just wanted to yeah. That's because there was so much focus on is one that.

Make myself clear there.

And then you have no question was yeah, well you mentioned I'm in the prepared remarks that they trade or they sell for something 1.5 revenue six times EBITDA kind of pick up.

Public company comps, but I'm, having issues finding a pure play there.

Well, it's kinda difficult I'm talking about contract manufacturing, Okay, you know, but something you know so what I've seen and working with private equity is that these these contract manufacturers under 100 million.

Usually range from six to seven times, but.

With the boom in Canning, it probably could be a lot more than that and that [laughter] multiples that I've seen from experience a working in that sector.

Awesome, Okay. That's very helpful. Thank you.

Yeah.

This concludes our question and answer session.

I'd like to turn the conference back over to Paul block for any closing remarks.

[noise] alright, well look I yeah. Thank you everyone for your time today and your continued interest Sydney size.

Jeff and I'll get back to work and deliver the results and novel Port back in Q3.

I look forward to talking to you individually, but specifically on or how we make those our capital structure and built an acquisition plans forward. So thanks, again and have a great day cheers.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

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