Turning Point Brands, Inc.

conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Louis Reformina, Chief Financial Officer. Please go ahead.

Thank you. Good morning, everyone. This is Louis Reformina, our Chief Financial Officer. Joining me are Turning Point Branch President and CEO, Yavor Efremov, and Grant Purdy, Chief Operating Officer. This morning, we issued a news release covering our first quarter results. This release is located in the IR section of our website, www.turningpointbrands.com. There is also a presentation we will be referencing on the call available on site. Now turning to page one. In this call, we will discuss our consolidated and segment operating results and provide our 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 filings with the Securities and Exchange Commission. On 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. Turning the slide over, I would now like to introduce our new CEO, Yavor Efremov.

Thank you, Louis. I would like to keep this brief so we can allow for more time on Q&A. First, I would like to say how excited I am about the opportunity to lead Turning Point Brands. I joined the board in July of 2021 and spent most of July, August, and September working in different segments of the company in frontline capacity, either as a temp or a trainee, depending on the position. I started with two weeks working in different departments of our MSP plant in Dresden, Tennessee, followed by another week on the production side on the line in Louisville. I can tell you all about MSP and how exactly it is made because some of the product we sold in Q4 was made by me. That was followed by a week of picking and packaging in our fulfillment center in Louisville. Then I spent one week in Florida as a sales rep trainee and the second week in Denver on my own, as a sales rep with my own band visiting stores and doing the job of a TSS. I then proceeded to spend a few days in each of our Miami and LA offices. Given the nature of the work there, undercover boss was not a good format, but I did meet with each and every employee in those locations individually and spent time understanding what they do and how they do it. It goes without saying that I have spent also a ton of time with management, board members, and reviewing the company's financial performance and current position. Throughout that time, I have witnessed a business that is already performing very well and has significant potential for continued organic and inorganic growth, which is also the answer to why I took the job. We're currently viewed as a small-cap tobacco company, and even though our metrics reflect solid organic growth and substantial free cash flow generation, That is not reflected in our share price. We have brands that provide us with a strong mold, solid balance sheet, and impressive cash flow, and yet we traded a heavy discount. To solve for that, we have to move towards a place where we are much larger and more diversified. To that end, we are looking to do two things from a strategy perspective. Number one, execute on the plan. As stated in our press release, we are guiding yet again to solid growth in ZigZag and Stalkers, and are looking to stay in line with Nibida despite pressure from NewGen. Continuing to perform in our current business is, has been, and remains job one. To maintain the momentum, we will invest in the business in targeted ways. You will see us invest more in ZigZag as a brand. We have already started that with the launch of Zigzag Studios and expect to do more in that area. You will see us invest in our IT infrastructure, including upgrading our ERP systems to modern levels that should drive substantial efficiencies. This is something I identified as a need over the summer and we have been working to prepare for it ever since. We are currently in ERP scope with the consulting arm of a big four accounting firm and expect to launch an actual implementation of a new ERP by this summer. On a side note, in addition to the typical efficiencies and cost savings from an ERP implementation, we have the additional benefit of cost savings coming from integrating VIT systems we inherited from prior acquisitions. This is a financial benefit that we will get without spending additional resources. Second, and perhaps most importantly, we will hunt for acquisitions that will help get us out of the small cap status. In that regard, I would like to be clear on two items. Number one, investments in minority stakes with no cap to control is not something that we will prioritize going forward. I have learned to never say never, but that is not a strategy we will actively pursue. In terms of timing, sometimes the right deal appears quickly, and sometimes it takes time to find it. When I hunted for deals at Liberty, I learned to be patient. That is specifically true when you're looking for deals in size. I would like to assure you that we will be cautious with your capital and we will only undertake transactions that we find compelling from a shareholder value perspective. Putting it all together, I believe that our organization infrastructure provides a strong platform to invest further and deliver both organic and inorganic growth. I have gotten to know our employees well over the last six, seven months and would like to thank them for delivering yet another outstanding quarter and welcoming me into the organization. With that, let me turn it back over to Louis to go through the results.

