Larry Wexler - President, Chief Executive Officer Louie Reformina - Chief Financial Officer Graham Purdy - Chief Operating Officer.

Good morning. My name is Chris and I will be your conference operator today. At this time I’d like to welcome everyone to the Turning Point Brands 2021 Q3 Earnings Call. All lines have been placed on mute to prevent any background noise. [Operator Instructions]. Thank you. Louie Reformina, Chief Financial Officer. You may begin..

Thank you. Good morning, everyone, and this is Louie Reformina, our Chief Financial Officer. Joining me are Turning Point Brands’ President and CEO, Larry Wexler and Graham Purdy, Chief Operating Officer. This morning we issued a news release covering our third quarter results.

This release is located in the IR section of our website at www.turningpointbrands.com where a replay of today’s conference call will also be available. In this call we will discuss our consolidated and segment operating results and provide our perspective on our progress and our strategic plans.

As is customary, I direct your attention for the discussion of forward-looking and cautionary statements in today’s press release and the risk factors in our filings with the SEC.

The disclosure outlines various factors that could cause actual results to differ materially from projections or forward-looking statements that may be cited in today’s discussion.

These forward-looking statements and projections are not guarantees of future performance and you should not place undue reliance upon them, except as provided by the federal securities laws and we undertake no obligation to publicly update or revise any forward-looking statements.

In 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 Larry Wexler, our CEO..

Thank you, Louie, and good morning everyone. Thank you for joining the call. Our third quarter performance fell in line with our expectations. Revenue was up 6% to $110 million; however, our core business was up 11%. Adjusted EBITDA was up 10% to $26 million and outpaced revenue growth.

Zig-Zag saw a 17% growth during the quarter as a result of contributions from our strategic initiatives including paper cones, e-commerce and growth within our newly consolidated Canadian business. This was despite a headwind we had in our last business from a trade inventory load that pulled forward sales into the previous quarter.

We're excited about our upcoming product launches in the fourth quarter and beyond and new marketing initiatives and to energize the Zig-Zag brand to drive growth going forward. Stoker’s saw a 2% growth driven by double digit growth in MST.

This saw a sudden decline in our chewing tobacco business which faced a very challenging comp against the third quarter of 2020 when we saw double digit growth as a result of the competitor being offline due to a COVID related disruption.

MST continued its steady share gain and continued to be favorably positioned for the secular shifts in the back to the value category. NewGen which navigated around another quarter of disruption, around the PMTA process declined 3% during the quarter.

That saw a 22% growth in gross profit for the comparable period in the previous year when we saw transitory pricing pressure ahead of the PMTA deadline. This year the quarter was challenged by the uncertainties around Market Denial Order or MDOs issued by the FDA related to the PMTA’s.

We disclosed in mid-September that we receive the MDO for certain of our proprietary vapor products, which was primarily comprised of our non-menthal, non-tobacco e-liquids. Based on the rationale outlined in the MDO, we believe that there was an oversight in the handling of our application.

A letter appeared to be a form letter, which was similar to those received by numerous other industry participants, many of which we believe did not have complete applications. In addition there were references in the MDOs that conflicted with the actual application we submitted.

We filed a petition for relief earlier this month and we are subsequently notified by the FDA that our MDOs were rescinded. Our applications are now being put back under review.

We have dedicated significant time and resources to the PMTA process, having spent close to $19 million since we began the process, including $1 million just this past quarter to ensure that we have a robust application that demonstrated that marketing these products are appropriate for the protection of public health, or in other words taking into account the risk of these products attracting never users, youth and former users.

It demonstrated how effective these products, these vapor products are in motivating consumers to dramatically reduce or completely cease the use of combustible cigarettes. We believe our application makes this case with a lot of science behind it and our strong regulatory team and capabilities as produced in the application that sets us apart.

As an example of the depth of our science, including in our filings, our population health impact model, which was developed specifically for our [inaudible] was recently published in a Peer Reviewed Journal.

