Turning Point Brands Inc Aktie

Good morning, and welcome to the Turning Point Brands First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Mr. Andrew Flynn, Chief Financial Officer. Please go ahead, sir.

Good morning, everyone. Earlier today, we issued a press release covering our first quarter results available in the Investor Relations section of our website at www.turningpointbrands.com. During this call, we'll discuss consolidated and segment operating results, the operating environment and our progress against our strategic plan.

Before we begin, please refer to forward-looking statements and risk factors in our press release and SEC filings. We'll also reference certain non-GAAP financial measures. Reconciliations and explanations are included in today's earnings release.

With that, I'll turn the call over to our CEO, Graham Purdy.

Thanks, Andrew. Good morning, everybody, and thank you for joining our call. We started the year with strong momentum, led by accelerating growth in Modern Oral with gross and net sales up 167% and 133% year-over-year and 30% and 26% sequentially. These results are driven by ongoing growth in both brands' D2C platforms, FRE's early expansion into larger, higher-volume chain accounts and ALP's very early move into bricks and mortar.

In the quarter, Modern Oral accounted for 42% of our total revenue, up from 21% in Q1 2025. Before we dive into details of the quarter, I want to step back and frame the opportunity in front of Turning point Brands. We believe we are in the midst of a greater than $50 billion generational shift in nicotine consumption, and we are positioning the business to capture meaningful share of nicotine users in this evolving high-barrier category. We are strengthening that position through foundational investments in our sales force, marketing and commercial capabilities. These investments are critical to building a durable growth platform that can scale into a leading player in the post-cigarette nicotine market over time. While this infrastructure will ultimately allow us to compete across the modern nicotine ecosystem, our priority today is clear: winning in nicotine pouches. We believe the nicotine pouch category is still in its nascent stages of development and can become the dominant revenue and profit driver of the company over time. As we've said before, we expect the market to consolidate around a limited number of scaled brands, and we are increasingly confident that FRE and ALP will be among them. Our confidence is grounded in execution. We continue to see encouraging consumer response across both FRE and ALP, supported by product quality, brand positioning and repeat purchasing behavior. Our outsized share of direct-to-consumer sales, coupled with our continued market share gains in bricks and mortar are evidence that our plan is working in the early innings.

Based on our Q1 performance, we believe our results captured mid-single-digit category share of both gross and net sales, giving confidence that we are on track to achieve our long-term goal of double-digit market share by the end of the decade. We are using that momentum to build scale across channels. FRE Continues to expand in the larger regional and national convenience chains, while ALP has moved from a strong direct-to-consumer base into retail faster than we originally expected. We've had several notable chain wins, driving confidence in our growth. We expect our chain store count to increase 70% by the end of 2026 versus the prior year. As you know, we are building an operational foundation to further support scale in Modern Oral.

Commissioning our Louisville manufacturing facility is an important step in localizing production, improving supply control and reducing freight and tariff exposure over time. As we build production, we expect that work to strengthen unit economics and support margin improvement as domestic inventory moves through the P&L. At scale, we believe our margins should approach 70% in this category by the end of the decade. We also continue to invest in the commercial infrastructure needed to support growth, including sales force expansion, chain account support, enhanced consumer visibility and manufacturing capabilities. In 2026, we plan to continue investing in our sales force and marketing to secure chain placement, build brand awareness and support our growing distribution footprint. Based on achieving our sales and financial objectives, we expect total sales and marketing investment for the year to range from $80 million to $105 million. Given the strong gross sales growth we have experienced, we are confident that these investments will provide attractive returns for investors over the long term. In short, we are making front-loaded investments in a category where acquiring brand-oriented adult consumers can drive repeat purchasing and strong margins over extended periods. Over time, we believe our investments in physical execution, particularly sales force expansion, distribution support and retail presence will become a more important source of competitive advantage.

Overall, we are encouraged by the momentum we are seeing, the progress we are making and the platform we are building to scale profitably.

With that, I'll hand the call over to Summer to walk through the progress of our key go-to-market initiatives.

Thank you, Graham, and good morning, everyone. I'll focus my comments on our go-to-market execution in the nicotine pouch segment. This remains our top commercial priority. And as we scale the business, we continue to benefit from the strength of our legacy distribution relationships and broader commercial capabilities. Our strategy is to build demand across both online and retail channels with retail expansion as the key lever to scale the business. To support that effort, we are investing in sales coverage, merchandising support and brand-building programs to help us win distribution and improve in-store execution. That includes securing the right assortment, shelf placement and visibility to support trial, repeat purchase and long-term performance. These investments support both near-term execution and the broader foundation we need to scale the business. In the first quarter, we made progress against that plan. We secured new wins across critical top chain convenience stores that will expand distribution across our portfolio. Our brands are designed to resonate with distinct consumers, and we will continue to promote the expansion of both FRE and ALP into retail stores. We believe our brand credibility, market performance and ongoing marketing support were important drivers of those wins.

While nicotine pouch gross sales grew nearly 500% in 2025, we still have meaningful room to build brand awareness relative to category leaders. Our early strategy was to establish distribution first using our existing retailer relationships to build a strong retail foundation. With the progress we made in 2025 and the additional distribution we have secured, we believe we are now at a point where increased brand investment can drive stronger returns. Over time, that should improve consumer awareness, support retail productivity and increase the value of the nicotine pouch opportunity. Accordingly, we are investing aggressively in brand building to support future scale.

Last month, we announced a partnership between [ FRE in 6 ] TKO properties, including UFC, Zuffa Boxing and PBR. This expansion is a result of the demand and brand alignment success we validated through our initial partnership with PBR, which started in May of last year. We believe this broader platform will help accelerate brand awareness and consumer engagement with adult consumers. We are off to a solid start, already having executed a few events since the announcement, and we'll share more as the partnership unfolds. Building on ALP's success in direct-to-consumer, this was the first quarter that TPB sales organization started to sell ALP on retail shelf. We began with a manageable launch and expect to incrementally add stores this year through our new chain account wins. While it's early innings, we are encouraged by the initial results.

With regards to Zig-Zag, we continued executing against our core brand pillars, strengthening the core business while scaling new product innovation and expanding brand presence in target markets. We accelerated growth in new products, including Natural Leaf Flatwraps by expanding retail distribution through targeted merchandising programs. At the same time, we are growing brand awareness with a focus on under-indexed markets through integrated marketing campaigns and in-store activations that embodies Zig-Zag's new "Life's Fast, Burn Slow" tagline. Overall, we are seeing encouraging early proof points across both brand building and retail expansion, and we believe that progress positions the nicotine pouch segment to become a major contributor to growth over time.

Let me now turn the call over to Andrew to go through our financial results.

Thank you, Summer. Starting with consolidated results. Sales were up 17% year-over-year to $124.3 million for the quarter. Growth was driven primarily by Modern Oral. Gross profit of $68.3 million increased 14.6%, driven by Modern Oral.

Gross margin was 55%, which was down 100 basis points versus last year. Reported SG&A was $55.8 million for the quarter, which was up $8 million sequentially. The increase was driven primarily by our nicotine white pouch investments, including approximately $1 million of incremental spend tied to expansion of our sales force. We also spent approximately $7 million on increased marketing investment and broader brand-building initiatives.

Adjusted EBITDA was $25.9 million for the quarter at a 20.8% margin, which exceeded the midpoint of the guidance. This was primarily attributed to accelerated growth in Modern Oral, offset by our strategy to increase sales and marketing investment and softness in Zig-Zag.

Stoker's segment net sales increased 48% year-over-year to $88 million for the quarter. The Stoker's segment now accounts for 70% of consolidated net sales. Regarding Modern Oral, I want to briefly address our disclosure of gross sales. Because most contra revenue investments relate to slotting-related distribution fees, we believe both gross and net sales provide the clearest view of underlying business performance. Support of our growth investments, Modern Oral nicotine pouch net sales FRE and ALP were up 133% year-over-year, achieving net revenue of $52 million. Gross revenue was $69 million, up 167% year-over-year. For the quarter, Modern Oral accounted for 42% of consolidated net sales, up from 21% a year ago.

Legacy Stoker's brands net revenue decreased 3.5% year-over-year to $36 million for the quarter, driven by continued share growth in MST that was partially offset by anticipated declines in loose leaf.

Stoker's gross profit increased 39% to $47 million. Gross margin decreased 350 basis points to 54% due largely to the impact of tariffs.

Zig-Zag segment net sales were down 22% year-over-year to $36.7 million for the quarter. For the quarter, Zig-Zag gross profit decreased 18% to $20.9 million and gross margin was 57.1%, which was up 300 basis points versus last year. First quarter free cash flow was negative $27.4 million, reflective of our investments in trade and brand marketing programs as well as working capital and U.S. manufacturing CapEx. We ended the quarter with $192.4 million of cash. Our expectation is to be approximately cash flow breakeven for the remainder of the year. Our capital allocation approach remains disciplined and aligned with the opportunity we see in nicotine pouch. As we invest behind growth initiatives, the timing of those investments and the timing of their benefits may not always align evenly within a given quarter. That reflects our effort to position the business to capture incremental share in a category with substantial long-term annuity value.

Today, we are increasing full year 2026 Modern Oral guidance. We now expect gross sales of $280 million to $300 million, up from a previous range of $220 million to $240 million. And net sales of $210 million to $225 million, up from our previous range of $180 million to $190 million. Implied gross revenue growth at the midpoint is 83.7%.

We are also introducing full year EBITDA guidance of $70 million to $90 million, inclusive of increased nicotine pouch investments in sales force expansion, merchandising support and consumer marketing. For modeling purposes, we expect the effective income tax rate to be 23% to 26% on a go-forward basis.

