Good day, and welcome to the Eastside Distilling third quarter 2022 financial results conference call. All participants will be in a 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 one on your telephone keypad. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Heather White, 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 White 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 & 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 Section 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 proved 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 from 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 & 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 are including a few slides to help illustrate the progress we are making. As Heather said, you can find these slides on 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, and we can start with slide three. Now, Eastside is unique in that we have two very valuable businesses in two segments of the craft beverage sector.
Craft Canning + Printing, pictured here on the left, is not the same business 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. Suffice it to say, we are seeing strong demand for this new service. What we have 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 and spirits envisioned pre-pandemic has proven to be unsustainable. The strategic direction left it with very unattractive margins, and it consumed 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 four, we have opportunistically taken advantage of high wholesale whiskey values throughout the year. However, taking those sales out, you can see sequential improvement in the pro forma sales at the bottom of this slide.
Below the line, our operating losses from our new business initiatives at 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 needs 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 five, clearly, the highlight of the quarter was the performance at Craft. Sales continued 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 six 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. We believe that number on the left can go well beyond 20 million in a single year. 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.
Our goal is to push this utilization higher each month until we get to full utilization. As we do this, margins improve as well as cash flow, and I believe this will be a very profitable business. Now let's turn to slide seven. This isn't just about decorating cans. Digital 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. This strategy is what I call the one plus two 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 eight. 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 a Spirits brand that is true value doesn't happen with a deal to open, let's say, a thousand doors, and it doesn't happen once you sign a celebrity endorsement.
No, it happens when you create brand equity. This is the velocity. This is the pull, the 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. We are focusing Spirits on three brands that have brand equity. Azuñia, 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 vodka, PPV. All year, we have been calling out the fact that we have repositioned the brands in channels that have higher margins. That has resulted in lower volume, as we reported this quarter. Slide nine 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. Now we've 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 -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. We've made some significant improvements, and some of these improvements are in the distribution and supply chain.
These things take a while, but we've taken price increases, and we've invested in savings initiatives. Most recently, we've rebuilt our Oregon sales and marketing team. That's a lot for one business in a year. I want you to know that we expect improvements in Q4 in Spirits, and we definitely think these improvements in these initiatives that we've undertaken will become much more obvious as we move into next year. Now, the last slide of our slide deck, I'm gonna leave for Tiffany, who's also gonna take us through the financials for the quarter. 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 . 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 2022, allowing us to repay almost $6 million of outstanding debt through the same period. During October 2022, 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 2022, compared to $3.3 million for the third quarter of 2021. Spirit sales were $1.2 million for 2022, compared to $1.5 million for 2021.
Due to volume softness in Azuñia, as we reduced discounting, we had a price increase and two large one-time inventory purchases in 2021. Craft sales were $1.9 million for 2022 and $1.8 million for 2021, reflecting our success in can printing, but offset by mobile canning. Our consolidated gross profit was $200 thousand for Q3 2022 compared to $900 thousand for Q3 2021. Our consolidated gross margins were 6% for 2022 and 27% for 2021. Spirits margins were 29% for 2022 and 36% for 2021. Craft had margins of -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 2021.
Adjusted EBITDA was negative $1.1 million for 2022 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?
Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star then one on your telephone keypad. If you're using a speaker phone, you may need to pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily for the first question. Our first question will come from Calvin Teo, retail investor. Please go ahead.
Hey, Geoffrey . The team has executed well on several fronts, and I think doing the investor presentation slide is a huge improvement. Really great job on that. I do have a few questions, right? If the discounted Azuñia products were being pulled off, technically 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-on-year basis. I wonder if there's anything I'm missing out.
Hi, Calvin. This is Amy. I can take that. Hi, Calvin. How are you? We actually had a catch-up entry in Q3 related to unallocated overheads, which were due to the, you know, lower volume production. 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. Thanks, Amy. 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've printed nearly 2.5 million cans in quarter three. Definitely a huge improvement, but we are still operating on a negative gross profit margin. Any thoughts on when we are hoping to see breakeven on this business unit, either through volume growth or better sourcing for materials?
Yeah. I'll take this one, and Bruce, you can jump in too if you have some thoughts on it. Calvin, you're right. You know, this is the business that we're ramping up, that's gonna have the biggest near-term impact on the company. You know, you know, we're chewing through cans pretty quickly, and we're continuing to ramp up. You know, 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.
