Q4 2020 Turning Point Brands Inc Earnings Call
Good morning, and welcome to the turning point brands fourth quarter, 'twenty and 'twenty earnings Conference call.
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I would now like to turn conference over to moving away from you.
Chief Business Development Officer. Please go ahead.
Thank you. Good morning, everyone. This is Louis Reformation, and Chief business Development Officer, joining me today are turning point brands, President and CEO Larry Wexler.
Graham Purdy, Chief operating officer, and Bobby Lavan, Chief Financial Officer.
And this morning, we issued a news release covering our fourth quarter and full year 2000, and 'twenty result. This release is located and the IR section of our website Www Dot turning point brands Dot Com, where a replay of today's conference call will also be available and this call. We will discuss our consolidated and segment operating results and provide our perspective on our progress again.
And so she said your plan.
And as is customary I direct your attention to the discussion of forward looking and cautionary statement in today's press release, and the risk factors and our filings with the Securities and Exchange Commission.
The disclosure outlines various factors that could cause actual results to differ materially from projections or forward looking statements that may be cited in today's discussion.
These forward looking statements and projections are not guarantees of future performance and you should not place undue reliance upon them, except as provided by federal Securities laws and.
We undertake no obligation to publicly update or revise any forward looking today and the <unk>.
Call today, we will reference certain non-GAAP financial measures.
And we can fully agents to GAAP can be found in today's earnings.
Along with reasons why management believes that they provide useful information.
I'll now turn the call over to Larry Wexler, our CEO.
Yes.
Thank you Louis and good morning, everyone. Thank you for joining the call.
We finished the year with another strong quarter and our fourth quarter revenue was up 31% to $105 million and adjusted EBITDA was up 81% to $26 million compared Tori restructuring impacted fourth quarter 2019.
As a result of the stronger than expected quarter full year revenue was above our previous guidance range and up 12% from the previous year for 405 man.
Growth was led by our core Zig Zag, and stoker segments, which were up a COVID-19%.
Is the first year since our IPO were a combined core businesses units were up double digits and the organizational changes and the growth initiatives, we put in place over the last two years are driving this growth.
Full year EBITDA of 90 million finished at the high end of our previous guidance range.
This year was not without its challenges and we took an extra $3 million of additional compensation expense, including temporary COVID-19 related wage increases for our sales warehouse and manufacturing line workers.
The COVID-19 pandemic presented a difficult environment for our work force, but they're responding.
Their commitment to servicing our customers combined with our preplanned initiatives and are well soon and for the changes brought about by the pandemic with the cornerstones of our strong results for the year.
And our press release. This morning, we highlighted the renaming of our core segments from smoking products and smokeless products to zig zag products and stokers products respectively.
And this change better aligns with our positioning as a branded consumer products company and highlights the strength and importance of our core brands.
Zig Zag products segment saw a tremendous growth during the quarter driven by the continuing benefits from our internal growth initiatives, the leveraged a healthy demand environment, and both papers and and why Youre cigar wraps.
These strategies were supplemented by inventory replenishment and our <unk>.
Our reps.
Which generated incremental sales by fulfilling back orders and were built up from Covid related disruptions earlier in the year.
The <unk> transaction and continues to pay dividends by establishing a more direct relationship with our third party manufacturer, that's enabling us to properly prioritize production to meet increasing market demand, while improving our segment margins.
And Canada, we increased our stake and recreation marketing and will now be consolidated its results within zig zag as they continue to expand our presence and E commerce alternative channels and dispensers.
And I'm pretty excited about what is happening with our zig Zag products group.
We have made a lot of changes to our strategy, bringing in new talent with different skill sets to accelerate these changes.
I've been involved and some interesting shifts and brand strategies over my career, but this one is particularly gratifying and actually a lot of fun.
The group is firing on all cylinders.
Our new products headlined by cones are taking a leadership position and mainline retail.
And our alternative strategy is beginning to bear fruit a.
