Earnings call transcript Q2 2023

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Operator

Welcome to Vector Group Ltd.'s Second Quarter 2023 Earnings Conference Call. This call is being recorded and simultaneously webcast. An archived version of the webcast will be available on the Investor Relations section of the company's website located at www.vectorgroupltd.com.

During this call, the terms adjusted operating income, adjusted net income, adjusted EBITDA and tobacco adjusted operating income will be used. These terms are non-GAAP financial measures and should be considered in addition to but not as a substitute for other measures for financial performance prepared in accordance with GAAP. posted income, operating income the website. income release has operating and adjusted company's adjusted Relations which adjusted Investor tobacco are been to adjusted the and net EBITDA earnings section Reconciliations of the company's to contained in

the not like from read historical in subject cause forward-looking those forward-looking Commission's 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 of Executive to President would I Now, and Vector Howard call Officer Lorber. like to the Group, Chief turn

Howard Lorber

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

sheet. begin will We discussing balance consolidated Vector's by

remains strong. balance Our sheet

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

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

million diluted June million $XXX.X corresponding $X.XX to $XX.X or revenues the EBITDA the results diluted or per $X.XX per million common The to million million consolidated period. compared $XX.X second in million Net $XX.X Adjusted Vector quarter net share company diluted per XXXX or share the adjusted per compared in ended share to Group's common period. the million Vector's recorded the income million were $XX.X $XX.X for for $XX.X compared period. was in period. in diluted of XXXX X $X.XX to compared $XXX.X to share income was the XXXX XXXX XXXX $X.XX XXXX. Turning XX, or months

share Group's per company June from diluted Vector's for per $X.XX $XX.X was corresponding in net ended XXXX XX, share income or compared the Turning common to Vector months operations $XX.X [ph]. common million X $X.XX million X in Adjusted period. million of from June period. share ended to $XX.X the $XXX.X flat diluted to period. months or was results for Net consolidated the to XXXX, income compared compared in XXXX the revenues $X.XX or share $XXX.X XX, million XXXX EBITDA diluted period. per per XXXX million The million XXXX or $XXX.X was diluted which $XX.X recorded the million adjusted was $X.XX the

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

Nick Anson

on an a income-based or a million which shift $X.X and gross reflects in driver increase from X% our in approach to the profit of volume-based the approximately the our second Liggett Thank and outperformance In industry. and outperformed Liggett's the half results the quarter, to in impressive and good second of quarter both morning. you, Howard wholesale first shipments continued retail XXXX. was deliver strategy gradual Montego of approach. our brand This

segment even confident distribution declines. deep migration portfolio as our continues. remains the high numbers, disposable with consumers and strong a Americans that among and and cooling discount discount Despite the option The discount to consumers deep national brand price broad cigarette advantage a market market presents the these segment for an headline Liggett lower-income are under provide to be in attractive prices Despite competitive value-focused as dynamics, deep remain income recent overall inflation continues pressure. we

Montego discount second largest largest the -- and largest which brand and cigarette second fifth brand became has largest fifth become United XXXX brand States. to in grown brand also our in the

Our second the of year XX,XXX quarter. share X.X% the retail period from period. up expanded second in the in stores brand's the from of market The XXXX, quarter and of prior approximately quarter to in stores in XX,XXX XXXX, Montego distribution prior national X.X% prior to X.X% up year from increased the in

market growth, Our our share market our benefits portfolio. substantial investment is the presence. profit while long-term fact value-based objective optimizing brand to and pricing significant we volume, XX's has strategy Pyramid managing Eagle Montego of that is Montego effectively reap in That which foundation earnings from continue reinforced long-term delivers and in consistent for with our by with by expanded our and income

As whereas from outperformed I shipments industry. shipments X.X%. Science wholesale data Liggett's second retail to earlier, wholesale declined by X.X%, industry according and the Management Associates, quarter quarter second mentioned declined Liggett's shipments both wholesale

are have past, of we inconsistent patterns. due wholesaler to a we better noted the industry indicator shipments As regularly trends believe retail purchasing in

manufacturers' In impact typically promotional retail wholesale addition, other sales. do programs not

period the shipments industry for retail in compared by declined quarter Liggett's retail the shipments while same XXXX, declined X.X% second to by X.X%.

