Q1 2024 Eastside Distilling Inc Earnings Call

Operator: Good evening, and welcome to the Eastside Distilling first quarter 2024 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. Please note, this event is being recorded. I would now like to turn the conference over to Tiffany Milton, Controller. Please go ahead.

Good evening and welcome to the Eastside distilling first quarter 'twenty 'twenty four financial results conference call.

All participants will be in listen only mode.

Should you need assistance, please signal a conference specialist.

Zero.

After today's presentation there'll 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 two.

Please note this event is being recorded.

I would now like to turn the conference over to Tiffany Milton Controller. Please go ahead.

Tiffany Milton: Thank you. Good evening, everyone, and thank you for joining us today to discuss Eastside Distilling's financial results for the first quarter of 2024. I'm Tiffany Milton, Eastside's Controller, and joining us on today's call to discuss these results are Geoffrey Gwin, the company's Chief Executive Officer, and Connor Kilkenny, Kraft CEO. Following our remarks, we will open the call to your questions. Now, before we begin with prepared remarks, we submit for the record the following statement.

Thank you good evening, everyone and thank you for joining us today to discuss your scientists Sterling financial result for the first quarter of 'twenty 'twenty four I'm, Tiffany Milton sites controller and joining us on today's call to discuss these results as Jeffrey Gwen the company's Chief Executive Officer, and Conor Kilkenny Kras C E O following our remarks.

We will open the call to your questions now be before we begin with prepared remarks, we submit for the record. The following statement certain matters discussed on this conference call by the management of Eastside distilling may be forward looking statements within the meaning of section 27, a of the Securities Act of 1933 as amended.

Tiffany Milton: Certain matters discussed on this conference call by the management of Eastside Distilling may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements describe future expectations, plans, results, or strategies and are generally preceded by words such as may, future, plan, or planned, will, or should, expected, anticipates, draft, eventually, or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements.

<unk> 21 E of the Securities Exchange Act of 1934 as amended and such forward looking statements are made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.

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

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

Tiffany Milton: Such matters involve risks and uncertainties that may cause actual results to differ materially, including, but not limited to, the company's acceptance and the company's products in the market, success in obtaining new customers, success in product development, ability to execute the business model and strategic plans, success in integrating acquired entities and assets, ability to obtain capital, ability to continue its going concern, and all the risks and related information described from time to time in the company's filings with the Securities and Exchange Commission, including the financial statements and related information pertaining to the company's annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission. Now, with that said, I'd like to turn the call over to Geoffrey Gwin. Geoffrey, please proceed.

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

Acquired entities and assets ability to obtain capital ability to continue with going concern and all the risks and related information described from time to time in the company's filings with the Securities and Exchange Commission, including the financial statements and related information pertaining to the company's annual report on Form 10-K for the year ended.

Speaker Change: December 31, 2023 filed with the Securities and Exchange Commission now with that said I'd like to turn the call over to Jeffrey Gwen Jeffrey. Please proceed.

Geoffrey C. Gwin: Okay, great. Thank you, Tiffany, and welcome to our first quarterly 2024 conference call. We have a lot to discuss this quarter. In addition to Tiffany, I'm excited to have Connor Kilkenny join us today.

Geoffrey C. Gwin: Okay, great. Thank you Tiffany and welcome to our first quarter 2024 conference call. We have a lot to discuss this quarter. In addition to Tiffany IMAX.

Geoffrey C. Gwin: I'm excited to have Conoco Kenny.

Geoffrey C. Gwin: Connor joined Eastside in January as the CEO of Kraft and comes to us with an extensive background in manufacturing. He will share some of his first impressions of Kraft's business and outlook in a moment. Now, if you're new to the company, we operate two distinctly unique businesses, including a craft beverage services business, which we refer to as craft. And we also have a spirits business, which sells a number of great brands, including Burnside Whiskeys, Portland Potato Vodka, and Amazon, I'm sorry, Azunia Tequila, primarily in the Pacific Northwest, as well as other regional markets.

Conoco Kenny: Joining us today on our joint you saw it in January.

Conoco Kenny: If that comes to us with an extensive background in manufacturing Conor will share some of his first impressions and crafts business and outlook in a moment.

Conoco Kenny: If you're new to the company, we operate two distinctly unique businesses, including the craft beverage that services business, which we refer to as crap.

Conoco Kenny: And we also have our spirits business, which sells a number of great brands, including Burnside Whiskey is Portland potato vodka.

Conoco Kenny: And Amazon I'm, sorry Junior Tequila, primarily in the Pacific Northwest as well as other regional markets No. One particular highlight in our company.

Geoffrey C. Gwin: Now, one particular highlight in our company is the investment we made at Kraft in digital can printing a couple years ago. This is a very new technology that allows us to decorate 100% recyclable aluminum cans for the Kraft beverage segment.

Conoco Kenny: He made it crashed and digital campaign a couple of years ago. This is a very new technology that allows us to decorate a 100% recyclable aluminum cans for the craft beverage segment.

Geoffrey C. Gwin: This is a very exciting business opportunity for us as one of the most dynamic and competitive spaces in consumer packaging. Now, new entrants in this category are faced with tough decisions as they chart a route to market. It's a crowded space and extremely expensive to launch a new beverage brand. Think about it. How many new products have you come across in your daily life over the last year? Now I'd be surprised if you actually guessed that number correctly.

Conoco Kenny: This is very exciting business opportunity for us as one of the most dynamic and competitive spaces in consumer packaging.

Now new entrants in this category our space with tough decisions is a chart of route to market.

Conoco Kenny: It's a crowded space and extremely expensive to launch a new beverage brands think about it.

Geoffrey C. Gwin: I suspect you'd be way off on that number, for the reality is many new products simply go unnoticed. They simply show up. You may notice them briefly, but they fade away in the morass of all the new ideas and concepts we see daily. Now, for a startup reaching you, a potential consumer, just getting your attention, let alone actually building brand equity with you, is a huge challenge. Now, there are many paths you can take to try to build your brand. Take, for example, the influencer space, which at times feels like a tsunami for me.

Conoco Kenny: How many new products have you come across in your daily life over the last year.

Speaker Change: I'd be surprised if you actually get that number correctly I.

Speaker Change: I suspect you'd be way off on that number but the reality is many new products are simply aren't go unnoticed. They simply show up you may noticed them briefly but they fade away in the morass of all the new ideas and concepts, we see daily.

Speaker Change: Now for startup, reaching you a potential consumer.

Speaker Change: Just getting your attention let alone actually building brand equity with you is a huge challenge.

Speaker Change: Now there are many paths you can take to try to build your brand take for example, the Influencer space.

Speaker Change: At times, it feels like a like a tsunami people.

Geoffrey C. Gwin: People fill up my inboxes daily, suggesting that they can introduce us to influencers on the spirit side. Now, there is an unknowable army of people claiming to have access to this social media, a large segment of promoters who can get your product in front of large numbers of eyeballs. But, for many brands, navigating that road is fraught with challenges. Why is this important for us?

