Turning Point Brands Archives - Green Market Report

Debra BorchardtApril 27, 2022
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6min8580

Turning Point Brands, Inc. (NYSE: TPB) announced financial results for the first quarter ended March 31, 2022. Turning Point reported that net sales decreased 6.3% to $100.9 million, while net sales for Zig-Zag and Stoker’s Products increased 10.1%. Net income decreased 6.7% to $11.0 million. The adjusted EBITDA dropped 9.8% to $25.3 million and the diluted EPS of $0.55 and Adjusted Diluted EPS of $0.71 as compared to $0.57 and $0.80 in the same period one year ago, respectively.

“Our first quarter results were in-line with our expectations as we continued to grow our market share for both Zig-Zag and Stoker’s while navigating a difficult consumer and regulatory environment to drive profitability in each of our segments, including NewGen. Sales decreased 6 percent from the previous year driven by a 37 percent decline in NewGen sales but showed double-digit growth excluding NewGen,” said Yavor Efremov, President and CEO, Turning Point Brands. “Zig-Zag delivered another strong growth quarter led by our U.S. Papers business which built on its market leading share during the quarter. At the same time, Stoker’s maintained its growth trajectory driven by double-digit growth in the Moist Snuff Tobacco (MST) business which benefited from consumer trade-down as a leading value brand. Despite the expected sales decline, NewGen maintained positive profitability during the quarter while improving the distribution reach for its regulated products.”

Zig-Zag Grows

Turning Point said that the U.S. rolling papers and e-commerce business grew double-digits, aided by approximately $2 million in sales from an inventory load with certain customers. A low-single-digit decline in the cigar wraps business and double-digit decline in the Canadian business partially offset this growth. The decline in the cigar wraps business was partially due to a trade inventory adjustment compared to the prior-year period. Order timing that benefitted the prior year period contributed to the decline in the Canadian business. Wild Hemp sales moved into the Zig-Zag Products segment during the current quarter which contributed $0.2 million, or 0.6 percent to the segment growth. For the first quarter, total Zig-Zag Products segment volume increased 7.1 percent, while price / mix increased 4.3 percent.

For the quarter, the Zig-Zag Products segment gross profit increased 5.8% to $26.3 million. The segment’s gross margin contracted 300 basis points to 57.7 percent driven primarily by growth in lower gross margin products and lower margin contribution from the inclusion of the DVW acquisition in the current period.

“Paper cones and Zig-Zag’s e-commerce business continued to drive the growth within our U.S. papers business,” said Graham Purdy, Chief Operating Officer, Turning Point Brands. “We introduced a new line of Zig-Zag rough cut natural leaf cigars and ramped up Zig-Zag hemp wraps and natural leaf tobacco wraps distribution during the quarter. Meanwhile, our marketing team continues to launch exciting programs to strengthen the Zig-Zag brand including its recent partnership with luxury fashion line AMIRI for its Spring 2022 collection. We are also eager to launch CLIPPER lighters distribution in the second half of the year which has the potential to be a meaningful contributor to the segment’s long-term growth.”

Vape Struggles

For the first quarter, NewGen Products’ net sales decreased 37.1% to $23.5 million. The regulatory environment for the vape businesses continues to impact sales. For the quarter, the NewGen Products segment gross profit decreased 37.7% to $7.8 million. The segment gross margin contracted 40 basis points from the previous year to 33.0 percent.

“Our vape business remained profitable even with the expected weakness during the quarter as it continues to navigate challenges presented by the regulatory environment,” concluded Purdy. “Encouragingly, we continued to ramp our last mile logistics and distribution capabilities through the quarter. We will continue to adapt to the market environment as it goes through another transition period with the FDA expanding regulation of nicotine products. TPB’s applications for our vapor products remain under review.”

Mr. Efremov added, “We continue to monitor FDA developments. While added regulation may cause short-term disruption, this is a necessary step to fully regulate the industry, create a level playing field, and provide consumers with additional reduced-risk alternatives to cigarettes.”


Debra BorchardtFebruary 22, 2022
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7min6610

Turning Point Brands, Inc. (NYSE: TPB) reported its financial results for the fourth quarter and full-year ending December 31, 2021 as sales remained flat year-over-year. Turning Point‘s fourth-quarter total sales in 2021 were $105.283 million down slightly from 2020’s fourth-quarter total sales of $105.285 million. Net income in the fourth quarter fell to $11 million from last year’s $14 million.

