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01/10 16:25
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a strong financial performance with a 28% revenue increase and a significant rise in modern oral nicotine pouch sales. Despite some declines, gross margins improved, and strategic investments in sales and marketing are evident. The Q&A section reveals positive feedback on brand reception, ongoing expansion efforts, and effective management of tariff impacts. While there are uncertainties in the brick-and-mortar rollout and some evasive responses, the overall sentiment is positive, supported by optimistic guidance and strategic initiatives. The lack of market cap data suggests a moderate positive stock price reaction.
Revenue Revenue increased 25% to $116.6 million for the quarter, including $30.1 million in Modern Oral revenue. Modern Oral now accounts for 26% of our total revenue.
Adjusted EBITDA Adjusted EBITDA increased 15% to $30.5 million for the quarter. The increase reflects significant sales and marketing investments.
Stoker's Revenue Stoker's revenue increased 63% to about $70 million, reflecting a 3% decline in looseleaf and a 4% increase in MST.
Modern Oral Nicotine Pouch Sales Modern Oral nicotine pouch sales, FRE and ALP, were up nearly 8x year-over-year, achieving total revenue of $30.1 million, a 35% sequential increase. White pouch accounts for 26% of total revenue mix.
Zig-Zag Sales Zig-Zag sales decreased 6.9% year-over-year to about $47 million for the quarter. Gross margins declined 410 basis points, driven primarily by product mix due to an accelerated exit from the CLIPPER business.
Gross Margin Gross margin was 57.1%, which was up 310 basis points year-over-year and 110 basis points sequentially. The change in margin is mix driven.
SG&A Expenses Reported SG&A was $40.3 million for the quarter, up $3.9 million sequentially. The increase is driven by continued investments in sales and marketing as well as temporarily elevated outbound freight charges.
Free Cash Flow Free cash flow for the second quarter was $11.2 million.
CapEx CapEx for the quarter was $3.9 million.
Modern Oral nicotine pouch sales: Revenue increased 8x year-over-year to $30.1 million, accounting for 26% of total revenue. White pouch sales grew 35% sequentially. Full-year sales guidance increased to $100-$110 million from $80-$95 million.
Zig-Zag product introductions: Launched hemp cones and pop tubes, with solid traction during the introductory period.
Nicotine pouch market positioning: ALP is now one of the top D2C pouch brands in America and is expected to expand into retail sooner than anticipated. The nicotine pouch market is projected to reach $10 billion by the end of the decade, with the company targeting a double-digit market share.
Distribution expansion: Expanded distribution and product assortment with notable chain partners, supported by an increased sales force.
Sales force expansion: Doubling the size of the 2024 sales force by the end of 2026, ahead of schedule.
Strategic marketing campaigns: Launched a long-term partnership with Professional Bull Riders (PBR) to enhance brand awareness and consumer loyalty.
Focus on Modern Oral category: Reallocating resources to prioritize white pouch products while maintaining cash flow from heritage brands.
Exit from CLIPPER business: Accelerated exit from CLIPPER business and deemphasis of the cigar category to focus on higher-margin products.
Zig-Zag Sales Decline: Zig-Zag sales decreased 6.9% year-over-year to $47 million for the quarter, with gross margins declining 410 basis points due to product mix and the accelerated exit from the CLIPPER business.
Cigar and CLIPPER Segment Headwinds: The company anticipates second-half headwinds in the Zig-Zag segment from cigars and CLIPPER lighters due to tariff impacts and reallocation of resources to nicotine pouch initiatives.
Tariff and Currency Impacts: Guidance reflects increased investment in go-to-market plans as well as tariff and currency-related impacts, which could affect financial performance.
Freight Charges: Temporarily elevated outbound freight charges contributed to increased SG&A expenses, impacting profitability.
Modern Oral Investments: Significant investments in Modern Oral nicotine pouch initiatives, including sales force expansion and U.S. manufacturing, could strain resources and financials in the short term.
Competitive Market Dynamics: The nicotine pouch market is expected to consolidate to 5-6 widely distributed brands, increasing competitive pressures.
Product Mix Challenges: Gross margin changes were mix-driven, with some segments like Zig-Zag experiencing declines due to lower-margin product exits.
Adjusted EBITDA Guidance: Increased to a range of $110 million to $114 million, up from $108 million to $113 million, inclusive of significant sales and marketing investments.
Nicotine Pouch Sales Guidance: Full year consolidated nicotine pouch sales guidance increased to a range of $100 million to $110 million, up from $80 million to $95 million.
Modern Oral Sales: Anticipated total Modern Oral sales range increased to $100 million to $110 million from the previous range of $80 million to $95 million.
Market Share Target for Nicotine Pouch Category: Long-term target of double-digit market share in the nicotine pouch category.
Sales Force Expansion: Goal to approximately double the size of the 2024 sales force by the end of 2026, with progress ahead of schedule.
Zig-Zag Segment Outlook: Anticipates second half headwinds due to the wind down of the CLIPPER business and deemphasis of the cigar category.
CapEx for 2025: Budgeted at $4 million to $5 million, exclusive of projects related to the Modern Oral business. Additional $3 million to $5 million expected for Modern Oral PMTAs.
Effective Income Tax Range: Expected to be 23% to 26% on a go-forward basis.
The selected topic was not discussed during the call.
The earnings call indicates positive sentiment with increased guidance for EBITDA and nicotine pouch sales. The Q&A section confirms a favorable revenue environment and strategic growth plans, such as sales force expansion and market share targets. Although there are some concerns, like headwinds in the Zig-Zag segment, the overall outlook remains optimistic with strong modern oral sales projections and strategic investments. The increased guidance and strategic initiatives suggest a likely positive stock price movement.
The company's earnings call highlights an increase in EBITDA guidance and nicotine pouch sales, indicating strong financial performance. The Q&A section reveals confidence in capacity expansion and strategic growth in Modern Oral products. Despite some margin pressures and negative free cash flow, the company's positive guidance and strategic investments in growth areas suggest a likely positive stock price reaction.
The earnings call presents a strong financial performance with a 28% revenue increase and a significant rise in modern oral nicotine pouch sales. Despite some declines, gross margins improved, and strategic investments in sales and marketing are evident. The Q&A section reveals positive feedback on brand reception, ongoing expansion efforts, and effective management of tariff impacts. While there are uncertainties in the brick-and-mortar rollout and some evasive responses, the overall sentiment is positive, supported by optimistic guidance and strategic initiatives. The lack of market cap data suggests a moderate positive stock price reaction.
The earnings call reveals mixed signals: strong revenue growth and positive modern oral segment performance, but declining gross margins and competitive pressures. The Q&A section highlighted management's reluctance to provide specifics, raising uncertainty. Despite strong financials, the absence of a shareholder return plan, potential tariff impacts, and supply chain challenges balance the positives. Overall, the sentiment remains neutral, with both positive and negative factors at play.
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