Turning Point Brands Inc (TPB) 2023 Q4 法說會逐字稿

(audio in progress)

（音訊進行中）

(Operator Instructions) Please note that this event is being recorded.

（操作員說明）請注意，該事件正在被記錄。

I would now like to turn the conference over to Louie Reformina, Chief Financial Officer. Please go ahead.

我現在想將會議交給財務長路易·雷弗納 (Louie Reformina)。請繼續。

Thank you. Good morning, everyone. This is Louie Reformina, Chief Financial Officer. Joining me are Turning Point Brands President and CEO, Graham Purdy; and Chief Revenue Officer, Summer Frein.

謝謝。大家，早安。我是財務長路易‧瑞維納 (Louie Reformina)。和我一起的還有 Turning Point Brands 總裁兼執行長 Graham Purdy；首席營收長薩默‧弗雷恩 (Summer Frein)。

This morning, we issued a news release covering our fourth-quarter results. This release is located in the IR section of our website, www.turningpointbrands.com. During this call, we will discuss our consolidated and segment operating results and provide our perspective on the operating environment and our progress against our strategic plan.

今天早上，我們發布了有關第四季度業績的新聞稿。此新聞稿位於我們網站 www.turningpointbrands.com 的 IR 部分。在這次電話會議中，我們將討論我們的合併和分部經營業績，並提供我們對經營環境的看法以及我們根據戰略計劃取得的進展。

As is customary, I direct your attention to the discussion of forward-looking and cautionary statements, today's press release and the risk factors in our filings with the SEC. On the call today, we will reference certain non-GAAP financial measures. These measures and reconciliations to GAAP can be found in today's earnings release, along with reasons why management believes that they provide useful information.

按照慣例，我請您注意有關前瞻性和警示性聲明、今天的新聞稿以及我們向 SEC 提交的文件中的風險因素的討論。在今天的電話會議上，我們將參考某些非公認會計準則財務指標。這些措施和對公認會計原則的調節可以在今天的收益報告中找到，以及管理層認為它們提供有用資訊的原因。

I will now turn the call over to our CEO, Graham Purdy.

我現在將把電話轉給我們的執行長格雷厄姆·珀迪。

Thanks, Louie. Good morning, everyone, and thank you for joining our call. Our fourth-quarter results were at the high end of our expectations and demonstrated continued progress against our plan. Adjusted EBITDA increased 7.5% to $24.8 million for the quarter, and we finished 2023 having generated $61.2 million of free cash flow. During Q4, Stoker's finished the year on a high note, posting extraordinary 18.6% revenue growth for the quarter. Zig-Zag was down 2.9% for the quarter due to the previously discussed discontinuation of an unprofitable product line in Canada.

謝謝，路易。大家早安，感謝您加入我們的通話。我們第四季度的業績達到了我們預期的最高水準，並表明我們的計劃持續取得進展。本季調整後 EBITDA 成長 7.5%，達到 2,480 萬美元，2023 年結束時，我們產生了 6,120 萬美元的自由現金流。第四季度，Stoker's 以高調結束了這一年，該季度的營收成長了 18.6%。由於先前討論的加拿大不獲利產品線的停產，Zig-Zag 本季下跌 2.9%。

We are pleased with the market share increases for Stoker's, which continues to be a steady growth engine with a long runway for volume growth and favorable pricing dynamics. That said, to be clear, while Stoker's continues to gain momentum, we do not believe 19% organic revenue growth for our legacy Stoker's products is sustainable over the long term.

我們對 Stoker's 市場份額的成長感到高興，該公司仍然是一個穩定的成長引擎，具有長期的銷售成長和有利的定價動態。也就是說，需要明確的是，雖然 Stoker's 繼續保持成長勢頭，但我們認為我們的傳統 Stoker's 產品 19% 的有機收入成長在長期內是不可持續的。

However, we do believe these, and greater levels of growth, are achievable for FRE, our modern oral or white pouch and nicotine product. This product will compete in the category that is trending towards $2 billion in manufacturer revenue and grew volume by over 50% last year per MSAi.

然而，我們確實相信 FRE（我們的現代口服或白色袋裝尼古丁產品）可以實現這些以及更高水平的成長。該產品將在製造商收入趨向於 20 億美元的類別中競爭，根據 MSAi，去年銷量增長了 50% 以上。

Up until recently, we are focused on optimizing our supply chain to ensure consistent product quality, analyzing consumer feedback and testing online and in-store marketing and merchandising programs to best position us for a successful rollout of FRE. We are now focusing on prudently ramping up our sales and distribution efforts with the goal of achieving sustainable, consistent growth.

直到最近，我們一直致力於優化供應鏈以確保一致的產品品質、分析消費者反饋以及測試線上和店內行銷和銷售計劃，以便為成功推出 FRE 做好準備。我們現在專注於謹慎地加大銷售和分銷力度，以實現可持續、持續的成長。

Our strategy for this exciting category focuses on leveraging our sales and distribution expertise to profitably expand FRE's present and store count over an extended time frame similar to what we have achieved with Stoker's MST. FRE presents a significant opportunity for the company given its differentiated offering. Like Stoker's MST, we don't need outsized share in the market to have a significant impact on our overall bottom line. We look forward to providing updates on this exciting new product in quarters to come.

