Turning Point Brands (TPB) 28 Apr 202020 Q1 Earnings call transcript

Good day and welcome to the Turning Point Brands' First Quarter 2020 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would like to turn the conference over to Mr. of President Vice Reformina, Business Development. Louie Mr. floor the is yours sir. Reformina,

morning Thank Louie everyone. Reformina, Good Vice is Development. This you. Business President of

me Operating Point Wexler; Joining Chief Turning and are Larry CEO, Financial Brands' Officer. Graham and Officer, President Chief Bobby Lavan, Purdy, today

release issued website, This www.turningpointbrands.com call replay today's located morning where XXXX we our will quarter section conference available. news a a This in also covering IR release first results. is our be of of

consolidated and our In operating we this discuss our on against call, provide and progress perspective strategic segment our will results our plans.

The direct differ As our be outlines is in in statements release materially could that customary, to discussion attention that various I today's that forward-looking the may cautionary and your filings and with forward cause factors statements press disclosure in actual -- of results Commission. discussion. actual from looking the factors the could cited or Securities risk projections to Exchange and today's

guarantees and and revise we projections statements. obligation them by forward-looking Laws, and Securities statements undue not publicly update Federal to except as future upon you of are undertake forward-looking reliance place any should provided These not or performance no

will and non-GAAP along be reference today, measures. These why financial management measures reasons with In call in today's the provide they reconciliations information. useful we can GAAP release, to certain found earnings believes that

over the call Wexler, our Larry turn to now will I CEO.

to joining thank Thank are you, call for safe. family want you this good you and staying I and hope trying your and Louie, everyone. morning, during the time,

our business for due even exceeded the to forward expectations country and Smokeless considering across quarter. lines. environment. at of current pulled of Tobacco, the end our expectations, Our disruption major first both all sales of the particularly our discounting quarter We across the outperformed after estimates businesses was the strong, Smoking all

the the business XX% encouraged especially by month quarter. sequentially growing of each of with results reorganization than our sales the vape We're of more

safe safety for our have the to in we job colleagues focus and thank and well-being customers of is I communities That employees shown on they ensure and how and the to our needs. for commitment have aside, our inspired serve. truly the like our they done in would other our communities a and serve I their working am proud resiliency customers' to express environment of and each

As to safety an mitigate environment. in work we've organization, implemented several enhance changes and our risk

social sanitation. cleaning and these increased shifts split warehouse hand where our contactless For scans, include equipment, appropriate, manufacturing distancing and and operations, sanitizing stations, temperature guidelines, protective

we changed unnecessary conferencing We implemented through have canceled telecommunicating increased salesforce. communicate implemented all use we the throughout possible. of way travel, tele-selling companies, many video Like where I've the initiatives and

of changes rewardingly proving these efficient likely place to be this after and remain crisis are to cost in ongoing savings. Some and are to lead even

than on employees for this required. put also new annual other those we We've have spending corporate compensation hold We increases manage commitments environment. in as deferred contractually cautiously

demand for our has remained consumer consistently Meanwhile, brands products and strong.

The demand are products workforce important daily consumers' this our our remarkable. to serve part dedication lives. has Our of been of

to employees and additional Louisville in for turbulent hourly these their wage times. employees We have facility care take increases hired our at of implemented families

local added also first in four sanitizers XXX,XXX hospitals, nursing to over to capacity have We in and homes, facilities manufacture three donated of responders our bottles our hand and communities.

for We the three back in second do Republic and impact cigarette expect Dominican COVID-XX ramping manufacturer slowly the third-party in up. A is quarter. results weeks closed temporary

are will offset been be These expected launches. temporary annual which slow has our growing issues be somewhat dramatically Select price dampened, selling In-person BXC budget will to increases and product by platforms. delayed. new

and the response the to quarter, approximately sales believe benefited the million Smokeless We stay-at-home was segments. $X our in the There result by were the a quarter, few restrictions loading between believe we Smoking notable trends of pandemic. during end the of trade-in split at evenly which

quarter. the of tubs the trends were up pandemic. in quarter, During orders over Stoker's larger during to saw the cans case our almost consumer as shifted quantities same MST earlier XX% from two MST last lift the the volume Stoker's during period weeks the for XX%

have trade Some tubs undoubtedly the which of accelerating giveback in loading, expected, trading but is sign this so is category far, of less through volume seen purchasing consumers are environment. trends economic a the we that we than and maybe a on down

end saw of our Another platforms, in e-commerce branded businesses. our only a in at increase We our was BXC area vape March, but websites. benefit that also saw meaningful not products the

pleased These to trends serving new We're ease sites purchasing going the have continued them look of online. April to and forward. to customers shift our bring consumers to as through forward

