- Q3 2024 Adjusted EBITDA of $27.2 million, up 11% over prior
year
- Zig-Zag and Stoker’s Products Net Sales for Q3 2024 Increased
8% Year-Over-Year
- Company increases full-year 2024 adjusted EBITDA guidance to
$101 to $103 million
Turning Point Brands, Inc. (“TPB” or “the Company”) (NYSE: TPB),
a manufacturer, marketer and distributor of branded consumer
products, including alternative smoking accessories and consumables
with active ingredients, today announced financial results for the
third quarter ended September 30, 2024.
Q3 2024 vs. Q3 2023
- Total consolidated net sales increased 3.8% to $105.6 million
- Zig-Zag Products net sales increased 5.5%
- Stoker’s Products net sales increased 12.1%
- Creative Distribution Solutions net sales decreased 17.4%
- Gross profit increased 4.0% to $53.7 million
- Net income increased 14.3% to $12.4 million
- Adjusted net income increased 9.8% to $15.9 million (see
Schedule B for a reconciliation to net income)
- Adjusted EBITDA increased 11.3% to $27.2 million (see Schedule
A for a reconciliation to net income)
- Diluted EPS of $0.68 and Adjusted Diluted EPS of $0.87 compared
to $0.58 and $0.76, respectively, in the same period one year ago
(see Schedule B for a reconciliation to Diluted EPS)
Graham Purdy, President and CEO, commented, “We were pleased by
our third quarter results. We believe Zig-Zag is on a sustainable
growth trajectory. Stoker’s MST continued to grow market share,
while FRE sales more than quadrupled versus year-ago and grew 26%
sequentially as we continue to expand our national footprint.”
Zig-Zag Products Segment (47% of total net sales in the
quarter)
For the third quarter, Zig-Zag Products net sales increased 5.5%
to $49.3 million driven by strong performance in our North American
Papers & Wraps business as well as solid growth in cigars.
For the quarter, the Zig-Zag Products segment gross profit
increased 2.2% to $27.3 million. Gross margin declined 180 basis
points to 55.4% driven primarily by product mix.
Stoker’s Products Segment (39% of total net sales in the
quarter)
For the third quarter, Stoker’s Products net sales increased
12.1% to $41.4 million. The segment was driven by low single-digit
growth from MST and triple-digit growth off of a low base for FRE
partially offset by low-single-digit decline in loose-leaf chew.
For the third quarter, total Stoker’s Products segment volume
increased 2.9%, while price / product mix increased 9.2%.
For the quarter, the Stoker’s Products segment gross profit
increased 12.1% to $23.1 million. Gross margin increased 10 basis
points to 55.8%
Creative Distribution Solutions (“CDS”) (14% of total net
sales in the quarter)
For the third quarter, CDS net sales were $14.9 million, gross
profit was $3.3 million, and gross margin was 22.1%.
Performance Measures in the Third Quarter
Third quarter consolidated selling, general and administrative
(“SG&A”) expenses were $33.2 million compared to $31.4 million
in the third quarter of 2023.
The third quarter SG&A included the following notable
items:
- $1.2 million of FDA PMTA-related expenses for modern oral
products compared to $0.3 million in the year-ago period; and
- $0.9 million of transaction related costs compared to $0.1
million in the year-ago period
Total gross debt as of September 30, 2024 was $250.0 million.
Net debt (total gross debt less unrestricted cash) as of September
30, 2024 was $216.4 million. The Company ended the quarter with
total liquidity of $92.4 million, comprised of $33.6 million in
cash and $58.8 million of asset backed revolving credit facility
capacity.
2024 Outlook
The Company is increasing its previous full-year 2024 adjusted
EBITDA guidance from $98 to $102 million to $101 to $103 million,
excluding CDS.
During the quarter, the Company re-purchased 26,978 shares of
common stock at a cost of $1.1 million.
On November 6, 2024, the Board of Directors of the Company
increased the Company’s share repurchase authorization by $77.9
million to an aggregate amount of $100.0 million.
