TPB - Earnings call transcript Q1 2024 | Turning Point Brands, Inc.

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Operator

Good morning, and welcome to Turning Point Brands First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Graham Purdy, Chief Executive Officer. Thank you. Please go ahead.

Graham Purdy

you. Thank everyone. morning, Good Purdy, Officer. Graham Chief is Executive This

understand Joining Flynn; him. Frein. and Turning immediately Point after Andrew. I company quarter join CFO, take Andrew Brands' new it Please to Chief welcome so to the a me he until wish didn't the are want special that concluded, Revenue please March Officer, Summer on easy

Andrew Flynn

morning. Thank to today. great Good you It's you, Graham. with be

company thank to Cannabis thrilled the entire lend the my for given I'm the and Connected want organization to opportunity. experiences join I and Labs. both support my First, at Juul

while I've management our the Second, my in strength brands. early journey been impressed of the and here, by team

we and opportunities ahead highly to quarters the in I ahead. early to our getting have few I capitalize to foundation on build up the help that look My more a build to am forward I've Over sharing strong past excited on, been value. stakeholder engaged speed. to are weeks, conclusions in

let's that, IR section release release www.turningpointbrands.com. the This in dive issued results. located our is we With website our quarter. QX covering at of a This news into the morning,

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

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

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

our to call I will turn the CEO, Graham now Purdy. over

Graham Purdy

and that for said, you our Thanks, Andrew. joining thank all morning, call. good everyone, With

EBITDA expectations cases, XX.X% and to million Adjusted were the quarter first than progress for continued $XX.X our against our demonstrated in results Our plan. quarter. in and increased with, some line better

and well double-digit Zig-Zag alternative During in our performed the XX.X% papers strong by very Zig-Zag growth $XX.X million, with driven up quarter, channel revenue March to business.

discussed last and the mentioned anticipate the and growth backdrop we're just QX. associated the we last XXXX, in that year, we quarter, think for past noise we we in favorable demonstrated we with As rationalizations inventory trade is

encouraged are some recent introductions. new expanding our to customers our by and We our and retail of response product portfolio customers wholesale

remain alternative strategy out our portfolio are our We evolving efficiently from the and end committed better our are addressable consumers. growing factors to channel satisfy Both filling demand customers' to market. and expanding

customers alternative and are We but untapped we customers not Zig-Zag distributor a portfolio. buy brick-and-mortar old complete alternative winning having success the are network, only new more existing seeing across also

average shelf we've a seen the and satisfy increases in brand to As build with Zig-Zag space healthy providing space more in preferences. consumer result, alternative as within estate valuable these evolving stores real order while brand awareness merchandising sizes we across the

we're of evolving far of partners many service our for Considering the meet of truly beyond Zig-Zag, that needs one than few can fewer are above that competitors that provide the SKUs the customer. is finding ordinary alt channel and offer end that we looking fulfillment, companies the and actively

product apparel, to of nicotine Oral and brand from accessories stores offerings a cones, from papers, there distributors in suite like In full that and and cigars growing Modern a to addition appetite to our wraps, our growing cater channel. well-known sell is Zig-Zag this

to experience shopping recreational virtue know, consistently attempts greenlighting of provide the better a for additional by expanding and channel as cannabis as is consumers. well you As states alternative medical

drafting like dispensaries more processing trend. In and shops retail other are this addition off head to facilities, manufacturing and legal outlets

quarter. in alternative XX% saw continued Our business BXB over accelerating the the XXXX, growth from QX, we throughout growing momentum saw in

