Earnings call transcript: Turning Point Brands Q2 2025 beats expectations

Turning Point Brands Inc. (TPB) reported a strong performance in its Q2 2025 earnings call, surpassing analyst expectations with an earnings per share (EPS) of $0.98, significantly beating the forecasted $0.73. The company also reported revenue of $116.6 million, exceeding the anticipated $107.3 million. Following the announcement, TPB’s stock price surged by 7.95% in pre-market trading, reflecting investor confidence in the company’s strategic direction and financial health. According to InvestingPro data, the company maintains a "GOOD" overall financial health score, with particularly strong profitability metrics.

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Key Takeaways

• Turning Point Brands reported a 34.25% EPS surprise, significantly surpassing expectations.
• Revenue increased by 25% year-over-year, driven by strong product innovation and market expansion.
• The company’s stock rose by 7.95% following the earnings announcement.
• Modern Oral products accounted for 26% of total revenue, highlighting growth in the nicotine pouch segment.
• The company raised its 2025 Adjusted EBITDA guidance to $110–114 million.

Company Performance

Turning Point Brands demonstrated robust growth in Q2 2025, with revenue rising 25% year-over-year. This growth was fueled by the company’s focus on product innovation and expansion in the nicotine pouch market, a segment projected to reach $10 billion by the end of the decade. The company’s strategic initiatives, including expanding its sales force and investing in U.S. manufacturing, are expected to sustain this upward trajectory.

Financial Highlights

• Revenue: $116.6 million, up 25% year-over-year
• Earnings per share: $0.98, exceeding the forecast of $0.73
• Adjusted EBITDA: $30.5 million, up 15% year-over-year
• Gross Margin: 57.1%, an increase of 310 basis points year-over-year
• Cash Position: $109.1 million
• Free Cash Flow: $11.2 million

Earnings vs. Forecast

Turning Point Brands delivered an EPS of $0.98, outperforming the forecasted $0.73, representing a surprise of 34.25%. This significant beat highlights the company’s effective cost management and strategic growth initiatives. Revenue also exceeded expectations, coming in at $116.6 million compared to the forecasted $107.3 million, marking an 8.67% surprise.

Market Reaction

Following the earnings report, TPB’s stock price increased by 7.95% in pre-market trading, reaching $85.50. This movement reflects positive investor sentiment and confidence in the company’s future prospects. The stock’s current price is approaching its 52-week high of $89.38, indicating strong market performance relative to broader trends. InvestingPro data shows TPB has delivered an exceptional 128.49% return over the past year, significantly outperforming market averages. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value.

Outlook & Guidance

Turning Point Brands has raised its 2025 Adjusted EBITDA guidance to a range of $110–114 million, signaling confidence in its growth strategy. The company also increased its Modern Oral sales guidance to $100–110 million. These revisions underscore the company’s commitment to capitalizing on opportunities in the growing nicotine pouch market. With a market capitalization of $1.57 billion and revenue growth of 24.54% over the last twelve months, TPB shows strong momentum in its core markets.

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Executive Commentary

CEO Graham Pardia emphasized the company’s strategic focus, stating, "We believe the nicotine pouch space will ultimately feature five to six widely distributed brands that command most of the market." This vision aligns with the company’s efforts to expand its market share and enhance brand awareness through partnerships and strategic marketing initiatives.

Risks and Challenges

• Supply Chain Issues: Potential disruptions could impact production and distribution.
• Market Saturation: Increased competition in the nicotine pouch market may affect growth.
• Macroeconomic Pressures: Economic downturns could impact consumer spending.
• Regulatory Changes: Changes in tobacco regulations could affect product offerings.
• Tariff Impacts: Tariffs may increase production costs, affecting profitability.

Q&A

During the earnings call, analysts inquired about the company’s brick-and-mortar rollout strategy for ALP products, tariff impacts on production, and the promotional environment in the nicotine pouch market. Executives addressed these concerns, highlighting their strategic initiatives to mitigate risks and leverage growth opportunities.

