Turning Point Brands Inc (TPB) 2024 Q2 法說會逐字稿

Thank you for standing by. My name is Sully, and I will be your conference operator today. At this time, I would like to welcome everyone to the Turning Point Brands' second-quarter 2024 conference call. (Operator Instructions) Thank you.

謝謝你的支持。我叫 Sully，今天我將擔任你們的會議操作員。此時此刻，我謹歡迎大家參加 Turning Point Brands 的 2024 年第二季電話會議。（操作員說明）謝謝。

I would now like to turn the call over to Andrew Flynn. Please go ahead.

我現在想把電話轉給安德魯·弗林。請繼續。

Good morning, everyone. A short while ago, we issued a press release covering our Q2 results. This release is located in the IR section of our website at 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. As is customary, I direct your attention to the discussion of forward-looking and cautionary statements in today's press release and the risk factors in our filings with the Securities and Exchange Commission. On the call today, we will reference certain non-GAAP financial measures. These measures and reconciliations to GAAP are in today's earnings release, along with reasons why management believes they provide useful information.

大家早安。不久前，我們發布了一份有關第二季業績的新聞稿。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。按照慣例，我請您注意今天新聞稿中前瞻性和警示性聲明的討論以及我們向美國證券交易委員會提交的文件中的風險因素。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準則的調整已包含在今天的收益報告中，並附有管理層認為它們提供有用資訊的原因。

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

我現在將把電話轉給我們的執行長 Graham Purdy。

Thanks, Andrew. Good morning, everyone, and thank you for joining our call. Our consolidated first-quarter results were better than expected and demonstrated continued progress against our plan. Adjusted EBITDA increased 7% to just over $27 million for the quarter. Given our solid start to the year, we are increasing our guidance for projected 2024 adjusted EBITDA to $98 million to $102 million versus our prior guidance of $95 million to $100 million. Neither of these ranges include contributions from CDS.

謝謝，安德魯。大家早安，感謝您加入我們的通話。我們的第一季綜合業績優於預期，並表明我們的計劃持續取得進展。本季調整後 EBITDA 成長 7%，略高於 2,700 萬美元。鑑於今年開局良好，我們將預計 2024 年調整後 EBITDA 的指引上調至 9,800 萬至 1.02 億美元，而先前的指引為 9,500 萬至 1 億美元。這些範圍都不包括 CDS 的貢獻。

During the June quarter, Zig-Zag performed well with revenue up 8% to $50.5 million, driven by high single-digit growth in our North American papers and wrap businesses and a strong showing from our cigar business, which we've leaned into more heavily in 2024. We are excited about this business going forward. We remain committed to our alternative channel strategy of becoming a one-stop shop for our alt customers.

在6 月季度，Zig-Zag 表現良好，收入增長8%，達到5,050 萬美元，這得益於我們的北美紙張和包裝紙業務的高個位數增長以及我們的雪茄業務的強勁表現，我們已將更多精力投入雪茄業務。我們對這項業務的未來感到興奮。我們仍然致力於我們的替代通路策略，成為我們的替代客戶的一站式商店。

In particular, we continue to expand our SKU assortment to offer these customers a more diverse portfolio of products. The alt channel declined 3% in the quarter. But as a whole, in the first half, this business is up about 28%. The drop in sequential is attributable to the first quarter having a particularly robust trade show calendar and the timing of some large purchases in March. Nonetheless, we are having success not only winning new untapped alternative customers, but also with existing alt customers buying a more complete Zig-Zag portfolio. We've seen healthy increases in average order sizes while expanding Zig-Zag with more valuable shelf space and merchandising real estate within these stores. We continue to have a long runway in this emerging and fluid market.

特別是，我們繼續擴大我們的 SKU 種類，為這些客戶提供更多樣化的產品組合。另類通路本季下降了 3%。但整體來看，上半年，這項業務成長了約28%。環比下降的原因是第一季的貿易展覽日曆特別強勁以及三月份進行了一些大規模採購。儘管如此，我們不僅成功贏得了新的未開發的另類客戶，而且還吸引了現有的另類客戶購買更完整的之字形投資組合。我們看到平均訂單量健康成長，同時透過更有價值的貨架空間和這些商店內的商品空間擴大了之字形。在這個新興且流動的市場中，我們仍然有很長的路要走。

As you know, the alternative channel is consistently expanding as additional states embrace medical and recreational cannabis. In addition, alt retailers, including dispensaries, smoke shops, and head shops, are expanding product offerings to provide a better shopping experience for consumers. As such, we view the marketplaces for Zig-Zag products as converging in many ways, and we are seeing evidence of traditional C-store distributors that we've done business with for decades increasingly target this market, which is good news for us. We are also seeing evidence of new distributors emerging to specifically address this market. And that plays to our strength, considering the depth and breadth of our product lines as well as our reputation as a reliable partner. That said, although this is exciting and great news for us, it will likely make it increasingly challenging to measure alt versus traditional C-store sales. That's just something to keep in mind going forward, especially as you do your own channel checks.