Stoker's. Moving to

likely of X.X% X% Please to quarter increase increase out XXXX, leaf recall that the in reflecting in million, During Stoker's decline a $XX.X loose a for revenue. the MST. X.X% fourth total XX.X% quarter, in and unsustainable we increased Stoker's called revenue a

continue engine Stoker's, runway for steady a which be to continues for share long be pleased growth a increases dynamics. market favorable with pricing We to volume the with growth and

the response pouch with product. beginning our of Oral, pleased market's Modern so-called to white FRE, national are our We of launch the enthusiastic

we As you this growing are in early we FRE. can in limit the appreciate, operating of category, presence metrics around given our that innings will specific

worth However, segment, to and billion revenue the over we the a grew annual buoyed wholesale revenue in are that's are MSAi. excited and opportunity by in over FRE contributor XX% seeing positive a momentum, growth year Stoker's to about and we profit category make material already last for $X

distribution to prudently up time. sales over ramping growth steady We our efforts are on achieve focusing and currently

distribution are over sales MST achieved time. FRE's similar our to count store and We profile we've and with Stoker's expand leveraging expertise profitably to what

addition to tobacco products. I to mentioned even are nicotine many the in quarters world-class demand FRE TPB we that brings seeing for Oral platform. our channel product updates volume may to service dynamic the intuitive distribution speaks traditional with traditional bear it stores to also and look be alt We Modern if these years In channel, our our because to don't forward for come. of this sales, product, sell not but the you, new exciting synergies of and providing some on this

contribution to projected which note, this XXXX we in on capital flexibility first A hand on providing solid convert the approximately that and gives Given CDS, closed for $XXX,XXX in $XXX cash last to contemplated range year generation while EBITDA flow our free our XXXX. of about million and ample EBITDA deployment. reaffirming million ABL Of reminder guidance of $X summer, million. facility, the no our full with maturity cash year, our liquidity generated address us range which guidance adjusted year, to from adjusted we start EBITDA quarter $XX our are the during for

to of and our that, With hand let the over some progress some to go-to-market Summer me call results of specific initiatives. walk through

Summer Frein

Graham. a against lifestyle Zig-Zag's our as by map. Throughout continued brand we to Thank you, road further QX, position executing multiyear

tenet increasing remains brand while core alternative and the channel ubiquity on growing the a focus Our plan. that Zig-Zag's portfolio of

the distribution papers a our by for MSOs fuel points cannabis from organized posted BXB, Graham and quarter, and be our to as As the head secular barometer shops and penetrating underlying quarter our on industry dispensaries, and smoke growth trend. record shops on for commitment BXB and a this Zig-Zag continues a importantly, of to focus alternative Within alternative in strong the channel. manufacturers first noted, strong capitalize

partnered Zig-Zag's design. Beginning lifestyle our brand which that quarter. throughout flower To as Valentine's the further celebrities with custom rose opportunities integrated base, into growth Day, consumer bouquets, XX-plus a resonates brand cones numerous Zig-Zag's by the ever-evolving hand bouquet engaging created delivering with Zig-Zag with

we with meaningful opportunities a to provide as and brand are continue cones rose addition this. popular the into to Our be leaning such portfolio, the which

The partners its the most hip-hop Across Rolling was and anniversary world's in with lovers Zig-Zag for XX custom came rap coming thousands X-day which celebrated and partnership during event. together celebrity Loud festival's the notable by to the developing days, however, XXX X event Zig-Zag worked and over festival, working year. of promote the this culture. merchandise Loud, with XX-year nearly quarter, thousands Rolling music embrace together the music with largest influencers to

momentum and future. to that history XX/XX support all Sample had forward purchase updates shop brand. digital to a screens look We custom pop-up signage that Among Zig-Zag's growth. the efforts and as venue, Zig-Zag's and with and learned provide interact the that continuing well, attendees products in invited highlight Zig-Zag about the to more across

Stoker's. to Turning

a QX. pleased off We results, coming with are the strong of especially

on and distribution see consumers, We given resonate continuing to are macroeconomic backdrop. the continue the for focused expand with to the particularly brand evolving brand

brick-and-mortar consumers building with brand for the BXC other our focused We keenly that and will stores term. both sales and and resonate across in marketplaces, on FRE, both For our a parties marketing website. made digital progress organizations quarter are long own the

our for us been extended be of an the In we brick-and-mortar business time, to to know traditional well, to e-commerce which closer addition end we enabling channel, the period consumer. have building

