Q2 2024 Turning Point Brands Inc Earnings Call
Graham Purdy: Adjusted EBITDA increased 7% to just over $27 million for the quarter. Given our solid start to the year, we are increasing our guidance for projected 2024 adjusted EBITDA to $98 to $102 million versus our prior guidance of $95 to $100 million. We remain committed to our alternative channel strategy of becoming a one-stop shop for all. In particular, we continue to expand our SKU assortment to offer these customers a more diverse portfolio of products.
Speaker: Adjusted EBITDA increased 7% to just over 27 million for the quarter.
<unk> EBITDA increased 7% to just over $27 million for the quarter.
Graham Purdy: Given our solid start to the year, we are increasing our guidance for projected 2024 adjusted EBITDA to 98 to 102 million versus our prior guidance of 95 to 100 million. Neither of these ranges include contributions from CDS. During the June quarter, Zigzag performed well with revenue up 8% to 50.5 million, driven by high single-digit growth in our North American papers and rap businesses and a strong showing from our cigar business, which we've leaned into more heavily in 2024. We are excited about this business going forward. We remain committed to our alternative channel strategy of becoming in one stop shop for our alt customers.
Given our solid start to the year, we are increasing our guidance for projected 2024, adjusted EBITDA to 98% to $102 million versus our prior guidance of 95 to 100 million.
Neither of these ranges include contributions from Cvs.
Speaker Change: During the June quarter, Zig Zag performed well with revenue up 8% to $55 million driven by high single digit growth in our North American papers, and wrap businesses and a strong showing from our cigar business, which we've leaned into more heavily in 2024. We are excited about this business going forward.
We remain committed to our alternative channel strategy of becoming a one stop shop for all customers in.
Graham Purdy: In particular, we continue to expand our skew assortment to offer these customers a more diverse portfolio of products. The alt channel declined 3% in the quarter, but as a whole in the first half, this business is up about 28%. The drop in sequential is attributable to the first quarter having a particularly robust trade show calendar in the timing of some large purchases in March. Nonetheless, we are having success not only winning new, untapped alternative customers, but also with existing alt customers buying a more complete Zigzag portfolio. We've seen healthy increases in average order sizes while expanding Zigzag with more valuable shelf space and merchandising real estate within these stores.
In particular, we continue to expand our SKU assortment to offer these customers a more diverse portfolio of products.
Graham Purdy: The alternative channel declined 3% in the quarter, but as a whole, in the first half, this business is up about 28%. The drop in sequential is attributable to the first quarter having a particularly robust trade show calendar and the timing of some large purchases in March.
Speaker Change: The all channel declined 3% in the quarter, but as a whole in the first half of this business is up about 28%.
Speaker Change: The drop in sequential is attributable to the first quarter, having a particularly robust trade show calendar and the timing of some large purchases in March.
Graham Purdy: Nonetheless, we're having success not only winning new, untapped alternative customers but also with existing customers buying a more complete zigzag portfolio. We've seen healthy increases in average order sizes while expanding the zigzag with more valuable shelf space and merchandising real estate within these stores. We continue to have a long runway in this emerging and fluid market. As you know, the alternative channel is consistently expanding as additional states embrace medical and recreational cannabis.
Nonetheless, we are having success not only winning new untapped alternative customers, but also with existing customers buying a more complete zig zag portfolio.
We've seen healthy increases in average order sizes, while expanding zig zag with more valuable shelf space and merchandising real estate within these stores.
Graham Purdy: We continue to have a long runway in this emerging and fluid market. As you know, the alternative channel is consistently expanding as additional states embrace medical and recreational cannabis. In addition, alt retailers, including dispensaries, smoke shops, and head shops, are expanding product offerings to provide a better shopping experience for consumers. As such, we view the marketplaces for Zigzag products as converging in many ways. And we are seeing evidence of traditional sea store distributors that we've done business with for decades increasingly target this market, which is good news for us. We are also seeing evidence of new distributors emerging to specifically address this market, and that plays to our strengths considering the depth and breadth of our product lines, as well as our reputation as a reliable partner.
We continue to have a long runway in this emerging and fluid market.
As you know the alternative channel has consistently expanding as additional states embraced medical and recreational cannabis.
Graham Purdy: In addition, alternative retailers, including dispensaries, smoke shops, and head shops, are expanding product offerings to provide a better shopping experience for consumers. As such... We view the marketplaces for ZigZag products as converging in many ways, and we are seeing evidence of traditional C-Store distributors that we've done business with for decades increasingly target this market, which is good news for us. Although this is exciting and great news for us, it will likely make it increasingly challenging to measure e-commerce versus traditional C-store sales. That's just something to keep in mind going forward, especially as you do your own channel check.
In addition, all retailers, including dispensaries smoke shops in head shops are expanding product offerings to provide a better shopping experience for consumers.
Speaker Change: As such.
We view the marketplaces for Zig Zag products is converging in many ways and we are seeing evidence of traditional C store distributors that we've done business with for decades increasingly target this market, which is good news for us.
We are also seeing evidence of new distributors emerging to specifically address this market.
Speaker Change: And that plays to our strengths considering the depth and breadth of our product lines as well as our reputation as a reliable partner.
Graham Purdy: That said, although this is exciting and great news for us, it will likely make it increasingly challenging to measure alt versus traditional sea store sales. That's just something to keep in mind going forward, especially as you do your own channel checks.
That said.
Speaker Change: Although this is exciting and great news for us it will likely make it increasingly challenging to measure alt versus traditional C store sales that is.
Something to keep in mind going forward, especially as you do your own channel checks.
Graham Purdy: Moving to Soaker's, during the quarter, Stoker's revenue increased 19% to 42.7 million, reflecting a 1% decline in loose leaf and a 14% increase in moist enough. Three sales were approximately 4 million for the quarter, up 76% sequentially, and more than 500% versus the prior year. We are pleased with the market share increases for Stoker's, which continues to be a steady growth engine with a long runway for volume growth and favorable pricing dynamics. We are also pleased with the market's enthusiastic response to the national launch of Free. We launched with 9, 12, and 15 milligrams because we wanted a product on the shelves that was immediately differentiated.
Speaker Change: Moving to <unk>.
Graham Purdy: During the quarter, Stoker's revenue increased 19% to $42.7 million, reflecting a 1% decline in loose leaf and a 14% increase in moist snot. Free sales were approximately $4 million for the quarter, up 76% sequentially and more than 500% versus the prior year. Naturally, it takes some time to get a brand new product out, so you can expect to start to see the 6 milligram product on retail shelves this fall. Also, we've got a lot of questions about the potential timing of seeing free at some of the more well-known national and regional C-Store chains.
