Turning Point Brands, Inc.

Thank you for standing by. My name is Kathleen and I will be your conference operator today. At this time, I would like to welcome everyone to the Turning Point brand fourth quarter and fiscal year 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. If you would like to ask a question during this time, Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one again. Thank you. And now I would like to turn the call over to Andrew Fee, CFO, Turning Point Brands. Please go ahead.

Good morning, everyone. A short while ago, we issued a press release covering our Q4 results. This release is located in the IR section of our website at www.turningpointbrands.com. As you're aware, this release followed an 8K issued February 10th that included some preliminary financial metrics. During this call, we will discuss our consolidated and segment operating results and provide some perspective in the operating environment and progress against our strategic plan. As a brief reminder, we deconsolidated our CDS segment and is now classified as discontinued ops. This change is reflected in our financials and the consolidated results that we will be discussing today. 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 fourth quarter results were better than expected and demonstrated continued progress against our plan. Revenue increased 13% to $93.7 million for the quarter. Adjusted EBITDA increased 5% to $26.2 million for the quarter. Recall that in early January, we announced the divestiture of our CDS business These results are now classified as discontinued and excluded from our consolidated financials and any guidance going forward. We think the transaction best positions management to focus on the exciting growth opportunities in our core business. Adjusted EBITDA for the full year increased 12% to 104.5 million. At the high end of the preliminary range of 103.5 to 104.5 million provided on February 10th, and above our prior increased range of 101 to 103 million provided with third quarter results. We are pleased with our results for both Q4 and full year 2024, and we are excited about the momentum we are seeing across the organization. We are initiating 2025 adjusted EBITDA guidance of 108 to 113 million. This reflects continued growth of our ZigZag and Stoker businesses as well as significant acceleration of growth of our modern oral brands free and out, which we expect to generate 60 to 80 million of combined revenue in 2025. Our EBITDA guidance includes meaningful sales and marketing investments to support our ambitious growth plans. Going forward, we will discuss our modern oral business on a combined basis for financial reporting and guidance purposes. Our adjusted EBITDA guidance reflects our pro rata 50% share of Alps Economics. We expect both brands to play key roles in achieving our long-term goal of 10% market share of the modern oral category. During the fourth quarter, ZigZag revenue was up 2%. Excluding Clipper, it was up 4%. We have a promising lineup of ZigZag growth initiatives for 2025 that should help deliver another year of solid segment growth. We remain bullish on the convergence of distribution channels for smoking accessories, which provides an opportunity for us to leverage our diverse SKU portfolio to offer customers a one-stop shop for all their needs. It's also worth reiterating the valuable cross-selling opportunities across our ecosystem as customers onboard modern oral products alongside the ZigZag portfolio. Nearly 75% of all Americans now live in a legal, regulated medical cannabis or adult use state. And over the past year, we've seen another green wave emerge with the adoption of Farm Bill compliant hemp, which has significantly expanded the TAM. As an illustration, there are estimated to be 7,000 retail outlets in Texas that now sell hemp-derived products in a state without a regulated cannabis marketplace. This secular tailwind should continue to benefit picks and shovels businesses with must-carry brands like ZigZag. And as mentioned, many of these stores don't sell traditional tobacco products like combustible cigarettes or MST, but they do carry modern oral nicotine pouches. This dynamic should give us a valuable cross-selling advantage in modern oral over time as we continue to build our ZigZag distribution and vice versa. Moving to Stokers, during the quarter, Stokers revenue increased 26% to $47.8 million, reflecting flat loosely a 1% decline in MST and $11.2 million in modern oral revenue. Our modern oral business included a 419% increase in free sales off of a low base to approximately $6.3 million for the quarter, which represented both sequential and year-over-year acceleration in sales growth. The balance of the modern oral revenue was from the very successful launch of ALP. A quick note on MST. As we called out previously, Stoker's MST had very strong quarters in Q4 2023 and Q2 2024. So we anticipated a flat quarter as we lapped a tough comparable of roughly 20% in Q4 last year. Summer will talk more about our modern oral brand shortly, but I will offer the following high-level commentary. We are very pleased with the launch of Alps Supply Company, our joint venture with the Tucker Carlson Network. There has been significant excitement around the brand and strong reason for optimism. We are somewhat limited in what we can disclose due to our confidentiality obligations. Free sales increased 26% sequentially for the quarter. This progress provides further evidence that free is winning in the marketplace. Positive consumer feedback has consistently reinforced the brand's positioning, pouch size, flavor, mouthfeel, and a range of nicotine strengths. This feedback and strong sales growth, along with initial retail acceptance and reorders, have given us increased confidence to further invest in expanding our chain store footprint. This will likely involve investment to secure competitive placement, execute our desired in-store look and feel, and participate in loyalty and promotional programs. In Q3, we launched 6 milligram free on our website to complement our 9, 12, and 15 milligram offerings. In Q4, we began to expand 6 milligram distribution to retail stores. With that, let me hand the call over to Summer to walk through the progress of some of our go-to-market initiatives.