Earnings Conference Call
As previously disclosed, a conference call with the investment
community to review TPB’s financial results has been scheduled for
10:00 a.m. Eastern on Thursday, November 7, 2024. Investment
community participants should dial in 10 minutes ahead of time
using the toll-free number (800) 751-9871 (international
participants should call (646) 307-1963) and follow the audio
prompts after typing in the event ID: 6640134. A live listen-only
webcast of the call will be available on the Events and
Presentations section of the investor relations portion of the
Company website (www.turningpointbrands.com). A replay of the
webcast will be available on the site two hours following the
call.
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
generally accepted accounting principles in the United States
(GAAP), this press release includes certain non-GAAP financial
measures including EBITDA, Adjusted EBITDA, Adjusted Net Income,
Adjusted Diluted EPS and Adjusted Operating Income (Loss). A
reconciliation of these non-GAAP financial measures accompanies
this release.
About Turning Point Brands, Inc.
Turning Point Brands (NYSE: TPB) is a manufacturer, marketer and
distributor of branded consumer products including alternative
smoking accessories and consumables with active ingredients through
its iconic Zig-Zag® and Stoker’s® brands. TPB’s products are
available in more than 217,000 retail outlets in North America, and
on sites such as www.zigzag.com. For the latest news and
information about TPB and its brands, please visit
www.turningpointbrands.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements may generally be identified by the use of words such as
"anticipate," "believe," "expect," "intend," "plan" and "will" or,
in each case, their negative, or other variations or comparable
terminology. These forward-looking statements include all matters
that are not historical facts. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. As a result, these statements are not guarantees of future
performance and actual events may differ materially from those
expressed in or suggested by the forward-looking statements. Any
forward-looking statement made by TPB in this press release, its
reports filed with the Securities and Exchange Commission (the
“SEC”) and other public statements made from time-to-time speak
only as of the date made. New risks and uncertainties come up from
time to time, and it is impossible for TPB to predict or identify
all such events or how they may affect it. TPB has no obligation,
and does not intend, to update any forward-looking statements after
the date hereof, except as required by federal securities laws.
Factors that could cause these differences include, but are not
limited to those included it the Company’s Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and other reports filed by the
Company with the SEC. These statements constitute the Company’s
cautionary statements under the Private Securities Litigation
Reform Act of 1995.
Financial Statements Follow on Subsequent Pages
Turning Point Brands, Inc. Consolidated Statements of
Income (dollars in thousands except share data) (unaudited)
Three Months Ended September 30,
2024
2023
Net sales (1)
$
105,617
$
101,722
Cost of sales
51,918
50,100
Gross profit
53,699
51,622
Selling, general, and administrative expenses
33,169
31,385
Operating income
20,530
20,237
Interest expense, net
3,773
3,984
Investment (gain) loss
(203
)
2,101
Gain on extinguishment of debt
-
(481
)
Income before income taxes
16,960
14,633
Income tax expense
4,601
3,767
Consolidated net income
12,359
10,866
Net (loss) income attributable to non-controlling interest
(16
)
35
Net income attributable to Turning Point Brands, Inc.
$
12,375
$
10,831
Basic income per common share: Net income attributable to
Turning Point Brands, Inc.
$
0.70
$
0.62
Diluted income per common share: Net income attributable to Turning
Point Brands, Inc.
$
0.68
$
0.58
Weighted average common shares outstanding: Basic
17,722,855
17,595,980
Diluted
18,448,720
20,098,450
(1) Net sales include excise taxes billed to
customers of $0.8 million and $1.0 million for the three months
ended September 30, 2024 and 2023, respectively.
