22nd Century (XXII) Q2 Earnings call transcript Aug 13, 2024

In the recent earnings call for 22nd Century, CEO Larry Firestone and CFO Dan Otto provided insights into the company's financial performance and strategic direction. The call, which followed the release of the company's second-quarter financial results, highlighted both challenges and opportunities for the company as it navigates its way towards profitability.

Financial Turnaround and Operational Updates

22nd Century reported a significant financial turnaround, moving from a consolidated net loss of $21 million in the second quarter of 2023 to just $1.6 million in 2024. This achievement reflects the company's efforts to streamline operations and reduce costs. Firestone emphasized the company's commitment to its unique position in the tobacco industry and its goal of addressing nicotine addiction among tobacco users. He also outlined operational updates, including the addition of Robert Manfredonia to head up sales and marketing activities and the focus on growth and profitability.

Contract Manufacturing Business and Low Nicotine Solution

The call provided a detailed insight into the company's contract manufacturing business (CMO) and its low nicotine solution, VLN. The CMO business, which provides a direct path to breakeven, has been repositioned to maximize volume and drive down costs. Meanwhile, VLN, the only MRTP PMTA low nicotine combustible cigarette, represents a growth opportunity for the company. Firestone acknowledged the challenges in marketing VLN, emphasizing the need to respect the smoking ritual and oral fixation, which are key to addressing nicotine addiction.

Future Outlook and Challenges

Firestone cautioned investors about the long road to success, acknowledging the challenges of transforming the company's financial position and executing the brand relaunch for VLN. He emphasized the need for hard work and patience, acknowledging that this is not a quick fix solution. The company's competitors, who are focusing on smoking cessation, were also discussed, with Firestone highlighting the difference between their offering and the industry's emphasis on nicotine attachment.

Financial Performance and Balance Sheet Improvements

Otto provided a detailed analysis of the company's financial performance, highlighting improvements in net revenue and gross profit. He also discussed the company's cost reduction initiatives, including price increases for customers and the exit of unprofitable business lines. The focus on improving the balance sheet, with a goal of reaching profitability in Q1 2025, was also emphasized.

Conclusion

In conclusion, 22nd Century's earnings call offered a comprehensive update on the company's financial performance and strategic direction. The focus on profitability, operational improvements, and the potential of the low nicotine solution underscored the company's commitment to addressing the challenges of nicotine addiction in the tobacco industry. With a clear path to profitability and a focus on growth opportunities, 22nd Century is poised for a transformative period in its history.