Beeline Holdings Inc (BLNE) 2022 Q3 法說會逐字稿

Good day, and welcome to the Eastside Distilling's Third Quarter 2022 Financial Results Conference Call. (Operator Instructions) Please note that this event is being recorded.

I would now like to turn the conference over to Heather Whyte, VP of Human Resources. Please go ahead.

Good afternoon, everyone, and thank you for joining us today to discuss Eastside Distilling's financial results for the third quarter 2022. I'm Heather Whyte with Eastside Distilling, and I'll be your moderator for today's call.

Joining us on today's call to discuss these results are Mr. Geoffrey Gwin, the company's Interim Chief Executive Officer and Chief Financial Officer; Ms. Tiffany Milton, Eastside's Controller; and Mr. [Bruce Wells], Craft Controller. For this quarter's call, the company is also providing a presentation or slide deck that is available to all interested parties via Eastside Distilling's website. We encourage you to access this presentation and follow along by visiting www.eastsidedistilling.com, 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 21E of the Securities Exchange Act of 1934 as amended. The reliability of forward-looking statements is subject to risks and uncertainties, and you should not rely upon forward-looking statements as predictions of future events. 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. However, these beliefs may not be 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 eastsidedistilling.com/investors and on the SEC website at www.sec.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 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 non-cash and other items that we do not consider relevant to our evaluation of ongoing operating performance. These excluded items may include professional fees, equity-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 or net loss or net income per share or 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 a 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 website, www.eastsidedistilling.com, then 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 Geoffrey Gwin. Geoffrey, 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. And as Heather said, you can find these slides on the Eastside's website on the Investors page.

When you look at the performance of the company on a consolidated basis or for that matter, both Craft 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 in both businesses that I will talk about today.

Hopefully, you have the slides up now, we can start with Slide 3. Now, Eastside is unique in that we have 2 very valuable businesses and 2 segments of the craft beverage sector. Craft Canning and Printing pictured here on the left is not the same business as it was last year and has gone through a significant transformation. It has moved from a small mobile co-packing business to a broader Craft services business, leading with its core offering of digital can printing. On prior calls, I have talked about the importance of digital can printing, and I would 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 Craft 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 here on the right. In 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 it with very unattractive margins, and it consumes significant amount of cash. In the past year, we have repositioned the business and focused it on core markets and core brands. We have exited unprofitable channels, improved distribution and rebuilt our sales team. We expect this business to show improvement and get back to growth.

Now, turning to Slide 4, 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 the slide. And below the line, our operating losses from our new business initiatives at Craft have offset some improving results. This slide encompasses both the challenge and the opportunity ahead. Craft digital printing needs to continue its growth trajectory to profitability and Spirits need to begin to rebuild volume. Now, I believe as we do this we can achieve strong gross margins, probably higher than we've achieved in the past.

Turning to Slide 5. Clearly, the highlight of the quarter was the performance at Craft. Sales continue to improve both sequentially and year-over-year as we have walked away from selling blank cans through our mobile business, and we now sell digitally printed cans 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 in can printing.

To see this development, take a look at Slide 6, and let's talk about the digital can printing ramp-up. Craft launched its digital can printing operation in Q2. And on the left of this chart, you can see the increase in total cans printed 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, hiring more staff, working around bottlenecks and supply chain improvements. Now, our goal is to push this 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 7. This isn't just about decorating cans. Digital can printing has expanded our universe of business opportunity. In the past, Craft 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, it was the beyond beer space, and now encompassing an even larger category, a convergence of the good for you and other segments of beverage. This area is full of hundreds of small innovative new customers that, not only need great cans and 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 buy cans from us. And this strategy is what I call the 1+2 strategy. We lead with can printing, and we wrap up other service opportunities from a much broader segment of potential customers.

Now, let's turn to Spirits in Slide 8. As I've said before, Spirits has undergone its own transformation. We were striving to be a house of brands, building and eventually selling them. That vision, I believe, is flawed. Building the Spirits brand that is true value doesn't happen with a deal to open, let's say, 1,000 doors. And it doesn't happen once you sign a celebrity endorsement, now it happens when you create brand equity. This is the velocity. This is the pool that faithful customer demand that moves bottles out the door every day across your system, and most importantly, that phenomenon can't be only linked to price. So we are focusing Spirits on 3 brands that have brand equity: Azunia, a super premium single estate tequila, the Pacific Northwest's best small batch premium whiskey aged in Oregon Oak in Burnside and Portland's own backup PPV. All year, we have been calling out the fact that we have repositioned the brands and channels that have higher margins. That has resulted in lower volume as we reported this quarter.

