TPB earnings call transcript, November 9, 2026

Good morning and welcome to the. The Turning Point Brands, third quarter, 2026. All participants will be in listen only mode. All lines have been placed on mute to prevent any background noise. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask. questions. Please note this event is being recorded. I would now like to turn the conference over to Andrew Flynn, chief financial officer. Please go ahead.

Good morning, everyone. Earlier today, we issued a press release covering our third quarter results available in the investor relations section of our website at www.turningpointbrands.com. During this call, we'll discuss consolidated and segment operating results, the operating environment, and our progress against our strategic plan. Before we begin, please refer to the forward-looking statements and risk factors in our press release and SEC filings. We'll also reference certain non-GAAP financial measures, reconciliations, and explanations are included. in today's earnings release. With that, I'll turn the call over to our CEO, David Glasek.

Thanks, Andrew, and good morning, everyone. Before discussing the results of the quarter, I'd first just like to say how excited I am to serve as the CEO of TrainingPoint. As some of you know, I've been involved with the company for nearly 14 years, including the past four years as Executive Chairman, where I work closely with our leadership team on a daily basis. Over that time, I've had the pleasure of seeing firsthand the strength of our brand, the capabilities of the company, and the leadership of the company. And our ability to adapt and capitalize on emerging opportunities. I'm incredibly proud of what we've accomplished to date and see tremendous potential in what lies ahead. Our strategy remains unchanged. Investing cash flow from our heritage. businesses to build leading brands in modern oil. Our investments in brands, people, and capabilities will continue to be focused on maximizing the value of this transformational opportunity. Now turning to the third quarter results. We delivered a other strong quarter led by modern oil. Consistent with our expectations, modern oil growth sales were up 114% year over year and 8% sequentially, while net sales were up 103% year over year and we're encouraged by the performance of both of our modern oil brands, free and out. We remain focused on continuing to build convenience store distribution, especially in chain accounts, where the majority of the category volume now.

Thank you, David, and good morning, everyone. We are encouraged by the progress you're making across our commercial initiatives as we expand the reach of free and out. Our approach is centered on creating a reinforcing cycle of growth. Broader distribution increases consumer access and trial. Growing demand drives repeat purchases and stronger in-store performance, and that success creates opportunities. For further distribution expansion. We are beginning to see this dynamic take shape across both brands, reinforcing our confidence and our go-to-market strategies. Starting with commercial momentum, Free continues to expand its presence across national retail chains. While also securing broader product assortments within existing accounts. As David said, we are on track to increase our chain store account by more than 70% during 2026. Importantly, we are encouraged by the early performance. of free and newly added locations, supported by our expanded sales coverage, merchandising, and shelf visibility. For ALP, we're making progress expanding distribution across independent retailers and regional chains with discussions among larger national chains beginning to take shape. Stepping back, we believe the strength of our two-brand portfolio is an important competitive advantage. Free and ALP provide multiple avenues to reach consumers, expand distribution, and strengthen our overall position in the modern oral category.

Thank you, Summer.

our footprint expands and sales continue to grow. We expect our cost to be leveraged over a larger revenue base. With that, I'll turn it over to the operator to begin questions. We will now begin the question and answer session. Please limit.

yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that. you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the queue. Win a roster.

Your next question comes from the line of Aaron Gray with AGP, Alliance Global Partners. Your line is now open. Please go ahead.

your next question comes from the line of ian zafino with oppenheimer your line is now open please go ahead

hi great thank you very much um you know i just wanted to go back to the the guide on modern or for the fourth quarter um you know is there any seasonality or anything we need to take into account for i mean that this business has been growing sequentially you know for a long time and then i guess the guide really doesn't assume a whole lot of special you on the net side um you know at the high end so is there like a seasonality going on do you have some large chains where you have incremental swatting fees and i i get that you gave guidance in september would imagine you have had data you know we have data ourselves since then um so i'm just curious in in why we're sticking with this guidance you know is there something that you're seeing out there that worries you um or is this just naturally being conservative you guys have been conservative consistently so um you know i'm kind of leaning towards that but i wanted to hear kind of your thoughts thanks yeah no look we're we're not seeing anything different there is there is like some um uh i don't know if you can necessarily characterize it as seasonality there are some like timing issues when you get to the end of the year if the buyers are are sort of buying and loading in um you know in late december it's getting pushed into january and frankly that can go either way right i mean you do tend to see a lot of volume move at the end of quarters but there is always some uh you know a little bit of uncertainty you know um around the holidays because of that but um no

