Turning Point Brands (TPB) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales rose 2.8% year-over-year to $108.5 million, with adjusted EBITDA up 7% to $27.0 million, marking the highest quarterly EBITDA since Q2 2021.

• Zig-Zag and Stoker's segments delivered strong growth, with Zig-Zag net sales up 8% to $50.5 million and Stoker's up 19% to $42.7 million; both brands gained market share.

• Net income increased 31% to $13.0 million, with diluted EPS up 28.3% to $0.68 and adjusted net income up 12.2% to $17.2 million.

• FRE modern oral nicotine pouch sales grew 76% sequentially, with a new 6mg product launched and national expansion ongoing.

• Liquidity remained strong, ending Q2 with $142.2 million in cash and retiring $118.5 million in convertible notes post-quarter.

Financial highlights

• Q2 2024 net sales: $108.5 million (+2.8% YoY); adjusted EBITDA: $27.0 million (+7% YoY); gross profit: $53.8 million (+2.6% YoY); gross margin: 49.6%.

• Operating income was $22.8 million (+10.8% YoY); net income: $13.0 million (+31% YoY); diluted EPS: $0.68 (+28.3% YoY).

• Free cash flow for Q2 2024 was $10.9 million; operating cash flow for the first half was $36.1 million.

• Adjusted EBITDA margin for Q2 2024 was approximately 24.9%; LTM Q2 2024 adjusted EBITDA was $102 million with a 25.1% margin.

• Ended Q2 with $142.2 million in cash and $58.8 million available under the revolving credit facility.

Outlook and guidance

• Full-year 2024 adjusted EBITDA guidance raised to $98–$102 million, up from $95–$100 million, excluding CDS.

• CapEx expectation revised down to $11 million for 2024, with reductions due to timing.

• Effective income tax rate expected at 23%–26%; Q2 2024 effective tax rate was 25.5%.

• Management expects ample liquidity to meet operating requirements after debt retirement.