For the full year 2021, sales increased 10 % to $445.5 million, while net income increased 36.3% to $52.1 million. This was in line with the company’s previously announced lowered guidance. The diluted EPS was $2.52 and Adjusted Diluted EPS was $3.03 versus $1.85 and $2.60 in the same period one year ago, respectively.

Turning Point also forecasts that in 2022 Zig-Zag Products sales are expected to range between $193 to $203 million and Stoker’s Products sales range between $127 to $134 million. The company also said that “Given the dynamic regulatory environment impacting the vape industry, it is difficult to provide reliable guidance for the NewGen Products segment. However, the company’s current expectation is to generate consolidated adjusted EBITDA in-line with fiscal year 2021 despite anticipated volatility in the NewGen Products segment.”

“Our fourth-quarter results capped off another strong year of performance for Turning Point Brands with EBITDA growing 20 percent for the fiscal year. Sales for the fourth quarter finished above our previous guidance and in-line with the previous year despite a 22 percent decline in NewGen sales which fell within our previous guidance,” said Yavor Efremov, President and Chief Executive Officer, Turning Point Brands. “Zig-Zag delivered another quarter of double-digit growth against a tough comparable period, while Stoker’s re-accelerated to high-single digit growth driven by mid-teens growth in the Moist Snuff Tobacco (MST) business. Additionally, NewGen managed through a challenging quarter clouded by the evolving regulatory landscape while maintaining long-term upside potential in a post-PMTA environment.”

Zig-Zag Is The Winner

For the fourth quarter, net sales of Zig-Zag Products increased 13.6% to $46.1 million. The company said that growth was led by double-digit advances in the U.S. rolling papers and Canadian businesses, including consolidation of Turning Point Brands Canada (formerly ReCreation Marketing) which contributed $4.5 million in the Q4 period. “This was partially offset by a double-digit decline in our cigar wraps business as the prior year period benefitted from the re-stocking of channel inventory that was depleted by a COVID-related manufacturing shutdown earlier in 2020. The cigar wraps business was up sequentially from the third quarter of 2021.” “Our Zig-Zag business experienced organic growth during the quarter despite a double-digit percentage growth headwind from the re-stocking of cigar wraps channel inventory in the prior year period,” said Graham Purdy, Chief Operating Officer, Turning Point Brands.

For the fourth quarter, net sales of Stoker’s Products increased 8.3% to $31.2 million on double-digit growth of MST. “This was partially offset by a low single-digit decline of loose-leaf chewing tobacco. MST represented 63 percent of Stoker’s Products revenues in the quarter, up from 59 percent a year earlier. For the fourth quarter, total Stoker’s Products segment volume increased 2.1 percent, while price / mix increased 6.2 percent.”

Vape Struggles

For the fourth quarter, net sales of NewGen Products decreased 22 % to $28.0 million. For the full year, net sales of NewGen Products decreased 7.5% to $144.7 million. Sales were impacted by the regulatory environment in the vape businesses. “NewGen continues to navigate multiple challenges driven by the evolving regulatory environment,” said Purdy. “We began building a last mile network infrastructure that had completed over 38,000 shipments prior to the PACT Act implementation in October. Since then, we have improved our operational positioning having received an exemption with the USPS to ship our vape products to qualified B2B customers while continuing to ramp our B2C logistics capabilities. Meanwhile, our proprietary products remain under review by the FDA as our regulatory capabilities has allowed us to remain one of the few companies continuing to navigate the PMTA process.”

Clipper Agreement

In addition to delivering earnings, Turning Point announced that it had entered into an agreement with Flamagas, a lighter manufacturer, for exclusive distribution of CLIPPER lighters in the United States and Canada. CLIPPER is the number one reusable lighter in the world and the number two overall world lighter brand. CLIPPER is currently available in several leading retail chains with a growing presence in additional retail outlets, dispensaries, smoke shops, and headshops.

“Given Flamagas’ global reach and renowned product portfolio, this partnership represents a tremendous opportunity to expand CLIPPER’s reach in the United States and Canada,” said Frank Vignone, Senior Vice President of Sales and Marketing at Turning Point Brands. “CLIPPER and Zig-Zag create a powerful combination of iconic premium brands in the roll-your-own market perfectly suited to leverage Turning Point Brands’ distribution infrastructure touching over 210,000 retail outlets in North America.”

