Q3 2022 Eastside Distilling Inc Earnings Call
[music].
Good day and welcome to the Eastside Distilling third quarter 2022 financial results Conference call all participants will be in a listen only mode.
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I'd now like to turn the conference over they had their weight VP of human resources. Please go ahead.
Good afternoon, everyone and thank you for joining us today to discuss Eastside distilling financial result for the third quarter 2022.
I'm, Heather white with Eastside distilling and I'll be your moderator for today's call joined.
Joining us on today's call to discuss these crystal are Mr. Jeffrey Cohen, the company's interim Chief Executive Officer, and Chief Financial Officer.
Stephanie Melton East type controller, and Mr. Bruce well crafts controller.
For this quarter's call. The company is also providing a presentation or slide deck that is available to all interested parties.
You said just fillings website we.
We encourage you to access the presentation and follow along by visiting Www Dot Eastside distilling dotcom.
Clicking on the Investor page, and then selecting events and presentations on the left hand navigation panel.
From there you'll be able to download and view today's presentation.
This presentation by Eastside distilling includes forward looking statements within the section of 21 E of the Securities Exchange Act of $19 34 as amended the reliability of forward looking statements are subject to risks and uncertainties and you should not rely upon forward looking statements as predictions of future events.
Thank you.
You can identify forward looking statements by words, such as anticipate believe could project or the negative of those words or other similar terms that express our expectations for the future.
These statements are based on management's current beliefs about future events and trends that management considers reasonable.
Over these beliefs may not prove to be correct.
We may not actually achieve the expectations expressed in forward looking statements and so you should not place undue reliance on them.
Some of the key factors that could cause actual results to differ the expectations expressed in our forward looking statements are set forth in the section of our most recently filed annual report on Form 10-K, titled Risk factors and you should refer to that text for detailed information about those risks.
The annual report is available on our Investor Relations website at Eastside distilling Dotcom backslash investors and on the SEC website at Www Dot SEC Dot Gov.
The forward looking statements made in this presentation are based on circumstances existing as of the date on which the statements are made we undertake no obligations to update any forward looking statements made in this presentation to reflect events or circumstances occurring after the date of this presentation or to reflect new <unk>.
Information or the occurrence of anticipated events, except as required by law.
This presentation and the oral presentation that will accompany.
Include references to adjusted EBITDA, which is a supplemental measure of financial performance not required by or presented in accordance with GAAP.
We define adjusted EBITDA as earnings before interest taxes, depreciation and amortization adjusted to exclude the impact of certain noncash and other items that we do not consider relevant to our evaluation of ongoing operating performance.
These excluded items may include a professional fees equity based.
Based compensation expense write offs on property and equipment deferred rent financing expenses and certain other charges and gains that we do not believe reflect our underlying business performance.
We believe that adjusted EBITDA provides our management with useful financial data for internal comparative analysis and also provides meaningful supplemental information to investors.
However, this non-GAAP measure should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP such as net income.
Our net loss or net income per share on net loss per share as a measure of financial performance cash flows from operating activities as a measure of liquidity or any other performance measure calculated in accordance with GAAP.
Before I turn it over I would like to just mention that reminder, in case anyone has just joined the call that we do have a presentation deck to go along with today's earnings call. You can access that by visiting the company web site Www Dot Eastside distilling dot com and clicking on the investor.
Page and select events and presentations on the left hand navigation panel.
Now with that said I would like to turn the call over to Jeffrey Cohen Jefferies. Please proceed.
Thank you Heather and let me also add my welcome to our third quarter earnings call.
This quarter. We have included a few slides to help illustrate the progress we are making.
You can find these slides on <unk> website on the investors page.
When you look at the performance of the company on a consolidated basis.
For that matter are both kraft and spirits individually.
It's hard to see the progress in the quarter, we are still reporting a substantial operating loss on a consolidated basis.
But there is a great deal of improvements from both of you.
We'll talk about today.
Hopefully you have the slides up now we can start with slide three.
Now each side is unique and that we have two very valuable businesses in two segments of the craft beverage sector.
<unk> Canyon and printing pictured here on the left.
There's not the same business that it was last year.
And has gone through a significant transformation.
It has moved from a small mobile co packing business to a broader cross services business.
