- Q2 2024 Adjusted EBITDA of $27.0 million, up 7% over prior
year
- Zig-Zag and Stoker’s Products Net Sales for Q2 2024 Increased
13% Year-Over-Year
- Company increases full-year 2024 adjusted EBITDA guidance to
$98 to $102 million
Turning Point Brands, Inc. (“TPB” or “the Company”) (NYSE: TPB),
a manufacturer, marketer and distributor of branded consumer
products, including alternative smoking accessories and consumables
with active ingredients, today announced financial results for the
second quarter ended June 30, 2024.
Q2 2024 vs. Q2 2023
- Total consolidated net sales increased 2.8% to $108.5 million
- Zig-Zag Products net sales increased 8.0%
- Stoker’s Products net sales increased 18.5%
- Creative Distribution Solutions net sales decreased 33.0%
- Gross profit increased 2.6% to $53.8 million
- Net income increased 31.0% to $13.0 million
- Adjusted net income increased 12.2% to $17.2 million (see
Schedule B for a reconciliation to net income)
- Adjusted EBITDA increased 6.9% to $27.0 million (see Schedule A
for a reconciliation to net income)
- Diluted EPS of $0.68 and Adjusted Diluted EPS of $0.89 compared
to $0.53 and $0.79, respectively, in the same period one year ago
(see Schedule B for a reconciliation to Diluted EPS)
Graham Purdy, President and CEO, commented: “We were pleased by
our second quarter results. We achieved our highest quarterly
EBITDA since the second quarter of 2021. We believe Zig-Zag is on a
sustainable growth trajectory, and Stoker’s MST continues to grow
market share. In addition, sales of FRE, our modern oral nicotine
pouch, grew 76% sequentially as we continue to expand our national
footprint.”
Zig-Zag Products Segment (47% of total net sales in the
quarter)
For the second quarter, Zig-Zag Products net sales increased
8.0% to $50.5 million driven by solid performance in our North
American Papers & Wraps businesses as well as solid growth in
cigars.
For the quarter, the Zig-Zag Products segment gross profit
increased 1.7% to $26.9 million. Gross margin declined 330 basis
points to 53.2% driven primarily by product mix.
“We are encouraged by our Zig-Zag results for the quarter,” said
Purdy. “Our ongoing initiatives continue to demonstrate progress
toward sustainably growing the Zig-Zag brand.”
Stoker’s Products Segment (39% of total net sales in the
quarter)
For the second quarter, Stoker’s Products net sales increased
18.5% to $42.7 million. The segment was driven by high teens growth
from MST and triple-digit growth off of a low base for FRE,
partially offset by low-single-digit decline in loose-leaf tobacco.
For the second quarter, total Stoker’s Products segment volume
increased 5.3%, while price / mix increased 13.2%.
For the quarter, the Stoker’s Products segment gross profit
increased 17.8% to $23.5 million. Gross margin contracted 30 basis
points to 55.0%.
Performance Measures in the Second Quarter
Second quarter consolidated selling, general and administrative
(“SG&A”) expenses were $32.8 million compared to $31.9 million
in the second quarter of 2023.
The second quarter SG&A included the following notable
items:
- $1.9 million of stock compensation expense compared to $2.1
million in the year-ago period; and
- $1.0 million of FDA PMTA-related expenses for modern oral
products compared to $0.7 million in the year-ago period.
Total gross debt as of June 30, 2024 was $368.5 million. Net
debt (total gross debt less unrestricted cash) as of June 30, 2024
was $226.4 million. The Company ended the quarter with total
liquidity of $201.0 million, comprised of $142.2 million in cash
and $58.8 million of asset backed revolving credit facility
capacity.
On July 15, 2024, the Company retired the remaining $118.5
million of its convertible notes outstanding with cash on hand. Pro
forma for retirement of the convertible notes as of June 30, 2024,
the Company had gross debt outstanding of $250.0 million and net
debt of $226.4 million.
During the quarter, the Company re-purchased 34,350 shares of
common stock at a cost of $1.0 million.
2024 Outlook
The Company is increasing its previous full-year 2024 adjusted
EBITDA guidance from $95 to $100 million to $98 to $102 million,
which excludes CDS.
Creative Distribution Solutions (“CDS”) (14% of total net
sales in the quarter)
For the second quarter, CDS net sales were $15.3 million, gross
profit was $3.4 million, and gross margin was 22.5%.