Budgeted 2026 CapEx is $4 million to $5 million, excluding projects related to Modern Oral, and we expect to spend an additional $3 million to $5 million this year to support our PMTAs.

Additionally, as we focus on strengthening our market presence, we expect to spend between $80 million to $105 million to expand our sales force and bolster our marketing strategy in 2026. As we continue to scale, we expect the overall cost structure of the business to become more efficient. Many investments we are making today, slotting related, brand building and go-to-market spend are tied to building distribution and driving initial trial and growth of our products. As our consumer base grows, these costs should become a smaller percentage of sales.

Now let me turn it to Graham.

Thanks, Andrew. We are encouraged by the momentum we see in the business and by the progress we are making against our strategy. As I said at the outset, we believe we are in the midst of a generational shift in nicotine consumption, and we believe Turning Point is uniquely positioned to capture meaningful share in that transition. Our focus remains on winning in Modern Oral by investing in the brands, commercial capabilities and infrastructure needed to scale. We are seeing continued proof points in both consumer traction and distribution growth, and we believe that positions us well to build a meaningful and profitable business over time.

And with that, I'll turn it over to questions.

[Operator Instructions] Our first question today will come from Eric Des Lauriers from Craig-Hallum Capital Group.

Congrats on the strong results. Very encouraging to see nicotine pouch sales reaccelerating into Q1 here. So you raised guidance for Modern Oral net sales by about $30 million and then gross sales by about $60 million. So suggesting a big increase in contra revenues with these national chain wins. How did these wins announced today compared to your expectations coming into the year? Have you won more chains than initially expected? And any national chains that we should expect for both FRE and ALP? Or is it mostly FRE right now?

Great question. Thanks, Eric. We were really, really excited about the springtime negotiations that we worked through over the past few months. As Graham noted in his comments, we expect our store count to increase by nearly 70% by the end of the year. I think as you know, every chain account is different. So we're currently in the process of determining the rollout schedule and the [ doors ] will come online over the balance of the year. Where we have opportunities to bring both brands in, we will. So you'll hear more about that as the year rolls out, and we're encouraged and excited about the success that we had over the past few months.

Yes. No, it certainly sounds very exciting. And I guess, Summer, you touched on this in your answer there. And maybe it's just sort of, we'll see over the next couple of quarters. But how should we think about the timing from these wins? When should we expect to see them on shelves? And then how should we think about the sort of impact on gross versus net sales? Should we look for net sales to sort of pick up from these in the back half? Or is that more of a 2027 thing?

Yes. I'll answer the first part, and then I'll turn it to Andrew to answer the second part. But you'll start seeing some of these chain wins roll out over the next few weeks. But as the progress of rolling out these chains requires resets and fixtures and different dynamics that they're sorting out with getting everything situated in store, it just takes time. So you'll see those stores sort of fill out across the balance of the year, but I'll turn it to Andrew to explain how we thought about the dollar impact.

Yes. As we think about the net sales trajectory over the course of the year, we would expect to see some pickup in the back half as it relates to the Modern Oral category.

Awesome. Well, it's all very encouraging. Congrats again on the strong results.

Thanks, Eric.

Your next question comes from Ian Zaffino from Oppenheimer.

Great guidance on that DMO side. So question would be on the PMTA process. How is that going? I know there's [indiscernible] articles about that. And any kind of change in discussions there or thoughts about getting kind of final approval? And then how are you thinking about the Louisville plant, which I guess they're kind of connected a bit.

Yes. Great question, Ian. Look, the PMTA process is -- it's a rigorous scientific process. We're not surprised by the timing, to be frank. And our approach is, we respect the process and any additional commentary around sort of where we're at on that frontline probably wouldn't be appropriate at this time.

In terms of Louisville manufacturing, we're threading a bit of a needle here with respect to the PMTA process, and scaling our infrastructure here in Louisville. We've made really great progress relative to laying down the infrastructure to support manufacturing here in Louisville. We've certainly got equipment in Louisville, and we feel really good about where we're at from a throughput on those machines in the early innings.

Okay. And then I guess maybe a question for Summer is when you're going to market out portfolio, I guess you now have a newly expanded portfolio. And so how are you going to market? Are you going to market as far as FRE being your higher nicotine pouches and ALP being your lower nicotine pouches? Is that the strategy? And also, can you maybe talk about this portfolio -- expanded portfolio, which has significantly more SKUs, how that's resonating with retailers bringing them incremental SKUs? And any other kind of color you could give us maybe about the maybe synergistic effects of having those 2 brands together?

Yes, sure. So I would say the retailers, our consumers and our sales organization are all very excited about us having both brands in the portfolio and in the sales bag to bring to market. And what's been great about both of these brands is that they've built a strong base with consumers, especially ALP, they've created a really strong D2C presence, and there was some pent-up demand at retail that we were really able to start leveraging. And as these brands are being put into market, we're really thinking about the end consumer. So while the product itself is important and they certainly have their differences, what's resonating with retail, what's resonating with consumers is that these brands are really focused on 2 very distinct consumer bases. There is room in this category for both brands to win, and we've seen some really encouraging early results as we've been bringing them to market.

Next up is Nick Anderson from ROTH Capital Partners.

Congrats on the quarter. First for me, just on the rising fuel price environment, have you seen any impact on C-store visits or consumer behavior? Tobacco is typically more resilient when it comes to higher fuel prices. Are you seeing the same trend emerge within nicotine pouches? Just any discernible changes to [indiscernible] would be helpful.

I think given the backdrop of our results, we feel really good about sort of where we're at today with the consumer. As Summer had mentioned in the last question with Ian, we're really focused in on building brand equities, building brand identity and really winning on the premium front over the long haul. We view the fuel prices as transient. We think where we generally see that more so is in the heritage businesses. And I think what's an interesting aspect of that, historically, consumers tend to not move out of the categories. They tend to look for more value. And I think we feel very well positioned with our Stoker's heritage products with respect to spiking gas prices.

Great. That's helpful. Second for me, just on the retail landscape. With the momentum from TKO and brand awareness obviously ticking higher here, have you seen a difference in appetite for [indiscernible] to change the carry FRE and ALP? As brand recognition grows, I would assume your negotiations should become smoother, but any color there would be helpful.

Great question. We are really excited about the TKO deal. As you know, we invested in PBR last year. We learned a lot, and that gave us some momentum to build upon because I think having this TKO deal really has us show up as a credible partner that's investing for the long term to win with our brands. And so certainly, while it's early, it has been part of the conversation with retail. We've seen some early consumer excitement. We have some events under our belts and more to come as that partnership unfolds, but encouraged about the credibility it brings to us and sort of the proof point that comes to the table of us being a brand and a company that's investing in the long term here.

The next question is from Gerald Pascarelli, Needham & Company.

This is Jack on for Gerald. As for as EBITDA guidance, it obviously implies a decline relative to last year, which at this point, I think is well understood, but the range is pretty wide. So could you just kind of go through some assumptions that get you to the high end versus the low end?

Sure thing. So look, what's driving the EBITDA guide is, as we discussed, we've got big investments in terms of sales force, retail distribution as well as marketing spend. And so those are the big drivers of the year-over-year change. Also, as you know, our freight -- our outbound freight costs are captured in SG&A. That's also up on a year-over-year basis. And so what's kind of driving the range here is, one, the biggest driver is our ability to get that spending and what we will spend on in the future. And so that spending is dependent on what we see in terms of sales because we'll be able to pivot if needed. And we're being judicious about that investment. And so as we monitor it, we may make some changes. So that's really the reason for the guide. And also, there could be a real upside opportunity in terms of the TKO agreement that we just launched, this is very new. And also some of these chain wins are also very new, and that can provide a very large upside for us as well.

Okay. That's helpful. And then for the UFC sponsorship, it looks like it can be pretty transformative. It's incremental to your OpEx outlook relative to last time you presented. So as we kind of look forward, is there the potential for Turning Point to enter into some more of these sponsorships? And then if so, can that imply another leg down on EBITDA? Or do you think the low end is the floor at this point?

I'll take the first part of that question, and Andrew may want to chime in on the dollar aspect. But as you know, investing in TKO is a bet for us, we're really excited about. We are also doing other marketing activities, other consumer engagement building activities like with motorsports and other avenues. And so I think to Andrew's point, we will invest prudently as we go and make changes as we may need to, but excited about the awareness opportunity this gives for the brands, and I'll turn it to Andrew on the dollar aspect.

Yes. In terms of what that may mean for the low end of guidance, as I said before, we're going to be judicious about our spending. And so if something makes sense for us to gain incremental market share, we will do that. And so that's really how we think about these opportunities.

And everyone, at this time, there are no further questions. I'd like to hand the conference back to Mr. Graham Purdy for any additional or closing remarks.

Thanks, operator. I really want to thank everybody for joining the call today. Look, in closing, I think, ultimately, I want to emphasize a couple of points to our investors. For one, I've been in this industry for -- I'm closing in on my 30th year, and I can't tell you how excited I am about the opportunity in front of us with the generational transformation that we spoke of earlier in the script. And what -- how TPB fits into that long term, I think, is incredibly exciting.

The Modern Oral opportunity, it's real. It's gaining momentum. I think you're seeing early progress from our company that across our D2C platforms and progress we're making in bricks and mortar gives us a lot of enthusiasm around where we're at in terms of harvesting that long-term opportunity. As Andrew mentioned, our investments in this category are going to be incredibly disciplined and ultimately tied to our sales objectives in this category.