And Slide 9 shows you a volume walk 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 27,912 cases, and we walked away from some unprofitable cases business, pulled out some one-time sales, the impact of out-of-stocks and destocking and 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 say it clearly, we are not satisfied with negative case sales. But we believe we have cycled most of the unprofitable accounts, and we are now rebuilding much more profitable sales.

Now, turning to Slide 10. Let's talk about Spirits a little bit more. 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 and investment savings initiatives. And most recently, we've rebuilt our Oregon sales and marketing team, and that's a lot for one business in a year. But I want you to know that we expect improvements in Q4 in Spirits, and we definitely think these improvements 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's also going to take us through the financials for the quarter. And after that, we will take your questions. In addition to Tiffany today, I have both Amy Lancer and Bruce Wells with me from Spirits and Craft, respectively, and they can help answer any questions you have.

Now, I'll turn it over to Tiffany.

Thank you, Geoff, 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 through the same period. During October '22, we closed on a new facility on favorable terms 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, let's 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 '21. Spirits sales were $1.2 million for '22 compared to $1.5 million for '21 due to volume softness in Azunia as we reduced discounting, we had a price increase and 2 large one-time inventory purchases in 2021. Craft sales were $1.9 million for '22 and $1.8 million for '21, reflecting our success in can printing, but offset by mobile canning.

Our consolidated gross profit was $200,000 for Q3 '22 compared to $900,000 for Q3 2021. Our consolidated gross margins were 6% for '22 and 27% for 2021. Spirits margins were 29% for '22 and 36% for 2021, and Craft had margins of negative 7% for 2022 and 19% for 2021. Craft margins are expected to continue to improve as we build volume, as Geoffrey mentioned earlier. Craft margins did improve from last quarter. However, we're still down from Q3 '21.

Adjusted EBITDA was negative $1.1 million for '22 and negative $600,000 for 2021 due to the weakness in both businesses.

Turning to the balance sheet. We raised a net $500,000 during the third quarter of 2022, ending with cash of $400,000 as we continue to pay down debt, which we fully repaid a $500,000 loan at Craft.

I would like to wrap up the financial results with this thought. We are continuing to right the ship by improving our distributor relationships in Spirits and working towards full capacity of our digital can printer. Both of these take time, but we continue to work on them while watching our overheads. We are excited about the growth potential of the printer for the remainder of the year. As Geoffrey said, 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?

(Operator Instructions) And our first question will come from Kelvin Seetoh, retail investor.

The team has executed 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 discounted Azunia products were being pulled off, [likely] we should see an overall higher gross profit margin. But for this quarter, I'm seeing a lower gross profit margin for the entire Spirits division on a year-to-year -- year-on-year basis. I wonder if there's anything I'm missing out.

Kelvin, this is Amy. I can take that. We actually had a catch-up entry in Q3 related to unallocated overheads, which were due to the lower volume production. So margins have improved year-to-date versus last year due to the things that we've previously outlined, the reduced discounting and the price increases, but that is offset by the increase in the overheads.

All right. Got it. My second question is that, I see that the ramp-up for Craft Canning is very visible. Congratulations on that. Based on what I'm seeing, we printed nearly 2.5 million cans in quarter 3. Definitely a huge improvement, but we are still seeing -- we are still operating on a negative gross profit margin. So any thoughts on when we are hoping to see breakeven on this business unit, either through volume growth or better sourcing for materials?

Yes. I'll take this one and Bruce, you can jump into if you have some thoughts on it. So Kelvin, you're right, we're -- this is the business that we're ramping up that's going to have the biggest near-term impact on the company. The -- we're chewing through cans pretty quickly, and we continue to ramp up. And I have to say that this has been an exploration for the team. I mean, you get a digital can printer and you have to immediately load it in the front and the back, both with working capital, new customers. And you can imagine when you're a beer customer or a CBD customer or a water customer, you want to make sure that when you put in your order for cans, they show up the label is right. It works. And so, we've had a lot of acceptance of the machine. And we're even getting to the point now we're doing repeat printing of 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 on where things ramp up and how things change.