And our warehouse portfolio is reasserting its leadership position rebounding from the supply disruption and we're starting to assert the power of the brands and E commerce, particularly on Amazon.
Again, particularly enjoyment of how consumers are engaging with our portfolio of accessory products. They are demonstrating their feelings towards the brand by buying more than our papers and routes and also by and the T shirts, trays and hats and showing all their friends, how they feel about zig zag, which reinforces endorses the brands among these consumer.
<unk>.
And stokers MST momentum momentum continued.
Our market share. According to MSA I grew by another 100 basis points with revenue growth of 25 per cent for the year driven mostly by same store sales, while we keep expanding our distribution footprint.
We remain the fastest growing brand and the category and continues to be well positioned for the secular shifts into the value category.
Our loosely products had one of its best years with significant share gains and modest volume growth.
New Gen rebounded from the 2019 disruption and the vape market and grew and the fourth quarter. Despite a challenging environment with competitors exiting the business and liquidating inventory and following the P. M J deadlines and September.
And now holds significant optionality with applications in place for what we believe is the most extensive portfolio of illiquid brands submitted through the process.
And we are encouraged by the Fda's recent enforcement actions and.
In January yesterday announced that he was issued warning letters to 19 different firms that did not submit applications ahead of the deadline.
We've also observed at the eight enforcement actions by customers.
We expect the FDA to provide further clarity on the process.
Beginning gauging with applicants to finalize submissions and take more enforcement actions as we progressed through the year.
Last week, we price to $250 million of senior secured notes, our first high yield offering as a public company.
This was a big step and the evolution of our capital structure.
We are thrilled to welcome a new and large pool of investors that had another source of capital to fund our growth going forward.
After the settlement later this week, we will have about $180 million and liquidity to pursue acquisitions to further position ourselves for growth.
We are carrying the momentum for our business performance into 2021, and when combined with the newly improved balance sheet enables us to issue a favorable outlook for the coming year that we will discuss later in the call.
With that and to add some additional color and perspective on our quarter and the path going forward, Let me turn the call over to Graham Purdy Chief operating officer.
And thank you Larry.
And I'll give you a quick snapshot of the performance from segment level.
It's the exact products saw double digit growth and the quarter led by strong double digit growth and both U S. Rolling papers and <unk> cigar wraps and.
And the U S. Zig zag papers position as the leading premium and overall paper brands strengthened increasing its share and the measured market by 1.9 points year over year to 36, 7% and according to MSA.
This was the sixth consecutive quarter, it's exactly has realized year over year share growth.
Ah wraps business accounted for a majority of the growth as we caught up from the previously mentioned back orders that built up earlier in the year.
Stripping that out our U S wraps business still grew strong double digits during the quarter and grew 27% for the full year.
New products were also a strong contributor to the segment's growth.
And paper cones, we jumped to the number one brands and the MSI measured channel with 47 point.
For percent of the market and the fourth quarter.
Up 29 points from the previous year.
Our cone sales more than doubled for the full year and tripled year over year and the fourth quarter.
It built to be a double digit percentage of our U S paper sales and the fourth quarter and will keep ramping for us and 'twenty 'twenty one.
We are now the leading leading the growth and penetration of the product and C stores.
There is still plenty of room for expansion of the product and the measured channel or only 22% of the stores that ordered zig zag paper from us during the fourth quarter also purchased cones.
There is even more significant room to make up ground and the non measured alternative channel, including head shops and dispensaries.
Where most of the market currently currently exists.
And where zig zag and still under represented.
As a reminder, cones are highly accretive to our business.
Cones are a more convenient product for the consumer.
And one co and effectively sells for four to 10 times, the price of and individuals' sheet of regular rolling paper at retail.
A significant increase to our addressable market on a per usage basis.
And Canada.
Our partnership with Recreation marketing continues to ramp.
Zig Zag is now and dispensaries that cover 60% of the market and is gaining share.
Share in that market.
E Commerce, which was nonexistent for US last year was again, a big driver of growth accounting for double digits of our U S paper sales during the quarter.
