Turning Point Brands, Inc.

Good morning and welcome to the Turning Point Brands second quarter 2023 earnings conference call. All participants will be in listen-only mode. All lines have been placed on a 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. 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, Chief Financial Officer. Joining me are Turning Point Brands President and CEO, Graham Purdy, and Chief Revenue Officer, Summer Cream. 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. During this call, we will discuss the consolidated and segment operating results and provide a perspective on the operating environment and 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 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 our CEO, Grant Purdy.

Thanks, Louis. Good morning, everyone, and thank you for joining our call. Our second quarter results demonstrated continued progress against our plan. During the June quarter, we showed revenue growth of both Stokers and ZigZag as we continue to gain traction from the initiatives we put in place and consumers are responding as demonstrated by market share gains in most of our major categories. Given our solid start to the year, we are raising our annual EBITDA guidance to 90 to 95 million. Of course, Our business, like many other consumer-oriented companies, is not without challenges. Our results continue to reflect the impacts of prolonged inflation and higher interest rates. As we've shared previously, our wholesale customers, particularly buyers of our ZigZag paper and wraps portfolio, have been carefully monitoring inventory levels in response to the higher cost of financing their working capital. While we think the bulk of our wholesale customers' inventory adjustments are largely behind them, We still saw further destocking with certain customers in the second quarter. Despite this transitory dynamic, we're confident that the ZigZag brand continues to strengthen based on several factors we track. Our sell-through was better than our reported results, and we are encouraged by our wholesale customers and retail customers' response to our expanding portfolio, which includes clipper lighters, and our recent new product introductions. We are also encouraged by our continued penetration of the alternative channel driven by continued secular tailwinds that are expanding our addressable market. We are having success not only winning new untapped alternative customers, but our new and existing alternative customers are showing more interest in taking on more complete zigzag portfolio. This not only increases our order sizes, but also provides valuable shelf space and merchandising real estate within these stores to build brand awareness as we satisfy evolving in consumer preferences. As many of you can probably see in your hometowns, the alternative channel is consistently expanding by virtue of additional states green lighting medical and recreational cannabis. In addition to more legal dispensaries, other alternative retail outlets and manufacturing processing facilities are drafting off this trend. Our zigzag B2B e-commerce business selling into that channel was up over 30% during the quarter, excluding Clipper, which also contributed to our sales into the channel. Stokers had another strong quarter with revenues up 7.3% and market share gains in both the MST and loose-leaked chewing tobacco categories, as its value proposition continues to resonate with consumers. MST continues to expand distribution and gain market share, while Turning Point Brands became the number one manufacturer of loosely products for the first time in its history. On free, our modern oral product, we're increasingly optimistic about our prospects and given positive consumer feedback and results in recent test markets. We also continue to be proactive in optimizing our capital structure and opportunistically purchase another 15.1 million notional of our convertible notes during the second quarter. bringing the total as of the end of the quarter to $39 million, while maintaining a strong cash balance to help address future maturities. With that, let me hand the call over to Summer to walk through some progress and results of some of our specific go-to-market initiatives.