Speaker Change: During the quarter Stokers revenue increased 19% to $42 7 million, reflecting a 1% decline in loose leaf and a 14% increase in moist snuff.
Speaker Change: <unk> sales were approximately $4 million for the quarter up 76% sequentially and more than 500% versus the prior year.
Speaker Change: We are pleased with the market share increases for stokers, which continues to be a steady growth engine with a long runway for volume growth and favorable pricing dynamics.
Speaker Change: We're also pleased with the market's enthusiastic response to the national launch of free.
Speaker Change: We launched with 912 and 15 milligrams, because we wanted a product on the shelves that was immediately differentiated.
Graham Purdy: Based on our initial successes, we recently launched a 6-milligram product on our website, breedpouch.com. Naturally, it takes some time to get a brand new product to shelves, so you can expect to start to see the 6-milligram product on retail shelves this fall. Also, we've got a lot of questions about the potential timing of seeing free at some of the more well-known national and regional c-store chains. As you can imagine, these chains tend to have a longer sales cycle in planned out merchandising and planigram strategies. So our immediate successes have tended to be with independently-owned stores that, by and large, can act more quickly.
Speaker Change: Based on our initial successes, we recently launched a six milligram product on our website <unk> dot com.
Naturally it.
Speaker Change: It takes some time to get a brand new product to shelves. So you can expect to start to see the six milligram product on retail shelves. This fall.
Speaker Change: Also we've got a lot of questions about the potential timing of seeing free and some of the more well known national and regional C store chains.
Graham Purdy: As you can imagine, suffice it to say, we have a long runway ahead of us in what's estimated to be a roughly $3 billion wholesale market in 2024 per MSAI and could be worth between $5 and $7 billion by the end of the decade, per various analysts' reports. We look forward to providing updates on this exciting new product in the quarters and years to come. With that, I will hand the call over to Summer to walk through some progress and results on some of our specific go-to-market initiatives.
Speaker Change: As you can imagine.
Speaker Change: This change tend to have a longer sales cycle and planned out merchandising and planning various strategies.
Speaker Change: So our immediate successes have tended to be with independently owned stores that by and large can act more quickly.
Graham Purdy: Suffice it to say, we have a long runway ahead of us in what's estimated to be a roughly $3 billion wholesale market in 2024 per MSAI, and could be worth between $5.7 billion by the end of the decade per various annual reports. In addition to the convenience store channel, we're also seeing all channel demand for free, even if many of these stores don't sell traditional tobacco products. It speaks volumes to the synergies TPP brings to bear with our world-class sales, service, and distribution platform.
Speaker Change: Suffice it to say we have a long runway ahead of us in what's estimated to be a roughly $3 billion wholesale market in 2024 per MSA.
Speaker Change: And could be worth between five and $7 billion by the end of the decade for various analyst reports.
Speaker Change: In addition to the convenience store channel. We're also seeing all channel demand for free.
Even if many of these stores don't sell traditional tobacco products.
It speaks volumes to the synergies TPB brings to bear with our World class sales service and distribution platform.
Graham Purdy: We look forward to providing updates on the exciting new product in the quarters and years to come.
Speaker Change: We look forward to providing updates on this exciting new product in the quarters and years to come.
Summer Frein: With that, let me hand the call over to Summer to walk through some progress and results of some of our specific go-to-market initiatives.
Summer: With that let me turn the call over to summer to walk through some progress and results of some of our specific go to market initiatives.
Summer Frein: Thank you, Graham. During Q2, we made further progress in building Zigzag's position as a lifestyle brand by executing against our multi-year roadmap. As Graham noted, Zigzag posted a strong quarter fueled by papers, wraps, and a more distinct push into the cigar category.
Summer: Thank you Graham during Q2, we made further progress in building <unk> position as a lifestyle brand by executing against our multiyear roadmap.
Graham Purdy: As Graham noted, ZigZag posted a strong quarter fueled by papers, wraps, and a more distinct push into the cigar category. For only the second time in its history, the brand achieved over $50 million in revenue. Like our prior innovative rose products, these new mini rose cones are made with all natural organic rose petals that promise an enhanced smoking experience.
Summer: As Graeme noted did that posted a strong quarter fueled by papers wrapped in a more distinct plus a little cigar category for only the second time in <unk> history, the brand achieved over $50 million in revenue.
Summer Frein: For only the second time in Zigzag's history, the brand achieved over $50 million in revenue. We also continued to launch and promote products that resonate with evolving consumer preferences. In June, we added to our growing rose cone portfolio with the introduction of Zigzag mini rose cones. Like our prior innovative rose products, these new mini rose cones are made with all natural, organic rose petals that promise an enhanced smoking experience.
Summer: We also continued to launch and promote products that resonate with evolving consumer preferences.
Summer: We added to our growing road coating portfolio with the introduction of Zig Zag many right.
Speaker Change: Like our prior innovative growth products. These new mini road calls are made with all natural organic growth pedal that promise and enhanced smoking experience.
Summer Frein: Additionally, as part of our endeavor to build a lifestyle brand that goes beyond smoking accessories, and we continue to expand our brand presence and culturally relevant moments, we teamed up with Guest Genes to partner with them on their exclusive Coachella compound. The activation brought together some of the world's largest celebrities and influencers into a compound consisting of multiple homes during the largest musical festival of the year. Zigzag participated in sponsoring the compound of co-branded products, artists and celebrity gifting, rolling stations throughout the venues, as well as a post-festival after party. The tagged content from the weekend yielded a cumulative reach of 19 million individuals.
Summer Frein: Additionally, as part of our endeavor to build a lifestyle brand that goes beyond smoking accessories, and we continue to expand our brand presence in culturally relevant moments, we teamed up with Guess Jeans to partner with them on their exclusive Coachella compact. The tagged content from the weekend yielded a cumulative reach of 19 million individuals. Turning to free, our sales and marketing teams are keenly focused on building a brand that will resonate with consumers for the long term. We made further progress in the quarter across both brick-and-mortar stores and digital marketplaces, as Graham noted with our revenue growth.
Speaker Change: Additionally, as part of our endeavor to build a lifestyle brand that goes beyond smoking at factory and we continue to expand our brand presence and culturally relevant nanos, we teamed up with gesture to partner with them on their exclusive Coachella compound.
Speaker Change: The activation brought together some of the world's largest celebrities and influencers into a compound consisting of multiple homes during the largest musical festival of the year.