Leading with its core offering of digital can printing.
On prior calls I have talked about the importance of digital Cam printing that we'd be happy to answer more questions on it in the Q&A here in a minute.
But suffice it to say we are seeing strong demand for this new service.
What we've seen at Kraft has validated our decision to move in this new direction.
More on that in a moment.
The other business, we operate is our premium craft spirits business youre on the right.
And that business, we have been navigating a reset to position the business to survive and grow in a very exciting growth category.
Our strategy in spirits envision pre pandemic has proven to be unsustainable.
The strategic direction left left it with.
With very attractive margins and a consumed significant amount of cash.
In the past year, we have repositioned the business and focus on core markets and core brands.
We've exited unprofitable channels improved distribution and rebuilt our sales team.
We expect this business to show improvement.
Get back to growth.
Now turning to slide four we have opportunistically taken advantage of high wholesale whiskey values throughout the year.
However, taking those sales out you can see sequential improvement in the pro forma sales at the bottom of this slide.
Below the line, our operating losses from our new business initiatives at Kraft have offset some improving results. This slide encompasses both the challenge.
And the opportunity ahead.
<unk> digital printing needs to continue its growth trajectory to profitability and spirits needs to begin to rebuild volume.
I believe as we do this we can achieve strong gross margins probably higher than we've achieved in the past.
Turning to slide five.
Clearly the Hollywood highlight of the quarter was the performance at Kraft.
Sales continued to improve both sequentially and year over year as we have walked away from selling blank can through a mobile business and we now sell digitally printed can to a much larger group of customers, including legacy mobile customers.
Customer growth there has been over 100% over the last quarter gross margins improved 75% over Q2, and we saw a big improvement in adjusted EBITDA as well there.
This improvement is wholly due to the sequential improvement.
Campaigning.
To see this development take a look at slide six and let's talk about the digital Cam printing ramp up.
Kraft launched digital Cam printing operation in Q2 and on the left of this chart you can see that.
The increase in total <unk> printed year to date year to date.
And we believe that number on the left can go well beyond $20 million in a single year. So we have a long way to go here.
To the right you can see utilization as we ramp up printing. This is not a straight line. This is a series of process and operational improvements.
Bring more staff working around bottlenecks and supply chain improvements now.
Our goal is to push utilization higher each month until we get to full utilization and as we do this margins improve as well as cash flow and I believe this will be a very profitable business.
Now, let's turn to slide seven.
This isn't just about decorating cans digital campaigns and has expanded our universe of business opportunity in the past Kraft was focused on a smaller subset of craft beer customers.
Today, our wins are all over the craft beverage space innovation here has been phenomenal initially.
Initially it was the beyond beer space.
And now encompassing an even larger category a convergence of the good for you and other segments in beverage. This area is full of hundreds of small innovative new customers, but not only need Greg Kansas, great packaging, but also help filling them.
We've used digital printing to launch us into that space and during the quarter. We began operations at Galactic Unicorn packaging, our first fixed site co packing plant.
That small facility serves multiple customers, who by the way also by cans from us.
And this strategy is what I call. The one plus two strategy, we lead with <unk> printing and we wrap up other service opportunities from a much broader segment of potential customers.
Now, let's turn to spirits in slide eight.
As I've said before.
Spirit's has undergone its own transformation.
We were striving to be a house of brands building and eventually selling them.
That vision I believe this floor building a spirits brand there is true value doesn't happen with a deal to open let's say 1000 doors and it doesn't happen once you sign a celebrity endorsement no. It happens when you create brand equity.
This is the velocity.
This is the poll.
April customer demand that moves bottles out the door every day across your system and most importantly that phenomenon can be only linked to price.
So we are focusing spirit on three brands that have brand equity.
Our Super premium single estate Tequila.
The Pacific Northwest Best small batch premium whiskey, aged in Oregon.
Burn side.
And Portland zoned box PPD.
All year, we've been calling out the fact that we have repositioned the brands and channels that have higher margins.
That has resulted in lower volumes as we reported this quarter and slide nine.
Shows you a volume work for year to date shipments.
We've never done this before.
Let's take a look case volumes in 2021 at this point in the year were 27912 cases, and we walked away from some unprofitable cases.