Earnings Conference Call
As previously disclosed, a conference call with the investment
community to review TPB’s financial results has been scheduled for
10:00 a.m. Eastern on Thursday, August 1, 2024. Investment
community participants should dial in 10 minutes ahead of time
using the toll-free number (888) 330-2502 (international
participants should call (240) 789-2713 and follow the audio
prompts after typing in the event ID: 6640134). A live listen-only
webcast of the call will be available on the Events and
Presentations section of the investor relations portion of the
Company website (www.turningpointbrands.com). A replay of the
webcast will be available on the site two hours following the
call.
Non-GAAP Financial Measures
In addition to financial measures prepared in accordance with
generally accepted accounting principles in the United States
(GAAP), this press release includes certain non-GAAP financial
measures including EBITDA, Adjusted EBITDA, Adjusted Net Income,
Adjusted Diluted EPS and Adjusted Operating Income (Loss). A
reconciliation of these non-GAAP financial measures accompanies
this release.
About Turning Point Brands, Inc.
Turning Point Brands (NYSE: TPB) is a manufacturer, marketer and
distributor of branded consumer products including alternative
smoking accessories and consumables with active ingredients through
its iconic Zig-Zag® and Stoker’s® brands. TPB’s products are
available in more than 217,000 retail outlets in North America, and
on sites such as www.zigzag.com. For the latest news and
information about TPB and its brands, please visit
www.turningpointbrands.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements may generally be identified by the use of words such as
"anticipate," "believe," "expect," "intend," "plan" and "will" or,
in each case, their negative, or other variations or comparable
terminology. These forward-looking statements include all matters
that are not historical facts. By their nature, forward-looking
statements involve risks and uncertainties because they relate to
events and depend on circumstances that may or may not occur in the
future. As a result, these statements are not guarantees of future
performance and actual events may differ materially from those
expressed in or suggested by the forward-looking statements. Any
forward-looking statement made by TPB in this press release, its
reports filed with the Securities and Exchange Commission (the
“SEC”) and other public statements made from time-to-time speak
only as of the date made. New risks and uncertainties come up from
time to time, and it is impossible for TPB to predict or identify
all such events or how they may affect it. TPB has no obligation,
and does not intend, to update any forward-looking statements after
the date hereof, except as required by federal securities laws.
Factors that could cause these differences include, but are not
limited to those included in the Company’s Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and other reports filed by the
Company with the SEC. These statements constitute the Company’s
cautionary statements under the Private Securities Litigation
Reform Act of 1995.
Financial Statements Follow on Subsequent Pages
Turning Point Brands, Inc. Consolidated Statements of
Income (dollars in thousands except share data) (unaudited)
Three Months Ended June
30,
2024
2023
Net sales (1)
$
108,512
$
105,595
Cost of sales
54,671
53,117
Gross profit
53,841
52,478
Selling, general, and administrative expenses
32,753
31,933
Other operating income
(1,674
)
-
Operating income
22,762
20,545
Interest expense, net
2,991
4,019
Investment loss
2,439
4,080
Gain on extinguishment of debt
-
(600
)
Income before income taxes
17,332
13,046
Income tax expense
4,415
3,338
Consolidated net income
12,917
9,708
Net loss attributable to non-controlling interest
(87
)
(217
)
Net income attributable to Turning Point Brands, Inc.
$
13,004
$
9,925
Basic income per common share: Net income attributable to
Turning Point Brands, Inc.
$
0.74
$
0.56
Diluted income per common share: Net income attributable to Turning
Point Brands, Inc.
$
0.68
$
0.53
Weighted average common shares outstanding: Basic
17,656,732
17,584,241
Diluted
20,156,854
20,409,943
(1) Net sales include excise taxes billed to customers of
$0.8 million and $1.2 million for the three months ended June 30,
2024 and 2023, respectively.
Turning Point Brands, Inc.