With the recession of the MDO’s, we are looking forward to engaging with the FDA and having an evidence based, scientific review of our products and are hopeful that the FDA will maintain a pathway to market, while potentially lower risk products with a more than 30 million adult cigarette smokers in the United States.

As we await the ultimate outcome of the PMTA process, we have had to manage through a dynamic environment created by the uncertainties around the process.

Over the last two months MDOs have been issued to most of the e-liquid vape market, but without clarity from the FDA and the actual products including the MDOs which has led to uncertainty with our customers on what products they can carry.

Meanwhile disposal vape products, some of which are still under review are offering a wider variety of flavors and have been taking share in the market. In addition, both e-liquid and disposable vape manufactures are now switching their product offerings to synthetic nicotine, which is currently viewed as a gray area regarding FDA regulations.

Needless to say, this is creating a lot of confusion in the market and requiring us to be nimble while ensuring we are compliant. To effectively compete, we have to balance caring enough inventory and a diversified portfolio, while mitigating our risk on products that may have to come off the market.

As a result of this trade off, we have been reducing our inventory exposure, which in the short term will impact our sales until we get clarity on the regulatory and competitive landscape. Last week the USPS also issued its final rule eliminating the shipping of e-cigarettes under the PACT Act.

The major private carriers for the most part have already stopped shipping vapor products earlier this year. This will require us to ramp up and shift into our alternative shipping network which we have been building throughout the year.

We think we can get through the quarter – but we think we can get there during this quarter, but we also have to manage competing against players that are skirting regulation [inaudible] enforecement.

We believe the hurdles created by both the PMTA process and the PACT Act can ultimately be a positive for us from a competitive standpoint in the longer term in this large category. But it may cause some disruption in the shorter term as our customers and consumers adjust to an evolving market.

With a clouded short term visibility created by this environment, we believe it is prudent for us to adjust our expectations for our vape business as reflected in the guidance we issued this morning. While we managed through this transitory period, we are being conservative in our guidance.

We will remain nimble with our vape business, but longer term we still believe that vape consumers will not go away. We are well positioned to serve them with our products and most importantly, our distribution infrastructure as you await clarity from the PMTA process and eventual FDA's enforcement. Now let’s move on to capital deployment.

Today we announced an increased share repurchase program that reflects our positive outlook on the prospects of our company. In August we increased our stake in ReCreation Marketing from 50% to 65%.

ReCreation Marketing has been instrumental to our growth in Canada, including placing Zig-Zag in close to 80% of the volume weighted distribution within private dispensaries in the country.

We are quickly becoming a one-stop shop for alternative smoking accessory products in Canada through an extensive variety of third party proprietary product offerings.

ReCreation Marketing will also be transitioning its name to Turning Point Brands Canada Corporation, to better reflect the strategic importance and how integral they are to the organization.

While this quarter was otherwise relatively quiet from the acquisition and investment standpoint, we maintain a very healthy pipeline of opportunities synergistic to our company. With over $150 million of liquidity at the end of the quarter we remain well positioned to capitalize on these opportunities.

Looking forward, while our vape business has created unwanted volatility and certainly grabbed a hold of the headlines and interest regarding our company, recently it is important to note that our core business with Zig-Zag and Stoker’s which completes the project, a vast majority of our segment operating income are performing well and continuing to remain favorably positioned in our markets.

We remain optimistic in the outlook of our core business where we will continue to adapt our vape business appropriately to a dynamic market. To add some color and perspective on our quarter and the path forward, let me turn the call over to Graham Purdy, Chief Operating Officer..

Thank you, Larry. Let me now give you a quick snapshot of the performance from the segment level. Zig-Zag products saw double digit growth in the quarter led by strong double digit growth in U.S. rolling papers and a Canadian business that more than doubled as a result of the growth and consolidation of Rec marketing.