Business pulled out some one time sales the impact of out of stocks and Destocking.
Some distributor issues and we believe our underlying performance.
Is a negative 5% year over year decline, which is more in line with retail depletion trends.
Now, let me say this and saying clearly we're not satisfied with negative case sales.
But we believe we have cycled most of the unprofitable accounts and we're now rebuilding.
Much more profitable sales.
Now turning to slide 10.
Let's talk about the script a little bit more so.
So we've made some.
Significant improvements.
And some of these improvements are in the distribution and supply chain.
And these things take a while but.
We've taken price increases in investment and savings initiatives.
And most recently, we've rebuilt our Oregon sales and marketing team. So that's a lot for one business in a year.
But I want you to know that we expect improvements in Q4 and spirits and we definitely think these improvements and these initiatives that we've undertaken will become much more obvious as we move into next year.
Now the last slide of our slide deck I'm going to leave for Tiffany who is also going to take us through the financials for the quarter.
After that we will take your questions.
Additionally, Tiffany today I have both annual answer and Bruce Wells with me from spirits and craft, respectively, and they can help answer any questions. You have now I will turn it over to Tiffany.
Thank you, Jeff and thank you all again for joining our call today before we review the third quarter, let's look at slide 11, we have raised $8 $2 million through October 22, allowing us to repay almost $6 million of outstanding debt. During the same period. During October 22, we closed on a new facility on favorable terms.
<unk> by eliminating restrictive covenants, we also extended the maturity of our 6% secured debt and are working with the lender for a longer extension with these initiatives. We are continuing to improve near term liquidity now lets review the third quarter.
On a consolidated basis, our gross sales were over $3 million for the third quarter of 22 compared to $3 3 million for the third quarter of 'twenty. One spirit sales were $1 2 million for 22 compared to $1 5 million for 'twenty, one due to volume softness in his junior as we reduced discounting we had a price increase and two large one time inventory.
Just as in 2021 craft sales were $1 9 million for 2002, and $1 8 million for 2021, reflecting our success in Cannes printing, but offset by mobile Canning. Our consolidated gross profit was 200000 for Q3 dollars 22 compared to 900000 for Q3 2021, our consolidated gross margins were six.
<unk> percent for 22, and 27% for 2021 spirits margins were 29% for 'twenty, two and 36% for 2021 and craft had margins of negative 7% for 2022 and 19% for 2021 Cross margins are expected to continue to improve as we build volume as Jeffrey mentioned earlier.
<unk> margins did improve from last quarter. However were still down from Q3 dollars 21, adjusted EBITDA was negative $1 1 million for 'twenty to a negative 600000 for 2021 due to the weakness in both businesses turning to the balance sheet. We raised a net $500000 during the third quarter of 2022, ending with cash of 400.
Third as we continue to pay down debt, which we fully repaid a $500000 loan at Kraft I would like to wrap up the financial results with the thought we are continuing to write the ship by improving our distributor relationships in spirit and working towards full capacity of our digital Cam printer. Both of these take time, but we continue to work on them, while watching our own.
<unk>, we are excited about the growth potential of the printer for the remainder of the year as Jeffrey side. We are also expecting better results from the hard work of restructuring spirits, which will be more apparent in the coming quarters. We will now open the floor for questions operator.
Thank you and we will now begin the question and answer session.
If you would like to ask a question. Please press Star then one on your telephone keypad.
If youre using a speakerphone you may need to pick up your handset before pressing the keys.
The majority of your question. Please press Star then two.
And at this time, we will pause momentarily for the first question.
Yes.
Okay.
Okay.
And our first question will come from Kevin Theater.
Retail investors. Please go ahead.
Hey, Jeffrey the theme as you could well on several fronts and I think during the Investor presentation Slide is a huge improvement so a really great job on that.
I do have a few questions right. So if the discount is doing.
Production will be.
Paul.
Basically we should see.
Overall higher gross profit margin.
For this quarter I am seeing a lower gross profit margin for the entire division on a year to year.
On year basis.
If there's anything I'm missing.
Hi, Kevin this.
This is Amy I can take that hi, Kevin how are you.
We actually had a catch up entry in Q3 related to unallocated overheads, which were due to that.
Lower volume production so Martin.
<unk> have improved year to date versus last year.
