VGR - Earnings call transcript Q1 2021

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Operator

Welcome to Vector Group Ltd.'s First Quarter 2021 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 we begin, 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

earnings conference Good Officer; our Advisor XXXX Liggett us morning, Senior Officer; to Bernstein, and the first Richard and are of joining you BryantKirkland, President Brands. Operating Chief join Financial Operating during Q&A. With on us call. Liggett Lampen, thank for Chief and Chief Vector today NickAnson, Ron will Vector Officer me quarter our our Brands,

I XX, consolidated for call then financial Nick Elliman's and for this financial for discuss and closing open provide March will performance summarize questions. afterwards, quarter I performance During the our we comments ended the results XXXX. then will months review Tobacco first the business. of will Douglas then the will the three call,

Now, turning consolidated balance sheet. Group's to Vector

including and Our equivalents we maintain cash strong, balance of XX, as at liquidity million with $XXX sheet remains significant at $XX March XXXX, cash million, Liggett. of cash

investment also We March held fair of with XXXX. a XX, market partnership value interests securities and investment at $XXX million

quarter we proceeds million advantage retire took All first XXXX, notes. to of markets of due in XX% X. of $XXX older the senior and used capital As issued previously secured announced, were XXXX. favorable notes

$XX million XX, were as million. credit facility Liggett's of to March In its no credit addition, capacity under There increase its $XX Liggett from facility borrowing to XXXX. amounts outstanding amended

operations. Group's to turning consolidated Vector Now from results

income $X.X million of Estate segment. in the $XXX.X of $XX.X the XXXX. of common cents a common ended of March result recorded was share, compared or adjusted The quarter share loss $X.XX period. revenues $XX XXXX, revenues in million, diluted company XXXX Adjusted and $XX.X the of decline Net in in million prior attributed million cents $XXX.X For per The $X.XX the in Group million increase million were million segment compared to to $XXX.X first EBITDA the million, $X.XX net was was a Tobacco Group's million a per $XX.X $XX.X $X.XX in compared Vector year. diluted or million, $XX.X to million share, to the an diluted or income net XXXX in compared of to or share increase X Vector months diluted period. XX, per $XX.X the Real per

Now Elliman's operations. turning Douglas to from results

million. EBITDA charges Angeles, of first XX% daily by were adjusted Palm Douglas South seems significantly loss revenues business of months to up as to of well City such of XXXX. quarter impairments in a X from $XX.X New York be City, New markets, XX% York XXXX. from increased the Miami, loss York in Douglas $XX revenues, For non-cash The from $XXX.X XXXX, City, pretax improve sales during reported Closed In major quarter receipts quarter months quarter and Aspen, included Beach, continued for loss as ended Los our Commissions first first the million quarter cash ended average continuing. net The New in in and the of first April were trend Hamptons, from XXXX. this Florida Elliman's for XX, $X.X XXXX up the compared XXXX, March In as revenues, Aspen. million to and million, million March $XXX.X net X million adjusted the an and EBITDA Elliman income $XX.X of XXXX, XX, million of of of first the $XX.X net the

over to our call the Tobacco business. I Nick turn Now Nick? to discuss will

Nick Anson

Howard. earnings quarter in year-over-year first significant a of morning, you, with comparison increase difficult XXXX, good performed Thank a the marketplace. Liggett despite during everyone. well and very And a challenging

Our confident quarter portfolio brand market-specific company. evolving well-positioned presence In of proven meet demand. market maintaining substantial the to stable to XX's and first Pyramid and significantly for and retail share our margins market successful is we XXXX, have delivered remain deliver programs Eagle while continues market the higher profit

turn performance We price-fighting are build strategic as with I also pleased geographic Tobacco. will our combined of measured financials targeted and distribution Vector for Tobacco we Liggett Montego, now with brand to approach. the a Group the