Full transcript - Turning Point Brands Inc (TPB) Q2 2025:

Conference Operator: Good morning, and welcome to the Turning Point Brands Second Quarter twenty twenty five Earnings Conference Call. All participants are in a listen only mode. All lines have been placed on mute to prevent any background noise. Please note this event is being recorded. It is now my pleasure to turn the conference call over to Andrew Flynn, Chief Financial Officer.

Please go ahead.

Andrew Flynn, Chief Financial Officer, Turning Point Brands: Good morning, everyone. A short while ago, we issued a press release covering our Q2 results. This release is located in the IR section of our website at www.turningpointbrands.com. During this call, we will discuss our consolidated and segment operating results and provide some perspective on the operating environment and progress against our strategic plan. As is customary, I direct your attention to the discussion of forward looking and cautionary statements in today’s press release and the risk factors in our filings with the Securities and Exchange Commission.

On the call today, we will reference certain non GAAP financial measures. These measures and reconciliations to GAAP are in today’s earnings release, along with reasons why management believes they provide useful information. I will now turn the call over to our CEO, Graham Pardia.

Graham Pardia, CEO, Turning Point Brands: Thanks, Andrew. Good morning, everyone, and thank you for joining our call. Our consolidated second quarter results were better than expected and demonstrated continued progress against our plan. Revenue increased 25% to $116,600,000 for the quarter, including 30,100,000 in Modern Oral revenue. Modern Oral now accounts for 26% of our total revenue.

Adjusted EBITDA increased 15% to $30,500,000 for the quarter. We are increasing our adjusted EBITDA guidance to a range of 110,000,000 to 114,000,000 up from $108,000,000 to $113,000,000 inclusive of significant sales and marketing investments. We are increasing full year consolidated nicotine pouch sales guidance to a range of 100,000,000 to $110,000,000 up from 80,000,000 to $95,000,000 This includes both free and out. We are particularly pleased with the growth of our white nicotine pouch brands. Their long lasting vibrant flavor options, comfortable mouthfeel and flexible nicotine levels have resonated with consumers, and we continue building Freeze presence in bricks and mortar.

During the quarter, white pouch sales increased by nearly eight times 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. We believe the nicotine pouch space, like most other nicotine businesses, will ultimately feature five to six widely distributed brands that command most of the market. Analysts’ expectations for the size of the category differ, but most now believe it will approach $10,000,000,000 in manufacturers’ revenue by the end of the decade. Our Q2 performance supports our long term target of double digit market share in the category.

In order to best position the company to capitalize on this multibillion dollar opportunity, we have made and will continue to make significant investments in the business in refining our route to market strategy to prioritize white pouch while continuing to generate strong cash flow from our heritage brands. As we mentioned last quarter, key investment initiatives include 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. We have been particularly encouraged by our ability to identify and onboard new sales talent.

Our goal is to approximately double the size of our 2024 sales force by the 2026. So far, we are ahead of schedule and pleased with the initial results. The rest of the Stoker segment portfolio also performed better than expected in the quarter. Overall, Stoker’s revenue increased 63% to about $70,000,000 reflecting a 3% decline in loose leaf, a 4% increase in MST and as Afer mentioned, our Modern Oral revenue increased by nearly eight times. During the first quarter, Zig Zag revenue was down 6.9% to $47,000,000 but essentially flat sequentially, despite our focus on the white pouch category during the quarter.

For modeling purposes, people should recall that in the second half of the year, we will continue to face difficult year over year comps due to the wind down of our Clipper business and the de emphasis of the cigar category. With that, I’ll hand the call over to Summer to walk through the progress of our key go to market initiatives.

Conference Operator: Thank you, Graham. As he shared, we’ve made exciting progress in the modern oral category so far in 2025. Throughout the quarter, we continued to receive favorable consumer and trade feedback, reinforcing our portfolio’s meaningful points of difference in strength, moisture and flavor. We also continue to see increasing order and repeat purchase rates online and in wholesale. This strong performance continues to give us confidence in our brand investments, particularly in sales and marketing.

