Turning Point Brands(US:TPB)2024-05-04 17:30Financial Data and Key Metrics Changes - Q1 sales decreased by 3.9% to $97.1 million, but excluding the CDS segment, overall revenue increased by 10% [60] - Adjusted EBITDA rose by 21.6% to $25.3 million for the quarter [31][60] - Gross margin improved by 530 basis points to 53.5% due to favorable segment and product mix [60] Business Line Data and Key Metrics Changes - Zig-Zag sales increased by 11.5% year-over-year to $46.7 million, driven by strong growth in papers and the alternative channel [31][39] - Stoker's revenue increased by 8% to $36.4 million, with a 0.1% volume increase and a 7.9% price mix increase [62] - FRE sales more than tripled from a low base, indicating strong early momentum in national distribution [63] Market Data and Key Metrics Changes - The alternative B2B business grew over 60% in Q1, reflecting the expanding market for cannabis-related products [32] - Stoker's market share grew by 140 basis points to 31.1%, making it the 1 chewing brand [41] - The overall category volume for loose leaf tobacco declined by 6.9%, but the company's volume benefited from consumer trade down [41] Company Strategy and Development Direction - The company is focused on expanding its sales and distribution efforts in the alternative channel to achieve steady growth [33] - There is a commitment to building Zig-Zag as a lifestyle brand and increasing its presence in the alternative channel [35] - The company aims to maximize the value of its brands and strengthen distribution capabilities [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the favorable growth backdrop for 2024, with positive responses from wholesale and retail customers [24] - The company reaffirmed its guidance for projected 2024 adjusted EBITDA in the range of $95 million to $100 million [26][64] - Management noted that the competitive landscape is evolving, with a focus on satisfying consumer preferences and expanding product offerings [52][75] Other Important Information - The company ended the quarter with over $130 million in cash, sufficient to address the maturity of $118.5 million convertible notes due July 2024 [17] - The Canadian business faced an approximate $800,000 headwind due to the discontinuation of a low-margin product line [61] Q&A Session Summary Question: Can you clarify the B2B growth within Zig-Zag? - The 60% growth mentioned is entirely from the alternative channel [44] Question: What is the margin impact from the CLIPPER stocking? - The management is assessing the margin improvement from the elimination of the CLIPPER stocking versus overall margin improvement [46] Question: Is the CDS business sustainable at current levels? - The CDS business has stabilized at $14 million, and management is comfortable with its current performance [50][82] Question: Can you provide more details on the alternative channel penetration? - The company is successfully expanding its portfolio and increasing shelf space, leading to healthy increases in average order sizes [52][75] Question: What is the competitive landscape for Stoker's? - Management noted that they are well-positioned with their product offerings and are seeing positive consumer feedback [76][85]