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 • 2024 • Q3
Operator
Good day, and welcome to the Turning Point Brands Third Quarter 2024 Conference Call. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Andrew Flynn, CFO, to begin the conference. Andrew, over to you.
Andrew Flynn
Good morning, everyone. A short while ago, we issued a press release covering our Q3 results. This release is located in the IR section of our website at www.turningpointbrands.com. During this call, we will discuss our consolidated and segment operating results and provide perspective on the operating environment and progress against our strategic plan. As is customary, 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 Securities and Exchange Commission. On the call today, we will reference certain non-GAAP financial measures. These measures and reconciliations to GAAP are in today's earnings release, along with reasons why management believes they provide useful information. I will now turn the call over to our CEO, Graham Purdy.
Graham Purdy
Thanks, Andrew. Good morning, everyone, and thank you for joining our call. Our consolidated third quarter results were better than expected and demonstrated continued progress against our plan. Adjusted EBITDA increased 11% to $27.2 million for the quarter. Ex CDS, EBITDA increased 12% to $26.9 million. Given strong performance across our business lines, we are increasing our guidance for full year 2024 adjusted EBITDA to $101 million to $103 million versus our prior guidance of $98 million to $102 million. Neither of these ranges include contributions from CDS. During the September quarter,
Summer Frein
Thank you, Graham. Throughout Q3, we continued to build upon
Andrew Flynn
Thank you, Summer. Starting with our consolidated quarterly results. Q3 sales were up 3.8% to $105.6 million. Excluding CDS, overall revenue was up 8.4% year-over-year. Gross margin was up 10 basis points year-over-year to 50.8%. As reported, SG&A for the quarter was $33.2 million, which includes nonrecurring items. PMTA expense was up $900,000 year-over-year and transaction-related costs were up $800,000 year-over-year. Adjusted EBITDA was up 11.3% year-over-year to $27.2 million. Going into segment performance.
Graham Purdy
To conclude, we're pleased with our progress nine months into 2024. Now I'll turn it over to questions.
Operator
[Operator Instructions] And your first question comes from the line of Eric Des Lauriers from Craig-Hallum Capital Group.
Eric Lauriers
Great. And thank you for taking my questions. And congrats on a very nice quarter here. First question for me, just on the growth outlook for FRE. It sounds like you have some increased marketing initiatives underway. I'm wondering if you could just kind of help us understand the growth outlook for sort of expanded velocity or perhaps SKU counts in existing doors versus kind of the growth coming from new door penetration? And if you can sort of help us break that out between kind of near-term and longer-term opportunity, that would be helpful.
Summer Frein
Eric, this is Summer. Thanks for the question. So as you know, we launched with a focus on national distribution this year and continue to scale and add new independent retailers. As you also know, getting into chains is a little bit more of a longer runway and chains are the predominant place where OST is sold, about 67%, 70% of the category is sold through chain convenience stores. And larger chain stores take a little bit more time to get into. But as you know, we have relationships and long-standing relationships where our products are currently sold with those chain stores. And so we are in active conversations and expanding distribution. And with the expansion of our 6-milligram products and 3 milligram to come in Q1, we're really excited about continuing to expand the portfolio across that chain universe.
Eric Lauriers
All right. That's helpful. And then just for my follow-up, so this kind of new Alp brand, the Tucker Carlson affiliated brand has been reported by Wall Street Journal. Patents have been filed. Obviously, we haven't seen an official announcements from turning Point Brands just yet. But just wondering if you can kind of comment high level on your thoughts for the Alp brand for this partnership. Just kind of any color you may be able to provide would certainly be very helpful for us.
Graham Purdy
Eric, it's Graham. I hope you're doing well. Look, at this point in time, we're not going to talk about Alp today, but we will have some updates in the near future.
Operator
And your next question comes from the line of Michael Legg of Benchmark.
Michael Legg
Thanks. Good morning. When you look at the FRE sales going forward with the introduction of the 3 and 6 milligram, what percent of your sales do you think will come from the new 3, 6 milligram versus the larger milligram down the road?
Summer Frein
Mike, so as you know, the majority of the volume in the category is taken up by 3- and 6-milligram products, nearly 70% of the category. And so the fact that we've been as successful as we have been with 9, 12 and 15 has been very encouraging for us. We continue to hear consumers talk about our product differentiation, including mouth feel and flavor. And so as we get into where the majority of the category is, we're quite encouraged about the early comments that we've heard from consumers and getting into that 6- and 3-milligram category. And the early sales that we have for 6 milligram have also been very encouraging, incremental to our business, and we're continuing to get that really great consumer feedback. Reorders on our D2C site, for example, have been quite encouraging.
Michael Legg
Okay. And then just a follow-up on that. When you look at your supply chain for FRE and then the obviously growing demand within the retail space, can you talk about what may be the limiting factor? Is it getting new accounts to take the product? Or is it having enough product to get into the doors?
Graham Purdy
Mike, look, I think it's -- we've talked about this in the past, getting into chains is somewhat of a transactional event because of the process and no two chains are alike in terms of their planograms and the cycle times that it takes to get in there. We feel great about our manufacturing capacity at this point in time. And I think one of the other areas that we're looking at right now is given the results of the past election, exploring U.S. manufacturing options may be of interest depending on what potential tariff environment looks like.
Michael Legg
Okay. And then just one last question. When we look at the alt channel versus your traditional distribution, does an all channel unit offer larger revenue opportunity than a traditional convenience store? Or are they similar? How do you view the opportunities for sell-through in the alt channel per unit?
Summer Frein
That's a great question. Categorically, we believe the TAM for the alt space is as large, if not larger in some cases than the convenience store channel. And given the runway for growth, given that we're under-indexed in the alternative channel, the profit is quite significant for us as we think about that. That being said, the two channels are converging quite a bit. So we are definitely mindful of how those channels are playing together and making sure that we're tackling every opportunity that comes our way in a profitable manner.
Operator
Your next question is from the line of Nick Anderson of ROTH MKM.
Nick Anderson
Yes, good morning. And thanks for taking our questions and congrats on the quarter here. The first question for me, just on the FRE and the pricing strategy side. You've taken share within Stoker's as you've kind of priced that product competitively. Are you following a similar blueprint for FRE? Just your sense of the pricing strategy and how you're looking to capture share as you enter new stores there.
Summer Frein
Yes, sure. Thanks for the question, Nick. As we think about the FRE brand, it is a premium brand that we believe can compete at a premium pricing level with the other major competitors in the marketplace, and our pricing strategy will reflect that.
Nick Anderson
Okay. I appreciate that color. And then second one for me, just on
Graham Purdy
Nick, Graham, welcome. The cigar category is a massive opportunity for this company. There's a lot of correlation with consumers in that channel with the rest of the
Operator
And due to the constraints of time, we do need to conclude our Q&A session there. I would like to hand back over to Graham Purdy for closing remarks.
Graham Purdy
Thanks, operator. I appreciate everybody joining the call today. We're excited about the results coming out of Q3, and we look forward to talking to you in a few months.
Transcript from November 9, 2024
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