And I think lastly, the heritage business for us is still very important. It provides strong cash flows for the company, and it gives us cash flow to invest in the future and ultimately harvest the opportunity that we see in front of us. So it's really exciting times at Turning Point Brands. And with that, I'll sort of close by saying, I look forward to talking to you all in a few months here and updating against our progress against the plan. So thank you so much for joining.

Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.

Good morning, and welcome to the Turning Point Brands Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

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

Good morning, everyone. Earlier today, we issued a press release covering our fourth quarter results. available in the Investor Relations section of our website at www.turningpointbrands.com. During this call, we'll discuss consolidated and segment operating results, the operating environment and our progress against our strategic plan.

Before we begin, please refer to the forward-looking statements and risk factors in our press release and SEC filings. We'll also reference certain non-GAAP financial measures. Reconciliations and explanations are included in today's earnings release.

With that, I'll turn the call over to our CEO, Graham Purdy.

Thanks, Andrew. Good morning, everyone, and thank you for joining our call. We are pleased with how the year wrapped up and the momentum we built for 2026. Revenue increased 29% to $121 million for the fourth quarter, including $41.3 million in Modern Oral net revenue. Adjusted EBITDA increased 14% to $30 million for the quarter. We are initiating 2026 Modern Oral gross revenue guidance at a range of $220 million to $240 million in Modern Oral net revenue at a range of $180 million to $190 million.

As we've stated in the past, we are ready, willing and able to increase our investment behind our white pouch brands and expect a portion of that investment to be accounted for as contra revenue under GAAP. Accordingly, we think it's valuable for us to provide transparency into difference between gross and net to evaluate our progress over time. Our focus is on building lasting consumer relationships that require front-loaded investment. Once consumers enter the franchise, we tend to see consistent repeat purchasing that supports revenue over many years. While this category is still in the early stages, we believe the average consumers with lifetime value could last decades.

In addition, we expect first quarter 2026 consolidated adjusted EBITDA to be between $24 million and $27 million. We are currently working on several significant and exciting sales and marketing initiatives and investments for white pouch that make it difficult to accurately project EBITDA beyond Q1. Obviously, when looking back at 2025, we are most pleased with the growth of our white nicotine pouch brands, they're long-lasting vibrant flavor options, comfortable mouth feel and flexible nicotine levels continue to win with consumers.

Both FRE and ALP have cultivated strong brand identities that resonate with their respective consumer bases. During the quarter, net white pouch sales increased by 266% year-over-year and gross sales increased 337%. We continue to make progress expanding freeze distribution to large regional and national c-store chains and ALP already one of the top [ D2C ] pouch brands in America, has started to appear on bricks-and-mortar shelves in select retailer tests. Recall that we initially expected ALP to be exclusively D2C for all of 2025. Suffice it to say, we are pleased ALP's running ahead of schedule, and we expect to significantly expand bricks-and-mortar distribution about during Q2.

We believe the nicotine pouch space, like most other nicotine businesses, will ultimately feature 5 to 6 widely distributed brands that command most of the market. Analysts expectations for the size of the category differ the most believable approach, if not exceed, $10 billion in manufacturers revenue by the end of the decade. Our Q4 performance and sales growth trajectory support our long-term target of double-digit market share in the category.

In order to best position the company to capitalize on this multibillion-dollar opportunity we have made and will continue to make significant investments in the business and refine our route-to-market strategy to prioritize FRE and ALP while continuing to generate strong cash flow from our [ heritage brands ]. Key investment initiatives include reallocating sales and marketing resources, increasing the head count of our sales force, improving our online presence, ramping up investment in chain accounts, pursuing brand-enhancing partnerships, expanding to international markets and building out U.S. manufacturing for our white pouch brands.

We are pleased with our progress on the manufacturing front and expect to qualify the first production lines at our new [ ruble ] factory over the next several months. We've been particularly encouraged by our ability to identify and onboard new sales talent. We are ahead of schedule in our goal of doubling the size of our sales force.

The rest of the Stroker's segment portfolio also performed better than expected in the quarter. Overall, Stoker's net revenue increased 70% to $81 million reflecting a 9% increase in our legacy brands and the [ aforementioned ] 266% increase in Modern Oral revenue. During the fourth quarter, Zig-Zag revenue was down 13% to $40 million and 9% sequentially. This decline was as anticipated and in line with expected opportunity costs with our laser focus on Modern Oral.

With that, I'll hand the call over to Summer to walk through the progress of our key go-to-market initiatives.

Thank you, Graham. As he noted, we continue to make significant investments to support our go-to-market strategies, prioritizing FRE while also maximizing the cash flow from our legacy brands. Throughout the quarter, we continued to expand our efforts and our initiatives to support the growth of FRE, focused on sales and marketing. We remain committed to optimizing our approach to expand distribution, improving brand merchandising and ensuring adequate inventory conditions.

We are seeing the early benefits of the new sales and merchandising tools referenced in prior quarters, which are enabling our sales team to secure the ideal assortment, establish shelf space and execute a premium look and feel at retail. We finished 2025 strong with our continued progress in large-scale chains and look forward to sharing further progress throughout 2026. We were grateful to have recently spent time with some of you at the sold-out Professional Bull Riding event in Madison Square Garden. These events are high octane and nationally televised providing a unique opportunity to engage with our consumer base and build brand awareness.

We look forward to sharing other opportunities that we're exploring, which align with FRE's Own Your Edge, tagline and brand [ ethos ]. With regards to Zig-Zag, we continued executing product, retail and cultural initiatives that build upon our 145-year legacy and strengthen our premium position across the segment. During the quarter, we advanced the rollout of natural lease flat wraps, expanding distribution and awareness in this fast-growing tobacco segment. We also supported trial of our legacy paper products through targeted regional programs and sampling tied to major sporting weekends in key markets.

We continue to advance the brand's evolution into a lifestyle platform with new apparel lines and culturally relevant brand activations that embody Zig-Zag's life fast burn slow ethos. In the quarter, we also had some exciting news from Stoker's with the launch of a new flanker brand, Stoker's Proud. Stoker's Proud offers a traditional long cut while delivering the same 100% American-made quality dip that Stoker's is known for. It's designed to attract value-seeking can consumers while insulating the broader brand from category pricing pressure. We'll share more about this expansion in coming quarters.

In closing, we continue to build our brands for the long term, execute and deliver against our omnichannel plan and win consumers. Our focus is to prioritize strategic investments that maximize the value of our world-class brands and further strengthen and leverage our distribution capabilities.

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

Thank you, Summer. Sales were up 29% year-over-year to $121 million for the quarter. Growth was driven primarily by Modern Oral, while we continue to invest in sales and marketing to support that expansion. For the quarter, gross margin was 55.9%, which is flat versus last year. Reported SG&A was $47.7 million for the quarter, which was up $3.1 million sequentially, the increase is driven by our planned commitment to invest in Modern Oral related sales and marketing as well as increased outbound freight charges. Adjusted EBITDA was up 14% year-over-year to $30 million for the quarter, at a 24.8% margin.

Going into segment performance. Zig-Zag segment net sales were down 13% year-over-year to $40 million for the quarter, which was in line with our expectations. For the quarter, Zig-Zag gross margin was 54.6%, which was up 40 basis points versus last year. Stoker's segment net sales increased 70% year-over-year to $81 million for the quarter. The Stroker's segment now accounts for 67% of consolidated net sales. Legacy Stoker's brands increased by 9% year-over-year to $39.7 million for the quarter, driven by continued share growth in [ MST ] that was partially offset by anticipated declines in loose leaf.

Modern Oral nicotine pouch net sales FRE and ALP were up 266% year-over-year achieving total revenue of $41.3 million. For the quarter, white pouch now accounts for 34% of consolidated net sales, up from 12% a year ago. We ended the quarter with $222.8 million of cash. Free cash flow for the fourth quarter was $19.2 million. CapEx for the quarter was $3.3 million. On to guidance and other items, as previously noted, we are initiating full year 2026 Modern Oral gross sales guidance of $220 million to $240 million and net sales guidance of $180 million to $190 million. We expect first quarter 2026 EBITDA of $24 million to $27 million, inclusive of increased white pouch sales and marketing investments.

For modeling purposes, the effective income tax range is 23% to 26% on a go-forward basis. Budgeted CapEx for 2026 is $4 million to $5 million, exclusive of projects related to our Modern Oral business. We expect to spend between $3 million to $5 million for the full year to supplement our Modern Oral PMTAs.

Now let me turn it back to Graham.

To conclude, we are pleased with our year-end results and excited about our prospects for 2026.

I'll now turn it over to questions.

[Operator Instructions] Our first question comes from the line of Eric Des Lauriers with Craig-Hallum Capital Group.

Congrats on another very impressive quarter here. First one for me on the investment opportunity. So you mentioned you're already willing and able to invest in nicotine pouch growth this year. It sounds like you have some investments picking up in Q1 with that EBITDA guide.

Just wondering if you could provide a bit more color on the sales and marketing sort of opportunities that you see in front of you right now? And just how we should be thinking about that for this year?

Eric, Andrew here. for the question. So yes, the way we're thinking about the EBITDA guide is that we are investing in sales and marketing. And we're also preparing ourselves for the launch of ALP in bricks and mortar in Q2. So we'll need to invest dollars upfront in order to have a successful launch in the second quarter.

All right. That's helpful. And then on domestic production, it's nice to hear the progress there. I think you said initial lines to be qualified in the coming months. Could you just expand on the domestic production outlook for the year, whether that's how many lines you expect to bring online? Or how do you think about the mix of domestic versus international production and how that should evolve throughout the year?

