Turning Point Brands, Inc. (NYSE: TPB) reported Q3 EPS of $0.75, $0.17 better than the analyst estimate of $0.58. Revenue for the quarter came in at $104.2 million versus the consensus estimate of $91.86 million.

Third Quarter 2020

(Comparisons vs. same period year-ago)

• Net sales increased 7.6% to $104.2 million;
• Gross profit increased 12.8% to $48.3 million;
• Net income increased $1.5 million to $7.8 million despite PMTA costs incurred during the current quarter;
• Adjusted EBITDA increased 27.4% to $23.9 million (see Schedule A for a reconciliation to net income);
• Diluted EPS of $0.40 and Adjusted Diluted EPS of $0.75 as compared to $0.31 and $0.61 in the year-ago period, respectively (see Schedule B for a reconciliation to Diluted EPS);

“Streamlining and repositioning the business at the end of 2019 has paid dividends throughout 2020. Smokeless saw continued same store sales momentum in MST and newfound strength in loose leaf chewing tobacco. Smoking (Zig-Zag) saw its highest growth rate in recent history driven by product and channel growth initiatives behind rolling papers, the benefits of greater control of our MYO cigar wraps business after the Durfort transaction closed in the second quarter, and a burgeoning e-commerce presence. The NewGen segment navigated admirably through significant market disruption caused by the PMTA application deadline,” said Larry Wexler, President and CEO. “Overall, we are seeing ongoing benefits from re-shaping our business towards a more growth-oriented mindset and are able to raise our outlook once again for the remainder of the fiscal year.”

GUIDANCE:

Turning Point Brands, Inc. sees FY2020 revenue of $395-401 million, versus the consensus of $378.3 million.

Taking into account the strength we have seen thus far this year and expected near-term volatility within our NewGen segment, we revise our guidance provided on July 28, 2020 as follows:

Absent any further acquisitions, the company projects 2020 net sales to be $395 to $401 million (up from previous guidance of $370 to $382 million). We project 2020 Adjusted EBITDA of $87 million to $90 million (up from previous guidance of $78 to $83 million).

Stock compensation and non-cash incentive expense in 2020 is projected to be $2.8 million.

The company spent a total of $16.6 million on the PMTA process, in-line with previous guidance of $16 to $18 million. This is inclusive of $2.2 million spent in 2019 and $14.4 million in the first three quarters 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%.

Capital expenditures for 2020 are anticipated to be approximately $6 million (up from previous guidance of $4 to $6 million) as we have accelerated certain capital expenditure projects due to temporary tax code incentives.

Net Sales for the fourth quarter of 2020 are expected to be $95 to $101 million.

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