Conflicting Signals: 22nd Century's Q1 2025 Earnings Call Unveils Breakeven Timeline and CMO Revenue Challenges

Breakeven timeline, CMO contract stability, breakeven expectations, and revenue growth in CMO product line are the key contradictions discussed in 22nd Century's latest 2025Q1 earnings call.



Financial Performance and Market Dynamics:
- 22nd Century Group reported net revenue of $6 million in Q1 2025, up 50% from the previous quarter.
- The increase was driven by a recovery in volume and manufacturing capacity with CMO customers, as well as new customer contracts.

Gross Margin Improvement:
- The company's gross margin improved to a loss of $0.6 million, showing a 50% improvement from the prior quarter.
- This was due to the rebuilding of volume and manufacturing capacity, despite temporary declines from repricing CMO customer contracts.

Operating Expense Reduction:
- 22nd Century reduced total operating expenses to $2 million, the lowest quarterly amount since the turnaround began in late 2023.
- This was a result of restructuring efforts and continued progress in restoring fiscal responsibility.

Branded Product and CMO Business Growth:
- The company's branded products, including Smoker Friendly, Pinnacle, and VLN, are expected to drive growth, with additional products and distribution launches planned.
- The CMO business, including filtered cigars and container orders, continues to contribute to gross profit despite being high-volume, low-margin.

Regulatory Environment and Tobacco Harm Reduction:
- The FDA's proposed low-nicotine rule is ongoing, with a comment period ending in September 2025.
- 22nd Century is prepared to move forward with its low-nicotine technology regardless of the FDA's decision as it is already approved and market-ready.