Stokers products saw double digit growth and the quarter.
A majority of the growth was again driven by same store sales gains and stokers moist snuff market share was up to five 5% a little over one full share point compared to a year ago. According to MSA is.
Our share and stores receiving the product during the quarter was up at nine 1%.
Up 110 basis points from the previous year and.
And stokers moist snuff is now and stores represent representing 68% of industry volumes and a full five points above last year's level, but still leaves a long runway for further growth.
Chewing tobacco sales saw low single digit growth during the quarter.
Stokers Chew gained an impressive four point for share points and was the number one brands with 25, 2% share and the fourth quarter. According to MSCI.
Our sales initiatives earlier in the year led to a 14% more stores ordering stokers during the quarter compared to the previous year.
Stokers has continued to gain share every year, we have owned the business.
With the continued secular shifts into the value category and stokers positioning as the leading value brands. The chewing tobacco business is well placed to provide us with a stable annuity stream of cash flow going forward.
Moving to new Gen, where we once again had a resilient quarter and a disruptive environment.
And our vape distribution business, we comped against a challenging quarter and the previous year and recorded strong double digit growth. Despite continued competitive pressure and the market around the PMT.
As competitors exiting the market liquidated their inventory.
On an encouraging note, we saw nice monthly progression and our gross margins during the quarter as we move further away from the PMT a deadline and September.
Our new ex business continues to build momentum with strong double digit growth.
<unk> and Nu X products, both contributed to the growth.
We also launched our free white nicotine pouch product and roughly 1000 stores and are encouraged by the result early results.
Our overall strategy with new agenda is the continued push of our proprietary products, which stands at roughly 20% of the segment year to date.
The product submitted and the PMT and.
And expected industry consolidation, along with our new ex product introductions will lay the groundwork to continue to increase this mix.
And with that I'll turn it to Bobby for a review of our fourth quarter financial performance Bobby.
Thank you Graham before I turn it over to results I'd like to make some comments on our M&A strategy and how it relates to the rest of our business and.
And 2018, we saw one of our biggest opportunities was revitalizing. This exact business. It is an incredibly strong brand and the lack and ecommerce and and alternative distribution presence.
We identified that we needed incremental resources to drive the growth and Zig Zag and.
In mid 2019 require a leading vape brands, but even though we acquired the company and and accretive multiple more importantly was the E commerce expertise the acquisition brought with it.
E Commerce became a big initiative for Us and helps drive our other zig zag initiatives.
Our revamped the Zig Zag website helped push our new cone products now over 10% of our U S paper sales and the fourth quarter.
Another initiative was our presence and the alternative channel. The Zig Zag brand was strong and C stores, but was underrepresented and head shots and dispensaries, where the growth in the industry what's happening.
A total head shop sales five to 10 ex the volume of paper books versus the C store and carry other zig zag, skus and accessories, and our heart and place and a C store.
And 2020, we made in person visits for calls via the solid new ex team drove 3700 alternative stores and partnered with over 20 distributors that focus on this channel to offer over 40 different zig zag products and accessories and pushing our omni channel approach.
I'm very happy with our recent debt raise and that gives US a war chest and deploy capital via M&A, where we can fill in the gaps and only and our products portfolio, but or in our infrastructure we.
We will continue to deploy it accretive capital and more to come now.
Now to our results or performance and the fourth quarter was ahead of plan once again.
Turning to the segment reviews and.
And the exact products net sales and the quarter increased 47% for $45 million with strong double digit growth and U S. Rolling papers, and <unk> cigar wraps and.
<unk> cigar wraps benefited from an inventory restock increased sales by $4 million to $5 million during the quarter.
This more than offset $1 $5 million decline and our Canadian papers business.
Non focused cigar and nyo pipe declined 600000.
Total segment volume increased 49%, while price mix increased five eight per cent.
According to MSCI fourth quarter industry volumes for U S. Cigarette papers increased strong double digits with our volume is growing one for ex the rate on the overall market.
