Turning Point Brands, Inc. (NYSE: TPB) reported Q2 EPS of $0.71, $0.26 better than the analyst estimate of $0.45. Revenue for the quarter came in at $105 million versus the consensus estimate of $95.44 million.

Second Quarter 2020

(Comparisons vs. same period year-ago)

• Net sales increased 12.5% to $105.0 million;
• Gross profit increased 16.8% to $48.1 million;
• Net income decreased $4.0 million to $9.2 million, reflecting the inclusion of expensing PMTA costs incurred during the current quarter compared to the net gain related to a settlement from the V2 wind-down in the previous year’s quarter;
• Adjusted EBITDA increased 24.8% to $22.8 million (see Schedule A for a reconciliation to net income);
• Diluted EPS of $0.47 and Adjusted Diluted EPS of $0.71 as compared to $0.66 and $0.52 in the year-ago period, respectively (see Schedule B for a reconciliation to Diluted EPS);

“Our Smokeless segment saw high-teens growth driven by same store sales growth of Stoker’s MST along with accelerated secular consumer trade-down trends across the entire Smokeless category. Smoking grew despite the headwind of a COVID-related plant shutdown in MYO cigar wraps, which was more than offset by the ramp of our growth initiatives. Our NewGen segment delivered an extraordinary quarter as our B2C platform saw elevated sales levels from a consumer shift to online purchasing and our B2B platform gained share in the marketplace from internal initiatives and COVID-related marketplace disruptions,” said Larry Wexler, President and CEO. “This quarter saw favorable financial results even absent any temporary benefits, the acquisition of important strategic assets from Durfort Holdings, the completion of the SDI merger (closed July 16), and progress toward the filing of our premarket tobacco applications. Looking forward, TPB is well-positioned to further advance growth initiatives and new product introductions.”

GUIDANCE:

Turning Point Brands, Inc. sees Q3 2020 revenue of $90-95 million, versus the consensus of $95.44 million.

Turning Point Brands, Inc. sees FY2020 revenue of $370-382 million, versus the consensus of $360.96 million.

We are encouraged by our results thus far this year but are also balancing our optimism for the business with the uncertainty in the current environment and on-going government support for the consumer. With this framework, along with taking into account the temporary benefits during the second quarter and expected near-term volatility within our NewGen segment, we revise our guidance provided on April 28, 2020 as follows:

• Absent any further acquisitions, the company projects 2020 net sales to be $370 to $382 million (up from previous guidance of $338 to $353 million). We project 2020 Adjusted EBITDA of $78 million to $83 million (up from previous guidance 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 $2.8 million.
• The company now expects to spend a total of $16 to $18 million (up from previous guidance of $15 to $18 million) on the PMTA process. This is inclusive of $2.2 million spent in 2019 and $9.5 million in the first half of 2020.
• Cash interest expense is projected to be $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 expects the 2020 effective income tax rate to be 23% to 24% (up from previous guidance of 22% to 24%).
• Capital expenditures for 2020 are anticipated to be approximately $4 to $6 million as we are currently evaluating accelerating certain capital expenditure projects due to temporary tax code incentives.
• Net Sales for the third quarter 2020 are expected to be $90 to $95 million.

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