Yes. So we expect to qualify the lines in the next couple of months. And really, what we've done is we've -- in 2025, we spent CapEx dollars investments in infrastructure of the building. These are things like HVAC systems, electrical, plumbing, et cetera. We've got those lines and those lines are becoming more efficient week by week. So we're encouraged with the progress that they've made.

We will have -- we will continue to use our Indian partner because both brands are growing. And so the U.S. will supplement the growth. So we think that between the 2 locations, we'll have no supply chain constraints, in terms of enhanced margins, it's going to take a while to get the inventory out of the -- in the U.S. and through our P&L. So we expect to see some green shoots in margin enhancements towards the end of the year.

But one thing I will say is what we're doing to help with the margin profile is we are very much focused on freight. Our inbound freight. There are some opportunities for us to optimize there, and we've taken advantage of that.

Our next question will come from the line of Ian Zaffino with Oppenheimer.

As far as the investment and the ramp of Modern Oral, what should we expect as far as timing of all this investment? And maybe the better way to ask it is what does that investment look like exiting '26? So how much will it come down? And maybe what are your view as kind of a sustainable rate?

Yes. I think the way we're thinking about it is that the investment will be somewhat lumpy through the year as we see opportunities to invest that we think are high ROI projects, we will do that. And so to give you an exact figure in terms of investment ratio, I think it's going to be -- it's going to modulate quarter-to-quarter.

Okay. And then would you be able to give us kind of a sense of what to expect as far as the store count ramp for ALP? Should it be similar to what we've seen in FRE recently? Just maybe use that as a benchmark.

Yes. Thanks, Ian. Look, I think that we're, number one, incredibly excited about the ALP launch in Q2. We've laid some groundwork here as of late. And so we think that we're going to come out of the gate very strong there.

As we think about it, we're entering 2026 with a ton of enthusiasm and a ton of excitement around both potential for FRE and ALP and really putting some investment dollars behind that to yield the strong growth. That said, we think that the store count growth will probably look similar to the sort of early days of the FRE launch. As we focus in and hone in on areas where we've gotten free distribution currently, so we can round up the portfolio inside of those particular retail stores. And we have a specific focus around fee this year with chain wins. So we're pretty excited about sort of all the above relative to both FRE and ALP.

Our next question comes from the line of Aaron Grey with Alliance Global Partners.

First question for me, just want to piggyback off the last 1 here and maybe focus more on that free distribution, which you just alluded to there, Graham. So I appreciate the color that you provided on ALP distribution, but for FRE, which has been kind of the main horse for brick-and-mortar distribution.

It seems like you still see some opportunities for wins in white space in 2026. So maybe some more color in terms of expectations there? And you mentioned some change there, so I know that can be sometimes a big step change in uncertainty in terms of the timing. So any color there would be appreciated.

Yes. Look, I think that there's still tremendous amount of store opportunity out there in both sort of the chain environment, which we view as substantial at this point in time. as well as continued growth in our independent customers. We also see green shoots relative to the level of distribution that we have in stores and specifically our share of shelf and what we see in our internal in terms of what that yields.

So it's not necessarily at all times about raw store count adds. It's about the maturity of each of the stores that we get in distribution and making sure that we're winning inside those specific stores, but we do expect continued store growth this year. It may be a little bit lumpy relative to when chains come online, but we continue to expect upward trajectory there.

I appreciate the detail there. Second question for me. I just wanted to get some control of how are you thinking about innovation in the category, the need to stay ahead on that front as other large players aim to introduce new products, particularly given the FDA's new fast track PMTA program.

So I know we've talked about flavors a lot, but also more it seems like that's a big initiative for some of the larger players. So how are you thinking about innovation in the category? Any color there would be helpful.

Yes. Look, I think our first focus is winning with the existing products that we have. We think we have a tremendous edge relative to our flavor profiles, our satisfaction levels within our product, our moisture level, the majority of the category today is sold in sort of the [ Montandintergreen ] environment. We feel very confident that we're sort of covered up where the biggest portion of the market is.

In terms of long-term innovation, as we continue to grow our store count, we continue to grow the business, we certainly see opportunities down the road to make some investments behind additional flavor options. But at this point in time, we think we've got a portfolio with both FRE and ALP that we can win.

Our next question comes from the line of Nick Anderson with ROTH Capital Partners.

First one for me, just on nicotine pouch consumption, it looks like U.S. consumers are using more on a per day basis than they were a year ago. But that's still well below some of the more developed international regions. Just curious how you see growth evolving in this industry near term? Will it be more from existing consumers using more or new users entering the category? Any color there would be helpful.

I think the great news is both. And as you pointed out, the consumption patterns of existing consumers continues to grow as Modern Oral becomes a greater share of their nicotine requirements. And as you see the growth in the category, certainly, we're seeing consumer uptake from other tobacco products, specifically cigarettes and even vapes. So I think it's just a tremendous opportunity where sort of both provide growth vectors for the category.

I appreciate that. Second one for me on the tax landscape within Modern Oral, but we're seeing several safe considering tax hikes on nicotine pouches. Just wondering if you could provide some color on the potential for these increases this year. And just how that might impact the pricing and promotional environment going forward?

Yes. So taxes are something that the tobacco companies have dealt with for decades now. And I think the good news on the tax front is if you think about taxation in a specific state level, it impacts every product that's within that state. So there's no disadvantage for one manufacturer or another manufacturer relative to the tax landscape.

We would anticipate that taxes will, over the long haul, will continue to grow and look more like sort of the existing tobacco products. But for us, that the absolute opportunity of winning inside the states where taxes are aren't at this point in time, that doesn't really matter to us because playing fields level, and we think we've got a winning product.

Our final question will come from the line of Gerald Pascarelli with Needham & Company.

Great. I know you don't provide a breakout by brand, understandable, but I was hoping that you could maybe broadly unpack for us the revenue performance between FRE and ALP this quarter. Just wondering specifically if you saw a slowdown in ALPs [ DTC ] growth or if you had better-than-expected performance in FRE, which we know is lower gross margin?

So the basis of the question is just trying to reconcile some of the drivers behind the negative mix that you cited in terms of the Stoker's segment level gross margin in the quarter. So any color there would be great.

Yes. For internal reasons, we haven't split out specifically ALP in FRE. But what I can say is both brands performed within our expectation in the quarter.

Okay. And then for Graham, just I guess, a high-level question. Now that we're through year 1 of the white pouch rollout, if you could just talk about any learnings you've had where you view the biggest white space opportunities from a distribution perspective? And how you balance getting into some of these larger national chains, which are seemingly more expensive versus maybe doubling back to retail locations where you're currently present and where you've done very well historically to get more shelf space and more facings to build out your presence at some of these retail locations you're currently in? So any color there would be great.

Sure. Sort of reference prior answer here on this call. Sort of green shoots all over the place for us. When you think about the leaning into ALP and the retail distribution there as we ramp that tons of white space. It's virtually all white space for ALP out there, FRE still a tremendous amount of store level distribution opportunities. Still a tremendous amount of opportunities relative to expanding the portfolio inside of existing stores.

And so we're focused on really all of the above because we think that there's so much opportunity out there. We've made a tremendous amount of investment in our sales force to really solidify sort of the ground troops to be able to go out and tackle that opportunity. You can see sort of how we're thinking about this coming year and ramping up our investment, we think that there's opportunities to invest in trade programs. There's opportunities to invest in further strategic partnerships to build out our brand profiles.

And so ultimately, what we think is long term, brands are going to win in this space. And for us, we think about ALP as probably one of the leading sort of brand properties in the space given the connection there. The large [ D2C ] footprint, FRE has done a great job relative to leaning into its equities with the [ Probo Writing ] Association partnership. We think that there's other opportunities out there that we're incredibly excited to invest behind. And so I think that it's really all of the above, more stores, more facings, more product in there for both FRE and ALP. And we think as we continue to build the brand profiles that we have a winning combination and ultimately, our goal is to be a strong challenger brand in the space where we think, the combination of those two brands could achieve a #4 position in the space and maybe with a little bit of upside.

I do want to circle back to your first question about the gross margin performance in Stroker's. So one thing to keep in mind is that we had an elevated tariff rate in the fourth quarter. And so that had an impact on the Stroker's margins because of the white pouch. We did -- we had an [ add ] back in EBITDA, but that's in the adjusted EBITDA. It's not in the gross margins.

This concludes our question-and-answer session, and I will now hand the call back over to Graham for any closing comments.

Thank you, operator. Really appreciate everybody getting on the call. We feel great about how we finished 2025. And I can tell you how enthusiastic and excited we are about the opportunities in front of us in 2026. So we look forward to talking to you in a few months here, and we'll talk to you then.

This concludes today's call. Thank you all for joining. You may now disconnect.

Good morning, and welcome to the Turning Point Brands Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Graham Purdy. Please go ahead.

Thank you, operator. Good morning, everybody, and I really appreciate you all joining the call. A little bit of a somber morning here for us in town here. Before we walk you through our Q3 results, I'd like to say a few words about the tragedy that hit our community yesterday with the UPS flight crash. As I'm sure you're aware, we're a Louisville-based company. Aside from being a business partner of ours, UPS is really woven into the fabric of the Louisville community. In many ways, Louisville is a -- it's a very small town and the community is very tight-knit. And while we're fortunate that none of our employees were directly impacted or affected by the tragedy yesterday, it's likely that we have friends and loved ones that know somebody that was. Our heart goes out to the families of those that were directly impacted by the tragedy and then to the UPS family as they deal with this heartbreaking situation.

And so with that, I'd like to turn the call back to the operator to get started.

