Turning Point Brands Inc ((TPB)) has held its Q1 earnings call. Read on for the main highlights of the call.
Turning Point Brands Inc. recently held its earnings call, revealing a generally positive sentiment with a focus on strong revenue growth, particularly in modern oral nicotine products. Despite the upbeat outlook, the company acknowledged some challenges, including decreased gross margins and minor growth in the Zig-Zag segment, alongside anticipated impacts from tariffs and foreign exchange rates.
Strong Revenue Growth
The company reported a remarkable 28% increase in revenue, reaching $106.4 million for the quarter. This performance exceeded expectations and underscored the company’s robust market position and strategic execution.
Significant Growth in Modern Oral Nicotine Products
Modern oral nicotine products saw impressive growth, with revenue hitting $22.3 million. Notably, sales of white pouches surged nearly tenfold year-over-year and doubled sequentially, highlighting the growing consumer demand and successful market penetration.
Stoker’s Segment Success
The Stoker’s segment demonstrated significant success, with a 63% increase in revenue to $59.2 million. This growth was driven by a 4% rise in loose leaf sales and a 10% increase in MST, reflecting strong brand loyalty and effective marketing strategies.
Increased Guidance for Nicotine Pouch Sales
The company raised its full-year consolidated nicotine pouch sales guidance to a range of $80 million to $95 million, up from the previous $60 million to $80 million. This adjustment reflects confidence in the continued expansion and consumer adoption of nicotine pouches.
Decreased Gross Margin
Despite the revenue growth, the gross margin declined to 56%, down 220 basis points from the previous year. This decrease was attributed to mix-driven changes, indicating a shift in product sales composition.
Zig-Zag Segment Challenges
The Zig-Zag segment experienced modest growth, with revenue increasing by only 1% year-over-year. The company anticipates further challenges in this segment due to expected headwinds from cigars in the second quarter.
Tariff and FX Headwinds
Turning Point Brands is preparing for a $5 million to $7 million impact from tariffs and foreign exchange headwinds, particularly affecting the Zig-Zag segment due to a stronger euro.
Forward-Looking Guidance
Looking ahead, Turning Point Brands reaffirmed its full-year adjusted EBITDA guidance at $108 million to $113 million. The company is strategically investing in the growing nicotine pouch market by expanding its sales force and enhancing distribution channels. With a strong cash position of $99.6 million and a reported free cash flow of $12.4 million, the company is well-positioned to capitalize on future opportunities.
In summary, Turning Point Brands Inc.’s earnings call highlighted a positive outlook with strong revenue growth, particularly in modern oral nicotine products. While challenges such as decreased gross margins and minor Zig-Zag segment growth were noted, the company’s strategic investments and increased guidance for nicotine pouch sales underscore its commitment to future growth and market expansion.