- Earnings call transcript Q3 2022

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Operator

Welcome to Vector Group Ltd.s' Third Quarter 2022 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 An archived version of the webcast will be available on the Investor Relations section of the company's webcast, located at www.vectorgroupltd.com for one year.

During this call, the terms, adjusted operating income, adjusted net income from continuing operations, adjusted EBITDA from continuing operations 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 reconciliations to adjusted operating income from continuing operations. posted continuing operating EBITDA the website. income release, has from and continuing company's income Relations which adjusting Investor tobacco are been net operations, the from adjusted operations earnings section Adjusted of the company's on contained in

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

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

Howard M. Lorber

Bryant us Ron Good Vector Chief With today morning, Adviser of are for Richard the Conference Brands. Chief also Liggett Officer; Operating President during Group's to Officer and Senior Third Officer; our Q&A. for thank join our Call. you Brands XXXX Earnings and will Nick Vector me Kirkland, us Vector and Lampen, Liggett Anson, Bernstein, Chief Financial joining Quarter Operating

Group's During and open of the third then this summarize then closing comments I our will provide consolidated will the Tobacco XXXX. call Nick financial Vector questions. call, results the performance of for review quarter will business. I for

consolidated of adjusted the note discontinued are fourth because as financial our please results. Before Vector are quarter Element's results, for Douglas XXXX excluded the of in reviewing XXXX, results Douglas operations statements and Vector consolidated Group's in from Group's of that spin-off period Element the financial financial presented

Group's sheet. First, beginning consolidated balance with Vector

sheet balance Our strong. remains

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

$XXX of We partnership investment with also approximately a fair and securities million. interest held value investment

approximately due senior of principal quarter, $XX.X During XXXX annual This retirement million retargeted $X.X aggregate by XX.X% the we third discount. our in at reduces cash notes, million. also amount a expenditures our and repurchased interest

Some notes purchases may privately additional market of amounts market negotiated open XX.X% transactions. senior conditions, or repurchase we our in

million or income Adjusted million third share to to common to operations $X.XX was $XXX $XX.X Vector million Group company recorded third in XXXX. compared or or net in of $X.XX per XXXX. compared share $X.XX the diluted for ended in $XX.X to for operations million to from diluted of quarter share Group's Group million $XX.X to operations of $XX.X in was XX, $XX.X diluted attributed the compared adjusted the common million, $X.XX months million per continuing million, share diluted or XXXX. $XX.X share, third from per September Vector operations common from quarter continuing of income XXXX. $XX.X million Turning were common or attributed third $X.XX compared third quarter in income compared revenues of per diluted Vector or $XX.X the was from share per XXXX. the continuing to of consolidated Group's The to EBITDA quarter the quarter million, XXXX. diluted the $X.XX Vector results three per quarter $XXX.X Net Net

XX was from or to $X.XX Group $XXX million diluted in common $XXX.X operations share to the compared million The common for net to the the Vector million from share, share $XXX.X to diluted period. $XXX.X Group's Vector the the September million, from company operations compared $XXX.X operations will compared months or adjusted our Net income turn share $XXX billion, were Nick period. revenues $X.XX $X.XX EBITDA or XXXX Next XX, was attributed diluted recorded nine million continuing ended common income in compared period. operations. the $XXX.X Net Tobacco results diluted XXXX continuing XXXX nine XXXX XXXX. to or Group's from million XXXX consolidated Vector or in to period. in or million September Vector to XXXX share now compared continuing million to per it period. Ltd. per for per the $X.XX in $X.XX $XXX.X common per over share I per attributed to months per Adjusted ended $X.XX million income of operations diluted was discuss Nick? $XXX.X $X.XX Group

Nick Anson

Howard, and performance capitalize in brand revenues earnings during foundation opportunities we another to XX% we quarterly Liggett's X.X%, when increased Liggett's by expand growth. delivered largest since to increased XXXX, share invest than the and tobacco a cigarettes. and approximately on third the XX% represents record market quarter to brand. by continue period favorable significant discount quarter you, industry marketplace same by wholesale retail by Montego our good for strong Thank as including to our XXXX, compared driven shipments morning. market third volumes originally more long-term Liggett the increased of Liggett's Montego ago. growth introducing of year our This share also our disrupted retail the

the continues to be discount category a in core expertise competency. Our

Following competitors a quickly marketplace of share. competitor's market portion in approximately exit XXXX, from capitalized captured the December significant on opportunity X% US the we that and

broad-based and converted to more leveraging volume September that vacated competitor's than execution. broad Montego retail our XX% strong business XX, XXXX, have of sales distribution As -- our by we of base

to as the the much percentage market the twice is and exit related highest as competitor's next in competitor. the conversion Our