Our MYO cigar wraps business saw a low single digit decline from the previous year. The business would have grown if not for a trade inventory load the pulled forward sales into the second quarter. In the U.S.

Zig-Zag papers continued its position as the leading premium and the overall paper brand with 33% share in the measured market according to MSAi. Zig-Zag dropped by 1.6 points as we comped against a noisy period, when industry participants experienced COVID related supply shortages.

During the quarter our paper cones had 30.9 share of this segment in the major channel according to the MSAi, up 2.5 points from the previous year as our volumes nearly doubled. Paper cones now comprise approximately 20% of our sales in our U.S. papers business after minimal sales two years ago.

There's more room for penetration of cones within the measured channel as roughly 30% of stores that receive paper products received cones during the quarter.

Outside the measured channel, our business continues its nice growth trajectory with our e-commerce platform nearly doubling in sales from the prior year, while we are enhancing our initiatives to penetrate head shop, dispensaries and in product manufacturers.

In Canada ReCreation Marketing which is now being consolidated continues to experience a strong organic growth ramp with even bigger reach after the acquisition of DVW, a distributor in Western Canada.

ReCreation has reached breakeven from an operating profit standpoint and is poised for further growth in an extensive set of products that have been added to their portfolio.

The outlook for our Zig-Zag segment remains bright with a full pipeline of new product introductions including Zig-Zag hemp wraps and a Zig-Zag natural leaf tobacco wrap this quarter. Next year we aim to reintroduce Zig-Zag cigar and launch some more diversified portfolios cone and wrap offerings.

Cigars is a $2.5 billion plus market from a manufacturer revenue standpoint. It is a fairly consolidated market, so it will not be easy, but it does not take much share to have a meaningful impact to our business over the next few years.

We're also excited about new marketing initiatives our team is launching to reenergize Zig-Zag in the adult consumer space.

We launched a YouTube channel during the quarter and we'll be launching an exciting new concept called Zig-Zag Studio in December with plans to include a video series, podcast, limited edition apparel in collaboration with partners that have a wide adult audience reach. Moving to our Stoker’s segment.

Stoker’s products are low single digit growth in the quarter with double digit growth from MST again being the driver. Within MST, our growth was strong despite comping against COVID related consumption benefits last year and a trade inventory reduction in the quarter.

Stoker’s market share was 5.6%, up 50 basis points compared to a year ago according to MSAi. Stoker's moist snuff is now in stores representing 62% of industry volumes, 2.6 points above last year's level, which still leaves the long runway for further growth through same store sales growth and filling our distribution gaps.

Chewing tobacco sales saw a high single digit decline during the quarter again – after comping against a quarter that saw double digit growth when a competitor experienced COVID related disruptions in the prior year period.

Stoker's Chew was the number one chewing tobacco brand in the third quarter and despite the tough comp gained 130 basis points with 25.6 shares according to MSAi.

With the continued secular shift into the value category and Stoker's positioning as a leading value brand, the chewing tobacco business is well placed to provide us with a stable, annuity stream of cash flow going forward. Moving to NewGen where we continue to manage through a disruptive environment.

Our vape distribution business saw high single digit declines due to the market dynamics resulting from the PMTA, along with a pull forward of sales into the second quarter ahead of major parts of the implementation of the PACT Act.

Larry detailed the challenging environment we are currently operating in with our vape distribution business, but we do believe we can be favorably positioned with our business as a regulatory process unfolds.

Earlier in the year we had already developed a completely new distribution system outside of USPS, FedEx and UPS, comprised of LTL shippers, last mile carriers and retail drop ship locations for convenient adult consumer pick up in anticipation of the PACT Act.

We believe that there are a number of competitors, particularly in the B2C segment who will have difficulties restructuring their systems, which provides a longer term opportunity. However, we expect some volatility in the fourth quarter as we activate this system as the new regulations were implemented without any transition period.