Key initiatives in this space include: first, we will continue growing the size of our sales force to increase the frequency of store visits with a focus on expanding distribution, improving brand merchandising, and minimizing out of stocks at retail. As a result, we expanded our distribution and product assortment with notable chain partners throughout the quarter. Second, strategic marketing campaigns to accelerate brand awareness and consumer loyalty. For example, 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 who appreciate authenticity, seizing the moment, and pushing boundaries, core tenants that align with Free’s brand ethos.

We marked our debut with this partnership at the PBR World Finals Championship at AT And T Stadium in May, where the free brand was woven into fan experiences and the competition itself. We are looking forward to the PBR season officially kicking off this fall and integrating this partnership into three sixty marketing campaigns. We believe in the importance of building our brand for the long term and will continue to invest to support growing consumer loyalty. With regards to Zig Zag, we continue to execute marketing and sales initiatives that build upon our 145 legacy and solidify our premium position in papers, cones and wraps. Recent new product introductions include the launch of hemp cones and pop tubes, which are singular cones available in our unbleached variety and sold in a reusable premium tube.

We have solid traction during this introductory period with more brand news to follow in upcoming quarters. As we shared last quarter, we anticipate second half headwinds within the Zig Zag segment from cigars and clipper lighters. Our expansion plans in these categories included investments behind some lower margin products, which we deemphasized in light of tariff impacts and a reallocation of time and resources to our nicotine pouch initiative. In closing, we continue building our brands for the long term, executing against our omnichannel plan and winning new consumers. We will continue to prioritize strategic investments to maximize the value of our world class brands and further strengthen our distribution capabilities.

Let me now turn the call back over to Andrew to go through our financial results.

Andrew Flynn, Chief Financial Officer, Turning Point Brands: Thank you, Summer. Sales were up 25% year over year to $116,600,000 for the quarter. For the quarter, gross margin was 57.1%, which was up three ten basis points year over year and 110 basis points sequentially. The change in margin is mix driven. Reported SG and A was $40,300,000 for the quarter and up $3,900,000 sequentially.

The increase on a sequential basis is driven by continued investments in sales and marketing as well as temporarily elevated outbound freight charges. Adjusted EBITDA was up 15% year over year to $30,500,000 for the quarter at a 26.1% margin. Going into segment performance, Zig Zag sales decreased 6.9% year over year to about $47,000,000 for the quarter and is in line with recent quarterly performance. Gross margins declined four ten basis points, driven primarily by product mix due to an accelerated exit from our Clipper business. Stoker’s net sales increased 63% year over year to almost $70,000,000 for the second quarter.

Net sales for the MST portfolio grew 4% year over year to $29,000,000 in the quarter. Share in store selling was up 60 basis points year over year to 11.8%. Stoker’s chewing tobacco was the number one chewing brand in the quarter, gaining 160 basis points of share to 32.7% according to MSAI. Category performance was driven by a larger decline in premium loose leaf, with Stoker’s benefiting from consumer trade down. Our modern oral nicotine pouch sales, free and alp, were up nearly 8x year over year, achieving total revenue of $30,100,000 a 35% sequential increase.

As Graham mentioned, white pouch accounts for 26% of our total revenue mix. Moving on to the balance sheet. We ended the quarter with $109,100,000 of cash, and free cash flow for the second quarter was $11,200,000 CapEx for the quarter was $3,900,000 During Q3, we will have our first coupon payment on the $300,000,000 7.625% bond that we issued in February 2025. On to guidance and other items. As previously noted, we are increasing our full year 2025 adjusted EBITDA guidance to $110,000,000 to $114,000,000 from 108,000,000 to $113,000,000 and also increasing our anticipated total Modern Oral sales range to $100,000,000 to $110,000,000 from the previous range of 80,000,000 to $95,000,000 This guidance reflects increased investment 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 4,000,000 to $5,000,000 exclusive of projects related to our modern oral business. We expect to spend between 3,000,000 to $5,000,000 for the full year to supplement our modern oral PMTAs. Now let me turn it back over to Graham.

