Good afternoon, everyone, and welcome to the Eastside Distilling Reports second quarter 2023 financial results conference call. All participants will be in a listen-only mode. Should you need assistance, please send to 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 and then one on your touchtone telephones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Tiffany Milton, Controller. Ma'am, please go ahead.
Thank you. Good afternoon, everyone, and thank you for joining us today to discuss Eastside Distilling's financial results for the second quarter of 2023. 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 Bruce Wells, Craft's Controller. Following their remarks, we will open the call to your questions. Now, 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 27A of the Securities Act of 1933 as amended, 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, anticipate, 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.
Such matters involve risks and uncertainties that may cause actual results to differ materially include, but are 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, 2022, filed with the Securities and Exchange Commission. With that said, I'd like to turn the call over to Geoffrey Gwin. Geoffrey, please proceed.
Okay, great. Thank you, Tiffany, and welcome to our second quarter 2023 conference call. We have a lot to discuss this quarter, and I'd like to encourage you to follow along with me as I reference a few slides about the business and our progress this quarter. As Tiffany said, you can download these slides from our website under the Investor Relations tab. 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 Canning + Printing, and we also have a spirits business, which sells a number of great brands, including Burnside Whiskeys, Portland Potato Vodka, and Azunia Tequila.
I want to start today with a little background on Craft, because in my opinion, it's probably the one segment of our business that is not widely appreciated, nor do people understand that really the potential here. Craft is poised to carve out a unique position in a fast-growing segment of the craft beverage packaging segment. It is in an elite position to be the preeminent provider of digitally printed aluminum cans for craft beverage companies in the Pacific Northwest. I want to start our conversation on Craft by turning to Slide three, and we want to talk about that opportunity. Digital can printing is revolutionary. That's a bold statement, but after watching this opportunity develop, I'm confident in that statement.
The craft beverage category, and I'm including in this the Beyond Beer category, is one of the most dynamic and competitive spaces there is. You've seen brands come out of literally nowhere and dislodge legacy brands, a feat that few would have predicted. Brands that don't connect and evolve immediately lose distribution. Here on this slide on the left, you can see there are a number of benefits of digital can printing. Probably the most important is what is listed below here, and that is it's a technology that helps brands win and win big. It allows marketers to elevate their marketing. It's a critical tool that allows you to win in the marketplace. Let's look at this in a bit more detail on the next slide. This is Slide four. Up first, this technology allows for design work that is extraordinary.
Now take a look at the pictures on the left. The ability this, this machine has to print is perfect for storytelling. It also allows for new packaging elements crossing into sensory elements that you just don't have in aluminum cans with texture printing. If you've ever held a can that has texture printing on it, it's pretty impactful. The two elements that are right are the critical ones that I want to focus on for a minute. That's the ability to use digital printing to shorten new product introductions. A concept you've got to get your head around is historically, brands were developed with huge investments, very long lead times with consumer research and testing. You had one shot to get it right, and you needed a large pile of money.
Now, with digital packaging investment that's low, like ours, you're allowed to approach it with a different strategy, more of a point-and-shoot, redirect approach. This adjust and repeatability allows you to be a brand creator that improves their chances of success. Lastly, I want you to consider this statement, and I'm going to quote here The Onion, which probably no one should ever quote, but I think it proves my point. When many years ago they said, "Everything in the entire world is collectible." Yes, that's been true, proven to be true. Think on it. We've moved from not just trading cards to clothing, to shoes, and yes, even beverage cans. Artwork can be elevated by limited quality, quantities, high differentiation, and become collectible. Digital can printing facilitates that.
The design proliferation we are seeing at Craft is just stunning, and we are seeing winners emerge using our technology. Now, let's turn to Slide five, and let's address the question: Are consumers adopting this technology? The simple answer to that is yes. We've printed over 12 million cans since we started this operation, and the chart here shows the ramp-up by month. We're just getting started here, and we still have a long way to go on volume, but we are getting better daily. Now, it's important to remember, when we win a customer, we are winning their supply chain. It's a huge commitment and a show of trust to give us that supply chain. As you can see, in Q4 of last year, we realized that we needed to make some incremental investments in our printing plant.