Thank you, Yavor. Turning to page three, which is our consolidated segment overview, Q4 sales were in line with the previous year at 105 million, with strong zigzagging focus growth offset by a decline in UGEN. This is above the previous guidance of 93 to 103 million, without performance relative to our expectations in each segment led by zigzag. Adjusted gross margin was down 170 basis points year over year, or down 100 basis points without the consolidation of TPP Canada. This was primarily due to product mix within ZigZag and $2 million of inventory write-downs and reserves in new gen. Adjusted EBITDA was down $2 million year-over-year, primarily due to the inventory write-down and increased freight expenses from PACT Act implementation. Turning now to page four, ZigZag products. ZigZag sales grew 13.6% year-over-year to $46.1 million, with 12.2% from volume and 1.4% from price mix. growth would have been 3% without the consolidation of TPB Canada. Adjusting further, though, for a COVID-related headwind in our RAPs business, growth would have been much stronger. RAPs revenue for Q4 was consistent with our average from the first three quarters of the year. On a year-over-year basis, RAPs was down 70% due to a $5 million headwind from a COVID-related backorder in the fourth quarter of 2020. During the quarter, we introduced zigzag natural leaf RAPs in limited markets, and reintroduce zigzag hemp wraps and expect those products to be tailwinds for us as they ramp in 2022. Our U.S. papers and e-commerce business was up 28% year over year, driven by more than the doubling of e-commerce and paper cone sales. E-commerce was up two and a half times and now 20% of subsegment, with strong growth expected in 2022. As an anecdote, our accessory sales through e-commerce, which non-existed two years ago, touched $1 million in sales in 2021. Sales of Kohn's products was up 2.8 times and now 21% at the subsegment. Zigzag remains the number one premium and overall paper brand in the MSAI measured market with 35.1% share. Zigzag is also the number one brand in the paper Kohn's category for MSAI with 38.9% share, up 530 basis points year over year. Kohn's remains a large opportunity with only one third of stores receiving paper products also receiving Kohn's during the quarter in the measured market. The paper category showed strong growth in the MSAI measured market at 5.6%. We were also excited by the launch of the ZigZag Studio concept in December with an exciting set of videos, limited edition apparel, and collaborations with partners that have a wide adult audience reach. We were encouraged by the reception to the launch and look forward to our 2022 marketing initiatives to continue to grow the ZigZag brand. Canada more than tripled during the quarter due to the consolidation of TPB Canada which added $4.5 million in revenue, with the majority coming from the DBW acquisition. TPB Canada would have contributed $1.1 million of organic growth during the quarter, or more than the tripling of its base business, had the old recreation marketing business been consolidated in the previous year. The cigar, another subcategory, grew this year after years of decline. The acquisition of the unit to back assets provided a launching point for a re-entry into the large and growing 2.5 billion manufacturer revenue cigars category, with our zigzag natural leaf cigar being introduced later in Q1. Gross margins declined 490 basis points during the quarter. The consolidation of TPB Canada was the biggest driver of decline, given low margins from a DVW acquisition earlier in the year. Margins would have been down 220 basis points, excluding TPB Canada, which was driven by higher growth and lower margin products like paper cones. The tough comp from the $5 million RAPS backfill in Q4 of 2020, which carried high variable contribution margins, led to a year-over-year operating income decline of $1.3 million during the quarter. The decline from RAPS was partially offset by growth in e-commerce, which has lowered contribution margins. We also consolidated a $0.4 million loss from CPB Canada, which we expect to improve through 2022. Overall, ZigZag accounted for 60% of our segment operating income in the fourth quarter and continues to be our fastest-growing segment. Turning now to page five for Stokers Products. Stokers Products net sales increased 8.3% to $31.2 million in the quarter, with 2.1% buying growth and 6.2% from price mix. Net sales for the MST portfolio grew 16% and represented 63% of Stokers revenues in the quarter, up from 59% a year earlier. The category was down 0.9% while we were up 1.7%, as our share grew 10 basis points to 5.7% during the quarter, according to MSAI. Our share in-store selling remained at 9.1%, which still is now in stores representing 63% of industry volumes, which still provides a long runway for growth. Chewing tobacco declined 3% from the previous year, with the category down 5.1%, and TPB outperforming the categories. Stoker's Chew was the number one chewing brand in the fourth quarter, gaining 120 basis points of share to 26.4%, according to MSAI. With a continued secular shift into the value category and Stoker's positioning as a leading value brand, the chewing tobacco business is well-placed to provide us with a stable annuity stream of cash flow going forward. Segment gross margins expanded by 100 basis points to 54.3% during the quarter, driven by price across the segment. Operating margins were stable from the previous year, despite higher shipping and promotional costs. Turning to page six, new gen product. We continue to manage through a disruptive environment with sales down 22% from the previous year to 28.0 million. Our base distribution business saw a 16% decline due to the market dynamics resulting