Graham Pardia, CEO, Turning Point Brands: To conclude, we are pleased with our second quarter results. And I’ll now turn the call over to questions.

Conference Operator: Thank you. The floor is now open for questions. Your first call comes from the line of Eric DeLoreyes. Your line is now open.

Eric DeLoreyes, Analyst: Great. Thank you for taking my questions and congrats on a very impressive quarter here.

Graham Pardia, CEO, Turning Point Brands: Thanks, Eric.

Eric DeLoreyes, Analyst: My first question is on ALP. Graham, I think you mentioned plans for the brick and mortar rollout were ahead of expectations. I’m just wondering if you could expand a bit on that and just how we should be thinking about the rollout of ALP from e commerce to brick and mortar? Thanks.

Graham Pardia, CEO, Turning Point Brands: Yes. Look, I think that we’ve been pretty excited about the online results. In our estimation, they’ve grown the brand into one of the largest B2C brands. And I think that’s given the team a lot of confidence to move forward with starting in bricks and mortar. It’s super early innings, and I think that, you know, as the the bricks and mortar matriculate, obviously, they’re they’re a small sales organization right now.

And so, you know, I would expect them to, you know, to to sort of plot along and, you know, gain stores over time as we sort of bend around the end of this year as they kinda just started the the thought process of getting into it.

Eric DeLoreyes, Analyst: Got it. And should we think of the rollout for ALP as kind of following in the stores where where free already is? Is it

Analyst: a bit is it a bit

Eric DeLoreyes, Analyst: of a different team or, you know, go to market strategy there? And then just kind of related to all that, just wondering how conversations with national chains are progressing? Thanks.

Graham Pardia, CEO, Turning Point Brands: Yes. I’ll take the first part of that question. Look, think that inevitably, our goal with Free is to be ubiquitously distributed across The United States. So eventually, there should be total overlap of those two brands. I think in the early innings, given the different sizes of the organizations, it will be a little bit hit and miss in terms of where that overlap may or may not, exist.

Conference Operator: And then with regards to expanding free and other national chain accounts and throughout The United States, we continue to see progress with the chains that we’ve spoken about in prior quarters. And throughout q two, 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. So we’re excited about the momentum that we have and and more to come in in short order. Great. Your next question comes from the line of Ian Zaffino with Oppenheimer.

Your line is now open.

Ian Zaffino, Analyst, Oppenheimer: Hi, great. Thank you very much. I just get a sense about the white pouch production, that you might be facing and then potential to maybe move production out of India? Thanks.

Andrew Flynn, Chief Financial Officer, Turning Point Brands: Yes. Hi, Ian. Andrew here. So as it relates to tariffs, as you’ve seen in the news, there’s it’s a dynamic environment. And, what we’re doing is we’re focused on controlling our controllables.

So we built, an inventory position, around that product, so that gives us some insulation for, you know, from a tariff increase. We’ve also been negotiating with some of our suppliers, across the board to get some some reductions in our our cost of goods. And also, we’ve been looking at, taking some price increases in different product lines. So we’re we’re managing the tariff headwind as best we can. And so as it relates to India and and our production capabilities there, we’ve got we’ve got plenty of capacity.

So good news is we’re feeling good about that. And then in terms of the mitigation around the tariff exposure and bringing production to The U. S, we continue to invest. You’ll see the CapEx was around $3,900,000 for the quarter. So we continue to invest in that capability here in United States.

Ian Zaffino, Analyst, Oppenheimer: Okay. And then as a follow-up, would you be able to give us a breakout between ALP and FREE? And then also, what type of slotting fees are you facing now? Did you pay last quarter? And how do we think about that going forward as far as cost to roll out and to expand distribution?

Sure

Andrew Flynn, Chief Financial Officer, Turning Point Brands: thing. So as much as I would love to disclose the app and free split, we’ve got an you know, we’ve got a a joint venture relationship with with ALP, and it’s it’s it’s just something that we’re not able to provide in terms of that split. In terms of slotting fees, look, this is a very exciting segment of the market, and it’s competitive. And so we’ve got to pay fees to get into chains and all kinds of other retailers. And so that is something that we have invested in, and it’s something that we will continue to invest in.

