TPB - NYSE
Turning Point Brands, Inc.
TPB·NYSE
$86.24
+5.1%Consumer DefensiveTobacco
Turning Point Brands, Inc., together with its subsidiaries, manufactures, markets, and distributes branded consumer products. The company operates through three segments: Zig-Zag Products, Stoker's Products, and NewGen Products. The Zig-Zag Products segment markets and distributes rolling papers, tubes, finished cigars, make-your-own cigar wraps, and related products under the Zig-Zag brand. The Stoker's Products segment manufactures and markets moist snuff tobacco and loose-leaf chewing tobacco products under the Stoker's, Beech-Nut, Durango, Trophy, and Wind River brands. The NewGen Products segment markets and distributes cannabidiol isolate, liquid vapor products, and other products without tobacco and/or nicotine to individual consumers through VaporFi B2C online platform, as well as non-traditional retail through VaporBeast. It sells its products to wholesale distributors and retail merchants in the independent and chain convenience stores, tobacco outlets, food stores, mass merchandising, and drug stores. The company was formerly known as North Atlantic Holding Company, Inc. and changed its name to Turning Point Brands, Inc. in November 2015. Turning Point Brands, Inc. was founded in 1988 and is headquartered in Louisville, Kentucky.
At a Glance
Live SnapshotMarket Cap$1.67B
EPS3.1800
P/E Ratio27.12
Earnings Date08/05/2026
Earnings Call Transcript
TPB • 2023 • Q2
Operator
Good morning, and welcome to the Turning Point Brands' Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. All lines have been placed on mute to prevent any background noise. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Louie Reformina, Chief Financial Officer. Please go ahead.
Louie Reformina
Thank you. Good morning, everyone. This is Louie Reformina, Chief Financial Officer. Joining me are Turning Point Brands' President and CEO, Graham Purdy; and Chief Revenue Officer, Summer Frein. This morning, we issued the news release covering our second quarter results. This release is located in the IR section of our website, www.turningtpointbrands.com. During this call, we will discuss our consolidated and segment operating results and provide a perspective on the operating environment and our progress against the strategic plan. As discussed, may I direct your attention to the discussion of forward-looking and cautionary statements in today's press release and the risk factors in our filings with the SEC. On the call today, we will reference certain non-GAAP financial measures. These measures and reconciliations to GAAP can be found in today's earnings release, along with reasons why management believes that they provide useful information. I will now turn the call over to our CEO, Graham Purdy.
Graham Purdy
Thanks, Louie. Good morning, everyone, and thank you for joining our call. Our second quarter results demonstrated continued progress against our plan. During the June quarter, we showed revenue growth of both Stoker's and
Summer Frein
Thank you, Graham. As discussed in prior quarters, our focus on growing the
Louie Reformina
Thank you, Summer. Starting with our consolidated quarterly results. Q2 sales were up 2.6% to $105.6 million. Adjusted gross margin was down 30 basis points to 49.7% due to segment and product mix. Adjusted EBITDA was $25.3 million, up 2.2% year-over-year. Go into segment performance -- going into the segment performance.
Graham Purdy
Thanks, Louie. To conclude, we had a solid start to the year and we remain focused on demonstrating further progress for the balance of the year. Thank you for participating in the call today. And with that, I'd like to open the call for questions.
Operator
[Operator Instructions] Your first question comes from the line of Vivien Azer from TD Cowen.
Vivien Azer
Hi. Good morning.
Louie Reformina
Hi, Vivien.
Vivien Azer
Good morning. So I wanted to start on
Louie Reformina
Yes. Vivian, on a sequential basis, I would say that we think mostly inventory [indiscernible] you are still seeing it in certain areas. I would say that we should continue to see sequential improvement in Q3 versus Q2 on
Vivien Azer
Noted. That's really helpful. And then as we kind of think about the gross margin progression on
Louie Reformina
Yeah. So the big driver that we had from Q1 to Q2 is that if you recall, the products that were subject to the trade inventory reduction in Q1 where our papers and wraps, which carry higher gross margins. So obviously, those rebounded in Q2 sequentially. So we had a nice lift in gross margin in Q2. And going forward, as we continue to grow our paper cones and CLIPPER on some of our other kind of lower gross margin businesses, I would expect gross margins to have that same kind of headwind as we've experienced in the past.
Vivien Azer
Super helpful. Maybe pivoting to FRE, the modern oral category has been incredibly topical this earnings season from your larger competitors. Any incremental insights you can offer around kind of performance, how you guys are feeling about contraction it's getting with consumers, the 3-milligram offering? Anything incremental on that would be great.
Summer Frein
Yeah. Hi, Vivien. This is Summer. We continue to get really great feedback from both the trade and our consumers. We have the ability to really look at what consumers are doing within our own websites and our purchase patterns, and we remain really encouraged by what we're seeing. We also feel really great about our product assortment. As you noted, our points of difference in milligram strength sort of separate us and we are excited about what we're seeing there as well. As we think about the playbook going forward, obviously, we've learned a lot about how to go to market through the success we've had with Stoker's, and so borrowing from that playbook will definitely be influencing our go-to-market strategies in the near future.
