Good morning, and welcome to the Turning Point Brands first quarter 2022 earnings conference call. All participants will be in a listen-only mode. All lines have been placed on mute to prevent any background noise. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Louie Reformina, Chief Financial Officer. Please go ahead. Thank you, operator. Good morning, everyone. This is Louie Reformina, Chief Financial Officer. Joining me are Turning Point Brands President and CEO, Yavor Efremov, and Graham Purdy, Chief Operating Officer. This morning, we issued a news release covering our first quarter results. This release is located in the IR section of our website, www.turningpointbrands.com. There is also a presentation we will be referencing on the call available on the site. On that presentation, if you turn to slide two, our disclaimer. During this call, we will discuss our consolidated and segment operating results and provide a perspective on our progress against our strategic plan. As is customary, I direct your attention to the discussion of forward-looking and cautionary statements in today's press release and the risk factors in our filings with the SEC. On the call today, we will reference certain non-GAAP financial measures. These measures and reconciliation to GAAP can be found in today's earnings release, along with reasons why management believes that they provide useful information. I will now turn the call over to our CEO, Yavor Efremov. Thank you, Louie. Good morning, everyone, and thank you for joining our call. We had a strong start to the year with our first quarter results in line to slightly better than our expectations. Zig-Zag continued its strong growth trajectory with another quarter of double-digit growth led by our U.S. papers business, building on its market share gains in the measured channels. In addition, we're showing good progress in our alternative channel efforts as we benefit from increased sales force focus into the channel and the secular growth in the industry. Stoker's MST also saw double-digit growth during the quarter. While inflation is pressuring the consumer wallet, Stoker's was well-positioned with its value proposition to capture share as consumers traded down during the quarter. Meanwhile, NewGen navigated an expected decline in sales resulting from the PACT Act and the regulatory environment. Our vape distribution business remains profitable despite these challenges. I'm very proud of the fact that we completed the scope of both the ERP and the CRM systems within the quarter and did so on plan and on budget. While this is only the first step of a long journey, I am encouraged by the fact that we did all of that needed to be done while still delivering a strong quarter. We did not cut corners and had full engagement in the process top to bottom. I believe this says a lot about the organization and its potential. On April 14th, the FDA obtained regulatory oversight over non-tobacco nicotine products. As a result, these products are now subject to the same regulatory regime as tobacco-derived products. Pre-market filings for non-tobacco nicotine products must be submitted by May 14th. Products subject to a timely filing may remain on the market until July 13th unless they receive a negative action. After July 13th, these products become subject to enforcement. We view FDA oversight as a critical component of effective regulation of the entire industry. While it may cause some short-term disruption around upcoming deadlines, we view this as a long-term positive to level the playing field and continue to enhance our position in the industry. With regards to our product portfolio, we aim to file new applications for a number of non-tobacco nicotine offerings, including our FRĒ nicotine pouch products, and we are evaluating spending up to $10 million on PMTA applications throughout the year with a heavy focus on Modern Oral. On capital allocation, we continued to buy back shares during the quarter after receiving increased authorization from our board. We continue to be committed to not growing our cash balance from here as we aim to use our cash flow to invest in our organic growth. Practically all remaining cash flow will be directed towards buybacks so long as the shares remain priced attractively. On the M&A front, as stated before, that is not our near-term focus. However, to reiterate from the previous call, our intent is to be patient and do deals that leverage our brand and distribution expertise, and we will be value accretive to shareholders. Any large-scale transaction we pursue will be synergistic and thus leverage an existing asset, including our distribution network, to drive shareholder value. We may also pursue smaller tuck-in acquisitions that deliver a capability to service our existing business that we prefer to acquire rather than build organically. We recently announced the hiring of a new CMO, Summer Frein, who brings