And it’s reflected in our top line guidance for the white pouch range that we disclosed this morning.

Conference Operator: Great. Thank Your next question comes from the line of Aaron Grey with Alliance. Your line is now open.

Analyst: Hi. Thanks for the questions and congrats on the quarter. First question for me, just wanted to talk about gross margins a bit, particularly Stoker’s gross margin remains healthy. You called out mix kind of for the overall improvement in gross margin. Obviously, Stoker’s was a highlight there.

So just any color you can provide there, particularly as we think about pouches within that, that’s a higher mix. Historically, you pointed to lower margins from pouches, but maybe better than you initially had expected. There’s a lot of dynamics moving between DTC and brick and mortar. So maybe just any color in terms of how that sticks out gross margin, particularly as we move forward? And it seems like we’re going get increasing mix in terms of coming from brick and mortar.

Thank you.

Graham Pardia, CEO, Turning Point Brands: Yes. Thanks for the question, Aaron. Look, I think that we’ve got our Stoker’s heritage business, which is our MST and our chewing tobacco brands. The margins there remain healthy and expanding. As it relates to Modern Oral, I think you rightly pointed out there is you do have a mix of D2C versus bricks and mortar.

But I think in the early innings, we’re pretty excited about where the margin profile of the business is. Now I think that we need to underscore that, as Andrew had mentioned in the last question, we intend to invest behind the brand. And so I think you can see a bit of lumpiness within the white pouch segment for us. But over the long haul, we have we’re very bullish on the margin profile of the segment.

Analyst: Thank you. I appreciate that color there. Second question for me. Just as we think about pouch es in the second half of the year, so guidance implies it will be roughly flat versus first half. I know there’s some volatility in terms of new distribution and replenishing.

So I wonder if you could provide some color in terms of new distribution you’re expecting in the back half and what’s embedded within that? And then maybe also some color in terms of how you’re incentivizing the sales team that you’re looking to double there. So any color you can talk about in terms of how you’re incentivizing because this is a kind of different category in terms of growth you’re seeing than some of the legacy categories you’ve seen, maybe where you’re sourcing some of that sales force from? Sure.

Graham Pardia, CEO, Turning Point Brands: So look, I think as long as it seems like it’s been around, ALP has only been in the market for a few quarters now. And I think that a little bit of the guidance range is reflective of some of the unknown relative to the bricks and mortar launch and then ultimately what the growth profile of both the brand properties will be on the D2C platforms. In terms of how we go out and gain stores, obviously, that’s a function of the amount of feet that you have on the street. We have continued to expand our sales force. I think we noted in the call that our plan is to double the 2024 sales force by the 2026.

And obviously, with that expanded sales footprint, we would expect increased rates of distribution from our historical averages. So I think we’re pretty excited about the way that we’ve resourced the brand at this point in time. We’re in a trench warfare format here and I think that we feel like we’re moving our staffing in a direction that gives us the effective capability to compete against the broader market.

Conference Operator: Thank you. And your next question comes from the line of Nick Anderson with Roth. Your line is now open.

Nick Anderson, Analyst, Roth: Yeah. Good morning and thanks for taking the questions. First one for me, just on the modern oral promotional environment. We saw some aggressive marketing activity in the first half of the year. Your gross margin suggests you haven’t been participating in this discounting.

Just what are you seeing out there in terms of the pricing environment, and how are you planning on positioning your products I guess, maybe a more aggressive promotional backdrop? Yes.

Graham Pardia, CEO, Turning Point Brands: Look, I think that since the category became competitive, meaning once it became a category that was beyond just the market leader, we’ve seen consistent promotions from one manufacturer to the next quarter to quarter. I think what’s interesting for us is we’re incredibly excited about the promotional environment from the standpoint of building awareness around the category. With the current estimates now sort of cresting the $10,000,000,000 by the of the decade, this is actually how it happens as the large companies spend a ton of money speaking to adult vapers, adult cigarette consumers. And so we’re actually very excited about that opportunity. As you’ve seen with the results, the first two quarters of this year, we’ve had high promotional environments from a large competitor entering the market.

