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Turning Point Brands, Inc. (TPB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered double-digit top-line growth and solid adjusted EBITDA, with consolidated net sales up 12.8% to $93.7M and adjusted EBITDA up 5.3% to $26.2M; diluted EPS fell to $0.13 due to losses from discontinued operations (CDS), while adjusted diluted EPS rose 19% to $0.98 .
  • Segment performance was balanced: Zig-Zag net sales rose 1.8% (ex-Clipper +4.1%) amid mix-driven margin compression, while Stoker’s net sales climbed 25.8% on Modern Oral contribution ($11.2M) despite MST lapping a tough prior-year comp .
  • 2025 guidance introduced: adjusted EBITDA $108–$113M and combined Modern Oral sales $60–$80M; management signaled increased sales/marketing investment and discussed tax rate (23–26%), CapEx ($4–$5M), and PMTA spend ($3–$6M) for 2025 .
  • Strategic catalyst: accelerated Modern Oral ramp (FRE quadrupled YoY to ~$6.3M; ALP launch late Q4), omni-channel expansion (including 7‑Eleven regional rollout), and cigar category push within Zig-Zag; dividend raised to $0.075 in Feb 2025, supporting capital return narrative .

What Went Well and What Went Wrong

What Went Well

  • Strong consolidated growth and profitability: Q4 net sales +12.8% YoY to $93.7M; adjusted EBITDA +5.3% YoY to $26.2M; adjusted diluted EPS +19% YoY to $0.98 .
  • Modern Oral momentum: combined sales $11.2M; FRE sales ~+$6.3M, +419% YoY and +26% sequential; ALP JV launched late Q4, with early traction and confidentiality around route-to-market suggesting online leverage .
  • Management confidence and forward guide: 2025 adjusted EBITDA $108–$113M and Modern Oral $60–$80M; CEO: “We were pleased with our fourth quarter and full year 2024 results and the momentum we are seeing across the organization” .

What Went Wrong

  • GAAP EPS pressure from discontinued CDS: Q4 diluted EPS dropped to $0.13 (from $0.53) as CDS loss of $7.3M weighed on GAAP results; SG&A rose to $34.5M with restructuring, transactional, and PMTA costs .
  • Mix-driven margin compression in Zig-Zag: Q4 Zig-Zag gross margin fell 240 bps to 54.1%, driven by product mix and Clipper unwind; management expects moderated margin growth as mix shifts persist .
  • MST declined modestly in Q4 (-1% YoY) against a strong prior-year comp, though share and distribution continued to expand, partially offsetting category volume declines .

Financial Results

Consolidated Performance (USD)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($MM)$108.512 $105.617 $93.667
Gross Margin (%)49.6% 50.8% 56.0%
Adjusted EBITDA ($MM)$27.035 $27.158 $26.241
Diluted EPS ($)$0.68 $0.68 $0.13
Adjusted Diluted EPS ($)$0.89 $0.87 $0.98

Notes:

  • Q4 gross margin cited by management at 56% (-108 bps YoY; mix-driven) .
  • Adjusted figures reconciled in press release schedules .

Segment Net Sales ($MM)

SegmentQ2 2024Q3 2024Q4 2024
Zig-Zag$50.482 $49.324 $45.891
Stoker’s$42.743 $41.380 $47.776

Segment Gross Profit ($MM)

SegmentQ2 2024Q3 2024Q4 2024
Zig-Zag$26.872 $27.327 $24.848
Stoker’s$23.524 $23.071 $27.570

KPIs and Operational Metrics

KPIQ2 2024Q3 2024Q4 2024
Modern Oral Sales ($MM)n/an/a$11.2
FRE Sales ($MM)~$4.0 ~$5.0 ~$6.3
Stoker’s MST Market Share (%)7.5 (quarter) 7.3 (quarter) 7.6 (year)
In-store Selling Share (%)10.3 (quarter) 11.3 (quarter) 11.2 (year)
Stoker’s Chewing Tobacco Share (%)32.5 (quarter) 32.9 (quarter) 32.9 (quarter)
Zig-Zag Gross Margin (%)53.2 55.4 54.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAFY 2024$98–$102M (Q2 guide) $101–$103M (Q3 raise) Raised
Adjusted EBITDAFY 2025n/a$108–$113M Initiated
Modern Oral SalesFY 2025n/a$60–$80M Initiated
Effective Tax RateFY 2025 modelingn/a23%–26% New disclosure
CapExFY 2025n/a$4–$5M (excl. Modern Oral projects) New disclosure
PMTA ExpenseFY 2025n/a$3–$6M New disclosure
Dividend per ShareQuarterly (paid Apr 2025)$0.070 (Nov 2024 declared) $0.075 Raised

