UPDATE: Turning Point Brands, Inc. (TPB) Tops Q1 EPS by 20c, Revenues Beat; Offers 2Q & FY20 Revenue Outlook

(Updated - April 28, 2020 7:34 AM EDT)

Turning Point Brands, Inc. (NYSE: TPB) reported Q1 EPS of $0.51, $0.20 better than the analyst estimate of $0.31. Revenue for the quarter came in at $90.7 million versus the consensus estimate of $83.7 million.

First Quarter 2020

(Comparisons vs. same period year-ago)

• Net sales decreased 1.0% to $90.7 million;
• Gross profit increased 2.4% to $41.4 million;
• Net income decreased $3.3 million to $3.3 million, reflecting the inclusion of expensing PMTA costs incurred during the quarter;
• Adjusted EBITDA increased 10.6% to $17.8 million (see Schedule A for a reconciliation to net income);
• Diluted EPS of $0.16 and Adjusted Diluted EPS of $0.51 as compared to $0.33 and $0.43 in the year-ago period, respectively (see Schedule C for a reconciliation to Diluted EPS);

“Our results this quarter reflect the robust demand for our products even during challenging times. Sales performance was driven by mid-teens growth in our core Smokeless and Smoking segments partially aided by trade load-in as a response to strong customer demand and the uncertain environment. We estimate trade load-in impacted sales in our core tobacco segments by $2 million. Our NewGen segment also delivered better than expected results after we reorganized the business last quarter,” said Larry Wexler, President and CEO. “During this challenging environment, we are especially proud of the job our employees are doing to ensure the health and safety of each other and our local communities while maintaining our commitment to meet our customers’ needs. The dedication of TPB’s workforce to serve those needs has been remarkable.”

COVID-19 Impact

“As a result of the extraordinary situation we are facing, our focus during the quarter was on the safety and well-being of our colleagues and the communities and customers we serve. This focus serves as the basis for decisions we make as a company and how we react going forward,” said Wexler.

GUIDANCE:

Turning Point Brands, Inc. sees 2Q revenue of $81-87 million, versus the consensus of $85.35 million.

Turning Point Brands, Inc. sees FY2020 revenue of $338-353 million, versus the consensus of $346 million.

We are pleased that our first quarter results were above our expectations. We are also encouraged by government measures to support consumers and the economy. In-light of the changing landscape, we feel it is prudent to maintain our full year net sales and Adjusted EBITDA guidance provided February 26, 2020 until there is some clarity on the duration and the impact of the government reaction to the pandemic.

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 now projected to be $2.8 million (down from previous guidance of $3.3 million).

The company continues to expect to spend a total of $15 to $18 million (inclusive of $2.2 million spent in 2019 and $5.9 million in the first quarter of 2020) on the PMTA process, with expenses heavily weighted towards the first half of 2020.

Cash interest expense is projected to be $11 to $12 million and GAAP interest expense includes $7 million of debt discount amortization equal to the fair value of the equity components over the expected life of the 2024 convertible notes.

The company now expects the 2020 effective income tax rate to be 22% to 24% (compared to previous guidance of 21 to 23%).

Capital expenditures for 2020 are anticipated to be approximately $4 to $6 million (up from $4 million previously) as we are currently evaluating accelerating certain capital expenditure projects due to temporary tax code incentives.

Net Sales for the second quarter 2020 are expected to be $81 to $87 million.

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

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