我們對這個令人興奮的類別的策略重點是利用我們的銷售和分銷專業知識，在較長的時間內以盈利方式擴大 FRE 的現有和商店數量，類似於我們透過 Stoker 的 MST 取得的成就。鑑於其差異化的產品，FRE 為該公司帶來了重大機會。與 Stoker 的 MST 一樣，我們不需要在市場上佔據過大的份額就能對我們的整體利潤產生重大影響。我們期待在未來幾季提供這款令人興奮的新產品的更新。

Moving on to Zig-Zag. While we faced a headwind from previously discussed inventory destocking throughout much of the year, we believe the reduction in trade inventory is behind us, setting the backdrop for return to growth in 2024. We were pleased that both our Zig-Zag papers in the traditional channel and alternative channel business posted double-digit growth.

繼續進行鋸齒形調整。儘管我們在今年的大部分時間裡都面臨著先前討論的庫存去庫存的阻力，但我們相信貿易庫存的減少已經成為過去，為 2024 年恢復增長奠定了背景。我們很高興傳統通路和另類通路業務的 Zig-Zag 論文均實現了兩位數的成長。

We are encouraged by our wholesale customers and in consumers' response to our expanding and more complete portfolio, fueled by many new products launched over the past few years. In Q4, we launched combo books as well as our first seasonal vintage apparel line. As you may have noticed, we leaned into our direct relationships with our consumers using several social media tactics to engage our growing audience.

在過去幾年推出的許多新產品的推動下，我們的批發客戶和消費者對我們不斷擴大和更完整的產品組合的反應令我們感到鼓舞。在第四季度，我們推出了組合書以及我們的第一個季節性復古服裝系列。您可能已經注意到，我們使用多種社交媒體策略來建立與消費者的直接關係，以吸引不斷增長的受眾。

As mentioned, we continue to see strong demand from consumers in the alternative channel as legalization and further normalization of cannabis is expanding the alternative store footprint, dispensaries, head shops, smoke shops, which cater to a growing accessory market. Our alternative B2B business saw continued momentum with Zig-Zag sales growing by over 30% during the quarter driven by an acceleration in premium paper sales in the second half of 2023.

如前所述，我們繼續看到消費者對替代管道的強勁需求，因為大麻合法化和進一步正常化正在擴大替代商店、藥房、總店、菸店的足跡，以滿足不斷增長的配件市場。我們的另類 B2B 業務持續保持成長勢頭，在 2023 年下半年優質紙張銷售加速的推動下，本季 Zig-Zag 銷售額成長了 30% 以上。

Our strategy in the alternative channel is to be a valued partner to the growing distributor, retailer, and manufacturing networks serving this ecosystem. In addition to growing traffic, alternative stores are attractive because they offer the Zig-Zag portfolio more valuable shelf space and merchandising real estate than traditional C-stores. We try to be a solution provider to various customers throughout the ecosystem. And in doing so, we're able to build brand awareness and consumer trial to ensure we satisfy this growing consumer base.

我們在替代管道中的策略是成為服務於該生態系統的不斷增長的分銷商、零售商和製造網絡的重要合作夥伴。除了不斷增長的客流量之外，另類商店也很有吸引力，因為它們為 Zig-Zag 組合提供比傳統便利商店更有價值的貨架空間和商品銷售空間。我們努力成為整個生態系統中各種客戶的解決方案提供者。透過這樣做，我們能夠建立品牌知名度和消費者試用，以確保我們滿足這個不斷成長的消費者群。

As discussed in the past, our growth in the alternative market has been driven by two drivers: one, gaining new customers across the retail, distributor, and manufacturing landscape; and two, increasing order sizes to both existing and new customers as we expand our portfolio. Cross-selling CLIPPER lighters is an example of that. Both drivers continue to be healthy.

如同過去所討論的，我們在另類市場的成長是由兩個驅動因素推動的：一是在零售、分銷和製造領域獲得新客戶；二是在零售、分銷和製造領域獲得新客戶。第二，隨著我們擴大產品組合，增加現有和新客戶的訂單規模。交叉銷售 CLIPPER 打火機就是一個例子。兩名司機仍然健康。

Lastly, in 2023, we were pleased to close on our ABL Facility, which, along with the cash we have on hand, gives us ample liquidity to address our convertible debt maturity later this year.

最後，我們很高興在 2023 年完成 ABL 融資，連同我們手頭上的現金，為我們提供了充足的流動性，以解決今年稍後到期的可轉換債務問題。

With that, let me hand the call over to Summer to walk through progress and the results of several of our specific go-to-market initiatives.

接下來，讓我將電話轉交給薩默，介紹我們幾個具體的市場推廣計畫的進度和成果。

Thank you, Graham. Throughout Q4, we continue to make progress against our road map of furthering Zig-Zag's position as a lifestyle brand. Our focus on growing Zig-Zag's portfolio and the alternative channel while increasing the brand ubiquity remains a core tenet of that plan.

