Vector (VGR) 2 Nov 232023 Q3 Earnings call transcript

Welcome to the Vector Group Ltd.'s Third Quarter 2023 Earnings Conference Call. This call is being recorded and simultaneously webcast. An archived version of the webcast will be available on the Investor Relations section of the company's website located at www.vectorgroupltd.com.

During this call, the terms adjusted operating income, adjusted net income, adjusted EBITDA and tobacco adjusted operating income will be used. These terms are non-GAAP financial measures and should be considered in addition to, but not as a substitute for other measures of financial performance prepared in accordance with the GAAP. to income, income income, company's are which been operating tobacco EBITDA earnings adjusted section has operating Relations adjusted contained posted and adjusted company's adjusted net and release, of Reconciliation the Investor website. the in the

forth begins, facts call to like that risks subject are The forward-looking would harbor call that and read this to made differ statements uncertainties more during implied or that I Securities set conference cause filings. from safe are could statement. the Before risks a detail statements in Commission not company's in historical are to forward-looking described materially These results the statements. and by Exchange those actual are in

Howard to over sir. the call ahead, like Chief to I'd Executive turn Please Vector Lorber. go and Now Group, President Officer of

with thank Bryant us Richard Financial today our me performance I I'll final Group's balance and ask then morning, for to Call. financial open the call Vector's consolidated Earnings I Vector Liggett tobacco Officer; you our are Officer; XXXX third Operating Nick Good sheet President joining Brands. Operating Vector Kirkland, Conference for Chief for and Quarter with Third XXXX. Nick Chief update Anson, our the begin Officer With review of and results will quarter questions. for summarize and will of on close business. of an Chief Then Lampen, our the and comments

sheet. discussing balance Vector's by begin consolidated will We

balance Our strong. sheet remains

liquidity approximately cash million, $XXX $XXX million Liggett. of of XXXX, As maintained cash and including September XX, of equivalents we with and cash significant at

value a of and securities investment We also held with investments fair approximately million. $XXX long-term

million, Net $XXX.X $XX.X ended XXXX increased share, in or increased for per XXXX. million million period. to million common the XXXX $X.XX XXXX in results income consolidated up the revenues XXXX $X.XX compared period. diluted in in Adjusted XXXX $XXX XX, net or $XX.X from or Group's September share period. million million to were million to third diluted period. the diluted corresponding up share Vector's common quarter the from Vector $XX the per per X diluted up Adjusted income the $XX.X for from per $XX.X to share months $X.XX of EBITDA $XX.X to $X.XX million or increased Turning

or $XXX.X share period. million period. tobacco it common Turning common billion the September Net from operations over to X results to to $XXX.X per XXXX. Vector our Group's share from income $XXX.X billion up in diluted per share, the XX, to $XXX.X Nick? Adjusted up for $XXX.X share, million $X.XX $X.XX in $XXX.X from or period. months consolidated or XXXX per September to now in XXXX corresponding XXXX, up million, Nick ended revenues the Vector's diluted operations. in period. the million to from net million X XXXX XXXX the increased per income million were increased $X.XX $X.XX EBITDA increased for discuss diluted months compared ended Adjusted The or XX, diluted to I'll $X.XX the $X.XX turn

third year and income manufacturers, increased compared Liggett challenging million $X.X approximately retail deliver again has very with by to environment industry, Howard, progress. the morning. X.X% are good the pleased Liggett's other the results income In a you, for operating in Thank outperformed continued to our or while once become we what prior quarter. impressive shipments period. some

by country the that discount in brand excited the now proliferated in the a is I'm addition, to across U.S. quarter brand on shipments continues third based In and to Montego market gain consumers brand with products. largest The report acceptance our retail retailers is competing that the

Liggett tobacco has behind disrupted when benefit to U.S. by brand beyond of now cigarette Montego reflects the the the the in consumers in of and from period of XX,XXX country largest XX,XXX history and fourth XXXXs back prior targeted leadership our second the to long quarter market. success U.S. is the stores only value. the in nation, third in in the the we provide a brand the Camel. XXXX, of distribution and XXXX. early industry commitment the being expanded of dating ongoing #X investment with the to the introducing Importantly, in discount In first cigarettes Marlboro, discount in brand segment Montego Newport stores to XX,XXX Montego's approximately the The quarter year excellent up discount

