Q2 2024 Vector Group Ltd Earnings Call

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Speaker Change: [music]. Please standby your program is about to begin if you should need assistance. During your conference today. Please press star zero.

Speaker Change: Welcome to vector Group Ltd second quarter 2024 earnings Conference call. This call is being recorded and simultaneously webcast. An archived version of the webcast will be available on the Investor Relations section of the company's website located at Www Dot Doctor Group L. T D dotcom.

Unknown Executive: During this call, the terms Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, and Tobacco Adjusted Operating Income will be used. These terms are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, other measures of financial performance prepared in accordance with GAAP. Reconciliations to Adjusted Operating Income, Adjusted Net Income, Adjusted EBITDA, and Tobacco Adjusted Operating Income are contained in the company's earnings release, which has been posted to the Investor Relations section of the company's website.

Speaker Change: During this call the terms adjusted operating income adjusted net income adjusted EBITDA and tobacco adjusted operating income will be used. These terms are non-GAAP financial measures and should be considered in addition to but not as a substitute for other measures of financial performance prepared in accordance with GAAP reconciliations to adjusted operating income adjusted net.

Operator: These terms are non-GAAP financial measures and should be considered in addition to, but not as a substitute for, other measures of financial performance prepared in accordance with GAAP.

Operator: Reconciliation to adjusted operating income, adjusted net income, adjusted EBITDA, and tobacco-adjusted operating income are contained in the company's earnings release, which has been posted to the Investor Relations section of the company's website.

Speaker Change: Net income adjusted EBITDA and tobacco adjusted operating income are contained in the company's earnings release, which has been posted to the Investor Relations section of the company's website.

Operator: Before the call begins, I would like to read a safe harbor statement. The statements made during this conference call that are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings.

Unknown Executive: Before the call begins, I would like to read a Safe Harbor Statement. The statements made during this conference call that are not historical facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings. Now, I would like to turn the call over to the President and Chief Executive Officer of Vector Group, Howard Lorber.

Speaker Change: Before the call begins I would like to read a safe Harbor statement.

Speaker Change: The statements made during this conference call that are not historical facts are forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward. Looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings now I would like to turn the call over.

Howard M. Lorber: Adjusted net income increased to 53.3 million or 34 cents per diluted share, up from 50.8 million or 32 cents per diluted share in the 2023 period. Revenues for the six months ended June 30 of 2024 were $696.5 million compared to $699.8 million in the corresponding 2020 free period. Adjusted EBITDA increased to $186 million, up from $172 million. I will now turn the call over to Nick to discuss our tobacco operations.

Howard Lorber: Now, I would like to turn the call over to the President and Chief Executive Officer of Vector Group, Howard Lorber. Good morning, and thank you for joining us for Vector Group's second quarter of 2024 earnings conference call. With me today, Richard Lampen, our Chief Operating Officer, Brian Kirkland, our Chief Financial Officer, and Nick Anson, President and Chief Operating Officer of Ligid Vector Brands.

Speaker Change: To the President and Chief Executive Officer.

Howard Lorber: Vector group Howard Lorber.

Howard Lorber: Good morning, and thank you for joining us for vector group's second quarter 'twenty 'twenty four earnings conference call with me today are Richard lapping, our Chief operating Officer, Brian <unk>, Our Chief Financial Officer, and Nick Anson, President and Chief operating officer of Liggett vector brands I will.

Howard Lorber: I will start the call with an update on our balance sheet and review our consolidated financial results for the second quarter of 2024. Then, I will ask Nick to summarize the performance of our tobacco business.

Howard Lorber: Start the call with an update on our balance sheet and then review our consolidated financial results for the second quarter of 2024.

Howard Lorber: Then I will ask Nick to summarize the performance of our tobacco business I will close with final comments and open the call for questions.

Howard Lorber: I will close with final comments and open the call for questions. As of June 30, of 2024, we maintain significant liquidity with cash and cash equivalence of approximately 391 million, including cash of 150 million at Ligid. We also held investment securities and long-term investments with a fair market value of approximately 188.

Howard Lorber: As of June 30 of 'twenty 'twenty, four we maintained significant liquidity with cash and cash equivalents of approximately 391 million, including cash of 150 million I'd look at where you're also held investment securities and long term investments with a fair market value of approximately 188 million.

