Zig-Zag Maker Turning Point Beats Analyst Estimates For Fourth Quarter

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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