Turning
Point Brands, Inc. Consolidated Balance Sheets (dollars
in thousands except share data)
(unaudited)
September 30, December 31, ASSETS
2024
2023
Current assets: Cash
$
33,557
$
117,886
Accounts receivable, net of allowances of $59 in 2024 and $78 in
2023
10,582
9,989
Inventories, net
106,416
98,960
Other current assets
34,197
40,781
Total current assets
184,752
267,616
Property, plant, and equipment, net
26,082
25,300
Deferred income taxes
919
1,468
Right of use assets
10,788
11,480
Deferred financing costs, net
1,984
2,450
Goodwill
136,413
136,250
Other intangible assets, net
78,621
80,942
Master Settlement Agreement (MSA) escrow deposits
29,482
28,684
Other assets
18,968
15,166
Total assets
$
488,009
$
569,356
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable
$
13,436
$
8,407
Accrued liabilities
30,475
33,635
Current portion of long-term debt
-
58,294
Total current liabilities
43,911
100,336
Notes payable and long-term debt
248,282
307,064
Lease liabilities
9,057
9,950
Total liabilities
301,250
417,350
Commitments and contingencies Stockholders' equity:
Preferred stock, $0.01 par value; authorized shares 40,000,000;
issued and outstanding shares -0-
-
-
Common stock, voting, $0.01 par value; authorized shares,
190,000,000; 20,167,180 issued shares and 17,716,847 outstanding
shares at September 30, 2024, and 19,922,137 issued shares and
17,605,677 outstanding shares at December 31, 2023
202
199
Common stock, nonvoting, $0.01 par value; authorized shares,
10,000,000; issued and outstanding shares -0-
-
-
Additional paid-in capital
123,833
119,075
Cost of repurchased common stock (2,450,333 shares at September 30,
2024, and 2,316,460 shares at December 31, 2023)
(82,263
)
(78,093
)
Accumulated other comprehensive loss
(2,112
)
(2,648
)
Accumulated earnings
146,014
112,443
Non-controlling interest
1,085
1,030
Total stockholders' equity
186,759
152,006
Total liabilities and stockholders' equity
$
488,009
$
569,356
Turning Point Brands, Inc. Consolidated Statements
of Cash Flows (dollars in thousands) (unaudited)
Nine Months Ended September
30,
2024
2023
Cash flows from operating activities: Consolidated net income
$
37,455
$
27,916
Adjustments to reconcile net income to net cash provided by
operating activities: Gain on extinguishment of debt
-
(1,858
)
Loss on sale of property, plant, and equipment
38
34
Gain on MSA investments
(14
)
-
Depreciation and other amortization expense
3,393
2,388
Amortization of other intangible assets
2,337
2,315
Amortization of deferred financing costs
1,947
1,795
Deferred income tax expense
349
694
Stock compensation expense
5,720
4,660
Noncash lease income
(317
)
(48
)
Loss on investments
2,722
11,162
Changes in operating assets and liabilities: Accounts receivable
(412
)
(2,112
)
Inventories
(7,281
)
3,036
Other current assets
3,075
(1,384
)
Other assets
(1,031
)
(5,110
)
Accounts payable
5,019
2,865
Accrued liabilities and other
(3,679
)
(6,348
)
Net cash provided by operating activities
$
49,321
$
40,005
Cash flows from investing activities: Capital expenditures
$
(3,516
)
$
(4,206
)
Purchases of investments
(8,865
)
(200
)
Proceeds from sale of investments
4,520
-
Purchases of non-marketable equity investments
(1,250
)
-
Proceeds on the sale of property, plant and equipment
3
3
MSA escrow deposits, net
44
-
Net cash used in investing activities
$
(9,064
)
$
(4,403
)
Cash flows from financing activities: Convertible Senior
Notes repurchased
$
-
$
(41,794
)
Payment of Convertible Senior Notes
(118,541
)
-
Proceeds from call options
-
114
Payment of financing costs
(133
)
-
Payment of dividends
(3,644
)
(3,354
)
Exercise of options
1,341
419
Redemption of options
(328
)
(346
)
Redemption of restricted stock units
(840
)
-
Redemption of performance based restricted stock units
(1,212
)
(995
)
Common stock repurchased
(4,170
)
-
Net cash used in financing activities
$
(127,527
)
$
(45,956
)
Net decrease in cash
$
(87,270
)
$
(10,354
)
Effect of foreign currency translation on cash
$
(29
)
$
22
Cash, beginning of period: Unrestricted
$
117,886
$
106,403
Restricted
4,929
4,929
Total cash at beginning of period
$
122,815
$
111,332
Cash, end of period: Unrestricted
$
33,557
$
96,071
Restricted
1,959
4,929
Total cash at end of period
$
35,516
$
101,000
Non-GAAP Financial Measures
To supplement our financial information presented in accordance
with generally accepted accounting principles in the United States,
or U.S. GAAP, we use non-U.S. GAAP financial measures, including
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS,
and Adjusted Operating Income (Loss). We believe Adjusted EBITDA
provides useful information to management and investors regarding
certain financial and business trends relating to our financial
condition and results of operations. Adjusted EBITDA, Adjusted Net
Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss)
are used by management to compare our performance to that of prior
periods for trend analyses and planning purposes and are presented
to our board of directors. We believe that EBITDA, Adjusted EBITDA,
Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating
Income (Loss) are appropriate measures of operating performance
because they eliminate the impact of expenses that do not relate to
business performance.