You can imagine when you're a beer customer or a CBD customer or a water customer, you wanna make sure that when you put in your order for cans, they show up, the label's right, you know, it works. We've had a lot of acceptance of the machine, and we're even getting to the point now we're doing repeat printings, you know, of cans. You know, 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 times on our projections on you know where things ramp up and how things change.
The other thing I'd say about it is the mix of can types that we run through the machine, and types of customers, sizes, different, you know, 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, you know, the margins on that are very different from competing for, you know, say, a 12-ounce guy that's, you know, running smaller margins. When we first priced this service, we priced it to win volume immediately, right, from our competitors, and we can definitely see us taking volume from competitors. Now we're working on improving margins and mixes.
The chart that I showed in the slides is important because it shows you where we are. We're much higher than where we you know reported here on the chart today 'cause we're now well into November. That chart should be a chart where you know we're printing over 2 million cans a month right? If you're printing 2 million cans a month then utilization of the machine is gonna be much higher. We would expect you know margins to improve pretty substantially. When will we get to that point? You know every month we're trying to make incremental progress and you know improve. On a four walls basis I think we're really close to breaking through and starting to generate positive cash at Craft.
You know, as I've said to a lot of people, you know, when we talk about the company, this company still has to navigate, you know, the fact that it's really small and bears the public company costs of, you know, that we all talk and know about. We have to make improvements on both sides of the business to get to a point where we're, you know, generating positive EBITDA, positive operating cash flow and net income. Craft is gonna do its part and get us, you know, closer and closer on that side, and we need to continue to work on Spirits and get it up there as well.
Got it. 2 million cans per month is really significant. Yeah, I was looking at the investor slide. I noticed there's this name called Galactic Unicorn Packaging. Is that our new name for the digital printing unit or what is that about?
As I said in the script and as we're referring to here on the slide that you're calling out, would it surprise me, but at the same time it requires being creative is digital can printing brings opportunities, 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, you know, opportunity you have with really high quality impact graphics, not in a sticker label or shrink wrap label. Then they come to you, and in many cases, they have other needs, right? They're looking to buy, you know, other disposables. You know, they're looking for logistics help, right? Storage.
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. That's naturally what we historically have done, right, in our mobile business. The challenge with the mobile business is we've talked about on our prior earnings call is, you know, it's a business where you're going to a customer site, filling on site for them. The margins are much different. As you know, deal with the logistics of moving teams and people around, you have the impact on your profit margins. A huge opportunity for us is to get into the fixed site space and attack the market that's just around the printer. Specifically, I'm talking about Portland.
When we did the deal earlier in the summer with Aprch, when we, I think we announced that, we talked about on the last call. Aprch is a partner that we're, you know, producing their CBD water for them. They had grown through their ability to really continue to build their production assets, right? Wanting to go more towards a brand focus and asset-light strategy with their CBD brand. 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. Now that facility has been renamed Galactic Unicorn Packaging, and we now have, I believe, it's four 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. We sell cans to these customers. We deliver the cans to our own facility now. We co-pack for Aprch, who's our core, you know, anchor customer there. Now we have three new customers who've stepped in, and we're working to produce for them. This facility won't be one where we can scale it dramatically, but it's a kind of a test case to show how you can, you know, bring can printing, you know, 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 to, through the customer, a broader set of customers, generate more profitability from one customer, you know, control more of the wallet, have to earn more of their wallet and have a much bigger market share of Craft's, you know, services for the beverage sector, particularly in the Pacific Northwest. That's how we built Galactic Unicorn Packaging. You know, some people could drop, you know, $20 million or $10 million on a new co-packing plant. Eastside doesn't have the capital 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. Thanks, Geoffrey, and thanks, the team. Thank you.
Thank you. Thanks, Calvin.
Once again, if you would like to ask a question, please press star then one. Our next question will come from Ross Taylor with ARS Investment Partners. Please go ahead.
Hey, Ross.
Geoff, hey, how are you doing?
Good.
I wanna get into a couple of things here. One is, you know, you sing the praises of Azuñia and Burnside, and you're just not selling a great deal. Those brands seem to be something that, at this stage, kind of underutilized. I recognize you're focusing on Portland, but what's it gonna take to get sales in those to really kind of push forward? You know, do you think there's a possibility getting each of those to be to sell the same kind of volume we're seeing out of Portland Potato Vodka?