Speaker Change: The exact participated in sponsoring the compound a cobranded product artist.
Speaker Change: And celebrity gifting rolling patients or other venues as well as opposed festival after party.
Speaker Change: <unk> content from that weekend yielded a cumulative reach of 19 million individuals.
Summer Frein: We have a healthy pipeline of new product introductions across the Zigzag portfolio, and we look forward to continuing to provide updates that highlight the momentum and efforts that support Zigzag growth.
Speaker Change: We have a healthy pipeline of new product introductions across the zig zag portfolio and we look forward to continuing to provide updates that highlight the momentum in efforts that support the exact square.
Summer Frein: For Stokers, we continue to be pleased with the brand's performance, which grew to over $40 million in revenue for the first time in company history. We are focused on expanding distribution and continue to see the brand's great debt at a fair price messaging resonate with today's consumer.
Speaker Change: For <unk>, we continue to be pleased with the brand's performance, which grew to over $40 million in revenue for the first time in company history.
Speaker Change: We are focused on expanding distribution and continue to see the brand great debt at a fair price messaging resonate with today's consumer.
Summer Frein: Turning to free, our sales and marketing teams are keenly focused on building a brand that will resonate with consumers for the long term. We made further progress in the quarter across both brick-and-mortar stores and digital marketplaces, as Graham noted in our revenue growth. As shared last quarter, the receptivity and engagement from our trade partners and with consumers continue to reinforce that our product quality, moisture content, pouch size, and differentiated nicotine offerings are a powerful selling proposition. We summarized the selling proposition with the phrase "power field flavor." Our recent product portfolio expansion into six milligrams enables us to further lean into the selling proposition and, as importantly, expand our product disortment to participate in the largest portion of the nicotine pouch category.
Speaker Change: Turning to free our sales and marketing teams are keenly focused on building the brand that will resonate with consumers for the long term.
Speaker Change: We made further progress in the quarter across both brick and mortar stores and digital marketplaces of Graham noted with our revenue growth.
Speaker Change: Shared last quarter, the risk activity and engagement from our trade partners and with consumers continue to reinforce that our product quality moisture content pouch size and differentiated nicotine offerings are powerful selling proposition.
Summer Frein: We summarize this selling proposition with the phrase power, feel, and flavor. We look forward to sharing our progress throughout the year. In summary, we continue building our brand for the long term, executing against the plan we've established, and growing our business at retail and with our consumers.
Speaker Change: We summarize the selling proposition with the phrase power steel flavor or.
Speaker Change: Our recent product portfolio expansion into six milligram enables us to further lean into the selling proposition and as importantly, expand our product assortment to participate in the largest portion of the nicotine pouch category.
Summer Frein: We look forward to sharing our progress throughout the year. In summary, we continue building our brand to the long term at executing against the plan we've established and growing our business and retail and with our consumers. We will continue to focus on maximizing the value of our world-class brands and strengthening our extensive distribution capabilities.
Speaker Change: We look forward to sharing our progress throughout the year.
Speaker Change: In summary, we continue building our brands for the long term executing against the plan, we have established and growing our business in retail and with our consumers.
Speaker Change: We will continue to focus on maximizing the value of our world class brands and strengthening our extensive distribution capabilities.
Andrew Flynn: Let me now turn the call back over to Andrew to go through our results.
Speaker Change: Let me now turn the call back over to Andrew to go through our results.
Andrew Flynn: Thank you, Summer. Starting with our consolidated quarterly results. Q2 sales were up 2.8% to $108.5 million, which is up 12% on a sequential basis. Including CDS, overall revenue was up 13%.
Andrew: Thank you summer starting with our consolidated quarterly results.
Speaker Change: Q2 sales were up two 8%.
Andrew: $108 5 million, which is up 12% on a sequential basis.
Speaker Change: Moody's Cvs overall revenue was up 13%.
Andrew Flynn: For a margin was down 8 basis points to 49.6% due to segment and product mix. It just said even it was up 7% to $27 million going into segment performance. Zigzag sales increased 8.1% year-over-year to $50.5 million to strengthen cigars and growth in our North American papers and wraps of businesses.
Unnamed Speaker: Gross margin was down 8 basis points, and I just said EBITDA was up 7%, going into segment performance. This was driven primarily by product management.
Speaker Change: Gross margin was down eight basis points.
Speaker Change: 49, 6% due to segment and product mix adjusted EBIT was up 7% to.
Speaker Change: $27 million.
Speaker Change: In the segment performance.
Speaker Change: <unk> sales increased eight 1% year over year to $50 $5 million due to strength in cigars and growth in our North American papers and wraps businesses.
Andrew Flynn: Gross margin decreased 330 basis points to 53% during the quarter. This was driven primarily by product mix. Stokers net sales increased 19% to $42.7 million in the quarter, with a 5.3% volume increase at a 13.2% price mix increase. Net sales for the MST portfolio grew 14.1%. Stokers volume was up 0.4% despite category volume down 7.2%. With share growing 60 basis points year-over-year to 7.5% during the quarter, according to MSAI. A share of in-store selling was up 60 basis points year-over-year to 10.3%, with Stokers now in-stores representing approximately 2 thirds of industry volumes, which still provides a long runway for growth.
Speaker Change: Gross margins decreased 330 basis points to 53% during the quarter.
Speaker Change: This was driven primarily by product mix.
Unnamed Speaker: Stoker's net sales increased 19% to $42.7 million in the quarter with a 5.3% volume increase and a 13.2% price-mix increase. Meanwhile, net sales for the MST portfolio grew 14.1%. Its share of in-store selling was up 60 basis points year-over-year to 10.3%, with stokers now in stores representing approximately two-thirds of industry volumes, which still provides a long runway for growth. However, chewing tobacco sales were down approximately 1% from the previous year. Stoker's Chewing Tobacco was the number one chewing brand in the quarter, gaining 160 basis points of share at 32.5%, according to MSAI.
Speaker Change: Stokers net sales increased 19% to $42 7 million in the quarter with a five 3% volume increase and a 13, 2% price mix increase.
Speaker Change: Net sales for the MST portfolio grew 14, 1%.
Speaker Change: Stokers volume was up.
Speaker Change: 4% despite category volume down seven 2%.
Speaker Change: With share growing 60 basis points year over year to seven 5% during the quarter. According to MFS AI.
Speaker Change: Its share of in store selling was up 60 basis points year over year to 10, 3% with stokers now in stores, representing approximately two thirds of industry volumes, which still provides a long runway for growth.