Thanks, Graham. Now I would now like to turn the conference over to Andrew Flynn, Chief Financial Officer. Please go ahead.

Good morning, everyone. A short while ago, we issued a press release covering our Q3 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 some perspective on the operating environment and 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.

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

Thanks, Andrew. Good morning, everyone, and thank you for joining our call. Our consolidated third quarter results were better than expected and demonstrated continued progress against our plan. Revenue increased 31% to $119 million for the quarter, including $36.7 million net Modern Oral revenue, which includes $1.5 million of slotting fees that are accounted for as contra revenue. Adjusted EBITDA increased 17% to $31.3 million for the quarter. We are increasing adjusted EBITDA guidance to a range of $115 million to $120 million, up from $110 million to $114 million. We are increasing full year consolidated nicotine pouch sales guidance to a range of $125 million to $130 million, up from $100 million to $110 million. This includes both FRE and ALP.

We are particularly pleased with the growth of our white nicotine pouch brands. Their long-lasting vibrant flavor options, comfortable mouth feel and flexible nicotine levels have resonated with consumers. During the quarter, white pouch sales increased 628% year-over-year and 22% sequentially. Some of you may have noticed that ALP, already one of the top D2C pouch brands in America, has started to appear on bricks-and-mortar shelves in select retailer tests. Recall that we initially expected ALP to be exclusive D2C for all of 2025. Suffice it to say, we are pleased that ALP is running ahead of schedule.

We believe the nicotine pouch space, like most other nicotine businesses, will ultimately feature five to six widely distributed brands that command most of the market. Analyst expectations for the size of the category differ, but most believe it will approach, if not exceed $10 billion in manufacturers revenue by the end of the decade. Our Q3 performance supports our long-term target of double-digit market share in the category. In order to best position the company to capitalize on this multibillion-dollar opportunity, we have made and will continue to make significant investments in the business and refine our route-to-market strategy to prioritize FRE and ALP, while continuing to generate strong cash flow from our heritage brands.

During the quarter, we raised $100 million of gross proceeds under our previously announced at-the-market offering program at an average share price of $98.59. We expect to opportunistically deploy this capital across a variety of high-return opportunities to accelerate the growth of our Modern Oral business. Consistent with our policy of maintaining active buyback and sales authorizations to maximize capital markets flexibility, we plan to update our ATM prospectus supplement and buyback authorization to provide for $200 million of capacity under each program. We have no current plans to transact under the updated authorizations.

Key investment initiatives include reallocating sales and marketing resources, increasing the headcount of our sales force, improving our online presence, ramping up investment in chain accounts, expanding to international markets and building out U.S. manufacturing to improve white pouch profitability and mitigate supply chain and tariff risk. We are pleased with our progress on the manufacturing front and expect to qualify the first production lines in the first half of 2026. We have been particularly encouraged by our ability to identify and onboard new sales talent. We are ahead of schedule in our goal of doubling the size of our sales force by the end of 2026.

The rest of the Stoker's segment portfolio also performed better than expected in the quarter. Overall, Stoker's revenue increased 81% to about $74.8 million, reflecting a 4% increase in looseleaf, a 6% increase in MST and the aforementioned 628% increase in Modern Oral revenue. During the third quarter, Zig-Zag revenue was down 11% to $44.2 million and down 6% sequentially. While this decline was anticipated and performance was ahead of our expectations, we continue to think it reflects some opportunity costs related to our focus on Modern Oral.

With that, I'll hand the call over to Summer to walk through the progress of our key go-to-market initiatives.

Thank you, Graham. As he noted, we continue to make significant investments to support our go-to-market strategies to prioritize FRE, while also continuing to generate strong cash flow from our legacy brands. Throughout the quarter, we continued to expand our efforts and our initiatives to support the growth of FRE focused on sales and marketing. Our key initiatives to support FRE include: first, optimizing our approach to expand distribution, improve brand merchandising and minimize out of stocks. To support our growing sales organization and increase store footprint, we have developed new sales and merchandising tools to secure the ideal assortment, establish shelf space and execute a premium look and feel at retail.

Throughout the quarter, we also continued our expansion efforts not only into new stores within large-scale chains, but also expanded our SKU offerings. Toward the end of the quarter, we launched FRE Watermelon. Fruit flavors represent about 1/4 of all OSB sales when excluding mint and wintergreen flavors. Watermelon is not merely a flavor extension, it is the fastest-growing fruit flavor in the nicotine pouch category, and FRE is uniquely positioned as a first mover with a complete strength offering.

Second, continuing to invest in and expand strategic marketing campaigns to accelerate brand awareness and consumer loyalty. We have been encouraged by engagement and early returns from our partnership with Professional Bull Riders and are exploring other brand partnerships and collaborations that align with FRE's Own Your Edge tagline and brand ethos.

With regards to Zig-Zag, we continue to execute marketing and sales initiatives that build upon our 145-year legacy and solidify our premium position across the segment. To build upon this legacy and reward our most loyal consumers while creating an opportunity for viral buzz, we launched a promotion called Zig-Zag for Life. This campaign offers an opportunity to win a lifetime supply of Zig-Zag cones to anyone who has or gets a Zig-Zag tattoo. We also relaunched Zig-Zag Studio, a collaboration with creators and musicians to build upon the brand's strong association with pop culture. These campaigns magnify Zig-Zag's identity as an iconic brand and consumer interest has been encouraging. Of note, in the quarter, we also laid the groundwork for the launch of a new Zig-Zag product, Natural Leaf Flat Wraps to better compete in the ever-growing Natural Leaf segment of the wraps category.

Lastly, turning briefly to Stoker's. We continue to see strong performance despite category pressure. In the quarter, we launched both a new product offering, Stoker's Fine Cut Wintergreen cans and Stoker's first-ever D2C site. Stoker's continues to be a steady heritage business with a very active and engaged consumer base.

In closing, we continue to build our brands for the long term, execute against our omnichannel plan and win new consumers. Our focus is to prioritize strategic investments to maximize the value of our world-class brands and further strengthen our distribution capabilities.

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

Thank you, Summer. Sales were up 31% year-over-year to $119 million for the quarter. For the quarter, gross margin was 59.2%, which was up 360 basis points year-over-year and 210 basis points sequentially. The change in margin is mix driven, primarily related to our outsized growth in Modern Oral. Reported SG&A was $44.5 million for the quarter, which was up $4.2 million sequentially. This increase was primarily driven by Modern Oral related sales and marketing investments as well as increased outbound freight charges to support our growing business. Adjusted EBITDA was up 17% year-over-year to $31.3 million for the quarter at a 26.3% margin.

Going into segment performance. Zig-Zag sales decreased 11% year-over-year to $44.2 million for the quarter, but was ahead of our expectations. Gross margins increased 210 basis points to 57.5%, driven by mix shift and improved COGS pricing in certain Zig-Zag product categories. Stoker's net sales increased 81% year-over-year to almost $75 million for the quarter. MST sales increased 6% year-over-year to $27 million for the quarter. Share in-store selling was up 130 basis points year-over-year to 12.1%. Loose leaf sales increased 4% year-over-year to $11 million. Our Modern Oral nicotine pouch sales, FRE and ALP, were up 628% year-over-year, achieving total revenue of $36.7 million. White pouch now accounts for 31% of our business, up from 26% in the second quarter and 6% a year ago.

Moving to the balance sheet. We ended the quarter with just over $201 million of cash. Free cash flow for the third quarter was negative $1 million, including the first coupon payment on our 7.625% high-yield bond issued in February of 2025. As Graham mentioned, during the quarter, we raised $100 million of gross proceeds and $97.5 million of net proceeds at an average price of $98.59 per share under our previously announced ATM program to support our white pouch growth initiatives. CapEx for the quarter was $3.8 million.

On to guidance and other items. As previously noted, we are increasing our full year 2025 adjusted EBITDA guidance to $115 million to $120 million from $110 million to $114 million and also increasing our anticipated total Modern Oral sales range to $125 million to $130 million from the previous range of $100 million to $110 million. This guidance reflects increased investment in our go-to-market plan as well as tariff and currency-related impacts. For modeling purposes, the effective income tax range is 23% to 26% on a go-forward basis. Budgeted CapEx for 2025 is $4 million to $5 million, exclusive of projects related to our Modern Oral business. We expect to spend between $3 million to $5 million for the full year to supplement our Modern Oral PMTAs.

Now let me turn it back over to Graham.

To conclude, we are pleased with our third quarter results, and I'll now turn it over to questions.

[Operator Instructions] The first question comes from Eric Des Lauriers from Craig-Hallum.

Congrats on yet another fantastic quarter here. First question for me, just on the onshoring, nice to see. How should we think about this from a capacity standpoint? And how are you thinking about sort of COGS per unit for nicotine pouches produced onshore versus via your co-manufacturing partner right now?

Eric, thanks for the question. So the way we're thinking about the unit economics for our white pouch is with onshoring, we'll have sort of immediate savings in terms of inbound freight as well as avoidance around tariff. So we should have favorability on those two items out of the gates once we actually qualify the lines, which we're expecting in the first half of 2026. And then on an ongoing basis, as we get volume on those lines, we expect the unit economics to improve from there.

Okay. Great. That's very encouraging. And then just any commentary on that capacity standpoint, how we should think about this?

Yes. Look, I think that as we've disclosed in the past, we feel good about the capacity that we've got with our third-party manufacturer. And the capacity that we get in the U.S. will be additive to that. So we believe that we're in a very good position, both from an inventory perspective that we have on hand today as well as capacity on a go-forward basis.

