Turning Point Brands, Inc.

Good day and welcome to the Turning Point Brands first quarter 2020 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star, then two. Please note, this event has been recorded. I would now like to turn the conference over to Mr. Luis Reformina, Vice President of Business Development. Mr. Reformina, the floor is yours, sir.

Thank you. Good morning, everyone. This is Luis Reformina, Vice President of Business Development. Joining me are Turning Point Brands President and CEO, Larry Wexler, Graham Purdy, Chief Operating Officer, and Bobby Levin, Chief Financial Officer. This morning, we issued a news release covering our first quarter 2020 results. This release is located in the IR section of our website. www.turningpointbrands.com where a replay of today's conference call will also be available. In this call, we will discuss our consolidated and segment operating results and provide a perspective on our progress against our strategic plan. As is customary, I direct your attention to the discussion of forward-looking and cautionary statements in today's press release and the risk factors in our filing to the Securities and Exchange Commission. The disclosure outlines various factors that could cause actual results to differ materially from projections or forward-looking statements that may be cited in today's discussion. These forward-looking statements and projections are not guarantees of future performance, and you should not place undue reliance upon them, except as provided by federal securities laws. We undertake no obligation to publicly update or revise any forward-looking statements. In the call today, we will reference certain non-GAAP financial measures. These measures and reconciliations to GAAP can be found in today's earnings rules, along with reasons why Mandra believes that they provide useful information. I will now turn the call over to Larry Reifler, our CEO.

Thank you, Louis, and good morning, everyone. I want to thank you for joining the call during this trying time and hope you and your family are staying safe. Our first quarter was strong, particularly considering the disruption of all businesses across the country at the end of the quarter. We outperformed our expectations across all our major business lines. Tobacco, both smokeless and smoking, exceeded expectations. even after discounting for our estimates of sales pulled forward due to the current environment. We are especially encouraged by the results of our reorganization of the vape business, with sales growing more than 10% sequentially each month of the quarter. That aside, our focus is on the safety and well-being of our colleagues and the communities and customers we serve. I would like to thank our employees for the job they have done to ensure a safe working environment for each other and our communities and express how truly proud and inspired I am of the resiliency they have shown in their commitment to serve our customers' needs. As an organization, we've implemented several changes to enhance safety and mitigate risk in our work environment. For our warehouse and manufacturing operations, these include split shifts where appropriate, temperature scans, contactless hand sanitizing stations, protective equipment, social distancing guidelines and increased cleaning and sanitation. We canceled all unnecessary travel and implemented telecommunicating where possible. Like many companies, we have changed the way we communicate through increased use of video conferencing and have implemented teleselling initiatives throughout the sales force. Some of these changes are proving to be rewardingly efficient and are likely to remain in place even after this crisis and lead to ongoing cost savings. We have deferred annual compensation increases for corporate employees other than those contractually required. We have also put on hold new spending commitments as we cautiously manage this environment. Meanwhile, consumer demand for our products and brands has remained consistently strong. Our products are an important part of our consumers' daily lives. The dedication of our workforce to serve this demand has been remarkable. We have hired additional employees at our Louisville facility and implemented wage increases for our hourly employees to take care of their families in these turbulent times. We have also added capacity to manufacture hand sanitizers in three of our four facilities and have donated over 100,000 bottles to hospitals, nursing homes, and first responders in our local communities. We do expect COVID-19 to impact results in the second quarter. Our third-party cigar wrap manufacturer in the Dominican Republic temporarily closed for three weeks and is slowly ramping back up. In-person selling has been dramatically dampened, which will slow new product launches. Select budget annual price increases will be delayed. These temporary issues are expected to be somewhat offset by our growing B2C platforms. There are a few notable trends at the end of the quarter which we believe was a result of the stay-at-home restrictions in response to the pandemic. We believe trade-in loading benefited our sales by approximately 2 million during the quarter, split evenly between smokeless and the smoking segments. During the last two weeks of the quarter, our case orders for Stokers MSD cans were up over 40% from the trends earlier in the quarter. Stokers MSD tubs saw almost a 60% lift during the same period. as consumers shifted to larger volume quantities during the pandemic. Some of this is undoubtedly trade loading, but so far we have seen less of a give back on tubs than we expected, which is a sign that consumers are trading down and volume purchasing trends in the category may be accelerating due to the economic environment. Another area that saw a benefit was our B2C e-commerce businesses. We saw a meaningful increase at the end of March not only in our vape platforms but also in our branded products websites. These trends have continued through April as consumers shift to the ease of purchasing online. We are pleased to bring new customers to our sites and look forward to serving them going forward. Turning to the PMTA process, the District Court Judge for Maryland agreed to the FDA's request to extend the deadline for filing from May 12th to September 9th. As we've said before, We continue to be excited about the longer-term potential for these products in a much less cluttered market. Overall, we are pleased with our performance in the quarter. More importantly, we came together as an organization to tackle the challenges presented to us by this current epidemic. will continue to be vigilant about the safety and well-being of our employees and will continue to make the necessary adjustments to our businesses to adapt to the changing environment. To add some more color and perspective on our quarter and the path forward, let me turn the call over to Graham Purdy, Chief Operating Officer.