Speaker Change: People still are my Inbox is daily.

Speaker Change: Suggesting that they can introduce justice influencers in the spirits side no there isn't unknowable army of people, claiming to have access to this social media.

Speaker Change: A large segment of promoters, who can get your product in front of large numbers of eyeballs.

Speaker Change: For many brands navigate getting that road is fraught with challenges now why is this important for us.

Geoffrey C. Gwin: It's important because marketing around your product has changed. When I say around the product what I'm talking about, where it's sold, on the shelf, the point of purchase, the moment a consumer makes a choice, that moment is huge. It's a moment of opportunity. Unlike a consumer connecting online, we have to have to see it. Seek it out. Find it. Purchase it.

Speaker Change: It's important because marketing.

Speaker Change: Around your product has changed.

Speaker Change: When I say around the product, where I'm talking about where it's sold on the shelf at the point of purchase the moment a consumer makes a choice that moment is huge it's a moment of opportunity.

Speaker Change: Unlike a consumer connecting online.

Speaker Change: You have to have to see it.

Speaker Change: Seek it out find it purchase it.

Speaker Change: Having ted on the shelf at retail you are at the moment of opportunity as the consumer moves by.

Geoffrey C. Gwin: On the shelf at retail, you're at the moment of opportunity as the consumer rolls by; they're there to buy. So a new brand has a huge opportunity to win a customer, and I've said this repeatedly in the past, in the craft beverage space, the great equalizer here at the moment of opportunity is the packaging opportunity. You can go with the red light, with old boring cans and old technology, or you can pick something that speaks to the consumer.

Speaker Change: They're there to buy something so a new brand has a huge opportunity to win a customer.

Speaker Change: And I've said this repeatedly in the past and the craft beverage space the great equalizer here at the moment of opportunity is the packaging opportunity.

Speaker Change: You can go like Bud light with old boring cans and old technology or you can pick something that speaks to the consumer.

Geoffrey C. Gwin: Consumer beverage marketing has changed, and we deliver the opportunity to run circles around national brands. To see this opportunity, you need to start by wandering through the craft beer space in your grocery store. There, you will see great marketing, local brands fighting successfully for shelf space. We see them win daily with data.

Speaker Change: Consumer beverage marketing has changed and we deliver the opportunity to run circles around national brands to see this opportunity you need to start by wandering through the craft beer space and your grocery store.

There you will see great marketing local brands fighting successfully for shelf space, we see them win daily with data craft beer is not struggling.

Geoffrey C. Gwin: Craft beer is not struggling; those brands that embrace their advantage are winning. In that aisle of the grocery store, you will see can decoration in many forms. Old school, screen printed, limited colors.

Speaker Change: Those brands and embrace their advantage are winning.

Speaker Change: And that is the grocery store you will see Chandra decoration, many forms old school screen printed limited colors same seen it there always same design you'll.

Geoffrey C. Gwin: Same, seen it there always, same design; you'll see paper labels, not recyclable, and shrink-wrapped plastic labels, not recyclable. Unknown Attendee The latter two are difficult because they require high volumes and a lot of working capital. And in our market, you'll see a new type of digital package, digitally printed cans. These cans are extraordinary. They are the digital billboards that can change after 15 minutes when you drive by the stadium on the way home from a concert or show.

Speaker Change: You'll see paper labels, not recyclable shrink like shrink wrap plastic labels not recyclable.

Speaker Change: The latter two are are difficult because they require high volumes and a lot of working capital and in our market, you'll see a new type of digital packaging.

Speaker Change: Digitally printed chance of these cancer extraordinary they are the digital Billboard that can change after 15 minutes when you drive by the stadium on the way home concert show.

Geoffrey C. Gwin: They can be unique, unique for a season, for a day, for a week. They can be a special beer. Unexpected, hard to get seasonal. The opportunities are endless here; beverage manufacturers embracing this technology are just getting started. I started talking about this adoption two years ago, and we've only seen a gain in momentum. But now we finally have data that shows that these digital trendy cans are driving incremental sales for our customers. We saw adoption expanding again this quarter. In fact, I would say adoption is accelerating for us. In the quarter, Kraft produced a record number of cans.

Speaker Change: They can be unique unique for a season for a day for a week.

Speaker Change: There can be a special beer.

Speaker Change: Unexpected hard to get seasonal.

Speaker Change: The opportunities are endless here.

Beverage manufacturers embracing this technology are just getting started.

Speaker Change: So I started talking about this adoption two years ago, we've only seen it gained momentum but now we finally have seen data that shows that these did you try any chance of driving incremental sales for our customers.

Speaker Change: We saw the adoption expanding again this quarter in fact, I would say the adoption is accelerating for us in the quarter craft produced a record number of cans kind of we'll talk about that at all it now while gross margins were impacted by a number of factors, including transitioning to a lower price can contract expensing new parts.

Geoffrey C. Gwin: Connor will talk about that in a moment. Now, gross margins were impacted by a number of factors, including transitioning to a lower-priced can contract and expensing new parts. Unknown Attendee, Geoffrey Gwin, Tiffany Milton, Unknown Attendee, Amy Lancer, Eastside. We see this business growing and evolving very quickly. Now I'm going to talk in more detail about digital printing and craft, but I want to talk for a minute about spirits and their performance for the court. Spirits had a great quarter, producing the best operating result without bulk sales we've seen in some time. Iwata for that segment was only a $56,000 loss for the entire quarter.

Speaker Change: The price investment for large volume we are pleased with the performance, we expect to improve margins in Q2, but most importantly.

Speaker Change: We see this business growing and evolving very quickly.

Speaker Change: Now I'm going to let corrine to talk in more detail about about digital.

Corrine: Digital printing in craft, but I want to talk for a minute about spirits and its performance for the quarter.

Merits.

Corrine: Had a great quarter, producing the best operating result, without bulk sales we've seen in some time EBITA for the for that segment was only a 56000 or a loss for the court to an entire quarter.

Geoffrey C. Gwin: Importantly, volumes in Oregon were in line with what our expectations were, despite the clear trend of consumers trading down at retail. Now, this consumer shift has been ongoing for a few quarters now, and we've seen it across multiple categories. Also, it's important to keep an eye on agave.

Corrine: Importantly volumes in Oregon were in line with what our expectations were despite the clear trend of consumers trading down at retail now this consumer shift has been ongoing for a few quarters now we've seen it across multiple categories also it's important to keep an eye on agave prices.

Corrine: We're seeing tequila prices come off our input prices come off all time highs and we expect to see savings in the coming quarters there.

Corrine: That said the tequila market is clearly facing strong near term headwinds as consumers trade down there.

Corrine: There as well.

Corrine: We've barked on a multi year effort to refocus our spirits investment in profitable segments and regions.