Consolidated Balance Sheets (dollars in thousands except
share data)
(unaudited)
June 30,
December 31,
ASSETS
2024
2023
Current assets: Cash
$
142,159
$
117,886
Accounts receivable, net of allowances of $54 in 2024 and $78 in
2023
12,557
9,989
Inventories, net
102,333
98,960
Other current assets
32,688
40,781
Total current assets
289,737
267,616
Property, plant, and equipment, net
26,441
25,300
Deferred income taxes
1,177
1,468
Right of use assets
10,305
11,480
Deferred financing costs, net
2,145
2,450
Goodwill
136,307
136,250
Other intangible assets, net
79,393
80,942
Master Settlement Agreement (MSA) escrow deposits
28,407
28,684
Other assets
17,644
15,166
Total assets
$
591,556
$
569,356
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable
$
11,919
$
8,407
Accrued liabilities
30,428
33,635
Current portion of long-term debt
118,470
58,294
Total current liabilities
160,817
100,336
Notes payable and long-term debt
247,960
307,064
Lease liabilities
8,834
9,950
Total liabilities
417,611
417,350
Commitments and contingencies Stockholders' equity:
Preferred stock, $0.01 par value; authorized shares 40,000,000;
issued and outstanding shares -0-
-
-
Common stock, voting, $0.01 par value; authorized shares,
190,000,000; 20,126,521 issued shares and 17,703,166 outstanding
shares at June 30, 2024, and 19,922,137 issued shares and
17,605,677 outstanding shares at December 31, 2023
201
199
Common stock, nonvoting, $0.01 par value; authorized shares,
10,000,000; issued and outstanding shares -0-
-
-
Additional paid-in capital
121,948
119,075
Cost of repurchased common stock (2,423,355 shares at June 30,
2024, and 2,316,460 shares at December 31, 2023)
(81,144
)
(78,093
)
Accumulated other comprehensive loss
(3,072
)
(2,648
)
Accumulated earnings
134,917
112,443
Non-controlling interest
1,095
1,030
Total stockholders' equity
173,945
152,006
Total liabilities and stockholders' equity
$
591,556
$
569,356
Turning Point Brands, Inc. Consolidated Statements of
Cash Flows (dollars in thousands) (unaudited)
Six Months Ended June
30,
2024
2023
Cash flows from operating activities: Consolidated net income
$
25,096
$
17,050
Adjustments to reconcile net income to net cash provided by
operating activities: Gain on extinguishment of debt
-
(1,377
)
Loss on sale of property, plant, and equipment
7
44
Loss on MSA investments
6
-
Depreciation and other amortization expense
1,916
1,535
Amortization of other intangible assets
1,559
1,542
Amortization of deferred financing costs
1,393
1,225
Deferred income tax expense
363
659
Stock compensation expense
3,951
2,836
Noncash lease income
(85
)
(29
)
Loss on investments
2,722
8,989
Changes in operating assets and liabilities: Accounts receivable
(2,489
)
456
Inventories
(3,218
)
(5,146
)
Other current assets
4,863
3,769
Other assets
(279
)
(4,548
)
Accounts payable
3,565
2,500
Accrued liabilities and other
(3,293
)
(1,972
)
Net cash provided by operating activities
$
36,077
$
27,533
Cash flows from investing activities: Capital expenditures
$
(2,858
)
$
(2,993
)
Purchases of investments
(7,934
)
-
Proceeds from sale of investments
3,314
-
Purchases of non-marketable equity investments
(500
)
-
Restricted cash, MSA escrow deposits
4
-
Proceeds on the sale of property, plant and equipment
2
3
Net cash used in investing activities
$
(7,972
)
$
(2,990
)
Cash flows from financing activities: Convertible Senior
Notes repurchased
$
-
$
(27,357
)
Proceeds from call options
-
70
Payment of financing costs
(133
)
-
Payment of dividends
(2,407
)
(2,209
)
Exercise of options
900
406
Redemption of options
(4
)
(346
)
Redemption of restricted stock units
(840
)
-
Redemption of performance based restricted stock units
(1,212
)
(995
)
Common stock repurchased
(3,051
)
-
Net cash used in financing activities
$
(6,747
)
$
(30,431
)
Net increase (decrease) in cash
$
21,358
$
(5,888
)
Effect of foreign currency translation on cash
$
(76
)
$
(8
)
Cash, beginning of period: Unrestricted
$
117,886
$
106,403
Restricted
4,929
4,929
Total cash at beginning of period
$
122,815
$
111,332
Cash, end of period: Unrestricted
$
142,159
$
100,507
Restricted
1,938
4,929
Total cash at end of period
$
144,097
$
105,436
Non-GAAP Financial Measures
To supplement our financial information presented in accordance
with generally accepted accounting principles in the United States,
or U.S. GAAP, we use non-U.S. GAAP financial measures, including
EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS,
and Adjusted Operating Income (Loss). We believe Adjusted EBITDA
provides useful information to management and investors regarding
certain financial and business trends relating to our financial
condition and results of operations. Adjusted EBITDA, Adjusted Net
Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss)
are used by management to compare our performance to that of prior
periods for trend analyses and planning purposes and are presented
to our board of directors. We believe that EBITDA, Adjusted EBITDA,
Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating
Income (Loss) are appropriate measures of operating performance
because they eliminate the impact of expenses that do not relate to
business performance.
