VGR - Earnings call transcript Q2 2018

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Operator

Welcome to Vector Group Limited Second Quarter 2018 Earnings Conference Call.

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. Reconciliations to adjusted operating income, adjusted net income, adjusted EBITDA and tobacco-adjusted operating income are contained in the company’s earnings release, which has been posted to the Investor Relations section of the company’s website located at www.vectorgroupltd.com.

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

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

Howard Lorber

million, standards release that, an accounting company new and in provide industry in update XXXX Group's are Vector earnings morning. Good June and Vector's Vector and quarter discussed financial to morning. include summarize million Brands will Vector Vector answer And update review your Group's performance are Bryant Group's an then $XXX After developments. significant performance of adoption maintained with cash and today provide $XX Elliman million available performance cash includes at of at this joining for you CEO and approximately XX, XXXX. the Kirkland, several will Vector President call. and for us conference Group I Ron and Douglas thank issued Financial company's Liggett's cash $XX for ended that Liggett equivalents press be liquidity we questions. and which Chief company's on the the XXXX will me months the Liggett; With and Liggett. on our of second Bernstein, business three Ron Officer. six of

June approximately investment value interests $XXX as also XX, with of securities had a of partnership investment XXXX. market We million and fair

key Group's Now, let's Vector turn financials. to

recorded to million revenue company million Vector in compared per in diluted XXXX June of adjusted XX, to XXXX $XX.X Adjusted to period. or million million $XX.X $XX.X compared For company share to in EBITDA period. the diluted period. The share recorded the three period. The the or $XX million XXXX the compared $X.XX XXXX, million million XXXX was income per of net was compared Group's operating $XX.X $XX.X in $XXX.X adjusted $X.XX the ended months million income $XXX

ended This of XXXX June revenues approximately revenues June to period $XX.X reported Elliman million of in million. of revenues EBITDA $X.X comparable and period. Group’s $XXX.X compared adjusted million $XXX.X $XXX.X months XX, the the in XXXX, three XXXX compared for adjusted $XXX.X million million period. EBITDA XXXX the For Douglas in the were at XX, Vector to million and

$XX.X compared compared the million share the XX, months the months in of ended company XXXX. million was XX, income in June six XX, six to XXXX million $XXX ended months per million year was million $XXX.X period. in million the $X.XX EBITDA net It's to year or XXXX $XXX.X I compared that's The EBITDA $X.XX period. $XXX.X XXXX recorded the about ago million operating $XXX months June diluted to per think ended for For six ago for adjusted $XX.X for XX, or the June XXXX, Adjusted diluted period was $XXX.X to compared mistake. share June adjusted income -- six XXXX, million adjusted a

XXXX $XXX,XXX. the $XX million reported to in the now Ron? of adjusted the turn EBITDA For period. Ron to Elliman call million revenue ended adjusted will Douglas our This June business. and and loss $XXX XXXX, over I million months approximately discuss EBITDA six an $XXX.X to of in Tobacco XX comparable compared

Ron Bernstein

trend Liggett that half I'm continued Howard. and Good of growth the Thanks, report pleased XXXX. to its during volume share first everyone. second quarter of morning, and

made in a growth. industry, invest years we upon few occurring the based As for previously noted, over to the commitment past changes volume

pleased opportunities achieved litigation, XX with in as that has in cases and growth approximately XXXX. We're very Liggett to see I'll maintained but to although we've cigarette further progeny individual the now commitment we tobacco product thus With non-Engle all to Vector As for respect the subject results has actions, liability continue progressed, and far Engle adverse combined we market. XXXX financials turn always may XX to Tobacco. periodic Liggett resolved verdicts. and still caution, be we the

