Turning Point Brands (TPB) 7 Nov 242024 Q3 Earnings call transcript

Good day, and welcome to the -- turning Point Brands Third Quarter 2024 Conference Call. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Andrew Flynn, CFO, to begin the conference. Andrew, over to you.

everyone. morning, Good ago, QX while a release press A we our results. covering short issued is IR This website in located release the at section www.turningpointbrands.com. our of

segment perspective During results strategic and plan. call, we discuss our consolidated this will progress against and the on and provide operating environment our operating

As I the factors risk in attention filings with direct to forward-looking Commission. discussion of the is cautionary release statements and and customary, Securities Exchange and in your the today's press our

financial why today, measures. GAAP information. call will they the we to CEO, turn reconciliations earnings certain non-GAAP call provide now measures the to our These On Graham are release, reference and along management useful today's in Purdy. will over with I reasons believes

joining our call. Thanks, morning, Andrew. Good for everyone, you and thank

were XX% expected progress than third $XX.X Our million and EBITDA XX% results increased consolidated our against the to quarter EBITDA to continued for CDS, increased $XX.X Adjusted plan. million. Ex demonstrated quarter. better

for increasing across performance million our strong guidance $XX to prior million to versus Given XXXX million we our $XXX million. guidance business are adjusted $XXX $XXX of EBITDA our full to lines, year

Neither include of CDS. from these contributions ranges

XXXX. our and million, from During Zig-Zag X% except $XX.X with in business, performed which driven cigar our we more one, subsegments all in by into revenue the to for heavily experienced another growth showing up well quarter, September strong leaned we've

alternative a our declined experienced was the category. distribution across this solid excited to low sequentially assessing be saw line. for growth growth versus ago. lighter about this segment which business within the a both continue including product and in that double-digit The to We we strategy year-to-date quarter forward. weaker-than-expected going year Due channels, channel, go-forward are performance, Zig-Zag We loan

a opportunity bullish on customers leverage us to to their for diverse an which of remain us offer SKU channel, shop these accessory the needs. one-stop for portfolio our We provides all this emergence continued

to target decades we've deep see we who continued specifically onboarded and C-store At grow we've reputation a for channels time, market. strong our as mainstream alt They traditional serve that convergence continues category distributors increasingly with because the distribution the diversified successfully same gain with As of reliable expect distributors acceptance, the to business emerged partner. and and want portfolio, have to this us as brands to new work market. manufacturers done

businesses XX% of state. or legal brands This a to now tailwind with Zig-Zag. must-carry continue Americans in should shovels live adult-use Nearly like all like secular benefit picks medical TPB and

Stoker's. to Moving

end a decline During the X% for revenue sales X% the quarter, the XX% we Stoker's to sell-through sequentially, approximately which to approach, fit. product a Through a increase Free XXX% our quarter. XX% in market increase than per low that believe in growth growth looseleaf, more increased consumers. industry's MST off increased is to million million, reflecting test-and-learn greater in and $X even free and $XX.X sales have disciplined our we MSAI XX% double base strong a in a

feedback have loyalty desired in feedback size, convinced feel participate and range our reorders retail in-store strengths. execute look acceptance which feel and competitive secure our growth chain placement, in brand's and and nicotine pouch requires consumer investment invest reinforced consumer mouth purchases, flavor, consistently initial in footprint, promotional to us and to programs. expanding of features This has Positive with in along the positioning, and

retailers market to stocks quarter. the in pleased many distributors and restocking leader, with out capital performance particularly allocated which the of experienced widespread are Free's second We given

of mouthfeel to profile, feedback we at We as a select X-milligram initially X-milligram launched started quantities X our the styles volumes. XX% flavor and that limited over retailers. started XX just selling about consumer overwhelmingly in selling we category in currently and X recently strength flavor It free worth represents into of X is XX-milligram the have milligrams, unique milligram and offer online in Due which order noting well, also to proposition. and with are expanding positive X-milligram

We to X XXXX. QX of in expect QX launch accelerating milligram will and milligram during distribution be X

As be a a category for quarters, to large noted with this previous and in continues growing we've growth. runway rapidly long

some forward our the we our are to initiatives. XXXX call walk that, specific also Summer in strategy to this over of Looking category. to me success to through system progress working go-to-market results planning, some go-to-market hand With and and enhance to commercial maximize of our let