All right. That's encouraging. And then just as a kind of follow-up here, could you comment on what you're seeing from an in-store market share perspective for your Modern Oral category here? Just any -- I know it's still very early and you're still rolling out, but any comments on early kind of in-store market share would be helpful.

Yes. Look, it's -- we certainly haven't disclosed that publicly, but it's really sort of bifurcated at this point. Obviously, you have sort of a national perspective on where our market share sits from a national standpoint. As we grow our distribution base, we're really focused on share in-store selling. And I'll tell you, we're highly encouraged by those results.

The next question comes from Ian Zaffino from Oppenheimer.

Really good quarter. Question would be, can you maybe talk about the MST and looseleaf growth there? What was driving that as far as price, volume and kind of market share, if you could talk about that?

Yes. I would say that it's a combination of a couple of those things. We grew share sequentially in the quarter as well as there was some favorability around pricing. I would note that we anticipate that there's going to be north of 900 million cans sold in that category. We still have less than 10% share, although it's high single-digit share. We think there's tremendous opportunity for further gains within MST. So we remain excited about the opportunity.

Okay. And then on Modern Oral, can you just maybe help us understand the drivers there, FRE versus ALP? Maybe you could talk about each one and what you're seeing there. And then as you kind of continue to push into larger chains, what kind of cadence should we expect as those start to hit and as your discussions have been ongoing?

Sure. I'll take the first part of that question. To this point, we haven't disclosed the differentiation between FRE and ALP given the sensitivity around the partnership. What I can say is we saw healthy growth from both properties during the quarter. So we were excited about that. Our ALP business continues to dominate from a B2C standpoint, but they are also making some inroads into some bricks-and-mortar accounts. We're highly encouraged by the results of some of those early tests in there. FRE had a very nice quarter, both online as well as in bricks and mortar.

I'll pass it over to Summer to answer the second part of the question there for you, Ian.

We continue to make progress in both new chains and expanding our SKU assortment in existing chains. So we remain really excited and encouraged about our progress there. And in particular, with some of the partners we've had for a while, both sides continue to be happy with the partnership, and we're excited to see how it evolves in coming quarters. And as we look toward progressing in upcoming quarters, major chains are in the process of evaluating their planograms for next year, and we're in those conversations, same as our competitors. So we look forward to how the next few quarters roll out.

Okay. And then if I could just ask one more here. As far as in Modern Oral, the promotions, how did you handle the promotions that we saw a couple of months ago? And how do you kind of navigate the landscape given that? Or what's kind of, I guess, your overall view of how the category is going to kind of play out over -- the competitive landscape is going to play out over the next, call it, quarter or 2 quarters or so?

Sure. Look, I remain bullish on the category. And one of those sort of foundational components about that bullishness is around the balance sheets that the large manufacturers have to deploy against converting consumers into the category. We believe we have a winning format as well as two winning brands that give us an opportunity to really chase after consumers. Obviously, Q3 was a brutal promotional quarter, but not for us. We sort of maintained the integrity of our pricing at retail. We continue to focus on the things that we know win for our brands, which is getting more shelf space, getting broader presence in the store. So we really did participate within the quarter as we saw the major competitors sort of deploy their promotional resources in the market.

And look, we think long term, there's going to be strategic opportunities for us to invest in opening up the funnel for the consumer, but we're taking a really measured approach and really reading our data and listening to what consumers are telling us within our online platforms, which gives us somewhat of a distinct advantage when we have that really direct touch point with our consumer. So we'll be opportunistic in terms of the way we think about deploying our promotional dollars from a retail standpoint. But more importantly, we're really focused on getting our platform right in the store because we see when we do that, that we have a really great opportunity to win consumers.

The next question comes from Aaron Grey from Alliance Global Partners.

This is John on for Aaron Grey. Congrats on the strong quarter. So I know in the prepared remarks, you touched on the go-to-market strategy progress. But in terms of distribution, do you still see meaningful white space opportunities for FRE more so near term? And for ALP, when should we expect to see meaningful brick-and-mortar distribution? Were some of the initial brick-and-mortar channel pilots to see how ALP and FRE performed? Just any more color on what you think may be the right approach to promote the brands alongside each other would be helpful.

Yes. Look, we're excited about the continued gains that we make. We've mentioned in past quarters and as well as on this call that we continue to invest in our sales infrastructure to further our distribution gains in the market. Some are just noted a second ago, we're pleased with our progress against the chain accounts, both large and small chains. We do have an account that shares both platforms, both FRE and ALP. We've been excited about the results of sort of that shared platform inside the store. There's a tremendous amount of white space for both brands, albeit a little bit more for ALP at this point in time, given the fact that we've been focused on bricks-and-mortar distribution out of the gate, and ALP has been focused on direct-to-consumer.

So I think there's a really great marriage there as we move forward with tremendous opportunities for both brands to effectuate a broad-based distribution and really screen to multiple consumer audiences to give us the greatest upside to capture consumers into either one of the franchises.

Great. And second, how would it be best to think about the approach to balancing profitability and growth? 4Q embeds a little bit of EBITDA margin pressure and the company has been able to achieve sizable growth while maintaining a healthy EBITDA margin of 26% year-to-date in 2025. Do you expect you'll be able to maintain that? Or could there be some EBITDA margin pressure even beyond 4Q as you invest in the promotional pouch environment?

Yes. Look, we're not certainly going to comment on our investment strategy specifically for competitive reasons. I would say that at this point in time, we've struck a sort of a healthy balance between growth and profitability. And so I think that we'll be measured in the future in terms of how we deploy our resources around high-return projects.

The next question comes from Nick Anderson from ROTH Capital Partners.

Congrats on the quarter. First one for me, just on Modern Oral. Given the growth in the category, have you seen any noticeable changes in shelf space allocation by retailers? I know someone mentioned the planogram phase going on now, but how do you expect that allocation of space to trend kind of going forward? And if Modern Oral products are gaining allocation, which products are losing allocation?

Yes. I'll take that question, and Graham can chime in as well. What we're hearing from retailers that they're really taking a methodical approach to how they do allocate space across their shelf and their back bar area, because they see the category dynamics shifting more to OST. And so they're being really diligent and deliberate about how they're allocating that space across the segments in the nicotine space and then being really thoughtful about which brands they're putting on shelf as well based on performance. And so we're happy to be part of those conversations.

Yes. Look, I think we anticipate that the allocation of space for Modern Oral will grow given the underlying growth of the category. And I think it's really -- it's too difficult a question to answer specifically on which products will be displaced on the shelf because there's a lot of regional preferences around different types of products that sell nationally. So I think it's a little hard to say what could be displaced in that process. But from our standpoint, we think opening up more shelf space is just -- is a big tailwind for our business.

Great. I appreciate that color. Second for me, just on the loyalty initiatives. You have ALP and FRE rewards programs online. Just wanted to get some color on how those are trending in terms of program growth and engagement, and if there's any noticeable difference in spend from these consumers in those loyalty ecosystems.

Yes. Look, I think having rewards programs on any D2C site is a smart strategy for a D2C brand because you're able to engage with those consumers that are loyal and coming back to purchase and engage with your brands. And those are really the customers that we highly value. And so as we continue to grow that program, we'll continue to evolve and engage with those consumers, and they're certainly the most valuable to us. And that first-party data and being able to understand their preferences is something that we're really focused on.

Yes. And look, I'd like to add to that as well, both FRE and ALP, I think where we're particularly excited is the engagement with our subscription sign-ups on both platforms. While we haven't specifically pointed out what that growth is, we're very encouraged with the consumer adoption around our subscription service.

The last question comes from Gerald Pascarelli from Needham.

Just on Modern Oral. Obviously, it's another very strong quarter, another very strong guidance raise here. But the guidance does imply that the trends that the revenue will slow, I think, to like mid-single-digit growth sequentially if you use the midpoint of the updated guidance here. So if you could maybe just talk about some of the dynamics. Was there a potential pull forward in revenue in 3Q? Or is it fair to assume that there may be a certain degree of conservatism embedded in the new outlook just given some of the category dynamics? So any color there would be helpful.

Yes. Gerald, great question. Thank you for asking. Look, I think the -- while we're excited about sort of the guidance increase, I think the area that we would point out is as we go out and we get on shelf and we negotiate those deals to get on shelf, that comes at the expense of contra revenue. And so I think in the out quarters, what you could expect from us is really to talk a little bit of the differential between our gross sales and net sales because of that dynamic of contra revenue. But that's really the area that speaks to your question.

Got it. My next one is on gross margin for Stoker's specifically. Historically, a segment with gross margin that ranged in the high 50s or in the mid-50s to the high 50s. And over the past 2 quarters, now you're above 60%, which comes seemingly with negative mix shift from higher revenue growth in your Modern Oral portfolio. So if you could just help us bridge what's driving this really strong margin? Have the margin profiles on both FRE and ALP come up maybe relative to where they were a few months ago as you continue to scale the brand? And I guess just like a long-winded way of asking like what's driving the 60% plus margin in Stoker's?

Yes. Thanks for the question. So what's driving the higher margins in the segment is really mix. And what we're seeing is that we have a higher D2C in the Modern Oral part of that business. I think the thing that's important to keep in mind is that our freight expense is actually in SG&A and not in cost of goods. And so when you look at it, when you include the SG&A portion of that freight that's attributable, you will see some compression on the margins at the EBITDA line. But that's part of the driver.

The other part of the driver is tariffs on a go-forward basis, we would expect to have more of an impact on tariffs. So as I think about the short term over the next couple of quarters, I would expect to see those margins come down just a bit due to margins, but also we'll still have a higher mix of D2C, which should elevate. But I'd expect net-net for those margins to come down just a bit.