Corrine: And we will have more to report on that progress in the coming quarters, but suffice it to say for Q1, I'm really pleased with the results.

Geoffrey C. Gwin: We're seeing tequila prices come off, and input prices come off all-time highs, and we expect to see savings in the coming quarters there. That said, the tequila market is clearly facing strong near-term headwinds as consumers trade down there as well. We've embarked on a multi-year effort to refocus our spirits investment in profitable segments and regions. And we will have more to report on that progress in the coming quarters. But suffice it to say, for Q1, I'm really pleased with the results. Now, I want to pause there and introduce Connor, our CEO at Kraft, and he will take you through his thoughts on the progress there and a little bit more about his background. Thank you.

Corrine: Now I'm going to pause there and introduce Conor our CEO of Kraft and he can take you through his thoughts on the progress there and a little bit more about his background welcome Conor.

Connor Kilkenny: Thank you, Geoffrey. And I'm very excited to be a part of the team. I look forward to meeting some of you on the call, and you're always welcome to visit our facility in Portland. First, a bit about my background.

Conor Kilkenny: Thank you Jeffrey and I'm very excited to be a part of the team I look forward to meeting some of you on the call and you're always welcome to disrupt instead all the in Portland first a bit about my background I was 11 year career working for a large scale of sharing firm focusing on manufacturing efficiency in 2013 myself in Atlanta, Dublin, Ireland named.

Connor Kilkenny: I have an 11-year career working for a large scale engineering firm focusing on manufacturing. In 2013, myself and a man from Dublin, Ireland named James Gill started an engineering office in our garages, which focused on large scale, high-tech manufacturing. Over the course of the next 11 years, we grew Barry Waymiller Design Group's high tech consulting practice to the third largest in the United States. This experience gave me insights into some of the world's largest and best-run operations across multiple sectors in consumer products, but also how to set up a company for rapid scale. I believe graph will benefit from a number of process improvements that are already being I'll say that again: 320% higher than Q1 of 2020.

Conor Kilkenny: James Gill started and engineering office in our garage, which focus on large scale high tech manufacturer.

Conor Kilkenny: Over the course of the next 11 years, we grew Barry Wayne Miller design groups High Tech consulting practice, the third largest in the United States. This experience gave me insights into the some of the worlds largest and best run operations across multiple sectors and consumer products, but also how to set up a company for rapid scaling I believe Kraft will.

Conor Kilkenny: Fit from a number of process improvements that are already being implemented for Q1 of this year grass production output was 320% I'll say that again, 320% higher than Q1 'twenty three.

Connor Kilkenny: We had three record months of production in historically the most difficult quarter, and we're on track for a. Now I'll start my comments by echoing what I've heard over the past four months as I've traveled and met new people. What is clear is that digital can printing isn't just a trend. It's an industry revolution. Unlike cans burdened by wasteful sticker labels and plastic wraps, our 100% recyclable solution is a game-changer. Distribution and retail partners alike are recognizing the environmental impact, and with digital printing, craft is at the forefront of Sustainable Packaging.

Conor Kilkenny: We had three record months of production and historically, the most difficult quarter and we're on track for a horse.

Conor Kilkenny: Now I'll start my comments by echoing what I've heard over the past four months as I've traveled to meet new customers.

Conor Kilkenny: What is clear is that digital can predict isn't just a trend its an industry revolution.

Conor Kilkenny: Unlike cans burdened by wasteful sticker labels and plastic wraps are 100% recyclable solution is a game changer distribution of retail partners alike are recognizing the environmental impact and the digital printing crafted at the forefront of.

Conor Kilkenny: Sustainable packaging solutions.

Connor Kilkenny: Another primary benefit of our product, stealth dress, forward-thinking brands are unlocking the full potential of our technology to forge deeper connections with consumers. Our technology offers millions of color combinations and a multitude of finishes ranging from metallics, sophisticated mattes, and high gloss applications.

Conor Kilkenny: Another primary benefit of our product shelf presence, but we're thinking brands or unlocking the full potential of our technology to forge deeper connections with consumers. Our technology offers millions of color combinations in a multitude of finishes ranging from of Alex.

Conor Kilkenny: <unk> maps and high class applications. Furthermore, our technology empowers brands to another dimension with unique can textures, creating a truly immersive brand experience.

Connor Kilkenny: Furthermore, our technology empowers brands to add another dimension with unique can textures, creating a truly immersive brand experience. And our commitment to producing cans of the highest quality doesn't go unnoticed. We recently won decoration of the year for our Mother's Day can, featuring a unique texture that personalizes each can with the name of every mother in their company.

Conor Kilkenny: And our commitment to producing cans of the highest quality doesn't go unnoticed. We recently won decoration of the year, where our mothers day can featuring a unique texture that personalizes each can with the name of every mother in their company and award which serves as a testament to our dedication to innovation and eye catching design yet.

Connor Kilkenny: An award that serves as a testament to our dedication to innovation and eye-catching design. Yet another piece that differentiates Kraft is our decade of experience as a world-class mobile canner. We have a firsthand understanding of the rigors of a production line and have leveraged our expertise to create cans with unmatched durability. They'll not only look stunning on store shelves but also run flawlessly on high-speed lines, minimizing downtime and maximizing efficiency.

Conor Kilkenny: Another piece that differentiates graph is our decade of experience of being a world class mobile Cantor, we have a firsthand understanding of the rigors of a production line and have leveraged our expertise to create cans with unmatched durability they'll not only looks stunning on store shelves, but also the policy on high speed lines, minimizing downtime and maximizing efficiency.

Connor Kilkenny: In fact, we're seeing broad adoption, and I'm pleased to report we have won three new large volume customers. When a customer like that is a big deal because you are winning their confidence, you become their supply chain and their marketing platform. So performance between the four walls matters, quality matters, and craft means quality. To further increase our quality and throughput, we began making incremental investments to improve our manufacturing, and while that impacted margins in the short term, it will drastically improve the end result.

Conor Kilkenny: In fact, we're seeing broad adoption and I'm pleased to report we won three new large volume customers when a customer like that is a big deal because we're winning the topics you become their supply chain and their marketing platform. So performance in between the four walls matters quality matters and craft means quality.

Conor Kilkenny: To further increase our quality and throughput, we began making incremental investments to improve our manufacturing and while that impacted margins in the short term it will drastically improve the end result.

Connor Kilkenny: Everything we are doing here is being done the right way. No cutting corners. We believe in doing something once and doing it right. In summary, I'm very excited to be a part of this exciting new business, and I have a world-class team to work with.

Conor Kilkenny: Everything we are doing here is being done the right way.

No cutting corners, we believe in doing something once and doing it right.

Conor Kilkenny: In summary, I am very excited to be a part of this exciting new business and I have a world class team to work with and I want to take a second to recognize the leadership of that team. We have bill Anders who leads our manufacturing bill has over a decade of experience in mobile scanning and printing industry and in my opinion is also the most knowledgeable pro.