BXC and nicotine to metrics selling see with and to returning our The pouch and continue impressive are from and differentiated quality, engagement our increases offerings trade product month-over-month a partners continues site. receptivity size reinforce We moisture proposition. content, that consumers consumer our revenue powerful on

the we've our long and In consumers. with continue our for executing and in the established growing business against our plan summary, building retail we term, brands

We capabilities. strengthening extensive of will maximizing focus our our world-class continue distribution value on the to brands and

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

Andrew Flynn

quarterly Thank were sales Summer. X.X% is which Starting flat million, our $XX.X results. QX on to down you, with basis. consolidated sequential a

Gross up basis Excluding was to was XXX mix. XX%. up product margin to EBITDA to XX.X% $XX.X due CDS, favorable was up Adjusted overall revenue points segment and XX.X% million.

in continued strength Zig-Zag increased million to performance. the and penetration as alt business year-over-year segment channel, our due into Going papers to XX.X% mentioned. $XX.X sales of

to doing important BXB job of the pleased we the strong alternative had given our everywhere the channel. couldn't our channel critical aim be to more As is our this quarter. the This and depth with a team distribution consumer alt is, is and to be breadth noted, expand

low-margin Canadian Gross low-margin Our approximate the product the due $XXX,XXX headwind XXX provided third-party of the driven of during an including discontinuation business was primarily product to quarter. discontinuation line. previously by XX% points line. margins basis mix, product This the to increased mentioned

representing X.X%. quarter with to growth. increased was points the the XX.X%, to store points sales portfolio price $XX.X volume sales Stoker's for despite a runway MSAi. X.X% net volume basis was Its XX in quarter million up industry mix Stoker's X.X% long down for stores share X% during according Net still category which approximately grew to with Stoker's X/X year-over-year volumes, provides of selling X.X%, [ growing ] the increase MST to X.X% increase. year-over-year in in now X.X% X.X% up share with volume basis (sic) and XXX a

down Stoker's of chewing beating leaf to loose volumes declines in a driven year. was TPB with still from in previous larger Overall, the X.X%, volume sales to gaining digits MSAi. XX.X% from according leaf previous X.X%. benefiting the of from Stoker's quarter, Chew down were consumer year. points decline #X as basis by premium XXX trade mid-single was Chew the volume volume Category was down loose the share grew brand category TPB's performance

continue XX.X%, gains. product. of somewhat Gross base offset XX sales FRE mix, more national than the primarily to due to we basis margin MST a declined Our product off distribution low pricing by tripled as points

CDS. to $XXX,XXX. were million. Adjusted Gross Sales EBITDA $XX was approximately XX.X%. was Moving margin

With address cash Now balance comfortable And $XXX million as on generation our remaining today, July just have enable flow to maturity within to free the with historical to due sufficient leverage cash year, notes of the balance range cash and XXXX. our convertible previously sheet. sheet. our million ended on this well quarter We discussed our shareholder of we value. $XXX.X the are liquidity projected with we the of over are

This projections XX%. to XX% include of consolidated $XX million to are we million. of guidance. $XXX rate effective morning, to our of EBITDA tax adjusted On reaffirming Other expectation income

to year supplement million CapEx spend PMTAs which our to expect approximately products, this approximately to review related expect FDA. be to $X our currently Oral under full We remain We by for million Modern the $XX year. the

Now let Graham. over back me turn to it

Graham Purdy

with To national we a feel to signs year growth, at like performance conclude, from start solid to we're Zig-Zag ongoing to returning Stoker's solid our and off FRE. encouraging early of launch the

to I'll questions. that, turn With it over

Operator

[Operator Lauriers Des Capital first will from Eric Instructions] from come Craig-Hallum Our question Group.

