Turning Point Brands, Inc. (TPB) Misses Q4 EPS by 5c, Revenues Miss; Provides FY20 Revenue Outlook

Turning Point Brands, Inc. (NYSE: TPB) reported Q4 EPS of $0.41, $0.05 worse than the analyst estimate of $0.46. Revenue for the quarter came in at $80.2 million versus the consensus estimate of $82.37 million.

Fourth Quarter 2019
(Comparisons vs. same period year-ago)

• Net sales decreased 14.9% to $80.2 million;
• Gross profit decreased 68.3% to $12.3 million as a result of certain restructuring expenses;
• Net income decreased $17.2 million to a net loss of $12.3 million primarily as a result of $24.7 million of fourth quarter restructuring costs;
• Adjusted EBITDA decreased 17.3% to $14.2 million (see Schedule A for a reconciliation to net income); and
• Diluted EPS of $(0.62) and Adjusted Diluted EPS of $0.41 as compared to $0.25 and $0.51 in the year-ago period, respectively

“We entered 2019 with strong momentum across the board. However, in late summer, negative media headlines began to impact the vaping market resulting in a sustained and dramatic business disruption in both the third and fourth quarters. We reacted quickly, consolidating the vaping business and cutting company-wide headcount by more than 10%. Fourth quarter 2019 was a solid quarter for our core tobacco segment and an important transition period for our NewGen segment,” said Larry Wexler, President and CEO.

“As part of our previously announced review of strategic alternatives on third-party vaping, we restructured our operations into one system closing two offices, shut down unprofitable dropship and third-party resellers, consolidated four warehouses into one and continued to eliminate underperforming stores and deemphasize retail operations. We have stabilized the vaping business at smaller, but still profitable levels. We will continue to evaluate the business as we progress through the PMTA process.”

“Our ambition continues to focus on creating value for our shareholders by delivering quality products to satisfy the evolving preferences of consumers in the actives market. In 2020, we expect to continue growing market share and driving operating leverage in MST, expanding Zig-Zag in the alternatives space and further enhancing our product pipeline at Nu-X. Additionally, we look forward to potentially significant upside as the FDA PMTA process provides a sizeable opportunity as the industry consolidates.”

GUIDANCE:

Turning Point Brands, Inc. sees FY2020 revenue of $338-353 million, versus the consensus of $341.27 million.

• Absent any acquisitions, the company projects 2020 net sales to be $338 to $353 million. We project 2020 Adjusted EBITDA of $69 to $75 million. Our projections assume no upside from the PMTA process in 2020.
• Stock compensation and non-cash incentive expense in 2020 is projected to be $3.3 million.
• Cash interest expense is projected to be $11-$12 million and GAAP interest expense includes $7 million of debt discount amortization amount equal to the fair value of the equity components over the expected life of the 2024 convertible notes.
• The company expects the 2020 effective income tax rate to be 21-23%.
• Capital expenditures for 2020 are anticipated to be approximately $4.0 million.
• Net Sales for the first quarter 2020 are expected to be $82 million to $86 million.

For earnings history and earnings-related data on Turning Point Brands, Inc. (TPB) click here.

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