Turning Point Brands, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Results: Consolidated revenue for Q3 was $119 million, a 31% increase. Adjusted EBITDA was $31.3 million, a 17% increase.
• Guidance Update: Adjusted EBITDA guidance was increased to $115 million to $120 million (previously $110 million to $114 million). Full-year Modern Oral sales guidance was raised to $125 million to $130 million (previously $100 million to $110 million).
• Investments: Plan to deploy $100 million from the at-the-market offering. Updated ATM prospectus supplement and buyback authorization to $200 million each. Key initiatives include reallocating sales/marketing resources, expanding sales force, improving online presence, expanding to international markets, and building U.S. manufacturing.
• Go-to-Market Initiatives: Optimizing distribution, expanding SKUs, strategic marketing campaigns for FRE (e.g., launching FRE Watermelon), Zig-Zag promotions (Zig-Zag for Life, Zig-Zag Studio), and Stoker's new product launches and D2C site.

Segment Performance

• Modern Oral: Revenue was $36.7 million, representing a 628% year-over-year increase and 22% sequential growth. White pouch sales saw a 628% YOY growth. White pouch now accounts for 31% of the company's total business.
• Stoker's: Revenue increased 81% to approximately $74.8 million. Looseleaf sales grew 4%, MST sales grew 6%, and Modern Oral revenue contributed significantly to this growth.
• Zig-Zag: Revenue decreased 11% to $44.2 million, a 6% sequential decline. This decline was anticipated, but performance was better than expected, reflecting opportunity costs related to focus on Modern Oral.

Guidance

• Increased full-year 2025 adjusted EBITDA guidance to $115 million to $120 million from $110 million to $114 million.
• Increased anticipated total Modern Oral sales range to $125 million to $130 million from $100 million to $110 million.
• Budgeted CapEx for 2025 is $4 million to $5 million, exclusive of Modern Oral projects, with $3 million to $5 million expected for Modern Oral product development and manufacturing (PMTAs).

Risks

• No specific risks detailed in the transcript beyond general risk factors mentioned in SEC filings.

Question and Answer

• **Q: On onshoring capacity and COGS per unit for nicotine pouches...

A: Onshoring will save inbound freight and tariffs, expecting unit economics to improve once production lines are qualified in the first half of 2026.**

• **Q: MST and looseleaf growth drivers...

A: Combination of share growth, pricing favorability, and less than 10% market share in a ~900 million can category with opportunity for further gains.**

• **Q: Modern Oral in-store market share...

A: Highly encouraged by results but specific market share not publicly disclosed.**

• **Q: Distribution white space for FRE and ALP brick-and-mortar...

A: Tremendous white space for both brands, with ALP having more current white space, and shared platform accounts showing positive results.**

• **Q: Balancing profitability and growth...

A: Measured approach to deploying resources around high-return projects to balance growth and profitability.**

• **Q: Shelf space allocation for Modern Oral...

A: Retailers are methodical in space allocation, Modern Oral space expected to grow, but hard to specify which products might be displaced.**

• **Q: Loyalty programs for ALP and FRE...

A: Encouraged by engagement, especially with subscription sign-ups on both platforms.**

• **Q: Modern Oral revenue trends and conservatism in guidance...

A: No pull forward in Q3 revenue, guidance reflects category dynamics and a measured approach to resource deployment.**

• **Q: Near-term outlook on promotional environment...

A: Anticipates a healthy promotional environment driven by large competitors, focused on building brand and consumer connection while being mindful of resource deployment.**