Connor Kilkenny: And I want to take a second to recognize the leadership of that. We have Bill Anders who leads our manufacturing. Bill has over a decade of experience in the mobile canning and printing industry and, in my opinion, is also the most knowledgeable pro in the industry when it comes to operating and maximizing the output of additional equipment. Leading our co-packing and mobile division is Michael Kilgore, a seasoned industry veteran with over a decade of experience from head brewer to a wide range of experience in co-packing and mobile canning. His diverse expertise lends to his ability to drive process improvements and maximize efficiency. The last person I want to recognize is our controller, Bruce Wells.

Conor Kilkenny: In the industry when it comes to operating and maximizing the output of additional printer, leaving our co packing and mobile Division is Michael Kilgore, a seasoned industry veteran with over a decade of experience from head brewer to a wide range of experience in co packing and mobile Canning is diverse expertise lends to his ability to drive process improvements.

Conor Kilkenny: And maximize efficiency the last person I want to recognize as our controller Bruce Wells Bruce is the most experienced pro in our company and it's also our manufacturing cost of capital.

Connor Kilkenny: Bruce is the most experienced pro in our company, and it's also a manufacturing cost. His knowledge allows us to have extremely accurate estimates on our manufacturing, which allows us to be very targeted as to where we implement improvements that yield the highest ROI. One final announcement I would like to make is that we have recently hired a business development manager, Kevin Mann. Kevin is based in Seattle, Washington, and was the marketing and sales director for nearly half a decade for a national beverage company, Minkasi.

Conor Kilkenny: Rousselot Bruce's knowledge allows us to have extremely accurate estimates on our manufacturing costs, which allows us to be very targeted as to where we implement improvements that yield the highest rois.

Speaker Change: One final announcement I would like to make is we have recently hired a business develop manager Kevin Man, Kevin is based in Seattle, Washington, and was then marketing and sales director for nearly half a decade for old National beverage company NIM costing his leadership led them through an explosive growth period.

Connor Kilkenny: His leadership led them through an explosive growth period. Kevin has relationships with most of the major beverage companies, distributors, and grocers in the Western U.S. He understands the entire life cycle of our cans, from the source to the end consumer, and is already forming strategic partnerships that are immediately translating to sales. Now, with that, I will turn it over to Tiffany.

Speaker Change: Kevin has relationships with most of the major beverage companies distributors and groceries in the Western U S. He understands the entire lifecycle of our cans from the source to the end consumer and is already forming strategic partnerships that are immediately translate into sales now with that I will turn it over to Tiffany.

Tiffany Milton: Thank you, Connor. I'll summarize the financial results for the quarter, and then we will take questions. On a consolidated basis, our growth sales were $2.5 million for the first quarter of 24 and $2.9 million for Q1-23, primarily due to bulk spirit sales of $600,000, offset by an increase in printed can sales. Craft sales were $1.8 million for 24 and $1.5 million for 23, as printing is finally gaining its full potential. Spirit sales were $600,000 for 24 and $1.4 million for 23, decreasing as a result of bulk spirit sales in Q1-23.

Tiffany Milton: Thank you Conor I'll summarize the financial results for the quarter and then we'll take questions on a consolidated basis. Our gross sales were $2 5 million for the first quarter of 24, and $2 9 million for Q1, 'twenty three primarily due to bulk spirits sales of 600000 offset by an increase in pregnant can't fail.

Tiffany Milton: <unk> sales were $1 8 million for 24, and $1 5 million for 'twenty. Three printing is finally, gaining its full potential spirit sales were 600000 for 24 and $1.4 million for 'twenty three decreasing as a result of the bulk spirits sales in Q1 2023.

Tiffany Milton: Our consolidated gross profit was $200,000 for Q1'24 and $600,000 for 2023, primarily due to our bulk spirit sales in Q1'23 of $500,000. Our consolidated gross margins were 8% for Q1'24 and 22% for Q1'23. Craft had margins of 3% for Q1'24 and negative 7% for Q1'23. Operating expenses were $1.2 million for Q1'24 and $1.9 million for Q1'23, a decrease of almost $650,000. Our lower expenses reflect the success of our restructuring efforts throughout 2023.

Tiffany Milton: Our consolidated gross profit was 200000 for Q1, 'twenty four and 600000 for 2023, primarily due to our bulk spirits sales in Q1, 'twenty three or 500000, Arkansas data gross margins were 8% for 24 and 22% for 2023 craft had margins of 3% for 24 and negative.

Tiffany Milton: 7% for 2023.

Tiffany Milton: Its margins were 23% for 24 and 54% for 2023, primarily related to the bulk spirits sales operating expenses were $1 2 million for Q1, 24, and $1 9 million for Q1, 'twenty three a decrease of almost 650000 hour lower expenses reflect the success of our restructuring.

Tiffany Milton: Efforts throughout 2023, our net loss with $1 3 million for Q1, 24, and one 6 million for Q1, 'twenty three and our adjusted EBITDA was flat at about 800 negative 800000 for both periods. We will now open the floor for questions operator.

Tiffany Milton: Our net loss was $1.3 million for Q1'24 and $1.6 million for Q1'23, and our adjusted EBITDA was flat at about negative $800,000 for both periods. We will now open the floor to questions.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question today is from Sean McGowan with Roth, please go ahead.

Speaker Change: We will now begin the question and answer session.

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

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.

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

Speaker Change: Okay.

Speaker Change: The first question today is from Sean Mcgowan with Roth. Please go ahead.

Sean Patrick McGowan: Hey Sean. Hey guys, thank you. Hey Geoff, how are you?

Sean Patrick McGowan: Hey, guys. Thank you.

Sean Patrick McGowan: A couple of questions if I can. Can you give us a little clearer sense of the ramp-up of output on the digital CAN printer? You know, like what kind of ramp-up you're seeing there? Yeah.

Sean Patrick McGowan: You couple of questions. If I can can you give us a little clearer sense of the ramp up of our.

Sean Patrick McGowan: Put on the.

Digital champion a.

Sean Patrick McGowan: Kind of ramp up you're seeing there.

Geoffrey C. Gwin: Yeah, I'll start and I'll let Connor add anything if you'd like to. I think we're seeing it really meet our expectations in the first quarter on volume. I mean, as Connor said, the year over year comparison isn't really there.

Speaker Change: Yeah, I'll start and I'll, let Conor add anything as you'd like to I think we're seeing it really.

Meet our expectation in the first quarter on volume.

Speaker Change: I mean, as Conor said I mean, the the year over year comparison is there's really no comparison were really.

Geoffrey C. Gwin: We're really fully into 24-hour printing now, and that basically puts this thing on the path to get to full capacity here shortly. I mean, there'll be opportunities to streamlining take and get more out of it here, but I see ourselves, you know, really on the path here to fill the fill the machine up, and I expect that we'll be in a position later in the quarter, later in the year, to announce more capacity coming online in the facility.