Yeah. 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, you know, 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 that, you know, there's a lot of different views on how you can build a spirits business, and this business, frankly, was built, you know, from our legacy, really the big, you know, addition of, 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 and corner, get to 10,000 points of distribution, have it everywhere. Then you really have a challenge, right? That challenge is, can you pull the volume off the shelf, right? Can you pull the volume through Walmart and then replenish it?
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 amount of cash. Then when we did the Azuñia acquisition and thought we could bring it through the same channel, was also poorly thought through because we're gonna need even more cash to keep Redneck Riviera going and so you can kind of see the challenges. When we pulled back to markets where we really have more of a presence, the key piece that's missing, in my view, it has been missing, is the investment with the distributor. The distributor is super important in making profitable growth possible with these three brands.
Less so in Oregon, because in Oregon it's a control state, but definitely in our other states, California, Arizona, Colorado, and Texas. We didn't partner with the distributor, right, last year. The strategy was to try to work on other routes to 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, you know, that we had done at Azuñia. What we've done is, and as I try to make it clear both in this call and in prior calls this year is, you know, we're turning the page, and we're not gonna sell Azuñia and let the distributor, you know, capture all the gross margins.
We're gonna go back, and we'll work with distributor, and they get paid for their part of the sale, but we're gonna put it in places where it, you know, is going to be sold. We're gonna 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 Burnside. You know, I love this stuff. I've really enjoyed, you know, Azuñia Black." We find opportunities where we, you know, show up. There was one recently where one of our competitors with the Black Label Tequila wasn't able to produce the volume that people were looking for, and we stepped in, and I think people loved the product that was in place of our competitor.
We have to continue to do that, Ross, you know, win 'em one at a time. But the volume that we're doing now with these new sales is gonna be much more profitable. Now you can see it, and Amy will allude to this with the question that Calvin asked at the very start, like, the Q&A, which is volumes go down, exposes the you know the fixed infrastructure of the business. 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 gonna be much more apparent, you know, better in the bottle and outside the bottle as well. I mean, that's how I'd attack that question. I don't know. Amy, do you have anything else you wanna add to that?
Yeah. I mean, the only thing I'd add is that, you know, hands down, the number one thing that we have going for us is the liquid, you know, in every one of our brands. Driving trial, you know, and sampling would be the number one priority for the sales team going forward, you know, on-premise with the pairing dinners and at events where we can sample, you know, hundreds of people, not a handful of people. As well as, you know, digital media on 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 at a market cap, equity market cap's about equal to the value of one of your printing machine, your canning machine. It makes no sense to stay public at this level, but the market's unwilling to reward you with a going-concern enterprise value also. Talk to me about two things. One, why is the market wrong when it's telling us right now that you're not gonna be around, and there's not gonna be any recovery, that we're probably better off.
Right.
Owning certain tokens and coins. Second is-
Appreciate that.
I thought you would. The second is that, you know, looking at this situation, you've got, you've talked about the value of this business. There's obviously, you know, something we need to do to kind of get that close. How do we...
Right.
How do we get, you know? Basically, talk to me about how you get rid of the going concern issues. You know, 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 Q yet for this quarter, but you actually were able to produce operating you know, slightly positive operating cash flow last quarter.
Yes.
All of a sudden.
Yeah.
It is loose, you know, 70%.
Yeah.
of its value. Talk to me about that.
Right.
About what your vision is and where we go and how we get this to a level where, quite honestly, I mean, right now, you know, a share will trade for more than penny candy.
You know, clearly, when you look at the market cap of the company, you know, people have questions about the company's ability to move forward from here. I don't think that's dissimilar for a lot of small-cap companies facing, you know, interest rates where, you know, on the spectrum of risk we see big double-digit numbers, right? That fear that the whole debt structure of your company is just gonna consume all available cash. I think the part here that is important is, you know, this isn't a company that has, you know, simply one path to walk down. I tell this to the team, I tell it 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 two paths to see value grow. 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, you know, in your printer." I literally had someone call me a few weeks ago and ask if we would be interested in selling our printer. I was thinking, "Well, shoot, it's 17 tons. It will be pretty heavy to lift and drag it out of the facility." You know, I appreciate the call. You know, companies are for sale every day, right? Basically, public companies are for sale every day.
