Turning Point Brands Inc ((TPB)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Turning Point Brands Inc. recently held its earnings call, revealing a strong performance marked by significant revenue and EBITDA growth. The company’s success was largely driven by the Modern Oral segment and strategic investments, although challenges were noted in the Zig-Zag segment with revenue declines and gross margin pressures. Despite these challenges, the overall sentiment was positive, with achievements in growth and increased guidance taking center stage.
Revenue and EBITDA Growth
Turning Point Brands reported a remarkable 25% increase in revenue, reaching $116.6 million, alongside a 15% rise in Adjusted EBITDA to $30.5 million for the quarter. This growth underscores the company’s successful strategies and market positioning.
Modern Oral Segment Expansion
The Modern Oral segment emerged as a key growth driver, with revenue hitting $30.1 million, which now accounts for 26% of the company’s total revenue. Notably, white pouch sales surged nearly 8x year-over-year and 35% sequentially, highlighting the segment’s robust expansion.
Stoker’s Segment Performance
Stoker’s segment demonstrated impressive growth with a 63% increase in revenue, totaling approximately $70 million. This was driven by a 4% rise in MST sales and a consumer trend towards trading down in the premium loose leaf category.
Increased Guidance
Reflecting its strong performance, Turning Point Brands raised its adjusted EBITDA guidance to a range of $110 million to $114 million. Additionally, the full-year nicotine pouch sales guidance was increased to between $100 million and $110 million, signaling confidence in continued growth.
Positive Consumer Reception
The company reported favorable consumer feedback on its Modern Oral products, evidenced by increased reorder rates and positive trade receptivity, further solidifying its market position.
Zig-Zag Revenue Decline
Despite overall growth, the Zig-Zag segment faced challenges, with revenue declining by 6.9% to $47 million. This was attributed to the wind down of the CLIPPER business and a deemphasis on the cigar category.
Gross Margin Pressures
The Zig-Zag segment also experienced a decline in gross margins by 410 basis points, driven by changes in product mix and the accelerated exit from the CLIPPER business.
Tariff and Currency Impacts
Turning Point Brands is managing tariff and currency-related impacts by building inventory and negotiating cost reductions, showcasing proactive measures to mitigate external financial pressures.
Forward-Looking Guidance
Looking ahead, Turning Point Brands has outlined plans to double its sales force by 2026 and continues to invest in U.S. manufacturing and strategic marketing initiatives. The company’s guidance reflects ongoing investments in sales, marketing, and manufacturing capabilities, with a focus on sustaining growth and enhancing market presence.
In summary, Turning Point Brands Inc.’s earnings call painted a picture of robust growth and strategic foresight, with the Modern Oral segment leading the charge. While challenges in the Zig-Zag segment were noted, the company’s increased guidance and proactive strategies underscore a positive outlook for future performance.