from the regulatory environment, along with the implementation of the PAC Act, which required a switch from the USPS to an alternative distribution infrastructure. Our other new-gen business was down 49% as our other vape products were impacted by the regulatory disruption. Adjusted gross margins were down 690 basis points during the quarter as we took $2 million of inventory write-downs and reserves, mostly related to other new-gen products that were impacted by vape industry regulatory dynamics. Adjusted operating income for the segment was down $3.7 million due to the lower gross profit, which was partially offset by lower variable SG&A. Incursively, we received a USPS exemption for B2B shipments to our qualified customers in December, and we continue to build our last-mile distribution infrastructure for B2C shipments. Not much to update on the PMTA process, as the industry continues to await progress from the FDA. We've talked about the challenging environment we are currently operating in with our vape distribution business in detail in past calls. Ultimately, we still believe that all the short-term challenges the industry is facing presents an opportunity for us in the long term given our size and ability to navigate the regulatory environment. Turning now to page seven, our balance sheet and liquidity. We ended the quarter with over 128 million of cash in the balance sheet and 150 million of available liquidity providing flexibility on capital deployment. We repurchased $18.2 million of shares during the quarter and 6.4 million in January. We recorded a gain from the forgiveness of a 7.5 million PPP loan but recorded a 7.1 million impairment related to our investment in doses. Turning now to slide eight, our Clipper distribution agreement. This morning, we also issued a press release announcing a partnership with Flamagas for exclusive distribution of Clipper lighters in the US and Canada. Clipper is the number one reusable lighter and number two overall lighter in the world, including number one share in several developed markets in Europe. This is a large opportunity for us with a lighter market that is approximately $1 billion in retail revenue and $500 million in wholesale revenue, which roughly equals the size of the U.S. papers and wraps market. Clipper is currently a small player with approximately 3% share in the U.S., but it has had success in a playbook, growing their presence in other markets by partnering with other rolling paper companies with strong distribution. The Clipper lighter is the preferred product in the roll-your-own-cannabis market with very strong presence in the alternative channel, but it's currently underrepresented in the convenience store channel, given lack of distribution. We believe this presents strong cross-selling opportunities with TPB and ZigZag, which have strong presence in convenience stores, but it's currently underrepresented in the alternative channel. We expect to start selling slipper products late in Q2 with a gradual ramp through the second half of the year, and we'll report it in the ZigZag segment. While we do not currently expect contribution and profitability to be meaningful for the year, we believe this is a tremendous long-term opportunity for our company. Furthermore, the choice of Zigzag and TPB as a partner was a deliberate decision by Flamagot and is a testament to the value of the reach of our distribution infrastructure and demonstrates our ability to expand our addressable markets by carrying complementary products. Moving to page nine, our guidance. With limited visibility around the PMTA regulatory landscape, we are limiting our top-line guidance to our Zigzag and Stokers product segments. With that backdrop, we project for 2022, Zigzag product sales of 193 to 203 million, which represents 12% growth at the midpoint. Our base Canadian business outside of TPB Canada can have quarterly fluctuations depending on timing of orders. Just as a reminder, our full year revenue on our base business was $12.1 million in 2021. Q1 of 2020 was $5.9 million due to timing of orders. Sorry, Q1 of 2021 was $5.9 million due to timing of orders. So as a reminder, we will face a tough comp of approximately $3 million headwind in Q1. We also had a $2 million pull forward in our RAP business with a trade inventory build in Q2 of last year that pulled from Q3. Stokers product sales of $127 to $134 million, which represents 5% growth in midpoint. Our current expectation is to generate consolidated EBITDA in line with fiscal year 2022, despite anticipated volatility in the new gen product segment. With the rampant new products and zigzag, as well as continued improvement in our VAPE logistics infrastructure, we expect the second half of the year to be stronger than the first half. Our other projections include stock compensation and non-cash incentive expense of $7 million, and cash interest expense of $18.5 million, and gap interest expense of $21 million. We expect our effective income tax rate to be between 22% to 24%. With regard to CapEx, we are currently reviewing projects that we believe will drive value to the organization. We do expect an increase in CapEx this year, but can give further color as the projects get underway. One of those projects involving the improvement of a manufacturing process is moving from detailed planning stages through last year into late stage design phase today with plan completion next year, carrying with it a very attractive return profile. The projects also include the ERP upgrade Yalvar mentioned, where we are currently in the planning stages with implementation likely to begin later this year into next year. With that, I'd like to thank you for participating in the call today and would like to open the call now for questions.

Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from Vivian Acer from Cohen. Please go ahead.

Thank you. Good morning, and congratulations on the new role. My first question, please, is on the comment, Yavor, about your M&A philosophy. I appreciate the rationale for large-scale M&A, but I was hoping you could square that with some of the historical minority stakes that the company has taken specifically around cannabis. Are we meant to understand that perhaps cannabis is less of a priority or pending legislative catalyst? How do we square those two concepts? Thanks.

Sure. So look, cannabis is evolving quite rapidly in multiple directions. At this stage, I think it's pretty hard to pick a winner. There's quite a few contenders, if you will, and no clear contender who will come out of this. So going out and putting a lot of money on brands that exist yesterday and were fashionable yesterday and then today are gone, to me, is a risky way to deploy shareholders' capital. That being said, some of our portfolio, I think, would perform quite well in a fully legalized cannabis situation. So to the extent cannabis ever got legalized, if we were in a position where our existing assets are well-developed and strong, I think we'll be exactly where we need to be. That being said, I'll say, look, and I'll never say never. If we see something that is attractive and large and meets our other criteria, specifically around size and control and cash flow, I think we're going to be taking a hard look. But I think the best thing we can do in terms of kind of addressing the potential legalization of cannabis is to invest in our current brands. and invest heavily and make sure that they're perceived as the number one kind of leading brand in whatever category they're in.

Understand. That's helpful. Thank you. And my second question is on the ERP implementation. You know, obviously that's not a simple endeavor to undertake and certainly can drive some lumpiness in your results. Louis, is it fair to understand that there shouldn't be any really disruption to your business in the first quarter, given that you're still in the planning phases and any kind of inventory movement and adjustments that you guys would be making to build safety stock around an ERP implementation would be more back half-loaded? Any other color would be helpful, too. Thanks.

Yeah, I think that's fair. I mean, we're early in the process. As Yavor mentioned, we're still in the scoping phases, so we don't expect implementation to really begin until later in the year. And even at that, you know, it's the beginning stages of the implementation.

Okay, fair enough. Thank you very much.

Your next question comes from Susan Anderson from B. Riley. Please go ahead.

Hi, good morning. Nice job on the quarter. I was wondering for ZigZag, the growth for this year that you're guiding to, maybe if you could just break out volume versus pricing expectations and then also the major drivers there such as You know, is it going to be new products or market share gains or industry growth?

