Turning Point Brands Shares Up On 16.8% Higher Q2 Net Sales Of $122.6M, Increases 2021 Guidance

Consumer products company Turning Point Brands, Inc. TPB reported Tuesday its net sales amounted to $122.6 million in the second quarter of 2021, representing a year-over-year increase of 16.8%.

Moreover, for the full year 2021, the company anticipates generating between $447 to $462 million in net sales.

Larry Wexler, the company’s president and CEO, credited the strong second-quarter performance to growth in its core market segments, revealing that its proprietary brand Zig-Zag, which accounted for 39% of total net sales over the period, saw “an exceptional quarter” increasing by 72.3% to $47.2 million.

Moreover, Zig-Zag Products segment gross profit rose by 77% to $27.7 million, the Louisville, Kentucky-based company revealed, while the segment’s gross margin expanded 160 basis points to 58.8%.

“We are seeing strong gains from the initiatives put in place to accelerate growth in the segment as we allocate more resources to further leverage and grow the Zig-Zag brand,” Graham Purdy, the company’s CEO, disclosed.

Here’s a breakdown of what the second-quarter earnings report revealed:

• Gross profit grew by 25.1% to $60 million.
• Net income spiked 49.2% to $15.4 million.
• Adjusted EBITDA came in positive at $30 million, representing a year-over-year increase of 31.7%.
• Consolidated selling, general and administrative expenses totaled $35.1 million, up from $30.8 million in 2020.
• Diluted EPS of $0.73 and Adjusted Diluted EPS of $0.84 versus $0.49 and $0.66 in the corresponding quarter of 2020, respectively.
• As of June, the total gross debt was $440 million.
• Ended the quarter with $157.5 million in cash and $21.4 million of revolving credit facility capacity.
• Stoker’s Products segment accounted for 27% of total net sales during the period, increasing by 8.3% to $33.4 million.
• NewGen Products segment represented 34% of total net sales in the quarter, representing a decline of 10% to $42.1 million.

“Our growth initiatives, along with a favorable environment resulting from evolving consumer perception and state legalization efforts around cannabis, provide a strong tailwind for our business going forward,” Purdy explained.

Turning Point Brands’ Recent Moves

Turning Point announced the acquisition of particular cigar assets of Unitabac, LLC on Monday, including a portfolio of cigarillo products and all related intellectual property, including Cigarillo Non-Tip (NT) Homogenized Tobacco Leaf (HTL), Rolled Leaf, and Natural Leaf Cigarillo Products.

On Thursday, the company announced the completion of an $8 million strategic investment in cannabis brand Old Pal Holding Company LLC.

The investment is in the form of “a convertible note which includes additional follow-on investment rights,” the company said, and it will enable Old Pal to bolster its product offerings in existing states, including California, Nevada, Michigan, Oklahoma, Ohio, Washington and Massachusetts.

Price Action

Turning Point Brands shares were trading 11.11% higher at $52 per share at the time of writing Tuesday morning.

Photo: Courtesy of Tim Foster on Unsplash