Conor Kilkenny: Fully into 'twenty, four seven printing now and and that basically puts this thing on path to get to full capacity here. Shortly I mean, there'll be opportunities to streamlining take them get more out of it here, but.

Conor Kilkenny: I see ourselves you know you know really on path here to fill.

Conor Kilkenny: Till the pillow machine up and.

Conor Kilkenny: I expect that we'll be in a position later in the quarter.

Conor Kilkenny: Later in the year to announce more capacity coming online in the facility. So we'll be able to you know double what we're doing we're yeah, we're producing with one machine. So I'm very pleased with the the ramp up.

Geoffrey C. Gwin: So we'll be able to double what we're producing with one machine. I'm very pleased with the ramp-up, and Conrad has done a fabulous job de-bottlenecking it. But moreover than that, getting out into the field and really seeing the customer base, understanding where the market is, and pulling people over the fence into the digital printing landscape. I can't stress how important that is today, because once you get them over, and you convert their supply chain, and you start to really show them what they can do with this new packaging, then you're really in a position to just build off them. This is a recurring business, too, right? So we're not having to resell these stuff every cycle. So, Sean, I think I'm pleased with where we are in the ramp-up.

Conor Kilkenny: And conahan has done a fabulous job debottlenecking it.

Conor Kilkenny: But moreover than that.

Conor Kilkenny: Getting out into the field and really seeing the customer base understand where the market is and pulling people over.

Conor Kilkenny: So defense into the digital printing landscape I can't stress how important that is today because once you get them over.

And you convert their supply chain and you've got to start to really show them. What they can do with this new packaging. Then you know you're really in a position to just build off and this is reoccurring business too right. So when a hunter we sell this stuff every you know every cycle so Sean I think.

Conor Kilkenny: Pleased with where we are in the ramp up.

Sean Patrick McGowan: Okay, I don't know if there's gonna be more details in the car, but I like the actual number, the revenue number wasn't too far off from what I had. But I'm just wondering how we got there. Like, are you getting the pricing you're expecting? Are you getting the number of cans up to where you are?

Speaker Change: Oh, Okay, I didn't know if there's any more detail than carbonate.

Speaker Change: The actual number the revenue number wasn't too far off from what I had but I'm just wondering how we got there like was.

Speaker Change: The pricing we're expecting are you getting number of cans up to where you want it to be.

Geoffrey C. Gwin: You know, we were a little lower on cans than we expected, but part of that was getting into the quarter. We had to really scramble to make sure we had the machine working at the level that we needed to get the volume that we're expecting and the consistency and the reliability that we're looking for.

Speaker Change: You know we were a little lower on cans than we expected.

Speaker Change: But part of that was.

Getting into the quarter, we had to really scramble to to make sure. We had the machine working at the level that we needed to get them more than what we're expecting and the consistency.

Geoffrey C. Gwin: But there have been some price investments with larger customers to bring them over, but not as much as could be expected. And again, what we're seeing, and Connor can probably echo this, is the breadth of customers, Sean, that are moving over is wider than I expected. So, for example, if you're going to enjoy a Dodgers baseball game this summer, you're going to be drinking beer out of a can we printed. Unknown Speaker We're starting to do business for other, you know, colleges.

Speaker Change: And the reliability that we're looking for but there had been some price investment with larger customers to to bring them over but not as much as you know it could be expected and I and again, what we're seeing and conoco can can echo this is probably.

Speaker Change: Is the the breadth of customers Sean that are moving over is wider than I expected. So for example, if you're going to enjoy a dodger Dodgers baseball game this summer you're going to be drinking.

Speaker Change: Beer out of a can we printed.

Speaker Change: We're starting to do business for for other college.

Geoffrey C. Gwin: College Groups that are part of the NIL, right? So this is not a case of going after the same large customers and fighting for them over price. These are starting to be customers that specifically need something unique like this, who are looking for something where they can really benefit from the advantages that we can get from digital printing.

Speaker Change:

Speaker Change: College groups that are part of the Nio right. So there's this is not a.

Speaker Change: You know going after the same large customers and fighting for them over prices are starting to be customers that this specifically need something unique like this who can who are looking for something where they can really benefit from the advantages that we can with digital print.

Sean Patrick McGowan: Thank you. And if any updates that you can provide would be helpful in showing the balance sheet or any changes there both during the quarter and anything subsequent that's updating. Right. Right.

Speaker Change: Thank you.

Speaker Change: And if.

Speaker Change: Any updates that you can provide would be helpful on and off shoring up the balance sheet or any changes there both during the quarter and then subsequent to that.

Speaker Change: That's great right.

Geoffrey C. Gwin: Right. You know, that's a great question.

Speaker Change: Right.

Speaker Change: You know that's a that's a great question I mean, one of the big things that everybody is obviously, you're aware of and concerned about is the NASDAQ listing.

Geoffrey C. Gwin: I mean, one of the big things that everybody is obviously aware of and concerned about is the NASDAQ listing issue. You know, last year, we went, you know, down the road, and we, and this has been something that I've been working on for two years now, fixing the balance sheet. Fixing the balance sheet has been a priority, and we've made big changes there. Last year, we reduced a large amount of debt and converted it to equity. That was a hard choice to make, but it was a choice I think was absolutely necessary to put us in a position where we could invest in the business and move forward.

Speaker Change: Issue.

Speaker Change: You know last year, we went down the.

Speaker Change: Road, and we and this has been something that then I've been working on for two years now is to fix the balance sheet fixing the balance sheet.

Speaker Change: Is it has been a priority and we've made big changes there last year we.

Speaker Change: Reduce the large amount of debt converted to equity that was a hard choice to make but it was a choice I think was absolutely necessary to to put us in a position where we could.

Speaker Change: Investment business and move forward and I think that that's a focus in the first quarter here and into the second quarter, we're looking to build a credible plan.

Geoffrey C. Gwin: And I think that that's a focus in the first quarter here and into the second quarter, that's not just wholly built on, you know, balance sheet, you know, adjustments, debt to equity, but on the really the income statement. Now, what you're starting to see in the company is the income statement change, right? We're seeing crafts revenue really grow through what it historically did because we've realigned the business, but on the

It's not just wholly built on Bal.

Speaker Change: Balance sheet adjustments debt to equity, but on the really the income statement now what you're starting to see in the company is the income statement change right. We're seeing crafts revenue really grow through what are historically did because we realigned the business, but on the spirit side.

Geoffrey C. Gwin: We're at a point where you're starting to see that business really at breakeven, and we alluded to that in the comments, and I'll just reiterate now that we're in advanced discussions with a group, and you should expect to hear something from us shortly that really pushes spirits into a new realm of profitability here in the back half of the year. So between the balance sheet, some possible changes that we're working on to get us in compliance with NASDAQ, and, you know, finishing some of these priorities on the income statement, driving Kraft to full capability out of its one facility, leveraging fixed expenses with multiple digital printers.

