The following is a summary of the Turning Point Brands (TPB) Q3 2024 Earnings Call Transcript:

Financial Performance:

• Turning Point Brands reported a solid financial performance with Q3 sales up 3.8% to $105.6 million, driven by growth across most business lines.

• Adjusted EBITDA for the quarter increased by 11% to $27.2 million.

• Gross margin slightly improved by 10 basis points year-over-year to 50.8%.

Business Progress:

• Zig-Zag brand revenues grew by 6% to $49.3 million, highlighting success across multiple distribution channels and the introduction of four new hemp wrap products.

• Stoker's reported a 12% revenue increase to $41.4 million, with significant growth in FRE sales, indicating successful market testing and consumer approval.

• Turning Point Brands is expanding its product offerings in FRE, launching lower nicotine strength products due to positive consumer feedback.

• The company emphasized strengthening its position in alternative sales channels and harnessing emerging opportunities in legal cannabis markets.

Opportunities:

• TPB plans to further capitalize on the legalization of cannabis in various states, which provides a growing market for their accessory products.

• The company is expanding its chain footprint and securing competitive placement for its products, likely enhancing its market presence and brand strength.

Risks:

• The lighter category experienced weaker-than-expected performance, prompting a reassessment of its go-forward strategy.

• Operational challenges in aligning distribution and manufacturing capacities to meet the increasing retail demands, especially for the newly introduced lower nicotine FRE products.

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