Mr. Efremov continued, “Turning to capital deployment, we increased our share repurchase activity during the quarter and continue to maintain a strong balance sheet. Going forward, I am eager about the opportunity to work with a great organization, continue our momentum and invest further to deliver future organic and inorganic growth.”

 

 


StaffDecember 16, 2021
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Turning Point Brands (NYSE: TPB) has appointed Yavor Efremov as President and Chief Executive Officer, effective January 11, 2022. Mr. Efremov succeeds the Company’s current CEO, Larry Wexler, who will retire in January following 18 highly successful years at TPB. Mr. Wexler will remain on the Board of Directors and serve as a consultant to the Company following his retirement.

Outlook Update

Turning Point also updated its guidance for 2021 revenue. The company said it now expects 2021 revenue and EBITDA to be near the higher end of the previous guidance, In October, Turning Point also revised its guidance downward from a range of $447 to $462 million to $433 to $443 million. At the time, the company cited the FDA regulatory environment along with the further implementation of the PACT Act. Turning Point also noted that to a lesser extent supply chain-related delays were pushing some sales of new products into the first quarter of 2022. The company also changed its forecast for its adjusted EBITDA to $104 to $108 million versus the previous guidance of $108 to $113 million.

“Yavor joined Turning Point’s Board of Directors in July 2021 to help develop our long-term strategic plan. Since then, he has spent extensive time working closely with teams in each area of the business,” said David Glazek, Chairman of Turning Point Brands. “Yavor came highly recommended by some of the most successful operators and investors in the world. The Board is confident he has the right skill-set to help grow the Company to the size and scale necessary to maximize value in a world driven by constantly shifting consumer preferences.”

Prior to joining Turning Point Brands, Mr. Efremov served as the CEO of Motorsport Network, where he was responsible for upgrading the IT infrastructure, processes, and company strategy to support the integration of more than 30 businesses around the world. He also served as a senior executive at Liberty Media Corp., where he was instrumental in sourcing, financing, and growing Liberty’s investments in multibillion-dollar businesses, including Charter Communications and Formula 1. Prior to that, Mr. Efremov worked as an investment banker at Goldman Sachs & Co. and as a corporate lawyer at the law firm of Cleary, Gottlieb, Steen & Hamilton. Mr. Efremov holds a J.D. from Yale Law School and a Ph.D. in economics from Yale University. He also has a B.S. in mathematics and a B.A. in economics from Furman University.

“It has been my sincere privilege to serve Turning Point Brands and its stakeholders during this period of significant growth as we increased EBITDA fivefold over the past 18 years,” said Mr. Wexler. “I want to thank both the Board for the opportunity to serve our shareholders, and my colleagues for their dedication, hard work and, most importantly, their resiliency during my tenure. Turning Point Brands is well-positioned with highly recognizable brands and a strong management team. I look forward to working with Yavor and the next generation of leaders to build upon the success we have achieved.”


Debra BorchardtNovember 29, 2021
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A new report from Headset has found that Americans aren’t as into pre-rolls as Canadian consumers. Between August 2020 and August 2021, the market share of pre-rolls in Canada averaged 18.6%, while in the US, the market share of pre-rolls only averaged 9.5%. The only exception it seems is the Massachusetts market. Apparently, they really like pre-rolls in that state. 

Cooper Ashley Senior Data Analyst at Headset said he could think of two reasons that could partly explain why the pre-roll market share is higher in Canada than in the US.
  • Firstly, PreRolls were one of the few product formats that have been available since the beginning of Canada’s cannabis market. A regulation change, dubbed ‘Cannabis 2.0’, allowed previously-prohibited product formats (such as vapor pens, edibles, and concentrates) to be sold in Canadian cannabis retailers at the beginning of 2020 – more than a year after the market originally launched. Most product categories that were introduced in ‘Cannabis 2.0’ still have significantly lower market shares in Canada than in the US. For example, over the previous 90 days, edibles made up about 11% of sales in the US, but only 5% of sales in Canada.
  • Secondly, Canadian Pre-Roll products tend to be larger. By that, I mean that there tends to be more total cannabis in a single Canadian pre-roll product than in a US pre-roll product. For example, over the previous 90 days the highest volume package size of pre-roll in the US was 1g, but 1.5g in Canada. A tendency towards larger package sizes unsurprisingly pushes up the average price of these products as well. Eg. Over the previous 90 days the average price of a pre-roll product was about $11 in the US and about $18 in Canada. That difference in size and price could cause consumers to think of a pre-roll more as a primary purchase, rather than a low-cost add-on item.