extensive consumer products industry experience, and we're excited about what she and our marketing team can do to further build our brands. In addition, we have also brought on a Chief Information Officer to oversee our technology systems, including our ERP implementation. A Chief People Officer to support our organizational infrastructure. We have revamped our organizational structure to improve accountability and more clearly define functional responsibilities and the reporting structure within the organization. We have also realigned our segment reporting to better reflect the results of our vape business. NewGen in the past was a combination of a profitable vape distribution business and our Nu-X product development platform. Effectively, we have streamlined and integrated the non-vape part of Nu-X into the rest of the organization from an operational and financial reporting standpoint. NewGen results are now a clean representation of 100% of our vape organization as if it were a standalone entity. With that, let me turn the call back to Louie to go through our results. Thank you, Yavor. Starting with our consolidated results on slide four. Q1 sales were down 6.3% to $100.9 million, with strong Zig-Zag and Stoker's growth offset by a double-digit decline in NewGen, which was impacted by the regulatory environment, including the PACT Act. Adjusted gross margin increased 180 basis points, driven by improvement in Stoker's gross margin, along with a mix benefit from increase in sales in our higher margin Zig-Zag and Stoker's segments and decline in lower margin NewGen sales. Adjusted EBITDA was down $2.7 million year-over-year, with a decrease coming from the expected decline in our vape distribution business. Now turning to the segment performance. Slide five for Zig-Zag products. Sales grew 11.4% year-over-year to $45.7 million, with 7.1% from volume and 4.3% from price mix. Wraps revenue was down 3% year-over-year due to an industry decline in HTL wraps category, offset by growth in natural leaf and hemp wraps. We believe the trade was building up inventory in the first half of last year in HTL wraps and is now working its inventory to more normalized levels. Partially offsetting this was our ramp of the Zig-Zag natural leaf and hemp wraps during the quarter, which collectively accounted for double digits percentage of our wrap sales during the quarter. As a reminder, in our second quarter, we will have a tough comparable as last year's second quarter benefited from $2 million of pull forward of sales into the quarter. Our U.S. papers and e-commerce business was up 41% year-over-year, driven by growth in e-commerce and paper cone sales, as well as a planned 2 million inventory load with certain customers. E-commerce was up 2.6x and now represents 21% of the sub-segment, with strong growth expected the rest of the year. Our B2B e-commerce business targeting the alternative channel led the growth and accounted for more than half of our e-commerce sales. Sales of cones products was up 78%, including over 4.4x in our e-commerce channel and is now 25% of the sub-segment. Zig-Zag remains the number one premium and overall paper brand in the MSAi measured market with 33.3% share, which was up 30 basis points year-over-year. Zig-Zag was the number 2 brand in the paper cones category in the MSAi measured market with 34.2% share. Cones continues to remain a large opportunity with only 1/3 of stores receiving paper products also receiving cones during the quarter in the measured market. Overall, the paper category saw a decline in MSAi, down 3.5% during the quarter. Canada was down 13% during the quarter. This expected decline was primarily due to the timing of orders from our third-party distributor last year when we delivered half of our sales for the full year in Q1, creating a tough comp. TPB Canada, which is the old ReCreation Marketing business, continued to perform well and grew double digits organically. The cigars and other subcategory grew 17% with growth in our cigars business and the addition of $0.2 million of Wild Hemp sales previously recognized in NewGen. We introduced our Rough Cut natural leaf cigars during the quarter and expect a steady build this year. Gross margins for the segment declined 300 basis points during the quarter. The consolidation of TPB Canada was the biggest driver of decline, given the lower margins from the DBW acquisition last year. Margins would have been down 80 basis points excluding TPB Canada in both periods, with the decline driven by higher growth in lower margin products like our paper cones. The operating margin decline for the quarter was due to the gross margin decline, the impact from the DBW acquisition as part of TPB Canada, and the reallocation of segment costs, in particular, personnel from Nu-X now dedicated to Zig-Zag marketing. Increased sales and marketing costs and increased shipping costs also led to the decline. We