Vivien Azer
Got it. Last one for me. On Stoker's, perfect segue. We're seeing some changes in the competitive landscape in cigarettes. I don't think it's yet kind of impacted the broader traditional moist smokeless tobacco category. But any kind of insights you can offer on the competitive landscape in MST more broadly?
Graham Purdy
Yeah. Hi, Vivian. It's Graham. Look, I think the sort of the tale of two cities, the value category, I think, continues to be successful in MST and the premium brands are struggling at this point in time. I think a little bit of that has to do with sort of a macroeconomic environment, but also the pricing activity that they're taking. We sort of remain committed to this down the street plan that we've had for many years. continue to get -- win more stores, continue to win more chain accounts, continue to opportunistically price when that allows, and we're excited about the continued runway that we have with Stoker's.
Vivien Azer
Sounds good. Thanks for all that guys.
Graham Purdy
Thanks, Vivien.
Operator
Your next question comes from Michael Legg from The Benchmark Company.
Michael Legg
Thanks. Great quarter, guys. I appreciate you see these results in a tough environment. I want to understand a little bit about the MSOs guiding two of the top five. Can you talk a little bit about whether you're displacing other products that's there if it's additive for the MSOs and what you're looking forward to getting in there over time? Thanks.
Summer Frein
Yeah. Hi. This is Summer. In terms of getting into the MSOs, I think for us, it's about getting broader presence in the very important retail environments for us so that
Michael Legg
Okay. Great. Thanks. And then just on CLIPPER, can you talk about where you see your penetration today? I mean, are we 10% into the market? Are we -- how much more runway is there for you to go? Thanks.
Summer Frein
Yeah. So as noted, that category is pretty tremendous for us in the United States. We've been at it for almost a year now, and we continue to see distribution expand quarter-over-quarter, and we're continuing to gain distributors as well, both in the traditional and the alternative space. So making inroads there, continue to see growth in that space, both in-store and as shared, we're on Amazon now as well. So the growth there is encouraging as well.
Michael Legg
Great. And then with the
Summer Frein
Yeah. So for us, it's as much of a sales opportunity as it is a marketing opportunity. Introducing into
Michael Legg
And what type of margin potential do you think you have in apparel?
Summer Frein
I don't know if we're sharing what the margin potential is quite yet with apparel, but certainly can follow up on that.
Michael Legg
Thanks. Okay. Great quarter. Thanks, guys.
Summer Frein
Thank you.
Operator
And your final question comes from Eric Des Lauriers from Craig-Hallum Capital Group.
Eric Des Lauriers
Great. Thank you for taking my questions. First one for me, a follow-up on one of Vivien's questions just on the sort of continued strong performance of Stoker's MST and just overall, that sort of value segments continuing to be successful against premium. You called out that you're in 67% of the stores by volume. Obviously, leaving about one-third of the market available to you guys. So a strong opportunity there. It seems to me like that opportunity has kind of been out there for a while. So I'm just kind of wondering what the overall sort of road map there looks like? And maybe another way of thinking about it would be just sort of what might cause you to lean into that opportunity maybe more than you have in the past? Thanks.
Graham Purdy
Yeah. Look, great question, Eric. I don't think that we've made any modifications to our strategic approach around Stoker's. It really is sort of trench warfare. It's 1 store at a time. It's a chain at a time. At the same time, we've sort of maintained this ethos about being profitable while we do it, so not going out in -- you're rationally spending money to gain distribution. And so I think that the pathway we're on, we continue to grow that weighted distribution. We continue to win stores. We continue to win chain accounts. So I think that, that long runway is something that's very exciting for us, especially with the pricing dynamics in the category. We're one of the few that's actually growing volume in the space. So obviously, that leaves share growth. And we've got the benefit of fast following pricing from a large competitor. So lot of great dynamics. I wouldn't anticipate any change to our current thinking about how we go to market there.
Eric Des Lauriers
Okay. No, that certainly makes sense to me. Obviously, continuing to benefit in more ways than one was just kind of status quo. So that certainly makes sense to me. Moving to
Summer Frein
Yeah. Sure. So as noted on the call, we recently put into market palm rolls and 70-millimeter cones. We've especially seen a lot of great traction across both the alternative and the traditional channel with 70-millimeter cones. Just tells us that consumers are both interested in the
Louie Reformina
Yeah. I'll add that the all-channel e-commerce platform, [indiscernible] provides kind of a great channel for us to try out products and prove it out before we launch it into the
Eric Des Lauriers
That's great. And as we go forward, so we sort of had palm rolls and especially the 70-millimeter cones helping to drive results currently and in the recent past. I'm just wondering on the road map, like sort of as we look into 2024, should we expect a significant proliferation in the number of SKUs you guys are servicing? Is it really kind of focusing on these finding one or two that really work and kind of investing behind those a bit. I'm just kind of wondering how we should think about the innovation pipeline going forward, just considering how much it has been a driver of the growth here.