When Americans want to buy pre-rolls, they typically choose the connoisseur/infused segment, which makes up 32.4% of sales. Canadians aren’t as picky and this same segment makes up only 0.1% of sales. Pricing is a possible reason for the large difference in Connoisseur/Infused market share between the two countries. In Canada, they are priced 57% higher than the average item price of the other segments, while in the US they are priced only 18% higher than the other segments.

However, pricing might not be the only reason that Americans are choosing the infused joints.  Andrew DeAngelo, Cannabis Industry Consultant, and Strategic Advisor said, “The quality of legal cannabis in the U.S is better in full flower form not in pre-roll form motivating consumers to roll their own rather than getting a subpar pre-roll.”

Scott Grossman, Vice President of Corporate Development at Turning Point Brands (NASDAQ: TPB) (maker of ZigZag rolling papers) agrees with DeAngelo on the perceived quality of cannabis in pre-rolls. He said, “In the U.S., the old pre-rolls were historically viewed as a lower quality flower which may have capped sales—in addition, these items are typically additions to the basket versus the main intent of purchase.” Grossman thinks that Americans prefer to roll their own so that they can control the quality of the product. Despite that, he thinks the perception is slowly changing. 

Innovation

“Companies like Old Pal, Space Coyote, etc. have innovated to create shareable pre-roll packs which make a lot of sense, especially during the pandemic—no one wants to pass around a single joint,” said Grossman.”Nearly 30% of the U.S. pre-roll market is driven by infused pre-rolls—ie. flower either dipped in Kief, but more recently, pre-rolls with hash concentrates within (a better form factor).” 

More companies are producing mini-pre-roll packages so that people can have the social aspect of smoking joints together but without the passing around of a joint. The smaller size also means fewer unsmoked joints that the consumer now has to store without it falling apart or making a mess. For example, Green Thumb Industries (OTC: GTBIF) sells a package of five mini-pre-rolls called Dogwalkers. The idea is that the little joint is small enough to be enjoyed walking one’s dog. 

Cones could be another reason why Americans are rolling their own versus buying pre-rolls. The innovation of selling a cone-shaped empty joint with a small plunger to tamp down dry herb can turn those without joint-rolling skills into a master. Grossman said, “Without question for the consumer. Not only does it make it easier to roll, but new innovation at the cultivation/manufacturing facilities allows the production of pre-rolls at scale (which, to be clear, is still much more labor-intensive than tubes). In addition, a conical joint versus a straight tube/joint actually makes the burn better due to the “Venturi Effect” — because there’s more material on top, it produces a more consistent flavor because you’re burning more in the beginning (and less in the end). This creates less resin and because of increased pressure, it tends to burn smoother. Punchline—a more concentrated hit. Cones also tend to produce less waste (because there is less material near the tip).”

Joint burning performance is also a key issue for these consumers. DeAngelo said that rolling joints at home avoids the joint running problem (burning unevenly) associated with almost all store-bought joints in the US. “A joint that is stuffed by a machine runs like crazy compared to a joint rolled by hand. The way the fibers intertwine works better with a hand roll so the joint burns evenly. Americans are more sensitive to this perhaps. I know I am.” 

More Pre-Roll Differences

Headset also determined in its report that market shares of the Indica and Sativa Single Strain segments in Canada were more than double the size of their market share in the U.S. where Hybrid – Single Strain has more category share than Indica and Sativa combined. “We also find that the Cannagars/Blunts segment owned 4.2% of the Pre-Roll market in the US, while it only held 0.1% within Canada. 

While Americans haven’t been big buyers of pre-rolls to date, that could be changing. It seems companies have learned that tossing the crummy trim into a pre-roll isn’t going to sell. Social media accounts have shown various people buying these pre-rolls and then unwrapping them on camera to expose the insides. That exposure may have turned the tide on poor-quality pre-rolls. As consumers spread the word of an improved product, sales are likely to grow and could make this an improving category.