Andrew Flynn: Tune into back of sales were down approximately 1% from the previous year. Stokers chewing tobacco was a number one chewing brand in the quarter, gaining 160 basis points of share at a 32.5% according to MSAI. Overall, TPB and Loose Leaf volume was down 0.9%, meaning category volume declines of 3.7%. Category performance was driven by a larger decline in premium loose leaf, with TPB's volumes benefiting from consumer trade down, as Stoker's volumes grew from the previous year.
Speaker Change: Chewing tobacco sales were down approximately 1% from the previous year.
Speaker Change: Stokers chewing tobacco was the number one <unk> brand in the quarter, gaining 160 basis points of share to 32, 5% According to MSCI.
Unnamed Speaker: Overall, TPB loose leaf volume was down 0.9%, meaning category volume declines of 3.7%. Gross margin declined 30 basis points to 55% primarily due to product mix somewhat offset by MST pricing gains. Next on to the balance sheet. We ended the quarter with just over $140 million in cash. Post 2Q close, we retired our $118.5 million convertible note on the maturity date of July 15. We were able to do this without drawing on our ADL.
Speaker Change: Overall, TPB loose leaf volume was down 9% cleaning category volume declines of three 7%.
Speaker Change: Category performance was driven by a larger decline in premium loose leaf with tpb's volumes benefiting from consumer trade down.
Speaker Change: <unk> volumes grew from the previous year our.
Andrew Flynn: Our free sales more than tripled off a low base as we continued national distribution of the product. Gross margin declined 30 basis points to 55%, primarily due to product mix, somewhat offset by MST pricing gains. Moving to CDS, sales were $15 million.
Speaker Change: <unk> sales more than tripled off a low base as we continued national distribution of the product.
Speaker Change: Gross margin declined 30 basis points to 55%, primarily due to product mix somewhat offset by MST pricing gains.
Speaker Change: Moving to Cvs sales were $15 million gross margin was 22, 5%.
Andrew Flynn: Gross margin was 22.5%; adjusted EBITO was approximately $450,000.
Speaker Change: Adjusted EBITDA was approximately $450000.
Andrew Flynn: Next on to the balance sheet. We ended the core with just over $140 million cash. Close to QClose, we retired our $118.5 million convertible note on the maturity date of July 15th. We were able to do this without drawing on our ADL. On a pro forma basis, after retiring the convert, our gross debt is $250 million, net debt $226.4 million. With our projected free cash flow generation this year, we are well within our previously disclosed leverage range of 2-3 times and are comfortable with our liquidity position. On to guidance and other line items. As Graham noted, we are increasing our guidance for forecasted 2024, adjusted EBITO, to $98 to $102 million versus our prior guidance of $95 to $100 million.
Speaker Change: Next on to the balance sheet.
Speaker Change: We ended the quarter with just over $140 million of cash post <unk> close we retired our $118 $5 million convertible note on maturity date of July 15th.
Speaker Change: To do this without drawing on our ABL on a pro forma basis. After retiring the convert our gross debt is $250 million net debt $226 $4 million with our project.
Unnamed Speaker: On a pro forma basis, after retiring the convert, our gross debt is $250 million, and net debt is $226.4 million. On to guidance and other line items. As Graham noted, we are increasing our guidance for forecasted 2024 adjusted EBITDA to $98 to $102 million versus our prior guidance of $95 to $100 million and an effective income tax rate of 23 to 26 percent. We revised our CapEx expectation from $15 million to $11 million.
Speaker Change: <unk> free cash flow generation. This year, we are well within our previously disclosed leverage range of two to three times and are comfortable with our liquidity position.
Speaker Change: On to guidance on other line items.
Speaker Change: As Graeme noted we are increasing our guidance for forecasted 2024, adjusted EBITDA to 98% to $102 million versus our prior guidance of $95 to $100 million.
Andrew Flynn: Neither of these ranges include contributions from CDS. Effective income tax rate of 23% to 26%.
Speaker Change: Neither of these ranges include contributions from Cvs.
Speaker Change: Effective income tax rate of 23% to 26% we.
Andrew Flynn: We revised our catbacks expectation from $50 million to $11 million. Our investment plans have not changed, and reductions are timing driven.
Speaker Change: We revise our capex expectation from $15 million to $11 million.
Speaker Change: Our investment plans have not changed and reductions are timing driven.
Andrew Flynn: We expect to spend approximately $4 million for the full year to supplement our PNTAs that are related to our modern oral products, which remain under review by the FDA.
Speaker Change: We expect to spend approximately $4 million for the full year supplement our PMT as that related to our modern oral products, which remain under review by the FDA.
Andrew Flynn: Now let me turn it back to Graham.
Speaker Change: Now, let me turn it back to Graham.
Graham Purdy: To conclude, we're pleased with our progress at 2024's halfway point. And with that, I'll turn it over to questions.
Operator: To conclude, we're pleased with our progress at 2024's halfway point. And with that, I'll turn it over to questions.
Speaker Change: To conclude we're pleased with our progress at 2024, its halfway point and with that I'll turn it over to questions.
Operator: Thank you for joining us in the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called to ask your question and I'm listening via loudspeaker on your device, please speak up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Thank you.
Speaker Change: And the question and answer session.
Operator: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: <unk> and <unk>.
Speaker Change: To ask a question please.
Speaker Change: Press Star one on your telephone keypad, Tunisia and join the queue.
Speaker Change: We'd like to withdraw your question Press Star one again.
Speaker Change: If you all recall donlin to ask your question and I listen the wireless speaker on your device.
Speaker Change: Please go ahead your handset ensured that your phone is not on mute when asking your question.
Michael Legg: Your first question comes from the line of my colleagues with the best smart company. Please go ahead. Thank you.
Speaker Change: Your first question comes from the line of Mike Good luck.
Mark: Mark. Please go ahead.
Speaker Change: Thanks, Congratulations on a great quarter for everyone.
Graham Purdy: Congratulations on a great corner, everyone. Three obviously seems like a huge opportunity for you. You decided you've had the PNTAs for the three milligrams and the six milligrams, which didn't launch them alongside the nine, 12, and 15 milligrams packets. Can first you just talk about the timing and why you decided to launch the six milligrams now. Yeah. Hey, Michael. It's Graham. Thanks for the question. Yeah, I think the original thesis was to provide a differentiated product for consumers as well as our customers, as the shelves were being filled up with various products, you know, sort of sub nine milligram.
Mike: Three obviously it seems like a huge opportunity before you decided that <unk> had the PMT as 43 milligrams and six milligrams with didn't launch built alongside the mind 12 and 15 million.