Graham. build Zig-Zag's all iconic channels. you, across we push history ubiquity continuing Throughout Thank upon to sales toward QX, while continued our

untapped not only while we shelf In space within all the which X healthy quarter, expanded market. noted, existing been with portfolio our buying and we seen new Zig-Zag hemp expanding valuable new We've are stores. successful these increases with offerings, the well in received sales merchandising in across portfolio. who channels but wrap As also sizes order having winning the customers more success are alternative average Graham customers increasing share of have

also of cartons. identify a out new it papers that will a easier paper shelves. rolling Zig-Zag high-impact look cartons vibrant cartons of consistent Zig-Zag We the will process are vibrant create look visibility, increase to in on orange making rolling store These thus

legacy expect For innovation for QX consumer. evolving and new products while continue that tapping beyond, into we build introducing today's this to on new

solidify high-value in more this continue and to and products related channel as mainstream, position as partner. become have a runway continue a We our to we long cannabis trusted

offer a XX example, For fraction stores accessories in sales, legal both represent cannabis XX,XXX yet dispensaries, retailers tiny of and currently Zig-Zag. opportunities in for states, over meaningful now

revenue $XX which again Stoker's, be over brand's million continue to For quarter. we the saw pleased with in last like we performance, posted

resonate continue fit today's at see distribution, and with fair with a price We product expanding on the our are messaging to brand's tubs consumer. especially great focused

the last retail channels, to Turning by successfully incremental X-milligram initial we across the results. free. expanding into and After DXC select are quarter strength encouraged nicotine

the As these benefit. during enjoy quarter, we full initiatives quarter's took place didn't a

We on both and engagement orders. increased repeat our these introductions, revenue site look launched Since repeat we and XXXX. That further. strong being early, while DXC as in of number sharing quarter. to customer forward in the programs continues site solid go-to-market progress to increases, additional We said, our customers strategies engagement growth, accelerate subscription and DXC consistent show have rewards

In new summary, and against for business our we to growing executing add to established, consumers winning the long our growing term, base. omnichannel plan the brands building continue we've our customer

distribution We of maximize strengthen world-class extensive our will continue the to our value brands and capabilities.

our go Let Andrew back me now through to the results. over turn call to financial

results. Thank with were quarterly QX X.X% up million. to our you, Summer. sales $XXX.X Starting consolidated

XX.X%. revenue overall was margin CDS, up year-over-year basis Gross up was Excluding points year-over-year. to X.X% XX

quarter up EBITDA $XXX,XXX includes costs million. up XX.X% was year-over-year and were year-over-year. transaction-related which As to year-over-year reported, $XX.X nonrecurring up expense was million, Adjusted for was the SG&A items. $XXX,XXX $XX.X PMTA

segment into Going performance.

our of primarily quarter. with increased the $XX.X the to mix. increased as net to a with This category to share and to increase. X.X% portfolio million price/mix down XX.X% the sales X.X% quarter during to volume driven of X.X% according points MSAI. quarter mentioned. the with growing points year-over-year Stoker's Net margins decreased X%, XX despite Stoker's Gross exception year-over-year was was Zig-Zag MST lighters volume during for X.X% million strength in the due category, to year-over-year by XXX sales in basis down the $XX.X grew categories, sales a MST year-over-year. X% increase all the volume year-over-year basis product XX.X% X%

volume with basis of selling chewing of up representing year-over-year to XXX in of XX were points of runway from the X/X XX.X% was stores volumes, points long the in approximately Stoker's down was a Chewing which to category quarter, the X.X%. XX.X%, basis points industry gaining MSAI. loose #X approximately XX still beating previous leaf year. for volume brand tobacco Stoker's now according was X.X%, to chewing TPB basis tobacco share in-store declines Overall, growth. sales Share provides down

year. was a leaf loose trade grew benefiting larger premium from as volumes performance volumes the by Category driven down TPB's Stoker's with from in consumer decline previous

continue rollout. approximately sales flat gross more at Sales to Gross free than was Adjusted our we quadrupled $XX was year was national XX.X%. were moving EBITDA margin XX.X% margin million, ago CVS. as year-over-year -- $XXX,XXX. a versus Our

$XX $XX.X of sheet. quarter Free Moving Year-to-date $XX.X the flow flow ended just was million. the the cash. cash for over million. free cash million on balance is quarter to with We

With with shares. liquidity well position. hand. our cash range repurchased XX, year, are within of convertible with July quarter, this $XXX.X free we On flow X our on In our leverage generation disclosed note we we comfortable million previously retired of projected our are worth to cash the million and Xx $X.X

In addition, program a the share that repurchase capacity Board $XXX has has of authorized million. a

guidance and line to items. other On

guidance our guidance these Neither adjusted increasing CVS. to XXXX $XXX are ranges million year we $XX noted, our for prior million $XXX of full from million. $XXX versus million previously to EBITDA contributions of include As to

million We $XX to range tax the is purposes, CapEx modeling For for effective expectation $XX XX% revised XX%. our the from million year. to income under

are have and plans changed not investment reductions Our driven. timing

spend to our approximately million $X related to year to modern which review products, for full remain under are oral supplement expect FDA. by PMTAs the the that We our

me let turn to back Graham. it Now over

our conclude, we're X into months with pleased To XXXX. progress

questions. Now turn over I'll it to

line [Operator Des Lauriers Capital question Craig-Hallum the comes Instructions] from of Eric first And your Group. from

nice very here. a quarter on Congrats

the near-term for just I'm marketing you us if you versus initiatives from SKU have increased for wondering growth out of And perhaps penetration? outlook question doors First It underway. for existing kind if of the sort that of some growth growth of me, counts sort kind just that the velocity helpful. understand help could outlook be and longer-term us of break would opportunity, on expanded help free. coming between like kind door or in sounds new can you