如您所知，隨著更多州接受醫療和娛樂大麻，替代管道正在不斷擴大。此外，包括藥局、菸店和總店在內的另類零售商正在擴大產品範圍，為消費者提供更好的購物體驗。因此，我們認為Zig-Zag 產品的市場在許多方面都趨同，而且我們看到了數十年來與我們有業務往來的傳統便利商店分銷商越來越多地瞄準這個市場的證據，這對我們來說是個好消息。我們也看到有證據顯示新的經銷商正在專門針對這個市場。考慮到我們產品線的深度和廣度以及我們作為可靠合作夥伴的聲譽，這發揮了我們的優勢。也就是說，儘管這對我們來說是令人興奮的好消息，但它可能會使衡量替代品與傳統便利商店銷售額的難度變得越來越大。這是今後需要牢記的事情，尤其是當您進行自己的頻道檢查時。

Moving to Stoker's. During the quarter, Stoker's revenue increased 19% to $42.7 million, reflecting a 1% decline in loose-leaf and a 14% increase in moist snuff. FRE sales were approximately $4 million for the quarter, up 76% sequentially and more than 500% versus the prior year. 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.

搬到斯托克家。本季度，Stoker 的營收成長了 19%，達到 4,270 萬美元，反映出活葉鼻煙銷量下降 1%，濕鼻煙銷量成長 14%。本季 FRE 銷售額約 400 萬美元，較上一季成長 76%，與上年同期相比成長超過 500%。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。

We are also pleased with the market's enthusiastic response to the national launch of FRE. We launched with 9, 12, and 15 milligrams because we wanted a product on the shelves that was immediately differentiated. Based on our initial successes, we recently launched a 6-milligram product on our website, frepouch.com.

我們也很高興看到市場對FRE全國推出的熱烈反響。我們推出了 9 毫克、12 毫克和 15 毫克的產品，因為我們希望產品在貨架上能夠立即脫穎而出。基於我們最初的成功，我們最近在我們的網站 frepouch.com 上推出了 6 毫克產品。

Naturally, it takes some time to get a brand-new product to shelves, so you can expect to start to see the 6-milligram product on retail shelves this fall. Also, we've got a lot of questions about the potential timing of seeing FRE in some of the more well-known national and regional C-store chains. As you can imagine, these chains tend to have a longer sales cycle and planned out merchandising and planogram strategies. So our immediate successes have tended to be with independently owned stores that, by and large, can act more quickly.

當然，全新產品上架需要一些時間，因此您預計今年秋天就會開始在零售貨架上看到這款 6 毫克的產品。此外，我們還有很多關於在一些更知名的全國性和地區性便利商店連鎖店中看到 FRE 的潛在時機的問題。正如您可以想像的那樣，這些連鎖店往往有較長的銷售週期，並有計劃的銷售和貨架策略。因此，我們的直接成功往往是獨立擁有的商店，總的來說，它們可以更快採取行動。

Suffice it to say, we have a long runway ahead of us in what's estimated to be a roughly $3 billion wholesale market in 2024 per MSAi and could be worth between $5 billion and $7 billion by the end of the decade per various analyst reports. In addition to the convenience store channel, we're also seeing alt channel demand for FRE. Even if many of these stores don't sell traditional tobacco products, it speaks volumes to the synergies TPB brings to bear with our world-class sales, service, and distribution platform. We look forward to providing updates on this exciting new product in the quarters and years to come.

可以說，我們還有很長的路要走，預計到2024 年，MSAi 的批發市場價值約為30 億美元，根據各種分析報告，到本十年末，其價值可能在50 億至70 億美元之間。除了便利商店通路外，我們還看到其他通路對 FRE 的需求。即使其中許多商店不銷售傳統菸草產品，但這也充分說明了 TPB 與我們世界一流的銷售、服務和分銷平台所帶來的協同效應。我們期待在未來幾季和幾年內提供這款令人興奮的新產品的更新。

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

接下來，讓我將電話轉交給薩默，介紹我們一些具體的市場推廣計畫的一些進展和結果。

Thank you, Graham. During Q2, we made further progress in building Zig-Zag's position as a lifestyle brand by executing against our multiyear road map. As Graham noted, Zig-Zag posted a strong quarter fueled by papers, wraps, and a more distinct push into the cigar category. For only the second time in Zig-Zag's history, the brand achieved over $50 million in revenue.

