Turning Point Brands (NYSE:TPB) Q3 2024 Earnings Call Transcript November 7, 2024 10:00 AM ET

Company Participants

Andrew Flynn - Chief Financial Officer
Graham Purdy - President and Chief Executive Officer
Summer Frein - Chief Revenue Officer

Conference Call Participants

Eric Lauriers - Craig Hallum Capital Group
Michael Legg - The Benchmark Company
Nick Anderson - ROTH MKM

Operator

Good day, and welcome to the Turning Point Brands Third Quarter 2024 Conference Call. [Operator Instructions] 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.

Andrew Flynn

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.

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 million to $103 million versus our prior guidance of $98 million to $102 million. Neither of these ranges include contributions from CDS. During the September quarter, Zig-Zag performed well with revenue up 6% to $49.3 million, driven by growth in all our subsegments except for one, and 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 Zig-Zag across our distribution channels, including a solid quarter within alternative channel, which experienced low double-digit growth both sequentially and year-to-date versus a 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 as a reliable partner.