 


Debra BorchardtOctober 26, 2021
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Turning Point Brands, Inc. (NYSE: TPB) announced financial results for the third quarter ending September 30, 2021 with net sales increasing 5.5% to $109.9 million. This missed the Yahoo Finance average analyst estimate for revenue of $112 million.

Turning Point also reported that its net income increased 49.3% to $13.4 million and the adjusted EBITDA increased 9.9% to $26.3 million. The diluted EPS of $0.65 and Adjusted Diluted EPS of $0.72 rose versus last year’s $0.44 and $0.69 in the same period one year ago, respectively. This also missed the analyst estimate for earnings of $0.07 per share.

“Our third-quarter performance fell within our expectations with sales growth of 11% in our core business despite facing the headwind of COVID-related consumption and other benefits we experienced in the prior-year period,” said Larry Wexler, President, and CEO, Turning Point Brands. “Zig-Zag had another robust quarter driven by our strategic initiatives and growth within our Canadian business. Stoker’s saw double-digit growth in our Moist Snuff Tobacco (MST) business which drove growth in the overall segment. Regarding capital deployment, we continued to repurchase our shares during the quarter and today announced an increased share repurchase authorization. We also maintain a strong balance sheet to pursue a healthy pipeline of investment opportunities. Overall, we remain optimistic about the growth prospects in our core business.”

Outlook

Turning Point also revised its guidance downward from a range of $447 to $462 million to $433 to $443 million. The company cited the FDA regulatory environment along with the further implementation of the PACT Act. Turning Point also noted that to a lesser extent supply chain-related delays were pushing some sales of new products into the first quarter of 2022. The company also changed its forecast for its adjusted EBITDA to $104 to $108 million versus the previous guidance of $108 to $113 million.

Looking ahead to the fourth quarter, TPB said it expects net sales of $93 to $103 million with growth in the Zig-Zag and Stoker’s segments and a double-digit decline in NewGen. “A decline in sales for NewGen Products (compared to previous guidance of flat sales growth) which includes a double-digit decline in our vape distribution business (compared to previous guidance of low single-digit decline) offset by expected growth in Nu-X.”

On a positive note, TPB said it expects strong double-digit sales growth for Zig-Zag Products and mid-to-high single-digit sales growth for Stoker’s Products (compared to previous guidance of high-single-digit sales growth)

Mr. Wexler continued, “NewGen managed through a disruptive environment due to the uncertainty surrounding the PMTA process. We are encouraged by the FDA’s decision to reconsider and place back into review our application for our proprietary vapor products. I am confident that we submitted a robust application and look forward to engaging with the FDA in its review. We will manage through near-term disruptions and limited visibility in the vape distribution business resulting from the PMTA process and logistical transitions driven by the PACT Act. We have temporarily reduced our exposure to mitigate risk while we navigate the evolving regulatory landscape and adjusted our short-term guidance accordingly. We continue to believe that robust regulatory oversight is a positive for the industry and we believe we are favorably positioned to leverage our strong regulatory and logistics capabilities to capitalize on an attractive long-term opportunity.”


StaffOctober 11, 2021
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In a big “oops we goofed,”  the Food and Drug Administration (FDA)  took back its September 14 Marketing Denial Order for some of Turning Point Brands, Inc.  (NYSE: TPB) vape products. Turning Point said all of its proprietary vape products, including its Solace branded e-liquids, will continue to be marketed while they remain under review. They are currently under a pending Premarket Tobacco Product Applications (“PMTAs”) review.

Turning Point said that in its rescission letter the FDA stated, “Upon further review of the administrative record, FDA found relevant information that was not adequately assessed. Specifically, your applications did contain randomized controlled trials comparing tobacco-flavored ENDS to flavored ENDS as well as several cross-sectional surveys evaluating patterns of use, likelihood of use, and perceptions in current smokers, current ENDS users, former tobacco users, and never users, which require further review.” The letter further clarified that “at present, in light of the unusual circumstances, FDA has no intention of initiating an enforcement action against” the products.

“We are encouraged by the FDA’s decision to reconsider our product applications and look forward to engaging the agency as our PMTAs are reviewed,” said Larry Wexler, President and CEO, Turning Point Brands. “It is important that the PMTA process is transparent, purposeful, and evidence-based. Our organization dedicated significant time and resources in filing our applications in accordance with agency guidance. We remain hopeful that the depth and range of our studies and data will persuade the FDA that the continued marketing of our vapor products is appropriate for the protection of the public health and that the agency will ultimately preserve a diverse vapor market for the more than 30 million American adult smokers who may wish to transition from combustible cigarettes to lower risk alternatives.”