Excluding the incremental volume growth, we are seeing from the alternative and ecommerce channels.
And while cigar wrap industry volumes were up strong double digits in the quarter.
During the quarter, we saw the segment's gross margin expand significantly by 580 basis point to 62, 1%.
As a result, and financial benefits of eliminating royalty payments to <unk>, resulting in higher margin for NY us and our wrap product and accretive contribution from our ecommerce business, which is currently trending above the segment average.
Italy during the quarter and wrote off approximately 750000 relating to our product line transition.
Our team has done a great job so far turning this segment into the heart and the story there was 55% of our segment operating income in 2020, including 51% and the fourth quarter and is now our fastest growing segment looked for more to come from us on that front.
Stokers product net sales increased 15, 2% to $28 $8 million and the quarter net.
Net sales for the MST portfolio grew 25% and represented 59% of smokeless revenues and the quarter up from 54% a year earlier.
Total volume increased seven 5% with price mix advancing seven 7% for the segment or.
Our price mix benefited from comping against the catch up and it.
Accruals of allowances last year related to faster than expected ramp up of our chain wins.
Year over year industry volumes for MST grew by approximately 1% with chewing tobacco declining by approximately 2%.
So for shipments to retail continued to outpace the industry and the quarter growing its MSA I share and both chewing tobacco and MST.
Moving to our new Gen segment.
Net sales increased 30% to $36 million.
Saw double digit growth and both the vape distribution and new ex businesses.
For the quarter, New Gen gross profit was $11 8 million.
Segment gross margin was 32, 7% compared to a loss for the previous year related to write offs and reserves associated with the vapor business disruption.
Moving to the consolidated business.
Adjusted EBITDA for the quarter was up 81% to $25 8 million as compared to the prior year.
Did accrue and extra compensation expense and the quarter of approximately $2 million.
Despite that we achieved 46% incremental margin during the quarter and 53 per cent for the year, reflecting strong performance and our core segments and the benefits from the SG&A cost reductions made going into the year.
Leveraging our fixed cost structure was a focus for the entire team and something new to our story and 2020.
While we expect 2021, as we and investment year for growth, we will continue to focus on generating strong incrementals and the future by managing and getting strong returns on our SG&A spend.
And this morning's release, we issued our initial 2000 and 'twenty one guidance there were several external variables, we had to consider and our guidance mostly around the impact of COVID-19, which I will give some assumptions on later and physical government measures to support the consumer.
With those factors and consideration our guidance is as follows.
Net sales of $412 million to $432 million, including $97 million to $102 million and the first quarter and adjusted EBITDA for the full year is expected to be $99 million to $105 million.
Help guide your models here some incremental color on 2021 guidance, which will include some COVID-19 assumptions, which I'd caveat is more of an art rather than a science.
For Zig Zag, and we expect double digit sales growth. This is exciting and our 2000 and in 2020, our cigar wraps business was impacted by $5 million for manufacturing related disruptions and the second quarter, which we made up for and the fourth quarter. So the manufacturing impact with a wash for the year and we will have an impact on a quarterly basis.
We estimate that the net benefit from Covid on the overall segment was $7 million and 2020.
For Stokers, we expect high single digit sales growth.
We saw some benefit from our competitor being temporarily out of the market and the middle of the year and our loose leaf chewing business, while we had growth initiatives in place. So we have a tough comp for that.
We estimate that the net benefit from Covid and 2020 for stokers was approximately $3 million for the year.
For new Gen. We expect a mid single digit decline and revenue.
This includes double digit declines from day, vape distribution offset by growth and new mix as we take a pragmatic view of the market in front of the <unk> implementation.
And against Covid tailwind, particularly in the second quarter, a $3 million drag from the sale of our retail stores.
And continued disruption in the vape business as the FDA begins enforcement actions.
And Covid, we previously called out a benefit of $5 million and the second quarter of 2020 from our competitor being offline. We also benefited from increasing and our <unk> E Commerce business as more people stayed at home, especially and the second quarter.