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2, Q3)Current Period (Q4)Trend
Modern Oral rollout & mix (FRE/ALP)FRE revenue ~$4M; launch 6mg online; national rollout; profitability maintained FRE ~$6.3M (+419% YoY; +26% seq); ALP launch late Q4; combined Modern Oral $11.2M Accelerating
Chain distribution & 7‑ElevenLonger chain cycles; focus on independents; strong data-driven marketing Regional 7‑Eleven partnership; ongoing chain discussions Expanding
Modern Oral margins & investmentEarly-stage margin build; invest in brand (20–40% model historically) Mid-30s gross margin; reinvest for sales/marketing; slotting fees considered Scaling with reinvestment
Manufacturing & supply chainConfident in partner capacity; no capacity figures disclosed Considering U.S. manufacturing given potential tariff environment Evaluating reshoring
Regulatory/legal (PMTA; harm reduction)PMTA expense ~$4M FY; filings under review Positive view post ZYN authorization incl. flavors; continue wide range strengths; PMTA spend $3–$6M in 2025 Constructive backdrop
Zig-Zag strategy & marginsLifestyle push; alt channel convergence; GM 53.2% (mix) GM 54.1% (mix-driven decline); mid-single-digit growth expected despite Clipper/FX headwinds Growth with mix pressure
Cigar category within Zig-ZagStrong Q2/Q3 contribution; leaning in Management sees “massive opportunity” with long runway Strategic focus
D2C & subscriptionsStrong D2C engagement; rewards/subscriptions launched D2C remains key, ALP likely outsized online opportunity Building omnichannel

Management Commentary

  • CEO perspective: “We were pleased with our fourth quarter and full year 2024 results and the momentum we are seeing across the organization… We believe Zig-Zag remains on a sustainable growth trajectory… In Modern Oral, combined sales were $11.2 million for the quarter” .
  • 2025 strategy: “We are initiating 2025 adjusted EBITDA guidance of $108 million to $113 million… expect [FRE and ALP] to generate $60 million to $80 million of combined revenue… both brands to play key roles in achieving our long-term goal of 10% market share of the modern oral category” .
  • Zig-Zag & alt-channel synergy: “Nearly 75% of all Americans now live in a legal regulated medical cannabis or adult-use state… This secular tailwind should continue to benefit picks and shovels businesses with must-carry brands like Zig-Zag… many of these stores… carry modern oral nicotine pouches” .

Q&A Highlights

  • Chain distribution outlook: “About 70%… of the category is sold through chain convenience… we recently rolled out a regional partnership with 7‑Eleven… making great traction there” .
  • Cross-selling synergy MST/Modern Oral: “Portfolio… highly synergistic… as we hit the chains with modern oral… backstop… discussion around MST” .
  • Modern Oral margins/investment: “Gross profit margins in the mid‑30s… plan is to reinvest some of those profits… [including] slotting fees” .
  • Manufacturing considerations: “Considering all options… including U.S. manufacturing” given tariff environment .
  • Regulatory tone: Positive following ZYN authorization (incl. flavored products); continuing wide range of nicotine strengths .
  • D2C vs brick-and-mortar: ALP likely outsized online opportunity; FRE focused on bricks and mortar while expanding 6mg .
  • Zig-Zag margin mix: Mix shift into lower-margin products likely to continue; moderated margin growth expected .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 could not be retrieved at time of analysis due to SPGI daily request limits; as a result, explicit beat/miss versus consensus is unavailable. If you need precise consensus comparisons, we can re-query S&P Global once access resets and update this section accordingly.

Key Takeaways for Investors

  • Modern Oral is becoming a material growth driver: combined Q4 sales $11.2M, with FRE ~$6.3M and ALP launched late Q4; management guides $60–$80M in 2025, implying continued share capture and channel expansion .
  • 2025 guide signals confidence but investment: adjusted EBITDA $108–$113M alongside increased sales/marketing and PMTA spend ($3–$6M), suggesting nearer-term margin investment to support long-term category goals .
  • Zig-Zag remains a durable franchise with alt-channel tailwinds, yet mix pressures persist; expect margin variability as product mix evolves and Clipper/FX headwinds weigh near-term .
  • Stoker’s MST resilience and share gains provide ballast: MST share and in-store selling footprint grew despite category volume declines, supporting stable cash generation .
  • Capital structure and liquidity improved: $300M 2032 notes refinanced 2026 notes; net leverage within 2–3x; dividend increased to $0.075, reinforcing shareholder return .
  • Tactical trading lens: Watch for chain wins (7‑Eleven expansion), regulatory developments (PMTA progress; broader authorization trends), and ALP online traction; these could act as catalysts for estimate revisions and multiple expansion .
  • Near-term focus: Monitor gross margin mix shifts (Zig-Zag), SG&A normalization post restructuring, and Modern Oral unit economics as slotting/promotions ramp; execution will drive EBITDA translation of top-line growth .

Appendix: Additional Q4-Related Press Releases

  • Conference call scheduling and logistics for Q4/FY 2024 results .
  • ALP JV announcements and pre-order momentum (Nov–Dec 2024), highlighting launch strengths and online route-to-market .