to the decline to X a the XXXX shipments compared For Liggett's during the the ended led higher first in X.X% at affected than million reduction the Liggett's year, as period. year-over-year primarily volumes industry. patterns well start buying in were for normal corresponding million, across as $XXX.X to wholesale revenues inventories $XXX.X in March changes months The revenues XX, of volumes wholesale XXXX, the quarter. which Significant related

fewer months increased X%, a income day. our was gross X adjusted year higher result quarter. the profit by Management Science XX.X% to shipping approximately first the the earnings industry first contributions cost compared shipments operating overall while for March period wholesale base. the effective additional million and to of promotional for addition, million, corresponding from of X decreased had Liggett's ago. the associated efficiencies primarily management margin spending pricing Associates, in The XX, According increase quarter ended higher with wholesale In Tobacco decreased versus first with for $XX.X quarter shipments quarter of to $XX.X the year prior XXXX, XX% XXXX Liggett's

XXXX by wholesale to up toward industry. actions and year, this for year-over-year As previously of At due both in at to Liggett excess quarter cumulative patterns. pricing the further of the lower effects year industry tobacco the loading start Conversely, over to COVID first first and separate beginning inventories wholesale shipments pantry the XXXX, depleted inventories these mentioned, events potential performance the toward led built in of compared effect wholesalers quarter of significantly reflecting the pandemic. increased, in both end first XXXX end of widespread the industry concerns the restrictions. buying wholesale was the quarter The of changes last impacted

retail shipments rightly note, sales. short-term are because typically inconsistent retail impact we trends we wholesaler As indicator patterns better industry of do a not believe

For shipments quarter, the Liggett's declined decreased X.X% X.X% retail the industry by shipments while period. XXXX, during from retail same first

As Liggett's X.XX% a result, first retail X.XX% the last period from the in year. share slightly declined to in same quarter

is is with Montego. brand, deep-discount the of and distribution the expansion the to on our noted we segment, Despite last increased price-fighting which Liggett's in Today, retail last XX,XXX XXXX, the competitively segment priced to growth we are consistent taking we successful due volume As price and in market's stores. strong. a year, net are previous X% It quarter first year. of the declines in remained expansion. strategy. growing August the compared pricing increases, U.S. our the its is strategic XX% stores in with year-over-year delivered Eagle pleased targeted Montego share to modest income continued calls, Liggett's Montego, response approximately sold of in the first anticipated in of retail we in Montego with increased now over of is discount of market third-largest quarter brand volume XX,XXX discount sold for nationwide. approach currently Noting XX's

FDA cigarettes. regarding made years the scientific a is by menthol question health. considered open long-anticipated last data to approach This environment, by are There complex announcement has this issues the is issue XXXX any and to plan agency regulatory unintended statute, pursue since believe required been restrictions they conflicting many potential this also that the scientific issue involving and before of to the FDA and evaluate take cigarettes week, is it required we current consequences and menthol likely public It the resolved. to in any will decision. Regarding in on apply

financial business. the with cigarettes In performance we represented ended menthol March sales XX, months For of operational total Liggett's the of our Tobacco XX% pleased XX summary, are XXXX, volume. and

The validate our continue we our and distribution, programs execution market broad and to of base strategy the competitive reflect scope have of deep-discount capabilities including consumer-focused sales the advantages first force. the results our and segment, in quarter

focused remain income distribution of incremental on sales the strong generating As operating brand ahead, our we from look base portfolio. we and

regulatory and profit Finally, programs market while business to market have to you, our supporting keep industry, we remain subject that and for your to Howard. confident while growth. place always and Thanks and share in effective we efficiently general we back infrastructure operating are risks, attention,

