On August 1, 2024, Turning Point Brands Inc (TPB, Financial) released its 8-K filing announcing financial results for the second quarter ended June 30, 2024. Turning Point Brands Inc operates as a manufacturer, marketer, and provider of consumer products that include Other Tobacco Products (OTP) in the U.S. The company offers a wide variety across the OTP spectrum including moist snuff tobacco (MST), loose-leaf chewing tobacco, premium cigarette papers, make-your-own (MYO) cigar wraps, cigars, liquid vapor products, and tobacco vaporizer products. It operates in three segments: Zig-Zag products, Stoker's products, and NewGen products, with the Zig-Zag products segment generating the maximum revenue.
Performance Overview
Turning Point Brands Inc (TPB, Financial) reported net sales of $108.5 million for Q2 2024, surpassing the analyst estimate of $96.14 million. The company also reported earnings per share (EPS) of $0.68, exceeding the estimated EPS of $0.64. This performance marks a significant improvement compared to the same quarter last year, where net sales were $105.6 million and EPS was $0.53.
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.”
Segment Performance
The Zig-Zag Products segment, which accounted for 47% of total net sales, saw an 8.0% increase in net sales to $50.5 million. This growth was driven by strong performance in the North American Papers & Wraps businesses and solid growth in cigars. However, the gross margin for this segment declined by 330 basis points to 53.2% due to product mix.
The Stoker’s Products segment, representing 39% of total net sales, experienced an 18.5% increase in net sales to $42.7 million. This growth was fueled by high teens growth from MST and triple-digit growth for FRE, partially offset by a low-single-digit decline in loose-leaf tobacco. The segment's gross margin slightly contracted by 30 basis points to 55.0%.
Financial Achievements and Metrics
For the second quarter, consolidated selling, general, and administrative (SG&A) expenses were $32.8 million, compared to $31.9 million in the same period last year. Notable items in SG&A included $1.9 million of stock compensation expense and $1.0 million of FDA PMTA-related expenses for modern oral products.
Total gross debt as of June 30, 2024, was $368.5 million, with net debt (total gross debt less unrestricted cash) at $226.4 million. The company ended the quarter with total liquidity of $201.0 million, comprising $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.
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Net Sales | $108.5 million | $105.6 million |
| Gross Profit | $53.8 million | $52.5 million |
| Operating Income | $22.8 million | $20.5 million |
| Net Income | $13.0 million | $9.9 million |
| EPS | $0.68 | $0.53 |
Analysis and Outlook
Turning Point Brands Inc (TPB, Financial) has demonstrated robust performance in Q2 2024, driven by strong growth in its Zig-Zag and Stoker’s product segments. The company's ability to exceed analyst estimates for both revenue and EPS highlights its effective market strategies and operational efficiency. However, the decline in gross margins for the Zig-Zag segment indicates potential challenges in product mix management.
Looking ahead, the company has increased its full-year 2024 adjusted EBITDA guidance from $95-$100 million to $98-$102 million, excluding CDS. This optimistic outlook reflects confidence in sustained growth and market expansion, particularly in the modern oral nicotine pouch segment.
For more detailed financial information, readers can access the full 8-K filing.
Explore the complete 8-K earnings release (here) from Turning Point Brands Inc for further details.