You’ve seen our results. And I think we remain sort of optimistic, number one, around the benefits that our product, we think, brings the end consumer relative to mouthfeel and the satisfaction levels that we provide. That’s not to say that from time to time, we won’t partner with the chain or what have you to increase sort of in store foot traffic around our brand. But at the same time, we think that we’re sort of uniquely positioned in the long haul to be a premium brand in this category. And so that really excites us.

Nick Anderson, Analyst, Roth: That’s great. I appreciate that color. Second for me, just on the MRTP applications and the opportunity there, is this a path you would consider going down? And if these applications are passed, how would it change the way you could kinda go about marketing your modern oral offering? Thank you.

Graham Pardia, CEO, Turning Point Brands: Yeah. With no plans at this point in time, and we remain committed to the the current PMTA process.

Conference Operator: Thank you. Your next question comes from actually, this is the last question coming from the line of Gerald Pascarelli with Needham. Your line is now open.

Gerald Pascarelli, Analyst, Needham: Great. Thanks very much. Good morning, everyone. I just had a question on your legacy MST business. Just understanding that you’re going to prioritize modern oral, which obviously makes sense.

Your legacy MST business has been incredibly consistent. It grew again on a very tough comp this quarter. And in the current environment, it’s seemingly just very well positioned as a value offering, right? And so just looking forward, how do you think about managing growth and driving continued distribution and market share gains in Stoker’s MST with growing and rolling out your modern oral business, which is still very early days? So any color on the balance, I think, would be helpful.

Thank you.

Eric DeLoreyes, Analyst: Yes. I think what we’ve

Graham Pardia, CEO, Turning Point Brands: seen in the early innings is that there’s been relatively strong overlap between the Modern Oral stores that we’ve focused gaining distribution in and our Stoker’s MST portfolio, which has allowed us the opportunity to cross sell in those environments. So I think you’re seeing a function of the sort of the early days synergy that we actually are really bullish on long term as we grow out our sales force. And look, think you rightly pointed out, Gerald, that what we’ve seen from the large competitors and some of their announcements over the last couple of years is that premium MST has been very susceptible to the white pouch category. And what we see within the underlying dynamics of MST is that there’s still a large audience of committed dippers in The U. S.

We believe we’ve got one of the best brands that has incredible quality around it, and we continue to provide value to those consumers. And from an MST brand standpoint, we feel great about sort of the potential opportunity that’s still in front of us. There’s still a lot of runway in terms of store growth that we can get into. There’s still pricing opportunities in the segment. And so I think we’re still bullish on our MST business on a go forward basis and think that there’s a ton of opportunity out there to harvest.

Gerald Pascarelli, Analyst, Needham: Got it. Super helpful. Just last one for me. I know it’s early, obviously, but if you could share any learnings that you may have had, over the past two quarters, with with with both of these brands just in terms of the consumer reception, or any feedback that you’ve had, if you’ve had any, that would that would be helpful. Thanks.

Conference Operator: Yeah. Sure. We continue to hear incredibly positive feedback from both consumers and retailers as Graham has talked about the the power of the brand and the unique differences between our products relative to competition, including our variety of nicotine strengths, mouthfeel and moist pouch. So we continue to see increased reorder rates, increased trade receptivity and are very excited about the opportunities they proceed. We also, as I mentioned on the call, recently participated in the PBR event in Dallas in May.

We had a variety of consumers that we were able to engage with live. We were very active in that event, and the consumer reception while we were there was really tremendous. Thank you. At this time, there are no further questions. I’d like to turn it back over to Mr.

Purdy.

Graham Pardia, CEO, Turning Point Brands: All right. Thanks, operator. Appreciate everybody joining the call today. We’re pretty excited about our Q2 results, and we look forward to talking to you in about ninety days or so about Q3.

Conference Operator: Thank you. This concludes today’s conference call. You may now disconnect.

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