We define “EBITDA” as net income before interest expense, gain
(loss) on extinguishment of debt, income tax expense, depreciation
and amortization. We define “Adjusted EBITDA” as net income before
interest expense, gain (loss) on extinguishment of debt, income tax
expense, depreciation, amortization, other non-cash items and other
items that we do not consider ordinary course in our evaluation of
ongoing operating performance. We define “Adjusted Net Income” as
net income excluding items that we do not consider ordinary course
in our evaluation of ongoing operating performance. We define
“Adjusted Diluted EPS” as diluted earnings per share excluding
items that we do not consider ordinary course in our evaluation of
ongoing operating performance. We define “Adjusted Operating Income
(Loss)” as operating income excluding other non-cash items and
other items that we do not consider ordinary course in our
evaluation of ongoing operating performance.
Non-U.S. GAAP measures should not be considered a substitute
for, or superior to, financial measures calculated in accordance
with U.S. GAAP. EBITDA, Adjusted Net Income, Adjusted EBITDA,
Adjusted Diluted EPS, and Adjusted Operating Income (Loss) exclude
significant expenses that are required by U.S. GAAP to be recorded
in our financial statements and is subject to inherent limitations.
In addition, other companies in our industry may calculate this
non-U.S. GAAP measure differently than we do or may not calculate
it at all, limiting its usefulness as a comparative measure.
In accordance with SEC rules, we have provided, in the
supplemental information attached, a reconciliation of the non-GAAP
measures to the next directly comparable GAAP measures.
Schedule A Turning Point Brands,
Inc. Reconciliation of GAAP Net Income to Adjusted
EBITDA (dollars in thousands) (unaudited)
Three Months Ended
June 30,
2024
2023
Net income attributable to Turning Point Brands, Inc.
$
13,004
$
9,925
Add: Interest expense, net
2,991
4,019
Gain on extinguishment of debt
-
(600
)
Income tax expense
4,415
3,338
Depreciation expense
891
759
Amortization expense
931
771
EBITDA
$
22,232
$
18,212
Components of Adjusted EBITDA Corporate and CDS restructuring (a)
283
-
ERP/CRM (b)
489
138
Stock options, restricted stock, and incentives expense (c)
1,889
2,093
Transactional expenses and strategic initiatives (d)
97
82
FDA PMTA (e)
997
662
Non-cash asset impairment (f)
2,722
4,092
FET Refund (g)
(1,674
)
-
Adjusted EBITDA
$
27,035
$
25,279
(a)
Represents costs associated with corporate and CDS restructuring,
including severance.
(b)
Represents cost associated with scoping and mobilization of new ERP
and CRM systems and cost of duplicative ERP licenses.
(c)
Represents non-cash stock options, restricted stock, incentives
expense and Solace performance stock units.
(d)
Represents the fees incurred for transaction expenses.
(e)
Represents costs associated with applications related to FDA
premarket tobacco product application ("PMTA"). The PMTA regime
requires the Company to submit an application to the FDA to receive
marketing authorization to continue to sell certain of its product
lines with continued sales permitted during the pendency of the
applications. The application is a onetime resource-intensive
process for each covered product line; however, due to the nature
of the implementation process for those product lines already in
the market, applications can take multiple years to complete rather
than the typical one-time submission. The Company currently has
only two product lines currently subject to the PMTA process,
having utilized other regulatory pathway options available for our
other product lines. The Company does not expect to submit
additional PMTA applications for any new product lines after the
submission for the remaining two are complete.
(f)
Represents impairment of investment assets.
(g)
Represents a federal excise tax refund included in other operating
income.