FDA's the filing to the PMTA for Maryland September to May for Xth. the extend request agreed judge deadline process, Turning the from XXth to court to district

As before, will we PMTA process we in the the a major said shift believe industry. be

process. a expertise Our competitive be advantage products get scientific vape proprietary margin will and the major regulatory our help through higher to

these to term performance in a less for be we our quarter. continue Overall, with about products market. pleased the longer the are excited potential We cluttered in much

to came challenges us an by presented to tackle we this organization importantly, as More together the current epidemic.

the be to employees about of environment. the vigilant and safety and well-being we adjustments the our tend to adapt make our businesses continue will to changing necessary to to We

quarter perspective Chief turn Graham Officer. the add the on forward, To and Operating me Purdy, and path some to call color over more let our

Thank you, Larry.

quick snapshot give business. a now of me the Let our performance from tobacco you core

to another in demand. saw Stoker's at strong were in the our quarter product growth quarter. to by one customer compared the receiving Smokeless in delivered with results full snuff share year X.X% double-digit now Our point share, stores the up moist share robust record driven ago X.X a

cans sales which with in delivered quarter of and driven stores tubs during gains represent by the Stoker's is industry significant now of growth snuff games. volumes. XX.X% the moist most Both same-store

its share brand quarter, in tobacco the Stoker's category later. decline in the of As expand end the as Chewing held to share. second Stoker's tubs the Stoker's registered quarter. our by chew while largest Larry with continuing gap mentioned, XX was the strength flat closing at ongoing shipments remaining we particular the market saw sales chew the category offset in

in double-digit premium rolling quarter. Zig-Zag high wraps. quarter, consecutive remained growth Smoking growth its growth brand the by for Papers the year-over-year U.S., led and paper cigar leading U.S. saw increasing double-digit the In and third in papers strong share the single-digit

by Growth products our outlets papers and now strengthen new in approximately XX,XXX while contributions XX,XXX hemp Zig-Zag's was along and outlets, iconic organic in cones papers Zig-Zag retail with continue driven unbleached leverage are paper XX,XXX respectively. core we approximately to from where are retail now our positioning. products,

brand, is the hemp number over X% Zig-Zag with paper share of a number Zig-Zag from climbed the XX year Zig-Zag two to while has brand Paper one cones cone XX% paper position to last as category share. the

demand excited has our of quarter the about especially expectations. initial where launch We're line, wrap hemp exceeded first our trade

Going forward, channels e-commerce our year. on to alternative focus should lead contributions positive the the of recent for remainder and the

recreation will the which into our quarter this universe of partner and new marking be driving facilitate we further will our entry dispensaries. with brand Canada, In partnership the large growing

core tobacco continued remain with was in expansion the double-digit company but Smoking our up business the and behind Zig-Zag the strong saw total quarter. and gains quarters, XX% gross in Smokeless profits advances engines growth. Overall, especially tobacco Stoker's MST

our where Moving last the vape management to consolidation one of NewGen, quarter. business streamlining we completed team under

team from focus and key showing unified the expected and than from quarter better from during at bounce performed businesses coordination products. a stock vape strong a superior management better positions quarter previous the as Our in benefited we

surging Our us platforms online queue China front growth a as and the satisfy both sourcing at of during factories customer key to back played which China, quarter. team BXC role allowed positioning a came the the BXB in our

our onto particularly We're shifted the online. business new excited business, In strong as saw BXC the about future the welcome customers we platform. at end prospect of to these our rebound as customers purchasing we quarter a

with vape profitability. is through level the the our for have in big a the disruption we market behind navigated believe last segment high returning to now trough year business, On the and successfully us

We completing forward for the PMTA after to process significant which our there's potential are brands. looking proprietary now

