Turning Point Brands, Inc.

Good morning and welcome to the Turning Point Brands' third quarter 2020 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star, then one, on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Louie Reformina, Chief Business Development Officer. Please go ahead, sir.

Thank you, operator, and good morning, everyone. This is Louie Reformina, Chief Business Development Officer. Joining me are Turning Point Brands President and CEO Larry Wexler, Grant Purdy, Chief Operating Officer, and Bobby Lavin, Chief Financial Officer. This morning, we issued a news release covering our third 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 statement in today's press release and the risk factors in our filings with the Securities and Exchange Commission. 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 security laws, and we undertake no obligations 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 release, along with reasons why management believes that they provide useful information. I will now turn the call over to Larry Wexler, our CEO. Thank you, Louie, and good morning, everyone.

Thank you for joining the call. Our third quarter, once again, exceeded our expectations as we realized $104 million in revenue and $24 million of EBITDA. Our strategic growth initiatives are paying dividends, and we're responsible for most of the growth that we achieved during the quarter as we executed well in a favorable demand environment. COVID provided a volatile selling environment for the company, where we were able to navigate it successfully and accelerate a number of positive trends across all four of our focused product lines. Within Smokeless, MST's same-store sales momentum continued as we kept building our distribution footprint. Secular consumer trade-down trends remain in place, with our value proposition driving trial by new customers, many of which we end up winning over. In addition, the pricing environment remains healthy as we took our second price increase on both cans and tubs last week, while still maintaining a significant price discount to our larger competitors. We also saw accelerated double-digit growth of our loose-leaf chew business as a targeted Salesforce initiative initiated in the first quarter positioned us to achieve solid distribution and market share gains in a COVID-impacted environment. In smoking, we saw our highest growth rate in recent history, driven by our product and channel growth initiatives behind our rolling papers and cigar wraps businesses. With the close of the Durford transaction, we're also forming a closer and more direct relationship with our third-party MYO cigar wrap manufacturer in the Dominican Republic. This helped ramp production back up from the COVID-related disruptions experienced earlier in the year. Increased cannabis consumption is also benefiting us. But more encouragingly, the majority of our growth during the quarter came from internal initiatives through recently introduced products and a ramp up of our e-commerce business. NUGEN managed admirably through a significant disruption in the marketplace caused by competitors liquidating inventory and exiting the market around the PMTA deadline. While negative in the short term, this process has the potential to be a tremendous long-term benefit for our business. Despite the competitive environment, if not for last year's load-in at riptide, the segment would have showed growth during the quarter. More importantly, we leveraged our regulatory and scientific expertise and infrastructure to file PMTA applications covering 250 products, one of the most extensive portfolios in the vape industry. While we still expect near-term disruption in the fourth quarter, the PMTA process provides us with significant potential upside as the market consolidates, and we increase our mix of proprietary products. We're also very excited about our recently announced investments. Earlier this month, we announced an investment in Wild Hemp Hempettes, a leading brand in the nascent hemp cigarette and smokable hemp market. With our exclusive distribution agreement on the product, Wild Hempettes adds to our growing portfolio of hemp and CBD products, and we plan on expanding into our retail footprint. He also projects a smokable hemp market to grow from 70 to 80 million in 2020 to a range of 300 to 400 million by 2025. This product line will be an interesting alternative for C-store retailers looking to fill in the white space left by flavored vape products, which have exited the market. This morning, we also announced a strategic $15 million investment in Dosis, one of the most recognized cannabis brands in the marketplace today. DOSIS has built a well-recognized and trusted brand through a powerful marketing organization led by one of its founders, who leads a top marketing agency and has serviced clients such as Coca-Cola, Disney, and Budweiser in large campaigns. DOSIS built a sleek, disposable THC vape product that was well-received in the marketplace. Building upon that success, DOSIS has had a transforming platform point in its history, with new product launches such as rechargeable pens, higher THC content products, and other form factors that take the brand into much larger addressable markets, thereby reshaping the company. The legal cannabis market is projected to grow from $16 billion today to $34 billion by 2025, according to BDSA. We think this market will find its way into our channels in the long run, and we view DOSIS as the right partner to build our exposure. We're also excited to work with DOSIS on co-developing a non-THC brand that we believe has significant potential within our core convenience storage sales channel. In addition, the transaction comes with a very valuable option to invest another $15 million at predetermined terms within the next 12 months. Wild hemp and dosage transactions are representative of a strategic direction to enter into large and growing addressable markets. You should expect us to make more investments in the future with our ample liquidity and free cash flow generation. We streamlined the business at the end of 2019 and laid out a number of initiatives that drive growth and improve our cost structure heading into this year. We are seeing in our performance the ongoing benefits from this reshaping of our business towards a more growth-oriented mindset. We decide to play to our strength with two powerful brands, Stokers and ZigZag, to ensure that we are putting in place the infrastructure for them to reach their potential and to prepare for the future with our new X-Ventures group creating a robust pipeline of new products. Our focus on cost continues to provide the operating leverage so we can benefit from our market share gains As a result, we are pleased to be able to raise our outlook once again for the remainder of the fiscal year, which Bobby will detail later on the call. To add some additional color and perspective on our quarter and the path forward, let me turn the call over to Graham Purdy, Chief Operating Officer.