Yeah, for me, for ZigZag, we're looking mostly to drive our growth through volume gains. So it's a combination. We've got a number of new products that we are launching in the market. We mentioned Natural Relief, the reintroduction of HemRap, and the reintroduction of our Cigars product. So we expect those to be big drivers of our growth, and we expect to see market share gains, especially as we continue to increase our penetration in the alternative channel.

And look, this is the hour just to add to what Louis was saying. As I mentioned in my remarks before, we are looking to invest more in kind of pushing the ZigZag brand out. So ZigZag Studios, other initiatives of that type, those will take a little bit of time to take hold. Obviously, they don't happen overnight. But we like the brand, we like where we are, and we think that the best thing we can do is to continue to invest behind zigzag and building out zigzag. And going to the specifics of your question, if you think of the price-volume mix, one of the things that I'm encouraging about zigzag is the vast majority of gains are coming from volume. We're not taking price there in any way that's material.

Got it. That's helpful. And then did you guys say, I think you said that zigzag wraps were going to be delayed in the first quarter. Did you say how much that was?

No, what we mentioned was on the RAP side, there was a bit of a pull forward dynamic model out the year. We mentioned in Q2 of last year, we had a pull forward from Q3 into Q2 due to a trade inventory load that impacted the quarter 2 million in Q2. So it'll be a tough end win, but it's a tailwind for us in Q3 this year.

Got it. Okay. And then lastly, I guess just on the last mile network, I guess when do you guys expect to have that fully complete?

Look, it's tough to say complete. We're working very hard on it. To give you a little bit of inside baseball, we started preparing on the backpack. As soon as it came out, we ran a number of tests starting in I think April, May of last year. So we've been testing our network ever since. The only way to run a full test is to effectively shift all of our shipping off of the carriers we're using at the time, which would have been prohibitively expensive. Essentially, we would have been taking the hit we're taking now much earlier and kind of for no reason. So we've been doing this for over a year, well, close to a year now. We're built out quite well. We're continuing to build out. Obviously, we're continuing to talk to the big shippers as well. It's difficult to give you a kind of 100% completion date because most of the lock mile is done by individual local carriers. So that's a much harder thing to cover lock. I think I'm happy with the progress we've made. I like vape a lot. It's kind of a long-term potential. I understand how that is obviously not a great place to be right now, but I do believe all the time it's going to work out. So all I can tell you is we're working very hard on it. We're very focused on it. I'm spending a lot of time on vape. I've been to Miami three times this year. So I've been there three times. I'm going back there in two weeks. We're spending a lot of time on it. We are focused on it. I don't know if we'll ever get to a full 100% of each and every corner of the United States, but we're sure it's health pushing to get as close to that as we can.

Great. Very helpful. Thanks so much. Good luck this year.

Thank you.

And your next question comes from Eric DeLaurier from Craig Allen. Please go ahead.

Great. Thanks for taking my questions, and congrats on a great quarter here. Thank you. I was hoping you could expand a bit more on Clipper's alternative distribution share, and then just give us a bit more color on that relationship with you guys and sort of how you're looking to leverage that to get into more alternative channels. Thanks.

Yeah, so I mean it's a great opportunity for us because if you go to a head shops and dispensers, you'll find Clipper lighters. So they've got very strong presence in the alternative channel where we with Zig Zags are underrepresented. So it's a great selling point for us where we now have essentially a must carry item in the alternative channel that we can kind of piggyback with Zig Zags. On the flip side, they've got very limited presence in the convenience stores where most lighters are sold in the United States. So that is a huge opportunity for us to be able to take what we think is a great product into our strength, which is the C-Store, the measure channel.

And just to add to that, the thing about Clipper is obviously it's a leading brand. They have found ways to beat their largest competitor in some of their home markets, and we're very excited about partnering with them. Keep in mind, we get I wouldn't say inundated, but pretty much inundated with offers from people to distribute their stuff through our network. Obviously, we have a strong sales force with both digital and brick and mortar, so we're omnichannel. We decline about 99% of the offers to distribute stuff, but this was one where it made so much sense. It was the right partner, very good people to deal with, easy relationship, and we look forward to success there.

