Vector (VGR) 14 Feb 242023 Q4 Earnings call transcript

Good day, everyone, and welcome to Vector Group Ltd.'s Fourth 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 An archived version of the webcast will be available on the Investor Relations section of the company's website located at www.vectorgroupltd.com.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 GAAP. to income, income income, company's are which been operating tobacco EBITDA earnings adjusted section has operating Relations adjusted contained posted to adjusted company's adjusted net and release of Reconciliations the Investor webcast. the in the

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

Group, like call turn the would and over I Chief to Lorber. of Howard President Now Vector to Executive Officer

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

our to Turning balance sheet.

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

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

of December $XXX.X the XX, for million results consolidated for X the XXXX XXXX, quarter XXXX million corresponding in was revenue Vector's to period. $XXX.X Group's ended months compared fourth Vector to Turning the

period. increased million to increased EBITDA diluted $X.XX per XXXX per $X.XX increased $XX share net million $XX.X per or $XX.X $XX.X share or share million Net million, or per from period. from from $X.XX to period. million or in common diluted Adjusted XXXX the in to the share, up $XX Adjusted the common diluted XXXX $X.XX up diluted income income up million $XX.X in

Vector million were billion diluted operations for per period. the up XX, year diluted million, $X.XX from in or Net compared results to XXXX the to $X.XX share, Adjusted share the XXXX XXXX. million common turning from $XXX.X income year the increased December diluted billion revenue income diluted or common Adjusted up from the to XXXX Vector's in Group's up corresponding XXXX $XXX.X million for share, million per $X.XX Now $X.XX per period. ended period. to in increased or or $XXX.X $X.XX $XXX.X in period. per to for $XXX.X million net EBITDA increased $XXX.X the share $X.XX consolidated

discuss Nick our over to now I to businesses. it Nick? will turn tobacco

X.X%, the and XXXX market years. performances milestone retail XXXX, we anniversary good one points Thank in part highest market XXXth the celebrated In founding, and XX morning. of marked than to the that basis been our delivering grew more best you, operational of Liggett's the history. share XX annual Howard, an company's in in it's important by

We period. also of $XXX.X delivered record million, from up adjusted the prior X.X% EBITDA year

our period, increased remained continued operating million category. value Liggett's with the stable success prior in at retail X.X% reflecting investment quarter year provide of the and commitment became in the income strategy while or excellent compared consumers brand. reported remain discount Montego in to X.X%, share as addition, market quarter, United of $X.X the to country's benefits the our reinforces performance largest the third fourth this in by Montego's ongoing brand Montego. In the and largest States fourth the targeted

income environment growth our peers are amid earnings are we the believe We year-over-year challenging and pleased our a outperforming industry. with for

XXXX distribution the Montego's retail to quarter X.X% XXXX, in in fourth up expanded share to the Montego's the market period. strategic from margins. increases improved XX,XXX of in the national category increased up XX,XXX positioning quarter stores, noteworthy Montego's of fourth discount top prior X.X% also approximately brand's our price considering of stores particularly year and is the the period. gross from In at the prior profit year

Despite these range XX% remained gap increases, the industry's at XX% between in Montego brands to the and premium stable discount the a retail. price has leading of

volume, share with with our optimizing our value-based long-term in by brand pricing strategy effectively Montego consistent market remains of managing Our profit objective portfolio. and

XX process to has an leads investment successful been requires introducing through profits, and them market past and Liggett adjustments. the years, constant Over a that long-term managing that cycle at multiple analysis brands

Looking increase the year stable gradually investment. expect Montego we we our ahead, to market return remain retail as to the our on share

While the income outperform segment our XX's continues remains has long-term and cigarette Montego market. expanded success reach discount strong, our From the earnings Pyramid Eagle market deliver growth, to substantial and for overall continue to from which perspective, significant a broader we with industry deep foundation U.S. and benefits presence.

a as been brand suggests have As not historically. Wall analyst recently loyal they [indiscernible] as Street observed, leading down-trading are tobacco increased tobacco price-conscious

like Additionally, the quality that brands. select on product they affordable as more is consumers par with expensive options, Montego, particularly brands more recognize