We define “EBITDA” as net income before interest expense, gain
(loss) on extinguishment of debt, income tax expense, depreciation,
amortization. We define “Adjusted EBITDA” as net income before
interest expense, gain (loss) on extinguishment of debt, income tax
expense, depreciation, amortization, other non-cash items and other
items that we do not consider ordinary course in our evaluation of
ongoing operating performance. We define “Adjusted Net Income” as
net income excluding items that we do not consider ordinary course
in our evaluation of ongoing operating performance. We define
“Adjusted Diluted EPS” as diluted earnings per share excluding
items that we do not consider ordinary course in our evaluation of
ongoing operating performance. We define “Adjusted Operating Income
(Loss)” as operating income (loss) excluding other non-cash items
and other items that we do not consider ordinary course in our
evaluation of ongoing operating performance.
Non-U.S. GAAP measures should not be considered a substitute
for, or superior to, financial measures calculated in accordance
with U.S. GAAP. EBITDA, Adjusted Net Income, Adjusted EBITDA,
Adjusted Diluted EPS, and Adjusted Operating Income (Loss) exclude
significant expenses that are required by U.S. GAAP to be recorded
in our financial statements and is subject to inherent limitations.
In addition, other companies in our industry may calculate this
non-U.S. GAAP measure differently than we do or may not calculate
it at all, limiting its usefulness as a comparative measure.
In accordance with SEC rules, we have provided, in the
supplemental information attached, a reconciliation of the non-GAAP
measures to the next directly comparable GAAP measures.
Schedule A Turning Point Brands,
Inc. Reconciliation of GAAP Net Income to Adjusted
EBITDA (dollars in thousands) (unaudited)
Three Months Ended
September 30,
2024
2023
Net income attributable to Turning Point Brands, Inc.
$
12,375
$
10,831
Add: Interest expense, net
3,773
3,984
Gain on extinguishment of debt
-
(481
)
Income tax expense
4,601
3,767
Depreciation expense
981
782
Amortization expense
1,204
844
EBITDA
$
22,934
$
19,727
Components of Adjusted EBITDA Corporate and CDS restructuring (a)
186
190
ERP/CRM (b)
154
138
Stock options, restricted stock, and incentives expense (c)
1,769
1,824
Transactional expenses and strategic initiatives (d)
873
76
FDA PMTA (e)
1,242
275
Non-cash asset impairment (f)
-
2,173
Adjusted EBITDA
$
27,158
$
24,403
(a)
Represents costs associated with
corporate and CDS restructuring, including severance.
(b)
Represents cost associated with
scoping and mobilization of new ERP and CRM systems and cost of
duplicative ERP licenses.
(c)
Represents non-cash stock
options, restricted stock, incentives expense and Solace
performance stock units.
(d)
Represents the fees incurred for
transaction expenses.
(e)
Represents costs associated with
applications related to FDA premarket tobacco product application
("PMTA"). The PMTA regime requires the Company to submit an
application to the FDA to receive marketing authorization to
continue to sell certain of its product lines with continued sales
permitted during the pendency of the applications. The application
is a onetime resource-intensive process for each covered product
line; however, due to the nature of the implementation process for
those product lines already in the market, applications can take
multiple years to complete rather than the typical one-time
submission. The Company currently has only two product lines
currently subject to the PMTA process, having utilized other
regulatory pathway options available for our other product lines.
The Company does not expect to submit additional PMTA applications
for any new product lines after the submission for the remaining
two are complete.
(f)
Represents impairment of
investment assets.