were also excited by the continued push of our marketing team to strengthen the Zig-Zag brand during the quarter. Following the launch of Zig-Zag Studio only last year, we recently launched a partnership with luxury fashion line AMIRI for its Spring 2022 collection, which is now available for purchase at stores like Saks and Bergdorf Goodman. Zig-Zag accounted for 57% of our segment operating income in the quarter and continues to be our fastest-growing segment. The fundamental long-term drivers for the segment remains intact as cannabis continues to gain mainstream acceptance and new states come on board on legal recreational sales, including New Jersey last week. Turning to slide 6, Stoker's products. Sales increased 8.4% to $31.7 million in the quarter, with 0.3% from volume and 8.1% from price mix. Net sales for the MST portfolio grew 11% and represented 65% of Stoker's revenue in the quarter, up from 63% a year earlier. Category volume was down 5.6%, while we were up 0.9% as our share grew 40 basis points to 5.7% during the quarter, according to MSAi. Our share in store selling was up 30 basis points to 9.0%, with Stoker's now in stores representing 63% of industry volumes, which still provides a long runway for our growth. Chewing tobacco sales declined 3.6% from the previous year. Category volume was down 5.1% during the quarter according to MSAi. Stoker's Chew was the number one chewing brand in the quarter, gaining 100 basis points of share to 25.7% according to MSAi. Despite a softening in industry demand within the tobacco industry in general during the quarter, Stoker's performed well as its value proposition products resonated well with consumers, especially in the current inflationary environment. Segment gross margins expanded by 150 basis points to 55.8% during the quarter, driven by price and incremental margin from our higher MST volume. Operating margin increased 70 basis points with the higher gross margin from Stoker's sales, partially offset by the higher sales and marketing costs from FRĒ and increased shipping costs. Turning to slide seven, NewGen products. We continue to manage through a disruptive environment with sales down 37% from the previous year to $23.5 million. Our vape distribution business continues to be disrupted by the regulatory environment, including the implementation of the PACT Act late last year. Adjusted gross margins were down 40 basis points year-over-year. Adjusted operating income was down $1.3 million due to the lower sales and higher freight costs, offset by lower variable SG&A and reallocation of shared costs into the corporate segment, as mentioned earlier. NewGen results this quarter are now a cleaner representation of our vape business, which remain profitable despite the challenging environment. Encouragingly, our B2B business had its strongest revenue month of the quarter in March, and our B2C business continues to build its last mile distribution reach. We are still awaiting progress in the FDA and our PMTA applications and continue to adapt our business based on the changing dynamics in the industry. Ultimately, we still believe that all the short-term challenges present an opportunity for us in the long term, given our size and our ability to navigate the regulatory environment. Moving to slide 8. We ended the quarter with over $126 million of cash on the balance sheet and $147 million of available liquidity, providing us with flexibility on capital deployment. We repurchased $10.6 million of shares during the quarter. As mentioned in the press release, we are maintaining our previous guidance that's communicated in the Q4 earnings call. In addition, as Yavor mentioned, we are also projecting up to $10 million of PMTA spend, which includes filings of additional products, including our FRĒ nicotine pouch. With regards to CapEx, we are still reviewing projects that we believe will drive value to the organization, which include the ERP upgrade. We do expect CapEx to be higher this year and hope to provide a firmer update once we have pricing on our ERP and CRM projects later this year. We are evaluating spending up to $20 million for the entire year, excluding the ERP project, with the increase attributable to $8 million-$9 million from a manufacturing automation project that we started last year and $8 million from a potential warehouse consolidation and automation project that we are evaluating. Thank you for participating in the call today. With that, I would like to open the call for questions. Thank you. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one once again, and we'll pause for just a moment to compile the Q&A roster. We will take our first question from Eric Des Lauriers with Craig-Hallum Capital Group. Great. Thank you for taking my questions, and congrats on a solid quarter here. I was just wondering. Thank you. ... if you could just expand a bit more, on the inflation costs that you guys are seeing. I see that, you know, you called out some higher freight costs. You know, obviously you guys do have, you know, some sizable margins and ability to absorb that. Just if you could give us, you know, a sense of what you're seeing from an inflation perspective, and your ability to pass that on, that'd be great. Thank you. Yeah, sure. I mean, you know, shipping is one of our larger variable costs, especially in our NewGen segment. A lot of the shipping, freight increases for the quarter for NewGen was related to the PACT Act implementation. Our shipping costs as a percentage of sales within that segment was up over 300 basis points year-over-year. In what I would call our Zig-Zag and products traditional channel, our shipping costs were up a little bit, but not to the extent that we saw in our NewGen segment. Are you guys seeing any other, you know, material signs of inflation at this point, whether it be, you know, packaging or labor or, anything like that? Just any other sort of signs of, inflation that you may or may not be seeing would be helpful. Thank you. Yeah, we're not immune, obviously, to the labor pressure and that everyone else is feeling. We are, you know, kind of seeing that. We started seeing that already last year. You know, we have our normal merit increase for our employees this year, and so we're, you know, seeing it like everyone else is. Okay. All right. That certainly makes sense. Just last from me here, could you just kinda help us understand the impact that you expect to see from adding Clipper distribution starting in the second half here? I mean, I know the way I kinda see it, you know, sort of adding you know this penetration into the alternative channel and you know a bit of you know revenue synergies the other way around as well. Maybe just kind of help us understand whether qualitatively or quantitatively sort of you know what you're expecting in the second half here with Clipper. Thank you. Sure. Yeah. I mean, we mentioned that, you know, Clipper in the U.S. market is about $500 million in lighter markets from a manufacturer revenue standpoint. They had about 3% share in the U.S. and we're taking that over in the second half of this year. Yeah, there's gonna be a transition period as there are distributors that we are transitioning from. We're a little bit cautious in terms of how we're protecting it, but long-term, it is a large opportunity for us given the size of the market and given Clipper's success in other markets where they've gained number one share. Okay, great. Thank you very much. Appreciate it. We will take our next question from Vivian Azer with Cowen. Hi. Thank you. Good morning. Louie Reformina, I was hoping to follow up first off with the comment that you made around softening tobacco demand through the quarter. Any incremental color you can offer on that? You know, clearly we can see it in the scanner data. Higher gas prices are problematic for the category. But how is that materializing in terms of changes in consumer behavior? Thanks. Sure. This is Yavor. Let me take this. Look, one area where we're different from most CPG companies is our consumer shows up immediately after visiting the gas pump. There was a significant price shock on the consumer, which we saw late in the quarter, late in Q1, and we've seen reverberate a bit in April. Hopefully that's a temporary aberration that gets adjusted. The net result is you have a consumer who is now spending a lot more at the gas pump, which by definition means there's a lot less left to spend when they hit the convenience store. What we've seen from a behavior perspective is people shifting one towards the cheaper price points, which benefits us. Obviously, we are the value brand and you saw that we're gaining share. We have continued to gain share throughout the quarter. That has continued as far as we can tell into April. We're happy with gaining share. At the same time, the consumer has less money to spend, so you're seeing some trading away from tops and more towards cans because the can is obviously a lower price point, even though it's more expensive, you know, on a weight basis. Not sure if that's helpful, but kinda the pressure. At this point, it's too early to tell. We're happy where we are. We're continuing to take measures to make sure that we continue to gain share, which we've done last quarter, we're doing it today. We'll see which way the quarter goes. Yeah. I think, you know, Vivian, you know, as you know. Oh, sorry. Please. Yeah. I mean, as you know, the category is generally inelastic, but it's not immune to short-term and temporary shocks. Yeah. Yeah. Which dovetails perfectly into the follow-up, which, you know, if our math is correct, you guys realized a very healthy 8.1-point benefit from price mix realization in the Stoker's segment in the quarter. Obviously, pricing, where you guys are not the price leader, but pricing from a category perspective has been