Vector Group Ltd.

Welcome to Vector Group Limited's third quarter 2021 earnings conference call. During this call, the terms adjusted operating income, adjusted net income, adjusted EBITDA, and tobacco adjusted operating income will be used. These terms are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, other measures of financial performance prepared in accordance with GAAP. Reconciliations to adjusted operating income, adjusted net income, and adjusted EBITDA, and tobacco and adjusted operating income are contained in the company's earnings release, which has been posted to the investor relations section of the company's website located at www.vectorgroupltd.com. Before the call begins, I would like to read a safe harbor statement. The statements made during this conference call that are not historical facts are forward-looking statements that are subject to risks and uncertainties. that could cause actual results to differ materially from those set forth or implied by forward-looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings. Now I would like to turn the call over to President and Chief Executive Officer of Dexter Group, Mr. Howard Lorber.

Good afternoon, and thank you for joining us on our third quarter 2021 earnings conference call. We are also excited to discuss Vector Group separating its businesses through the spinoff of Douglas Elliman. With me here today are Brian Kirkland, CFO of Vector, Richard Lampin, Chief Operating Officer of Vector, Scott Durkin, President and CEO of Douglas Elliman Realty, LLC, David Ballard, CTO of Vector, and Nick Anson, President and COO of Liggett Vector Brands. We also have Ron Bernstein, Senior Advisor to Liggett Vector Brands, joining for the Q&A portion of the call. During this call, we will review our third quarter consolidated financial results, as well as the financial performance for Douglas Elliman and Liggett. We will then discuss the exciting news of our intention to spin off Vector Group's real estate brokerage business, including Douglas Elliman and its cutting-edge PropTech investments, into an independent publicly traded company. Today we issued a press release announcing the spinoff and posted a presentation to the investor relations section of our website with more details regarding the proposed transaction. We will also file a form 10 with the SEC. All references to SPNCO on today's call refer to the independent publicly traded real estate brokerage company following the effective date of the SPN. We will then take your questions before concluding today's meeting. Let us start with financial results. At September 30th, 2021, Vector Group's consolidated balance sheet remained strong. We maintained significant liquidity with cash and cash equivalents of $524 million, including cash of $159 million at Douglas Elliman and $133 million at Liggett. We also held investment securities and investment partnership interest with a fair market value of $214 million at September 30th, Now turning to Vector Group's consolidated results from operations for the three months ended September 30, 2021. Vector Group's revenues were $652.6 million compared to $547.8 million in the 2020 period. The $104.8 million increase in revenues was the result of an increase of $125.7 million in the real estate segment partially offset by the decline of $20.9 million in the tobacco sector. Moving on to, excuse me, net income attributed to Vector Group was $48.9 or $0.32 per diluted common share compared to $38.1 million or $0.25 per diluted common share in the third quarter of 2020. The company recorded adjusted EBITDA of $116.5 million compared to $103.3 million in the prior year. Adjusted net income was $52.6, or $0.34 per diluted share, compared to $38.3 million, or $0.25 per diluted share, in the 2020 period. Moving on to the results for the nine months ended September 30, 2021, Vector Group's revenues were $1.93 billion, compared to $1.45 billion in the 2020 period. The $478 million increase in revenues was the result of an increase of $500.4 million in the real estate segment, offset by a decline of $22.5 million in the tobacco segment. Net income attributed to Vector Group was $174.2 million, or $1.13 per diluted common share, compared to $60.7 million, or $0.39 per diluted common share, in the 2020 period. The company recorded adjusted EBITDA of $355.1 million, compared to $240 million in the prior year. Adjusted net income was $194.3 million, or $1.26 per diluted share, compared to $106.9 million, or $0.70 per diluted share, in the 2020 period. Moving on to the results of the last 12 months ended September 30th, 2021, Vector Group reported revenues of $2.48 billion, net income of $206.4 million, and adjusted EBITDA of $44.8 million. I will now turn the call over to Nick to discuss our tobacco business.

Nick? Thank you, Howard. Turning to our tobacco business financial results, Liggett continued its strong 2021 performance during the third quarter, delivering an increase in both retail market share and operating income. Eagle 20s continues to deliver significantly higher margins while Pyramid, delivers both substantial profit and market presence. And we continue to be pleased with the performance of our price-fighting brand, Montego, as we expand its distribution into targeted geographies across the country. Based on Management Science Associates retail data, the discount category increased approximately 80 basis points in the third quarter from a year ago, now comprising 26.5% of the total market as compared to 25.7% for the same period last year. As the deep discount segment continues to offer attractive value propositions for the consumers, we expect down trading trends will continue for the foreseeable future. As such, we remain confident that our value-focused brand portfolio and broad distribution position us well to meet these evolving market demands and drive profitable growth. I will now turn to the combined tobacco financials for Liggett Group and Vector Tobacco. For the three and nine months ended September 30th, 2021, revenues were $297.9 million and $895.9 million, respectively, compared to $318.9 million and $918.4 million for the corresponding 2020 period. Tobacco adjusted operating income for the three and nine months ended September 30th, 2021 was $91.8 million and $273.9 million compared to $91.6 million and $240.2 million for the corresponding periods a year ago. Through the first three quarters of 2021, tobacco adjusted operating income exceeded our full year 2019 figures, which was a record at that point in time. Liggett's third quarter earnings increase was primarily the result of higher gross profit margins associated with higher pricing and promotional spending efficiencies offset by lower wholesale volumes and higher master settlement agreement expense. As discussed in last quarter's conference call, we anticipated pressure on our third quarter wholesale volumes following significant inventory increase at the end of the second quarter, and we estimate approximately half of our year-over-year third quarter wholesale shipment declines relate to a reduction in wholesale inventories. In addition, significant reductions made to our net MSA expense in the third quarter of last year because of unusually strong third quarter 2020 industry volumes put additional pressure on our year-over-year earnings comparison. According to Management Science Associates, overall industry wholesale shipments for the three months ended September 30th, 2021 were down 11.8% compared to last year, while Liggett's wholesale shipments declined by 11.6 percent for the comparable period. As we regularly note, however, we believe retail shipments are a much better indicator of underlying industry trends due to varying wholesaler buying patterns. Liggett's retail shipments for the three months ended September 30, 2021, declined 6.1 percent from the year-ago period, while industry retail shipments decreased 7 percent during the same timeframe. As a result, Liggett's third quarter retail share increased to 4.22% from 4.18% in the corresponding period last year. Sequentially, Liggett's retail share increased by 13 basis points in the third quarter over the second quarter. In summary, we remain pleased with the operational and financial performance of our tobacco business. Finally, while we are always subject to industry, regulatory and general market risks, we remain confident that we have effective programs and infrastructure in place to keep our business operating efficiently and delivering both market share and profit growth from our value-based brand portfolio. With that, let me turn it over to Bryant to discuss Douglas Elliman's results.