Turning Point had been selling vape products under the label Solace with flavors like Peach, Mango, and Marshmallow Crispy. These sugary flavors have been very popular with underage consumers and were a big selling point for the competitor Juul. Solace noted on its website that Federal law required e-liquid companies to submit a Premarket Tobacco Product Application (PMTA) to the U.S. Food and Drug Administration (FDA) in order to continue selling products in the United States. These applications require that e-liquid companies demonstrate that products are “appropriate for the protection of public health.”

Turning Point has reported spending $14 million in 2020 on the PMTA application according to the company’s annual filing. In 2019, the company spent  $2.2 million on the PMTA. Turning Point also said that as a result of the rescission letter, it withdrew both the petition for relief and motion to stay that it had filed with the 6th Circuit Court of Appeals.


Debra BorchardtSeptember 17, 2021
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Turning Point Brands, Inc. (NYSE: TPB), the owner of ZigZag rolling papers announced that the Food and Drug Administration (FDA) had issued a Marketing Denial Order or MDO in response to a Premarket Tobacco Product Application (“PMTA”) covering some of the company’s vapor products. Turning Point bought the Solace vape company in 2019.  The company’s stock was slipping in early trading in response and was lately selling at $46.35.

Turning Point has reported spending $14 million in 2020 on the PMTA application according to the company’s annual filing. In 2019, the company spent  $2.2 million on the PMTA.

“While we believe the FDA’s current conclusion is misguided, we will continue our dialogue with the agency in search of a path forward,” said Larry Wexler, President, and CEO, Turning Point Brands. “As we explore options for appealing this decision, we are hopeful that the agency reaffirms its commitment to science-based decision making and to its announced Comprehensive Plan, which includes fully transitioning adult consumers down the continuum of risk in order to reduce the morbidity and mortality associated with combustible cigarette use by preserving the diverse vapor market.”

Turning Point said in a statement that it stands behind the high quality of its PMTA. “We believe established that the products’ continued marketing would be ‘appropriate for the protection of public health,’ the standard established by the Family Smoking Prevention and Tobacco Control Act of 2009. These products are crucial to improving public health by helping adult smokers migrate to less harmful products. TPB will continue to engage with the FDA and other stakeholders as we consider options moving forward, including a formal appeal of the decision and potential legal relief.”

The PMTA denied by this MDO included an in-depth toxicological review, a clinical study, and studies on patterns and likelihood of use. Turning Point said, “We believe the data demonstrated that TPB products do not appeal to never users, youth, or former users and that a significant majority of users of TPB products had completely ceased use of combustible cigarettes. The scientific literature on lower-risk nicotine delivery systems shows that these products can significantly improve public health by providing alternatives that are much less harmful than combustible cigarettes.”

Solace Vapes

Turning Point had been selling vape products under the label Solace with flavors like Peach, Mango, and Marshmallow Crispy. These sugary flavors have been very popular with underage consumers and were a big selling point for the competitor Juul. Solace noted on its website that Federal law required e-liquid companies to submit a Premarket Tobacco Product Application (PMTA) to the U.S. Food and Drug Administration (FDA) in order to continue selling products in the United States. These applications require that e-liquid companies demonstrate that products are “appropriate for the protection of public health.”

The application deadline for the PMTA was September 9, 2020. After that date, any tobacco vapor product on the market would need to have submitted an application or be removed from commerce. Solace had already stated that it was no longer shipping its products to Arkansas, Rhode Island, Utah, Vermont, Massachusetts, New Jersey, New York, and Maine.

Past Sales

The past sales for vape products were significant. Turning Point reported that for 2019, net sales in the NewGen products segment increased to $153.4 million from $131.1 million in 2018, an increase of $22.2 million or 16.9%. The increase in net sales was primarily driven by higher Nu-X alternative products sales in 2019 (includes the Solace acquisition) and an additional eight months of IVG net sales in 2019. IVG is International Vapor Group that operates a strong B2C eCommerce business with direct sales to consumers nationwide and abroad through the Direct Vapor and VaporFi brands. Net sales were negatively impacted by the vape disruption in the fourth quarter of 2019.