Howard Lorber

Vector has Nick. Group tobacco its reserves, has you, strong the taken position success. has its Thank and to consistently increased business profits future cash share for steps and Real Estate necessary market

of history and continue policy dividend. longstanding expectation cash an our well important quarterly with is pleased allocation paying strategy our of will a future. our that capital our are component It the it into We remains

please the open operator, questions. Now for call

Operator

signal to a will We Instructions] [Operator to the sir. you. pause you, questions. allow moment just opportunity everyone for Thank Thank for

question first with Ian Our from Zaffino come Oppenheimer. will

Ian Zaffino

the us what Aspen? kind up here. City were details tell on for New were Florida, quarter? to for in on far as then some more your also, of of some South best mentioned XX%. questions like of questions much markets trends And rest And up? couple You like the cigarette of NYC, maybe directionally, backlog sort then A Howard, accelerate York Just just maybe what's how have well. as more Can And actually the continued thanks you up? detail, they April? of as looking being

Howard Lorber

Yes. Sure.

think -- wrong, me markets, XX%, up as correct far up, different As about I'm was the XX%. I South Florida and if B.K.,

Bryant Kirkland

was up quarter or million. XXX% Florida the $XX South first for

Howard Lorber

million, $XX I'm sorry.

Okay, B.K. go ahead,

Bryant Kirkland

Northeast But the $XX.X was or was Hamptons, XX%. million, which -- that's region, The up

$XX was up up, XX%. $XX million or Colorado million New and California commissions, or York were in City XX%.

Howard Lorber

continuing It And life, I to be continuing keep the it's the going on Beach. seems same interesting South we're for -- in it basis, though, in is back a to April. probably Palm volume and mostly And April. doing comes York monthly We're It Miami looks going. that think Florida, into the Florida. South and that's same which definitely like as City into to is about really basically, New doing, city volume

caught to go. further of now up. to it's for I the is level has think think, New some City a I point, But but that, sort at has So out trend -- York think I right lot

Ian Zaffino

then from do Okay, And Liggett industry. the return the you it's know on business? the business? to but like on Maybe to would menthol have good. done guys you're what work probably the impossible the any I next this side, has under-indexing clearly home side, work figure out, And on to to studies to to what done then

I it's But gains of menthols. years will So smokers going that to the -- to share to policies see would being actually under-indexed, your menthol some going in take expect through should business type given traditional cigarettes? see transition you're that ban know to you

Nick Anson

appreciate and questions. Sure, Ian, the

for the from uncertainty the But behavior strong. And course of significantly specific year to a to still cigarette there's know, clearly with performance done obviously, result strong And the through of of changed an pandemic any And So where the has year, over be we how industry industry. purchasing and first the out haven't will was witnessed of consumer the lot quarter shake extraordinary year undoubtedly studies regards home. year. you to last this the respect here pandemic, this obviously, patterns. we continued work the with was

As of I lot a in going on mentioned I the down there's affect a X% about year-over-year remarks, this to my factors year. basis. that's industry mean obviously,

early of balance at I think to tailwinds that we these dissipate. in think over to respect start tell. menthol, industry too remains kind as the I consumption is this this general time, but to year it's point of fluid, expect feeling our it With to normalize the COVID-related

You're a now. been FDA are discussed but is is is, in which quite that's right, for this something we the time reality good some thing, the under-indexed,

with As issue very nuanced and it's lot I a a conflicting mentioned, data. of complex

potential the process any -- away of years consider FDA I you potential the many for think the this, from and impact litigation. we're when impact of within

Ian Zaffino

you This Okay. helpful. much. very Thank very is

Operator

Karru Thank Martinson question [Operator Instructions] Our you. from comes Jefferies. next with

Karru Martinson

menthol the what this? at, or what's we regulations, step just the should for FDA that the line be is the the next in process, on Just of looking headlines or time terms

Nick Anson

so. gets comment the for And the a course, the period. out of so a At those ruling, then to final of that which opportunity that will previous based proposal the comments. news time, and retail. then FDA comments, with point come next At out it doesn't in year And another litigation was with following implemented the and imagine amounts then that that or And there there's take came on within I significant -- potentially Sure. ruling. year another there a would Well, factor point come there's out would advisement under be plans a the typically significant at comments or before for potential in final challenges. FDA that,

away an I think we're this being again, from many So years potentially impact.