Summer Frein
Yeah. So for us, two things are really important. One, what is the consumer wanting from us, right? And staying ahead of the consumer is really critical for us, especially as we think about growing the
Eric Des Lauriers
That makes sense. And then the last one for me is kind of similar to the Stoker's MST outlook here. I just wanted to circle back on the FRE pouches. Just wondering if you're seeing any kind of green shoots of any inflection in market share? Or if there's any sort of anticipation of a significant ramp in the FRE pouch sales? Or this is going to be sort of that similar trench warfare? I mean, obviously, it's a very high category with many big players here. Is it that sort of one-by-one trench warfare or is there anything that you guys are seeing any green shoots to kind of call out on any inflection point in growth here? Thanks.
Summer Frein
Yeah. So we're very encouraged by the progress thus far. I think you hit the nail on the head when you refer back to Stoker's and various studies growth there. I do think it's a fair point on the trench warfare piece as well. So we're very mindful of that profitably growing in the space is a top focus for us. So I think the Stoker's reference was right on.
Eric Des Lauriers
Okay. Great. Appreciate it. Thank you.
Summer Frein
No problem.
Graham Purdy
Thanks, Eric.
Operator
The next question comes from Andrew Rem (ph).
Unidentified Participant
Hey, guys. I got to say, I really like the intro music, pretty sure that's the primary reason your stock is up today. So kudos on that.
Graham Purdy
Thanks, Andrew.
Unidentified Participant
Summer, just on your last comment there regarding innovative products. When you say test, can you -- what is an example of testing?
Summer Frein
Yeah. That's a great question. So what we have the opportunity to do in the all channel and on our e-commerce channels, is put a product into market and sort of gain that understanding of what consumers feel about it in terms of purchase patterns, giving feedback through our website, getting feedback through the dispensary channel and then determining if it makes sense based on the interest to expand it out further. It's really as simple as that if we find a product, does it make sense and it only going to be a temporary offering, for example, we won't expand it out further. We had a product earlier this year, rose wraps, that we concluded just made sense for us to have as a temporary product. And we'll decide later if it's something we expand further, but that's an example of when we test it, understood it was great for a moment. And more to come as we'll do something beyond, but I think that's an example of a test that we did and how we think about it.
Unidentified Participant
So do you -- when you test, are there specific stores or geographies? And what is the duration of a test?
Summer Frein
Yeah. I think it varies from product to product based on the market conditions and the product that we're testing.
Unidentified Participant
Do you start with some initial time frame? And then based on as results come back, that may expand or shorten, so it's very much like a feedback loop.
Summer Frein
Absolutely.
Unidentified Participant
Okay. Also, could you talk about -- I don't know exactly how to say this, but CLIPPER and FRE, what is the marketing road map? If it's like a Phase I, II, III, but kind of walk through each of those products, maybe CLIPPER since it's more recent. But just understanding when you think about marketing, what are the different phases that a new product like that goes through?
Summer Frein
For CLIPPER, when we first introduced the product, we really broadly focused on building product awareness. And that was done in a pretty traditional way across in-store and online. So I think in-store point-of-sale, advertising displays, that sort of thing is pretty typical to other businesses. And in terms of online, using social channels such as Instagram or TikTok to market that brand, so a pretty traditional playbook as it pertains to CLIPPER. As it pertains to FRE, similar story in terms of the marketing channels that we've been leveraging, albeit for FRE, starting on a smaller given the background that we've talked about before related to the category, and I just wanting to learn and be very methodical about our in-market approach.
Unidentified Participant
So do you use TikTok as an example, are you using influencers? You're creating your own content? How do you do that?
Summer Frein
It certainly varies as it pertains to CLIPPER. We have done a little bit of both.
Unidentified Participant
Sorry, am I still on?
Graham Purdy
You are.
Unidentified Participant
I'm sorry. So the last part of what you said cut off.
Summer Frein
No problem. I said as it pertains to CLIPPER, I think your question was specific to TikTok and the advertising approach we leverage there. It's a little bit of both.
Unidentified Participant
Okay. And then on the
Summer Frein
So
Unidentified Participant
Okay. Thanks a lot, guys. Appreciate it. Great quarter.
Graham Purdy
Thanks, Andrew.
Summer Frein
Thank you.
Operator
There are no further questions at this time. Mr. Graham Purdy, I turn the call back over to you.
Transcript from August 5, 2023
Other Transcripts
Related Guides
Continue your TPB research with focused valuation guides.
Research Paths
1
Snapshot
Start with context, operating signals, and key market metrics.
2
Value Model
Stress test fair value across bear, base, and bull assumptions.
3
Statements
Validate revenue quality, margins, and balance sheet durability.
4
Earnings Call
Read management commentary and compare it with reported outcomes.
5
Dividends
Check payout sustainability and long-term distribution behavior.
6
Analyst Expectations
Review consensus spread and where estimate risk is concentrated.