 

 

 


Debra BorchardtJuly 27, 2021
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Turning Point Brands, Inc. (NYSE: TPB) reported financial results for the second quarter ended June 30, 2021 with sales increasing 16.8% to $122.6 million. The average analyst estimate for revenues was $106 million according to Yahoo Finance. Net income increased by 49.2% to $15.4 million. The diluted EPS was $0.73 and adjusted diluted EPS was $0.84 as compared to $0.49 and $0.66 in the same period one year ago. This beat the Yahoo Finance average analyst estimate of $0.65.

The solid performance caused the stock to move higher in early trading by 2% to $48. The average analyst price target is $63.

“Our second-quarter performance continued to demonstrate Turning Point’s positive growth momentum, led by our core market segments. Zig-Zag had an exceptional quarter with over 70 percent growth, driven principally by our strategic initiatives and aided by a favorable comparison against a COVID-related disruption in MYO cigar wraps the previous year. Stoker’s also delivered a solid quarter fueled by double-digit growth in our MST business,” said Larry Wexler, President, and CEO, Turning Point Brands.

Vape Challenges

For the second quarter, net sales of NewGen Products decreased 10% to $42.1 million. The company said that the decline was a result of a challenging comparison against the previous year period when TPB’s vape distribution business benefitted from a COVID-related disruption at a B2B competitor and strong B2C orders during state stay-at-home provisions. For the quarter, NewGen Products gross profit decreased 10.6% to $14.1 million. The segment gross margin contracted 20 basis points to 33.5%.

“NewGen performed above our expectations as our vape distribution business was able to navigate the implementation of the PACT Act, which increased the regulatory requirements around transporting vape products,” said Graham Purdy, Chief Operating Officer. “While we still expect short-term volatility in the vape distribution business around the PMTA process and PACT Act, we are encouraged by our current market positioning and potential of our business in a post-PMTA regulatory environment.”

Stokers

Stoker products account for 27% of the company’s sales. For the second quarter, net sales of Stoker’s Products increased 8.3% to $33.4 million on double-digit growth of MST, partially offset by the low single-digit decline of loose-leaf chewing tobacco. MST represented 62 percent of Stoker’s Products revenues in the quarter, up from 58 percent a year earlier. For the second quarter, the total Stoker’s Products segment volume increased 2.4 percent, and price/mix advanced 5.9 percent.

“Our Stoker’s MST business continues its strong growth trajectory and market share gains,” said Purdy. “Our loose-leaf chew business performed well against the previous year period, which had benefitted from a competitor being offline due to a COVID-related disruption.”

Looking Ahead

For the third quarter of 2021, TPB is forecasting net sales of $109 to $114 million. For the full year of 2021, TPB is estimating net sales of $447 to $462 million (up from previous guidance of $422 to $440 million). The company attributed the rosy projections to expected strong double-digit sales growth for Zig-Zag Products and high single-digit sales growth for Stoker’s Products. The company hopes for flat sales growth for NewGen Products (up from previous mid-to-low single-digit declines), which includes low single-digit declines for vape distribution (up from single-digit declines) offset by expected growth in Nu-X. The adjusted EBITDA is forecast to be $108 to $113 million (up from previous guidance of $103 to $108 million).


StaffJuly 22, 2021
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Turning Point Brands, Inc.  (NYSE: TPB) completed an $8 million strategic investment in cannabis lifestyle brand Old Pal Holding Company LLC. TPB invested in the form of a convertible note which includes additional follow-on investment rights.

“Turning Point has a proven track record of developing and growing brands and is capitalizing on this experience to identify highly recognizable, leading cannabis brands poised to experience significant growth,” said Larry Wexler, CEO, Turning Point Brands. “Given Old Pal’s favorable market position, the awareness of its products outside its current geographies and its unique licensing model, we are confident the brand is well-positioned to further penetrate the market and capitalize on the growth potential of the cannabis industry.”

Old Pal was founded by Rusty Wilenkin and Jason Osni in 2018 and capitalizes on the idea of shareable cannabis. They have trademarked the term”Share the Stoke” and say “Burn one down, pass it around.” The company sells pre-rolls and vapes. TPB is known for selling ZigZag rolling papers and other smoking accessories.