CBD In presence expand shots NewX X,XXX and our continued tinctures, over retail now full stores. of gummies, products, our including new on-the-go to business, retail are lineup

is XX be nicotine With growing the engine pins for first in the along strong NewX future Additionally, solid of to a caffeine pipeline we development, primed chew growth. added a under products to quarter. be

on winning and a series planning we marketplace. strategies initiatives believe We communication of and to are with the in these to driven tactical we results robust coupled we a challenging process call. ensure to about beginning and those just quarter's talked We efforts see We circumstances. the of do deliver last through just that fruits remain

quarter for review Bobby to our first performance. it of turn Bobby? I'll financial that, with And

stronger Thank benefited the coming from in plan loading, you, and first execution. than ahead accelerated strong trade demand, we with Company Graham. quarter and of segment results every in were expected

has PMTA expect September spend total does let our plans million performance process. $XX consolidated months segment the million full first recent review for for we I impact to moved summarize me $XX Xth. quarter, developments. the some to to of continue the on and to out This not year a Before been

SDI TPB TPB for Diversified, of tax-free On held common executive X.XX common April and each Xth, receive and by the announced shareholders SDI. TPB summer. a SDI for share completed merger definitive Standard transaction shares agreement by will of shares

an a retire X.X% transaction, outstanding the and our we're holding come have of the structure. overhang to close will the company agreement this At of and to pleased eliminate of effectively transaction shares on

sales continues year sales momentum. to increased year-over-year segment and to growth the quarter. XX%. now Net the from portfolio XX% up Turning XX.X% net in for the Smokeless quarter, revenues earlier. MST Smokeless, Stoker's of in reviews. XX% grew represented In deliver Smokeless sustained a

outpace $ share the MST quarter. trade with approximately with X%. Smokeless Total growing and chewing both loading eroding Smokeless its quarter, mix XX.X% believe shipments X.X%. X% increased volumes in to industry sales retail tobacco chewing volumes MST. in the approximately advancing to Year-over-year million by continue Stoker's approximately We our increased impacted MSAi by industry by in tobacco price the for

$XXX,XXX the products, XX% MLI in in smoking net segment papers, offset in to sales rolling partially with year-over-year a the of growth cigar in Turning double-digit pipe U.S. increase decline product. non-focus quarter

million sales mid-single-digit. products Cigar Canadian the rolling We of the while of end which were high net up quarter. XXXX were X our pipe disconnected single-digit, in at up sales papers generated wrap

contracted volume smoking quarter our first the retail XX.X%, to low industry price believe shipment According mix increased trade MSAi, while volumes Cigar loading approximately U.S. impacted We X.X%. Total increased quarter. Wrap by papers by MYO for single-digits. million to or $X increased mid-single-digits, in sales

of where and quarter. segment NewGen sequentially. XX% to partially saw decreased growth and solid, sales during than discontinuing market see other of contributions the expected CBD, the the The products. from offset vape Net NewX disruption lingering stronger business, Moving impact positive XX% year-over-year sales from segment did VX our by the results we

decreased declining net of gross result as the profit million For NewGen $X.X sales. the $XX.X million quarter, to

$X.X quarter First $X.X million compared included XXXX million tariff year expense to ago. of a

quarter the consolidated Encouragingly, to was million for streamlined Moving advances as and the EBITDA segment on to consolidated NewGen $XX.X to the the the quarter and in million for structuring. new contribution the year. compared prior business. Adjusted $XX.X sales returned positive

our first We are expectations. results -- pleased were quarter's that above results our

to We measures are by in also support the encouraged government economy. consumers

revenue We our the until previously of the feel light prudent clarity and uncertainty the and In get maintain the EBITDA it's more to and guidance it's response duration impact around COVID-XX, we virus. of guided

million million XXXX million. adjusted $XXX Projected to to total $XX million of $XXX EBITDA $XX net sales of and

million, We the wider $XX million $XX quarter due are a uncertainty. to also the to little guiding bit second to

continue potential partners discussions as targets. and M&A we evaluate

delayed likely of attractive we such have Although completing of increased seen pipeline coronavirus has opportunities. an transactions, the timing

comments. turn to closing that, for With I'll call the back Larry

Bobby. you, Thank

the continue needs. and to to resilience we executed quarter its ability deal consumers' and well challenging meet environment, While its a during with shows company the

we initiatives, based remain has to current timing Company opportunities. a and be the new We implementation the however, finding of our number economic implemented growing our of as leverage tobacco optimistic creating by you numbers, saw see their on our the we while the operating disruption. and goals new what before market committed may environment. impacted can But of impact business, remain

our solid committed Our resilient and journey. the remain company to remains and people

the to Thank you for questions. for participating open that, like I'd today. call in With the call

sir. Thank you

begin [Operator session. Instructions] the now will We question-and-answer

ahead. go And we Vivien the Please of from question will come Azer first have Cowen.

