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.

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. As discussed, may 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 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.

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

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.

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.

However, we do believe these and greater levels of growth are achievable for FRE, our modern oral or white pouch 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.

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.

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.

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. 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.

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.

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.

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.

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. 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.

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. 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. 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 we’ll bring to consumers and retail to celebrate this remarkable milestone.

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

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.

Moving to Stoker’s. Graham noted the success we had for this 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.

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

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. Going into segment performance.

Zig-Zag sales decreased 2.9% year-over-year to $45.1 million due to the discontinuation of an unprofitable product line in Canada that impacted sales by $1.4 million. Our U.S.

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.

Gross margins increased 100 basis points to 56.5% during the quarter, driven primarily by product mix, including the discontinuation of a 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 digits.

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 runway for growth.

We also had strong growth in our international export business. 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 with 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’s volumes benefiting from its valued positioning and continuing consumer trade down. Our FRE sales more than doubled off a low base as we start a broader expansion of the product in 2024.

Gross margin increased 380 basis points to 57.6%, primarily due to MST pricing gains. CDS sales were $14.1 million.

Gross margin was 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 in the balance sheet. And as of today we have sufficient cash to address the maturity of our remaining $118.5 million convertible notes due 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 2.5x to 3.5x after retiring our convert this year, while having the flexibility for future capital deployment. Onto 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 the previous year, including $6.5 million of payments related to an automation project that was pushed out from 2023 to 2024. 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.

Now, let me turn it back to Graham.

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.

Yes. Good morning and thank you for the question.

Congratulations on the continued penetration into that alternative smoke shop channel and the progress continues there. 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? Just talk about kind of the promotional activity in that channel too, as you continue to build that out.

Hey, 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.

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. Fortunately, 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.

I appreciate the color. And then kind of following-up on that on FRE and obviously you have differentiated size, pouch and nicotine kind of 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 kind of into the FRE offering nicotine wise?

Or how do you see that kind of playing out as we look out in the 2024 and driving that growth going forward here?

Yes, 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 moded 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 of 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.

Perfect. And then last one follow-up for there.

Obviously, you’re ramping the FRE product and the strong trends there. Kind of similar opportunity as you saw in Stoker’s over time as you ramped up that product.

Just kind of step us through kind of the steady incremental gains you’re seeing and kind of timing of the cadence. And when this becomes more meaningful throughout the 2024, looking 2025 and beyond here for FRE?

Kind of just step us through that cadence and the size opportunity as that grows here.

Yes. 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 $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 sort of rolled out this quarter, that’s what we’re on track to do is continue to see that 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.

Thanks. That’s helpful.

I appreciate the detail. I’ll jump back in the queue.

Thanks for the questions.

Thanks. Good morning.

Great quarter. Wanted to dig down a little on the FRE.

What’s your pricing strategy there first?

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.

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 a premium price point?

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

Okay. And then you mentioned high single digit market share opportunity in $2 billion market, so we're talking $100-plus million there.

Can you talk what your long-term market share goal is and what your store ramp-up expectations are to get this distributed?

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.

Okay. Great.

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

Yes. 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. 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.

Okay. Great.

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

We had a shareholder settlement that was disclosed in the [indiscernible].

Okay. We'll take a look then.

And then the automation project, what is that for?

Yes. 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.

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?

Yes. At this point, we've got enough cash to be able to buyback in July.

So that is our current plan.

Okay, thanks. Great quarter.

Congrats.

Thanks Mike.

Thank you for taking my questions. I 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 kind of gaining momentum here. Within the Zig-Zag alternative channel, you mentioned you're sort of able to do a bit more brand building through that channel versus traditional C-store.

Could you just expand on that? And maybe just give us some examples of sort of some of the ways that you are able to drive brand recognition, brand equity?

Is this more shelf space? Is this sort of also being able to sell apparel?

Just kind of expand on that, that would be great. Thank you.

Yes. 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.

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 a more limited shelf space and opportunities to have those sorts of varieties of products.

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?

You mentioned new products like has there been a matter of sort of finding products that this channel is looking for and that's sort of been able – that's helped you increase your share within that channel? Or is it kind of all of the above with apparel and these other things as well.

Just wondering if there's anything to sort of call out as the driver to sort of increasing this penetration within this channel?

I mean no special call outs. And as you mentioned, we've had pretty strong success in this market for a while.

And so we expect to continue the same 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 kind of momentum that we're getting is leading to this hypercribal we're seeing.

And we still think there's a lot of further opportunity for us to attack that market.

Okay. Great.

And then just a couple more kind of quick ones from me. On CLIPPER, I know that we've sort of been working through some heightened inventory levels at retail.

Can you kind of just give us an update on what you're seeing there?

Yes. Look, I think the – this sort of 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.

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.

Yes, 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.

Okay, thank you so much, guys.

Thanks Eric.

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.