Turning Point Brands Announces Fourth Quarter and Full Year 2024 Results

• Q4 2024 Adjusted EBITDA of $26.2 million, up 5.3% over prior year
• Net Sales for Q4 2024 Increased 12.8% Year-Over-Year to $93.7 million
• FY 2024 Adjusted EBITDA of $104.5 million, up 12.0% over prior year
• FY 2025 guidance: Adjusted EBITDA of $108-113 million and Modern Oral sales of $60-80 million

Turning Point Brands, Inc. ("TPB" or "the Company") (NYSE:TPB), a manufacturer, marketer and distributor of branded consumer products, including alternative smoking accessories and consumables with active ingredients, today announced financial results for the fourth quarter and full year ended December 31, 2024.

Q4 2024 vs. Q4 2023

• Total consolidated net sales increased 12.8% to $93.7 million
  • Zig-Zag Product Segment net sales increased 1.8%
  • Stoker's Product Segment net sales increased 25.8%
• Gross profit increased 10.6% to $52.4 million
• Adjusted EBITDA increased 5.3% to $26.2 million (see Schedule A for a reconciliation to net income)
• Net income decreased 76.1% to $2.4 million compared to $10.1 million in the year-ago period, driven primarily by a one-time loss from discontinued operations (CDS) of $7.3 million
• Adjusted net income increased 12.7% to $18.0 million (see Schedule B for a reconciliation to net income)
• Diluted EPS of $0.13 and Adjusted Diluted EPS of $0.98 compared to $0.53 and $0.82, respectively, in the same period one year ago (see Schedule B for a reconciliation to Diluted EPS)

FY 2024 vs. FY 2023

• Total consolidated net sales increased 11.0% to $360.7 million
  • Zig-Zag Product Segment net sales increased 6.6%
  • Stoker's Product Segment net sales increased 16.4%
• Gross profit increased 10.2% to $201.6 million
• Adjusted EBITDA increased 12.0% to $104.5 million (see Schedule A for a reconciliation to net income)
• Net income increased 3.5% to $39.8 million
• Adjusted net income increased 15.5% to $65.9 million (see Schedule B for a reconciliation to net income)
• Diluted EPS of $2.14 and Adjusted Diluted EPS of $3.49 compared to $2.01 and $2.93, respectively, in the same period one year ago (see Schedule B for a reconciliation to Diluted EPS)

Graham Purdy, President and CEO, commented, "We were pleased with our fourth quarter and full year 2024 results and the momentum we are seeing across the organization. We believe Zig-Zag remains on a sustainable growth trajectory with Stoker's MST continuing to grow market share. In Modern Oral, combined sales were $11.2 million for the quarter. FRE sales more than quadrupled versus year-ago and grew 26% sequentially, and we are excited by the successful launch of ALP during the quarter."

Zig-Zag Products Segment (49% of total net sales in the quarter)

For the fourth quarter, Zig-Zag Products net sales increased 1.8% to $45.9 million driven by solid performance in our US Papers & Wraps business, partially offset by Clipper. Excluding Clipper, Zig-Zag revenue was up 4.1%.

For the quarter, the Zig-Zag Products segment gross profit decreased 2.5% to $24.8 million. Gross margin declined 240 basis points to 54.1% driven primarily by product mix.

For the full year, Zig-Zag Products net sales increased 6.6% to $192.3 million driven by strong performance in our North American Papers & Wraps business and solid growth in cigars that was partially offset by declines in lighter sales.

For the full year, the Zig-Zag Products segment gross profit increased 5.5% to $106.6 million. Gross margin declined 60 basis points to 55.4% driven primarily by product mix.

Stoker's Products Segment (51% of total net sales in the quarter)

For the fourth quarter, Stoker's Products net sales increased 25.8% to $47.8 million, driven by strong growth in our combined Modern Oral sales, partially offset by low-single-digit declines in MST against a strong comp from Q4 2023. For the fourth quarter, total Stoker's Products segment volume increased 17.8%, while price / product mix increased 8.0%.

For the quarter, the Stoker's Products segment gross profit increased 26.0% to $27.6 million. Gross margin increased 10 basis points to 57.7%

For the full year, Stoker's Products net sales increased 16.4% to $168.3 million. The segment was driven by triple-digit growth off a low base for our combined Modern Oral business and mid-single-digit growth from MST partially offset by low-single-digit decline in loose-leaf chew. For the year, total Stoker's Products segment volume increased 6.8%, while price / product mix increased 9.6%.

For the full year, the Stoker's Products segment gross profit increased 16.0% to $95.0 million. Gross margin decreased 20 basis points to 56.4%

Performance Measures in the Fourth Quarter

Fourth quarter consolidated selling, general and administrative ("SG&A") expenses were $34.5 million compared to $27.1 million in the fourth quarter of 2023.