謝謝你，格雷厄姆。第二季度，我們透過執行多年路線圖，在打造 Zig-Zag 作為生活風格品牌的地位方面取得了進一步進展。正如格雷厄姆指出的那樣，Zig-Zag 在紙張、捲菸以及更明顯地進軍雪茄類別的推動下，發布了強勁的季度業績。在 Zig-Zag 歷史上，這只是該品牌第二次實現超過 5000 萬美元的收入。

We also continue to launch and promote products that resonate with evolving consumer preferences. In June, we added to our growing rose cone portfolio with the introduction of Zig-Zag Mini Rose Cones. Like our prior innovative rose products, these new Mini Rose Cones are made with all-natural organic growth petals that promise an enhanced smoking experience.

我們也持續推出和推廣與不斷變化的消費者偏好產生共鳴的產品。六月，我們在不斷增長的玫瑰果產品組合中添加了 Zig-Zag 迷你玫瑰果錐。與我們之前的創新玫瑰產品一樣，這些新的迷你玫瑰錐體採用純天然有機生長花瓣製成，有望增強吸煙體驗。

Additionally, as part of our endeavor to build a lifestyle brand that goes beyond smoking accessories, and we continue to expand our brand presence in culturally relevant moments, we teamed up with Guess Jeans to partner with them on their exclusive Coachella compound. The activation brought together some of the world's largest celebrities and influencers into a compound consisting of multiple homes during the largest musical festival of the year.

此外，作為我們努力打造一個超越吸煙配件的生活方式品牌的一部分，並且我們繼續擴大我們在文化相關時刻的品牌影響力，我們與 Guess Jeans 合作，在他們獨家的 Coachella 場地上進行合作。在今年最大的音樂節期間，這項活動將世界上一些最知名的名人和影響者聚集到一個由多個住宅組成的大院中。

Zig-Zag participated in sponsoring the compound with co-branded products, artists and celebrity gifting, rolling stations throughout the venues, as well as the post-festival after-party. The tag content from the weekend yielded a cumulative reach of 19 million individuals. We have a healthy pipeline of new product introductions across the Zig-Zag portfolio, and we look forward to continuing to provide updates that highlight the momentum and efforts that support Zig-Zag's growth.

Zig-Zag 參與贊助了大院的聯名產品、藝術家和名人禮物、遍布場館的滾動站以及節後餘興派對。週末以來，標籤內容已累積覆蓋 1900 萬人。我們在 Zig-Zag 產品組合中擁有一系列健康的新產品推出管道，我們期待繼續提供更新，以突出支持 Zig-Zag 成長的勢頭和努力。

For Stoker's, we continue to be pleased with the brand's performance, which grew to over $40 million in revenue for the first time in company history. We are focused on expanding distribution and continue to see the brand's great fit at a fair price messaging resonate with today's consumer.

對於 Stoker's 來說，我們仍然對該品牌的業績感到滿意，該品牌的收入在公司歷史上首次增長到超過 4000 萬美元。我們專注於擴大分銷，並繼續看到該品牌以合理的價格傳達出的完美契合與當今消費者的共鳴。

Turning to FRE, our sales and marketing teams are keenly focused on building a brand that will resonate with consumers for the long term. We made further progress in the quarter across both brick-and-mortar stores and digital marketplaces, as Graham noted, with our revenue growth. I shared last quarter 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 a powerful selling proposition.

談到 FRE，我們的銷售和行銷團隊專注於打造一個能與消費者長期產生共鳴的品牌。正如格雷厄姆所指出的那樣，隨著我們的收入成長，本季我們在實體店和數位市場上都取得了進一步的進展。上季我與消費者分享了我們貿易夥伴的接受度和參與度，並繼續強調我們的產品品質、水分含量、袋尺寸和差異化尼古丁產品是一個強大的銷售主張。

We summarized this selling proposition with the phrase power, fuel, flavor. Our recent product portfolio expansion into 6-milligram enables us to further lean into this selling proposition, and, as importantly, expand our product assortment to participate in the largest portion of the nicotine pouch category. We look forward to sharing our progress throughout the year.

我們用「動力、燃料、風味」來概括這個銷售主張。我們最近的產品組合擴展到 6 毫克，使我們能夠進一步傾向於這一銷售主張，並且同樣重要的是，擴大我們的產品種類，以參與尼古丁袋裝類別的最大部分。我們期待分享我們全年的進展。

In summary, we continue building our brand for the long term, executing against the plan we've established and growing our business in retail and with our consumers. We will continue to focus 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和消費者業務。我們將繼續專注於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 Andrew to go through our results.

現在讓我將電話轉回給安德魯，以查看我們的結果。

Thank you, Summer. Starting with our consolidated quarterly results. Q2 sales were up 2.8% to $108.5 million, which is up 12% on a sequential basis. Excluding CDS, overall revenue was up 13%. Gross margin was down 8 basis points to 49.6% due to segment and product mix. Adjusted EBITDA was up 7% to $27 million. Going into segment performance, Zig-Zag sales increased 8.1% year over year to $50.5 million due to strength in cigars and growth in our North American papers and wraps businesses. Gross margins decreased 330 basis points to 53% during the quarter. This was driven primarily by product mix.