XXXX. the For in million the was were $XX.X corresponding six ending XX, $XXX.X million six XXXX. June adjusted quarterly and June reverse million $XXX.X in the result and tobacco increased industry compared XX, related periods in three $XXX.X for of timing accruals three the Tobacco adjusted decrease year year-to-date of is to the to corresponding $XXX.X compared operating expense months XXXX, million months will income periods for income and ended operating Liggett the half issues revenues an second The year-over-year million million and to $XX.X $XXX.X for and million the and which XXXX estimate. decline and and MSA in million primarily $XXX.X

and volume for prices continues well despite currently Pyramid positioned and nationwide XX,XXX Eagle now to increased XX’s, Likewise, its we're and distribution stores. to established on largest the third stores. effective the on growing brand growth volume continues Though core largest XX’s, nationwide and expansion. we've grow discount Eagle with strong Pyramid represented Eagle brand continued fifth focused Eagle over performance discount anticipated and two is long-term remains the efforts now provide is supporting selling in to approximately national Our is well brands; brand. continue to declines, declines Pyramid, Liggett and in XX’s brand be pleased still presence. Pyramid, offsetting XX’s brands. sold Pyramid while complement of focus brand; an remains national XXX,XXX the fastest sold the to continue on in and the other brand the our

recent trends, shipments years, and returned and we've range in and industry following X.X% on XXXX. norms segment robust of performance as such to increase industry line Camel Reynolds of remains in seen to in recent standard of two their industry typically shipment premium their Altria Marlboro offset development premium The Newport the years over declines anticipate a industry-wide decline declines Regarding has historical XXXX, above the in brands, discount the little in core has brands and that will The we Special This on discount products, challenging, X% effect premium extensions Blend, past shipment resulted various brands, those the brands. to-date. in is including extensions. discounted economy Red had price these and of a to focus economy price segment

Regarding growth increases smaller brands, focused proven which generally companies, slowed to the cumulative price beneficial of effect discount of has us. many has the

continue competitors smaller geographies However, various to in over search deep time, discount as emerge brands growth targeted opportunities. for

as filtered impact adversely noise and those the vapor decline few cigars continue other been such for non-combustible a in there products, of about past categories low-priced Recently, pipe has tobacco while lot to been products. years. marketplace, Additionally, have and mislabeled the

in we Associates, to-date, little to shipments Liggett's X.X%. to shipments wholesale while the increased According X.X% industry have second no market. basis, by segment of Management overall However, impact year-over-year by over on Science decreased seen quarter the on discount the wholesale combustible a

X.X% increases are I'm shipment reliable This buying that we I will wholesaler shipments shipments significantly outperformed major is that more of wholesale fluctuations, do While retail believe as individual due Liggett's have performance. remind price I and our company pleased quarter you to timing a other each retail of indicator the industry national competitors, We again to second nationally an decline an increased pleased manufacturer Liggett's in during the once things. quarter cigarette the focused And the were overall I'm quarter. increase among to that of X.X%. report major to year-over-year patterns in compared by register only retail shipments shipments

X.X% base basis to subject by attention. quarter result, risks from XX’s. while and And and our market for Liggett's second of have delivering generating XX ahead, continue Howard. income the increased profit. volume, distribution are but back and of our to the your to we We're As share that profit And marketplace retail performance. points share effective support continue to is to market. share programs sales look confident operating prior on now pleased Thanks place from remain period as regulatory year and grow share we focus Pyramid, to We total in Eagle plan a to market the strong compared you, we with growth and our

Howard Lorber

you, Ron. Thank

the positioned Group for start Vector I of call, the that continue well believe at generate shareholders. value to As long-term is to noted we

increased We margins for the profit MSA our the strong to sales and years, cash estate and we recent well have in our tobacco terms continue continues volumes under business and positioned have reserves, from favorable success. consistently real benefit to be

XXXX, We an and of that regular remains dividend again stock its uninterrupted since dividend The are company annual also track company’s cash once proud of X% same. the since paying dividend quarterly XXXX. reaffirms policy record the cash a

the call for questions? you would open operator, Now, please

Operator

Instructions]. Thank the you. floor open for At [Operator this we time, questions. will

of first comes Martinson Karru Our Jefferies. question from

Karru Martinson

hopefully points. kind the the -- margin on about the morning. I break half? that When the much of I was basis that EBITDA and MSA kind were reversed look was of second of for Good you in those think growth out, XXX the was expense down the tobacco side, how further how much the at front, accruals margin investments Could

