Turning Point Misses Estimates, Lowers Guidance

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.”


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.”

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.

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