I think, Ross, the answer to that is to continue to show people what these two businesses can do, right? Unfortunately, for external investors, it's hard to follow it. I mean, I'm in your seat too. You're following through the 10-Q and the 10-K and an earnings guide that we can give you as a public company. As stakeholders and people that are not that have private inside information, and they're looking at a different set of planning that we're guiding both companies towards the best possible outcome. Inevitably, what we need to do is continue to have people invest in these. I pledged this to you guys, and I'm a pretty good-sized equity holder.
I wanna head down that road, but do it in a way where we don't, you know, marginalize all equity holders, right? That there's an opportunity for equity holders to continue to stay invested and win when these, you know, assets continue to grow. I'm working on, you know, 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. You know, the board's engaged in that. The team's engaged in that. Right now, we're focused on winning the next opportunity because, you know, selling more cans to the printer, getting the innovation out to Spirit is, you know, seeing volumes improving, getting. We have a whole new sales team in Oregon, getting the sales team going.
We have a new marketing focused individual that's hit the ground running. More focused on field marketing closer to our markets. We're gonna win on those areas. I think when we do that, people respond positively and that specifically means with, you know, more capital, and that solves the biggest problem we have, which is the company has big opportunities, right? Big opportunities, but it needs incremental capital, right? Incremental capital to achieve some of the big opportunities. What's 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 were to come visit our digital can printing site in Ardell, Portland. Walk in, mountains of cans around it.
Machine pulling cans in one side on an automated, you know, conveyor and out the other side. Automatically stacked into a stack of 8,000 cans, wrapped, and it goes out, you know, to the LTL shipping. That facility is a big-sized facility, and it's big enough for three machines, right? Portland certainly can manage to support a $40 million decorating can business for the Seattle, Portland area. Second machine in that facility, you know, dramatically changes the contribution margins of both, which now you have two machines contributing to the same labor force, same, you know, square footage of the plant, you know, same overhead. That's an example of, you know, where you can really make a case and show people how this gets to be a pretty substantial and important viable business. That's what we're doing.
We're driving forward, validating that these businesses are valuable, and continuing to talk about it, you know, and get people interested in it and navigate the, you know, the next couple quarters that we see ahead and do things like what we described with the Aprch deal with this new co-packing facility that allows us to, you know, make investments and do it on a very, you know, shoestring basis.
A second machine is a 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. 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?
I'm sorry. I'm just getting nudged. One of my teams just texted me and said that you can't hear me very well, so I'm gonna take my headset off and speak more directly into this phone. You know, 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, you know, 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's done an outstanding job raising liquidity, improving the liquidity of the company.
You know, the company, as I said in the past, has a substantial amount of assets that are valuable that we sit on. For example, you know, we've monetized a lot of our barrel inventory that we didn't necessarily need this year or for that matter next year. I think there's more room to do, you know, 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. You have trade-offs there.
I think that there's a couple paths we can navigate to get us closer to a bigger win, where we can get, you know, enough capital to really start to unlock the value of both business, businesses going forward. You know, Ross, this is something that's hard to speculate on, now, but we'll be the first ones to tell investors when we have a good idea and can talk about it publicly.
Is the market's going concern risk misplaced?
You know, 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 they even made it the year before. I don't remember now. You know, investors make that call daily in how they price the security. I look at a whole different set of stacks that you don't see, you know, and I have to make my own call on that. I'm, you know, here fighting with the company to see a better future for investors. I'm, you know, comfortable with saying, as I said on the earnings call, that this is a strong and very valuable company, two very valuable businesses.
You know, I wanna see the two businesses thrive, the people, you know, win, and you know, see the whole combination you know, be rewarded by a higher stock price. We're doing that every day. We're going to, you know, attack the market and see if we can get more wins and have it show up in the financials. 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 our digital can printing, and I'm hoping that our sales improve also in the fourth quarter.
Yeah. Well, thank you for your direct answers. You know I have confidence that, you know, the going concern risk is misplaced, so thank you.
Yeah, I appreciate it. Thanks, Ross.
Take care.
This will conclude our question and answer session. I'd like to turn the conference back over to Geoff Gwin for any closing remarks.
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, you know, improve the utilization and the sales in craft as we see the digital can market take off. We're also working hard on the spirit side of the business. If you have any other questions and you wanna follow up with us, you certainly can reach out to me or the team, and we can spend some time and walk through the results and talk about our plans going forward. We'll probably touch base in the early part of next year with an update call. Anyway, I appreciate the time tonight and thanks.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.