Ron Bernstein

volume accrual just of we relative of is all MSA MSA estimate explain of the outperformed it is Virtually beginning accrual Yes. estimate to at year, we the original from year. what that that the year was beginning on. last the the to And based Basically, issue. the make our the

year, then for we that the So in And as year. of result, compensated in half a the second the first under we accrued.

last basis, year-over-year first this at accrual the to much because the last the running that is half we're year a is we comparable did year, first in it So, than rate half on in was greater what year. a

volume would in, million earnings which it So some year, takes of come than that volume of we cap us industry X% would is by volume this odd effects calculation percent, the cost other -- hit as if value. our it at reduce greater -- then to it decline probably would to which industry will the part that about a industry were reverse. $X.X And declines X

Karru Martinson

Okay. side. And on real the estate just

EBITDA there? step up, Just as trying sharply a are I up the costs sales driving in what's to mean business, the on down commission-based understand, front.

Howard Lorber

And of do of California much two City. stronger, expect more quarter. new the a the misleading the quarter, volume. just Florida of We Florida is area from for this third of to lower the increases than view reasons happened New that adds is one one, lack side. little have Well, the also on bit the Number volume basically. to really it's But revenue Teles, but now in do acquisition starting margin is includes a development which that York point place business is

bulk also, in it's has New So -- point have And at money York. The look details -- the if it. traditionally place the been that lower the where always of to so state. a is you of basically not really to made

Karru Martinson

resetting the think and perhaps And or coming last then on XX% I realignment? today aligning XX% about of sellers market we talked prices are that seeing quarter kind Where down to buyers. we

Howard Lorber

It an really hasn't happened on overall basis.

that Although, the there clients talk individual their reduce low are an brokers selling, prices on too starting where situations prices work. these maybe at a the about even to [bidding] nail apartment all putting little are they getting to

it's on It's through brokerage timing real is But about to put the Look, sometime like I or is There imagine run-offs and estate is business, going one matter price the It's or still now to start sales hard There by going next still business. it's had. next this have thing a made. the during out especially obviously the year, and being real business date year big readjustment run-offs this happen? phase. -- would of a crisis. There year. being a estate that when of it would we the made cyclical And point. we’re So a this just in we better the year is really playing like no it are and that. end financial sales are of every big the adjustment nothing at business,

Operator

Zaffino Ian from comes question next Our Oppenheimer. of

Unidentified Analyst

for on Ian. questions. Mark my is for Thanks taking the This

Thank Just just see the to investments going back to Do that additional could start guys impacting tobacco you forward? you. Eagles? something off, in margins we going And expect quickly. this is

Ron Bernstein

market I pretty always opportunities The Yes. as them. when Ian. us. the growth marketplace to is has need say, take offering to for opportunities, you been Hi, receptive And

second are So have we the majored opportunities during at of we opportunities. way expectation year, to half is grow the of Eagle and in those will to some a looking our continue is, that

may our continuing of selective spending going during investments, And to to year. the objective making So, that build additional second is brand. we're and the incorporate some half the be

Unidentified Analyst

terms in then increase increases, during And fair. That's price next great. like, Okay, third -- come the price just should quarter? of the

Ron Bernstein

Obviously, Well, in typically, don't a that's the case. vacuum. we operate

we've over in been April, typically, So October the March then timeframe. years what's we seen on year, so have typically now to many we've evaluate price increases in the a September, market. and or going last But twice

Unidentified Analyst

terrific. Okay, that's

an can puts guys in then quarter there, the there? just on EBITDA And terms takes Okay. Thanks Douglas of provide walk you for just of and terms in Elliman,

Howard Lorber

want you BK to that? walk through

Bryant Kirkland

Okay.

let's take Mark, So, first. quarter

declined revenue recognition EBITDA $X.X XXXX $X.X the would And to the EBITDA to ended So I the an at June standards is million. existed of Elliman have been $XX.X for one would want have XX, million prior months reported under make million XXXX, so very to million. three from point we $XX.XX additional clear that

