Turning Point Vape Sales Plunge As Zig-Zag Lights Up

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 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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