incredibly healthy. You know, all else equal, not talking about future price increases, but Louie, maybe just remind us, for the price increases that have already been implemented in the marketplace, like, how does that flow through the next three quarters of the year? When do we start anniversarying the last of those price increases, such that, you know, absent any incremental price increases, when would you expect that to normalize? Very healthy right now. Yeah. I mean, generally, the industry has been taking in the past two and in the last few years three price increases a year. In the last year, we just took one in February, and the last that we took last year was in June and October. Got it. Perfect. Thank you so much. We will take our next question from Susan Anderson with B. Riley. Hi, good morning. Alec calling in for Susan. On Zig-Zag, just looking out longer term, say the next five years, what do you think presents the largest opportunity of growth for the brand? Yeah. For Zig-Zag specifically, obviously Clipper is a large opportunity for us on a brand that we think is phenomenal and has had success internationally. That is, for a segment, one of the big ones that I think it can drive a decent amount of growth over the next couple of years. On top of that, we are continuing to introduce new products into the market. Cigars is a big opportunity for us. It's a very consolidated market, so it won't be easy, but we started with the introduction of our Rough Cut natural leaf cigar product in Q1, which we are excited about. On top of that, there's other new product launches. Natural leaf continues to ramp- up. Hemp wrap continues to ramp- up. We're gonna launch other products like natural leaf sometime later this year or into next year. On top of that, we still feel we are under-penetrated in the alternative channel. As I mentioned, B2B commerce led our growth in our Zig-Zag e-commerce business this year, and a lot of that was driven by alternative channel sales effort. We're continuing to build our alternative channel sales force, and we expect that to pay dividends for us over the next couple of years. Just to reiterate that last point, we are deploying significant resources into the alternative channel, both in the form of hiring sales personnel as well as meaningful marketing efforts. We're seeing great traction, great returns so far, so we'll keep doing that. To state the obvious, legalization takes more and more states and makes it, you know, as rec becomes legal in more and more states, and hopefully we'll get to federal legalization, those are all trends we're going to ride for a long time. In terms of the alternative channel, we're in the very early innings in terms of growth. We have a long path of hopefully consistent and strong growth. At least that's what we are seeing right now, and I don't have any reason to believe it's gonna be different. Thanks. I guess just to follow up on that, I mean, Zig-Zag, I feel like is probably one of the most recognized smoking-related brands in the U.S., and you just had that partnership with Am. Thoughts on maybe licensing out the brand image, or even expanding your apparel and collectible collections going forward? Look, we have a fantastic team that's handling marketing. We just brought Summer Frein to run it. There's a reason we're investing heavily behind the brand. We did say in Q1 that we will continue to support marketing. I think they've done a phenomenal job in kind of developing relationships, partnerships, collaborations. You should expect to continue to see that, and we'll do a lot of it, because it's highly effective. We've heard the fact that our competitors are complimenting it when we speak with them, it speaks for itself. That being said, we're highly unlikely to start licensing our brand. That's just not currently on the plate. Perfect. Thank you. Yeah. I would just point out, if you look at our website today, we have a limited edition $1,000 box, a pretty hefty offering that, you know, we just launched, and it's almost sold out already. I think what they're doing in terms of kind of product development and partnerships and general marketing has been beneficial for our brand. As a reminder, if you'd like to ask a question, hit star one on your telephone keypad. We will take our next question from Gaurav Jain with Barclays. Hi. Good morning. A few questions. Number one is, you know, on the M&A front, you know, we had extensive discussion last quarter on, you know, how you are thinking about M&A. Yavor, if you had any further thoughts, you know, what have you looked at, anything interesting and which categories you might be looking at here? Look, the quarter was entirely hands down and execute on the business. We have a lot on our plate. As I mentioned both on the previous call and on this call, we view M&A as opportunistic, and it's going to take time to actually find the right deal. I would reiterate what we've