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

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

X.X% shipments data According in shipments industry to Science by retail to X.X%. quarter fourth from Associates, XXXX, Management same the while period retail Liggett's declined declined compared by

the wholesale X.X%. nature declined of offsets shipments shipments patterns. Liggett's addition, short-term period purchasing wholesale while compared declined wholesaler third by reinforces the by In This quarter same quarter fourth industry X.X% and performance XXXX, in inconsistent Liggett's wholesale to shipment

have will the I for we now industry more retail Vector indicator shipments tobacco and in to financials we past, reliable significantly believe As volume Liggett Tobacco. are turn the performance. noted that of Group a consolidated

For X in of revenues the slightly XXXX. declined from ended the million to XX, decrease the decline million X.X% months $XXX.X a partially in shipments pricing. during This period, referenced was attributable was which by fourth offset in to $XXX.X quarter wholesaler XXXX, December previously X.X% increase the

by in the months increased For X comparison XX, revenues million to wholesale at the X.X% in income $X.XX the This prior year shipment in offset were X.X% volumes. X.X% December to December decrease increase $XX million for reflects XX, XXXX flat corresponding ended XXXX in period. was ended billion. operating to pricing, a Liggett's which $XX.X year a XXXX, the compared

operating the declined related $XXX.X the Liggett's XXXX. million to charge second XXXX, The XX, to December ended year million in million XXXX results include quarter $XXX $XX the in income compared a For onetime dispute million to long-standing in prior XXXX $XX.X settlement settlement to the for year over million adjusted Tobacco compared of a period. Mississippi EBITDA quarter increased $XX.X agreement. with our corresponding X.X% the fourth

ended $XX EBITDA X.X% million to period. year year December $XXX.X XXXX, compared to adjusted Liggett's X.X% million income $XXX.X quarter XXXX. to compared $XX.X million increased increased the For to in million tobacco the operating fourth in adjusted prior XX,

sequentially. quarter gross revenues, XX.X% XXX points quarter of basis an and points basis margin of approximately increase of the representing XXXX compared XXX comprised fourth fourth Our to

Human unified ruling regulatory we near final a Health On from the in published front, the the term. the for Services agenda, anticipate and latest FDA menthol

such is that while As we prohibition the firm as we evidence, previously reasonable our inevitably supported position illicit consequences on discussed, have in always of based answer, regulation it right unregulated we not remain have as scientific unintended growth sound drives markets. the

any industry. final ruling vigorously expect includes a menthol ban be We will by that challenged the on

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

only the discount in nation's to growth segment a build we As the brand, Liggett #X the platform with market, great have on. is

market been never market in to have proposition the the value relevant. mission Our and for plans our best carefully provide U.S. developed more been has XXXX

foundation in proven long-term discount expertise growth. and leadership segment are momentum we to us the our an competitive continue positions operating environment, on increasingly for well our and build While in earnings our

to your attention, you, back Thanks Howard. and for

summary, our as well and quarterly our of year as long-standing paying results practice quarter Nick. fourth XXXX Thank a In full with you, pleased are cash we dividend.

We expect that will this continue. dividend policy

questions. call Now for open the please operator,

We our [Operator . Barclays. first Hale will Instructions] from with Holden question take

kind focus Nick, to as I think market you said that of you expected forward remain going on profits. share flat you

this the is about implication question I for Is volumes margin. but forward? negative you're guess thinking that So potentially year, how the higher have go I is the

volume, the and previous on our a Yes. cycle, to that I kind looking the go we've get ultimately through growth growing a slowly certainly, investment Hale, past, and as of of cycles base return and return with with mean a we brands, done in business business. prudently that building

through tremendous that business. of we've a growth we're obviously, we on business that With prudently And realize return at so phase. base built good now starting a very stage to and a of gone Montego,

share the brand, has share, which how has But for market the still market continued so taken foreseeable increases, the the share, overall, been news, market good investment. on Montego stabilized, our price Montego, The we've stable here, though even yes, certainly, future gaining is those encouraging. return very

in had you Great. but I'll the in if wondering see And if it XXXX us bonds Bryant, repurchased XX-K, the quarter? of you sure the I'm any was then I tell could