XXXX, in to the and of up national third in prior from X.X% increased the the market Montego's year in quarter. share X.X% quarter prior period retail also X.X% from

profit at price is taken Montego's The discount remained stable has of brands Montego market the premium and with strategy managing Montego of impressive substantial growth, income Pyramid volume, objective XX% in industry's between pricing while prudently discount growth increases value-based leading by optimizing particularly has have long-term our our consistent in effectively brand's the is top presence. XX% we gap brand improved also share range we market Our portfolio. profit deliver and Eagle Montego foundation investment gross margin. the from since and XX's And with the for significant and category of to at to which in price our earnings benefits retail. our the and reap long-term expanded continue

strong the continues pressures be discount economic segment perspective, consumers can attributed income. to outperform performance in market. and this and the believe U.S. broader strong remains on cigarette disposable From deep ongoing the cigarette industry declines We to overall

XX.X%, the volumes discount During the XXXX, Management period increased same compared data, on quarter Science deep to third last of industry based X.X% declined year. Associates' retail while the category

continues. the year with September This a advantage and market, Liggett segment the we the attractive discount up migration discount provide same XXXX. meaningful brand consumers, months as option XX.X% broad for are segment XX.X% continues national our ended quarter period price confident the a value-based comprised deep present XX, competitive of the an second distribution overall the X to ago result, in XXXX, for XX.X% As in to and from of deep a and portfolio that

retail third to XXXX, quarter by outperformed declined the shipments industry As data Science declining according earlier, while retail in Liggett's compared industry shipment I Management mentioned period same X.X%. X.X% Associates, the to by from

Liggett's a basis a retail As third on the to up quarter period result, year-over-year in X.X% prior quarter. X.X%, in from grew the X.X% share XXXX market year and prior

While Liggett's wholesale shipment third wholesale the quarter retail market, industry the X.X%. overall XX.X% our compared declines declined shipments to of outperformed by shipment has

noted in past, indicator significantly have believe firmly shipments are performance. that reliable we we As industry volume more retail a the of

market inventories increasing manufacturers' largest list advance the second we indicator order It key consumer quarter. amounts is list as purchasing enacted. inventory share by note before coincided opportunities trends purchasing large often space price typically increase shipments. on provide in retailers the price based their short-term consumers quarter, wholesaler important benefits most off cigarette The calculations of better saw result to In of this physical have evident do and was increase. also basis, is such, inventory purchases. brands enacted are the substantial list these prices and a purchased of that U.S. the of or a wholesale and wholesalers manufacturers end own Retailers not These inconsistent third profit the as-needed to that of to a tend to pattern, replace capitalize on drive buying required particularly shipments with increases third an considering again the wholesaler inevitably associated for to retail of liquidity by distorts price the

manufacturers a quarter, reflect third deloading temporary the quarter. Liggett implemented brand the quarter took that our the wholesale in third numbers wholesalers those third at Given major a end our earlier portfolio pricing by price to increase of of relative

and reflected and the the that retail shipment inevitably industry shipments are Liggett's a and wholesale XX-month trends both Over and basis. the longer that term, wholesale is on year-to-date fact retail trailing in convert outperforming

financials With the now that Liggett and I to Tobacco. Vector tobacco will turn Group for in mind, consolidated

X September the in months shipment from XXXX, was to in XX, XXXX. revenues This ended declined $XXX.X $XXX the offset decline the pricing. quarter attributable million partially by decline X.X% in increase an volumes, X% to of third million wholesaler For

months pricing, X volumes. by X% XX, For the decrease up from in shipment reflects September wholesale in XXXX. revenues This billion, XXXX, $X.XXX offset increased corresponding a a period in increase the ended to X.X% X.X%

for XX, compared X.X% million increased XXXX, to $XX.X $XX.X operating and period. X income to million September the XXXX months ended in Liggett's the corresponding

million XX, decline of period was operating declined Liggett's months charge million XXXX, to by $XXX.X income income the $XX the million XXXX a bond over million For X.X% ended period. in pursue for connection the related the to long-standing in had agreement an compared an in the result posted with XXXX, September previously $XXX.X X-month the in XXXX a to operating second the to or settlement, $X.X Mississippi X million onetime corresponding The a our state settle company recovered $XX of which appeal. September dispute agreement. In settlement quarter this to it with