Milligan: Milligan and package.
Speaker Change: First can you just talk a little about the timing on why you decided to launch with a slow slog.
Speaker Change: We'll now.
Speaker Change: Yeah, Hey, Michael It's Graham Thanks for the question, Yes, I think the original thesis was to provide a differentiated product for consumers as well as our customers as the shelves were being filled up with that.
Speaker Change: Various products.
Speaker Change: Hub nine milligram, so pretty unique opportunity with both customer and consumer.
Graham Purdy: So pretty unique opportunity with both customer and consumer. I think through our direct selling apparatus, free pouch dot com, what we found over time is that mouth feel has become a very strong differentiator. For us to then gave us confidence to lean into the six milligram segment, you know, through as of Q two, that segment was about 52% the six milligram segment for the quarter. So it really gives us a strong opportunity to participate for those consumers and really grow them into sort of the broader portfolio of products that we have. Okay, and can you talk a little bit about your manufacturing code and how you could do something with the cost possible.
Unnamed Speaker: I think through our direct selling apparatus, freepouch.com, what we've found over time is that mouthfeel has become a very strong differentiator for us, which I think gave us confidence to lean into the six milligram segment, you know, though as of Q2, that segment was about 52% the six milligram segment for the quarter. So it really gives us a strong opportunity to participate with those consumers and really grow them into sort of the broader portfolio of products that we have.
Speaker Change: And think through our direct selling apparatus free pouch dot com. What we found over time is that mouthfeel has become a very strong differentiator for us, which I think gave us confidence to lean into the six milligram segment.
Speaker Change: As of Q2 that segment was about 52% to six milligram segment for the quarter. So it really gives us a strong opportunity to participate for those consumers and really grow them into sort of the broader portfolio of products that we have.
Speaker Change: Okay.
Speaker Change: Can you talk a little bit about your manufacturing capabilities are you producing.
Speaker Change: What's possible here.
Unnamed Speaker: Yeah, I think we feel really good about where we're at right now. We've got a strong manufacturing partner who's got an appetite to invest behind it. You know, if we look at how we perceive the sort of balance of this year and moving into next year, we feel really confident in the partner that we have.
Graham Purdy: Yeah, we look, we feel particularly so really good about where we're at right now. We've got a strong manufacturing partner who's got an appetite to invest behind it. You know, if we look through how we perceive the sort of balance of this year and moving into next year, we feel really confident in the partner that we have.
Speaker Change: Yes.
Speaker Change: I think we feel particularly feel really good about where we're at right now we've got a strong manufacturing partner, whose.
Speaker Change: Got a.
Speaker Change: Appetite to invest behind it.
Speaker Change: If we look through what we perceive to sort of balance of this year and moving into next year, we feel really confident in the partner that we have.
Graham Purdy: Okay, but as far as capacity is learning. Lovely to be this close. No. Okay, and then what do you actually. Yeah. The longer term budget for free. I'm sorry, Mike. Can you admit, say that again? The longer term margin potential for free. Yeah, look, I think it sort of follows our, you know, past thesis, which is growing into higher margins over time. We tend to invest in the brands in the early days, which, you know, if we call some of the past launches, we sort of signal that 20 to 40% was kind of our intro range for products.
Unnamed Speaker: Okay. But as far as capacity is concerned, is there any... Do you have anything to discuss? No. Okay, and then what do you view as the... Yeah, the long-term budget proposal for free.
Speaker Change: Okay.
Speaker Change: As far as possible.
Speaker Change: Anthony.
Anthony: Lovely you can disclose.
Speaker Change: No.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: It's a more difficult so for free.
Speaker Change: I'm sorry, Mike can you say that again.
Unnamed Speaker: The longer term margin potential is free.
Speaker Change: The longer term margin potential for free.
Unnamed Speaker: Yeah, look, I think it sort of follows our, you know, past thesis, which is, you know, growing into higher margins over time. We tend to invest in the brands in the early days, which, you know, if we recall some of the past launches, we sort of signaled that 20 to 40% was kind of our initial range for products. But we're seeing sort of favorable pricing dynamics emerge in this category as well. And so we're pretty confident that over time, you know, as we get more leverage, and the brand gets more scale in the marketplace, we'll sort of be able to follow that same model.
Mike: Yes look I think it sort of follows our our past thesis which is growing.
Speaker Change: Growing into higher margins overtime, we tend to invest in the brands in the early days, which.
Speaker Change: If you recall some of the past launches, we sort of signaled that 20% to 40% was kind of our intro range for products, but we're seeing sort of favorable pricing dynamics emerge in this category as well and so we're pretty confident that over time.
Graham Purdy: But we're seeing sort of favorable pricing dynamics emerge in this category as well. And so we're pretty confident that over time, you know, as we get more leverage and the brand gets more scale in the marketplace, that will sort of be able to follow that same model.
Speaker Change: As we get more leverage in the brand gets more scale in the marketplace that will sort of able to follow that same model.
Michael Legg: Okay, great. So basically, competition now is obviously building up the capacity and you know, surprise and the constraints in the marketplace and what I'm seeing. You guys have more P and TAs in the competition. They're only in the three and six. You guys also have the nine 12 to 15. Is that correct? Yes. Okay, great.
Speaker Change: Okay great.
Speaker Change: So both in competition now, obviously, a global outlet capacity.
Speaker Change: So the constraint in the market closer to what I'm, saying.
Speaker Change: You guys have more appealing to those in the comparable so that they are only in the familial folks you guys also have the 912 and 14 well correct.
Speaker Change: Yes.
Speaker Change: Okay, Great alright, thank you very much great quarter.
Michael Legg: All right. Thank you very much. Great corner. Oh, thanks, Mike.
Speaker Change: Thanks, Mike.
Eric Lauriers: Your next question comes from the line of very best. We create column. Please go ahead. All right. Thanks for taking my questions, and congrats on a very impressive quarter here. Thank you. I'll stick with the free questions for now. You know, you were just recently mentioning. You're investing in brands in the early days. Obviously makes sense. You know, considering the kind of explosive growth that we're seeing in this category. I'm just wondering sort of how you're thinking about marketing spend and trade promotion for free. You know, what would you need to see to sort of increase spend?
Operator: Your next question comes from the line of Eric Death Lauriers with Craig Hallum Capital Group. Please go ahead.
Speaker Change: Your next question comes from the line of Beth Mario.
Speaker Change: Great.
Speaker Change: Please go ahead.
Speaker Change: Yeah.
