Turning Point Brands, Inc.

Good day and welcome to the Turning Point brand's third quarter 2024 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. To join the queue and ask a question, simply press star followed by the number one on your telephone keypad. To withdraw your question, press the star one again. For operator assistance throughout the call, please press star zero. And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Andrew Flynn, CFO, to begin the conference. Andrew, over to you.

Good morning, everyone. A short while ago, we issued a press release covering our Q3 results. This release is located in the IR section of our website at www.turningpointbrands.com. During this call, we will discuss our consolidated and segment operating results and provide perspective on the operating environment and 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 are in today's earnings release, along with reasons why management believes they provide useful information. I will now turn the call over to our CEO, Graham Purdy.

Thanks, Andrew. Good morning, everyone, and thank you for joining our call. Our consolidated third quarter results were better than expected and demonstrated continued progress against our plan. Adjusted EBITDA increased 11% to $27.2 million for the quarter. Ex-CDS, EBITDA increased 12% to $26.9 million. Given strong performance across our business lines, we are increasing our guidance for full year 2024 adjusted EBITDA to 101%. to $103 million versus our prior guidance of $98 to $102 million. Neither of these ranges include contributions from CDS. During the September quarter, ZigZag performed well with revenue up 6% to $49.3 million, driven by growth in all our subsegments except for one. Then we experienced another strong showing from our cigar business, which we've leaned into more heavily in 2024. We continue to be excited about this business going forward. The loan segment that declined was the lighter category. Due to weaker than expected performance, we are assessing the go forward strategy for this product line. We saw growth in zigzag across our distribution channels, including a solid quarter within alternative channel, which experienced low double digit growth both sequentially and year to date versus year ago. We remain bullish on the continued emergence of this channel. which provides us an opportunity for us to leverage our diverse SKU portfolio to offer these customers a one-stop shop for all their accessory needs. As the category continues to grow and gain mainstream acceptance, we expect to see continued convergence of distribution channels as traditional C-store distributors that we've done business with for decades increasingly target the alt market. At the same time, we've successfully onboarded new distributors and manufacturers who have emerged to specifically serve this market. They want to work with us because our deep diversified portfolio, strong brands and reputation is a reliable partner. Nearly 75% of all Americans now live in a legal medical or adult use state. The secular tailwind should continue to benefit picks and shovels businesses like TPB with must carry brands like Zigzag. Moving to Stoker's. During the quarter, Stoker's revenue increased 12% to 41.4 million. reflecting a 3% decline in loose leaf, a 3% increase in MST, and a 342% increase in free sales off a low base to approximately 5 million for the quarter. Free sales increased 26% sequentially, which is more than double the industry's 11% growth per MSAI, and even greater growth in sell-through to our end consumers. Through our disciplined test-and-learn approach, we believe that we have a strong product-market fit, Positive consumer feedback has consistently reinforced features in the brand's positioning, pouch size, flavor, mouthfeel, and range of nicotine strengths. This consumer feedback and growth in purchases, along with initial retail acceptance and reorders, have convinced us to invest in expanding our chain footprint, which requires investment to secure competitive placement, execute our desired in-store look and feel, and participate in loyalty and promotional programs. We are particularly pleased with free's performance given many distributors and retailers allocated capital to restocking the market leader, which experienced widespread out of stocks in the second quarter. It is also worth noting that we initially launched free at 9 milligrams, 12 milligram, and 15 milligram strengths in order to offer a unique selling proposition. Due to overwhelmingly positive consumer feedback about the mouthfeel and flavor profile, We are expanding into 3 mg and 6 mg as well, which currently represents over 70% of the category volumes. We started with 6 mg online in two of our four flavor styles and have just recently started selling limited quantities in select retailers. We will be accelerating distribution of 6 mg during Q4 and expect to launch 3 mg in Q1 2025. As we've noted in previous quarters, This continues to be a large and rapidly growing category with a long runway for growth. Looking forward to 2025 planning, we are also working to enhance our commercial system and go-to-market strategy to maximize our success in this category. 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.