September industry, particularly more in segment as total Science retail driven for performance to months the XXXX environment the XX.X% to last Associates, data for three US in is same proposition of Liggett's economic value of to XX, value. discount current the shift better represented ended the Our market best discount the consumers by is XX.X% offer search category to According Management mission relevant cigarette the compared year. the in period which the

momentum for see growth segment. and continue brands in to discount deep category, we Within the the discount

deep estimate compared For the category, of XXXX, period the that the comprised a XX% segment discount ago. the total XX% in year third quarter same of to discount we

consumers. a attractive value deep more proposition expect We segment to discount migration for this continue presents as

brand its As such, broad with nearly in market became in Liggett third portfolio X.X% second up to also grown of the quarter, quarter of we extensive third to developing stores has this which brand's and the the competitive quarter distribution in largest from X.X% of in quarter XXXX, market share year United increased XXXX provides in to cigarette the third of meet XXXX. quarter XX discount national last The estimate that, of demands. X.X% become stores third the was deep the approximately the profitable Montego's in of second-largest Distribution our Montego, experience X% sixth-largest in advantage the year. and to significant in that of the shifting discount our value-focused a discount third quarter to a share compared brand We this share in brand brands believe XXXX. and expanded segment deep brand States. XX,XXX XX%, quarter expansion approximately from discount

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

and to market continues presence. and our for our income in we growth Eagle Pyramid. is provide While resilience margin XX's long-term a Eagle continue Pyramid's substantial also expands growth, Montego delivering significant from XX's now reap profit long-term earnings and to foundation benefits our brands investment substantial

I third September XXXX XX, Liggett's of three industry months Associates. according increased the the X.X% XXXX, result, ended declined Vector and retail period. from Group in retail financials shipments retail now will and earlier, a market quarter X.X%, from to Management the the X.X% to As prior up XX.X% Tobacco. year for as Liggett's data Science from while shipments Further combined tobacco Liggett third mentioned quarter to share increased turn for

a September record and for XXXX nine period. compared increased to to $XXX.X and three $XXX.X $X.X XXXX XX.X% $XX.X three ended months corresponding the decline nine XX, million billion to ago. market periods and and XX, first compared million months year-over-year year For ended in and a a to income and expected $XX.X and XXXX $XXX period XXXX million, the $XXX.X the adjusted and million nine $XXX.X to respectively million $XX.X Tobacco million, investment three the XXXX. million and respectively respectively was revenues million $XXX.X million for of approximately XX, the corresponding year accelerated was for months million volume compared an and the $XXX.X for nine ended September XX.X% growth the significant Strategic million corresponding EBITDA Montego's $XX.X share and ago. for September in income to operating led months has Tobacco

expansions fully significant brand a our to Montego we expect However, forward. with we as realize move previous investment return consistent on

summary, pack competently leading our XXXX, for a and of price per quarter third the at the year in million Montego of a decisions analysis In market close remains As tobacco our the gap growth slightly the represents on corresponding retail. XXXX months the to despite between to pack ago, operational to period adjusted the financial a Nonetheless has this the circumstances transition and discount in $X.XX our and brand Related to volume gross strategy increase opportunities. XXXX market real-time only on cost thorough in stable of XX% profit-based. September business and MSA on throughout of in $X.XX from quarter investment ended gradual remained a from for performance based in an third to always based premium XX, strong. to year prices compared the profit $XXX.X million average declined provides difference Montego's and reflecting industry's that tobacco $XXX three are

the quarter market the share have in competitive validate our strategy discount advantage Our growth profit this segment. we historic and gains retail long-term

and base, importantly our Our sales potential. capabilities of programs it distribution our strategy the underpinned for by on is builds broad long-term earnings our scope force. foundation consumer-focused Most our and

confident business to While your Howard. market we infrastructure keep attention. the And efficiently. in we regulatory you and have operating that risks, to back place we to general our industry, are and strategy Thanks subject are for

Howard M. Lorber

you is in Thank XXXX. outstanding Nick. Group year having another Vector

share. to reserves We revenues long-term market and have cash increase tobacco and our continue strong

be pleased component our are cash to quarterly will our and of our of It practice is allocation with We strategy dividend. it continues paying capital policy continue. that our important long-standing an expectation a

call please operator, questions. for Question-and-Answer the Session open Now,

Operator

will this take we floor Mittal first open our the Pallav questions. And At [Operator Barclays. time, question with will for Absolutely. we Instructions] from

Your line is open.