TPB’s investment will help Old Pal to expand its product offerings in existing states, which include California, Nevada, Michigan, Oklahoma, Ohio, Washington and Massachusetts, and will help create the infrastructure necessary to support continued territory and product expansion. As a result of Old Pal’s strong brand recognition and extensive network of licensed cultivation and production relationships, the company has the ability to scale its geographic footprint while continuing to offer consistent and readily available products.

“Old Pal’s mission is to spread the shareable cannabis lifestyle to customers across the U.S. through accessible and high-quality products,” added Charlie Cangialosi, COO, Old Pal. “Turning Point Brands’ experience with iconic brands, like Zig-Zag, and success in adjacent and complementary industries will allow us to bring the Old Pal experience to a wider range of markets and consumers.”


StaffFebruary 10, 2021
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Zig-Zag maker Turning Point Brands, Inc. (NYSE: TPB) announced financial results for the fourth quarter and full-year ending December 31, 2020. For the fourth quarter, the company said net sales increased 31.2% to $105.3 million and the net income increased from $25.0 million to $12.7 million. The adjusted EBITDA increased 80.9% to $25.8 million and the diluted EPS of $0.65 and the adjusted diluted EPS of $0.84 as compared to $(0.62) and $0.41 in the year-ago period, respectively. Turning Point beat expectations as the average analyst estimate for the quarter according to Yahoo Finance was $0.76 and the average estimate for revenues was $101 million.

For the full year. net sales increased 11.9% to $405.1 million and the net income increased $19.3 million to $33.0 million which includes PMTA related expenses from 4Q19 through 3Q20. The adjusted EBITDA increased 34.0% to $90.2 million and the diluted EPS of $1.67 and adjusted diluted EPS of $2.81 as compared to $0.69 and $1.86 in the year-ago period, respectively.

“Despite challenges related to COVID-19, our company remained focused on executing our plan throughout 2020 and finished the year strong with tremendous top-line growth in the fourth quarter. The year was especially transformational for our Zig-Zag brand as targeted initiatives led to 22% growth for the full year as we re-positioned it to be our fastest-growing segment. Our Stoker’s segment delivered a second consecutive year of double-digit growth driven by incremental share gains in both product lines. Going forward, we expect Zig-Zag and Stoker’s to continue to be the backbone of our organic sales growth,” said Larry Wexler, President, and CEO. “NewGen managed to deliver a solid performance despite market disruption around the PMTA application process while creating long-term upside potential through its filed applications. We also had an active year of capital deployment with the acquisition of assets from Durfort, as well as investments in the cannabinoid sector, in dosist and Wild Hempettes. Most recently, we successfully priced $250 million of senior secured notes, the latest step in the evolution of our capital structure, which gives us increased flexibility to scale the business through additional acquisitions and investments. Capitalizing on our strong momentum and increased liquidity, we expect another strong year in 2021.”

Zig-Zag

The company said it has renamed its core business segments from Smoking Products to Zig-Zag Products and Smokeless Products to Stoker’s Products. For the fourth quarter, Zig-Zag Products net sales increased 46.7% to $40.5 million. Growth was driven by double-digit advances in US rolling papers and MYO cigar wraps. MYO cigar wraps benefitted from re-stocking of channel inventory that was depleted by a COVID-related shutdown with our third-party manufacturer in the second quarter.

For the full year, Zig-Zag Products segment net sales increased 22.1% to $132.8 million. Growth was driven by double-digit advances in US rolling papers and MYO cigar wraps. This more than offset a $2.1 million decline in our Canadian papers business which was impacted by the timing of deliveries that pushed sales into 2021 and a $1.8 million decline in our Other Zig-Zag products business.

Outlook

Turning Point said it expects 2021 results to be impacted by several external variables including the extent of ongoing impacts from COVID-19 and the rate of vaccination distribution along with uncertainties about the magnitude of government measures to support the consumer. Absent any further acquisitions, TPB said it projects net Sales of $412 to $432 million which assumes a double-digit sales growth for Zig-Zag Products, high-single-digit sales growth for Stoker’s Products, mid-single-digit sales declines for NewGen Products, which includes double-digit declines for vape distribution offset by growth in Nu-X. Vape distribution outlook assumes comparisons against COVID-related benefits in 2020, a $3 million headwind from the sale of our Vapor Shark retail stores, and continued disruption in the vape market as the FDA begins enforcement actions.


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