Summer. for this Eric, Thanks the is question.

continue and add a you and retailers. know, launched focus this distribution as with scale we new to on So year independent national

of runway are place stores get As chains a larger the a little sold, XX% you a stores. chains XX%, the is also of about bit bit category chain to is more OST time into. convenience longer And chain know, is where predominant more take getting little through into sold and

sold and we where our know, are with chain you as those But stores. products have currently long-standing relationships relationships

milligram expanding we're expand are excited our in to And X so and across distribution. X-milligram we of chain And universe. active the product about and QX, conversations come that portfolio with continuing in really the to expansion

then thoughts we helpful. level so Obviously, the That's the been this of brands been Patents for right. brand announcements Point yet. has affiliated Wall my -- your turning for Street partnership. Journal. can brand, comment have kind Alp brand haven't you filed. for of And Carlson kind if this reported follow-up, high on new e.l.f. Tucker just All an just from wondering official by just seen But

certainly Just kind to be you be able of would for us. may helpful very color provide any

the not I but some well. Graham. updates we have we're to Look, about going will future. it's point this in Eric, talk time, in hope at you're near Alp doing today,

next question from of Benchmark. your Legg of Michael comes And the line

you do free at going sales the versus the and X forward think milligram what the come milligram X road? with look from the will XX larger of you percent the of down When sales new the introduction milligram, your

Mike, X-milligram so the by majority category. up is and the of XX% the as volume nearly products, you in the of know, category taken X-

the XX fact we've so very as as And and encouraging have for that X, been us. been XX has with been we successful

about differentiation, continue feel product talk including We our flavor. hear mouth to consumers and

on into get that encouraging. site, getting have X-milligram also into feedback. have incremental that so of category we're And continuing that the example, quite early for business, very early Reorders consumer the to is, from the about comments the X majority DXC get and as we And really have encouraging, and we and great that X we've milligram for to encouraged category. been been heard sales where quite we're our consumers our

it on then accounts can then the the what Or demand to look it the the you may doors? for And enough to product product? be supply is limiting obviously follow-up take the and When talk within chain getting free a growing space, your get you at into Is about retail Okay. having new factor? just that.

what is past, that in chains of one the in are get We think manufacturing because the of results process it our Mike, in past talked point the environment we're is look, manufacturing alike think given looks event may feel transactional to election, cycle And about like. this and -- it's I somewhat tariff of of interest in no their times of takes at that great chains terms about of on a other the be we've getting options now there. time. looking areas and into planograms the the at exploring right U.S. depending this potential capacity I

unit? distribution, in And for does question. When sell-through the the channel convenience per channel channel Okay. unit opportunity look similar? than are traditional versus you at we last store? a the alt just all one traditional Or larger opportunities revenue How your then alt do an they view offer

in Categorically, channel, said, cases question. for channel. larger for the great us channels the we that convenience we're alt runway converging the a think is And given that. space large, as believe than the significant some That's bit. not about quite the That store being TAM a given as under-indexed the profit growth, alternative for is in quite X we are the if

So in are making channels we a of playing are way definitely together those opportunity we're mindful tackling sure how that our that manner. comes every profitable and

continued on to Look more. success. forward the Congrats

is question of Anderson next the MKM. Your from of Nick line ROTH

Congrats on quarter here. the

The first question free the for just and side. strategy pricing on me, the

share and You've taken enter pricing competitively. you've you Are Just capture a kind stores as blueprint following new share strategy your as product you're of the similar free? there. within of that Stoker's you sense to for priced looking how

sure. Yes, the Thanks Nick. question, for

at premium the pricing that competitors reflect the in is compete it brand, a strategy free major believe we our other will the premium pricing that. about think we marketplace, with can a level As brand and

that appreciate That's growth. I for seeing of in expectation row And one and for me, how Zig-Zag that space segment much going color. where Curious white of cigar just there second a second forward? additional kind is the kind the just the Okay. what and quarter then solid cigar you're you've on seen opportunity.

with is about Nick, Zig-Zag couple Graham, a this extreme that Obviously, that correlation that of with there think is opportunity runway in billion a cigar process. to a us foundational of leverage we incredible category the early is we've have opportunity, lot portfolio. dollars welcome. we're we this But a really things in The channel of space. manufacturer company. brand of think for There's the We consumers the of the couple an rest for got that going in revenue. in Zig-Zag innings massive against

environment. smaller runway a And of our us we've vis-a-vis years that of give also that regulatory ago we got through products one number purchased acquisitions the

substantial wonderful innings, run opportunity could company. long that So us. for the we be Again, over for opportunity it's think that early fairly a of size but the the

there. to to due session we need And Purdy to Q&A the I for to of remarks. constraints would closing do over back like time, Graham conclude our hand

and to I excited QX, Thanks, a coming out the everybody the of today. we joining results talking about forward in operator. call few We're you look appreciate months. to