謝謝你，格雷厄姆。在整個第四季度，我們繼續在鞏固 Zig-Zag 作為生活風格品牌地位的路線圖上取得進展。我們專注於發展 Zig-Zag 的產品組合和替代管道，同時提高品牌知名度，仍然是該計劃的核心宗旨。

In Q4, we continued building a product assortment that aligns with market demand. In early December, at MJBizCon, we launched our new Zig-Zag combo booklet, a convenient package combining both papers and tips available in several varieties of our paper assortment. Since its launch, our team is ahead of plan and gaining valuable shelf space. In 2024 and beyond, you should expect us to continue to launch new products that cater to this rapidly evolving consumer.

第四季度，我們持續建立符合市場需求的產品組合。12 月初，在 MJBizCon 上，我們推出了新的 Zig-Zag 組合小冊子，這是一種方便的包裝，結合了我們多種紙張品種中的紙張和提示。自推出以來，我們的團隊提前完成了規劃並獲得了寶貴的貨架空間。在 2024 年及以後，我們將繼續推出新產品來滿足這個快速發展的消費者的需求。

We also launched Zig-Zag's first seasonal apparel collection, the vintage collection, which garnered the attention of the fashion and streetwear community with two of the largest culture publications, Complex and Hypebeast covering the launch. The vintage collection paid homage to Zig-Zag's century long influence in the smoking world by blending style, heritage, and culture. 2024 marks the 145th anniversary of the brand and launching the vintage collection is just the first of many moments will bring to consumers and retail to celebrate this remarkable milestone.

我們還推出了 Zig-Zag 的首個季節性服裝系列——復古系列，該系列吸引了時尚和街頭服飾界的關注，兩家最大的文化出版物 Complex 和 Hypebeast 對此次發布進行了報導。復古系列透過融合風格、傳統和文化，向 Zig-Zag 在吸煙界長達一個世紀的影響力致敬。 2024 年是品牌成立 145 週年，推出復古系列只是消費者和零售業慶祝這一非凡里程碑的眾多時刻的開始。

Furthermore, we continued to develop our event and partnership strategy to integrate Zig-Zag into music, entertainment, and other creative communities, including recent collaborations with major record labels.

此外，我們繼續制定活動和合作夥伴策略，將 Zig-Zag 融入音樂、娛樂和其他創意社區，包括最近與主要唱片公司的合作。

Leading into 2024, we hosted Grammy events within the Afrobeat community in partnership with Roc Nation, with the famous DJ collective selection and five-time Grammy award-winning producer, D'Mile, who added another Grammy at the ceremony for producer of the year.

進入2024 年，我們與Roc Nation 合作，在Afrobeat 社區內舉辦了格萊美活動，並邀請了著名DJ 集體選拔者和五次格萊美獲獎製作人D'Mile，他在年度製作人頒獎典禮上又增添了一位葛萊美獎得主。

Throughout Q4, we continued increasing store penetration for CLIPPER lighters and capitalizing on the synergies between CLIPPER and Zig-Zag. We look forward to continuing to provide updates that showcase the momentum and efforts that support Zig-Zag's growth.

在整個第四季度，我們繼續提高 CLIPPER 打火機的商店滲透率，並利用 CLIPPER 和 Zig-Zag 之間的協同效應。我們期待繼續提供更新，展示支持 Zig-Zag 成長的勢頭和努力。

Moving to Stoker's. Graham noted the success we had for the segment. The strength was driven by another strong quarter of share gains for both Stoker's MST and loose leaf. With its product quality and value proposition, continuing to resonate with consumers, we expect that trend to continue.

搬到斯托克家。格雷厄姆指出了我們在該領域的成功。這一強勁勢頭是由 Stoker's MST 和活頁紙又一個季度的強勁份額增長推動的。憑藉其產品品質和價值主張，繼續與消費者產生共鳴，我們預計這一趨勢將持續下去。

While a small contributor during the quarter, we are excited about the broader rollout of our FRE white nicotine pouch product. We are in the midst of our initial push on FRE in both brick-and-mortar stores and digital marketplaces, both our own and other parties websites. The receptivity and engagement from our trade partners and with consumers continue to reinforce that our product quality, moisture content, pouch size, and differentiated nicotine offerings are leading to positive consumer sentiment.

雖然我們在本季度的貢獻很小，但我們對 FRE 白色尼古丁袋產品的更廣泛推廣感到興奮。我們正在實體店和數位市場、我們自己的網站和其他方的網站上初步推廣 FRE。我們的貿易夥伴和消費者的接受度和參與度不斷增強，我們的產品品質、水分含量、袋裝尺寸和差異化尼古丁產品正在帶來正面的消費者情緒。

In summary, we continue building our brands for the long term, executing against the plan we've established, and growing our business in retail and with our consumers. Our efforts are focusing on maximizing the value of our world-class brands and strengthening our extensive distribution capabilities.