謝謝你，夏天。從我們的綜合季度業績開始。第二季銷售額成長 2.8%，達到 1.085 億美元，季增 12%。不包括 CDS，整體營收成長了 13%。由於細分市場和產品組合的原因，毛利率下降 8 個基點至 49.6%。調整後 EBITDA 成長 7%，達到 2,700 萬美元。就細分市場業績而言，由於雪茄業務的強勁以及北美紙張和包裝紙業務的成長，Zig-Zag 銷售額年增 8.1% 至 5,050 萬美元。本季毛利率下降 330 個基點至 53%。這主要是由產品組合所驅動的。

Stoker's net sales increased 19% to $42.7 million in the quarter, with a 5.3% volume increase and a 13.2% price mix increase. Net sales for the MST portfolio grew 14.1%. Stoker's volume was up 0.4% despite category volume down 7.2%, with share growing 60 basis points year over year to 7.5% during the quarter according to MSAi. Share of in-store selling was up 60 basis points year over year to 10.3%, with Stoker's now in stores representing approximately two-thirds of industry volumes, which still provides a long runway for growth.

Stoker 本季淨銷售額成長 19%，達到 4,270 萬美元，銷售成長 5.3%，價格組合成長 13.2%。MST 產品組合的淨銷售額成長了 14.1%。根據 MSAi 的數據，儘管類別銷量下降了 7.2%，但 Stoker 的銷量仍增長了 0.4%，本季度份額同比增長 60 個基點至 7.5%。店內銷售份額年增 60 個基點，達到 10.3%，目前 Stoker's 的店內銷售量約佔行業銷量的三分之二，這仍然為增長提供了漫長的道路。

Chewing tobacco sales were down approximately 1% from the previous year. Stoker's chewing tobacco was the number one chewing brand in the quarter, gaining 160 basis points of share to 32.5% according to MSAi. Overall, TPB loose-leaf volume was down 0.9%, beating category volume declines of 3.7%. Category performance was driven by a larger decline in premium loose-leaf, with TPB's volumes benefiting from consumer trade down as Stoker's volumes grew from the previous year. Our FRE sales more than tripled off a low base as we continue national distribution of the product. Gross margin declined 30 basis points to 55%, primarily due to product mix, somewhat offset by MST pricing gains.

嚼煙銷量比上年下降約 1%。根據 MSAi 的數據，Stoker 的咀嚼煙草是本季排名第一的咀嚼品牌，份額增加了 160 個基點，達到 32.5%。總體而言，TPB 活頁銷量下降了 0.9%，超過了類別銷量 3.7% 的降幅。優質活頁紙的銷售量大幅下降推動了品類表現，TPB 的銷售量受益於消費者貿易下降，而 Stoker 的銷售量較上一年有所增長。隨著我們繼續在全國範圍內分銷該產品，我們的 FRE 銷售額比低基數增長了兩倍多。毛利率下降 30 個基點至 55%，主要是由於產品組合的影響，但 MST 定價收益在一定程度上抵消了毛利率的影響。

Moving to CDS. Sales were $15 million. Gross margin was 22.5%, adjusted EBITDA was approximately $450,000. Next on to the balance sheet. We ended the quarter with just over $140 million of cash. Post 2Q close, we retired our $118.5 million convertible note on the maturity date of July 15. We were able to do this without drawing on our ABL. On a pro forma basis, after retiring the convert, our gross debt is $250 million; net debt, $226.4 million. With our projected free cash flow generation this year, we are well within our previously disclosed leverage range of two to three times and are comfortable with our liquidity position.

轉向 CDS。銷售額為 1500 萬美元。毛利率為 22.5%，調整後 EBITDA 約為 45 萬美元。接下來是資產負債表。本季結束時，我們的現金略高於 1.4 億美元。第二季收盤後，我們於 7 月 15 日到期日收回了 ​​1.185 億美元的可轉換票據。我們能夠在不利用 ABL 的情況下做到這一點。按預計，在轉換者退休後，我們的總債務為 2.5 億美元；淨債務2.264億美元。根據我們今年預計的自由現金流量產生情況，我們完全處於先前披露的兩到三倍的槓桿範圍內，並且對我們的流動性狀況感到滿意。

On to guidance and other line items. As Graham noted, we are increasing our guidance for forecasted 2024 adjusted EBITDA to $98 million to $102 million versus our prior guidance of $95 million to $100 million. Neither of these ranges include contributions from CDS. Effective income tax rate of 23% to 26%. We revised our CapEx expectation from $15 million to $11 million. Our investment plans have not changed and reductions are timing driven. We expect to spend approximately $4 million for the full year to supplement our PMTAs that are related to our modern oral products, which remain under review by the FDA.