no real difference in what we're seeing anything to add to that summer no shaking her head that's perfect

okay and then I'm zigzag I guess you know how do you think you have sales kind of going forward there um you know are we seeing maybe um are we seeing like an acceleration share shifts maybe to to independence or not is there um you know is that less of a trend now kind of give us your thoughts on you know sales in that channel in like c stores versus uh independent and i think about that thank you so i think i think the you know to directly answer your question on on independence versus c stores and shares one of the things that's a little bit unique about about zigzag relative to the other uh to the other plans uh that we have is that there is a decent amount of that volume that moves in the non-measured channel right so it doesn't show up in the data sets in you know msa or nielsen or cercana and so um you know we we call that backstreet you know think sort of odegas smoke shops those kind of places uh you know which uh don't report the data in the same way that uh you know that some of the large uh large chains do so it's always a little bit more opaque um i think we're fairly comfortable uh in the stability of the zigzag business you know can it be you know up or down a couple million dollars quarter to quarter based on you know individual uh sort of individual orders or something like that yes but uh you know i think i think the way that we would characterize it is stable at this point

okay thank you very much sure your next question comes from the line of nick anderson with roth capital partners your line is now

open please go ahead yeah good morning thanks for taking the questions and congrats on the quarter um first for me just on the pmta submissions yeah no problem we saw a step up in 2q and 3q uh you guided for another chunk here in 4q can you just run us through what's been submitted uh what remains to be submitted and just the expected go forward investment there into 2027. have the applications that would get louisville online been submitted fully and if not when could we expect them to thank you yeah thanks thanks for the question i'm i'm going to try to answer this succinctly and and um inevitably i'm going to i'm going to oversimplify it a bit so i i apologize um uh the the short answer is the applications uh that would allow us to um to get going louisville have have been submitted and and completed um there is a nuance to this how however which is that the fda did give some revised guidance in may that effectively opened up a secondary pathway to market um and for us uh one of the consequences of that you know in the white pouch category is that it is uh that there is an opportunity for greater innovation um and so what we are doing is we are prepping a second pmta submission in no way you know does that suggest that we have anything but confidence in the current pmta submission um but it is a a second pmta submission we will list u.s manufacturing in that pmta submission um and what that will allow us to do is to keep the current pmta on track

in the queue without having to alter the manufacturing site in pmta one because one of the concerns that if you alter the manufacturing site in pmta one before it's approved the sda may come back and ask you to rerun tests with products that come out of that new manufacturing site as part of the pmta review so we don't want to do that so the good news is this may guidance has opened up the secondary path so we can kind of dual track it we can keep our existing pmta in the queue hopefully get that approved quickly without having to add us manufacturing to that and risk sort of disrupting it or or sort of going to the back of the line while simultaneously filing a new pmta that lists us manufacturing so instead of having to wait for pmta one to be approved then go back and add us manufacturing we've got this secondary pathway where a pmta two will lift us manufacturing as the primary uh as the primary manufacturing site does that make sense yes very helpful color thank you for that um second for me just on the capital allocation side there's still obviously a lift to be made to get into locations just wondering how you view the other larger larger potential deployment opportunities maybe mna or buybacks at these levels you mentioned the purchase you made in third quarter given the cash balance you currently have any color there would be helpful thank you yeah sure we don't have any expectation for mna at this point you know this is a

a pretty phenomenal and unusual organic growth opportunity that we have in front of us you know frankly just on a personal note one of the reasons that i'm uh so excited to step into the role is i i really see here a a massive massive opportunity um as uh as billions and billions of dollars of cigarette revenue um uh shifts to these new forms of nicotine consumption and we are really situated uh in a great place to try to capture a meaningful share of that shift right we don't have the golden goose problem of cannibalizing you know 90 gross margin cigarette sales um so we have been sort of adjacent to some of these large nicotine margin pools historically now we think we're able to play in them and um you know we uh we think we have the right the right game plan to do that um so i'm uh i'm pretty pretty excited and very and very bullish on that um so no m a um huge opportunity here to capture a meaningful share of this new margin pool um and then on buybacks you know look we we're we are opportunistic um as we said uh you know obviously uh we thought there was compelling value uh where we where we purchased last quarter so um you know that's something that we continue to evaluate on an ongoing basis