We estimate the overall impact to new Gen for the year was $15 million with $10 million and the second quarter.
Moving to our balance sheet, we ended the quarter with $42 million of cash on the balance sheet and $88 million of available liquidity.
After closing of our $250 million senior secured notes. This week, we will have over $115 million of cash on our balance sheet and approximately $180 million of liquidity.
It's us and Inc. Incredibly strong position to execute on and active pipeline of opportunities. We're currently evaluating to grow the business for 2021, we will elect early adoption of new convertible accounting standards and will no longer amortize. The OID on our July 2020 for convertible notes and non amortizing charge interest expense in 2020.
And was $7 million.
With that I'll turn the call back to Larry for closing comments.
Thank you Bobby.
We are pleased to report the progress we made in 2020.
We made several key changes and the last several years, including restructuring the business and bringing in new talent with different viewpoints and skill sets.
We do this both organically and through the acquisition of solace to help position the company for accelerated growth.
We are starting to see the benefits of these moves and the initiatives that we put in place too.
2020 results reflected these strategies are core businesses, especially zig zag and should continue to create value for us going forward.
<unk> momentum has it.
Poker has momentum across its portfolio and we have tremendous optionality and our new Gen business as the Pea MTA process unfolds and with our new products.
Overall with strong momentum and our business and increase liquidity, we have never been better positioned as a company and expect another strong year in 2021.
This would not be possible without the hard work of our employees, who continue to execute and these difficult times and I want to personally thank and once again for their commitment and contribution to our success.
Thank you for participating in the call today and with that I'd like to open up the call to questions.
At this time, ladies and gentlemen, thank you for back to ask a question. Please go ahead and press star and the number one telephone keypad.
And Thats Star one to ask a question.
Our first question today comes from the line of Disney and Apple with Cowen. Please proceed with your question.
Hi, Good morning. This is Gerald Pascarelli on for Vivien, Thanks, very much for taking the questions.
Hi, My first question Larry was hoping that you could maybe provide us with an update some color around your current dialogue with the FDA regarding PMT day. Thanks.
Well, the FDA is making progress as I mentioned and Mike.
And my notes.
And we're starting to see some enforcement action, which is terrific.
They've been somewhat slow in terms of interacting with with companies and.
As you know they have a very large backlog, we expect to see some movement on that and the upcoming quarter and we're looking forward to it we think we've got a terrific portfolio of products.
For the open tank systems and.
We are eagerly looking forward to getting through the process and.
And to be able to execute in the marketplace.
Super helpful. Thanks.
Next one is around pricing and <unk>.
Smokeless I know you've mentioned this briefly in the prepared remarks, but.
We have been seeing some aggressive cigarette pricing and.
So as you look at the overall environment for smokeless. If you could just provide your view or some color around the pricing environment over the course of 2021 that would be helpful. Thanks.
Yeah, we have seen.
Pricing and.
And smokeless not necessarily following interest, but we've seen a pattern now.
Accelerated price increasing at least in terms of number of price increases per year, we expect that to continue through 2021.
Got it.
Last one for me.
There is there's been some evolution around your thinking related to cannabinoid products and so with that said.
Just love to get your thoughts and how youre thinking about the relative opportunity between both.
For CBD and THC.
Yes, so, let's let's split the baby. So CBD is something we've been focused on.
Really with the signing of the farm Bill and late 2018.
The market has.
Swing down in 2020 as sort of Covid stay at home made retailers reticent to bring new products and and our portfolio, but we've got a strong E commerce presence and we kind of continue to dialogue with the majors on their CBD portfolio is now I think everyone's sort of still.
In a holding pattern as it relates to the FDA and so it really is.
Something that we were in <unk>.
But we're not going to pound the pavement on until we get clarity from the FDA.
From a THC perspective.
And we did make our investment and doses. This year, it's something that we invested in and structure that have kept us from touching flower and.
The basically the rule for us at this point is we can't touch flower directly until there is.
And evolution of government policy.