The fourth quarter SG&A included the following notable items:

• $0.5 million of FDA PMTA-related expenses for modern oral products compared to $1.0 million in the year-ago period
• $1.1 million of transaction related costs compared to less than $0.1 million in the year-ago period
• $2.9 million of corporate restructuring costs compared to $0.2 million in the year-ago period

Total gross debt as of December 31, 2024 was $248.6 million. Net debt (total gross debt less unrestricted cash) as of December 31, 2024 was $202.4 million. The Company ended the quarter with total liquidity of $103.6 million, comprised of $46.2 million in cash and $57.4 million of asset backed revolving credit facility capacity.

During the quarter, the Company re-purchased 21,072 shares of common stock at a cost of $0.9 million.

On January 2, 2025, the Company contributed 100% of its interest in South Beach Brands LLC, the subsidiary that owned and operated the Company's former Creative Distribution Solutions reportable segment, to General Wireless Operations, Inc., giving the Company a 49% ownership interest in the joint venture. This business is presented as discontinued operations in the exhibits below.

Last month, the Company issued $300 million of senior secured notes due 2032 (the "2032 Notes"), the proceeds of which were used to repay its $250 million of existing senior secured notes due 2026 with no pre-payment penalty. The Company is well within its previously disclosed net leverage range of 2 to 3 times and is comfortable with its liquidity position.

2025 Outlook

Management expects full-year 2025 adjusted EBITDA to be $108 to $113 million and projects combined Modern Oral sales of $60 to $80 million.

Earnings Conference Call

As previously disclosed, a conference call with the investment community to review TPB's financial results has been scheduled for 10:00 a.m. Eastern on Thursday, March 6, 2025. Investment community participants should dial in 10 minutes ahead of time using the toll-free number (800) 715-9871 (international participants should call (646) 307-1963) and follow the audio prompts after typing in the event ID: 6640134. A live listen-only webcast of the call will be available on the Events and Presentations section of the investor relations portion of the Company website (www.turningpointbrands.com). A replay of the webcast will be available on the site two hours following the call.

Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles in the United States (GAAP), this press release includes certain non-GAAP financial measures including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS and Adjusted Operating Income (Loss). A reconciliation of these non-GAAP financial measures accompanies this release.

About Turning Point Brands, Inc.

Turning Point Brands (NYSE:TPB) is a manufacturer, marketer and distributor of branded consumer products including alternative smoking accessories and consumables with active ingredients through its iconic Zig-Zag® and Stoker's® brands. TPB's products are available in more than 220,000 retail outlets in North America, and on sites such as www.zigzag.com. For the latest news and information about TPB and its brands, please visit www.turningpointbrands.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements may generally be identified by the use of words such as "anticipate," "believe," "expect," "intend," "plan" and "will" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. As a result, these statements are not guarantees of future performance and actual events may differ materially from those expressed in or suggested by the forward-looking statements. Any forward-looking statement made by TPB in this press release, its reports filed with the Securities and Exchange Commission (the "SEC") and other public statements made from time-to-time speak only as of the date made. New risks and uncertainties come up from time to time, and it is impossible for TPB to predict or identify all such events or how they may affect it. TPB has no obligation, and does not intend, to update any forward-looking statements after the date hereof, except as required by federal securities laws. Factors that could cause these differences include, but are not limited to those included it the Company's Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other reports filed by the Company with the SEC. These statements constitute the Company's cautionary statements under the Private Securities Litigation Reform Act of 1995.

Financial Statements Follow on Subsequent Pages

Non-GAAP Financial Measures

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss). We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) are used by management to compare our performance to that of prior periods for trend analyses and planning purposes and are presented to our board of directors. We believe that EBITDA, Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to business performance.

We define "EBITDA" as net income before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation, amortization. We define "Adjusted EBITDA" as net income before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation, amortization, other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define "Adjusted Net Income" as net income excluding items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define "Adjusted Diluted EPS" as diluted earnings per share excluding items that we do not consider ordinary course in our evaluation of ongoing operating performance. We define "Adjusted Operating Income (Loss)" as operating income (loss) excluding other non-cash items and other items that we do not consider ordinary course in our evaluation of ongoing operating performance.

Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. EBITDA, Adjusted Net Income, Adjusted EBITDA, Adjusted Diluted EPS, and Adjusted Operating Income (Loss) exclude significant expenses that are required by U.S. GAAP to be recorded in our financial statements and is subject to inherent limitations. In addition, other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure.

In accordance with SEC rules, we have provided, in the supplemental information attached, a reconciliation of the non-GAAP measures to the next directly comparable GAAP measures.

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Investor Contacts

Turning Point Brands, Inc.

[email protected]