Due to the things that we have previously outlined the reduced discounting on the price increases that is offset by the increase in the overhead.
Alright got it thanks Amy.
My second question is that I see that the ramp the ramp up of crop planting is very visible.
Regulations of that basically went up based on what im seeing with nearly $2 5 million cans in quanta tree.
Definitely a huge improvement, but we are still seeing.
We're still operating on a negative gross profit margin. So any thoughts on when we are hoping to see breakeven on this business you need either through volume growth or better sourcing raw materials.
Yeah I'll take this one and Bruce can jump into if you have some thoughts on it so Kevin you're right.
This is the business that we're ramping up that's going to have the biggest near term impact on the company.
The the.
We're chewing through cans pretty quickly.
And then you ramp up.
I have to say that this has been an exploration for the team.
You get a digital Cam printer and you have to immediately loaded in the front and the back both with working capital new customers.
And you can imagine when you're a bigger customer or CBB customer water customer do you want to make sure that when you put it in your order for Kansas show up the labels right.
It works.
So we've had a lot of.
Except into the machine and we're even getting to the point now we're doing repeat.
<unk>.
Cans, but this is something where we have to wait and just see how we do I mean, we've got our own projections, but we've been wrong a couple of times on our projections.
Where where things ramp up in helping change and then the other thing I'd say about it is.
<unk>.
The mix of cancer types that we run through the machine.
And types of customers size is different.
Different types of customers.
<unk> affects the margins when you have a customer shows up if he wants to run 100000 cans in a day.
And it's a unique size can.
Margins on that are very different from competing for.
Say, a 12 ounce guy that's running smaller margins. So when we firstly first priced this service we price it to get wind volume immediately right from our competitors and we can definitely see us taking volume from competitors. So now we're working on improving margins and mixes but.
The chart that I showed in the slides is important because it shows you.
Where we are where we are much higher than where we reported here on the chart today, because we're not willing to November .
That chart should be a chart, where we're printing over 2 million cans.
Sure.
Alright, and have you printed 2 million cans of months.
Utilization of the machines will be much higher.
And we would expect.
Margins improved pretty substantially so when will we get to that point.
Every month, we're trying to make incremental progress.
And <unk>.
Improve.
On a four wall basis, I think we're really close to <unk>.
Breaking through and starting to generate positive cash at Kraft.
As I've said to a lot of people.
When we talk about the company.
This can be still has to navigate.
It's really small.
The bears the public company costs of.
We all talk and know about and so we have to make improvements on both sides of the business to get to a point, where we are.
Generating positive EBITDA positive operating cash flow and net income.
And so <unk> is going to do its part and get us closer and closer on that side and we need to continue to work on spirits and get it up there as well.
Got it got it.
2 million cans per month is really significant.
Yes, so looking at the Investor Slide.
Though these business named quite a delicate unicorn packaging is that a new name for the digital.
Breathing unit.
What is that about.
So.
As I said in the script.
Are we referring to you on that on the slide that you are calling out.
There isn't.
So would it surprise me, but at the same time.
This requires the creative digital Cam printing brings opportunity.
Right a lot of the people that are coming to us for the digital campaigning service.
Looking to take advantage of the market.
Opportunity you have with really high quality impact graphics sticker label or shrink or off label and then they come due and in many cases they have other needs right, they're looking to buy.
Other disposables.
Looking for logistics help storage.
But the main one that we see is a lot of people are looking to launch new innovative products and they want somebody to help them do filling so that's naturally what we historically have done right and mobile and our mobile business.
But the challenge with the mobile businesses.
<unk> talked about on our prior earnings calls.
It's a business where you.
I'll go into a customer site filling on site for them the margins are much different as you.
Deal with the logistics of moving teams and people around you have the impact on.
On your profit margins, so a huge opportunity for us is to get into the fixed site space.
And attack the market, that's just around the printer, so specifically I'm talking about Portland.
And so when we did the deal earlier in the summer was approach.
I think we announced that we talked about on the last call approaches a partner that we're producing.
Producing their CBD water for them.
They had grown through their ability to really continue to build our production assets right and then wanting to go more towards the brand.
Focus on an asset light strategy with their with their with their CBD brands. So we stepped into their facility assume their assets are there.