Beth Mario: Great. Thanks for taking my questions and congrats on a very impressive quarter here.
Speaker Change: Thank you I'll stick with the <unk>.
Speaker Change: Three questions for now.
Speaker Change: We're just recently mentioned.
Speaker Change: You are investing in brands in the early days, obviously makes sense.
Speaker Change: Considering the kind of explosive growth that we're seeing in this category.
Speaker Change: I'm, just wondering sort of how youre thinking about marketing spend and trade promotion for free.
Speaker Change: What would you need to see to sort of increased spend.
Graham Purdy: And you know, how should we think about, you know, potential spend as falling between marketing investment in SG&A or trade promotion and net sales or COGS? Just wondering how you're sort of thinking about this going forward. Yeah, I think if you just take a step back from a 30,000-foot view, I think we're very data-driven. We've got robust data for this segment, and specifically our brand through MSAI as well as our online channels. And I think that data informs our decision relative to how we throttle spending. In terms of the distinction between trade promotion and marketing expense, I think that that's always a balancing act.
Speaker Change: How should we think about potential.
Speaker Change: Potential spend.
Speaker Change: Following between marketing investment in SG&A or trade promotion in net sales our Cogs I'm, just wondering how youre, how youre sort of thinking about this going forward.
Unnamed Speaker: Yeah, I think if you just take a step back from a 30,000 foot view, I think we're very data driven. We've got robust data for this segment, and specifically our brand, through MSAI as well as our online channels. And I think that the data informs our decisions relative to how we throttle spending. In terms of the distinction between trade promotion and marketing expense, I think that that's always a balancing act, where as we read that data, we sort of make a determination on where to press in a little harder and maybe where to lean out of that particular spending or investment view. But at the end of the day, I think what makes us a little bit unique is that we've gone to market, and we maintain profitability in the segment, which I think we're incredibly proud of.
Speaker Change: Yes, I think if you just take a step back from a 30000 foot view I think we're very data driven we've got robust data for this segment and specifically our brand through MSA I as well as our online channels and I think that the data informs our decision relative to how we throttle spending in terms of the distinction between trade.
Speaker Change: <unk> and marketing expense. So we think that that's always a balancing act.
Graham Purdy: Whereas, as we read that data, we sort of make a determination on where to put the press in a little harder, and maybe where to lean out of that particular spending or investment view. But at the end of the day, I think what makes us a little bit unique is that we've gone to markets and we maintain profitability in the segment, which I think we're incredibly proud of. Yeah, that's great. I appreciate the color there. You mentioned some comments on, obviously, these larger sea-store chains have a longer sales cycle. You've had more success with some of these Independence.
Speaker Change: As we read that data, we sort of make a determination on where to be addressed in a little harder than maybe where to lean out of.
Speaker Change: That particular.
Speaker Change: Spending or investment.
Speaker Change: Investment view, but at the end of the day I think.
Speaker Change: What makes us a little bit unique is that.
Speaker Change: <unk> gone to market and we maintained profitability in the segment, which I think we're incredibly proud of.
Speaker Change: Yes, no that's great and I appreciate the color there.
Speaker Change: You mentioned some comments on obviously these larger C store chains have a longer sales cycle, you've had more success.
Speaker Change: With some of these independents.
Graham Purdy: I'm wondering how the sort of trajectory for the second half is looking here. Do you feel that you've sort of gotten into a good number of the independence? And maybe there's some inventory sort of initial load-in to be aware of that maybe we could see some volatility quarter to quarter. Or are we just kind of too early in this robust growth trajectory that we shouldn't necessarily be thinking about kind of quarter-to-quarter volatility at this point? Just sort of wondering how you're viewing that more near-term landscape?
Speaker Change: I'm wondering how the sort of.
Speaker Change: Trajectory for the second half.
Speaker Change: Is looking here do you feel that you've sort of gone into.
Speaker Change: A good number of the independent and maybe Theres some.
Speaker Change: Inventory sort of initial load in to be aware of that maybe we could see some volatility quarter to quarter or.
Speaker Change: Or are we just kind of too early in this robust growth trajectory that we shouldnt necessarily be thinking about kind of quarter to quarter volatility at this point.
Speaker Change: Sort of wondering how you are viewing that more near term landscape.
Graham Purdy: Yeah, look, it's a lot to unpack in that question. So I'll start first with the chain environment. Well, it's a long sales cycle for the large chain accounts. So we'll note out that we're in the overwhelming majority with the top 50 chains in the country, with some skewer representation with TBB. And it's important to note that because we've got a long history of creating partnerships and creating value with our customers. So we're very confident over time in our ability to sort of get into the larger chain accounts in terms of how we think about volatility from quarter to quarter.
Speaker Change: Yeah look it's lots to unpack in that question. So I'll start first with the changed environment, while it's a long sales cycle for the large chain accounts. So we'll no doubt that we are in the overwhelming majority with the top 50 chains in the country with some SKU representation with TPB and it's important to note that because we've got a long history.
Speaker Change: We have of creating partnerships and creating value with our customers. So we're very confident over time and our ability to sort of get into the larger chain accounts in terms of how we think about volatility from quarter to quarter I think it's in the early days right now obviously, it's still a relatively <unk>.
Graham Purdy: I think it's in the early days right now. Obviously, it's still a relatively small comparative to the entirety of the stoker's segment in terms of how we went to market. We certainly didn't go to market with a sort of a big load strategy, if you will. And what we're trying to do is get a view for get the product in the stores, merchandise it well, make sure the consumers can see it, placing point of sale and seeing what the pull-through rates are. And so we're really sort of managing not over-inventorying the trade in the early days for this launch.
Speaker Change: Small comparative to the entirety of Stoker segment.
Speaker Change: In terms of how we went to market. We certainly didn't go to market with a sort of a big load strategy. If you will.
Speaker Change: And what we're trying to do is get a view for get the product into stores merchandise at well make sure that consumers can see it.
Speaker Change: Placing point of sale and seeing what the pull through rates are and so we're really sort of managing not over inventory in the trade in the early days for for this launch.
Speaker: It's all very great to hear.
Eric Lauriers: It's all very great to hear. I've sort of been, you know, attacking the value side of the category, and here you're kind of competing head on here. I'm wondering if you have any view on sort of potential market share, you know, goals or targets or anything kind of longer term. I mean, is this something where you still see, you know, in the single digits as being the sort of target here as you are with Stoker's MST, or is there anything else that you're seeing that, you know, maybe that could be, you know, either more or less? I mean, just wondering how you're thinking about overall market share goals given the slightly different, you know.