Schedule B Turning Point Brands
Reconciliation of GAAP Net Income to Adjusted Net Income and
Diluted EPS to Adjusted Diluted EPS (dollars in thousands
except share data) (unaudited)
Three Months Ended
Three Months Ended
June 30, 2024
June 30, 2023
Income before income
taxes
Income tax expense (h)
Net loss attributable to non-
controlling interest
Adjusted Net Income
Adjusted Diluted EPS
Income before income
taxes
Income tax expense (h)
Net loss attributable to non-
controlling interest
Net Income
Diluted EPS
GAAP Net Income and Diluted EPS
$
17,332
$
4,415
$
(87
)
$
13,004
$
0.68
$
13,046
$
3,338
$
(217
)
$
9,925
$
0.53
Gain on extinguishment of debt (a)
-
-
-
-
-
(600
)
(154
)
-
(446
)
(0.02
)
Corporate restructuring (b)
283
72
-
211
0.01
-
-
-
-
-
ERP/CRM (c)
489
125
-
364
0.02
138
35
-
103
0.01
Stock options, restricted stock, and incentives expense (d)
1,889
481
-
1,408
0.07
2,093
536
-
1,557
0.08
Transactional expenses and strategic initiatives (e)
97
25
-
72
0.00
82
21
-
61
0.00
FDA PMTA (f)
997
254
-
743
0.04
662
169
-
493
0.02
Non-cash asset impairment (g)
2,722
693
-
2,029
0.10
4,092
1,047
-
3,045
0.15
FET refund (i)
(1,674
)
(426
)
-
(1,248
)
(0.06
)
-
-
-
-
-
Tax benefit (j)
-
(577
)
-
577
0.03
-
(560
)
-
560
0.03
Adjusted Net Income and Adjusted Diluted EPS
$
22,135
$
5,062
$
(87
)
$
17,160
$
0.89
$
19,513
$
4,433
$
(217
)
$
15,297
$
0.79
Totals may not foot due to rounding
(a)
Represents gain on extinguishment of debt.
(b)
Represents costs associated with corporate and CDS restructuring,
including severance.
(c)
Represents cost associated with scoping and mobilization of new ERP
and CRM systems and cost of duplicative ERP licenses.
(d)
Represents non-cash stock options, restricted stock, incentives
expense and Solace PRSUs.
(e)
Represents the fees incurred for transaction expenses.
(f)
Represents costs associated with applications related to FDA
premarket tobacco product application ("PMTA"). The PMTA regime
requires the Company to submit an application to the FDA to receive
marketing authorization to continue to sell certain of its product
lines with continued sales permitted during the pendency of the
applications. The application is a onetime resource-intensive
process for each covered product line; however, due to the nature
of the implementation process for those product lines already in
the market, applications can take multiple years to complete rather
than the typical one-time submission. The Company currently has
only two product lines currently subject to the PMTA process,
having utilized other regulatory pathway options available for our
other product lines. The Company does not expect to submit
additional PMTA applications for any new product lines after the
submission for the remaining two are complete.
(g)
Represents impairment of investment assets.
(h)
Income tax expense calculated using the effective tax rate for the
quarter of 25.5% in 2024 and 25.6% in 2023.
(i)
Represents a federal excise tax refund included in other operating
income.
(j)
Represents adjustment from quarterly tax rate to annual projected
tax rate of 23% in 2024 and 2023.
Schedule C
Turning Point Brands, Inc. Reconciliation of GAAP
Operating Income (Loss) to Adjusted Operating Income (Loss)
(dollars in thousands) (unaudited)
Consolidated
Zig-Zag Products
Stoker's Products
Creative Distribution
Solutions
2nd Quarter
2nd Quarter
2nd Quarter
2nd Quarter
2nd Quarter
2nd Quarter
2nd Quarter
2nd Quarter
2024
2023
2024
2023
2024
2023
2024
2023
Net sales
$
108,512
$
105,595
$
50,482
$
46,722
$
42,743
$
36,056
$
15,287
$
22,817
Gross profit
$
53,841
$
52,478
$
26,872
$
26,422
$
23,524
$
19,968
$
3,445
$
6,088
Operating income (loss)
$
22,762
$
20,545
$
18,260
$
17,000
$
17,862
$
15,110
$
(108
)
$
460
Adjustments: Corporate restructuring
283
-
-
-
-
-
-
-
ERP/CRM
489
138
-
-
-
-
-
-
Transactional expenses and strategic initiatives
97
82
-
-
-
-
-
-
FDA PMTA
997
662
-
-
-
-
-
-
FET refund
(1,674
)
-
(1,674
)
-
-
-
-
-
Adjusted operating income (loss)
$
22,954
$
21,427
$
16,586
$
17,000
$
17,862
$
15,110
$
(108
)
$
460
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240801150282/en/
Investor Contacts
Turning Point Brands, Inc. ir@tpbi.com
Turning Point Brands (NYSE:TPB)
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부터 10월(10) 2024 으로 11월(11) 2024
Turning Point Brands (NYSE:TPB)
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부터 11월(11) 2023 으로 11월(11) 2024