Outside of vape, Wild Hempettes contributed to our growth as we continued to roll out of both these products. And with that, I'll turn it to Louie for a review our third quarter financial performance. Louie..

Net sales of $433 million to $443 million. This is compared to previous guidance of $447 million to $462 million. This range is unusually wide for this point in the year given the limited visibility in the vape regulatory landscape.

Adjusted EBITDA for the full year is now expected to be $104 million to $108 million with the previous guidance of $108 million to $113 million. NewGen is expected to make up only mid to high single digits of our overall company EBITDA. For Zig-Zag we expect strong double digit sales growth.

As a reminder, in 2020 our Cigar Wraps Business benefited from $5 million in backlog sales in the fourth quarter as we recovered from manufacturing related disruptions early in the year, which will affect our year-over-year comps, but we still expect growth for year-over-year segment in the quarter even against that comp.

For Stoker’s, we expect mid to high single digit sales growth compared to previous guidance of high single digit growth. That is being impacted by a slight reduction in trade inventory. For NewGen we now expect a decline in revenue compared to previous guidance of flat sales growth.

This includes a double digit declines for vape distribution compared to previous guidance of low single digit declines, offset by growth in Nu-X. For the fourth quarter we spent $93 million to $100 million in sales, with growth from the Zig-Zag and Stoker segment and a double digit decline in NewGen due to the limited visibility in our vape business.

Now to help bridge that guidance, we took down guidance by $16.5 million on the revenue side of the mid-point. Roughly $3 million of that was due to the new products that have been pushed into the first quarter given supply chain and logistical delays. The rest of the decline is primarily due to the disruption in our vape business.

Within the vape business most of the decline we outlooked is due to the transitory impact form the PACT Act as we ramped up our logistics network through the quarter and the rest is through the market dynamic that we mentioned previously.

Moving to our balance sheet, we ended the quarter with over $130 million of cash in the balance sheet, $150 million of available liquidity.

We repurchased $6.4 million of shares during the quarter and today announced the Board increased our share repurchase program by $30.7 million to $50 million, which we use opportunistically and reflects the positive outlook we have on our company. During the quarter we prepaid a $10 million seller note related to the acquisition of Durfort assets.

The note that carried a 7.5% interest coupon and we're able – we were able to repay below par, resulting in a $0.4 million gain on extinguishment of debt. Subsequent to the quarter we also received notification of forgiveness for $7.5 million unsecured loans, which will result in the extinguishment of debt in the fourth quarter.

Regarding acquisitions and investments, our pipeline of opportunities to help create back business remains active. With that, I'll turn the call back to Larry for closing comments..

Thank you, Louie. I would like to note that in our vape distribution business our run rate thus far in October has performed better than our implied guidance. We hope that our guidance proves us conservative, where we have only limited control and visibility over how the regulatory environment is unfolding and disruption is creating the market place.

We will also have to see how customers adjust to new shipping options as a result of the PACT Act and that transition is happening in real time as we speak. That is why we felt it was prudent to adjust our expectations accordingly. I would like to close by reiterating that our core business continues to perform well, but remains favorably positions.

The strong performance is a result of the hard work of our employees. I want to thank them personally once again for their commitment and contribution to our success. Thank you for participating in the call today and with that, I'd like to open the call to questions..

Thank you. [Operator Instructions]. And our first question is from Vivien Azer with Cowen. Your line is open..

Hi! Thank you. Good morning..

Good morning, Vivien..

So I think we should start with the guidance. The market is clearly taking down the stock more than the implied percentage reduction to your revenues and EBIT, which clearly tells you that the problem isn't just with the guided revision, but kind of how the year I think has been telegraphed thus far.

So Larry and/or Louie, if you reflect back on the positive guidance revision you guys did in July, how are you guys thinking about regulatory inventory disruptions, because it doesn't seem like the PACT Act is new pact, right, we were talking about that last quarter. The disruption from competitor inventories due to COVID, that was known too.