總而言之，我們將繼續長期打造我們的品牌，執行我們已製定的計劃，並發展我們的零售業務以及與消費者的業務。我們的努力重點是最大化我們世界級品牌的價值並加強我們廣泛的分銷能力。

Let me now turn the call back over to Louie to go through our results.

現在讓我將電話轉回給路易，以查看我們的結果。

Thank you, Summer. Starting with our consolidated quarterly results. Q4 sales were down 6.1% to $97.1 million. Gross margin was up 410 basis points to 52.0% due to segment and product mix. Adjusted EBITDA was up 7.5% to $24.8 million.

謝謝你，夏天。從我們的綜合季度業績開始。第四季銷售額下降 6.1% 至 9,710 萬美元。由於細分市場和產品組合的原因，毛利率增加了 410 個基點，達到 52.0%。調整後 EBITDA 成長 7.5%，達到 2,480 萬美元。

Going to the segment performance. Zig-Zag sales decreased 2.9% year over year to $45.1 million due to discontinuation of an unprofitable product line in Canada that impacted sales by $1.4 million. Our US papers and wraps business was stable with double-digit growth in our B2B alternative sales business. Our Canadian and other smoking accessories categories saw declines during the quarter due to the discontinuation of the low-margin third-party product line.

進入分段表演。Zig-Zag 銷售額年減 2.9% 至 4,510 萬美元，原因是加拿大一條不獲利的產品線停產，影響銷售額 140 萬美元。我們的美國紙張和包裝紙業務穩定，B2B 替代銷售業務將達到兩位數成長。由於低利潤的第三方產品線的停產，我們的加拿大和其他吸煙配件類別在本季度出現下滑。

Gross margin increased 100 basis points to 56.5% during the quarter, driven primarily by product mix, including the discontinuation of the low-margin product line. Stoker's products net sales increased 18.6% to $38.0 million in the quarter with a 14.2% volume increase and 4.4% price mix increase. MST, Chew and FRE, all delivered strong growth during the quarter. Net sales for the MST portfolio grew double digit.

本季毛利率成長 100 個基點，達到 56.5%，主要受到產品組合的推動，包括低利潤產品線的停產。本季 Stoker 產品淨銷售額成長 18.6%，達到 3,800 萬美元，銷售成長 14.2%，價格組合成長 4.4%。MST、Chew 和 FRE 在本季度均實現了強勁成長。MST 產品組合的淨銷售額成長了兩位數。

Stoker's retail shipment pounds were up despite the category being down 5.6%, with share growing 50 basis points year over year to 7.1% during the second quarter, according to MSAi. MST share in store selling was up 40 basis points year over year to 10.7% with Stoker's now in stores representing 67% of industry volumes, which still provides a long run rate for growth. We also had strong growth in our international export business.

根據 MSAi 的數據，儘管 Stoker 的零售出貨量下降了 5.6%，但第二季的零售出貨量年增了 50 個基點，達到 7.1%。MST 在商店銷售中的份額同比增長 40 個基點，達到 10.7%，目前 Stoker's 的商店銷售量佔行業銷量的 67%，這仍然提供了長期的增長速度。我們的國際出口業務也強勁成長。

Chew sales were up high single-digits from the previous year. Stoker's Chew was the number one chewing brand in the quarter, gaining 220 basis points of share to 31.0% share according to MSAi. Overall TPB loose leaf retail shipment pounds were up despite the category being down 2.2%. Category performance was driven by a larger decline in premium loose leaf with TPB lines benefiting from its value positioning and continuing consumer trade out.

咀嚼食品的銷售額比上年增長了高個位數。根據 MSAi 的數據，Stoker's Chew 是本季排名第一的咀嚼品牌，市佔率成長了 220 個基點，達到 31.0%。儘管該類別下降了 2.2%，但 TPB 活頁零售總體出貨量仍有所增加（磅）。品類表現受到優質活頁大幅下降的推動，TPB 系列受益於其價值定位和持續的消費者交易。

Our FRE sales more than doubled off a low base as we started a broader expansion of the product in 2024. Gross margin increased 380 basis points to 57.6% primarily due to MST pricing. CDS sales were $14.1 million. Gross margin was 22.4%.

隨著我們在 2024 年開始更廣泛地擴展該產品，我們的 FRE 銷售額在較低基數的基礎上增長了一倍多。毛利率成長 380 個基點至 57.6%，主要得益於 MST 定價。CDS 銷售額為 1,410 萬美元。毛利率為22.4%。

Moving to our balance sheet. After generating $61 million of free cash flow during the year, we ended the quarter with $117.9 million of cash on the balance sheet. And as of today, we have sufficient cash to address the maturity of our remaining $118.5 million convertible notes due in July 2024. With our projected free cash flow generation this year, we will be able to stay within our net and gross leverage target range of 2.5 times to 3.5 times after retiring our convert this year while having the flexibility for future capital deployment.