Thanks. is safe Appreciate question. Hope everyone the and Good morning. healthy.

chain to with the disruption wanted that called you Republic. Dominican the one Just like supply your suppliers they're Seems from of back start in out online.

of piece about the and Just fact products online Thanks. you're if were how and of back in inventory bringing thinking you short how a remind impacts on supply. big that business kind us

but this about is a Wrap our It We're hit that's been sales. Yes, the wraps so conservative, we business weeks, now assuming product. million is a at now, down margin lower point. million at, we're it's XX% three the from think right about that of $X probably where $X that so quarter

And no? is that supplier back online or

are. They

Okay, got Perfect. it. Thanks.

might intrigued Smokeless you pre-COVID. Larry, as very CPG as think Nielsen in categories. for was some of that share we've by other pantry comment On clearly even the be destocking we momentum of that I side evident there the was that the your business, seen saw that strong not data much today. Certainly,

hearing traffic? data foot of curious your from retail guys, hearing But consumer customers, it. the your foot from around partners hearing certainly wouldn't it retail Like issues Just we're in impacting what just suggest you're your any from certainly you're terms demand? with gas, incremental any the insights traffic beverage

can what usually -- stores, and -- and time. cigarettes driving I've seeing one bag it buying would but they're a walked saw I around one the pack store a in of what in you're out so where I with of hearing go fewer full whole pocket in Okay, buy we've product is field full someone seen or the of the just at been whole from was C a more. people a that

What that at is of remained quarter. the our consistent. end pretty we the in that spoke the we've seen had lift it's shipments about We

have might, on we particularly thought We payback that we snuff. the seen not moist

good tub been the And of of I our past, and tubs. buying tub as a one last in can products, in buy in convenient can these the is have where we've aspects handful that that cans it's very the cans particularly, times into about week. go about the a think consumer talked a the a of feeder the consider

accelerated conditions where houses current of by their much. can't been that the people just out has think get I as

days Are my to original want to health just paycheck good of the and I commentary any consumer that hearing or hearing are Yes, back you come on the follow-up some stimulus Stoker's on question, the around that anything Thanks. sense. specifically, makes out -- I to you even XX April of checks XX went around XXth? ago demand but cycle shifts on think the brands or

seen really month only this haven't a -- for that. has It's going change. still We on been and

very other haven’t get dramatic we sort of we seen on buying, the And focused at sell of to if we haven't than out point a sort in But shift so sort seen selling stores, bulk needed. this our obviously consumers. -- of

I say also is city-driven. that definitely Smokeless would our segment less

And so we're in locked places as that people down. aren't

a is product very associated our recreational people side, Smoking with on basis. the On

using staying and people are products. home, our So, at just they're

those So, we feel issues. a little bit sheltered to

Yes, commentary press expand seems release and comment pricing that? markets. in for not the on But their last the of appropriate pricing given about in delays. reasonable. expectations leader. heard you International obviously potential in that pricing The back you're seems Can international and in the the from Philip on just the we've U.S., half Morris it price I mean week kind

comment. get some So, color Thanks. just on to that wanted more

Yes.

in So, delayed. like expected the that seems to last as MST year MST. it's an the the And well at increase they XXth, April increase of took big guy a on follow. going took not beginning That We expectation be price be that like did would price year. we

That take we we cans, on price that being tubs. can't can said, on increases take we price but feel increases

slight will modification plan, So, significant it the year be plan. think we to to don't a our it's full relative but

Perfect, it all helpful. the back queue. that's Thanks. really turn into I'll

[Operator Instructions]

Susan next FBR. The B. from come Riley Anderson question of will

has you came outsized like trade this you quarter. the of kind Hi, -- mean, think think -- growth? the parcel much where I up? -- out down kind I good versus curious Nice guys morning. the in from MST was job growth, you the growth stocking how do that of for but Did was

tubs, end until day growth of was up up. shut business I But significantly Yes, of I last weeks think mean, trade growing from the it's a which is few and the at down. March outsized the came the then just

sort continues So, the down. without to double-digit be business these or strength with of trade

Got it.

kind that then of up it And any seeing maybe do Okay. that are was quarters, you of growth? later stocking you is or hit straight think that will

$X a million quarter. assuming the in we're second Yes, giveback

Okay.