Co packing equipment, we already have our own team.
Mobile that we brought over installed and so now that facility has been.
Renamed Galactic Unicorn packaging and we now have I believe it's for customers there they're small it's a small facility.
But it's an example of the kind of ways that you can grow here. So we sell cans to these customers we deliver they can through our own facility now we co pack for approach who's our core anchor customer there and now we have three new customers, who have stepped in and we're working to.
Produced for them and this facility won't be one where we can scale it dramatically, but it's a kind of a test case to show how you can.
<unk> printing.
Kind of the opportunity to sell the Cam, but also selling additional services our goal.
Mr widen that funnel of revenue.
As to sell more things down one funnel through the customer a broader set of customers.
It generate more profitability from one customer.
Control more of the wallet.
Or more of their wallet.
And.
And have a much bigger.
Market share of craft services for the beverage sector, particularly in the pits are in the northwest.
So that's how we built the unicorn packaging.
Some people could drop.
$20 million $10 million on a new co packing plant <unk>.
<unk> doesn't have the capital to do that so we have to be creative and this is how we are growing and still with limited resources.
Okay. There's a lot of useful details down there, thanks, Rafi and things of that team. Thank you.
Thank you thanks Bill.
And once again, if you would like to ask a question. Please press Star then one.
Next question will come from Ross Taylor with Arris Investor. Please go ahead.
Hey, Ross.
How're you doing.
Good.
I wanted to get into a couple of things here one is.
You sing the praises of Azania, and Burnside and you're just not selling a great deal of both brands.
Seem to be something that at this stage kind of underutilized I recognize youre focusing on Portland.
But what's it going to take.
To get.
Sales in those two really kind of push forward then.
You think theres, a possibility of getting each of those to be.
To sell the same kind of volume, we're seeing other Portland potato vodka.
Yes.
Thanks, Ross I mean, Amy can weigh in on this amy's background as we've talked about many times is squarely in this space and has seen these.
Different size brands.
Brands grow and develop but I'll give you might take and then she can share her thoughts.
One of the things that I think investors have to think about with the history of east side is that there's a lot of different views on how you can build the spirits business and this business frankly was built for.
From our legacy really Big addition of as we've talked about in the past Ross Redneck Riviera and that jump over the strip distributor bring of celebrity and have him.
All the the product through Walmart in the mass channel into every nook and cranny corner get to 10000 points of distribution have it everywhere.
And then and then you really have a challenge and that challenge is can you pull the volume off the shelf right can you pull.
The volume through Walmart, and then replenish it and east side Couldnt do that well and we also couldn't do the logistics bring the whiskey to the West coast model. It send it back to the East coast.
<unk> business strategy was just Florida.
<unk> thought through.
We didn't have anywhere close to the number of amount of cash and then we did the zinc acquisition and thought we could bring it through the same channel was also poorly thought through because we're going to need even more cash to keep redneck Riviera going in.
So you can just kind of see the challenges so when we pulled back to markets, where we really have more of a presence.
The key pieces missing in my view that has been missing is the investment with the distributor.
The distributor is.
Super important.
And making profitable.
Growth possible with these three brands lessor in Oregon, because in Oregon, as a control stake but.
But definitely in our other states, California, Arizona, Colorado and Texas.
No.
We didn't and partner with the distributor right last year.
The strategy was to try to.
Work on other routes to market through other smaller distribute distributors and that was a mistake.
Alright that really.
Slowed up the process and we relied heavily on these these discount this kind of sales.
We have done at Zynga.
No.
What we've done is.
And as I tried to make it clear boats.
This call and in prior calls this year.
Turning to page and we're not going to sell a junior.
And look the.
The distributor capture all of the gross margins, we're going to go back.
Work with distributor and they get paid for their part of the sale, but we're going to put it in places where it.
Is going to be sold where we can invest alongside our distributor partner.
Start to build the velocity and as I said in the script really build.
That brand equity, which is people coming in and saying I'm looking for bachman.
I love the stuff I've really enjoyed.
Is there any black and <unk>.
We find opportunities, where we show up.
There was one recently, where one of our competitors and with the Black label Tequila wasn't able to produce the volume that people were looking for and we stepped in and I think people loved the product that was in place of our competitor. So we have to continue that lawsuit win them one at a time.