year anticipated pleased I'm quarter retail our market Liggett's Montego gradually market at flat report XXXX On that to second Liggett's share quarter focus. grew as share X.X%, a basis from on transition was sequential in which the year-over-year we retail X.X% was result, a up period. brand to basis, X.X% prior a As

data, in According market, category XXXX, the of year discount to total ago. XX.X% X ended the XX, same the period XX.X% Management Science from represented Associates' a June up the months for retail

XX.X% the same up segment a comprised first the For of year in period ago we quarter. estimate in XXXX, quarter second the deep and the of market, from XX% the that overall discount XX.X%

Vector consolidated Tobacco. to financials for Liggett will and the Group I tobacco turn now

in from increase pricing. decline X.X% X For volumes, X% quarter by shipment to XXXX. the million June attributable X.X% the to decreased revenues months XX, approximate decline period ended in the offset for in second This XXXX, was $XXX.X $XXX.X partially wholesaler a million

million from X volumes. reflects For offset pricing, X.X% decrease X.X% corresponding in increase revenues This X.X% months for XXXX, increase XXXX. increased period in XX, June the a in $XXX.X shipment a ended wholesale the to by $XXX.X million

June a for corresponding X XX, was $XX to the ended period. million $XX.X of agreement related $XX.X compared to months income in the million was income accrual XXXX with operating operating recent result settlement, a appeal. Liggett's over it in in This an the the decline this state million Mississippi partially XXXX, of million principle to a posted company our gross by agreement, long-standing connection to will increases. higher XXXX pursue In from settle bond a dispute price with offset recover an $XX the margin

to period. quarter to corresponding the year $XX.X in EBITDA adjusted X.X% increased prior for the Tobacco second million million $XX.X compared

months adjusted to $XXX.X increased the June $XXX tobacco XXXX, ended period. X X.X% the XX, year for For to million EBITDA prior million corresponding compared

increased income million in prior $XX.X $XX.X Liggett's year X.X% second to the compared period and our quarter million grew. operating to also operating adjusted margins

represents basis XXX adjusted XX.X% Our of of revenues the which compared operating basis year an XXX increase points last income was second to increase points of an sequentially. of quarter second quarter and

continued in on a the see expanding the in the quarter, strategic In pricing we carefully brand investment we Montego to our benefits Montego. increase brand's at have started of the to second distribution After significantly and discount pace. between the XX% modest the stable to the deep gap discount And brand range remains the remains retail. category. competitive industry's of XX% Montego at Montego leading premium in price

on later both a preliminary expect regulatory final the nicotine menthol standard year. this reducing the and we standard combustible on On in cigarettes front,

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

our business of In financial remains tobacco summary, the and strong. performance operational

Our on long-term validate strategy growth. gains our discount foundation our for share our earnings retail and advantages growth builds profit the market will in and strategy importantly, Most segment. long-term competitive

and continue we general are While industry risks, confident team us that strong this well market infrastructure regulatory strategy were momentum. we to to subject and position our and

to attention Howard. your Thanks for you, back and

Howard Lorber

you, Thank Nick.

are We policy expectation a that It dividend as operating as well cash of dividend. is quarterly our this continue. long-outstanding will with our our paying pleased practice results

the operator, call Now questions. please open for

Operator

Barclays. take from [Operator Instructions] first Mittal question with our we And Pallav will

Pallav Mittal

think is -- for If Nick, I could you you. this

if the volume data. with between and gap also share what's and you there's market a the retail significant dynamics So wholesale the shipments, could explain in the happening

are movements So couple and the is some of significant which happening next quarters? could which unwind over there inventory

Nick Anson

quarter, year, as what last So data we're with increased as you at distribution, inventory to part looking this the respect here stable wholesalers. were may of is, retail Mittal, growing there significant recall, build we brand versus the more getting the on was Montego the

started half the the over the of and we've rates seen quarter course inventory interest first inventories minor to based as deloading this of decrease. of some of on This cost have year,

between retail wholesale what that's you're So numbers stable and primary the more seeing moment the numbers. the but the difference at

Operator

questions the all are those call. quarterly on you today. earnings -- no are we there Group's gentlemen, joining and for for ladies us Well have Vector that conference Thank

thank Liggett, participation. all On behalf of we concludes today's you and of Investor for us your And at call. this Group

Vector (VGR) 4 Aug 232023 Q2 Earnings call transcript