Turning Point Brands' Q4 2024: Dissecting Contradictions in Modern Oral Strategy, Regulation, and Distribution

These are the key contradictions discussed in Turning Point Brands' latest 2024Q4 earnings call, specifically including: Modern Oral distribution outlook, regulatory stance on nicotine-based products, and future operational plans:



Revenue and Adjusted EBITDA Growth:
- Turning Point Brands reported revenue of $93.7 million for Q4 2024, up 13%, and a full-year adjust EBITDA increase of 12% to $104.5 million.
- The growth was driven by the continued progress of the company's strategic plan, including the divestiture of the CDS business and strong performance in the Modern Oral category.

Modern Oral Brand Performance:
- The Modern Oral category generated $11.2 million in revenue for Stoker's, with FRE sales increasing 419% to $6.3 million.
- This growth was attributed to the successful launch of ALP and positive consumer feedback on FRE's product offerings.

Zig-Zag and Stoker's Segment Performance:
- Zig-Zag revenue grew 2% in Q4, despite pressure from the Clipper relationship unwind, while Stoker's revenue increased 26%.
- The growth was driven by strong distribution and cross-selling opportunities, as well as the expansion of Modern Oral products across retail outlets.

Cash Flow and Financial Position:
- The company ended the quarter with $46 million in cash and generated $56.3 million in free cash flow for the year.
- This was supported by the successful issuance of $300 million in senior secured notes and the call of $250 million in notes maturing in 2026.

Outlook for Modern Oral in National C-stores:
- The company expects national chain convenience stores to account for a significant portion of Modern Oral's sales growth.
- This growth is driven by established partnerships with chain stores and the ongoing rollout of Modern Oral products into regional markets like 7-Eleven.