But the volume that we're doing now with these new sales is going to be much more profitable now you can see it and then you alluded to this.
The question that Kevin asked at the very start with the Q&A, which as volumes go down exposes the you know the.
Fixed infrastructure of the business and so we have more work to do.
Lower our overheads there.
But when we get the volumes moving in the right direction and I'm pretty confident we've got a good team in place in the field to do this.
Little time, this year, but when we start getting the volumes heading in the right direction.
And heading North then the margins are going to be much more apparently.
Obviously better.
And the bottle and outside the bottle as well so.
I mean, that's how I'd attack that question and I don't know Amy do you have anything else you want to add to that.
And the only thing I have to add is that hands down the number one thing that we have going for us is liquid.
One of our brands so driving trial.
Sampling would be the number one priority.
For the sales team going forward on premise with the pairing dinners and out events.
Where we can sample hundreds of people not a handful of people.
As well as in our digital media and that area will be another focus group in a little bit lacking in that and we need to increase the brand awareness.
Okay.
Another question is obviously you guys are right now trading your market cap equity market cap of about equal to the value of one of your printing of your printing machine you're counting machine.
What do you it makes no sense to stay public at this level.
But the market's unwilling to reward you with a growing enterprise value also so.
Talk to me about two things one why is the market wrong when its telling US right now that youre going youre not going to be around Andrew or Scott can be any recovery.
Probably better right.
Certain certain tokens and coins.
Second.
Yes.
Second.
[laughter] I thought you were going.
The second is that.
Looking at this situation.
You've got you've talked about the value of this business. There's obviously something we need to do to kind of get that close so how do we how do we get so basically talk about how you get rid of the going concern issues.
You've been able to pay down debt, you've restructured that you seem to have a good relationship with the person who holds the debt that you have outstanding.
You.
Basically last quarter I haven't seen the Q yet for this quarter, but you actually were able to reduce operating.
Slightly positive operating cash flow last quarter and all of the stock did lose 70% of that value. So talk to me about that about what your vision is where we go and how we get this.
To a level, where quite honestly I mean, right now share will trade more than Penny candy.
Right right.
So.
Clearly when you look at the market cap of the company.
People.
I have questions about the company's ability to move.
Move forward from here and I don't think Thats dissimilar poor.
A lot of small cap companies facing.
Interest rates were.
On a spectrum of risk, we see big double digit numbers right here.
Fear that that the whole debt structure of your company is just going to consume all available cash.
And I think that part here.
It is important.
This isn't a.
A company that has.
Simply one pass.
He'll walk down and I tell this to the to the team withheld to external investors already talk about it with the board we talk about it internally a lot and with the key stakeholders. I mean this is a company that as I said in the first of all I was purposeful has to pass to Steve value grow.
A lot of people call me and I have gotten some calls where people say hey, I'm interested in this business, where I'm interested in that brand while I'm interested in.
And your and your printer I literally had some what I would call me a few weeks ago and asked if we would be interested in selling our printer.
And I was thinking well suited 17 tons it'll be pretty heavy.
And drag it out of the facility, but but I appreciate the call.
<unk> is for sale every day right basically of public companies for sale every day.
I think the answer to that is to continue to show people. What these two businesses can do right.
And in.
Unfortunately for external investors, it's hard to followed then you'll see to your following through the Q and the K and on earnings.
Thanks.
Oh I'm sorry.
Stakeholders are people that are not.
Uh huh.
Private information.
Different centers.
Okay.
Guiding both companies towards them.
And inevitably what we need to do.
Yes.
Hey, guys.
Great.
I wanted to get down that road, but do it in a way.
No.
Marginalize all equity holders and that there is an opportunity.
Thanks.
And when when these.
Patrick.
So I'm working on it.
Charter charting a course that though of course I can't really talk about in a lot of details on what the ideas are down.
Fourth engaged.
Oh.
Mhm.
And right now we're focused on.
Thanks.
Okay.
Selling.
More cans.
Michelle.
Premium volumes improving.
We have a whole new sales team in Oregon.
Sure.
Yes.
Marketing individuals.
The ground running.
We're focused on fuel marketing closer to the market.
So we're going to win on those areas, but I think what we can do that.