Schedule B Turning Point Brands
Reconciliation of GAAP Net Income to Adjusted Net Income and
Diluted EPS to Adjusted Diluted EPS (dollars in thousands
except share data) (unaudited)
Three Months Ended Three
Months Ended September 30, 2024 September 30,
2023 Income before income taxes Income tax expense
(h) Net loss attributable to non-controlling interest
Adjusted Net Income Adjusted Diluted EPS Income
before income taxes Income tax expense (h) Net loss
attributable to non-controlling interest Net Income
Diluted EPS GAAP Net Income and Diluted EPS
$
16,960
$
4,601
$
(16
)
$
12,375
$
0.68
$
14,633
$
3,767
$
35
$
10,831
$
0.58
Gain on extinguishment of debt (a)
-
-
-
-
-
(481
)
(124
)
-
(357
)
(0.02
)
Corporate restructuring (b)
186
50
-
136
0.01
190
49
-
141
0.01
ERP/CRM (c)
154
42
-
112
0.01
138
36
-
102
0.01
Stock options, restricted stock, and incentives expense (d)
1,769
480
-
1,289
0.07
1,824
470
-
1,354
0.07
Transactional expenses and strategic initiatives (e)
873
237
-
636
0.03
76
20
-
56
0.00
FDA PMTA (f)
1,242
337
-
905
0.05
275
71
-
204
0.01
Non-cash asset impairment (g)
-
-
-
-
-
2,173
559
-
1,614
0.08
Tax benefit (i)
-
(494
)
-
494
0.03
-
(575
)
-
575
0.03
Adjusted Net Income and Adjusted Diluted EPS
$
21,184
$
5,253
$
(16
)
$
15,947
$
0.87
$
18,828
$
4,272
$
35
$
14,521
$
0.76
Totals may not foot due to rounding
(a)
Represents gain on extinguishment
of debt.
(b)
Represents costs associated with
corporate and CDS restructuring, including severance.
(c)
Represents cost associated with
scoping and mobilization of new ERP and CRM systems and cost of
duplicative ERP licenses.
(d)
Represents non-cash stock
options, restricted stock, incentives expense and Solace PRSUs.
(e)
Represents the fees incurred for
transaction expenses.
(f)
Represents costs associated with
applications related to FDA premarket tobacco product application
("PMTA"). The PMTA regime requires the Company to submit an
application to the FDA to receive marketing authorization to
continue to sell certain of its product lines with continued sales
permitted during the pendency of the applications. The application
is a onetime resource-intensive process for each covered product
line; however, due to the nature of the implementation process for
those product lines already in the market, applications can take
multiple years to complete rather than the typical one-time
submission. The Company currently has only two product lines
currently subject to the PMTA process, having utilized other
regulatory pathway options available for our other product lines.
The Company does not expect to submit additional PMTA applications
for any new product lines after the submission for the remaining
two are complete.
(g)
Represents impairment of
investment assets.
(h)
Income tax expense calculated
using the effective tax rate for the quarter of 27.1% in 2024 and
25.7% in 2023.
(i)
Represents adjustment from
quarterly tax rate to annual projected tax rate of 25% in 2024 and
23% in 2023.
Schedule C Turning Point Brands, Inc.
Reconciliation of GAAP Operating Income (Loss) to Adjusted
Operating Income (Loss) (dollars in thousands) (unaudited)
Consolidated Zig-Zag Products Stoker's
Products Creative Distribution Solutions
3rd Quarter
3rd Quarter
3rd Quarter
3rd Quarter
3rd Quarter
3rd Quarter
3rd Quarter
3rd Quarter
2024
2023
2024
2023
2024
2023
2024
2023
Net sales
$
105,617
$
101,722
$
49,324
$
46,754
$
41,380
$
36,916
$
14,913
$
18,052
Gross profit
$
53,699
$
51,622
$
27,327
$
26,745
$
23,071
$
20,572
$
3,301
$
4,305
Operating income (loss)
$
20,530
$
20,237
$
17,378
$
16,672
$
17,162
$
15,703
$
(278
)
$
(460
)
Adjustments: Corporate restructuring
186
190
-
-
-
-
-
190
ERP/CRM
154
138
-
-
-
-
-
-
Transactional expenses and strategic initiatives
873
76
-
-
-
-
-
-
FDA PMTA
1,242
275
-
-
-
-
-
-
Adjusted operating income (loss)
$
22,985
$
20,916
$
17,378
$
16,672
$
17,162
$
15,703
$
(278
)
$
(270
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241107220943/en/
Investor Contacts
Turning Point Brands, Inc. ir@tpbi.com
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