Turning Point Brands(TPB) - 2025 Q2 - Quarterly Results

Executive Summary & Financial Highlights Q2 2025 Consolidated Performance Turning Point Brands reported better-than-expected consolidated results for Q2 2025, with significant year-over-year growth in net sales, gross profit, net income, and Adjusted EBITDA, primarily driven by strong performance in the Modern Oral category Consolidated Performance Metrics | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | Chunk Num | | :----------------------- | :------------------- | :------------------- | :--------- | :-------- | | Net Sales | $116.6 | $93.2 | +25.1% | 6 | | Gross Profit | $66.6 | $50.4 | +32.2% | 6 | | Net Income | $14.5 | $13.0 | +11.3% | 6 | | Adjusted EBITDA | $30.5 | $26.6 | +14.8% | 6, 31 | | Diluted EPS | $0.79 | $0.68 | +16.2% | 6, 19 | | Adjusted Diluted EPS | $0.98 | $0.89 | +10.1% | 6, 35 | - Modern Oral sales were a key driver, increasing by 651% year-over-year to $30.1 million and now accounting for 26% of total Net Sales[4][6] Segment Performance The Stoker's Products segment experienced robust growth, largely due to Modern Oral sales, while the Zig-Zag Products segment saw a decline in net sales and gross profit Stoker's Products Segment Stoker's segment net sales and gross profit showed substantial year-over-year increases, primarily fueled by the exceptional growth of Modern Oral products Stoker's Products Segment Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | Chunk Num | | :---------------- | :------------------- | :------------------- | :--------- | :-------- | | Net Sales | $69.6 | $42.7 | +62.9% | 4, 6 | | Modern Oral Sales | $30.1 | $4.0 (approx) | +651% | 4, 6 | | Gross Profit | $43.5 | $23.5 | +85.0% | 5, 39 | | Gross Margin | 62.5% | 55.0% | +750 bps | 5 | - Stoker's segment volume increased 48.3%, and price/product mix increased 14.5% year-over-year[4] Zig-Zag Products Segment The Zig-Zag segment experienced a decline in net sales and gross profit compared to the prior year, with gross margin also decreasing due to product mix Zig-Zag Products Segment Performance | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | Chunk Num | | :----------- | :------------------- | :------------------- | :--------- | :-------- | | Net Sales | $47.0 | $50.5 | -6.9% | 6, 7 | | Gross Profit | $23.1 | $26.9 | -14.0% | 7, 39 | | Gross Margin | 49.1% | 53.2% | -410 bps | 7 | Financial Position & Liquidity Consolidated SG&A expenses increased significantly year-over-year, driven by investments in Modern Oral products and other operational costs. The company maintained a healthy liquidity position with manageable debt levels Financial Position and Liquidity Metrics | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | Chunk Num | | :---------------------------------- | :------------------- | :------------------- | :--------- | :-------- | | Consolidated SG&A Expenses | $40.3 | $29.2 | +38.0% | 8 | | Total Gross Debt (as of June 30) | $300.0 | N/A | N/A | 9 | | Net Debt (as of June 30) | $190.1 | N/A | N/A | 9 | | Total Liquidity (as of June 30) | $176.4 | N/A | N/A | 9 | | Cash (as of June 30) | $109.9 | N/A | N/A | 9 | - Increased SG&A was primarily due to white pouch-related SG&A, increased outbound freight, and sales and marketing investments[8] - Notable SG&A items included $1.7 million for FDA PMTA-related expenses (vs $1.0 million prior year), $0.6 million for transaction-related costs (vs $0.1 million prior year), $0.8 million for non-recurring freight, and $0.5 million for non-recurring legal costs[14] 2025 Outlook & Guidance The company has increased its full-year 2025 guidance for both Adjusted EBITDA and Modern Oral sales, reflecting confidence in continued growth 2025 Guidance Update | Metric | Previous 2025 Guidance (Millions) | New 2025 Guidance (Millions) | Chunk Num | | :---------------------------------- | :-------------------------------- | :--------------------------- | :-------- | | Adjusted EBITDA | $108.0 – 113.0 | $110.0 – 114.0 | 6, 11 | | Consolidated Modern Oral Sales | $80.0 – 95.0 | $100.0 – 110.0 | 6, 10 | Company Information & Disclosures About Turning Point Brands, Inc. Turning Point Brands is a manufacturer, marketer, and distributor of branded consumer products, including smoking accessories and consumables with active ingredients, sold through various brands and extensive retail presence - The company manufactures, markets, and distributes branded consumer products such as smoking accessories and consumables with active ingredients[15] - Key brands include Zig-Zag®, Stoker's®, FRE®, and Alp Pouch®[15] - Products are available in over 220,000 retail outlets in North America[15] Forward-Looking Statements & Preliminary Information The press release contains forward-looking statements subject to risks and uncertainties, and the financial estimates provided are preliminary and subject to change upon completion of the official 10-Q filing - The press release includes forward-looking statements, which are not guarantees of future performance and involve inherent risks and uncertainties[16] - Preliminary financial estimates are subject to customary quarter-end closing and review procedures and may differ materially from the final reported information in the Quarterly Report on Form 10-Q[17] Investor Relations Details for the Q2 2025 earnings conference call are provided, along with contact information for investor inquiries - An earnings conference call was scheduled for 9:30 a.m. Eastern on Wednesday, August 6, 2025, with dial-in and webcast details provided[12] - Investor contact information is ir@tpbi.com[18] Financial Statements Consolidated Statements of Income The consolidated statements of income present the company's financial performance for the three months ended June 30, 2025, compared to the same period in 2024, showing increases across key revenue