Respond positively and.
And that specifically means.
Capital and that's the biggest.
This company has big opportunity.
Big opportunities, but it needs.
Incremental capital incremental capital.
Was wondering if they got shared one one is the second.
Think about the fact that you're studying.
Sure.
Alright.
Walk in mountains of cans around it.
Yes.
Colon cancer.
Automated.
Now the other side.
Medically stacked into a stack of 8000 fans rock and he goes out.
The third issue.
That facility is a big size facility.
Sure.
Okay.
Certainly I can manage.
To support a $40 million decorating client business.
Yeah.
Second machine and that.
Dramatically changed.
Contribution margins.
Yes.
Securities The same labor force.
Same.
Plant.
Overhead.
So that's an example.
Where you can really make a case.
Yes.
Angela.
So that's what we're doing work.
For validating that these businesses are valuable and continuing to talk about it and get people interested in it and navigate.
The next couple of quarters that we see ahead in and do things like this.
Described with the approach deal with this new co packing facility.
How's us.
Make investments and do it on a very shoestring.
Two stream basis.
So a second machine is well north of $4 million to do something like that and obviously the economics still makes a great deal of sense you can meaningfully improve your operating margin with the second machine, but it sounds to me like to get that youre going to need to have a strategic equity partner some unwilling.
To step in.
What can be done to make that happen.
Yeah.
Im sorry.
Im just getting one of them.
<unk> said that you can't hear me very well, so I'm going to take my headset often speak more directly in the Sun.
No.
Like I said I think there are a lot of creative ways that we could.
Accommodate incremental capital and Im hopeful we can do it in a really.
<unk>.
Significant alright, I should say it this way in a way that really improves the.
The economics of the business, but also it does not have.
A huge negative impact on shareholders, whether we can get there or not is work to be done here as we go forward.
The team has done an outstanding job.
Jayson liquidity, improving the liquidity of the company. The company has said in the past has a substantial amount of assets that are valuable, but we sit on for example.
We've monetized.
A lot of our barrel inventory that we didn't necessarily need this year or for that matter next year, and I think theres more room to do.
A couple of those types of transactions. If we wanted to go down that road going down that road, obviously impacts your ability.
To performance in the future years, because you have to go out and buy a younger whiskey and you have to deal with that and infection product quality.
You have to you have trade offs, there, but I think that there is a couple of pads, we can navigate to get us closer to a bigger win where we can get.
Enough capital to really start to unlock the value of both businesses going forward.
Ross This is something that's hard to speculate on amount.
We'll be the first ones to tell investors when we have a good idea and can we talk about it publicly.
As the market's going concern risk misplaced.
That's a that's a great question. That's a question that's really.
Everybody makes on their own right.
Our auditors made that call.
Last year I think that you made the year before I don't remember now.
Investors make that called daily and how they price the security I look at a whole different set of specs that you don't see it.
To make my own call on that and I'm.
I'm here fighting with the company to see a better future for investors and I'm comfortable with staying as I said on the earnings call that this is a strong and very valuable company two very valuable businesses.
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I wanted to see them see the two businesses thrive people.
When and.
C C. The hole.
Combination.
We rewarded by higher stock price. So we're doing that every day, we're going to attack the market and see.
If we can get more wins and have it show up in the financials that I think will have.
Some success doing that in the next quarter, we will highlight the titles, we think things will improve for digital can printing and I'm, hoping that our sales improve also in the fourth quarter.
Thank you for your breath to answers and you know I have confidence that.
The going concern risk isn't this place. So thank you yeah I appreciate it thanks Ross.
And this will conclude our question and answer session I would like to turn the conference back over to Jeff Great Green for any closing remarks.
Yes, thanks again.
I appreciate the time Tonight to listen to our third quarter Conference call. The team is excited about the challenges ahead, and we've got our head down and we're working to improve.
Improve the utilization and the sales and crafts as we see the digital camera market take off and we're also working hard on the spirit side of the business. If you have any other questions and you want to follow up with US you certainly can can can reach out to me and the team and we can spend some time and walk through the results and talk about our R. R.
<unk> going forward.
And then we'll probably touch base in the early part of next year.
They call them.
Anyway, I appreciate the time Tonight and things.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Yeah.