轉向我們的資產負債表。在全年產生 6,100 萬美元的自由現金流後，本季末我們的資產負債表上有 1.179 億美元的現金。截至今天，我們有足夠的現金來解決 2024 年 7 月到期的剩餘 1.185 億美元可轉換票據的到期問題。根據我們預計今年產生的自由現金流，在今年退出轉換後，我們將能夠保持在 2.5 倍至 3.5 倍的淨槓桿和總槓桿目標範圍內，同時為未來的資本部署提供靈活性。

On to guidance. At this point, we expect consolidated adjusted EBITDA of $95 million to $100 million. The guidance excludes contribution from our CDS business which contributed a little over $2 million of EBITDA in fiscal year 2023. Other projections include effective income tax rate of 24% to 26%. We expect CapEx to be approximately $9 million to $11 million this year compared to $5.7 million in the previous year, including $6.5 million of payments related to an automation project that was pushed out from 2023 to 2024.

繼續指導。目前，我們預計綜合調整後 EBITDA 為 9,500 萬至 1 億美元。該指引不包括我們的 CDS 業務的貢獻，該業務在 2023 財年貢獻了略高於 200 萬美元的 EBITDA。其他預測包括有效所得稅率為 24% 至 26%。我們預計今年的資本支出約為 900 萬至 1,100 萬美元，而上一年為 570 萬美元，其中包括與 2023 年至 2024 年推遲的自動化項目相關的 650 萬美元付款。

We also expect to spend $6 million to $9 million in capitalized software implementation costs related to the ERP and CRM implementation after spending a little over $6 million last year. The first stage of the CRM is now live, and we expect the ERP to go live in the first half of 2024. We currently expect to spend approximately $4 million for the full year to supplement our PMTAs related to our modern oral products, which remain under review by the FDA.

我們也預計在與 ERP 和 CRM 實施相關的資本化軟體實施成本上花費 600 萬至 900 萬美元，而去年的支出略高於 600 萬美元。CRM第一階段現已上線，我們預計ERP將於2024年上半年上線。目前，我們預計全年支出約 400 萬美元，以補充與現代口腔產品相關的 PMTA，該產品仍在接受 FDA 審查。

Now let me turn it back to Graham.

現在讓我把話題轉回葛拉漢身上。

Overall, we saw impressive momentum for Stoker's MST, along with the progress in the alternative channel in support of Zig-Zag. We're also very excited about FRE. Thank you for participating in the call today. And with that, I'd like to open the call for questions.

總體而言，我們看到了 Stoker 的 MST 的強勁勢頭，以及支援 Zig-Zag 的替代管道的進展。我們對 FRE 也感到非常興奮。感謝您參加今天的電話會議。接下來，我想開始提問。

(Operator Instructions) Scott Fortune, Roth MKM.

（操作員說明）Scott Fortune，Roth MKM。

Yeah, good morning and thank you for the question. Congratulations on continued penetration into the alternative smoke shop channel and the progress continues there. Are you -- if we look at the channel, are you displacing competitors or look at it as continued kind of gradual market penetration within that channel? And then is there a promotional activity you have to do to kind of initially entry that channel to gain that share? If you can really just talk about the promotional activity in that channel, too, as you continue to build that out.

是的，早安，謝謝你的提問。恭喜您繼續滲透到替代菸店管道，並且進展仍在繼續。如果我們審視該通路，您是否正在取代競爭對手，或將其視為該通路內持續逐步的市場滲透？那麼，您是否必須進行促銷活動才能首先進入該管道以獲得該份額？如果您真的也可以談論該管道中的促銷活動，那麼您將繼續建立該管道。

Okay. Sure. This is Summer. Thanks for the question. I heard you first ask about are we displacing competitors and then ask about our promotional strategy as we're growing in the alt channel. Look, our penetration into the alternative channel is something we continue to be encouraged by.

好的。當然。這是夏天。謝謝你的提問。我聽說您首先詢問我們是否正在取代競爭對手，然後詢問我們在替代管道中發展時的促銷策略。看，我們對替代管道的滲透是我們繼續受到鼓勵的事情。

Primarily, we're focused on expanding distribution and gaining shelf space. So naturally that comes at the expense of taking space of some competitors, but for us, we're really focused on just gaining shelf space and continuing to grow in that channel given the TAM that we see and the opportunity ahead of us. Unfortunately, because of the strong brand equity that Zig-Zag has, we are not over-promotionalizing in that space and are quite encouraged by our pricing strategy thus far.

首先，我們專注於擴大分銷和獲得貨架空間。當然，這是以佔用一些競爭對手的空間為代價的，但對於我們來說，考慮到我們看到的 TAM 和我們面前的機會，我們真正專注於獲得貨架空間並繼續在該渠道中增長。不幸的是，由於 Zig-Zag 擁有強大的品牌資產，我們並沒有在該領域進行過度促銷，並且迄今為止我們的定價策略讓我們深受鼓舞。

I appreciate the color. And then following up on that on FRE. And obviously, you have differentiated size pouch and nicotine offering from there that continues to expand as you put more sales and support there. But what are you seeing? Are you seeing anything from the competitive side moving up into the FRE's offering nicotine wise? Or how do you see that playing out as we look out into '24 and drive that growth going forward here?