Perfect. And then if I could just squeeze one more in. Just going back to some of the promo commentary. Graham, if you could just maybe provide I don't know, your near-term outlook on the category, what you expect from the promotional environment and whether or not you expect it to maybe become a little more rational in 2026 than it is currently? I would just love your thoughts there.

Yes. I appreciate the question. Look, you've got three well-run, well-financed companies with incredibly strong balance sheets. And they really -- this category sort of is an area that they have to win in, right? And so I think that with that as the backdrop, as they all fight for the consumer, I would anticipate that the promotional environment would be -- would remain healthy, driven by the large competitors in the category. And from our standpoint, we're really focused in on building brand, building the connection with the consumer, both with our FRE and ALP properties and being really mindful of how we spend against the funnel and opening up for consumers. We certainly don't have the same types of resources that the large companies do, but we believe that we're -- our balance sheet for our size is it puts us in a really good position to sort of strike in the areas that make sense for our brands.

And so we're excited about the promotional activity from the standpoint of the growth of the category. This is the way the category gets to $10 billion or north by the end of the decade is by the conversion of cigarette consumers into Modern Oral, and there's no better companies to do that than the folks that own those cigarette brands. So I remain bullish on the category. I'm particularly bullish on the large manufacturers converting consumers into Modern Oral. And I'm particularly excited about our brands and the properties of our brands relative to the variety of nicotine strengths, the flavors as well as the mouth feel. I think that when we have a consumer that tries our product, we have a really good shot at converting that consumer.

And so I don't anticipate that the landscape will lighten up anytime soon from a promotional standpoint. It's been going on for over a year now. There has been some large company in the space that has been on promotion at some point in time for well over a year now. And so I don't think it's going to change anytime soon from that standpoint. But we're just bullish and excited about our opportunity to win consumers because of our brand as well as the features and benefits of the product.

That concludes our Q&A session. I will now turn the call over to Graham Purdy for closing remarks.

Thank you so much, everybody, for joining the call this quarter. Certainly really excited about our Q3 results and really excited to talk to you as we bend around to 2026. So thank you so much for taking the time, and we'll talk to you all in a few months.

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

Good morning, and welcome to the Turning Point Brands Second Quarter 2025 Earnings Conference Call.

[Operator Instructions]

Please note, this event is being recorded. It is now my pleasure to turn the conference call over to Andrew Flynn, Chief Financial Officer. Please go ahead.

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 some perspective on the operating environment and 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. I will now turn the call over to our CEO, Graham Purdy.

Thanks, Andrew. Good morning, everyone, and thank you for joining our call. Our consolidated second quarter results were better than expected and demonstrated continued progress against our plan. 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 increased 15% to $30.5 million for the quarter. We are increasing our adjusted EBITDA guidance to a range of $110 million to $114 million, up from $108 million to $113 million, inclusive of significant sales and marketing investments.

We are increasing full year consolidated nicotine pouch sales guidance to a range of $100 million to $110 million, up from $80 million to $95 million. This includes both FRE and ALP. We are particularly pleased with the growth of our white nicotine pouch brands. Their long-lasting vibrant flavor options, comfortable mouthfeel and flexible nicotine levels have resonated with consumers, and we continue building FRE's presence in bricks and mortar.

During the quarter, white pouch sales increased by nearly 8x year-over-year and was up 35% sequentially. We believe ALP is now one of the top D2C pouch brands in America and is poised to expand into retail sooner than initially expected. We believe the nicotine pouch space, like most other nicotine businesses, will ultimately feature 5 to 6 widely distributed brands that command most of the market.

Analyst expectations for the size of the category differ, but most now believe it will approach $10 billion in manufacturers revenue by the end of the decade. Our Q2 performance supports our long-term target of double-digit market share in the category. In order to best position the company to capitalize on this multibillion-dollar opportunity, we have made and will continue to make significant investments in the business and refining our route-to-market strategy to prioritize white pouch while continuing to generate strong cash flow from our heritage brands.

As we mentioned last quarter, key investment initiatives include reallocating sales and marketing resources, increasing the headcount of our sales force, improving our online presence, ramping up investment in chain accounts and developing U.S. manufacturing. We have been particularly encouraged by our ability to identify and onboard new sales talent. Our goal is to approximately double the size of our 2024 sales force by the end of 2026.

So far, we are ahead of schedule and pleased with the initial results. The rest of the Stoker segment portfolio also performed better than expected in the quarter. Overall, Stoker's revenue increased 63% to about $70 million, reflecting a 3% decline in looseleaf, a 4% increase in MST. And as April mentioned, our Modern Oral revenue increased by nearly 8x.

During the first quarter, Zig-Zag revenue was down 6.9% to $47 million, but essentially flat sequentially despite our focus on the white pouch category during the quarter. For modeling purposes, people should recall that in the second half of the year, we will continue to face difficult year-over-year comps due to the wind down of our CLIPPER business and the deemphasis of the cigar category. With that, I'll hand the call over to Summer to walk through the progress of our key go-to-market initiatives.

Thank you, Graham. As he shared, we've made exciting progress in the Modern Oral category so far in 2025. Throughout the quarter, we continued to receive favorable consumer and trade feedback, reinforcing our portfolio's meaningful points of difference in strength, moisture and flavor. We also continue to see increasing order and repeat purchase rates online and in wholesale. This strong performance continues to give us confidence in our brand investments, particularly in sales and marketing.

Key initiatives in this space include: first, we will continue growing the size of our sales force to increase the frequency of store visits with a focus on expanding distribution, improving brand merchandising and minimizing out of stocks at retail. As a result, we expanded our distribution and product assortment with notable chain partners throughout the quarter.

Second, strategic marketing campaigns to accelerate brand awareness and consumer loyalty. For example, in the quarter, we announced a long-term partnership with Professional Bull Riders or PBR. Few sports deliver quite like PBR, and we believe this opportunity will enable free to connect with consumers who appreciate authenticity, seizing the moment and pushing boundaries, core tenets that align with FRE’s brand ethos.

We marked our debut with this partnership at the PBR World Final Championship at AT&T Stadium in May, where the free brand was woven into fan experiences and the competition itself. We are looking forward to the PBR season officially kicking off this fall and integrating this partnership into 360 marketing campaigns.

We believe in the importance of building our brand for the long term, and we'll continue to invest to support growing consumer loyalty.

With regards to Zig-Zag, we continue to execute marketing and sales initiatives that build upon our 145-year legacy and solidify our premium position in papers, cones and wraps. Recent new product introductions include the launch of hemp cones and pop tubes, which are singular cones available in our unbleached variety and sold in a reusable premium tube.

We have solid traction during this introductory period with more brand news to follow in upcoming quarters. As we shared last quarter, we anticipate second half headwinds within the Zig-Zag segment from cigars and CLIPPER lighters. Our expansion plans in these categories included investments behind some lower-margin products, which we deemphasized in light of tariff impacts and our reallocation of time and resources to our nicotine pouch initiative.

In closing, we continue building our brands for the long term, executing against our omnichannel plan and winning new consumers. We will continue to prioritize strategic investments to maximize the value of our world-class brands and further strengthen our distribution capabilities. Let me now turn the call back over to Andrew to go through our financial results.

Thank you, Summer. Sales were up 25% year-over-year to $116.6 million for the quarter. For the quarter, 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.

Reported SG&A was $40.3 million for the quarter and up $3.9 million sequentially. The increase on a sequential basis is driven by continued investments in sales and marketing as well as temporarily elevated outbound freight charges. Adjusted EBITDA was up 15% year-over-year to $30.5 million for the quarter and a 26.1% margin.

Going into segment performance. Zig-Zag sales decreased 6.9% year-over-year to about $47 million for the quarter and is in line with recent quarterly performance. Gross margins declined 410 basis points, driven primarily by product mix due to an accelerated exit from our CLIPPER business.

Stoker's net sales increased 63% year-over-year to almost $70 million for the second quarter. Net sales for the MST portfolio grew 4% year-over-year to $29 million in the quarter. Share in-store selling was up 60 basis points year-over-year to 11.8%.

Stoker's chewing tobacco was the #1 chewing brand in the quarter, gaining 160 basis points of share to 32.7% according to MSAI. Category performance was driven by a larger decline in premium loose leaf with Stoker's benefiting from consumer trade down. Our 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. As Graham mentioned, white pouch accounts for 26% of our total revenue mix.

Moving on to the balance sheet. We ended the quarter with $109.1 million of cash and free cash flow for the second quarter was $11.2 million. CapEx for the quarter was $3.9 million. During Q3, we will have our first coupon payment on the $300 million, 7.625% bond that we issued in February of 2025.

On to guidance and other items. As previously noted, we are increasing our full year 2025 adjusted EBITDA guidance to $110 million to $114 million from $108 million to $113 million and also increasing our anticipated total Modern Oral sales range to $100 million to $110 million from the previous range of $80 million to $95 million.

This guidance reflects increased investment in our go-to-market plan as well as tariff and currency-related impacts. For modeling purposes, the effective income tax range is 23% to 26% on a go-forward basis. Budgeted CapEx for 2025 is $4 million to $5 million, exclusive of projects related to our Modern Oral business. We expect to spend between $3 million to $5 million for the full year to supplement our Modern Oral PMTAs. Now, let me turn it back over to Graham.

To conclude, we are pleased with our second quarter results, and I'll now turn the call over to questions.

[Operator Instructions] Your first call comes from the line of Eric Des Lauriers.

Congrats on a very impressive quarter here. My first question is on ALP. Graham, I think you mentioned plans for the brick-and-mortar rollout were ahead of expectations. I'm just wondering if you could expand a bit on that and just how we should be thinking about the rollout of ALP from e-commerce to brick-and-mortar.