So just trying to get a better understanding of what changed, because you guys were so much more constructive, you know we're heading into the July trend around your full year guide and you’re walking that essentially all back..

So let me let me give color on the numbers. So our guidance increase in July, it reflected the strong quarter we had in Q2. We didn’t really change our guidance in the second half of the year by much.

Now so if you look at what has changed with our guidance for Q4, some of that is the $3 million that I mentioned for these new products that we have forecasted where we are likely getting our containers that will not be able to get into market till Q1 of next year and so those are just increasingly difficult challenges that we saw over the last few months, and the rest of the vape business.

You know with the vape business, the market has been incredibly dynamic, especially with the MDBR’s that we’ve seen over the last couple of months and this shift in terms of the product offerings within the market, and the PACT Act instantiation, you know I’ll let Larry kind of give details to that.

It came suddenly without a transition period to our alternative shipping network..

Yeah Vivian, Louie had just made a bunch of comments to the USPS for the implementation of the PACT Act and one thing we have stressed very strongly was that there needs to be a transition period to set up the alternative distribution network that we had in place, but it takes time to activate.

Almost all our recommendations were taken by the USPS, except for that one and so that caught us a little bit off guard..

Okay, fair enough. Given all these moving pieces, you know I appreciate the color on the revenue shift into 1Q. I recognize you know we still have you know two months left in 2021, but can you offer any more color around your expectations for Zig-Zag heading into 2022. You're going to be cycling you know two years of a very explosive growth.

This I think it’ll be helpful to manage expectations around that. Thanks..

So yeah, so you know we feel pretty bullish about our Zig-Zag business. Our outlook has not changed on Zig-Zag and the growth next year is going to be driven by continued advances in our growth initiatives, specifically paper cones, e-commerce in our first year alternative channel. The investment will be supplemented with new product offerings.

The Zig-Zag hemp wraps and Zig-Zag natural leaf wraps that we launched this quarter, Cigar is the massive opportunity that we think incrementally can add to our sales over the next few years and we have some more new product that we have in our pipeline that we’re pretty excited about as well..

Okay, fair enough. Thanks for the questions..

The next question is from Susan Anderson with B. Riley. Your line is open..

Hi! Good morning. Larry, I just wanted to follow-up. I think you commented at the end there that October was trending better than the implied guide.

I guess is that across all of the segments or just the ones that you lowered or I mean would you – could that potentially continue throughout the rest of the quarter?.

Okay Susan, good morning. No, I was just specifically addressing the NewGen business, the vape business, trying to highlight that the guide is not reflective of the underlying trend in the business. That it has a large component of the transition to the new logistics system that we're setting up.

It's going to be a tough couple of weeks until we get that in place..

Got it. Okay, that's helpful. And then just really quick on the gross margin, the total gross margin for the fourth quarter, should we expect that to be similar to what we saw in the first three – third quarter and that high 48%, 49% range..

I think from the segment level I would expect a similar gross margin across each segment from what we saw in Q3 and you know honestly with – yeah, so it will be kind of similar to what we’ve seen there. And then the mix is slightly better because we’ll have less NewGen sales in Q4 versus Q3.

Just to kind of add some color on the PACT Act shipping, it's important to have business – you know it’s transitory.

We’ll get our – we’ll get our logistics and network up eventually by the quarter and we think this is a big positive for us going forward, because we do think that’s all advantages for us on the B2C business going forward as other people likely will not have the same kind of capabilities we have to manage through this.

And you know as Larry mentioned, we’re trending better. It's very hard to forecast. This happened Thursday, so these transitions are happening real time. Our vape, ahead of our vape seemed more proactive and our logistics team with [inaudible], they’ve done a phenomenal job so far this year in managing a lot of the changes we've seen.

It could be better than we expect, but we’re literally operating up half a week or day [ph] and giving this guidance for the quarter..