As a for Florida far but the margins, margin million $X.X both the are reconciliation we on Expenses revenues million had a reflected the and shift gross XXXX commission increased basis. well business, as using And associated mix in to as increased gross decline up in which $X.X from then $X.X by expansion as of Elliman’s quarter, in percentages, to the EBITDA, the lower our the York City million. the decline inflation. about margin just about are net those markets that’s attributed California. sales But New

explanation. as the far XX, net would XXXX, a existed $X.X revenue or have June that $XX recognition an declined second to EBITDA of prior quarter year-to-date, months Under the additional Elliman As reported EBITDA for $XXX,XXX, to six loss million XXXX. million to similar ended the standards from

of have So revenue $X.X had EBITDA million standards the old would recognition recognition we standards. under --

for margin the margin six million the shift differences for which offset associated margin of again, in increased margins, as commissions reconciliation million As inflationary. gross about California as $X Elliman’s lower well lower month million that $XX a about increases shift follows: that California change lower increased the and the far mix as period. was markets, $X.X EBITDA, the of as Florida with XXXX like markets reflects then of -- to $XX expansion net of the and added includes But margin commission such about million Using gross by and profit both as percentages, is expenses

Unidentified Analyst

was helpful. great. Okay, That very

is it. you got Thank like pipeline terms on just could the guess Okay, there in share term? real And the in you. then coming near anything anything the of investment as online front on in guys estate. I monetization

Howard Lorber

things. few a is there Yes,

the quarter. We any exact contract a will know have of things. we couple don't yet. haven't BK? a made on new which One investments the really itself, I -- numbers thing this Have profit provide We

Bryant Kirkland

the Howard, mode. -- we No, monetization in we've been

$X.X the $XX For first hotel of Manhattan, the only million XXX six where months, that of the the from Times we our The in million. a been made received for we XXth Marquand had Chrystie, million Street $X.X in net investments Witkoff we've XX $XX Dutch Square about have The million. project project. payment. and from GP million the project monetizations from public was on of the million We received $X.X $X

Unidentified Analyst

Okay. helpful. very Terrific that's also then And …

Bryant Kirkland

leftover we money condo that. parts we much projects things other of still that we're have expect investments because are will have positive pretty and selling, are quarter. There like the in condos maturing every Making in which our portfolio

distributions further to have cash us. will we So

Unidentified Analyst

makes tax housekeeping you your Bryant outstanding Thanks. balance just a Okay, That expectations quick and and expense maybe shares provide questions. just rate And of the interest then for Can of then great. 'XX? couple sense.

Bryant Kirkland

is $XX.XX a that million let's due Okay, conversion shares shares included conversion and in there XXXX. price April equity which million with shares January are convertible debt XXX.X fully are Fully for a $XX.XX shares. million in in XXXX, due $XX.X outstanding And first. debt computing that convertible associated XXX those associated diluted on that’s price. $XX.X computing is and take has diluted are Not EPS for million with

rate? tax was question next Your

Unidentified Analyst

Yes, correct.

Bryant Kirkland

Okay.

about taxes of the months, our some me real cash XX%. six for that by investments. rate And some tax received was lowered to for the we benefits -- related was on excuse quarter So estate our

of the of out is previous conference that We're XX% and XXXX expected EBITDA. for because adjust as guidance guidance is around rate to of from quarters, marginal up under income calls, rate the expense And new half, our of that that’s two expect first the issued our will evaluate that XX% the on act; XX% continuing next but several XX% interest the about we I'd and to sets a interest rate to the going tax relates the certainly Going tax non-deductible in XX% expense necessary as range. XX.X% forward. the increase we discussed to the

Unidentified Analyst

you Okay, great. Thank guys very much.

Operator

all Those we will your That are disconnect. have us our you all Group's you conference earnings call. on questions that And for Thank Thank Vector may you call. the today. participation. for joining for conclude now

Howard Lorber

everyone. you, Thank

Vector (VGR) 7 Aug 182018 Q2 Earnings call transcript