關於指導和其他行項目。正如格雷厄姆所指出的那樣，我們將預測 2024 年調整後 EBITDA 的指導提高至 9,800 萬美元至 1.02 億美元，而先前的指引為 9,500 萬美元至 1 億美元。這些範圍都不包括 CDS 的貢獻。有效所得稅率為23%至26%。我們將資本支出預期從 1500 萬美元修改為 1100 萬美元。我們的投資計畫沒有改變，削減是時間驅動的。我們預計全年花費約 400 萬美元來補充與我們的現代口腔產品相關的 PMTA，這些產品仍在接受 FDA 的審查。

Now let me turn it back to Graham.

現在讓我把話題轉回葛拉漢身上。

To conclude, we're pleased with our progress at 2024s halfway point. And with that, I'll turn it over to questions.

最後，我們對 2024 年中期的進展感到滿意。接下來，我將把它轉為問題。

(Operator Instructions) Michael Legg, The Benchmark Company.

（操作員說明）Michael Legg，Benchmark 公司。

Congratulations on a great quarter, everyone. FRE obviously seems like a huge opportunity for you. You decided -- you had the PMTAs for the 3 milligrams and 6 milligrams which didn't launch on the long side, the 9, 12, and 15-milligram packets. First, can you just talk a little bit about the timing on why you decided to launch the 6 milligram now?

恭喜大家，度過了一個美好的季度。顯然，FRE 對您來說似乎是一個巨大的機會。你決定——你有 3 毫克和 6 毫克的 PMTA，但沒有在長邊上推出，9、12 和 15 毫克的包裝。首先，可以簡單談談為什麼您決定現在推出 6 毫克的時機嗎？

Michael, it's Graham. Thanks for the question. Yes, I think the original thesis was to provide a differentiated product for consumers as well as our customers as the shelves were being filled up with various products, sort of sub 9-milligram. And so a pretty unique opportunity with both customer and consumer. I think through our direct selling apparatus, frepouch.com, what we found over time is that mouthfeel has become a very strong differentiator for us. So then gave us confidence to lean into the 6-milligram segment. As of Q2, that segment was about 52%, the 6-milligram segment for the quarter. So it really gives us a strong opportunity to participate for those consumers and really grow them into sort of the broader portfolio of products that we have.

邁克爾，我是格雷厄姆。謝謝你的提問。是的，我認為最初的主題是為消費者和我們的客戶提供差異化的產品，因為貨架上擺滿了各種產品，大約是 9 毫克以下。這對客戶和消費者來說都是一個非常獨特的機會。我認為，透過我們的直銷工具 frepouch.com，隨著時間的推移，我們發現口感已經成為我們的一個非常強大的差異化因素。這給了我們進入 6 毫克細分市場的信心。截至第二季度，該細分市場佔比約為 52%，即本季的 6 毫克細分市場。因此，這確實為我們提供了一個很好的機會來參與這些消費者，並將他們真正發展為我們擁有的更廣泛的產品組合。

Okay. And can you talk a little bit about your manufacturing capability and how you produce it and what the capacity is there?

好的。您能談談您的製造能力、生產方式以及產能嗎？

Yes. Look, we feel really good about where we're at right now. We've got a strong manufacturing partner who's got an appetite to invest behind it. If we look through how we perceive the balance of this year and moving into next year, we feel really confident in the partner that we have.

是的。看，我們對現在的處境感覺非常好。我們有一個強大的製造合作夥伴，他們有興趣在背後進行投資。如果我們審視我們如何看待今年的平衡和進入明年，我們對我們擁有的合作夥伴非常有信心。

Okay. But as far as capacity, is there any level you could disclose?

好的。但就容量而言，您能透露一下嗎？

No.

不。

Okay. And then the longer-term margin potential for FRE?

好的。那麼 FRE 的長期利潤潛力如何？

Yes. Look, I think it sort of follows our past thesis, which is growing into higher margins over time. We tend to invest in the brands in the early days, which if you recall some of the past launches, we sort of signaled that 20% to 40% was kind of our intro range for products. But we're seeing sort of favorable pricing dynamics emerge in this category as well. And so we're pretty confident that over time, as we get more leverage and the brand gets more scale in the marketplace, that we'll sort of be able to follow that same model.

是的。看，我認為這有點遵循我們過去的論點，即隨著時間的推移，利潤率會變得更高。我們傾向於在早期投資品牌，如果你還記得過去推出的一些產品，我們就暗示過 20% 到 40% 是我們的產品介紹範圍。但我們也看到這一類別中也出現了有利的定價動態。因此，我們非常有信心，隨著時間的推移，隨著我們獲得更多的影響力並且品牌在市場上獲得更大的規模，我們將能夠遵循相同的模式。

Okay. Great. And then so basically, competition now is obviously building out their capacity and supplies on the constraints in the marketplace we get on to. You guys have more PMTAs in the competition, right? They're only in the 3 and 6, you guys also have the 9, 12, and 15. Is that correct?