我很欣賞它的顏色。然後在 FRE 上跟進。顯然，隨著您在那裡投入更多的銷售和支持，您可以從那裡提供不同尺寸的袋和尼古丁產品，並繼續擴大。但你看到了什麼？您是否認為 FRE 的尼古丁供應方面有任何競爭方面的進展？或者，當我們展望 24 年並推動這裡的成長時，您如何看待這種情況？

Yeah, sure. So as you noted, one of the things that makes FRE so fantastic is its differentiated nicotine positioning in the market. And because of the loaded dynamic of the nicotine space, we aren't seeing a ton of competitive activity, although I don't think that's necessarily a forever situation because where consumers are gravitating, certainly, competitors will see that, but we're excited to get into the market and continue to expand and capitalize on our point of differentiation at this point.

好，當然。正如您所指出的，FRE 如此出色的原因之一是其在市場上的差異化尼古丁定位。由於尼古丁空間的負載動態，我們沒有看到大量的競爭活動，儘管我認為這不一定是永遠的情況，因為在消費者受到吸引的地方，競爭對手當然會看到這一點，但我們很高興進入市場並繼續擴大和利用我們目前的差異化優勢。

Perfect. And the last one follow-up for there. Obviously, you're ramping the FRE product and the strong trends there similar opportunity as you saw in Stoker's over time as you ramped up that product. Just step us through the steady incremental gains you're seeing and when -- timing of the cadence and when this becomes more meaningful throughout the '24 and looking '25 and beyond here for FRE. Just step us through that cadence and the size opportunity as that grows here.

完美的。以及那裡的最後一個後續行動。顯然，您正在增加 FRE 產品，隨著時間的推移，您在 Stoker's 中看到的機會與您在增加該產品時看到的強勁趨勢類似。只需向我們介紹一下您所看到的穩定增量收益以及何時——節奏的時機，以及何時這在整個 24 世紀以及 25 世紀及以後對 FRE 變得更有意義。請引導我們了解這種節奏以及這裡成長的機會規模。

Yeah. So as I think were noted in the opening remarks, we continue to see that category grow significantly over the past several years and as we anticipate over the years to come. We see it as over a $2 billion industry now and so very similar to our Stoker's strategy, even a high single-digit share in that growing market is really significant to our business. And so we're focused on prudent steady growth quarter over quarter. And as we've rolled out this quarter, that's what we're on track to do. We continue to see that steady growth. And that was our success story for Stoker's as you noted. So following that same playbook, I think will go really well for us.

是的。因此，正如我在開場白中指出的那樣，我們繼續看到該類別在過去幾年中以及我們在未來幾年中的預期顯著增長。我們認為它現在是一個價值超過 20 億美元的行業，與我們的 Stoker 戰略非常相似，即使在這個不斷增長的市場中佔據高個位數份額，對我們的業務也確實很重要。因此，我們專注於逐季審慎穩定的成長。正如我們本季推出的那樣，這就是我們正在做的事情。我們繼續看到這種穩定成長。正如您所指出的，這就是我們斯托克的成功故事。因此，遵循同樣的策略，我認為對我們來說會非常順利。

Thanks. That's helpful. Appreciate the detail. I'll just back in the queue.

謝謝。這很有幫助。欣賞細節。我會回到隊列中。

Thanks for the question.

謝謝你的提問。

Michael Legg, Benchmark.

邁克爾·萊格，基準。

Thanks. Good morning, guys. Great quarter. I wanted to dig down a little on the FRE. What's your pricing strategy there first?

謝謝。早上好傢伙。很棒的季度。我想深入了解一下 FRE。首先你的定價策略是什麼？

Sure. Our pricing strategy is pretty straightforward in the sense that we are focused on maintaining a profitable business and not over-promotionalizing that space.

當然。我們的定價策略非常簡單，因為我們專注於維持獲利業務，而不是過度促銷該領域。

Okay. But is it similar like Stoker's where there's premium product and then you have the more cost-effective product? Or are you going to compete with Zyn at that premium price point?

好的。但它是否像 Stoker's 一樣，有優質產品，然後有更具成本效益的產品？或者您打算在這個溢價點上與 Zyn 競爭嗎？

We will be and are competing at a premium price point. So a different approach than Stoker's given our brand positioning.

我們將並且正在以溢價競爭。因此，考慮到我們的品牌定位，我們採取了與斯托克不同的方法。

Okay. And then you mentioned high single-digit market share opportunity, $2 billion market, so we're talking $100 million-plus there. Can you talk what your long-term market share goal is and what your store ramp-up expectations are to get this distributed?

好的。然後你提到了高個位數的市場份額機會，20 億美元的市場，所以我們談論的是 1 億美元以上的市場。您能否談談您的長期市佔率目標是什麼，以及您對商店的成長期望是多少以實現這一目標？

Hey, Mike, it's Graham. Thanks for the question. Appreciate it. Look, I think we're -- number one, we're bullish on the category. Number two, we're incredibly bullish on our product, given the points of differentiation that someone had articulated. I think we're bullish on our success rate that we had with Stoker's and following that plan, which has been very methodical grind up over the last 10 years or so. I think our expectation would be that FRE would probably follow a similar path to that over time.