We made those to ensure we could meet our obligations to customers, and we had volumes decline as we prepared for this year. We're at to much higher utilization levels. This next slide shows the magnitude of the EBITDA improvement on top of Craft's 43% increase in sales. We expect to see even more improvement in the third quarter. Craft is on its way to generating cash, and we plan to grow it through the year and into next year. Let's turn for a minute and talk about Spirits on the next slide. This is slide seven, and I'd like to start my comments by saying this turnaround has been a challenge, but the rewards for getting this right are significant. In this quarter, we made progress.
Backing up for a minute, for those that haven't enjoyed this long, painful turn, I'd say in summary, the company has had a poor history of investment in large-scale branding, sales, and distribution. To summarize it in a slide, when I first joined the company, we lacked focus, we lacked financial resources, and a tested vision to win in a very competitive business. We were a national company, and we had very little cash to support that size business. When I became a CEO, I pulled out an unpopular play from the playbook, and that is to shrink the money-losing activities and focus investment in areas where we can win at our scale. You have seen volumes decline there, but you've seen performance improve. Let's turn to the next slide and talk about that improvement.
On this slide, you can see the EBITDA improvement on lower volumes over last year, and I'm happy to go into this in more detail in the question and answer section, but I believe we can see even more progress in the back half of this year. Here are my three goals for Spirits. I want to invest in marketing that has been tested and works. I want to improve our cost position. We've gone a long way to doing that already. I want to drive this thing to become EBITDA positive. From this level, achieving these goals, we can start to grow again, but we're going to grow wisely with adequate marketing, sales, and distribution. Okay, my last slide before I turn it over to Tiffany is to summarize our consolidated results.
On top of Craft and Spirits, we have a small corporate segment, which we use to... We call out, so you can see the, really, the profitability of the two online businesses. When we consolidate all three entities together, we report those results, and we've had significant progress in that as well this quarter. You take out the bulk inventory sales we did last year, same period in for Spirits, those comparable numbers look much better. We did grow, and we did see meaningful improvements in EBITDA year-over-year. Again, ex bulk sales by over $1.2 million. G&A cash expenses have sequentially declined each quarter since I was elevated to this role. That's 18 months of declines.
This quarter, in July, we also improved liquidity, raising a total of $1.3 million in equity through the ATM facilities that we have, and we continue to work on our debt-for-equity swap. We've made good progress, but we are not at the finish line yet. The way I would characterize it is we're halfway through a big year for the company, and I have high expectations for our team and the results for the back half of the year. Happy to take more questions on any of this material. For now, I'm going to turn it over to Tiffany. Tiffany?
Thank you, Geoffrey, and thank you all again for joining our call today. Let's review the second quarter. On a consolidated basis, our gross sales were $2.8 million for the second quarter of 2023, compared to $5.1 million for the second quarter of 2022, primarily due to barrel sales of $2.6 million in Q2 of 2022. Excluding bulk spirit sales, gross sales increased $200,000 from the prior year quarter. Craft sales were $1.9 million for 2023 and $1.4 million for 2022, as we sequentially improved our printed can production each month during the second quarter as Geoffrey referenced in Slide five. Spirit sales, excluding bulk, were $800,000 for 2023, compared to $1.1 million for 2022, due to lower distributor sales.
Our consolidated gross profit was $26,000 for Q2 2023, compared to $1.5 million for Q2 2022. Excluding bulk spirit sales, gross profit increased to $200,000 from the prior year quarter. Our consolidated gross margins were 1% for 2023 and 30% for 2022. Craft had margins of - 3% for 2023 and - 28% for 2022. Craft margins on a monthly basis sequentially improved through Q2 as we continued to build volume of printed cans. Spirits margins were 12% for 2023 and 52% for 2022. Excluding barrel sales, spirits margins were 12% for 2023 and 23% for 2022. Adjusted EBITDA was negative $1 million for 2023 and negative $350,000 for 2022, primarily due to decreased operating expenses.