And then the other thing I would say about it is the mix of can types that we run through the machine and types of customers, sizes, different types of customers affects the margins. When you have a customer shows up and he wants to run 100,000 cans in a day, and it's a unique size can, the 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 win 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 slide is important because it shows you where we are. We're much higher than where we reported here on the chart today because we're now well into November. But that chart should be a chart where we're printing over 2 million cans a month, right? And if you're printing 2 million cans a month, then utilization of the machine is going to be much higher, and we would expect margins to improve pretty substantially.

So when will we get to that point, every month, we're trying to make incremental progress and improve. On a 4-wall basis, I think we're really close to breaking through and starting to generate positive cash at Craft. As I've said to a lot of people, when we talk about the company, this company still has to navigate the fact that it's really small and bears the public company costs of -- that 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're generating positive EBITDA, positive operating cash flow and net income. And so, Craft 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 I was looking at the investor slide. I noticed this name called Galactic Unicorn Packaging. Is that our new name for the digital printing unit? Or what is that about?

So as I said in the script, and we were referring to here on the slide that you're calling out, there's an -- would have surprised me, but at the same time, it's requires to be creative. Digital can printing brings opportunity, right? A lot of the people that are coming to us for the digital can printing service are looking to take advantage of the marketing opportunity you have with really high quality impact graphics, not in a sticker label or a shrink wrap label. And then they come to you and in many cases they have other needs, right? They're looking to buy other disposables. They're looking for logistics help, right, storage. But the main one that we see is, a lot of people are looking to launch new innovative products and they want someone to help them do filling. So that's naturally what we historically have done, right, in our mobile business. But the challenge with the mobile business is, as we've talked about in prior earnings calls, it's a business where you are going to a customer site filling on site for them. The margins are much different. And as you deal with the logistics of moving teams and people around, you have the impact 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 with Aprch, when we -- I think we announced that and we talked about on the last call. Aprch is a partner that we're producing their CBD water for them. And they had grown through their ability to really continue to build their production assets, right, and then wanting to go more towards a brand focus and asset-light strategy with their CBD brand. So we stepped into their facility, assumed their assets, their co-packing equipment. We already have our own team at mobile that we brought over and have installed. And so, now that facility has been renamed Galactic Unicorn Packaging, and we now have, I believe, it's 4 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 the cans to our own facility now, we co-pack for Aprch, who is our core anchor customer there. And now we have 3 new customers who have stepped in and we're working to produce for them. And this facility won't be one where we can scale it dramatically, but it's kind of a test case to show how you can bring can printing kind of the opportunity to sell the can but also sell additional services. Our goal is to widen that funnel of revenue, right, is to sell more things down one funnel through the customer, a broader set of customers, generate more profitability from one customer, control more of the wallet, have -- earn more of their wallet and have a much bigger market share of Craft services for the beverage sector, particularly in the Pacific Northwest. So that's how we built Galactic Unicorn Packaging. Some people could drop $20 million or $10 million on a new co-packing plant. Eastside doesn't have the cattle to do that. So we have to be creative, and this is how we are growing still with limited resources.

Okay. That's a lot of useful details down there.

(Operator Instructions) Our next question will come from Ross Taylor with ARS Investment.

I want to get into a couple of things here. One is, you sing the praises of Azunia and Burnside and you're just not selling a great deal. Those brands seem to be something that, at this state kind of underutilized. I recognize you're focusing on Portland. But what's it going to take to get sales in those to really kind of push forward? And how -- do you think there's a possibility getting each of those to be to sell the same kind of volume we're seeing out 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 grow and develop. But I'll give you my take and then she can share her thoughts. One of the things that I think investors have to think about with the history of Eastside is, is that, there's a lot of different views on how you can build a Spirits business. And this business, frankly, was built from the -- from our legacy, really, the big addition, as we've talked about in the past, Ross, Redneck Riviera and that jump over the distributor, bring a celebrity in, have him pull the product through Walmart and the mass channel into every nook and cranny corner, get to 10,000 points of distribution, have it everywhere. And then you really have a challenge, right? 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 Eastside couldn't do that well, and we also couldn't do the logistics, bring the whiskey to the West Coast, bottle it, send it back to the East Coast. That business strategy was just flawed. It was poorly thought through, didn't have anywhere close to the number of amount of cash. And then we did the Azunia acquisition and thought we could bring it to the same channel, was also poorly thought through, because we're going to need even more cash to keep Redneck Riviera going. And so, you can kind of see the challenges.

