Turning Point Brands Inc. Reports Solid Q4 and FY 2023 Results
Net Sales: Q4 net sales for Zig-Zag and Stokers products increased by 5.9% year-over-year.
Adjusted EBITDA: Q4 adjusted EBITDA rose 7.5% year-over-year to $24.8 million.
Free Cash Flow: FY 2023 free cash flow reached $61.2 million.
Gross Margin: Zig-Zag Products segment gross margin increased to 56.5% in Q4; Stokers Products segment gross margin expanded to 57.6%.
Net Debt: As of December 31, 2023, net debt stood at $250.7 million with total liquidity of $177.9 million.
2024 Outlook: Management expects full-year 2024 adjusted EBITDA to be between $95 to $100 million.
On February 28, 2024, Turning Point Brands Inc (NYSE:TPB) released its 8-K filing, announcing financial results for the fourth quarter and full year ended December 31, 2023. TPB, a leading provider of Other Tobacco Products (OTP) in the U.S., reported increased net sales for its Zig-Zag and Stokers products, along with a significant rise in adjusted EBITDA and a robust free cash flow for the fiscal year 2023.
Company Overview
Turning Point Brands Inc operates through its Zig-Zag, Stokers, and NewGen segments, with Zig-Zag products contributing the most to the company's revenue. The company's offerings include moist snuff tobacco, loose-leaf chewing tobacco, premium cigarette papers, make-your-own cigar wraps, cigars, liquid vapor products, and tobacco vaporizer products. TPB's products are widely distributed across North America, reaching over 215,000 retail outlets.
Performance and Financial Highlights
The fourth quarter saw Zig-Zag Products net sales decrease slightly by 2.9% to $45.1 million, primarily due to the discontinuation of an unprofitable product line in Canada. However, the segment's gross profit margin improved, indicating a favorable product mix. Over the full year, Zig-Zag Products net sales saw a decrease of 5.2% to $180.5 million, with gross profit also down by 5.2% to $101.1 million.
Conversely, the Stokers Products segment experienced robust growth, with Q4 net sales surging 18.6% to $38.0 million, driven by double-digit growth in MST and high-single-digit growth in loose-leaf tobacco. The segment's gross profit for the quarter jumped 27.2% to $21.9 million, benefiting from MST pricing gains and operating leverage. For the full year, Stokers Products net sales increased by 10.5% to $144.6 million, with gross profit up by 14.9% to $81.9 million.
President and CEO Graham Purdy expressed optimism about the company's performance, particularly highlighting the strong quarter for Stokers and the potential growth for Zig-Zag in 2024. Purdy also noted the company's strong free cash flow generation, which has bolstered its cash balance and positioned it to address the remaining principal amount of its convertible notes at maturity in July.
Our fourth quarter results were at the high-end of our expectations. The Zig-Zag segment was stable from the previous year excluding the impact of a discontinued product line and is well positioned to return to growth in 2024. Stokers had an outstanding quarter posting its highest growth rate in over four years led by double-digit growth year-over-year in Stokers MST. We also had strong free cash flow generation during the year allowing us to build a cash balance to address the remaining principal amount of our convertible notes at maturity in July. Our outlook for 2024 is positive as we expect solid growth in our Zig-Zag and Stokers Products businesses." - Graham Purdy, President and CEO
Financial Metrics and Outlook
Turning Point Brands Inc's financial achievements in 2023, particularly in the Stokers segment, underscore the company's ability to grow its market share and leverage pricing strategies effectively. The increase in gross margins for both Zig-Zag and Stokers products reflects a disciplined approach to cost management and an emphasis on high-margin products. These financial metrics are crucial for TPB as they demonstrate the company's competitive strength in the OTP market and its capacity to generate shareholder value.
Looking ahead, management expects the full-year 2024 adjusted EBITDA to be in the range of $95 to $100 million, excluding any contribution from the CDS business, which added over $2 million of EBITDA in FY 2023. This forward-looking guidance suggests confidence in the company's growth trajectory and operational efficiency.
For more detailed financial information and the full earnings report, please refer to the 8-K filing.
Investor Relations and Conference Call
Turning Point Brands Inc held a conference call on February 28, 2024, to discuss the earnings results with the investment community. A replay of the webcast is available on the investor relations section of the company's website.
Investors and interested parties can find additional information about TPB and its brands on the company's website at www.turningpointbrands.com.
Explore the complete 8-K earnings release (here) from Turning Point Brands Inc for further details.
This article first appeared on GuruFocus.