嘿，麥克，我是格雷厄姆。謝謝你的提問。欣賞它。看，我認為我們是──第一，我們看好這個類別。第二，考慮到有人闡述的差異點，我們對我們的產品非常樂觀。我認為我們對 Stoker's 的成功率持樂觀態度，並遵循該計劃，該計劃在過去 10 年左右的時間裡經過了非常有條理的磨練。我認為我們的預期是，隨著時間的推移，FRE 可能會遵循類似的路徑。

Okay. Great. And then you mentioned CLIPPER, can we talk about what you're seeing with CLIPPER and how that's going?

好的。偉大的。然後你提到了 CLIPPER，我們可以談談你對 CLIPPER 的看法以及進展如何嗎？

Yeah. We're very encouraged by the results. We're on plan relative to the store gains that we're making in the market. Summer's team has done a nice job of expanding out our social footprint and building some really nice marketing campaigns around the CLIPPER lighters. We're seeing a lot of energy in the alternative channel with the carry with Zig-Zag and CLIPPER in the alternative channel.

是的。我們對結果感到非常鼓舞。我們正在按照與我們在市場上取得的商店收益相關的計劃進行。Summer 的團隊在擴大我們的社交足跡方面做得很好，並圍繞 CLIPPER 打火機開展了一些非常好的行銷活動。我們在替代通道中看到了很多能量，在替代通道中使用 Zig-Zag 和 CLIPPER 進行進位。

So I'd say generally, we're excited about the results thus far. And it's a consumer product. It competes against a very large and well-organized and well-capitalized player in the market. But again, similar to the FRE story, we feel like over the long term, we can be very successful with the product.

所以我想說，總的來說，我們對迄今為止的結果感到興奮。它是一種消費品。它與市場上規模龐大、組織良好、資本充足的參與者競爭。但與 FRE 的故事類似，我們覺得從長遠來看，我們的產品可以取得非常成功。

Okay. Great. And then just the $4 million legal settlement, what was that?

好的。偉大的。然後只是 400 萬美元的法律和解，那是什麼？

We had a shareholder sentiment that was disclosed in the (inaudible) notice further disclosure (inaudible) today.

我們在今天的（聽不清楚）通知進一步揭露（聽不清楚）中揭露了股東的情緒。

Okay. We'll take a look then. And then the automation project, what is that for?

好的。那我們就看一下。然後是自動化項目，那是做什麼用的？

Yeah. So we disclosed the project before. We decided to do in stages and we're taking the first line and optimizing. So we're able to defer some of the payments for the future lines for later this year.

是的。所以我們之前就透露過這個項目。我們決定分階段進行，我們正在第一線進行最佳化。因此，我們可以將未來線路的部分付款推遲到今年稍後。

Okay. Thanks. And then just one last question on the debt. Do you plan on paying that off? Or do you plan on refinancing debt and continuing with the same leverage?

好的。謝謝。最後一個問題是關於債務的。你打算還清這筆錢嗎？或者您是否計劃對債務進行再融資並繼續使用相同的槓桿？

Yeah. At this point, we got the cash to be able to retire that in July. So that is our current plan.

是的。此時，我們已獲得現金，可以在 7 月退休。這就是我們目前的計劃。

Okay. Thanks. Great quarter. Congrats.

好的。謝謝。很棒的季度。恭喜。

Thanks, Mike.

謝謝，麥克。

Eric Des Lauriers, Craig-Hallum Capital Group.

艾瑞克‧德斯‧勞裡爾斯 (Eric Des Lauriers)，克雷格-哈勒姆資本集團。

Great. Thank you for taking my questions and offer my congrats on the quarter as well. So it's great to see momentum at both the alternative channel for Zig-Zag and with the new FRE products really gaining momentum here. Within the Zig-Zag alternative channel, you mentioned you're able to do a bit more brand building through that channel versus traditional C-store. Could you just expand on that?

偉大的。感謝您回答我的問題，並對本季表示祝賀。因此，很高興看到 Zig-Zag 的替代管道和新的 FRE 產品在這裡真正獲得動力。在 Zig-Zag 替代管道中，您提到與傳統的便利商店相比，您可以透過該管道進行更多的品牌建立。能擴展一下嗎？

And maybe just give us some examples of some of the ways that you are able to drive brand recognition, brand equity? Is this more shelf space? Is this also being able to sell apparel? Just kind of expand on that, that would be great. Thank you.

也許只是給我們一些例子，說明您能夠提高品牌知名度和品牌資產的一些方法？這樣可以有更多的貨架空間嗎？這也能賣服裝嗎？只要對此進行擴展，那就太好了。謝謝。

Yeah. Hey, Eric, thanks for the question. In terms of the difference in brand building in the alternative space versus the traditional C-store channel, it really is so much more wide open. If you think about walking into the variety of stores that are in the alternative channel, there's a lot more receptivity to the sorts of things that you can hang and position in store.