Pallav Mittal

for taking my you Thank questions. Hi.

and are trading? the the segregate you benefit please gains exit benefit impressive volume from Can the unprecedented. clearly and competitor volume So of down a the from

Howard Lorber

that? handle to want you do Nick,

Nick Anson

Sure.

let apologize. clarify the down me the The Was that from the the -- question? just competitor vacated the trading volume? from question. segment Just gains I

Pallav Mittal

Yes.

is volume trading? understand that how the of wanted much how XX% down is of to much gains to the So, of from the due exit just and competitor

Nick Anson

I understand.

XX% vacated the the have the gained we the that volume trading. aggregate of both down and also is So, actually

searching people increase by gained the that's and volume what through in that itself for split between general marketplace. in vacated the XX/XX about value we've been a and volumes down So, just it's probably KT&G trading

Pallav Mittal

Got over think how to it. EBIT Montego. shifting profit gradually growth X.X%? the that growth should volume mentioned market on the about Does progression peaked we now share Also has from And you couple next of years? mean at

Nick Anson

as the the long-term. performance give about don't EBIT. the Well, guidance my we're objective feeling we in of I Montego remarks consistent But relates long-term overall you of as good consistent optimizing mentioned Sure. to know that's earlier as with over very certainly it and profit

make with what exceeded as previous the discount And we've start we've and volume we developments XX's, to that. to certainly build that's and as there Pyramid brand to at Eagle we So our monetize objective real-time. look with critical and that marketplace in that the Ultimately, such deep broad is respect done adjustments first expectations as base.

very we pricing quarter in year. half our on the of I and this this But improvement have in reflected taking the Montego. margins year good that's in third mentioned brand versus feeling first the the about we're As started

of lot a experience have We this. in

developments have these of these We profitable. clear track a record brands brand and turning

very feeling ultimately to our good a base future we're there higher the raising So, earnings level. and about

Pallav Mittal

How I to can if you California question. could planning of And last this year? the that approach Sure. flavor are in ask ban QX happen sometime one

Nick Anson

will challenge Look think will that think we certainly with pass. Sure. almost we up probably think respect I it's that. I But the likely that's that for well vote to proposition industry that

challenged From earlier, arguments our too though perspective, it In we're has fact, but Reynolds right. concerned. weren't not deemed already the

are menthol We half in to under-indexed California California menthol our less heavily in than market. volumes relates our And X% the represent of as the of -- in volumes there. it fact

certainly concerned the longer our not we're from perspective industry challenge we -- almost it, term. to expect but for the there's So,

Pallav Mittal

Got it. Thank you.

Operator

our Zaffino. comes Ian question And next from

Your line is open.

Ian Zaffino

I just much. Montego. little Hi, you great. a more very in Thank to on tie wanted bit

take as there you As you anything you opportunity took and capture this a specific bigger in And that longer it brand? where different pricing cadence Is faster that kind Montego the than you your of brands in did Can maybe is anything, other pricing us you like same Is look price could tail did? the versus Montego? there think maybe at some to market believe were share brands your or like that price where other follow then lead it impact is up is the about brands? to or other have you than takers unique it wouldn't you Thanks. of, on better? might will

Nick Anson

don't this No see Yes. any we being different.