好的。偉大的。基本上，現在的競爭顯然是根據我們所處市場的限制來擴大他們的產能和供應。你們比賽中有更多的PMTA，對嗎？他們只有3號和6號，你們還有9號、12號和15號。這是正確的嗎？

Yes.

是的。

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。

Congrats on a very impressive quarter here. I'll stick with the three questions for now. You were just recently mentioning you're investing in brands in the early days, obviously makes sense. Considering the kind of explosive growth that we're seeing in this category, I'm just wondering sort of how you're thinking about marketing spend and trade promotion for FRE. What would you need to see to sort of increase spend? And how should we think about potential spend as falling between marketing investment and SG&A or trade promotion and net sales or COGS? Just wondering how you're sort of thinking about this going forward?

恭喜這裡度過了一個非常令人印象深刻的季度。我現在先回答這三個問題。您最近剛剛提到您正在早期投資品牌，這顯然是有道理的。考慮到我們在這一類別中看到的爆炸性增長，我只是想知道您如何考慮 FRE 的營銷支出和貿易促銷。您需要看到什麼才能增加支出？我們應該如何看待潛在支出介於行銷投資和 SG&A 或貿易促銷和淨銷售額或 COGS 之間的情況？只是想知道您對未來有何看法？

Yes. I think if you just take a step back from a 30,000-foot view, I think we're very data-driven. We've got robust data for this segment and specifically our brand through MSAi as well as our online channels. And I think the data informs our decision relative to how we throttle spending.

是的。我認為，如果你從 30,000 英尺的高度退一步看，我認為我們非常依賴數據。我們透過 MSAi 以及我們的線上管道獲得了該細分市場的可靠數據，特別是我們的品牌。我認為這些數據可以幫助我們做出如何限制支出的決定。

In terms of the distinction between trade promotion and marketing expense, I think that that's always a balancing act, where, as we read that data, we sort of make a determination on where to press in a little harder and maybe where to lean out of that particular spending or investment view. But at the end of the day, I think what makes us a little bit unique is that we've gone to market and we maintained profitability in the segment, which I think we're incredibly proud of.

就貿易促銷和行銷費用之間的區別而言，我認為這始終是一種平衡行為，當我們閱讀這些數據時，我們會決定在哪裡加大力度，也許在哪裡傾斜。 。但歸根結底，我認為我們的獨特之處在於我們已經進入市場並保持了該領域的盈利能力，我認為我們對此感到非常自豪。

That's great. And I appreciate the color there. You mentioned some comments on, obviously, these larger C-store chains have a longer sales cycle. You've had more success with some of these independents. I'm wondering how the sort of trajectory for the second half is looking here. Do you feel that you've sort of gotten into a good number of the independents and maybe there's some inventory sort of initial load-in to be aware of, that maybe we could see some volatility quarter to quarter? Or are we just kind of too early in this robust growth trajectory that we shouldn't necessarily be thinking about kind of quarter-to-quarter volatility at this point? Just sort of wondering how you're viewing that more near-term landscape.

那太棒了。我很欣賞那裡的顏色。您提到了一些評論，顯然，這些較大的便利商店連鎖店的銷售週期較長。您與其中一些獨立人士取得了更大的成功。我想知道下半年的軌跡是什麼樣的。您是否覺得您已經接觸了大量的獨立人士，也許需要注意一些庫存類型的初始加載，也許我們可能會看到季度與季度之間的一些波動？或者我們在這個強勁的成長軌跡中是否還為時過早，我們現在不必考慮季度與季度之間的波動？只是想知道您如何看待近期的情況。

Yes. Look, it's a lot to unpack in that question. So I'll start first with the chain environment. While it's a long sales cycle for the large chain accounts, we'll note out that we're in the overwhelming majority with the top 50 chains in the country with some SKU representation with TPB, and it's important to note that because we've got a long history of creating partnerships and creating value with our customers. So we're very confident over time in our ability to sort of get into the larger chain accounts.

是的。看，這個問題有很多東西要解開。所以我先從鏈環境開始。雖然大型連鎖店的銷售週期很長，但我們要指出的是，我們在全國排名前 50 的連鎖店中佔絕大多數，並在 TPB 中擁有一些 SKU 代表，值得注意的是，因為我們已經在與客戶建立合作夥伴關係和創造價值方面有著悠久的歷史。因此，隨著時間的推移，我們對進入更大的連鎖帳戶的能力非常有信心。

In terms of how we think about volatility from quarter to quarter, I think it's in the early days right now. Obviously, it's still relatively small comparative to the entirety of the Stoker's segment. In terms of how we went to market, we certainly didn't go to market with a sort of a big load strategy, if you will. And what we're trying to do is get a view for get the product into stores, merchandise it well, make sure that consumers can see it, placing point of sale, and seeing what the pull-through rates are. And so we're really sort of managing not over-inventorying the trade in the early days for this launch.

