Turning Point Brands Reports Strong Earnings Growth

Turning Point Brands Inc ((TPB)) has held its Q3 earnings call. Read on for the main highlights of the call.

Turning Point Brands Inc. recently held its earnings call, revealing a generally positive sentiment driven by robust revenue and EBITDA growth. The company has successfully navigated challenges in the Zig-Zag segment and a competitive promotional environment, with strategic investments and expansion efforts yielding significant results. The positive aspects of growth and strategic advancements were emphasized, outweighing any negative challenges faced during the period.

Significant Revenue and EBITDA Growth

Turning Point Brands reported a substantial increase in revenue, up 31% to $119 million for the quarter. Adjusted EBITDA also saw a notable rise, increasing 17% to $31.3 million. In light of these strong figures, the company has raised its adjusted EBITDA guidance to a range of $115 million to $120 million, up from the previous $110 million to $114 million.

Modern Oral Segment Expansion

The Modern Oral segment demonstrated remarkable growth, with revenue, including FRE and ALP, surging 628% year-over-year to $36.7 million. In response to this success, the company has increased its full-year nicotine pouch sales guidance to a range of $125 million to $130 million, up from $100 million to $110 million.

Stoker’s Segment Growth

Stoker’s segment also experienced significant growth, with revenue increasing by 81% to approximately $74.8 million. This includes a 4% increase in looseleaf sales and a 6% increase in MST sales, highlighting the segment’s strong performance.

Successful Capital Raise

The company successfully raised $100 million of gross proceeds through its at-the-market offering program, with an average share price of $98.59. This capital raise is aimed at accelerating growth, particularly in the Modern Oral business.

Expansion and Investment in Sales Force

Turning Point Brands is ahead of schedule in its plan to double the size of its sales force by the end of 2026. The company has also developed new sales and merchandising tools to ensure optimal product assortment and execution at retail.

Zig-Zag Revenue Decline

Despite overall growth, the Zig-Zag segment saw a revenue decline of 11% year-over-year to $44.2 million, and a 6% sequential decline. This decline is attributed to opportunity costs as the company focuses on expanding the Modern Oral segment.

Negative Free Cash Flow

The company reported a negative free cash flow of $1 million for the third quarter, which includes the first coupon payment on a high-yield bond. This reflects some of the financial challenges faced during the period.

Promotional Environment Challenges

The earnings call highlighted the highly competitive promotional environment in the Modern Oral category, which has impacted pricing strategies. Despite these challenges, the company remains focused on strategic growth.

Forward-Looking Guidance

Looking ahead, Turning Point Brands has provided updated guidance, with consolidated revenue for the third quarter increasing by 31% to $119 million. The company has raised its adjusted EBITDA guidance for the full year and increased its full-year consolidated nicotine pouch sales guidance. The capital raised will be used to further accelerate growth in the Modern Oral business, indicating a strong focus on future expansion.

In conclusion, Turning Point Brands Inc.’s earnings call reflected a positive outlook, with strong revenue and EBITDA growth leading the way. While challenges remain in certain segments, the company’s strategic investments and expansion efforts are paying off, positioning it well for future success.