been saying. The right deal has to be synergistic. We have to have an angle for it. Whether that's our distribution, which is obviously the most obvious angle or some other asset that is unique to us, that we bring to the table, the deal is going to be synergistic. Period. Full stop. Again, the only other qualifier I would add is we may do small tuck-ins to address things that we'd rather buy than build, but those are going to be small. Okay. Thank you. Second is on those $10 million PMTA costs, which I don't recall were specified earlier. It is a decent amount of money. Could you just help us understand where you would be, you know, putting those PMTAs? Because I would have thought that you would be able to use the PMTAs that you filed last time largely to file the new PMTAs. Maybe you're going into some new products. Can you just help us understand why we have this $10 million cost? Let me start by just describing what the PMTA is meant to cover. The focus of this PMTA filings is going to be Modern Oral, to be clear. We have very little vape in it, and the vape part is going to be in partnership with others. Essentially, we'll be supporting somebody else's PMTA or we'll have an arrangement with somebody else where we're spending very little money but hopefully getting the benefit of it. The part where we'll spend the lion's share of the $10 million is our own proprietary products, which are going to be strictly Modern Oral. One of them is FRĒ, obviously. We have another product which we have not discussed. I'd like to hold off on discussing it, but it is Modern Oral. It is different. We think it's very different. We like it a lot. We'll see how it works. But we're very, very, very excited about it. That's what the PMTA is meant to cover. In terms of when we discussed it, no, you are correct, we did not discuss on the previous earnings call. We were still figuring out the exact timing. To be honest, our preference would have been to file the PMTAs later in the year after we've had more time to test the market, see reactions, get feedback. All of that got accelerated by the FDA and Congress, and that's just the reality of it. In terms of overall spend, I can tell you that we had about $9 million in the budget. It went to $10 million as a result of the acceleration. We've been working on the PMTAs for quite some time, and this is not something you can do in a rush, which is why it will be interesting to see what people file, because we've been working on our PMTAs for months and months. You know, I would say very excited about it. Should... And, And, and- Go ahead. Sorry. No. I was just going to ask that if you're putting that much money behind Modern Oral PMTAs, then could you also then share what your learnings have been from FRĒ so far in terms of, like, how much have you sold and what is the velocity? How many places is it distributed? I mean, I can see it online, but how many stores distribute, and how do you compare velocities of, let's say, FRĒ versus Stoker? Or some numbers if you could share, that would be quite helpful for us. Hi, Gaurav Jain. This is Graham Purdy here. You know, sort of consistent with our philosophy the last year and a half or so, we've taken a very measured approach to approaching the marketplace with the products in terms of store identification and sales force allocation of time. To date, we're in roughly 15,000 stores. The success of the product in those stores is incredibly encouraging. I'm not gonna go into specific numbers. I would just tell you that we're starting to cleave off some nice market share gains in those stores. Gaurav, the one thing I would add is, just from a reorder perspective, in comparison to other launches we've done, this has the highest reorders that we've ever seen. We thought that's encouraging. Just to be clear, I think our product is the only one that allows full step down from a higher level to a lower level. If you're looking to quit, we're walking you all the way from high to low, and that makes us very unique in the market. To accomplish the same result with a competing product, you'd have to be walking around with a mouthful of pouches, which is not all that attractive. Okay. Well, thanks a lot. There are no further questions at this time. Yavor, I will turn the call back over to you. I would like to thank all of you. Obviously, we had a very, very good quarter. I'd like to, again, thank everybody for their patience. We are obviously investing into the company. We're very optimistic. I've been here for a few months now, and I can tell you that, I'm more optimistic now than I've been in the last few months. The more I learn about this company, its people and its potential, the happier I am that I am here, and the more I look forward to what we can do together. We look forward to kind of the next earnings call and talking to you guys. Thank you all. This concludes today's conference call. You may now disconnect.