就我們如何看待每季的波動性而言，我認為現在還處於早期階段。顯然，與整個 Stoker 細分市場相比，它仍然相對較小。就我們如何進入市場而言，如果你願意的話，我們當然沒有以某種大負載策略進入市場。我們正在努力做的是了解如何將產品放入商店，好好地推銷它，確保消費者可以看到它，放置銷售點，並了解轉換率是多少。因此，在此次發布的初期，我們確實在設法避免庫存過多。

All right. Very great to hear. Overall, this is, I guess, another sort of 30,000-foot question or just a longer-term question. So with your other Stoker's products, you've sort of been attacking the value side of the category. Here, you're kind of competing head on here. I'm wondering if you have any view on sort of potential market share goals or targets or anything kind of longer term. I mean, is this something where you still see in the single digits as being the sort of target here as you are with Stoker's MST? Or is there anything else that you're seeing that maybe that could be either more or less? I mean, just wondering how you're thinking about overall market share goals given the slightly different competitive positioning with FRE versus your other Stoker's products.

好的。很高興聽到。總的來說，我認為這是另一個 30,000 英尺問題，或者只是一個長期問題。因此，對於其他 Stoker's 產品，您一直在攻擊該類別的價值方面。在這裡，你們就像是在正面競爭。我想知道您對潛在市場佔有率目標或目標或任何長期目標是否有任何看法。我的意思是，您是否仍然將個位數視為此處的目標，就像您對 Stoker 的 MST 一樣？或者您還看到其他可能或多或少的事情嗎？我的意思是，考慮到 FRE 與其他 Stoker's 產品的競爭定位略有不同，我只是想知道您如何考慮整體市場份額目標。

Sure. Great question. So I think that we have -- our aspirations are large. And if you take our aspirations and you unpack them, sort of our goal is to be an everyday player on the shelf across the US, which would mean that being one of the few that actually sort of emerges as in that top, say, four or five brands in the market. I think Stoker's and the gains that we've made there throughout the year sort of informs what we think the potential could be. And certainly, we're way ahead of the game in our entry into the white pouch category with a differentiated product. Whereas it took us 40 years to get to the moist snuff category, and we're competing against large entrenched incumbents, we're relatively early inside that cycle with FRE in the modern oral category.

當然。很好的問題。所以我認為我們的願望很大。如果你了解我們的願望並拆開它們，我們的目標就是成為美國各地貨架上的日常玩家，這意味著成為少數真正出現在前四名中的玩家之一或市場上的五個品牌。我認為斯托克和我們全年的成果在一定程度上告訴我們我們認為潛力可能是什麼。當然，我們憑藉差異化產品進入白色袋裝類別，在競爭中遙遙領先。儘管我們花了 40 年的時間才進入濕鼻煙類別，而且我們正在與大型老牌企業競爭，但我們在現代口香類別中的 FRE 處於這個週期的相對早期。

So there's a lot of adoption. The category growth that is expected throughout the rest of this decade will largely be from new consumers coming into the category that currently aren't engaged. And so we think that there's a great opportunity for us to win new consumers as they come into the category while also competing for existing consumers that are looking for a little more satisfaction, looking for better mouthfeel, and we think the launch of the 6-milligram sort of gives us license to speak to those consumers and give them an opportunity to try our product and see the difference.

所以有很多採用。預計本十年餘下時間的品類成長將主要來自新消費者進入目前尚未參與的品類。因此，我們認為，我們有一個很好的機會贏得新消費者，因為他們進入該類別，同時也與尋求更多滿足感、尋求更好口感的現有消費者競爭，我們認為推出 6-毫克給了我們與這些消費者交談的許可，讓他們有機會嘗試我們的產品並看到差異。

Yes. That's great. That certainly makes sense to me. Last question for me, switching gears over to Zig-Zag. I just wanted to kind of double-click on one of the comments you made earlier in your prepared remarks, Graham. You mentioned how traditional C-store customers are kind of increasingly targeting the alternative channel customer, and that there's sort of a blurring of the lines between traditional C-store and the alternative channel. And I'm wondering if you could just expand on that a bit. I mean, is this just traditional C-store customers now ordering a much wider assortment of SKUs? Or is there something about, like, new stores or new doors, something else blurring the lines between C-store and an alternative channel? I was wondering if you could expand on that.

是的。那太棒了。這對我來說當然是有道理的。我的最後一個問題是，切換到之字形。格雷厄姆，我只是想雙擊您之前在準備好的演講中發表的評論之一。您提到傳統便利商店客戶越來越多地瞄準替代通路客戶，並且傳統便利商店和替代管道之間的界線有些模糊。我想知道你是否可以對此進行擴展。我的意思是，這只是傳統便利商店的顧客現在訂購的 SKU 種類更加豐富嗎？或者是否有什麼東西，例如新店或新門，或者其他東西模糊了便利商店和替代管道之間的界線？我想知道你是否可以對此進行擴展。

Yes. So just as a point of clarification, as we launched the strategy, we are really focused specifically on a set of stores that we have defined as alternative stores, head shops, smoke shops, dispensaries, and also the growth of distributors that were emerging to service that space. Where the lines are getting blurry is that some of our traditional distributors are also going after those customers. And so as that customer base grows, it's opportunity for them to service those stores as well.