Speaker Change: We're at a point, where you're starting to see.

Speaker Change: That business really at breakeven and we alluded to it in the comments and I'll just reiterate now.

Speaker Change: We're in advanced discussions with a group and you should expect to hear something from us shortly there.

Speaker Change: It really pushes spirits into a new realm of profitability here in the back half of the year.

Speaker Change: So between the balance sheet some possible changes what we're working on to get our <unk>.

Speaker Change: In compliance with NASDAQ and.

Speaker Change: You know, finishing some of these priorities on the income statement driving craft too full.

Speaker Change: Capability out of it's one facility leveraging fixed expenses with multiple digital printers, and then on the spirit side are finally getting to a point, where we're generating positive cash and net income out of that business.

Geoffrey C. Gwin: And then, on the spiritual side, finally getting to a point where we're generating positive cash and net income out of that business. Those two elements are going to be the best fix for the balance sheet, I think.

Speaker Change: Those two elements or are going to be the best fixed for the balance sheet I think.

Sean Patrick McGowan: Thank you. Okay. I appreciate that.

Speaker Change: Thank you Okay I appreciate that.

Operator: Again, if you have a question, please press star then 1. The next question is from Matt Campbell with Latter-day Capital. Please go ahead.

Speaker Change: Again, if you have a question. Please press Star then one the next question is from Matt Campbell with Liberte capital. Please go ahead.

Matthew Campbell: Unknown Speaker Yeah. I just don't want to, uh.., said it's been a long haul.

Matthew Campbell: Hey, Matt Hey, Jeff.

Matthew Campbell: You don't want to.

Sure.

Matthew Campbell: Sure it's been a long haul here, but you.

Matthew Campbell: Unknown Speaker. But it, you know, it was pleasing to hear an announcement from Mr. Kilkenny about hiring a business development guy. Well, now, sounds like we're now hiring people to go out and get us business, which is phenomenal. Did I hear that correctly?

Matthew Campbell: You know it was pleasing day here.

Matthew Campbell: Hum.

Mr. Kilkenny about hiring a business development Guy will now.

Matthew Campbell: Sounds like we're now hiring people to go out and get us business, which is phenomenal.

Matthew Campbell: Is it did I hear that correctly.

Matthew Campbell: Sure. Conor, you want to talk about your team and the investments you're making?

Speaker Change: Sure Conor you want to talk about your your your teams and invest.

Conor Kilkenny: The investments Youre, making in Seattle.

Connor Kilkenny: Yeah, so our first goal was to hire a salesperson in Seattle, but we laid out kind of a skill set of what we were looking for up there, mainly geared towards a business development manager to help with our sales team. And what we went and found was a guy who, like I said, had five years of experience as the marketing and the sales director for one of the largest beverage companies in the country. And he, you know.

Conor Kilkenny: So our first goal was to hire a salesperson up in Seattle.

Conor Kilkenny: But the you know we laid out a kind of a skill set of what we were looking for up there mainly geared towards a business development manager to help with.

Conor Kilkenny: With our sales team and what we went and had found as a guy who has like I said you had five years' experience in the marketing.

Conor Kilkenny: And the sales director for one of the largest beverage companies in the northwest.

Conor Kilkenny: And he you know.

Connor Kilkenny: He's very, very hungry, but he's also very skilled at finding how we are a value add for the customer. So we're not just, you know, offering Unknown Attendee, Sean McGowan, Geoffrey Gwin, Tiffany Milton, Unknown Attendee, Amy Lancer, That's great to hear. Yes. And then Martin, when were you?

Conor Kilkenny: He is very very hungry, but he is also.

Conor Kilkenny: Very skilled at finding.

Conor Kilkenny: How we are a value add for the customer. So we're not just offering let's say you know what.

Conor Kilkenny: A beautiful can to them you can also help them with their forecasting right also their business strategy as well as how to how to leverage that but yeah. He's already in its first three weeks here has already sold a tremendous number of counts.

That's great to hear.

Conor Kilkenny: Then Martin wondering orders too yeah, no. That's that's that's helpful. So it sounds like you guys have gotten the kinks out of the like the printing side of the equation now you can drive the revenue, which is great to hear where there any other one time items on.

Conor Kilkenny: On the craft side, Oh, like whereas mobile Canning Ah that that side of the business is that now breaking.

Matthew Campbell: break even for us, so it's not going to bleed. Yeah, I love a little color there.

Conor Kilkenny: Breakeven for us so it's not going to bleed.

Speaker Change: Well, yes.

Speaker Change: Color there.

Connor Kilkenny: Yeah, that mobile was actually positive EBITDA in the first quarter. So yeah, we've gotten the operation down to where the expenses align with what the sales are. And so it's, yes, it's actually, it's above break even.

Speaker Change: Yeah go ahead Carter.

Speaker Change: That mobile was actually positive EBITDA in the first quarter.

Carter: So yeah, we've gotten the operation down to where the expenses align with what the you know the sales are and so it's yes, it's actually it's above breakeven.

Geoffrey C. Gwin: So remember, just to remind people on the call. So the legacy business of Kraft is mobile, which is actually a fascinating business. I mean, conceptually, for the people that don't know, it was, I think, actually originated by Kraft and the people, the forerunners of Kraft. I mean, it was a business that was envisioned where they took a very small filling line, the wild goose line, and was able to design it to fit it into a box truck, and then they went to a local site that's like a small brewery, and So that sounds complicated, and it is. It was.

Carter: So remember just to remind people on the call.

Speaker Change: So the legacy business of craft is mobile, which actually is a fascinating business I mean conceptually for the people that don't know it's it's it was I think actually originated by Kraft and the people the forums of craft I mean.

Speaker Change:

Speaker Change: It was a business that was envisioned where they took a very small filling.

Speaker Change: Lying a wild goose mine and was able to architected to fit it into a a box truck and then they go to a local site they.

Speaker Change: So my account small brewery and then they basically are successful in bringing the facility and the production capability to the locals.

Speaker Change: Right right, so that sounds complicated and it is it was and to scale that business. The company struggled with the return on investment because if you can think about it more.

Geoffrey C. Gwin: And to scale that business, the company struggled with the return on investment because, if you can think about it, Moving a factory, a tiny, small factory footprint, and we had 13 of them at our peak, and moving them to a customer, bringing them back, you bear a tremendous amount of risk and operational complexity. And then, inevitably, when the customer gets large enough, they just move off and build their own factory or buy their own equipment.

Moving a factory a tiny small factory footprint and we had 13 of them at our peak and moving them to a customer bringing them back you bear a tremendous amount of risk and our operational complexity and then inevitably when a customer gets large enough. They just moved often built you know built their own factory or are there.