Okay, that's really helpful. And then maybe if you could talk a little bit, I think you mentioned in the press release as now with the recreation partnership it'll allow you to enter Canada with more products.

So maybe can you remind us which products are already in Canada and which are not, and I guess just the timeline for getting more in there?.

Sure. We're selling Zig-Zag into the ReCreation Marketing. So basically we’re seeing Zig-Zag into dispensaries there. So we show almost 80% of the volume where its reaching the private market.

Yeah, we're also complementing that with other products within NewGen that we signed through that, and a decent amount of ReCreation Marketing sales is third party products as well, along with a proprietary set of products that they’ve developed on their own their own.

So they have a brand called Choice Leaf, which is alternative wrap products that they are selling as well and they are continuing to ramp those products..

Okay, and then just last one really quick on the Stoker’s revenue growth guidance, the slight decline in guidance there. I think you mentioned the trade inventory reduction.

Is that the only driver there? Are you still expecting loose-leaf chew to be impacted in the fourth quarter?.

Yeah. Sorry Susan, this is Graham. No, I think you know what happened to us in the third quarter was essentially an unwind between a half a week and a week, you know trade inventory. We’ve having delays out there relative to you know the tax increase, which we don't necessarily think will move through this year, but just a lot of noise in the system.

We're still comfortable with how our MST product is progressing in the marketplace and we feel well positioned with our Stoker’s chewing tobacco in the value segment..

Let me just add something to Graham's comment. I have the benefit or the curse, I don't know which one it is, of having been around here a long time, and I've seen this behavior by wholesalers when they start hearing about the potential implementation of a FET increase because of the floor taxes that's generally added to the bill.

Don't know – it’s hard to see or total rationality for that, but we saw in 2009 in our business and maybe we’ll have it occurring again and we’ll see if we’re safe..

Great! Okay, thanks for all the details you guys. Good luck for the rest of the year..

Thank you..

The next question is from Eric Des Lauriers with Craig-Hallum Capital Group. Your line is open..

Great! Thanks for taking my questions. First thing for me, with the NewGen, what's the size of the vape distribution business and anything you can give us from $1 or a mix basis would be great. And then how should we think about fixed costs during this disruptive period.

You know presumably you got some increased costs with that shift to you know alternative logistics channels. But just wondering if we should expect some negative operating leverage during this declining period? Thanks..

Sure. So we didn't use it. I was think about it as you know over 90% vape distribution to the profits that are really coming from the vape distribution in that segment. You know our fixed costs have come down a little bit, but it's important to note that there's also a high, pretty high variable cost in that NewGen business.

So people have kind of – our sales could bridge our guidance, our Zig-Zag product sales that are being deferred come in at somewhere around 50% contribution margin and our sales from our NewGen segment are coming in at about 20% contribution margins..

Okay, that's helpful. And then within Zig-Zag, so obviously its good to see that we got some new products coming online in Q1. I understand it's a bit of a shift or yeah, I guess a shift from Q4 into Q1.

As we look you know beyond those reps and at the cigar portfolio that you guys acquired, I’m not sure you’re looking for guidance, but just what's a reasonable timeframe that we can expect you guys to begin to monetize that IP and you know when we could expect from Zig-Zag, you know cigars or cigarillos products to hit the market here as we look towards ’22.

Thanks..

Yeah, hey Eric, its Graham. So we’re already monetizing with the products that we acquired in the deal through units at back. Obviously the price for us is the expansion of Zig-Zag into the marketplace.

We see a distinct opportunity around the Natural Leaf cigar segment and I think you'll start seeing us bear some fruits towards the end of the first quarter into the second..

Okay, great. Alright, thanks guys..

[Operator Instructions] Our next question is from Gaurav Jain with Barclays. Your line is open..

Hi! Good morning everyone. So just you know a question which is probably similar to some of the questions that have been asked earlier, but you know the stock is clearly down a lot today.

So for an investor looking at your company today and people are trying to let's say have a clear view on the stock, how should we think on the opportunity with Turning Point Brands.

