Earnings Call Insights: Turning Point Brands (TPB) Q2 2025
Management View
- CEO Graham Purdy announced that "Our consolidated second quarter results were better than expected and demonstrated continued progress against our plan. Revenue increased 25% to $116.6 million for the quarter, including $30.1 million in Modern Oral revenue. Modern Oral now accounts for 26% of our total revenue."
- Purdy stated, "We are increasing our adjusted EBITDA guidance to a range of $110 million to $114 million, up from $108 million to $113 million, inclusive of significant sales and marketing investments. We are increasing full year consolidated nicotine pouch sales guidance to a range of $100 million to $110 million, up from $80 million to $95 million."
- He highlighted, "White pouch sales increased by nearly 8x year-over-year and was up 35% sequentially. We believe ALP is now one of the top D2C pouch brands in America and is poised to expand into retail sooner than initially expected."
- The company is making significant investments by "reallocating sales and marketing resources, increasing the headcount of our sales force, improving our online presence, ramping up investment in chain accounts and developing U.S. manufacturing."
- Purdy noted, "Our goal is to approximately double the size of our 2024 sales force by the end of 2026. So far, we are ahead of schedule and pleased with the initial results."
- CRO Summer Frein discussed the company's new marketing partnership: "In the quarter, we announced a long-term partnership with Professional Bull Riders or PBR. Few sports deliver quite like PBR, and we believe this opportunity will enable free to connect with consumers." She added, "We expanded our distribution and product assortment with notable chain partners throughout the quarter."
- CFO Andrew Flynn reported, "Sales were up 25% year-over-year to $116.6 million for the quarter. For the quarter, gross margin was 57.1%, which was up 310 basis points year-over-year and 110 basis points sequentially."
Outlook
- Purdy stated, "We are increasing our adjusted EBITDA guidance to a range of $110 million to $114 million, up from $108 million to $113 million."
- The company raised its anticipated total Modern Oral sales range to $100 million to $110 million, up from the previous range of $80 million to $95 million.
- Flynn added, "This guidance reflects increased investment in our go-to-market plan as well as tariff and currency-related impacts. For modeling purposes, the effective income tax range is 23% to 26% on a go-forward basis. Budgeted CapEx for 2025 is $4 million to $5 million, exclusive of projects related to our Modern Oral business."
Financial Results
- Flynn reported, "Adjusted EBITDA was up 15% year-over-year to $30.5 million for the quarter and a 26.1% margin."
- Stoker's net sales increased 63% year-over-year to almost $70 million for the second quarter. Net sales for the MST portfolio grew 4% year-over-year to $29 million in the quarter. Stoker's chewing tobacco was the #1 chewing brand in the quarter, gaining 160 basis points of share to 32.7% according to MSAI.
- Zig-Zag sales decreased 6.9% year-over-year to about $47 million for the quarter. Gross margins for Zig-Zag declined 410 basis points, attributed to product mix and the accelerated exit from the CLIPPER business.
- The company ended the quarter with $109.1 million of cash and free cash flow for the second quarter was $11.2 million. CapEx for the quarter was $3.9 million.
Q&A
- Eric Des Lauriers, Craig-Hallum: Asked about ALP's rollout into brick-and-mortar. Purdy responded, "It's super early innings. And I think that as the bricks and mortar matriculate, obviously, they're a small sales organization right now. And so I would expect them to sort of plot along and gain stores over time as we sort of bend around the end of this year."
- Eric Des Lauriers: Asked if ALP rollout will follow FRE's path and about national chain progress. Purdy said, "There should be total overlap of those 2 brands. I think in the early innings...it will be a little bit hit and miss." Frein added, "We began to make significant progress with other nationally large recognized chains and are in the process of expanding in their geographies across the United States."
- Ian Alton Zaffino, Oppenheimer: Asked about white pouch production, tariffs, and moving production out of India. Flynn replied, "We've built an inventory position around that product. So that gives us some insulation from a tariff increase...we're focused on controlling our controllables." He added, "We continue to invest...in that capability here in the United States."
- Aaron Thomas Grey, Alliance: Inquired about gross margins and mix. Purdy explained, "The margins [for Stoker's heritage business] remain healthy and expanding. As it relates to Modern Oral...we're pretty excited about where the margin profile of the business is."
- Nicholas Steven Anderson, ROTH: Queried about Modern Oral promotions and pricing. Purdy observed, "We've seen consistent promotion from one manufacturer to the next quarter-to-quarter. We're incredibly excited about the promotional environment from the standpoint of building awareness around the category."
- Gerald John Pascarelli, Needham: Asked about balancing legacy MST and Modern Oral. Purdy explained, "There's been relatively strong overlap between the Modern Oral stores that we've focused on gaining distribution in and our Stoker's MST portfolio...we're still bullish on our MST business on a go-forward basis."
Sentiment Analysis
- Analysts focused on rollout progress, margin sustainability, and distribution expansion, with generally positive and inquisitive tones, frequently congratulating management on results and probing for growth details.
- Management maintained a confident and optimistic tone, using phrases like "we are pleased," "ahead of schedule," and "very excited about the opportunities as they proceed." During Q&A, responses remained detailed and constructive, with no defensive language detected.
- Compared to the previous quarter, management's tone in both prepared remarks and Q&A was consistently confident, but there was an increased emphasis on execution and acceleration of key initiatives. Analysts' tone remained positive but grew more focused on competitive dynamics and cost management.
Quarter-over-Quarter Comparison
- Guidance for adjusted EBITDA was raised to $110 million-$114 million from $108 million-$113 million, with Modern Oral sales guidance increased to $100 million-$110 million from $80 million-$95 million in Q1.
- Management emphasized faster-than-expected expansion of ALP into retail, compared to prior expectations of a primarily D2C approach.
- Increased sales force investment and an accelerated timetable for expanding retail distribution were highlighted, along with a new PBR marketing partnership in Q2, compared to billboard and in-store campaigns in Q1.
- Q2 saw higher revenue and adjusted EBITDA versus Q1, with stronger sequential growth in white pouch sales and Stoker's segment performance.
- Whereas Q1 featured more cautious language about supply chain and tariff risks, Q2 remarks reflected more robust control and active mitigation efforts.
- Analysts' focus shifted from initial rollout and supply chain questions in Q1 to deeper inquiries on margin sustainability, promotional strategies, and competitive positioning in Q2.
Risks and Concerns
- Flynn noted that "continued investments in sales and marketing as well as temporarily elevated outbound freight charges" contributed to higher SG&A this quarter.
- Tariff and currency impacts were acknowledged in updated guidance, and management is proactively building inventory and negotiating supplier costs to mitigate tariff risks.
- There is continued caution regarding year-over-year comparables in the Zig-Zag segment due to the wind-down of the CLIPPER business and deemphasis of cigars, as well as ongoing volatility in new distribution and replenishment for pouches.
Final Takeaway
Turning Point Brands' Q2 results reflect accelerated momentum in the Modern Oral segment, with white pouch products driving sharp revenue and margin growth. Management raised full-year guidance in response to robust market demand and successful expansion in both sales force and retail partnerships. Key investments in brand marketing and U.S. manufacturing, along with new national chain relationships and a major sports partnership, position the company to capture an increasing share of a growing nicotine pouch market. Management remains confident in its strategy and ability to deliver on its elevated targets for the remainder of 2025.
Read the full Earnings Call Transcript
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