And were upgrade our pleased we bonds. also by on recent

due right In on balance about those. addition of senior we million notes $XXX The of $XX.X to our that, now is XX.X% book XXXX. did repurchase million outstanding

from comes question next our Zaffino And with Oppenheimer. Ian

on the I in Montego just comments. key want to

question, of it's at could it performance, did of And it point but I for move this profitability as you these type can is think EBITDA do call what extrapolate to a some maybe or potential guess, historical of to I of brands what difficult you've know it then mode, as where moved Montego you, of kind maybe you then to kind maybe And could we we other would brand ball a question, far And how do. profit? maybe from As share harvesting? the to kind what more generate? look maybe market us -- brand that but -- if crystal those triangulate harvest

of and a we'll those we be a that pattern earnings have significant able all built of base invested That's there, and in done we've and brand. job the Montego in the to specifics our built Liggett to in volume that yes, with the as you brands, the repeat back way released first said, Yes, go to Select Every XX’'s, base earnings. Prix XXXX, in all the we've But Eagle business that XXXX, future leases, back brand of XXXX. would into I Pyramid Certainly previous our Grand to XXXX, been time Ian. confidence good brand raising significantly of going base years. every go future very not that

sell And Okay. going file ban be the then of it? as or Is out? expect far you'll where stay and And pull then Is us this this sort as what to shelves. might actually play investors analysts? you're something of you menthol, we a able it on give can How this does of a off maybe you're and going sense that should as work? everything how something to to

Yes. Lorber. It's Howard

past. happens. I the realistically, to quickly. in what ban think it, may try we've we'll been it's happen going seriously stay. doubt there'll And see through then They this and be I very a type to problems of then And

because groups going there ] incremental You certain fight honestly, groups. [ quite to prevail, really and sort what's be to real Kool don't be guess happen. it banned. if ahead is won't it a know those I really think adverse it's But [ ] my when that going of are do they And are that only to ban that exactly

that plus -- -- point, labels at Ian, that you that perfect it's is I Yes. there, that an and litigated the back . But example, government industry in add years that back result the later a these in would other being XX and still XX of a And appealing. would being issues, a issue was good are I XXXX. look was to raised we kind of and Howard. is litigated. if warning process was here got in years positive And making. the the and Recently,

X/X menthol, Nick, addition in of to XX% industry is industry around around that, would menthol. And add our to XX% where we the of I that It's we're menthol, volume. under-indexed the

Correct.

question Your comes Martinson Jefferies. next with Karru from

just the buying balance sheet for stack up in outlook we are then of refi terms those Hale's you're also the following on what's today on questions. the back? cap Just of Where XX.X% and kind that here

Sure.

in bonds XXXX. X.XX% So as to as $XXX stack, secured have due far million cap we of senior

markets, XX.X% do to right of senior communicating is with another as next As there the due mentioned $XXX And notes retire. the future there those those what I no capital We'll XXXX. be of penalty due over is on now to is are -- November premium calls. earlier, about And in . million in Those everyone on be evaluating conference it's year. to more XXXX.

if that add now, we'd probably at XX.X%. also would had we the do I to be same back it

worst case rates And were rates, we have the -- rate able lower, Over are. less last are bonds be going the that we to would and to better with do much to sort going the lower is we're the years, we we're hoping to really much I than think is But lower bonds. few much those on stay where going interest of case lower the be XX.X%.

total going ratio a on to total investments net -- a the company. about and a total very basis credit -- basis, we on with on leverage net now if about our believe we're a down on X.X% you X.XX% at We a cash a subtract Right. basis, attractive are holding

this we very So Liggett. view attractive earnings growth the of longer given as

you their in their pricing Okay. look in of when challenging And offerings then or response it a your seeing at be some discount from peers, potentially competitive environment, the are we premium offerings? even

between We're the kind I business. Montego XX% my whereas in discount would their premium certainly of the is the starting I play to in off range anywhere marketplace of discount prices. XX%, earlier as premium XX% those the prices XX% and various Yes. that But of to argue of premium -- mentioned about off to discounts there out obviously, remarks, base of lines seeing in

So seeing deep the on. with impacting response challenging certainly discount where the we're a certainly to respect environment, focused but segment not

Or All rate anything SG&A nature? of run bit. there kind we just kind right. consider that the up of going And just little onetime lastly, in Was ticked that a forward? should

to due was of corporate timing That the primarily Karru. expenses,

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