I and in the you managing the of mentioned remarks, of the got segment. experience segment in As We're the earlier we know, my brands segment. discount deep the discount leaders discount

evaluating each nuances was constantly Select, we marketplace time. look Prix, those the how brands. make in Pyramid the you know Grand there the sure there launch development our XX's and Obviously, adjustments manage opportunities we to and Eagle But at at different. with So back real we're and Liggett looking history each and

feeling and this we're got a ultimately we've the knowledge So significant to confident the realize and brand that obviously again very return. experience develop

Ian Zaffino

Okay. maybe than What's, that? point And then on brand? sort timing additional at of, that an you brand do beneath Is Montego? launch that years another Is off? then closer the what

Nick Anson

there's We're share Pyramid and monetize ultimately certainly the this to on nothing XX's focusing the short-term and there on profit point at on continuing brand. for obviously new horizon time. certainly, gains Yes, a the Montego in on Eagle and focused

at So no the plans moment.

Ian Zaffino

maybe question Okay. Howard. And a then for

the a expect do Are far your a and Thanks. we you you real seller? about environment buyer? the as you thinking a estate holder? On you what investors are side you And What are should as here? -- Are here how think analysts? as

HowardM. Lorber

Well, hard side, luxury as where markets, the the But overall exactly luxury to the I this Yes. the not how market. being difficult in obviously, are that's not going stage at residential are knowing and it's luxury talk they market. as answer the rates a more to banking affect X% be question believe we're going with their And on markets rates I end the interest mortgages. because to conforming the have lower people side, borrow those And -- stock lot very able flexibility X%, with are really equity when portfolios and about inexpensively. a to on the private XX-year think hit

So seen too we really much. haven't

And everyone understood. While the market Well, It going of very XXXX to and other of in down is the compare industry it's volume-wise, none issue is performing that, just XXXX. a general that really still really happened. sort is well. to us was

say And good as albeit, -- a a so, I is that don't think be same that not that's XXXX to good for us, for comparison, year the I would going XXXX.

Ian Zaffino

you, very Thank much. Okay.

Operator

is Martinson with Jefferies. next Karru Our question from

is line Your open.

Karru Martinson

morning. Good

the discount the high, behavior gas sales came were quarter, when were During consumer consistent prices the of channel? or the see you to when shift the cigarette kind it did

Nick Anson

down -- quarter. third Year-to-date, start industry it's the was So, the we the down the the total for X.X% from would overall I from industry throughout X.X%. industry you perspective, mean, Karru, say, quarter, if look at I if decline, there, the

no there, there. their energy are remain the -- just the cutting gas consumer prices, continues to It's cigarette prices remain under certainly consumer despite, gas prices prices an income, pressure high. abating doubt not that there's disposable So prices, food of into rental for

there's as the down-trading more value such, their QX. So consumer we purchases. people no continued and And that in under saw doubt pressure remains for searching cigarette throughout

Karru Martinson

fixed of FDA there it's in regulatory the or terms that are the in updates Okay. menthol pricing And update, ban on the whether any Colorado, front?

Nick Anson

menthol, at what they about, that sifting updates the at received XXX,XXX through least in real August. moment I think FDA the to XXX respect With and -- the no is comment

feel any by respect and we we've the be they before it's in any that we forward marketplace Colorado, believe litigate well with based federal get the that costs feel we did not further. main on the case. ultimately, dismiss push was we're our So, actually time the that With kind performing some the appointed very she be how standard. And to because new in industry. actually Colorado marketplace. initial issue and evaluation concerns behind going will of and relative case a continue we judge through that the to I there the But again, like challenged final to And to think, in of to there is decided performed reason an case to that

Karru Martinson

of And on your repurchases thinking the to repurchase market? And terms look bond how the in in Okay. debt are XX.X, the the would you that flows maturity? you allocating cash how of at

Bryant Kirkland

Kirkland. at We opportunistic mature four We'll bond Karru, continue Hi. not that Obviously, for it's Bryant where back years. to did million were in Good discount. does we $XX be the buy obviously a morning, another opportunistic. quarter

have patient. be we So time do to

Karru Martinson

much very appreciate I you Q&A guys. of it. Thank End

Operator

have we time. further questions no appears It this at

Howard M. Lorber

we joining quarter. to for you and next you with call look Thank our forward speaking

Operator

all Ladies you Call. we and our all that are This today. Group for questions well. us On us and everyone Group and the Thank participation. joining gentlemen, for at of Liggett, Quarterly your hope remains Thank have you those call. Conference Vector Vector for on of behalf we will conclude healthy Earnings

disconnect. may You

Vector (VGR) 2 Nov 222022 Q3 Earnings call transcript