Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Turning Point Brands Inc (TPB, Financial) reported a 7% increase in adjusted EBITDA, reaching over $27 million for the quarter.
- Zig-Zag's revenue grew by 8% to $50.5 million, driven by strong performance in North American papers, wraps, and cigars.
- Stoker's revenue increased by 19% to $42.7 million, with a notable 14% rise in moist snuff sales.
- The FRE product line saw a significant increase in sales, up 76% sequentially and over 500% year-over-year.
- TPB increased its guidance for 2024 adjusted EBITDA to $98 million to $102 million, reflecting confidence in continued growth.
Negative Points
- Gross margin decreased by 8 basis points to 49.6%, impacted by segment and product mix.
- The alternative channel experienced a 3% decline in the quarter, attributed to timing issues with trade shows and large purchases.
- Zig-Zag's gross margins decreased by 330 basis points to 53%, primarily due to product mix.
- Chewing tobacco sales declined by approximately 1% from the previous year.
- The company faces challenges in measuring alt versus traditional C-store sales due to market convergence.
Q & A Highlights
Q: Can you discuss the timing and rationale behind launching the 6-milligram FRE product now?
A: Graham Purdy, CEO, explained that the decision was based on providing a differentiated product for consumers and customers. The 6-milligram segment represented about 52% of the market in Q2, offering a strong opportunity to grow the consumer base and expand the product portfolio.
Q: What is the current manufacturing capacity for FRE, and can you disclose any specific levels?
A: Graham Purdy, CEO, stated that they have a strong manufacturing partner with an appetite to invest, ensuring confidence in meeting future demands. However, specific capacity levels were not disclosed.
Q: How are you approaching marketing spend and trade promotion for FRE, considering its growth potential?
A: Graham Purdy, CEO, mentioned that they are data-driven, using robust data to inform spending decisions. They balance trade promotion and marketing expenses based on data insights, maintaining profitability while investing in brand growth.
Q: How do you view the trajectory for FRE in the second half of the year, especially regarding inventory and sales cycles?
A: Graham Purdy, CEO, noted that while the sales cycle for large chain accounts is long, they are confident in their ability to penetrate these accounts over time. They are managing inventory carefully to avoid overstocking and are focused on ensuring product visibility and consumer engagement.
Q: Can you elaborate on the blurring lines between traditional C-store customers and the alternative channel for Zig-Zag products?
A: Graham Purdy, CEO, explained that traditional distributors are increasingly targeting alternative channel customers, creating opportunities for Zig-Zag. This convergence benefits Zig-Zag due to its strong relationships with traditional distributors, enhancing its market presence.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