great that's it for me i'll pass it on

thank you your next question comes from the line of gerald pascarelli with needham and company

great uh thank you for taking the questions um my first one's just on ebitda guidance i guess similar to the modern oral revenue guidance question um current guidance is 70 to 80 million um it implies range of outcomes in 4q i believe the initial expectation was for ebitda to improve sequentially relative to the to the 15 million that we saw in the second quarter um and so if you could just talk about um the 4q considerations for us to be mindful of um on you know how you get to the to the high end versus um versus the low end before your guidance i think that'd be helpful thank you sure thanks uh let me let me tackle this and then maybe and andrew can andrew can jump in here um so look one of one of the issues that we've got i think everybody knows um we've got this investment plan uh it's working it's bearing fruit we're really grabbing uh you know i think material share in the white house space we think this is going to have very long-term annuity value so we're essentially making these upfront investments today to reap you know what we hope are decades of uh of uh of ongoing sales uh from these investments what that has done is it has led to lower EBITDA in the near term right and so if we were up around you know 28 million of EBITDA um a couple million dollars swing from sort of natural items timing of things you know unexpected health care claims you know stuff like that it doesn't really move the needle um you know when we're sort of in in in the range that we've been in the last couple quarters you know two or three million dollars of uh of timing related issues or sort of unusual items can actually swing the number and so I think that's one of the reasons

why um you know you see some of the some of the sensitivity or some I guess might see some a wider range at this point uh it's sort of that and the fact that you know as I said before we we updated it in in late September and don't have a ton of additional transparency on it but um I wouldn't really read anything into that other than you know you can always get it you know a few million dollars of swing up or down um you know that you can't really anticipate um so that's that's that's really it to be frank you want you want to add anything to that and no nothing to add i think you got it okay uh thanks and then um my second question is just on alp and then the growth prospects for 7-eleven um i know you've been testing there some of our checks indicate that the brand is doing very well um like in our local store it has 14 facings it's the only brand other than the three market leading brands that are actually on the shelf um

I'm curious if you could talk about what you're seeing um more broadly in the testing there and then if you think that this could become a more meaningful distribution opportunity for ALP um in 2027.

thank you yeah look I think we are uh we're very pleased with the results um uh it's done quite well there uh you know frankly it's doing quite well everywhere um you know like free um the more facing the better so as you noted you know he had 14 facings in the 7-eleven you were uh you know you were visiting um so yes we we think it can do uh it can do very well um you know I would say one of the things that we are that we are noting um is that we think we are early days in terms of the in terms of the life cycle of uh of free now you know somebody I think asked earlier on one of the questions what inning we're in right we still think we're in very early innings however and this is a little bit of a caveat we do think that the category is starting to mature and and and that's a very good thing for us because what we see going forward is fewer players some of the smaller guys getting weeded out and both free and out really being surviving brands that make it to the other side. of that moat where both of them can become, you know, the phrase we like to use is ubiquitously distributed. What we basically mean by that is you can find it in most of the stores you're in. And so we think there's going to be a handful of brands carried in most of the stores in the United States and both free and out. I'll have a great shot of of being in that in that handful of brands. So while it is still early innings for free and out and in some respects, even earlier innings for out when it comes to brick and mortar, we think there is a maturation of the category going on that is going to in there.

to our benefit as there is a little bit of a culling of the herd starting to take place.

Okay, thanks very much.

There are no further questions at this time. I will now turn the call back to David Glasek, CEO for closing remarks.

Thanks everyone for joining the call. I appreciate it. You know, this is my first call. CEO, and as I mentioned before, I'm really excited by the opportunity. The team is energized and ready and engaged to go attack the opportunity in front of us. And, you know, I think with that. We look forward to speaking with you in February and going through the full year results. So thank you very much for joining. We very much appreciate it. Thank you.

That concludes today's call.

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