is April, strength which -- one Stoker's the it thing seen of say haven't think I'd to the we is in brand. Now, we goes

we excited assuming $X been about But have pretty that. in that second million So, giveback quarter. the we're

NewGen about guys reset over should look we then, are years? at couple of how Okay. segment ,what think being next we reset? out how or we should the expecting the the in And kind that guess you vape for with think there margins now the the What I as terms expansion of business, all now about

on discussed, But business years. change long-term That's what NewGen. past don't something margin anytime. that at sat we've to working in we've I mean, as with for I guidance I Yes, proprietary gross XX%, going mean towards we our increases few that the think gross we're has has brand. our been profit NewGen expect been

we, target to of little on out I'll tell that's the new bit website our that while being presentation a going sort something investor But take we you, quantify to did this with put a get is that a there. long-term long XX%.

seeing it. like okay. what more there. you categories front? in you're can out are seeing increase opportunity on the and you Yes, potential sounds maybe prices an then attractive? about And you you're are maybe talk what these acquisition seeing Got It become just opportunities seeing

opportunity we're in mean, space. ton I the and Yes, the in smoking cannabis a seeing of

I space exposure going to you last to and think We smoking get -- that out. summer into assumption there. stuff us space should seeing play capital mean we're done the cannabis we we that get expect that under So to raised -- the more this were the

playing space steelmaking that is we makes thought we worse would tell expected you, the which I than impossible. sometimes cannabis carnage out the in is

quarter massive a bad their had things that people debt of one expense our take -- that are Just paying a in aren't posted because competitors they bills. to

the even deals -- it to going do one's So, when they no pay it bills. makes can't

up we're but didn't going but what think We complicated, is is set for. we to what exactly it's this this way, prepared play out are it for. was this So,

just question, guess. And helpful. it. Got That's I then modeling lastly,

for and you're impacting as kind of more employees, like materially, should actions such that we think out should about we increased how quarter? or taking the COVID, that SG&A wages, the about So, like, the next think

going spend, Yes, those than other the I hourly more paying decreases that of sort where more would has significantly. say we're by say back go back been on to cut expenses or wage non-essential whether would increases, offset actually, it's are way. we've I T&E overtime the business in it's pulled

expecting all. SG&A of So, we're any creep not at sort

jump in. luck Good Thanks quarter. that's so I'll much. back Great, next helpful.

Instructions] [Operator

from we your phone Ms. Next of have be a Cowen. follow-up Azer, ma'am. Vivien Azer muted Hello, might

Thank sure It the you operator. very follow-up. the for prompt you was. much Thank for

Just on the PMTA. follow-up wanted to

in the submission length -- Imperial that your judge obviously, extension? of guys of of full kind instance, there the given on getting Just in will? there today queue on to Is COVID-XX, to all ruling using Is getting accommodative from Thanks. the value are the for disruption We you Maryland a from filed front saw brand, planning in? [Indiscernible]? if you the benefit just that

I not is our open are PMTA. of benefit no Right, -- systems only the flavored significant remember, a benefit. which part we're our still mean on because pods, open the filing on on There's the is market. out the systems, PMTA

value earlier terms because in getting But just from to just like FDA, all Okay. at once? in that at of going everything they're all, through feedback work no the

FDA. dialogue the mean, I we're Yes, having with

we're already. -- getting it's So, feedback

that's it. So,

on get really is early, you category, much, interest lower doesn't systems. the PMTA the open the particularly submitting So, which

early, we're little do but not it. like rush some a file in bit we'll so And to

in the some the cost of curious Got remotely, terms you're any longer? just work team your a delays going having inflation in cost that obviously, from you third-party it. just to the if work whether taking to utilizing just extent is resources but drive are And I'm are then perspective,

months of But expense don't a an on retainer that's the it's creep. fair, expect the There's on but bulk be of was little and XX,XXX extra there, To extra whack-a-mole. consultants few capacity. into bit they'll any stay XX,XXX significant so some I that lab here going have we an

capacity lab time. increase did extended that so And of not because

it. Understood. follow-up. the for Thanks I appreciate

no At questions. this showing time, further we're

the and management for the conference team Gentlemen? conclude call now ahead back session. question-and-answer to like remarks. We the I over would will to closing any go turn

everybody Thank next you See the you for joining call. quarter.

time Thank you, The of At everyone. care is today. now disconnect the conference for Take time, lines team a sir the and and this may have your wonderful to you your also rest day. concluded.