是的。因此，需要澄清的是，當我們推出該策略時，我們確實特別關註一組商店，我們將其定義為替代商店、總店、菸店、藥房，以及新興經銷商的成長。界線變得模糊的是，我們的一些傳統經銷商也在追逐這些客戶。隨著客戶群的成長，他們也有機會為這些商店提供服務。

And so what we're seeing is -- and again, very good news for us, we're seeing some of our legacy traditional distributors that we've done business with for decades. They're leaning into that segment because, look, if you think about it, they're driving trucks to convenience stores, and they're passing these stores along the way. So it's a great opportunity for them to leverage their fixed cost in terms of taking product to those stores. And so we're just seeing a little bit of that sort of starting to occur in the channel, which is just creating, one, an opportunity for us, but also the sort of blurring, where, a traditional distributor and an alternative distributor, you're starting to see those lines kind of cross up a bit.

因此，我們看到的是──這對我們來說是個好消息，我們看到了一些與我們有數十年業務往來的傳統經銷商。他們傾向於這個細分市場，因為，看，如果你想一想，他們開著卡車去便利商店，並且沿途經過這些商店。因此，這對他們來說是一個利用固定成本將產品運送到這些商店的絕佳機會。因此，我們只是看到通路中開始出現這種情況，這只是為我們創造了一個機會，但也造成了一種模糊，即傳統分銷商和替代分銷商，你開始看到這些線有點交叉。

I see. That's very helpful. I think that's where I was confused that we were sort of talking about the distributors here and the lines are getting blurred there, which -- I mean, to me, that sounds like that was very sort of beneficial to Zig-Zag compared to some of the other rolling paper brands that you might see at some of these alternative shops. I mean, I would imagine that you guys have much stronger relationships with these more traditional distributors. Can you kind of just comment on that subject, sort of your relationship with the traditional distributors versus maybe some of your competitors that you run into in the old channel?

我懂了。這非常有幫助。我想這就是我感到困惑的地方，我們在這裡談論的是經銷商，而那裡的界限變得模糊，這——我的意思是，對我來說，與某些人相比，這聽起來對鋸齒形調整浪非常有利。我的意思是，我想你們與這些較傳統的經銷商有著更強的關係。您能否就這個主題發表一下評論，您與傳統經銷商的關係以及您在舊通路中遇到的一些競爭對手的關係？

Yes. I would say the -- if you look at sort of from a relationship standpoint, this company has been in business since 1988. So a lot of these traditional distributors, we've been doing business with since that long. And so that partnership is deep. Most of the folks that are really focused on that specific alt channel haven't been around quite as long, and that's not a negative, but at the same time, we view the relationships that we've built with the traditional distributors as incredibly strong. And we feel that the process that we bring that created those relationships and that value can be transferable as well to these alternative distributors as they grow.

是的。我想說的是——如果你從某種關係的角度來看的話，這家公司自 1988 年就開始營業了。從那時起，我們就一直與許多傳統經銷商開展業務。因此，這種夥伴關係是深厚的。大多數真正專注於特定替代管道的人都沒有那麼長的時間，這並不是負面的，但同時，我們認為我們與傳統分銷商建立的關係非常牢固。我們認為，隨著這些替代經銷商的成長，我們帶來的創造這些關係和價值的流程也可以轉移給他們。

And so I think it really sets up nicely for us in the future. Having an omni distributor approach servicing that channel and overlaying on top of that our ability to sell direct-to-consumer as well as direct-to-store through our own website really gives us the ability to speak to consumers wherever they want to buy the product.

所以我認為這對我們的未來確實有好處。擁有全方位分銷商方法來為該通路提供服務，並在此基礎上涵蓋我們直接向消費者銷售以及透過我們自己的網站直接向商店銷售的能力，這確實使我們能夠在消費者想要購買產品的任何地方與他們交談。

Very helpful. Congrats again on a great quarter.

非常有幫助。再次恭喜這個季度的出色表現。

There are no further questions at this time. That concludes our Q&A session. I will now turn the conference back over to Graham Purdy for closing remarks.

目前沒有其他問題。我們的問答環節到此結束。現在我將把會議轉回格雷厄姆·珀迪致閉幕詞。

Thanks, operator. I appreciate everybody joining the call today, and we look forward to speaking to you again in a few months.

謝謝，接線生。我感謝今天加入電話會議的每個人，我們期待幾個月後再次與您交談。

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

女士們、先生們，今天的電話會議到此結束。感謝大家的加入。您現在可以斷開連線。