Turning Point Brands, Inc.

Good morning and welcome to the Turning Point Brands third quarter 2023 earnings conference call. All participants will be in a listen-only mode. 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. Please note this event is being recorded. I would now like to turn the conference over to Louie Ruffamina Chief Financial Officer, please go ahead.

Thank you. Good morning, everyone. This is Louis Reformina, Chief Financial Officer. Joining me is Turning Point Branch President and CEO, Graham Purdy, and Chief Revenue Officer, Summer Freed. This morning, we issued a news release covering our third quarter results. This release is located in the IR section of our website, www.turningpointbranch.com. During this call, we will discuss the consolidated and segmented operating results, provide our perspective on the operating environment and our progress against our strategic plan. As discussed, Mary, 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 reconciliation of the GAAP can be found in today's earnings release, along with reasons why a manager believes they produce useful information. I will now turn the call over to our CEO, Graham Purdy.

Thanks, Louie. Good morning, everyone, and thank you for joining our call. Our third quarter results were in line with our expectations and demonstrated continued progress against our plan. During the September quarter, we showed double-digit revenue growth at Stokers and sequential stability in the zigzag segment, notwithstanding the year-over-year comparison as we continue to gain traction from the alternative channel initiatives we have put in place. Given our performance through the first nine months of the year, We are raising the bottom end of our EPIDOG guidance from 90 to 92 million, with the range now 92 to 95 million from 90 to 95 million. As we finish up this year and move into 2024, we are particularly excited about our national rollout of our modern oral white pouch nicotine product called Free. That's F-R-E. this product will compete in a category that's already worth over a billion dollars in wholesale revenue and is currently growing 40 to 50 percent per MSAI. Up until now, we've spent most of our time over the past year shoring up our supply chain to ensure consistent product quality, analyzing consumer feedback, and testing online select in-store marketing and merchandising programs to ensure a successful national rollout. Given our progress to date, we are now focusing on prudently ramping up our sales and distribution efforts to achieve steady growth over time. Our early learnings and performance in test markets have given us more confidence to now leverage our sales and distribution expertise to profitably expand freeze profile and store count, similar to what we achieved with Stoker's Moisten Up over time. We look forward to providing updates on this exciting new product in the quarters and years to come. Stokers had another strong quarter with revenue up 10.1% and acceleration from 7.3% growth in the June quarter, reflecting overall volume and market share gains as its quality-to-value proposition continues to resonate with consumers. Stokers continues to be a steady growth engine with a long runway for volume growth and favorable pricing dynamics. Zigzag sales were consistent with the last quarter but faced a tough comp from the previous year due to promotional activity, initial Clipper load-in, timing of Canadian paper deliveries, and the discontinuation of a low-margin product line in Canada. Despite this transitory dynamic, we're confident that the ZigZag brand continues to strengthen based on a number of factors we track. Our sell-through was better than our reported year-over-year results, and we are encouraged by our wholesale customers and retail consumers' response to our expanding portfolio, which includes Clipper lighters and our recent new product introductions. This is particularly true in our alternative channel, where ZigZag and its growing portfolio efficiently fills out our customers' inventory to better satisfy the growing demand from consumers. Both factors are expanding our addressable market. We are having success not only winning new, untapped alternative customers across the brick and mortar and alternative distributor network, but we are also seeing existing alt customers buying a more complete ZigZag portfolio. As a result, we've seen healthy increases in average order sizes across the alternative space while providing the zigzag brand with more valuable shelf space and merchandising real estate within these stores to build brand awareness as we satisfy evolving in consumer preferences. As you know, the alternative channel is consistently expanding by virtue of additional states green lighting medical and recreational cannabis, as well as attempts to provide a better shopping experience for consumers. In addition to more legal dispensaries and manufacturing and processing facilities, other retail outlets like head shops are drafting off this trend. Our alternative B2B business saw zigzag sales accelerate, growing over 40% during the quarter. We also continue to be proactive in optimizing our capital structure and opportunistically purchased another $15 million notional of our convertible notes during the second quarter, bringing the total purchase as of the end of the quarter to $54 million, while maintaining a strong cash balance to help address future maturities. Moreover, today we announced the formation of a $75 million ABL revolving credit facility, which, along with the cash on hand and projected future free cash flow, allows us to comfortably address the maturity of our convertible notes next summer. Lou will discuss details later in the call. 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.