Excluding bulk spirits net income of $1.6 million for Q2 2022, Adjusted EBITDA improved $1 million from the prior year quarter. Printing at Craft is finally reaching its potential in driving results, achieving positive EBITDA in June. We continue to build momentum in printing and look for ways to reduce operating costs, which will be further implemented during Q3 and become more apparent in the last half of the year. We will now open the floor for questions. Operator?
Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and then one using a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster. Once again, that is star and then one to join the question queue. Our first question today comes from Matthew Campbell from Laridae Capital. Please go ahead with your question.
Yeah. Hi, good afternoon. Good, good to see a lot of progress here. Specifically on the, the Craft side of the business, how many shifts are you currently operating today, and where can you get to with this one printer?
Hey, Matt, thanks for the question. Right now, Craft is not operating on a 24/7 schedule. Through the week, we operate pretty much around the clock, but we're moving towards having the capability to do a 24/7 schedule around the clock. It's not just the number of shifts we're running, it's also the utilization of the printer. We have one machine currently, as we've talked about in the past, and we have the capability to get utilization up significantly. We know there's a number of people that have operated this machine, actually worldwide, and based on our partners, we think that, you know, we can get to a point where we're doing double what we're doing today.
Possibly a little bit less than that, but really utilizing the printer a lot more than, than where we are today. We have a lot of room to, to improve here.
Got it. That's helpful. When we look at the spirits business, clearly you've been culling some distributors that were not profitable for you. Where are you in this process, and when do you, when do you think you'll start seeing growth in, in, on the spirits business again?
We are actually seeing growth in our biggest volume brand. The three brands we, we should think about are Portland Potato Vodka, Burnside, and the tequila business. Historically, we've had to redirect investment from the tequila business, which is a broader distribution footprint. We have the least ability to impact the supply chain there. And the other aspect of that is we have probably the least amount of brand equity and market presence in those various markets. You know, relative to the distributor, we're probably the, you know, in a weaker position. Portland, in our home market, we're extremely strong. I mean, Portland Potato Vodka is the hometown vodka. Eastside bourbons are the same hometown bourbons, and we have a lot more room. It's also a control state, so we have-...
Much more visibility into where and how the product is placed. When we look at those three brands, we started the year making investments immediately, as we got into the kind of the consumption side of the season in Portland Potato Vodka, and we've seen those volumes grow. Those have sequentially improved and picked up and gotten to a point where we're seeing strong double-digit volume increases. The tequila business, on the other hand, has not grown. It's shrunk, and that's offset the performance of the Portland Potato Vodka wins. I'd say we're, the focus here is to win in Oregon first, reset the Azunia Tequila business, and then grow from there. We're working on that.
Each of the three brands this year, we're hoping, is gonna have a meaningful change in the brand positioning. Azunia probably is gonna be the last one, but certainly you'll see some stuff for the Burnside here shortly, and then it'll start catching up with Portland Potato Vodka as far as the turnaround in the volume. That's our expectations for the back half of the year. Stronger results in PPV, picking up volumes with some things that we'll be announcing here shortly on Burnside, and tequila is still something that we're working on, that we'll come out with some more details on that in the back half of the year, hopefully. You should expect to see improvements as we go through the year.
Thank you. That's helpful, Geoff. Great, great work. I know this has been a long turnaround, but, really appreciate all the hard, hard work and the vision that you've had to make some hard decisions here. It's, it's, it's gratifying to see you kind of start to turn the corner to help drive cash flow so that you can make those investments in the spirits business. Appreciate the work.
Yeah. Thanks, Matt. I appreciate it.
Once again, if you would like to ask a question, please press Star and one. At this time, showing no additional questions, I'd like to turn the floor back over to Geoffrey for any closing remarks.
Great. Thank you, Jamie. I appreciate the time. Thank you to all of you that listened to this call, and we look forward to talking to you at the end of the third quarter. All right. Thanks.
Ladies and gentlemen, at this time, we'll be concluding today's conference call and presentation. We thank you for joining today's conference. You may now disconnect.