Turning Point Brands, Inc. Q3 FY2024 earnings call

• Consolidated third quarter results better than expected, adjusted EBITDA increased 11% to $27.2 million. • Increased full-year 2024 adjusted EBITDA guidance to $101 million to $103 million from prior $98 million to $102 million. • Zig-Zag had 6% revenue growth, lighter category decline under assessment; strong performance in alternative channels. • Stoker's revenue up 12%, FRE sales surged; focused on expanding distribution. • Go-to-market initiatives for Zig-Zag (new products, carton updates) and Stoker's (expanding tubs distribution), with confidence in alt channel growth.

Zig-Zag: Sales increased 5.5% year-over-year to $49.3 million, but gross margin decreased 180 basis points to 55.4% due to product mix. Stoker's: Net sales increased 12.1% to $41.4 million, with MST portfolio up 3%, chewing tobacco at 32.9% share. FRE: Sales more than quadrupled year-over-year, gross margin flat at 55.8%. CDS: Sales $15 million, gross margin 22.1%, adjusted EBITDA ~$270,000.

• Increased full-year 2024 adjusted EBITDA guidance to $101 million to $103 million from prior $98 million to $102 million. • Revised CapEx expectation to under $10 million for the year, with $4 million allocated for PMTAs related to modern oral products.

Q: Growth outlook for FRE, especially regarding expanded velocity and SKU counts in existing doors vs new door penetration?

A: Summer Frein says they're expanding distribution in chains, which take longer, but in active conversations and excited about expanding 6-milligram and upcoming 3-milligram in Q1.

Q: Thoughts on the Alp brand affiliated with Tucker Carlson?

A: Graham Purdy says no comment today but updates will come soon.

Q: FRE 3 and 6 milligram sales, percent of sales from new strengths?

A: Summer Frein notes majority of category volume is 3-6mg, encouraged by early results of 6mg and excited for 3mg in Q1.

Q: Alt channel vs convenience store TAM?

A: Summer Frein says alt space TAM is as large or larger, with significant profit potential as they're under-indexed in alt channel.

Q: FRE pricing strategy?

A: Summer Frein says FRE is a premium brand, pricing strategy reflects premium positioning to capture share.

Q: Zig-Zag cigar opportunity?

A: Graham Purdy says cigar category is a massive opportunity with Zig-Zag's brand and regulatory runway, early innings but substantial long-term potential.