You bought their own equipment now, we havent fully exited mobile because the mobile customer base is extremely important to us I mean, it's part of our DNA, but it's also informs the company on how we can better serve our customer.

Geoffrey C. Gwin: Now we haven't fully exited mobile because the mobile customer base is extremely important to us. I mean, it's part of our DNA, but it also informs the company on how we can better serve our customers. So while we have reduced our mobile activities, we've exited Denver, we've reduced our activities in Seattle to some degree, and also in Spokane, we're still very active in Portland, and we will continue to be very active in Portland, but as Connor said, we've gotten that to a point where we've sized the opportunity.

Speaker Change: So while we have reduced our mobile activities, we've exited Denver, we've reduced our activities in Seattle to some degree and also Spokane were still very active in Portland, and we will continue to be very active in Portland, but as Conor said, we've got that to a point, where besides the opportunity. It's a great you know part of.

Geoffrey C. Gwin: It's a great, you know, part of the package that we can cross sell. But the biggest opportunity, as you said, is digital printing. There are only a handful of people in North America with functional digital printing.

Speaker Change: The of the packages that we can cross sale sell but the biggest opportunity as you said as digital printing theres only a handful of people in North America with functional digital printing.

Speaker Change: Have been investments made and other technologies that are not effective apparently and.

Geoffrey C. Gwin: There have been investments made in other technologies that are not effective, apparently. So fortunately, we have a great partner in Hendrickoff. That's the technology partner that we have that helps us with our equipment. And we're doubling down there, and we're gonna get to this one.

Speaker Change: So Fortunately, we have a great partner and Henry cough.

Speaker Change: That's the technology.

Speaker Change: Partner that we have that helps us with our equipment.

Speaker Change: And we're doubling down there and we're gonna be worthy of pollution. So.

Geoffrey C. Gwin: So as far as the one-time items go, you can imagine, I mean, there's a lot of things that you have to react to in a quarter. So as we see this volume of demand in front of us, and Conor meets that demand, for us, we have to be in a position where we meet the customer's needs. We cannot, when a million can deal with somebody and then wake up on a Sunday afternoon and say we don't have the spare part to keep this thing running through the weekend, right?

Speaker Change: As far as the one time items, you can imagine I mean, theres a lot of things that you have to react to in a quarter. So as we see this volume of demand in front of us and Conoco's gets that demand for us we have to be in a position that we meet the customers' needs we cannot.

Speaker Change: When a million can deal from somebody and then wake up on a Sunday afternoon, Let's say, we don't have the spare part a to keep this thing running through the weekend right. So we did have a number of items in the quarter that we had to expense in the quarter. So for example, we had a.

Geoffrey C. Gwin: So we did have a number of items in the quarter that we had to expense in the quarter. So, for example, we had a large amount of spare parts we bought, you know, pulled in, and we spent that we had a lot of scrap that we caught up with as we ramped up and extra freight. And the other thing that I'll take my hat off to Connor is that, immediately, he worked on our can costs, and our partner in the supply chain on the can side is outstanding, and they've helped us source cans cheaper so we can deliver that on to our customers at a better price.

Speaker Change: A large amount of spare parts. We bought you know pulled in we expense that we had a lot of scrap that we caught up with as we ramped up had extra freight.

Speaker Change: And and the other thing that I'll take my hat off to Congress immediately and in the door. He worked on the our aura can costs and we are partner on the supply chain on the can side is outstanding and they've helped us.

Speaker Change: Source cans cheaper so we can deliver that onto our customers at a better price. So we worked through some higher price plans in the quarter that normally.

Geoffrey C. Gwin: So we worked through some higher-priced cans in the quarter that normally we wouldn't have had. So, you know, as I look forward, I think we're in a position to really see some, you know, gross margin improvements. And then, as I said before, the bigger opportunities. [inaudible] As we move the cans, you know, volumes up through 2 million a month and into a much bigger number, you're really going to see the margins and the profitability here change.

Speaker Change: We wouldn't have had so as I look forward I think we're in a position to really see some gross.

Speaker Change: Gross margin improvements and then as I said before the bigger opportunity.

Speaker Change: For for the business is when you get even more horsepower and that facility youre not going to pay for or another you know large number of of operators because our operations are outstanding and they can manage two machines youre not going to have to pay another lease payment and I got to pay more for the overhead because that's going be leveraged so.

Speaker Change: As we move the cans, you know volumes up through $2 million, a month and into a much bigger number.

Speaker Change: Youre really going to see the the margins and the profitability here change.

Matthew Campbell: That's helpful, Geoff. If I could just... or have you elaborate on Sean McGowan's question about the spirits business? You said you're in discussions to push spirits into profitability. Obviously, you commented on agave prices now coming down, but we never know where agave is going to go. So taking that out of the equation, is there a partnership that you envision here? How should we think about that, where you do something that can really start to accelerate the opportunity that we have in these brands that haven't had any tender loving care for a while now?

Speaker Change: That's helpful. Jeff if I can just oh.

Jeff: On or have you elaborate on this.

Jeff: Sean Mcgowan <unk> question about the spirits business you said you're.

Jeff: You are in discussions to push spirits.

Jeff: The profitability, obviously, you commented on agave prices now coming down, but you know what.

Jeff: We never know where a Gaba he's going to go so taking that out of the equation.

Jeff: Is there is there a partnership that you envision here, how should we think about that where you do something that can really start to accelerate.

Speaker Change: Right the opportunity that we have in these brands that have been really.

Speaker Change: I haven't had any tender loving care for a while now.

Geoffrey C. Gwin: Yeah, it's a big question. I mean, for everybody on the call, the company evaluated selling brands two years ago, or basically, not this past Christmas but the holiday before that. We went through a full year of looking at the brands and talking to people that were potentially interested in them, and we've continued to do that. But one of the things that we've realized is there's a huge opportunity to maximize the value of the brands by continuing on this course to improve their performance, specifically their profitability performance.

Speaker Change: Yeah, that's that does that.

Speaker Change: The big question.

Speaker Change: I mean for everybody on the call the company evaluated selling brands.

Two years ago or basically not this past.

Speaker Change: Christmas, but the how.

Speaker Change: The holiday before that we went through a full year.

Speaker Change: Looking at the brands.

Speaker Change: Talking to people that we're potentially interested in them and we've continued to do that.

Speaker Change: But one of the things that we've realized is there's a huge opportunity to maximize value and brand by continuing to on this course to improve their performance specifically there their profitability performance and one of the challenges that we've had is and you have to go back in the <unk>.

Geoffrey C. Gwin: And one of the challenges that we've had, and you have to go back in the company's history a few years here. The company was built to produce product on a larger scale, and the vision then was to serve one of our brands that we're not involved with anymore, and that's the Redneck Riviera brand.

Speaker Change: Company's history, a few years here.

Speaker Change: Company was built.

