Zig-Zag Archives - Green Market Report

Debra BorchardtOctober 26, 2022
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5min7400

Turning Point Brands, Inc.  (NYSE: TPB) announced financial results for the third quarter ending September 30, 2022, as sales fell by 1.9% to $107.8 million. However, it beat the Yahoo Finance average analyst estimate of $106 million in sales.  Turning Point also reported that its net income decreased by 14.3% to $11.5 million.

Turning Point earnings for the third quarter fell to $11.54 million, or 60 cents a share, from $13.47 million, or 65 cents a share, in the year-ago quarter. Breaking out one-time items, Turning Point Brands earned 72 cents a share. FactSet data showed that the average of analysts expected Turning Point Brands to earn 49 cents a share, while Yahoo Finance had the number pegged at 60 cents.

Outlook

Turning Point reaffirmed its previous forecast which had been trimmed from earlier in the year. The company’s full-year 2022 results are forecast as follows:

  • Zig-Zag Products sales of $186 to $191 million (compared to the previous outlook of $193 to $200 million)
  • Stoker’s Products sales of $128 to $132 million (compared to the previous outlook of $127 to $133 million)
  • Consolidated adjusted EBITDA of $96 to $99 million (compared to the previous outlook of $97 to $103 million)

“Zig-Zag and Stoker’s segments demonstrated strong double-digit growth during the quarter despite a challenging economic backdrop with inflationary pressures continuing to impact consumers. Zig-Zag benefitted from solid growth in the U.S. papers and Canadian businesses during the quarter and the successful launch of CLIPPER lighters. Meanwhile, Stoker’s MST experienced continued share gains driven by consumer trade-down to the value category. NewGen sales decreased slightly compared to the previous quarter and the segment remained profitable as we monitor ongoing regulatory developments,” said Graham Purdy, President and CEO. “We continued to return capital to our shareholders during the quarter while maintaining a strong cash balance that provides us with the ability to navigate the current financing environment. While our competitive position remains strong and we outperformed our markets during the quarter, it is prudent to adjust our outlook for the year in light of the current economic environment.”

Sales Breakdown

For the third quarter, Zig-Zag Products net sales increased 23.3% to $52.1 million. Both TPB’s U.S. rolling papers and e-commerce, and other smoking accessories businesses grew by double-digits during the quarter. Continued strength in paper cones, strong receptivity to promotional programs, the launch of CLIPPER lighters, and timing shifts in Canadian deliveries contributed to strong performance during the quarter. In total, the company said it believes approximately $5 million of sales was pulled forward from the fourth quarter across the Zig Zag portfolio.

Stoker’s Products net sales increased 10.0% to $33.5 million on strong double-digit growth of MST partially offset by a mid-single digit decline in loose-leaf chewing tobacco. FRE nicotine pouch product was a marginal contributor to segment sales.

NewGen Products’ net sales decreased 40.3% to $22.2 million. The regulatory environment continues to impact sales. Net sales have been relatively steady sequentially within the current year period.

Total gross debt as of September 30, 2022, was $422.5 million. The corresponding net debt (total gross debt less cash) on September 30, 2022, was $316.8 million. The company said it ended the quarter with total liquidity of $127.1 million, comprised of $105.7 million in cash and $21.4 million of revolving credit facility capacity.

New CEO

Just a couple of weeks ago, Turning Point announced that it named long-tenured company executive Graham Purdy as CEO and Board Director, following Yavor Efremov’s resignation as CEO and Director. Additionally, David Glazek will be transitioned from Non-Executive to Executive Board Chairman, effective January 2023. Purdy oversaw two of the company’s highly successful brand extensions, rolling out Zig-Zag Cigar Wraps and Stoker’s MST.


Debra BorchardtApril 27, 2022
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6min3220

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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7min1550

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.”

 

 


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