Turning Point Brands, Inc.

Good morning, ladies and gentlemen, and welcome to the Turning Point Brands' second quarter 2022 earnings conference call. All participants will be in a listen-only mode, and all lines have been placed on mute to prevent any background noise. 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, and 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, Operator. Good morning, everyone. This is Louis Reformina, Chief Financial Officer. Joining me are Turning Point Brands President and CEO Yavor Efremov, Grant Purdy, Chief Operating Officer, and Summer Freem, Chief Marketing Officer. This morning, we issued a news release covering our second quarter results. This release is located in the IR section of our website, www.turningpointbrands.com. There is also a presentation, which we will be referencing on the call, available on the site. Turning over to slides through the presentation, during 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 filings with the SEC. On the call today, we will be referencing certain non-GAAP financial measures. These measures and reconciliations of the gap 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 our CEO, Yavor Efremov.

Thank you, Luis. Good morning, everyone, and thank you for joining our call. I have now been with the company for two quarters and wanted to start by sharing some thoughts on what I have seen so far and areas where I see opportunities. In terms of immediate steps, In light of the turbulence we saw in the quarter and continued uncertainty, we have taken a number of cost control measures on the OPEX side and have restructured our CapEx plans to protect our cash flow for the year. We continue to review the company for areas where we can improve on costs or delay spending without putting future performance at material risk. While those steps are necessary given the current environment, I'm happy to report that there are significant growth opportunities ahead of us. We have done more work on the areas we highlighted in prior calls, and I wanted to give you an update on what we're seeing so far. First, we have done quite a bit of analysis to understand the alternative channel, which we define as head shops and dispensaries. We believe that the target addressable market for the old channel relative to the current product types we engage with is roughly the same as the measured channel. While there are fewer dispensers and head shops than there are C-stores, the velocity of product sales in the old channel is multiples of that in the C-store channel, and the availability of shelf space also allows for more of our products and accessories to be sold. Importantly, we see the channel and its TAM growing strongly as a result of deregulation. MSAI does not measure sales in the old channel, but we have utilized our own sales data along with other available market information to triangulate the estimated size, which again, we believe is similar to the size of the measured channels today, and we expect that it will grow faster in the future. For MSAI, Our share of the measured market, broadly speaking, is one-third between papers and columns. Based on our estimates, we have a single-digit share in the total opportunity set within the alt channel, which extends beyond our traditional paper products. That leaves a large opportunity of incremental revenue that is available for us all the time. Penetrating the alt channel and continuing to push on the measured channel requires us to approach marketing in a different way. We recently brought some on board to drive that effort and to lead our talented Miami and LA-based teams, which have been critical to ZigZag's growth in recent years. I'm very excited by the initiatives she has outlined so far. While we are in the early stages, we believe that we can highlight the superior quality of our products and drive greater market share while at the same time realizing attractive returns. As we increase our focus on penetration, we will continue to keep an eye on marketing costs to ensure that we realize a decent ROI. Second, we have historically underinvested in technology. As many other companies have shown, leveraging the right technology can drive the top line and allow us to control costs. Specifically, we're looking to expand our CRM functionality to allow us to better track both performance and opportunities in the market and allow us to pivot quickly to respond to market dynamics. Moving from a cell-based solution to the full power of a modern CRM should help us drive the top line in ways that are not available to us today. As discussed in our prior calls, we are replacing our four existing ERP systems with a single fully integrated ERP. Over time, we expect significant deficiencies on the cost side from the implementation of the new system, both in terms of eliminating the excess costs associated with maintaining outdated systems and manual processes, as well as significantly better visibility into our business functions and better controls of our processes that should lead to better performance. Summing it up, I'm even more optimistic now than when I joined. I will continue to review the opportunity sets both for ways to drive revenue and to find initiatives to reduce costs so we can grow the company. Turning to the quarter. While we experienced uneven results during the second quarter, we are pleased with the resilience of our business. Rising prices at the pump and heightened inflationary environment had an impact on consumer traffic in convenience stores. Zigzag overall had a stable quarter against the top comparable period in the previous year. Continued proliferation of the cannabinoid market, combined with our new initiatives on new products, e-commerce DTC, and targeting the off-space is offsetting the impact of recent inflationary pressures on consumer demand and tail-off of COVID-related consumption. Our US papers in e-commerce business delivered another strong quarter of double-digit growth that was offset by a decline in our REPS business, which faced a tough comparable with a pull forward that failed in the previous year. Stalkers MSP and Looseleaf Business saw strong share gains during the quarter. With its value proposition, Stalkers was well positioned for the consumers looking to trade down during the quarter. The FDA has accepted our free PMTA filing and we look forward to continuing to supply our white power products to our consumers. Meanwhile, Mugen navigated another challenging quarter, but remains profitable despite a 45% decline in sales. On capital allocation, we continue to buy back shares during the quarter and maintain a strong balance sheet for further capital deployment along with our priorities, which continue to be investing in the company, buybacks, and accretive M&A. going forward we maintain a favorable outlook as stalkers and zigzag continue to be well positioned we are however mindful of the uncertainty in the economic environment and consumer confidence driven by the continued inflationary environment with the current economic backdrop along with the volatility we experienced during the second quarter we have adjusted our outlook for the remainder of the year as stated in today's press release With that, let me turn the call back over to Lloyd to go through our results.