Yes. Look, I think that we've been pretty excited about the online results. In our estimation, they've grown the brand into one of the largest D2C brands. And I think that's given the team a lot of confidence to move forward with starting in bricks and mortar. It's super early innings.

And I think that as the bricks and mortar matriculate, obviously, they're a small sales organization right now. And so I would expect them to sort of plot along and gain stores over time as we sort of bend around the end of this year as they kind of just started the thought process of getting into it.

Got it. And should we think of the rollout for ALP as kind of following in the stores where FRE already is? Is it a bit of a different team or go-to-market strategy there? And then just kind of related to all that, just wondering how conversations with national chains are progressing.

Yes, I'll take the first part of that question. Look, I think that inevitably, our goal with FRE is to be ubiquitously distributed across the United States. So eventually, there should be total overlap of those 2 brands. I think in the early innings, given the different sizes of the organizations, it will be a little bit hit and miss in terms of where that overlap may or may not exist.

And then with regards to expanding FRE in other national chain accounts and throughout the United States, we continue to see progress with the chains that we've spoken about in prior quarters. And throughout Q2, began to make significant progress with other nationally large recognized chains and are in the process of expanding in their geographies across the United States. So we're excited about the momentum that we have and more to come in short order.

Your next question comes from the line of Ian Zaffino with Oppenheimer.

I wanted to just get a sense about the white pouch production, tariffs that you might be facing and then potential to maybe move production out of India.

Ian, Andrew here. So as it relates to tariffs, as you've seen in the news, there's -- it's a dynamic environment. And what we're doing is we're focused on controlling our controllables. So we've built an inventory position around that product. So that gives us some insulation from a tariff increase -- we've also been negotiating with some of our suppliers across the board to get some reductions in our cost of goods.

And also, we've been looking at taking some price increases in different product lines. So we're managing the tariff headwind as best we can. And so as it relates to India and our production capabilities there, we've got plenty of capacity. So good news is we're feeling good about that.

And then in terms of the mitigation around the tariff exposure and bringing production to the U.S., we continue to invest. You'll see the CapEx was around $3.9 million for the quarter. So we continue to invest in that capability here in the United States.

Okay. And then as a follow-up, would you be able to give us a breakout between ALP and FRE? And then also, what type of slotting fees are you facing now? Or did you pay last quarter? And how do we think about that going forward as far as cost to roll out and to expand distribution?

Sure thing. So as much as I would love to disclose the ALP and FRE split, we've got a joint venture relationship with ALP, and it's something that we're not able to provide in terms of that split. In terms of slotting fees, look, this is a very exciting segment of the market, and it's competitive.

And so we've got to pay fees to get into chains and all kinds of other retailers. And so that is something that we have invested in, and it's something that we will continue to invest in, and it's reflected in our top line guidance for the white pouch range that we disclosed this morning.

[Operator Instructions] Your next question comes from the line of Aaron Grey with Alliance.

Congrats on the quarter. First question for me, I just wanted to talk about gross margins a bit, particularly Stoker's gross margin remains healthy. You called out mix kind of for the overall improvement in gross margin. Obviously, Stoker's was a highlight there. So just any color you can provide there, particularly as we think about pouches within that, that's a higher mix.

Historically, you had pointed to lower margins from pouches, but maybe better than you initially had expected. There's a lot of dynamics moving between DTC and brick-and-mortar. So maybe just any color in terms of how best to think about gross margins, particularly as we move forward. And it seems like we're going to get increasing mix in terms of coming from brick-and-mortar.

Yes. Thanks for the question, Aaron. Look, I think that we've got our Stoker's heritage business, which is our MST and our chewing tobacco brands. The margins there remain healthy and expanding. As it relates to Modern Oral, I think you rightly pointed out, there is -- you do have a mix of D2C versus bricks and mortar.

But I think in the early innings, we're pretty excited about where the margin profile of the business is. Now I think that we need to underscore that, as Andrew had mentioned in the last question, we intend to invest behind the brand. And so I think you can see a bit of lumpiness within the white pouch segment for us. But over the long haul, we have -- we're very bullish on the margin profile of the segment.

I appreciate that color there. Second question for me. Just as we think about pouch in the second half of the year. So guidance implies it will be roughly flat versus first half. I know there's some volatility in terms of new distribution and replenishing. So I wonder if you could provide some color in terms of new distribution you're expecting in the back half and what's embedded within that?

And then maybe also some color in terms of how you're incentivizing the sales team that you're looking to double there. So any color you can provide in terms of how you're incentivizing them because this is a kind of different category in terms of growth you're seeing than some of the legacy categories you've seen, maybe where you're sourcing some of that sales force from?

Sure. So look, I think as long as it seems like it's been around, ALP has only been in the market for a few quarters now. And I think that a little bit of the guidance range is reflective of some of the unknown relative to the bricks-and-mortar launch and then ultimately, what the growth profile of both the brand properties will be on the D2C platforms.

In terms of how we go out and gain stores, obviously, that's a function of the amount of feet that you have on the street. We have continued to expand our sales force. I think we noted in the call that our plan is to double the 2024 sales force by the end of 2026.

And obviously, with that expanded sales footprint, we would expect increased rates of distribution from our historical averages. So I think we're pretty excited about the way that we've resourced the brand at this point in time. We're in a trench warfare format here, and I think that we feel like we're moving our staffing in a direction that gives us the effective capability to compete against the broader market.

And your next question comes from the line of Nick s Anderson with ROTH.

First one for me. Just on the Modern Oral promotional environment. We saw some aggressive marketing activity in the first half of the year. Your gross margin suggests you haven't been participating in this discounting. Just what are you seeing out there in terms of the pricing environment? And how are you planning on positioning your products against maybe a more aggressive promotional backdrop?

Yes. Look, I think that since the category became competitive, meaning once it became a category that was beyond just the market leader, we've seen consistent promotion from one manufacturer to the next quarter-to-quarter. I think what's interesting for us is we're incredibly excited about the promotional environment from the standpoint of building awareness around the category.

With the current estimates now sort of cresting the $10 billion by the end of the decade. This is actually how it happens as the large companies spend a ton of money speaking to adult vapers, adult cigarette consumers. And so we're actually very excited about that opportunity.

As you've seen with the results of the first 2 quarters of this year, we've had high promotional environments from a large competitor entering the market. You've seen our results. And I think we remain sort of optimistic, number one, around the benefits that our product, we think brings the end consumer relative to the mouth feel and the satisfaction levels that we provide.

That's not to say that from time to time, we won't partner with a chain or what have you to increase sort of in-store foot traffic around our brand. But at the same time, we think that we're sort of uniquely positioned in the long haul to be a premium brand in this category. And so that really excites us.

That's great. I appreciate that color. Second for me, just on the MRTP applications and the opportunity there. Is this a path you would consider going down? And if these applications are passed, how would it change the way you could kind of go about marketing your Modern Oral offering?

Yes. No plans at this point in time, and we remain committed to the current PMTA process.

Your next question comes from -- actually, this is the last question coming from the line of Gerald Pascarelli with Needham.

I just had a question on your legacy MST business. Just understanding that you're going to prioritize Modern Oral, which obviously makes sense. Your legacy MST business has been incredibly consistent. It grew again on a very tough comp this quarter.

And in the current environment, it's seemingly just very well positioned as a value offering, right? And so just looking forward, how do you think about managing growth and driving continued distribution and market share gains in Stoker's MST with growing and rolling out your Modern Oral business, which is still very early days. So any color on the balance, I think, would be helpful.

Yes. I think what we've seen in the early innings is that there's been relatively strong overlap between the Modern Oral stores that we've focused on gaining distribution in and our Stoker's MST portfolio, which has allowed us the opportunity to cross-sell in those environments.

So I think you're seeing a function of the sort of the early day synergy that we actually are really bullish on long term as we grow out our sales force. And look, I think you rightly pointed out, Gerald, that what we've seen from the large competitors and some of their announcements over the last couple of years is that premium MST has been very susceptible to the white pouch category.

And what we see within the underlying dynamics of MST is that there's still a large audience of committed dippers in the U.S. We believe we've got one of the best brands that has incredible quality around it, and we continue to provide value to those consumers.

And from an MST brand standpoint, we feel great about sort of the potential opportunity that's still in front of us. There's still a lot of runway in terms of store growth that we can get into. There's still pricing opportunities in the segment. And so I think we're still bullish on our MST business on a go-forward basis and think that there's a ton of opportunity out there to harvest.

Got it. Super helpful. Just last one for me. I know it's early, obviously, but if you could share any learnings that you may have had over the past 2 quarters with both of these brands just in terms of the consumer reception or any feedback that you've had -- if you've had any, that would be helpful.

Yes, sure. We continue to hear incredibly positive feedback from both consumers and retailers, as Graham has talked about, the power of the brand and the unique differences between our products relative to competition, including our variety of nicotine strengths, mouth feel and moist pouch.

So we continue to see increased reorder rates, increased trade receptivity and are very excited about the opportunities as they proceed. We also, as I mentioned on the call, recently participated in the PBR event in Dallas in May. We had a variety of consumers that we were able to engage with live. We were very active in that event and the consumer reception while we were there was really tremendous.

At this time, there are no further questions. I'd like to turn it back over to Mr. Purdy.

All right. Thanks, operator. Appreciate everybody joining the call today. We're pretty excited about our Q2 results, and we look forward to talking to you in about 90 days or so about Q3.

Thank you. This concludes today's conference call. You may now disconnect.