You know if you could just help us think through – you know I'm not asking for guidance, but just sort of some broad sort of ranges in which how far can store card MDS grow? How big can Zig-Zag become? Is there any way to quantify those numbers?.

Yeah, so look, if you look at this segment-by-segment, Zig-Zag our outlook hasn’t changed.

We think we've got a nice secular tailwinds year with what you're seeing in terms of cannabis consumption and the change of perception around cannabis usage, where you know it's essentially becoming like having a drink and I think that is rapidly evolving and that type of tailwind is still there, and we feel bullish about our ability to outperform the market with some of the new products that we are launching and the growth initiatives that we have.

Stoker’s, we think we still have a strong runway for growth on fusion gains. You know I think we're probably not going to see double digit growth on the overall segment, but we still feel pretty good about growth in that segment over the next couple of years. The way we positioned NewGen is this has tremendous optionality.

You know clearly there's a big short term reduction in Q4 as we have to manage the risk associated with that business, but that is not something that you know we think it's permanent and we think as the PMTA regulatory process unfolds and as people have to comply with the PACT Act, we think we are significantly advantaged given our infrastructure to tackle what we think is a massive opportunity in terms of share gains in that business.

Larry, I’ll let you add your color on....

No, we are really pleased with the core business. I think I mentioned the core business is up 11% this quarter. The new products are – particularly the wrap products are positioned in a place where the wraps are growing the fastest and we have these tremendous cigar opportunities.

In fact we are going against some very big competitors in cigars, a very concentrated market. We have been successful in the past and we think it's an opportunity and I think the opportunity will roll out over 2022.

It’s going to take some time to get the distribution and get our products in the market, but very confident that we can get our piece of that market..

Okay, that's very helpful. The second question is just you know the comment around the moist snuff market. I think I heard the number that the market was down 5% in Q3.

Is this like the slowdown post the COVID bump which happened and you know if you could share how things have been in October so far? Like is the market continuing to slow down or has it picked up?.

Yeah, I think – Hi Gaurav! This is Graham. Yeah, I think you’re seeing a shift back to sort of that historical rates with moist snuff that we saw you know pre in the noise of COVID. So I think kind of the way to think about it is you know so how the category was tracking in 2019.

You know from a where we are today perspective and we feel pretty good about where the business has been thus far and continuing on that trajectory..

Great! Thanks a lot..

Your next question is from Richard Evans with Mara River Capital Management. Your line is open..

Oh hi! Just a couple of housekeeping questions. I wonder if you could give us the absolute dollar amount that the consolidation of recreation contributed in the quarter..

Sure. So there’s really two pieces of ReCreation Marketing and so there is a DWP’s which is what we call inorganic growth and there is a ReCreation Marketing piece, which you know came from very low levels last year that we’ve grown this year, with the penetration of Zig-Zag.

So that contributed about $5 million of sales during the quarter with the interrupting a little split roughly evenly between those two pieces..

Okay, so that's $5 million of benefit from now. So I guess in prior quarters you didn't consolidated it and now you did..

Yeah, but there was – you know I would say last year was minimal levels in ReCreation Marketing. So we view the growth within the base recreation business as organic growth, as decent amount of those sales are Zig-Zag sales into REC Marketing..

Okay and the last couple quarters you kind of called out the split between in dollar amounts between wraps and paper. I was wondering if you can kind of give that disclosure there to the U.S. business..

Sure. So on – so you’ll see on our, the investor presentation, the break out of papers and wraps, but wraps in the third quarter was about $17 million in sales and U.S. papers which we include with e-commerce is about $17 million as well..

Okay, great. Thanks..

[End of Q&A]:.

We have no further questions at this time. I'll turn the call back over to the presenters..

Well, thank you for joining the call. We look forward to talking to you at the end of the – after the fourth quarter. Thank you very much..

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating and you may now disconnect..