Speaker Change: Alright.
Speaker Change: Great to hear.
Speaker Change: Yes.
Eric Lauriers: Overall, I mean, you know, kind of this is a, I guess, another sort of 30,000-foot question or just, you know, longer term question. So, you know, with your other stoker's products, you've sort of been, you know, attacking the value side of the category. You know, here you're kind of competing head-on here. I'm wondering if you have any view on sort of potential market share, you know, goals or targets, or anything kind of longer term. I mean, is this something where you still see, you know, in the single digits as being the sort of target here as you are with Stoker's MST, or is there anything else that you're seeing that, you know, maybe that could be, you know, either more or less.
Speaker Change: Overall, I mean kind of this is.
Speaker Change: I guess, another sort of 30000 foot question or just.
Speaker Change: Longer term question so.
Speaker Change: With your other stokers products, you've sort of been.
Speaker Change: Attacking the value side.
Speaker Change: Of the category here, you are kind of competing head on here.
Speaker Change: I'm wondering if you have any view on sort of potential market share.
Speaker Change: Their targets or anything kind of longer term I mean is this something where you still see.
Speaker Change: In the single digits as being the sort of target here as you are with stokers MST.
Speaker Change: Or is there anything else that youre seeing that maybe.
Speaker Change: Maybe that could be.
Speaker Change: Either more or less I mean, just I was just wondering how youre thinking about overall market share goals given the slightly different.
Graham Purdy: I mean, just, just wondering how you're thinking about overall market share goals given the slightly different competitive positioning with free versus your other stoker's products. Sure. Very question. So, I think that we have, you know, our aspirations are large. And if you, if you take our aspirations and you unpack them, sort of our goal is to be an everyday player on the shelf across the US, which would mean that, you know, we're being one of the few that actually sort of emerges as, you know, in that top, you know, say four or five brands in the market.
Speaker Change: <unk> competitive positioning with free versus your other stokers products.
Unnamed Speaker: Sure, great question. So I think that we have, you know, our aspirations are high. And if you take our aspirations and you unpack them, sort of our goal is to be an everyday player on the shelf across the US, which would mean that we are one of the few that actually sort of emerges as, you know, in that top, you know, say, four or five brands in the market. I think Stokers and the gains that we've made there throughout the year sort of inform what we think the potential could be.
Speaker Change: Sure Great question. So I think that we have in our aspirations are large and if you if you take our aspirations and you unpack them.
Speaker Change: Our goal is to be an everyday player.
Speaker Change: On the shelf across the U S, which would mean that.
Speaker Change: Being one of the one of the few that actually sort of emerges.
Speaker Change: In that top.
Speaker Change: Say four or five brands in the market.
Graham Purdy: I think stokers and the gains that we've made there throughout the year, sort of informs what we think the potential could be. And certainly we're way ahead of the game in our entry into the white pouch category with a differentiated product. Whereas it took us 40 years to get to the moist enough category, and we're competing against large entrenched incumbents, you know, we're relatively early inside that cycle with, with free in the modern oral category. So, there's a lot of adoption; the category growth that is expected throughout the rest of this decade will largely be from new consumers coming into the category that currently aren't engaged.
Speaker Change: I think stokers and the gains that we've made there throughout the year sort of informs what we think the potential could be and certainly we're way ahead of the game in our entry into the white pouch category with a differentiated product, whereas it took US 40 years to get to the moist snuff category and we are.
Unnamed Speaker: And certainly, we're way ahead of the game in our entry into the white pouch category with a differentiated product, whereas it took us 40 years to get to the moist snuff category, and we're competing against large entrenched incumbents. You know, we're relatively early inside that cycle with free in the modern oil category. So there's a lot of adoption; the category growth that is expected throughout the rest of this decade will largely be from new consumers coming into the category that currently aren't engaged.
Speaker Change: Competing against large entrenched incumbents.
Speaker Change: We're relatively early inside that cycle with with free in the modern oral category.
Speaker Change: A lot of adoption the category growth that is expected throughout the rest of this decade will largely be from new consumers coming into the category that currently aren't engaged and so we think that theres a great opportunity for us to win new consumers as they come into the category, while also competing for existing consumer.
Unnamed Speaker: And so we think that there's a great opportunity for us to win new consumers as they come into the category, while also competing for existing consumers that are looking for a little more satisfaction, looking for better mouthfeel. And we think the launch of the six milligrams sort of gives us the license to speak to those consumers and give them an opportunity to try our product and see the difference.
Graham Purdy: And so we think that there's a great opportunity for us to win new consumers as they come into the category while also competing for existing consumers that are looking for a little more satisfaction, looking for better mouth feel. And we think the launch of the six milligram sort of gives us the license to speak to those consumers and give them an opportunity to try our product and see the difference.
Unnamed Speaker: Yeah. That's great.
Speaker Change: Owners that are looking for a little more satisfaction looking for better mouth feel and we think the launch the six milligram sort of gives us license to speak to those consumers and give them an opportunity to try our product and see the difference.
Speaker Change: Yeah. Thanks, Scott So it makes sense to me.
Eric Lauriers: last question from me, switching gears over to Zigzag. I just wanted to kind of double-click on one of the comments you made earlier in your prepared remarks, Graham. You mentioned how traditional C-store customers are kind of increasingly targeting the alternative channel customer and that there's sort of a blurring of the lines between traditional C-store and the alternative channel. I wanted to just expand on that a bit. Is this traditional C-store customers now ordering a much wider assortment of skews, or is there something about new stores or new doors, something else blurring the lines between C-store and alternative channels?
Graham Purdy: That certainly makes sense to me. Last question from me, switching gears over to ZigZag, I just wanted to kind of double-click on one of the comments you made earlier in your prepared remarks, Graham. You mentioned how traditional C-store customers are kind of increasingly targeting the, I guess, alternative channel customer, and that there's sort of a blurring of the lines between, you know, traditional C-stores and the alternative channel. And I'm wondering if you could just expand on that a bit.
Speaker Change: Last question from me switching gears over to Zig Zag I, just wanted to kind of double click on one of the comments you made earlier in your prepared remarks Graham.
Speaker Change: You mentioned that with traditional C store customers are kind of increasingly targeting the.
Speaker Change: I guess alternative channel customer.
Speaker Change: <unk>.
Speaker Change: That there is sort of blurring of the lines between traditional C store in the alternative channel and I'm wondering if you could just expand on that a bit I mean is this is this just traditional C store customers now ordering a much wider assortment of skus or is there something.