third the to in for X.X% EBITDA adjusted million quarter to compared prior period. the year Tobacco corresponding $XX.X $XX.X increased million

prior ended For operating X.X% the adjusted and period, $XXX X $XX.X $XX.X the $XXX.X third operating income also EBITDA year X.X% to increased Liggett's compared our for the adjusted year in to corresponding tobacco prior XX, million million million September to to quarter months million grew. margins period. compared increased

XX increase income increase and sequentially. approximately of third Our an the compared revenues, XX% to basis third points adjusted was of an represents operating XXX quarter quarter points which of XXXX approximately basis of

within menthol next On expect months. we the final on few ruling the regulatory front, a

we the on drives a is position ruling We it includes always vigorously right As inevitably scientific of challenged that have firm discussed, be such we we that growth answer by in have illicit sound will evidence, remain supported reasonable as not the the any unregulated our on market. based while previously ban menthol consequences industry. anticipate regulation final unintended as prohibition

in and of profit segment. strategy strong, builds earnings for operational growth. and retail validate share strategy our the and on importantly, growth our and tobacco summary, discount our competitive In performance long-term the gains business advantages our foundation market our Most financial remains long-term

industry, back to you, attention. infrastructure, to we maintain our confident momentum. Howard. always that and subject we position And for and well team us While management are your strategy, general market regulatory our Thanks are to risk,

Nick. you, Thank

pleased well expectation are long-standing with results paying is our our that We a dividend as practice dividend. as cash It of will policy quarterly continue. this our

for questions. please operator, call open Now the

Instructions] Jefferies. a Martinson, from Karru We do question have [Operator

take forward? about is the the by So much increase additional to with cash I the How in door should of more the price run think this we mode, room growth, ability brand? surprised as Kind distribution was the there Montego to in go the quarter. we for mean, harvest how

want you to do Nick, handle that?

Yes, the the pricing to we're profit with still as as Karru, with very No testament brand, Karru. we're and question, level. force and we've price And Montego analyzing there. increases, brand, the constantly the absolutely. is with retail -- taken execution associated growing yes, pleased our the marketplace we're margins Appreciate sales obviously all that of and the and the fantastic we're increased at distribution gaining which a prudently

We looking are and at marketplace constantly the opportunities. analyzing various there

well. necessarily very I well we're store, the you at it's we've doing the at. It's it is times But situated. well. that brand The price in very in that taken It's would even the can price and stores increase positioned when cheapest remind not competitive remain

So future positioned continued for we're marketplace in where feeling and the it's brand, in very about good growth. the the moment

Okay. their pack I discount the And doing forgoing what down or out consumption? perhaps on continues But X asked on behavior? market X we that are with behavior. mean always grow you there Is to of consumer they consumer seeing that? that the the XX.X%. smoker get Are instead recognize cutting

there's look, -- there's remains pressure. that significant average under mean I doubt consumer no the Yes.

-- that value As disposable current and best reducing reacting I provide marketplace my incomes have overall that argue that and proposition prices there's the they're been are Inflation to under obviously, remarks, Look, smokers the I been down by our anticipating consumption. based doubt continue, overall no argue But easing, and impacted pressure. the mission I trading U.S. high. in but would trends to has down-trading on mentioned that never statement is in with remain would those relevant. more the and

it yesterday? of to par capital I terms believe bonds your what the in lastly, was call. down stepped structure, Just the

It yesterday. was

that? are looking you How at

Bryant. it's Karru, Good,

call not did any We You're par down during repurchases correct. We for did yesterday. the step to the make quarter.

us repurchases. early However, $XXX.X million to another we'll be and we bought those of judicious XX.X% October, of in leaves of back $X.XX about those That continue notes notes. the million with senior outstanding,

of Thank participation, Ladies conference today. are questions joining on us today's we On at all Group's Liggett, for thank you behalf your concludes and and call. Group quarterly us those Vector we for gentlemen, and the you. earnings this have of Thank that you call. all for Vector

Thank you.

Thank you.