Karru Martinson

what the implemented you your minimum with guys impact then price in what the in legally being the did And on from first has staying challenge, Colorado sales quarter? you been Okay. Tobacco, while see

Nick Anson

Sure.

Colorado, in significant about to throughout buy-ins at that overall XX%. see in some anticipation brands the particular So this performed down some the degree But skewed of the we're our both large is in Liggett because market the mean and to course this did industry have state market, increase tracking December overall, holding loading of pantry the I looking was tax and and well. own Pyramid price. point. minimum basically excise our And at we

after large about previous been to So back X how look we'll it X the to pantry see for settle states that increases on with to things loading. months continue We takes typically go. there's SET and market

shake to situation. things relatively holding a very own and out, we're our market how see date, we'll the but pleased difficult tracking to in So

Karru Martinson

is there where any stands for in terms of update process legal the And Colorado?

Nick Anson

is this time, From point first, in in at And this on the point. moving Not it's the defendant's we're with see but some to relatively rulings dismiss really. this time. point the at slowly relatively at litigation slowly to respect to motion waiting moving

Karru Martinson

And last on cost-cutting Estate, Real an guys program just you had Okay. aggressive year.

the we costs As Or you to of coming infrastructure add York back, process what's some on to come those thought back to perhaps rates kinds operate have? increase back? at with in you look the equation? you New these costs levels Can the at the that do of need starting

Howard Lorber

already back added bit quite we've of costs. the a Well,

out I brokers listings. a to and lot the I because more have more think I increases we're volume have business. -- spend as a think are They as in more think them with, business, is on only increase we're lot marketing doing They get biggest doing side there. the

The Basel like in days Classic, now days Hampton that's couple December. we they Art the, or going think, money, horse event, in were And to September of first follow Hamptons, couple Miami, also, in Like that. going So August. certain which is [indiscernible] of in year last this happen happen to of the I of

way particular we the the that have seeing. we're seems to increases spend, have some but definitely things to we're this that somewhat looking compared it to amount money going So to point, are revenue insignificant more be at of

Karru Martinson

it. Appreciate you very Thank guys. much,

Operator

Thank you.

Our Barclays. Holden from Hale next question with comes

Hale Holden

had questions. Thanks two for taking my call. I

on well The for first might one headlines is, was there changes on what but around and the wondering you those thoughts your guys was addressed it, I there were low-nicotine be? of realize menthol movement no initial type pretty potential leaf implementation. I

Nick Anson

put Sure, I there not really was It's to with Hale. specific -- the obviously proposal I answer right, mean menthol. think there respect really same out that's surprising. no you're and it's

that studies, issue. and So is saying may this of that able complex nuanced studies to I even think issue implemented. be than menthol lot even the studies not this And conflicting and more practically lot a be of a

many to we're also our process the of and impact issue, potentially the complexity away, for that based I think again, this years the business. So on

Hale Holden

you. a been B.K., you're for of rate pretty on leverage Great, by than end the run year, the time. to some thank low you've historically lower a

So I or changed if update might where move thoughts? give could as capital your was towards you us you thoughts allocation you've on that excess maybe wondering leverage cash an if go or

Bryant Kirkland

are Great correct. question, absolutely And Hale. you Yes.

years. many in been we've levels lowest the at are We

is EBITDA. at you at Looking X.XX at our total X.XX at a release and secured a a if leverage, a basis, on on the look and basis, about, we are about press a this gross

the we be Real at We'll we're side, property the in allocation. Estate forward, our in to to investments stockholder in far add going value well think would As to continue both to technology as as opportunistic side. as going look continue capital

Hale Holden

the your announcement saw seemed have. exciting. I on of you. you time. kind VC Thank the guys' appreciate pretty new, property That that fund I

Bryant Kirkland

Yes. business. how and to excited Elliman's be that We're that complementary really about will

Operator

Thank you.