Speaker Change: To produce product.

Speaker Change: In larger scale.

Speaker Change: And then in the vision then was to serve one of our brands that we don't we're not involvement with anymore and that's the Redneck Riviera brand and when you bring in blended whiskey into Portland, we build product and they would ship back east.

Geoffrey C. Gwin: And we would bring in blended whiskeys into Portland, we'd build the product, and then we'd ship it back here. Conceptually, it made no sense as far as trying to keep costs low, and inevitably, it proved to be a very bad business decision because, at the end of the day, what we ended up having was a very expensive position on the shelf, and we weren't able to compete there. And so as the company downsized, um, across the board and across sales, you know, its whole market operation, and Harold Weber, who's probably on this call, remembers this because he asked these questions for call after call about why not be in New Jersey, why not bring your product here.

Speaker Change: Inception, it made no sense as far as trying to keep costs low.

Speaker Change: And inevitably it proved to be a very bad business decision because in the end of the day.

Speaker Change: <unk> was a very expensive.

Speaker Change: Our position on the shelf and we weren't able to compete there.

Speaker Change: So as the company downsized.

Speaker Change: Across the board and sales.

Speaker Change: Whole market operation East.

Speaker Change: And Hell Harold Webber would probably on this call remembers this because he asked these questions.

Speaker Change: You call after call about why not be on you know in new Jersey will not be bringing product here that whole apparatus was extremely expensive.

Geoffrey C. Gwin: That whole apparatus was extremely expensive, and in the three-tier distribution system, you have to be super focused on your investment in your go-to-market plan. So in this case, as that came back to reality, and we were focusing on our key core markets, we never downsized manufacturing enough, and one of the key goals here in this next step is to be in a cost-leading position finally. So we want to be in a position where we have significant market share, brand equity in our market, we can drive volumes, but we want to be in a cost-leading position, not just with the packaging and the liquid, but also with our overhead.

Speaker Change: And in the three tier distribution system, you have to be Super focused on your investment and your go to market plan. So in this case is that came back to reality and we were focusing on our key core markets, we never downsized manufacturing.

Speaker Change: Enough.

Speaker Change: And one of the key goals here in this next step is to be in a in a in a cost leading position finally.

Speaker Change: So we want to be in a position, where we have significant market share brand equity in our market. We can drive volumes, but we want to be in a costly.

Speaker Change: <unk> position not just with the packaging the liquid.

Speaker Change: But also with our overhead so you've seen the liquid already because I mean look over the last two years, we've sold Bourbon wholesale at record prices in the margins in that you can see in this quarter compared to last quarter. You know Oh, we had really big profitability year over year or last year comparing it to this year.

Geoffrey C. Gwin: So you've seen the liquid already, because look, over the last two years, we've sold bourbon wholesale at record prices, and the margins on that, you can see in this quarter, compared to last quarter, we had really big profitability year over year, last year, compared to this year, because we sold wholesale bourbon at great prices. We have a very low cost position there, and we're realizing really high prices in wholesale.

Speaker Change: Because we sold.

Speaker Change: Wholesale Bourbon at great prices, we have a very low cost position, there and we're realizing really high prices and wholesale so my point with that is we've got our cost position.

Geoffrey C. Gwin: So my point with that is, we've got our cost position, you know, mapped down everywhere. Packaging, liquid, we now just finished the overhead piece, and we're gonna have enough margin, gross margin dollars, to do exactly what I was talking about on the craft side, which is market around our brands in spirit. If there's one thing that's been a great thing about this company having two diverse groups, a spirits business, consumer products spirits business, and then being this, you know, unique digital printing business, is being informed at the importance of marketing around your bottle on the shelf in a liquor, We've spent a ton of money on, you know, Portland Trailblazers in the past, on billboards, on all kinds of things, but we've not marketed around the bottle in the store.

Speaker Change: Matt down everywhere packaging liquid we now just finished the overhead piece and we're going to have enough margin gross margin dollars to do exactly what I was talking about on the craft side, which is market around our brands in spirits.

Speaker Change: If there's one thing that's been a gene a great thing about this company, having two diverse groups our spirits business because they were Brock spirits business and then being you know unique digital printing business.

Speaker Change: Is it being informed at the importance of marketing around your bottle on the shelf and a liquor store.

We've spent a ton of money on Portland Trail Blazers blazes in the past on Billboards on all kinds of things, but we've not marketed around the bottle and the store when we get our cost position right and we have enough.

Geoffrey C. Gwin: When we get our cost position right and we have enough... disposable dollars to attack the market, we're going to win, and we're going to take share, and you're going to see volumes grow. They're going to start in Portland, and we're also going to use what savings we can get in the agave move down to do the same thing in Zunia. Zunia's a little bit more complicated because it's a multi-state product, and it goes through the traditional three-tier distribution system. We have to work with our distribution partners, and that's been a long-running challenge. In Oregon, it's a control state, so it's a different route to market.

Speaker Change: Disposable dollars to attack the market, we're going to win and we're going to take share and youre going to see volumes grow they're going to start and Portland, and we're also going to use what savings we can get in the agave and moved down to do the same thing in Virginia as soon as a little bit more complicated because its a multistate.

Product and it goes through.

Speaker Change: The traditional three tier distribution system, we have to work with our distribution partners and that's been a long running challenge.

Speaker Change: Oregon is they it's a control stake so it's a different route to market. So I'm really optimistic that we're in a good position. There. So we're going to we're going to see some improvements this year and in spirits I can't talk yet about that this new potential partnership, but I think we're really close to having had done.

Matthew Campbell: So I'm really optimistic we're in a good position there. We're going to see some improvements this year in spirits. I can't talk yet about this new potential partnership, but I think we're really close to having it done.

Matthew Campbell: Well, thank you very much and good luck for the future. Looking forward to seeing us start to turn the income statement around. Awesome work.

Speaker Change: Well. Thank you very much and continued good luck for the future looking Florida sooner.

Speaker Change: To turn the income statement around awesome work.

Geoffrey C. Gwin: This concludes our question and answer session. I would like to turn the conference back over to Geoffrey Gwin for any closing remarks.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Jeffrey Cohen for any closing remarks.

Geoffrey C. Gwin: Great. Thank you, Gary. And I'd like to thank all of you guys on the call for listening to our conference call, and we look forward to updating you on the second quarter. All right, great. Have a good evening. The conference is now concluded. Thank you for attending today's presentation.

Jeffrey Cohen: Great. Thank you, Gary and I'd like to thank all of you guys on the call for for listen to our conference call and we look forward to updating you on our second quarter alright, great have a good evening.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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

Speaker Change: Okay.

Speaker Change: [music].

Unknown Attendee: Unknown Attendee, Sean McGowan, Geoffrey Gwin, Tiffany Milton, Unknown Attendee, Amy Lancer

Speaker Change: Yeah.

Speaker Change: [music].