That being said there is a very large sort of accessories market that we continue to focus on and we continued investing.
Super helpful color. Thanks, very much guys I'll hop back into the queue.
Your next question today comes from the line of Susan Anderson with B. Riley. Please proceed with your question.
Hi, nice job again, and now they're a very good quarter and I was wondering if you could maybe talk about the margin gross margin growth drivers for each of the segments very good growth and all three segments.
Should we think about this as being a new base for 2021, and how are you thinking about gross margin for each segment in 2021.
And so on.
Margins on smokeless and <unk> and <unk>.
Alright.
<unk> segment.
Segment, exactly and stokers and Theyre going to continue going.
On the Stoker side, we manufacture our noise. So every incremental product we sell comes in and 65% to 70% gross margin.
And that being 60% of our business, we will sort of offset that.
Flatness of the tube business and so you'll see that margin continuing to creep up.
And I think it will actually accelerate and the next few years.
On the Zig Zag segment, the Big change was that we bought in there for.
So with dirt for took our rats margins from sort of the.
Mid Forty's too.
Hi, <unk> and that's a huge change for us. Additionally, we had a other segment that was effectively a flat margin and that business has gone from.
Double digit dollars of sales to this year, our 2021 there'll be sub a few million dollars. So I think you should expect sort of 2020 was not a baseline you should expect it to continue going.
On the new Gen segments.
We think that debt.
The margin profile will continue moving up but sort of more of a medium term perspective.
We do need enforcement from the FDA for us to be able to sell more of our proprietary products and vape and new ex.
And while they are proprietary product they do come in at sort of slightly better margin and the segment, but it's still because they're new products. We do have to invest and so that's something that we're very focused and moving that low thirties and into the forties, but thats a medium term trajectory.
Great. That's very helpful. Thanks, and then I guess, just kind of stokers and.
Nice to see that at mid single digit market share now, which I think is pretty amazing based on where it was a few years ago. I guess, how are you thinking about that share now and we look out over the next several years, where do you think it could go and.
Over time, I think you said mid single digit growth this year again.
Yes, Larry yes.
We are very optimistic about that.
And the Stoker business.
What was and particularly important about this year's growth.
Quite substantial and MSP, which is principally driven by same store sales growth and we're very focused on continuing that trend.
We think the product is a distinct advantage and the marketplace and if.
And we can get into consumers' hands and they will buy it.
The other thing that happened and is that the <unk> business significantly outperformed the.
The market and.
And also presented some opportunities for us. So if you so going forward. We think that same store sales growth. We will continue to drive the business and they still got 40% of the weighted distribution out there to grab and get our products distributed into.
We will look we are we're very optimistic over the medium term.
Great and then just one follow up and the Zig Zag growth for this year and can you said double digits. Obviously, there was some pretty significant growth and fourth quarter. So when looking at double digits, how you're thinking team there are 20% range or how should we think about that.
Teens.
Great. Okay. Thanks, so much you guys. Good luck next quarter.
Thanks, Susan.
And again, ladies and gentlemen to ask a question. Please press star and the number one on your telephone keypad.
Your next question comes from the line of Eric <unk> with Craig Hallum Capital. Please proceed with your question.
Alright, great. Thanks for taking my question really amazing execution on the Zig Zag business Ah Congrats and you guys and.
Great all around quarter.
Focusing on Zig zag, a little bit.
Can you talk about how the strong candidates association with the with the brand is impacting sales I mean, obviously there is there is a mix between cannabis users and.
And then just traditional tobacco users, but at a time when our cannabis industry is normalizing and legal sales are booming can you just talk about how that association.
With cannabis is impacting sales and then looking forward, where you see room for growth whether it's.
New channels or new product types.
Yes, I mean, so early on I think the first strength, we saw from sort of.
Legalization was was actually more decriminalization dynamic with rats are wrapped product is something that doesn't have sort of any competitive pressure from other form factors just because of the demographic and so as you had decriminalisation, we really saw tailwind from that and that accelerated into.
2020.