是的。嘿，艾瑞克，謝謝你的提問。就另類空間的品牌建立與傳統便利商店通路的差異而言，它確實更加開放。如果您考慮走進替代管道中的各種商店，您會發現對於可以在商店中懸掛和放置的各種物品有更多的接受度。

And certainly, you touched on apparel. These sorts of retailers are also open to selling different sorts of merchandise. And so it really opens a bag and the type of product expansion that we can capitalize on in those stores in a very different way than what is more traditional C-store space that has that more limited shelf space and opportunities to have those sorts of varieties of the products.

當然，您也談到了服裝。這些類型的零售商也願意銷售不同類型的商品。因此，它確實打開了一個袋子，我們可以在這些商店中以一種非常不同的方式利用產品擴展類型，這與傳統的便利商店空間相比，傳統的便利商店空間具有更有限的貨架空間和擁有這些品種的機會的產品。

Okay. That's helpful. And just in terms of the growth that you have been experiencing within the alternative channel, obviously, you guys have been going after this for some time here. Is there anything specific to call out to this sort of -- this growth that's been building over the past couple of quarters here?

好的。這很有幫助。就你們在替代管道中經歷的成長而言，顯然，你們已經在這裡追求這一點一段時間了。對於過去幾季以來的這種成長，有什麼特別值得關注的嗎？

You mentioned new products like has there been a matter of sort of finding products that this channel is looking for and that's been able -- that's helped you increase your share within that channel? Or is it all of the above with apparel and these other things as well. Just wondering if there's anything to call out as the driver to increasing this penetration within this channel?

您提到了新產品，例如是否存在找到該管道正在尋找的產品並且已經能夠實現的問題，這是否有助於您增加在該管道中的份額？或者，以上所有內容都與服裝和其他物品有關嗎？只是想知道是否有什麼可以作為提高該管道滲透率的驅動因素？

I mean no special call out. And as you mentioned, we've had pretty strong success in this market for a while. And so we expect to continue to say things, a lot of it is just increasing our penetration as Summer mentioned, within that channel and our product offering, our continued push and just the momentum that we're getting is leading to this growth that we're seeing. And we still think there's a lot of further opportunity for us to attack that market.

我的意思是沒有特別的呼籲。正如您所提到的，我們在這個市場上已經取得了相當大的成功一段時間了。因此，我們希望繼續說一些事情，正如夏天提到的那樣，很多只是增加我們的滲透率，在該渠道和我們的產品供應中，我們的持續推動以及我們所獲得的動力正在導致我們的增長正在看到。我們仍然認為我們還有很多進一步進攻該市場的機會。

Okay. Great. And then just a couple more quick ones from me. On CLIPPER, I know that we've been working through some heightened inventory levels at retail. Can you just give us an update on what you're seeing there?

好的。偉大的。然後是我的一些快速的。在 CLIPPER 上，我知道我們一直在努力解決零售庫存水準升高的問題。您能為我們介紹一下您在那裡看到的最新情況嗎？

Yeah. Look, I think the -- this goes across our business. We feel like the inventory overhang from last year are largely behind us at this point in time and that would include CLIPPER.

是的。聽著，我認為這貫穿我們的業務。我們覺得去年的庫存過剩現在基本上已經過去了，其中包括 CLIPPER。

Okay. Great. And then last one for me. So I understood this automation product -- excuse me, projects, you've been optimizing this first line here. So a bit of a push out in some of the CapEx dollar expectations here. Could you just help us with cadence, I think maybe it sounds like some of this might be pushed to maybe Q2, maybe second half? Just any kind of commentary on cadence would be helpful.

好的。偉大的。然後是我的最後一張。所以我理解了這個自動化產品——對不起，項目，你一直在這裡優化第一行。因此，這裡的一些資本支出美元預期有所下降。你能幫我們調整一下節奏嗎？我想這聽起來可能會被推遲到第二季度，也許是下半場？對節奏的任何評論都會有所幫助。

Yeah, listen, we expect to be through the majority of it in the first half of the year and continuing to ramp the production through the rest of the year on this project.

是的，聽著，我們預計將在今年上半年完成大部分工作，並在今年剩餘時間內繼續提高該專案的產量。

Okay. Thanks so much, guys. Congrats again.

好的。非常感謝，夥計們。再次恭喜。

Thanks, Eric.

謝謝，埃里克。

There are no further questions at this time. I will now turn the call back to Mr. Graham Purdy for closing remarks.

目前沒有其他問題。現在，我將把電話轉回給格雷厄姆·珀迪先生，讓其致閉幕詞。

Yeah. Thanks, operator. I appreciate everybody's time today. We're excited about the quarter, and we're excited to communicate with you here in a few months on results today. So thank you so much.

是的。謝謝，接線生。我很感謝大家今天抽出時間。我們對本季感到興奮，並且很高興能在幾個月後在這裡與您就今天的結果進行溝通。非常感謝。

Ladies and gentlemen, this concludes today's call. We thank you for your participation. You may now disconnect.

女士們、先生們，今天的電話會議到此結束。我們感謝您的參與。您現在可以斷開連線。