and profit metrics Consolidated Statements of Income | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Chunk Num | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------- | | Net sales | $116,634 | $93,225 | 19 | | Gross profit | $66,623 | $50,398 | 19 | | Operating income | $26,327 | $22,872 | 19 | | Income from continuing operations | $16,960 | $12,961 | 19 | | Net income attributable to Turning Point Brands, Inc. | $14,480 | $13,007 | 19 | | Diluted income per common share | $0.79 | $0.68 | 19 | Consolidated Balance Sheets The consolidated balance sheets provide a snapshot of the company's assets, liabilities, and stockholders' equity as of June 30, 2025, compared to December 31, 2024, indicating growth in total assets and stockholders' equity Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Chunk Num | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------- | | Total current assets | $285,217 | $198,205 | 21 | | Total assets | $595,788 | $493,353 | 21 | | Total current liabilities | $67,509 | $44,820 | 22 | | Notes payable and long-term debt | $293,138 | $248,604 | 22 | | Total liabilities | $370,965 | $302,973 | 22 | | Total stockholders' equity | $224,823 | $190,380 | 23 | - Cash increased significantly from $46,158 thousand at December 31, 2024, to $109,925 thousand at June 30, 2025[21] Consolidated Statements of Cash Flows The consolidated statements of cash flows detail the cash generated and used across operating, investing, and financing activities for the six months ended June 30, 2025, showing a net increase in cash driven by financing activities Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Chunk Num | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------- | | Net cash provided by operating activities | $29,230 | $36,077 | 24 | | Net cash used in investing activities | $(8,626) | $(7,972) | 24 | | Net cash provided by (used in) financing activities | $40,312 | $(6,747) | 24 | | Net increase in cash | $60,916 | $21,358 | 24 | | Total cash at end of period | $111,838 | $144,097 | 25 | - Financing activities in 2025 included the redemption of $250 million in 2026 Notes and proceeds from $300 million in 2032 Notes[24] Non-GAAP Financial Measures Non-GAAP Definitions and Use The company utilizes several non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income, to provide additional insights into its operating performance, while also acknowledging their limitations - Non-GAAP measures like EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income are used to supplement GAAP financial information[27] - These measures are used by management for trend analyses, planning, and performance comparison, as they eliminate the impact of non-ordinary course expenses[27][28] - The company cautions that non-GAAP measures should not be considered a substitute for GAAP measures and may not be comparable to those of other companies[29] Reconciliation of GAAP Net Income to Adjusted EBITDA This section provides a detailed reconciliation of GAAP Net Income to Adjusted EBITDA for the second quarter of 2025 and 2024, highlighting various adjustments made to arrive at the non-GAAP metric Reconciliation of GAAP Net Income to Adjusted EBITDA | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Chunk Num | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------- | | Net income attributable to Turning Point Brands, Inc. | $14,480 | $13,007 | 31 | | EBITDA | $25,754 | $21,749 | 31 | | Adjusted EBITDA | $30,472 | $26,552 | 31 | - Key adjustments for Adjusted EBITDA in Q2 2025 included stock-based compensation ($1,628k), FDA PMTA expenses ($1,651k), non-recurring freight ($837k), and non-cash asset impairment ($908k)[31] Reconciliation of GAAP Net Income to Adjusted Net Income and Diluted EPS to Adjusted Diluted EPS This reconciliation details the adjustments from GAAP Net Income and Diluted EPS to their adjusted non-GAAP counterparts for Q2 2025 and 2024, providing a clearer view of core operational profitability Reconciliation of GAAP Net Income to Adjusted Net Income and Diluted EPS to Adjusted Diluted EPS | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Chunk Num | | :------------------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------- | | GAAP Net Income | $14,480 | $13,007 | 35 | | Adjusted Net Income | $17,988 | $17,206 | 35 | | GAAP Diluted EPS | $0.79 | $0.68 | 35 | | Adjusted Diluted EPS | $0.98 | $0.89 | 35 | - Significant adjustments in Q2 2025 included stock options, restricted stock, and incentives expense ($1,628k), FDA PMTA ($1,651k), non-recurring freight ($837k), and non-cash asset impairment ($908k)[35] Reconciliation of GAAP Operating Income to Adjusted Operating Income This section reconciles GAAP Operating Income to Adjusted Operating Income for the consolidated entity and by segment (Zig-Zag and Stoker's) for Q2 2025 and 2024, providing a segment-level view of adjusted operational performance Reconciliation of GAAP Operating Income to Adjusted Operating Income | Metric | Consolidated Q2 2025 (in thousands) | Consolidated Q2 2024 (in thousands) | Zig-Zag Q2 2025 (in thousands) | Zig-Zag Q2 2024 (in thousands) | Stoker's Q2 2025 (in thousands) | Stoker's Q2 2024 (in thousands) | Chunk Num | | :------------------------------------------ | :---------------------------------- | :---------------------------------- | :----------------------------- | :----------------------------- | :------------------------------ | :------------------------------ | :-------- | | Operating income | $26,327 | $22,872 | $14,741 | $18,260 | $30,079 | $17,862 | 39 | | Adjusted operating income | $29,223 | $23,064 | $14,833 | $16,586 | $30,824 | $17,862 | 39 | - Adjustments to consolidated operating income in Q2 2025 included transactional expenses ($569k), non-recurring freight ($837k), non-recurring legal ($504k), and FDA PMTA ($1,651k)[39]