On the papers business. There is some cannibalization that happens from other form factors ultimately, but I think debt that the Pam.
Opportunity on cones and is so massive it offsets that additionally, this is less.
Tied to the cannabis industry, but we werent selling into head shops, or dispensaries, where all the growth in the industry was happening we didn't see that data and because it's not sort of in our measured channels and so we attack those channels as well and that's really driven a lot of the growth and so great tailwind.
Decriminalization was great cones and what's next.
Okay great.
And then I guess could you just give us a sense of.
Some of the upside you see in terms of maybe number of doors that you guys could get into and those alternative dispensary and head shop.
Channel is just kind of give us some some sense of how big this opportunity is compared to the already.
Large and strong base business.
Yes.
Louie.
Yes, sure. So in terms of kind of the alternative channel, we think from a volume perspective, it could be like 30% to 40% of the volumes.
Relative to the measure of the overall market and.
So we're well under represented there I would say, where we were at 35% share in the.
Measured market, we're closer to single digits low double digits and the alternative channel. So there's a lot of white space. There. In addition, and the alternative channel. What you see is there is a higher percentage of cones and cones. As we mentioned before is on a per use basis was five to 10 times the size.
Hi.
Paper booklet market. So there is significant headroom for us to keep growing.
And the third channel and just through our increased share and booklet and also through our penetration in the coatings business.
Okay great.
A lot of sense and so.
And the exciting I guess.
Just a follow up for me on M&A, you guys touched on it a bit but can.
Can you talk a bit more about what you're seeing and the M&A market.
And what sectors, you're focused on right now and then.
If we do get federal cannabis reform sometime in the next.
Yes, 12, 24 months whatever it may be.
Is M&A, a a direct operator or is that kind of on the table for you guys or is it mostly looking at brands like you've done with doses just kind of help us understand current M&A market and how that could change if if we do potentially get and federal cannabis reform here. Thanks.
So our primary focus on M&A right now is expanding this exact portfolio. There are some product lines that we are not in and we feel like we can jump in.
Very aggressively and we've looked at deals and sort of six to 10 times EBITDA range on a pre synergy basis and the synergies are significant.
Youll see us spending a lot of time, there and we're pretty excited about the growth opportunities from that and it really the type of.
Physicians are plug and play there.
Can slot for product into our portfolio and push it into 100000 plus stores very quickly.
And on the question on candidates.
Msos so.
And we like cash flowing assets. So I don't think youre going to see us go and buy and Msos that wants to trade at a multiple of revenues, but we have seen opportunities at very attractive EBITDA multiples and I think.
As we can thread the needle you should expect us to be there.
Your next question comes from the line of Greg <unk> with Sidoti and company. Please proceed with your question.
Hey, guys. Thanks for taking my questions just one on stokers on the.
The price mix I think you said there was a catch up and accruals can you quantify that on the price index.
It was a year over year.
Dynamic so it was about we had to take an extra million dollars non accruals in the fourth quarter of 2019.
Got it and then some.
That was anniversary and the one 5% price mix and the prior year correct.
Correct.
Got it and then just as we think about on double digit growth.
And Zig Zag is it fair to say I mean, we'll be anniversarying, a $5 million as we think about the cadence quarterly throughout the year, we'd be anniversarying, a $5 million headwind into Q, I'm, sorry, tailwind and then headwind and <unk> and <unk> is that fair, yes, yes.
Okay, and then does that impact margins at all given the fact that it's purely on the rep side as we think about the segment margins.
While margins for the first quarter and the second quarter of 2021 will be significantly higher than <unk> and QQ of 'twenty, because we acquired <unk> in June and didn't start flowing through our financials until July.
Got it.
That helps thanks a lot.
Thank you.
And again, ladies and gentlemen to ask a question. Please press Star then the number one on your telephone keypad.
And at this time there are no further questions in queue I turn the call back to the presenters for any more remarks.
Thank you very much for your time.
And this concludes today's conference call. Thank you for your participation you may now disconnect.
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