Great. I appreciate that color. And then on the cigars and hemp, or I guess cigars and wraps outlook here, understanding that there's a bit of, you know, kind of volatility quarter to quarter last year that won't necessarily repeat this year. But if you can kind of just take a step back, maybe this is more of a year to year than a quarter to quarter type question here, but can you just Kind of help us understand what, you know, what type of ramp we should expect in cigars and wraps now that you guys have that IP, you know, under your belt and you're looking to get these products out here. Just a bit of a, you know, help us frame the sort of ramp in cigars and wraps. Thank you.

Sure.

I mean, there's two separate parts there. I'll take the wrap question, so we'll let Graham answer the cigar piece of it. So, on the wrap side, the growth really in the category overall is growing. And then within wraps, we've got two new products, one of which is a natural leaf wraps that we're pretty excited about. It's a double-digit percentage of the market today, and we're underrepresented right now, so we expect our natural leaf product to ramp through the year. We've also got a hemp wraps product that we reintroduced under the ZigZag brand late last year that we expect to ramp for us as well.

yeah hey eric scram um you know with respect to the cigar business you know you've got a a tale of two cities there so you've got the homogenized tobacco leaf or the htl cigars the unit tobacco deal that we did last year i think positions us well in the htl cigar business when you look at where sort of the action energy is with uh with cigars it's in the natural leaf segment as i'd mentioned on the last call our plan is to launch at the end of this quarter uh natural leaf cigars under the zigzag brand so we're pretty excited about sort of the energy that natural leaf has you know louis mentioned naturally perhaps and then the complement with uh natural leaf cigars so we're pretty excited about sort of building out our natural leaf portfolio as you think about uh you know q2 and beyond yeah i think overall when you when you think about kind of zigzag what we've been doing over the last couple years is really increasing the addressable markets that we're playing in right cigars being

the largest addressable market within a cannabis accessories portfolio. And, you know, Quipra is just another addition of that to expand kind of the opportunities that we have in front of us.

Great. That's all very helpful. Thank you very much.

Again, if you'd like to ask a question, press star one on your telephone keypad. And your next question comes from Gaurav Chen from Barclays. Please go ahead.

Hi, good morning. Thanks a lot. I have a few questions here. So number one is, you are on your plan to make, you know, TPB into a much larger company. Your stock is trading at 10 times speed, approximately, and the free cash flow is about $60 million. So how do you use either your equity or free cash flow to become a much bigger company?

So, look, I think you use a combination of both, and it's going to be very much dependent on the target and on the deal structure. It has been done before. I've done it before. I did it at Liberty when the vehicle Liberty used to acquire Formula One at the time had about a billion dollars of cash and acquired an $8 billion asset. So how does that happen with a lot of structuring and some outside investment and a lot of talking to investors? So it is possible to buy somebody who is much bigger than yourself. Are we setting our sights that high for a first acquisition? We're not going to say no if it shows up. At the same time, I would interpret my comments primarily to mean that we're out of the small minority investment business. Again, never say never. But our preference would be hundreds of millions and above. And all of that, with the proper structuring, with some outside capital, should be doable. Again, depends on the target, depends on the situation, depends on the structure. But I'm not a stranger to complex structuring. I've done it before. I'm not a stranger to raising capital from outside investors. I've done it twice in size. I raised $1.5 billion for Formula One. I raised $2 billion in cash for Charter. And that's from calling people, showing them a proper structure, showing them a target, explaining a strategy. It's not easy. It doesn't happen all the night. But it can be done fairly quickly with the right target and the right structure.

Sure. And which industries would be your focus? Would it be tobacco? Would it be cannabis and cannabis, I guess? To Vivian's question, you know, you almost are downplaying it, or it could be something like, I just read today that Standard General has acquired a media company. So could it be completely outside of how we think about running for insurance?