So when we pulled back to markets where we really have more of a presence, the key piece that's missing, in my view, has been missing is the investment with the distributor. The distributor is super important in making profitable growth possible with these 3 brands. Less so in Oregon, because in Oregon it's a control state, but definitely in our other states, California, Arizona, Colorado, and Texas. So, we didn't partner with the distributor, right, last year. The strategy was to try to work on other routes of the market through other smaller distributors. And that was a mistake, right? That really slowed up the process and we relied heavily on these discounted sales that we had done in Azunia.

What we've done is and as I try to make it clear, both in this call and in prior calls this year is, we're turning the page and we're not going to sell Azunia and let the distributor capture all the gross margins. We're going to go back, we'll 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, 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 saying, I'm looking for Buckman, I love this stuff. I've really enjoyed, Azunia Black, and we find opportunities where we show up. There's one recently where one of our competitors with 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 to do that, Ross, win them one at a time. And -- 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 Amy alluded to this with the question that Kelvin asked at the very, very start, like the Q&A, which is volumes go down exposes the fixed infrastructure of the business. And so, we have more work to do to lower our overheads there, but when we get the volumes moving in the right direction, I'm pretty confident we've got a good team in place in the field to do this, taking 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 better in the bottle and outside the bottle as well. So, I mean, that's how I'd attack that question.

I don't know, Amy, do you have anything else you want to add to that?

Yes, I mean, the only thing I'd have to add is that, hands down the #1 thing that we have going for us is the liquid, and every one of our brands. So driving trial and sampling would be the #1 priority for the sales team going forward. On-premise with the pairing dinners and at events where we can sample hundreds of people, not a handful of people, as well as digital media and that area will be another focus. We've been 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 is about equal to the value of one of your printing machine, your canning machine. What do you -- it makes no sense to stay public at this level, but the market is unwilling to reward you with a going enterprise value also. So talk to me about 2 things. One, why is the market wrong when it's telling us right now that you're not going to be around and there's not going to be any recovery that we're probably better off owning certain tokens and coins.

The second is that, looking at this situation, you've got -- you're talking about the value of this business. There's, obviously, something we need to do to kind of get that close. So how do we get, so basically talk to me about how you get rid of the going concern issues. You've been able to pay down debt, you've restructured it, you seem to have a good relationship with the person who holds the debt that you have outstanding. You've -- basically, last quarter, I haven't seen the queue yet for this quarter, but you actually were able to reduce operating cash -- slightly positive operating cash flow last quarter, and all the stock units lose 70% of its value. So talk to me about that, about what your vision is and 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. So, clearly when you look at the market cap of the company, people have questions about the company's ability to move forward from here. And I don't think that's dissimilar for a lot of small cap companies facing interest rates, where on the spectrum of risk, we see big double-digit numbers, right? And that fear that the whole debt structure of your company is just going to consume all available cash. But I think that part here that is important is, this isn't a company that has simply one path to walk down. And I tell this to the team, I tell to external investors, obviously, I 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 slide, was purposeful, has 2 paths to see value grow. And a lot of people call me and I have gotten phone calls where people say, "Hey, I'm interested in this business, or I'm interested in that brand, or I'm interested in your printer." I literally had someone call me a few weeks ago and ask if we would be interested in selling our printer. And I was thinking, we'll shoot it 17 tons, it'll be pretty heavy to lift and drag it out the facility, but I appreciate the call. Companies for sale every day, right, basically a public company is for sale every day. So I think, Ross, the answer to that is to continue to show people what these 2 businesses can do, right? And unfortunately for external investors, it's hard to follow it. I mean, your [CT], you're following through the Q and the K and the earning (technical difficulty) guys that we can give is a company, stakeholders of people that are not (technical difficulty) not have private inside information and they're looking at a different set of (technical difficulty) companies that we're guiding both companies towards the best possible outcome. And inevitably what we need to do is continue to have people invest in these.

