Turning Point Brands(US:TPB)2025-03-06 20:32Financial Data and Key Metrics Changes - Revenue increased 13% to $93.7 million for Q4 2024, and full-year sales were up 11% to $360.7 million [6][25] - Adjusted EBITDA for Q4 increased 5% to $26.2 million, while full-year adjusted EBITDA rose 12% to $104.5 million [7][27] - Gross margin for the full year decreased by 39 basis points to 55.9%, and for Q4, it was 56%, down 108 basis points year over year [25][27] Business Line Data and Key Metrics Changes - Zig Zag sales increased 7% year over year to $192.4 million, with Q4 sales up 2% to $45.9 million [27][28] - Stoker's net sales increased 16% year over year to $168.3 million, with Q4 sales up 26% to $47.8 million [28] - Modern oral revenue included a 419% increase in Free sales to approximately $6.3 million for Q4, reflecting strong growth [14][32] Market Data and Key Metrics Changes - Nearly 75% of Americans now live in states with legal regulated cannabis, expanding the total addressable market (TAM) for related products [12] - Stoker's MST volume was up 10 basis points despite a category volume decline of 6.4%, with market share growing by 50 basis points year over year to 7.6% [29][30] Company Strategy and Development Direction - The company is focusing on growth opportunities in its core business after divesting the CDS segment, which is now classified as discontinued operations [4][6] - The goal is to achieve a 10% market share in the modern oral category, with significant investments planned for sales and marketing [8][34] - The company aims to leverage cross-selling opportunities between its Zig Zag and modern oral products [11][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth momentum across the organization and initiated 2025 adjusted EBITDA guidance of $108 million to $113 million [8][34] - The company is confident in the performance of its modern oral brands, particularly Free and Out, and plans to expand their market presence [17][20] Other Important Information - The company ended the quarter with over $46 million in cash and reported free cash flow of $56.3 million for the year [32] - Capital expenditures for 2024 were $4.6 million, with a budget of $4 to $5 million for 2025 [36] Q&A Session Summary Question: Outlook for modern oral products in national convenience store chains - Management is in discussions with partners and has rolled out a regional partnership with 7-Eleven, showing early positive results [40][43] Question: Growth and distribution opportunities for Stoker's MST - Management believes there are synergies between MST and modern oral products, presenting opportunities for cross-selling [45][47] Question: Drivers of guidance for modern oral products - Guidance is based on expected growth for Free and early reorder rates, with both Free and Out seen as synergistic [50][52] Question: Contribution margin and manufacturing considerations - Gross profit margins for modern oral are in the mid-thirties, with plans to reinvest profits into sales and marketing [56][58] Question: Regulatory environment regarding nicotine products - Management views recent regulatory actions as positive, particularly with the approval of flavored products [62][63] Question: Direct-to-consumer opportunities in the nicotine patch category - Management sees a strong online opportunity for the Out brand, while Free will focus on brick-and-mortar sales [65][67] Question: Marketing strategies for Free and Out brands - The company plans to leverage both online and brick-and-mortar channels to maximize reach across its product portfolio [71][73] Question: Zig Zag's growth and margin profile - Zig Zag is expected to see single-digit growth, with a mix shift impacting gross margins [75][77]