22nd Century 2025 Q1 Earnings Misses Targets as Net Income Improves by 39.9%

22nd Century (XXII) reported its fiscal 2025 Q1 earnings on May 13th, 2025. The company did not meet expectations, as revenue decreased by 7.9% year-over-year to $5.96 million. However, guidance remains optimistic, anticipating growth driven by new product launches and increased marketing efforts. The leadership expects to secure additional customer contracts, enhancing its position in the reduced nicotine content category.

Revenue
The total revenue for 22nd Century in Q1 2025 fell by 7.9% to $5.96 million compared to the same period in 2024. Contract manufacturing operations contributed $6.11 million, while cigarette sales recorded $5.01 million. Filtered cigars added $1.10 million, and cigarillos posted a marginal loss of $5,000. The VLN segment registered a notable loss of $155,000. Despite the overall decline in revenue, the company is focusing on strategic initiatives to drive future growth.

Earnings/Net Income
EPS improved significantly to a loss of $1.89 per share in Q1 2025 from $230.82 per share in Q1 2024, marking a 99.2% improvement. The company's net loss also narrowed to $3.3 million, down from $5.45 million in the previous year. The EPS performance indicates progress in reducing losses.

Price Action
The stock price of 22nd Century has climbed 5.50% during the latest trading day, has dropped 3.36% during the most recent full trading week, and has surged 20.68% month-to-date.

Post-Earnings Price Action Review
The strategy of purchasing 22nd Century shares following its quarterly revenue decrease and holding them for 30 days has proven unprofitable over the past five years. This approach resulted in an annualized return of -22.7%, with a total loss of $1.22 per share. The significant decline in stock price over this period highlights the ineffectiveness of this strategy. Investors relying on this method have faced substantial losses, indicating that alternative investment strategies might be more successful in navigating the company's fluctuating stock performance. The historical data suggests caution when applying this approach, as the company's stock has not consistently rebounded post-revenue drops.

CEO Commentary
“Our first quarter results demonstrate the positive trends we expect to build on in 2025 as we secure new opportunities to drive volume across our VLN®, core CMO, and filtered cigar businesses,” said Larry Firestone, CEO of 22nd Century Group. The investments made in 2024 are beginning to pay off, as evidenced by a 50% increase in sales from the previous quarter. Operating expenses have decreased significantly, and the company is excited about the upcoming launch of two partner branded VLN® products, emphasizing their growth strategy and the expected momentum in sales volumes.

Guidance
22nd Century Group anticipates continued growth in 2025, driven by the launch of partner branded VLN® products and increased marketing efforts. The company expects to secure additional new customer contracts, enhancing its market position in the reduced nicotine content category. The leadership is optimistic about executing their growth strategy and achieving improved sales volumes through strategic initiatives and expanded distribution channels.

Additional News
22nd Century Group has completed the sale of its Needle Rock Farms assets, netting approximately $770,000 after expenses. This transaction strengthens the company's cash position to support its 2025 growth strategies, including new VLN® and Partner VLN® launches. Additionally, 22nd Century has announced a $1.0 million debt reduction following a financing transaction, reducing the total debt principal to approximately $3.9 million. The company aims to become debt-free and focus resources on growth opportunities. Furthermore, 22nd Century is actively pursuing a settlement of stockholder derivative actions, scheduled for a hearing on July 16, 2025, which includes corporate governance reforms and attorney fees of $768,333.