And I pledge this to you guys, and I'm a pretty good size equity holder. I want to head down that road, but do it in a way where we don't marginalize all equity holders, right? And there's an opportunity for equity holders to continue to stay invested and win when these assets continue to grow. So I'm working on charting that course, that's a course that I can't really talk about in a lot of detail about what the ideas are now. The Board's engaged in that, the team's engaged in that. And right now we're focused on winning the next opportunity (technical difficulty) selling more cans to the printer, (inaudible). Spirits is seeing volumes improving, we have a whole new sales team in Oregon, getting the sales team [going], marketing focused individual that's hit the ground running or focused on field marketing closer to our markets. And so, we're going to win on those areas. And I think when we do that, people respond positively and that specifically means with more capital. And that solves the biggest problem we have, which is company has big opportunities, right? Big opportunities, but it needs incremental capital, right, incremental capital to achieve some of the big opportunities, one of the big opportunities I've shared one. One is the second printer, right?

Think about the fact that you're sitting and you come visit our digital campaign site (technical difficulty) Portland, walk in mountains of cans around it, [the team pulling] cans in one side on an automated [player and out] the other side, automatically stacked into a stack of 8,000 cans wrapped. And it goes out to the vanity ship. That facility is a big size facility, big enough for 3 machines. (technical difficulty) Portland certainly can manage to support a $40 million decorating can business for Portland area. Second machine in that facility dramatically changes the contribution margins of both machines because now you have 2 machines contribute to the same labor force, same [origin of plant], same overheads, so that's an example of where you can really make a case and show people how this get to be a pretty substantial and important valuable business. So that's what we're doing. We're driving forward (technical difficulty) these businesses are valuable and continuing to talk about it and get people interested in it and navigate the next couple quarters that we see ahead and do things like what we just described with the Aprch deal with this new co-packing facility. It allows us to make investments and do it on a very shoestring basis.

So a second machine is little north of $4 million to do something like that. And obviously, the economics do make 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 you're going to need to have a strategic or an equity partner, someone willing to step in. What can be done to make that happen?

Yes. I'm sorry, I'm just getting -- one of my teams just texted me and said that he can't hear me very well, so I'm going to take my headset off and speak more directly on the phone. Like I said, I think there are a lot of creative ways that we could accommodate incremental capital. And I'm hopeful we can do it in a really, significant, or I should say it this way, in a way that really improves the economics of the business, but also 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 raising liquidity, improving the liquidity of the company. The company, as I said in the past, has a substantial amount of assets that are valuable that 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 there's 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 perform in the future years because you have to go out and buy younger whiskey and you have to deal with that and it affects your product quality. So you have trade-offs there, but I think that there's a couple paths 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. But, Ross, this is something that's hard to speculate on now, but we'll be the first one to tell investors when we have a good idea and can be talk about it publicly.

Is the markets going concern risk misplaced?

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 call daily and how they price the security. I look at a whole different set of stacks that you don't see. And I have to make my own call on that. And I'm here fighting with the company to see a better future for investors and I'm comfortable with saying, as I said on the earnings call, that this is a strong -- very valuable company, 2 very valuable businesses. And I want to see them -- see the 2 businesses thrive, the people win and see the whole combination be rewarded by a 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. And I think we'll have some success doing that in the next quarter. We've highlighted the fact that we think things will improve for digital can printing, and I'm hoping that our sales improve also in the fourth quarter.

Okay. Well, thank you for your direct answers and I have confidence that the going concern risk is misplaced.

And this will conclude our question-and-answer session. I'd like to turn the conference back to Geoffrey Gwin for any closing work.

Yes, thanks. Again, we appreciate the time tonight to listen to our third quarter conference call. The team is excited about the challenges ahead. We've got our head down and we're working to improve the utilization and the sales in Craft as we see the digital can market take off. And we're also working hard on the Spirits side of the business.

If you have any other questions and you want to follow up with us, you certainly can reach out to me and the team and we can spend some time and walk through the results and talk about our plans going forward. And then we'll probably touch base in the early part of next year with an update call. So anyway, I appreciate the time tonight, and thanks.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.