Graham Purdy: I mean, is this just traditional C-store customers, you know, now ordering a much wider assortment of SKUs, or is there something about new stores or new doors, something else blurring the lines between C-store and alternative channels? Wondering if you could expand on that. Yeah.
Speaker Change: Something about new new stores or new doors, something else blurring the lines between C store in the alternative channel was wondering if you could expand on that.
Graham Purdy: I wanted to expand on that. Yeah, so just as a point of clarification, as we launched the strategy, we were really focused specifically on a set of stores that we'd defined as alternative stores, head shops, smoke shops, dispensaries, and also the growth of distributors that were emerging to service that space. Where the lines are getting blurry is that some of our traditional distributors are also going after those customers. As that customer base grows, it's an opportunity for them to service those stores as well. What we're seeing is, again, very good news for us. We're seeing some of our legacy traditional distributors that we've done business with for decades; they're leaning into that segment.
Speaker Change: So just as a point of clarification.
Speaker Change: We launched the strategy, we are really focused specifically on a set of stores, we had defined as alternative get stores head shop smoke shops dispensaries.
Graham Purdy: and also the growth of distributors that are emerging to service that space. Where the lines are getting blurry is that some of our traditional distributors are also going after those customers. And so, you know, as that customer base grows, it's an opportunity for them to service those stores as well. And so what we're seeing is, and this is again, very good news for us, we're seeing some of our legacy traditional distributors that we've done business with for decades, they're leaning into that segment.
Speaker Change: And also the growth of distributors that were that were emerging to service that space, where the lines are getting blurry is that some of our traditional distributors are also going after those customers and so as that that customer base grows it's opportunity for them to service those.
Speaker Change: Those stores as well and so what we're seeing is and again very good news for US we're seeing some of our legacy traditional distributors, we've done business with for decades. They are leaning into that segment because look if you think about it they're driving trucks to convenience stores and they are passing these stores along the way so it's a great opportunity for them.
Graham Purdy: Because look, you think about it, they're driving trucks to convenience stores, and they're passing these stores along the way. So it's a great opportunity for them to leverage their fixed costs in terms of taking product to those stores. And so we're just seeing a little bit of that sort of starting to occur in the channel, which is just creating one opportunity for us, but also the sort of blurring where a traditional distributor and an alternative distributor, you're starting to see those lines kind of cross up a bit.
Graham Purdy: You think about it; they're driving trucks to convenience stores, and they're passing these stores along the way. It's a great opportunity for them to leverage their fixed cost in terms of taking product to those stores. We're just seeing a little bit of that starting to occur in the channel, which is just creating one an opportunity for us, but also the blurring where a traditional distributor and an alternative distributor, you're starting to see those lines kind of cross up a bit. Actually, that's very helpful. I think that's where I was confused; that we were sort of talking about the distributors here, and the lines are getting blurred there, which to me, that sounds like that was very sort of beneficial to ZigZag compared to some of the other rolling paper brands that you might see as some of these alternative shops.
Speaker Change: To leverage their fixed cost in terms of.
Speaker Change: Taking product to those stores and so we're just seeing a little bit of that sort of starting to occur in the channel, which is just creating one an opportunity for us, but also with sort of blurring, where a traditional distributor and an alternative distributor you're starting to see those lines kind of kind of cross up a bit.
Speaker Change: Okay. That's very helpful. I think that's where I was confused.
Speaker Change: That were sort of talking about the distributors here in the lines are getting blurred.
Speaker Change: There, which I mean to me that sounds like that.
Speaker Change: Very sort of beneficial.
Speaker Change: To zig zag compared to some of the other.
Speaker Change: Rolling paper brand you.
Speaker Change: You might see some of these alternative shops, I mean, I would imagine that you guys have.
Graham Purdy: I mean, I would imagine that you guys have much stronger relationships with these more traditional distributors. Can you kind of just comment on that subject, your relationship with these traditional distributors versus maybe some of your competitors that you run into in the all channel? Yeah, I would say if you look at sort of from a relationship standpoint, this company has been in business since 1988, so a lot of these traditional distributors we've been doing business since that long. And so that partnership is deep. Most of the folks that are really focused on that specific alt channel haven't been around quite as long, and that's not a negative. But at the same time, we view the relationships that we've built with traditional distributors as incredibly strong.
Speaker Change: Much stronger relationships with these more traditional distributors can you kind of just comment on any on.
Speaker Change: That subject you sort of your relationship with your traditional distributors versus maybe some of the some of your competitors that you run into in the <unk> channel.
Speaker Change: Yes, I would say the.
Speaker Change: If you look at sort of from a relationship standpoint. This company has been in business. Since 1988. So a lot of these traditional distributors, we have been doing business with since that long.
Speaker Change: And so that partnership is deep most of the folks that are really focused on that specific all channel haven't been around quite as long and that's not a that's not a negative but at the same time, we view the relationships. We've built with the traditional distributors is incredibly strong and we feel the process.
Graham Purdy: And we feel the process that we bring that created those relationships and that value can be transferable as well to these alternative distributors as they grow. And so I think it really sets up nicely for us in the future, having an omnidistributor approach servicing that channel and overlaying on top of that, our ability to sell direct consumer as well as direct to store through our own website really gives us the ability to speak to consumers wherever they want to buy the product.
Speaker Change: That we bring that created those relationships and that value can be transferable as well to these alternative distributors as they grow and so I think.
Speaker Change: I think it really sets up nicely for us in the future, having an omni distributor approach servicing that channel and overlaying on top of that our ability to sell direct to consumer as well as direct to stores through our own website really gives us the ability to speak to consumers wherever they want to buy the product.
Eric Lauriers: Thank you very much. I appreciate you taking my questions. I congratulate you again on that great quarter. Thanks, Eric. Appreciate it.
Speaker Change: That's very helpful. I appreciate you taking my questions and congrats again on a great quarter. Thanks.
Speaker Change: Thanks, Eric I appreciate it.
Operator: There are no further questions at this time.
Speaker Change: There are no further questions.
Graham Purdy: That concludes our Q&A session.
Sean: Thanks, Sean.
Graham Purdy: I will not turn the conference back over to Graham Purdy for closing remarks. Thanks, operator. Appreciate everybody joining the call today, and we look forward to speaking again in a few months.
Speaker Change: I'll turn the conference back over for closing remarks.
Speaker Change: Okay. Thanks, operator, I appreciate everybody joining the call today and we look forward to speaking you again in a few months.
Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Operator: You may now disconnect. Please wait.
Speaker Change: Please wait the conference will begin shortly.
Operator: The conference will begin shortly.
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