Zig-Zag Maker Turning Point Brands' Stock Plunges As It Misses On Q3 2021 Revenue, Lowers Its 2021 Outlook

Zig-Zag rolling papers producer, Turning Point Brands TPB, reported its financial results on Tuesday for the third quarter ended September 30, 2021.

Based in Louisville, Kentucky, the company announced that its net sales increased 5.5% year over year to $109.9 million, missing estimates by $3.03 million, according to Seeking Alpha.

"Our third-quarter performance fell within our expectations with sales growth of 11% in our core business despite facing the headwind of COVID-related consumption and other benefits we experienced in the prior-year period," Larry Wexler, president and CEO of Turning Point Brands said.

Q3 Financial Highlights

• Gross profit increased 12.3% year-over-year to $54.3 million.
• Net income totaled $13.4 million, up by 49.3% from the last year.
• Adjusted EBITDA came in positive at $26.3 million, representing a 9.9% increase over the same period of 2020.
• Diluted EPS of $0.65 and adjusted diluted EPS of $0.72 as compared to $0.44 and $0.69 in the same period one year ago, respectively.
• Zig-Zag products segment accounted for 38% of total net sales in the period, increasing by 17.4% to $42.2 million.
• Zig-Zag products segment gross profit increased 11.5 percent to $23.7 million.
• Net sales of Stoker's Products increased 2.4 percent to $30.5 million on double-digit growth of the company's Moist Snuff Tobacco business.
• Stoker's Products segment gross profit increased 6.6 percent to $17.1 million.
• NewGen products segment accounted for 34 % of total net sales in the quarter.
• Net sales of NewGen Products decreased 3.2%to $37.2 million due to the regulatory environment in the vape distribution business, which experienced a high-single-digit decline.

"Zig-Zag had another robust quarter driven by our strategic initiatives and growth within our Canadian business," Wexler explained, adding that "Stoker's saw double-digit growth in our Moist Snuff Tobacco (MST) business which drove growth in the overall segment."

2021 Outlook And Share Repurchase Authorization

Turning Point Brands expects to generate between $433 million and $443 million in net sales for the full fiscal year. In addition, adjusted EBITDA is expected to range between $104 to $108 million.

Other projections for the period include:

• Stock compensation and non-cash incentive expense of $8 million.
• Cash interest expense of $19 million and GAAP interest expense of $21 million.

Effective income tax rate of 23% to 24%.

Capital expenditures of $6 million.

On Monday, the company's board of directors increased its share repurchase authorization by $30.7 million to $50 million.

The sum includes $19.3 million available for repurchases under the board's previous authorization approved on February 25, 2020.

More recent news from Turning Point Brands:

• NYSE-Traded Zig-Zag Maker Turning Point Brands Invests $8M In Cannabis Co. Old Pal
• Turning Point Brands Acquires Unitabac Cigar Portfolio For Undisclosed Sum
• Turning Point Brands' Zig-Zag Seeks To Offset Carbon Footprint Via New Partnership
• Turning Point Brands Shares Up On 16.8% Higher Q2 Net Sales Of $122.6M, Increases 2021 Guidance

TPB Price Action

Turning Point Brands' shares traded 17.63% lower at $40.04 per share at the time of writing Monday morning.

Photo: Courtesy of Markus Winkler on Unsplash