Eric Des Lauriers

Congrats results. strong on

First question one, just clarifying me. for a

So clarify, BXB within is highlighted is BXB I the that all the Zig-Zag. there in to XX% of wanted growth channel? you business Or just And some channel? traditional other alternative

Summer Frein

Yes, the channel. that's all alternative

Eric Des Lauriers

very right. That's impressive. All

of Within sticking the Zig-Zag with kind just alternative here. channel,

of into over the made years, dynamics on gaining kind on your kind like the mentioned of the color the you some within getting new alternative talk So competitive space. of of pretty of SKU of competitive up just terms evolving service see how of seems about or you it products this of of against I'm opportunities think to well but channel? doors, terms guys your you've could sort number bit, you competitive terms counts bit or commented and set wondering any levels just you've a or past here? additional those stack shelf SKUs, a or positioned of sort offerings feel progress just great share you dynamics expand obviously in if sort in I increasing overall few in these

Summer Frein

your for Eric, Thanks, question. Sure. Yes.

projections from out benefiting a might it. year-over-year are to you dynamics for comp take a from line I from of Zig-Zag important expectations, set from but year, to think perspective, last just trade in it's we're level some the remember that with if still know you that our perspective

consumer but consumers the the staying what and In introduced can know, in the really continue sure of generate we balancing consumer the in this as and is for continue it's profitability interested introducing really are those number products into they're make portfolio, that year where horizon, the with the against evolving earlier as terms category on news line going. Zig-Zag. of monitor of market, you something we're and we're so to to and have we new ahead to expectations new products that We a some continuing

Operator

The from question next come will Our Michael Benchmark Legg from Company.

Michael Legg

Can year, where the quarter, the little the a bit stocking about how improvement guys. in last is overall? we CLIPPER today? of of the CLIPPER margin the margin Great And margin improvement stocking segment elimination much from Zig-Zag talk versus you impact from the are

Graham Purdy

Yes. -- Mike, the think that convenience in of was from channel. traditional items perspective Look, a challenging store I what high-margin last impact happened majority our it's given QX the around in year-over-year our year

marginal headwind this that have so year, perspective. And from same a obviously, we didn't

with more more just So paper sales sales, year-over-year. versus it's really a year-over-year wrap the on catch-up comp

Michael Legg

Great. Okay.

these levels? at And so do sustainable you think it's

Graham Purdy

for portfolio, pretty where expectation is Zig-Zag our I about. think good the core with margins feel sit we our that

Michael Legg

Okay. channel penetration. that channels the versus is a much that up? are I dispensaries then opening from? in talk want bit alt of growth existing And Great. coming new to Where How is about little alt ones the

Summer Frein

Yes. I coming the the from is quarter that from would both. a of growth bit highlight

customers we benefit as new of the I in driven by quarter really on SKUs shelf. portfolio, stores alternative getting that But certainly, into more entering the their saw portion also well. expanding think the a primary was customer that was

Michael Legg

what And quarter. just just And much has you you I Great. focus -- you're Okay. I data you groups in on Can product? talk then a has that? with do base want focus packs dose low seen may a it think I you your heard container. this from about to the you're when can groups not hearing about I that product consumer a know the know that tripled But more giving on I talk higher for have just what from FRE.

Graham Purdy

Yes.

in of was as out differentiation point earlier think if we've the pointed entering I satisfaction, that that market more our will. you

hear pleased that mouthfeel It's are products starting I well. to from the consumers product they're of think is than differently that as touch analog to what we're the with on the designed market. the

We window with continue terms really are nice in pretty to providing our frepouch.com. We've direct-to-consumer website consumers. from Consumers feedback. feedback our win a on great active get got of us

a relative with note, but generally, of lot provide you'll the we're positive platforms, consumers product. complain, as quick And online positive to as are feedback not quick to feedback, to and seeing

receptive excited we're stores. the about right interestingly, think I in that products our traditional new trade on situation in the we're shelf, very now ramp and is to convenience

Michael Legg

then Vapor should acquisition talk Okay. vape buying Great. I And say? just the is are one segment business. the Brands about saw divesture, Can you magnitude CDS I that the whole is what a bit and last question we of possible with Shark. on little Real where or

Graham Purdy

Yes.

we're I communicated think the plan still we're previously that firmly how business. we've to relative treating under that

note, the management talking I'll the As we we're no about again, core business, spend CDS -- time within business.

the lines think note about cash And that previously own, well on we on extent that asset quarter. pretty we're today. the business flowing comfortable But sustainable matriculate well relative to future us along as those business of and quarter, that from Interestingly FRE future to performed own. So the with actually its we how to focused the to what the stands I on a anticipate business. I would communicated. perspective, think particular I remain runs think in in its the continuing we remains

Michael Legg

guys. Congrats. quarter, Great

Graham Purdy

Thanks, Mike.