I would say all of the above. We don't want to preclude an opportunity. I can tell you that it's highly unlikely that you would see us investing in space tourism. There are areas that are going to be completely outside of scope. anything we buy, the idea would be for it to make us larger, more diversified, and enhance our balance sheet. And therefore, to me, that means decent cash flow. There's a growth story, what we believe is going to be a growth story behind it. We need to bring something more than just, hey, we can find capital for you. So there's got to be some logic to it that makes sense. And above all, the way I view my job is kind of, Job number one continues to be running the business. There's no caveats or exceptions to that rule. Job number two is capital allocation. So I will allocate capital in a way that drives value to shareholders. And if that happens to be in tobacco or someplace else, so be it, so long as there's value driven to shareholders. Again, our preference would be to diversify. So the bar for tobacco is going to be higher in terms of the multiple we would be willing to pay.

But again, if it checks our other boxes, the door is open to conversations.

Sure. And if I look at the prior acquisitions of turning point brands and this new gen segment, which was built through acquisitions, its performance has been quite sketchy. And I would argue that it has actually led to the destruction of a lot of shareholder value. So before you embark on your M&A strategy, Would you look to unwind some of these past transactions or shut down some of the businesses which are loss-making, get a higher stock price and multiple, which will then also help you to do some deals?

Sure. So let me split this in two parts, if you will. There are, for any company, for us, I've done M&A for 20 years. I've seen a lot of companies do M&A. Nobody has 100% batting average. that I know of. There are people who tell you that they have it, and if you actually dig into it, you see that that's not quite true. So when it comes to unwinding or undoing something that's already been done, I want to differentiate between situations where we're experiencing temporary headwinds, which are severe, to your point, which I agree with, and situations where there's just no future in which an asset recovers. So let me talk about vape a little bit because obviously it's on everybody's mind. To my mind, and that's the analogy I've given internally, the vape industry, which is where our new gen segment sits, is a little bit like a harbor that's being beaten by a storm. And there's a lot of ships in the harbor. There are the big, solid, well-run, well-managed ships. And I think that describes our vape operation. uh like i said i've spent a lot of time in miami that's where kind of the management team for that for that group says uh i think they're doing an outstanding job given the situation they're in like any other ship inside the harbor that's being beaten by a storm you know they are taking damage there's no question about it but i do believe that when the storm is over at some point it is going to be over the ships that remain they are going to be a handful And they're going to be in a very good position in an industry that's not going anywhere. Whether we like it or not, vaping is here to stay, to my mind. It needs to be regulated. We're fully supportive of the regulator. We're spending a lot of time with the FDA. We're very much on the same page that the industry needs guidance. And once that happens, I think we're going to be in a good position to be one of the good guys. We've already been recognized as a good guy by the USPS. It's a question of surviving the storm. And if you look to the history of other companies, there have been plenty of cases where that has happened. You can look at, in my own experience, you can look at SiriusXM, which was on the verge of bankruptcy and everybody had written off. And John Malone was patient and went in and stayed and ended up with a phenomenal asset. You can look at Charter. After Charter acquired Time Warner Cable, there was a time when everybody thought that the world was coming to an end. And it turned out that the management team was correct, and Charter is still, to my mind, one of the best assets to own. So the fact that we are in a tough spot, the question is not so much kind of what do we do now? The question is what does the future look like when the dust settles? And I think when the dust settles, we're going to be in a much, much better position internally and much better position relative to other competitors.

Thanks a lot. If I could just make one last quick question. So share buybacks are now off the table.

I wouldn't say that they're off the table. I wouldn't say that they're completely kind of, we're not going to be pressing the gas pedal all the way down, nor are we taking off without the gas pedal. I think we will maintain flexibility to do what we view as appropriate, but we certainly are not saying never on the buybacks.

Thanks a lot.

Thank you.

And there are no further questions at this time. I will turn the call back over to the presenters for closing remarks.

Thank you, everyone, and welcome you next time on our next call. Thank you. Thank you.

This concludes today's conference call. You may now disconnect.