Our Jain with next Barclays. come will question from Gaurav

Gaurav Jain

questions. Good a morning. few have lot. Thanks I a

and the business I'm on are which is some trying the understand to happening. one So Tobacco trends just of

Clearly, and is happened, pricing share. is share to few the your say down, despite the times share moving of strong Your market from very XX% few which I Montego last that years. was X% in is one that would has

even pricing So Eagle on is your stronger. i.e., and Pyramid

say right maximizing and we could a than cycle fair bit continue is you the come more market So your to profit are it from your faster profits now, here? that in off grow share see expectations? But to

Nick Anson

Sure.

You're absolutely correct, Gaurav.

performance back XXXX growth. pricing that we're back are we And outperformed yes, brand has the the as objective over of but half profits. expected, as that very It in brand. of growth with we've kind was and But Eagle balance growth fact, year, sacrificing in respect And XX's brand. in a pleased get started optimal between Eagle the of taking to And We continued income more of taken And remains we're little the looking with share, phase market with that and obviously, started kind that on to to we've process of been the that of date. slowed. has bit of long-term course same. the pricing share last on market the our

Gaurav Jain

a pricing any it's increased? company, that for cigarette are is will because percentage your it of hike, tax guess for in the be Sure, taxes some categories. which Equity across of thank seek equalize Then very some last to taxes these is was these, tobacco remind you. in you Can competitors. more specific Tax us, are on discount than the That's there Act terms second I increase clearly, of for what proposals you time you you Because and much that of X helpful. your are tobacco terms Tobacco concern performance really

-- So be would you impacted. be able to

remember time? just happened last you could help us what So

Nick Anson

we've the I obviously, fair some with Well, going FET for to in it. segment ultimately discount I of profits price volume think. brand. We an with question, the attractive. We Look, opportunity got and significant planned excellent both were there Gaurav, cigarettes up capitalized and performance fact was had made there. substantially of our more the which an opportunity remind grow and saw last respect with track I you I that is And XXXX. absolute on the with we able say last would Sure. increase, to FET mean record increase, that a would and We the Pyramid down-trading

how good fear know federal don't certainly of if look have mislabeled as a tax to they round, right, -- opportunity to date. branded and If type tobacco on and taxes on think you're taxes are increase especially I of such and we a they that's their further think paying So those And record share we this I track equalize we performance share the Products hasn't other opportunities. a there. us excise to to tremendous for capitalize equalize that had been time out there an that, pipe tobacco advantage. fair misbranded gain they've capitalize products

Gaurav Jain

trends Yes, in the Vector? that's taking reduced And on question, transitioning are all risk made the are did helpful. How not allocation down in but next-generation I had and sort comment impact mentioned tobacco. Hale's thinking you of I very Bryant of you a smokeless future or and some products, mention form like prevalence just now, not offering a to these and longer-term the about think business priorities, the but think business. the property rates tech companies And Estate, at to think I capital terms right times, of Real around investing

Nick Anson

ultimately at We're not the Sure, opportunistic there Gaurav. believe, products, and these think mean looking lot acceptance with though, at in approach. with regulation products right we always uncertainty uncertainty reduced in We course respect I of We opportunities taxation us. that's with the to still products, of out this take the time, believe to the I marketplace. uncertainty there's those the point to also those still those. respect that risk for a of an of consumer always respect

discount ourselves monitor an strongly. time monitor the we But to we'll the the as focused on at simply continue the marketplace, but we're We're to it we evaluate our if the core various on market, out marketplace. focusing educated cigarette opportunity look, technologies being, keep And itself, to competencies. continue presents will So there.

Operator

at will healthy Thank you Group, behalf that Vector you, have ladies of all and gentlemen. today. the Call. everyone conclude Douglas Group's Earnings you for joining Thank Those Elliman, on your for we Vector hope for are Liggett This Conference XXXX First well. Quarter of our and and remains Thank On us we questions call. all us participation.

You may now disconnect.

Howard Lorber

you Thank everyone.

Vector (VGR) 9 May 212021 Q1 Earnings call transcript