Operator

comes question from next from MKM. Our Fortune Scott ROTH

Scott Fortune

Yes.

the of follow-up that million quick on one things, Just it's of business. CDS at $XX stabilized kind side

sense kind the CDS it levels, standpoint. rest just we of your but although of for from get of a kind a look business come as might of here indicated year as kind the kind these dollar here Just out comments the sustainable at that of hearing you've off,

Graham Purdy

Yes.

sequential the There's that, I think QX. a world services. about of a good business we on activity lot feel where has basis, business the that run through in

committed remaining we sits while I underneath to level do the umbrella. so to that sustainability think And this would profitable remain forward. it's TPB underwrite business it move this note as I we that hard of as

So Scott. at that itself, a continues that business our sustain is minimum, expectation to

Scott Fortune

penetration a little around the you're guys penetration the little I there provide just kind little gains that on product follow-up increasing are products alternative where and a that shelf-based selling share getting maybe you And a more continued you more that positive color in color here more and at? channel. into channel metrics providing that? know Summer has then the A there. strength digging mentioned, into really of SKUs if or But are just on market can the channel, that in levels

Graham Purdy

Yes.

think if sequential that, think year-over-year share. I'm So consumer we're occupying don't we our that, growing at I as and broadened to based Zig-Zag have confident is relevant. And created portfolio we as previously appeal that space look channel I more more shelf mentioned, And fact as brand the the of pretty surprise that more product on given to as that we we you feel internal XX%, growing. the say offerings that is to make well as metrics believe growth a like Zig-Zag well more create for

As that channel. in provide anticipate we would penetration we it in way clarity will over there, the innings I think to our time metrics, we're of still relates that early more but

if to the think So right product focus find that that continue keep we service head this new happen stores. to point on to focus stores, more those will our retail in things continue in consumer we find at down, that continue mix is distributors on to end our that space, time, for continue the And plan.

Scott Fortune

just Stoker's for focusing of bit. on then last me, it. kind And a little Got question

smokeless the but things a of here. taking continued of side on oral from You're more more landscape there, going side Just front? the little continuing tobacco the weighing share and pricing of there competitive and can seeing a on the is of towards color with bit you as color more things? growth Are provide movement the focus Modern market kind forward Oral growth nice you on little a seeing competition competitive of kind that

Graham Purdy

Yes. the retail started The nice down the the we We think directly is FRE quarter our were street really speak end gain really with in We've pleased business category are where online a penetration -- for results as we to got landscape. consumer. fire. we the on to I into

XX.X% not It you of that, As the on There basis. sort within category with XX% year-over-year that sequential but category activity sure can out, channel, look I'm of grew a would expect that that you umbrella sustain the is competitive provides. that growth. growth

we're positioned We we still product that mentioned mouthfeel a think well well really the think we for up catering the consumer with that's more We mouthfeel satisfaction. have, the offerings product to perspective. I our -- before. from stacks looking

we're to stores going And the brand. new gaining forward into engaging so and and consumers more continue moving

Operator

We for further call have queue. turn questions back closing would over Purdy to any no like in I remarks. Graham the to

Graham Purdy

Thanks, a for speaking really and operator. joining our Thank few months QX, you, good in our we're We felt on to looking again about everybody, QX you here call. to results. forward

you very thank So much.

Operator

conference today's for participation. your call. you concludes This Thank

disconnect. now may You

Turning Point Brands (TPB) 2 May 242024 Q1 Earnings call transcript