Turning Point Brands, Inc. (NYSE:TPB) Q4 2023 Earnings Conference Call February 28, 2024 10:00 AM ET

Company Participants

Louie Reformina – Chief Financial Officer

Graham Purdy – President and CEO

Summer Frein – Chief Revenue Officer

Conference Call Participants

Scott Fortune – Roth MKM

Michael Legg – Benchmark

Eric Des Lauriers – Craig-Hallum Capital Group

Operator

Ladies and gentlemen, good morning, and welcome to the Turning Point Brands' Fourth Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. All lines have been placed on mute to help prevent any background noise. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

I would now like to turn the conference over to Louie Reformina, Chief Financial Officer. Please go ahead.

Louie Reformina

Thank you. Good morning, everyone. This is Louie Reformina, Chief Financial Officer. Joining me are Turning Point Brands, President and CEO, Graham Purdy; and Chief Revenue Officer, Summer Frein.

This morning, we issued a news release covering our fourth quarter results. This release is located in the IR section of our website, www.turningpointbrands.com. During this call, we will discuss our consolidated and segment operating results and provide our perspective on the operating environment and our progress against our strategic plan.

As discussed, may 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 reconciliations to GAAP can be found in today's earnings release, along with reasons why management believes that they provide useful information.

I will now turn the call over to our CEO, Graham Purdy.

Graham Purdy

Thanks Louie. Good morning, everyone, and thank you for joining our call. Our fourth quarter results were at the high end of our expectations and demonstrated continued progress against our plan. Adjusted EBITDA increased 7.5% to $24.8 million for the quarter, and we finished 2023 having generated $61.2 million of free cash flow. During Q4, Stoker's finished the year on a high note, posting extraordinary 18.6% revenue growth for the quarter. Zig-Zag was down 2.9% for the quarter due to the previously discussed discontinuation of an unprofitable product line in Canada.

We are pleased with the market share increases for Stoker's, which continues to be a steady growth engine with a long runway for volume growth and favorable pricing dynamics. That said, to be clear, while Stoker's continues to gain momentum, we do not believe 19% organic revenue growth for our legacy Stoker's products is sustainable over the long-term. However, we do believe these and greater levels of growth are achievable for FRE, our modern oral or white pouch nicotine product. This product will compete in the category that is trending towards $2 billion in manufacturer revenue and grew volume by over 50% last year per MSAi.