Operator: 2,000,000,000.

Howard Lorber: Turning to Vector's consolidator results for the three months ended June 30, 2024. Vector's revenues for the second quarter of 2024 were 371.9 million, up from 365.7 million in the corresponding 2023 period. Net income increased to 54.2 million, or 34 cents per diluted common share, up from 38.1 million, or 24 cents per diluted common share in the 2023 period. Adjusted EBITDA increased to 103.3 million, up from 94.1 million in the 2023 period. Adjusted net income increased to 53.3 million, or 34 cents per diluted share, up from 50.8 million, or 32 cents per diluted share in the 2023 period.

Howard Lorber: Turning to vectors consolidated results for the free months ended June 30 of 'twenty 'twenty four.

Howard Lorber: Revenues for the second quarter of 2020 for it with 371.9 million up from $365 7 million in the corresponding 2020 free period.

Howard Lorber: Net income increased to $54 2 million or 34 cents per diluted common share up from $38 1 million or 24 cents per diluted common share in the 2020 free period.

Adjusted EBITDA increased to $103 3 million up from $94 1 million in the 2023 period.

Howard Lorber: Adjusted net income increased to $53 3 million or 34 cents per diluted share up from $50 8 million or 32 cents per diluted share in the 'twenty to 'twenty three period.

Howard Lorber: Turning to Vector's consolidator results for the six months ended June 30, 2024. Revenues for the six months ended June 30, 2024, with 696.5 million compared to 699.8 million in the corresponding 2023 period. Net income was 89 million or 56 cents per diluted common share, up from 72.8 million or 46 cents per diluted common share in the 2023 period. Adjusted EBITDA increased to 186 million, up from 172 million, 172.2 million in the 2023 period. Adjusted net income was 90.5 million or 50 cents, 57 cents per diluted share compared to 84.8 million or 54 cents per diluted share in the 2023 period.

Howard Lorber: Turning to vectors consolidated results for the six months ended June 30 of 'twenty 'twenty four.

Howard Lorber: Revenues for the six months ended June 30 of 'twenty, 'twenty, four or $696 5 million compared to $699 8 million and a corresponding twenty-twenty free period.

Howard Lorber: Net income was 89 million or 56 cents per diluted common share up from $72 8 million or <unk> 46 cents per diluted common share in the 'twenty 'twenty free period.

Howard Lorber: Adjusted EBITDA increased to 186 million up from 172 million.

Howard Lorber: $172 2 million in the 'twenty 'twenty free period.

Howard Lorber: Adjusted net income was $90 5 million or 50 cents 57 cents per diluted share compared to $84 8 million or 54 cents per diluted share in 2020 free period.

Howard Lorber: I will now turn the call over to Nick to discuss our tobacco operations.

Howard Lorber: I will now turn the call over to Nick to discuss our tobacco operations Nick.

Nicholas Anson: Nick. Thank you, Howard, and good morning. Liquid delivered strong results in the second quarter in the first half of 2024 as we continue to reap the benefits of our strategic investment in Montego while also delivering substantial income from our other core brands, Eagle 20s and Pyramid. Adjusted operating income from the tobacco segment in the second quarter was 103 million, an increase of 9.8 million or 10.5 percent compared to the prior year period. Liquid's total retail market share remains stable at 5.8 percent during the second quarter of 2024. At the same time, Montego's national retail market share grew to 4.1 percent, up from 3.5 percent in the prior year period.

Nick: Thank you Howard and good morning, Luke.

Nicholas P. Anson: Liggett delivered strong results in the second quarter of the first half of 2024 as we continue to reap the benefits of our strategic investment in Montego while also delivering substantial income from our other core brands, Eagle 20s and Pyramid. Adjusted operating income from the tobacco segment in the second quarter was $103 million, an increase of $9.8 million or 10.5% compared to the prior year period.

Nick: <unk> delivered strong results in the second quarter and first half of 'twenty 'twenty four as we continue to reap the benefits of our strategic investment in Montego, while we started delivering substantial income from our other cool brands Eagle Twenty's and pyramid.

Howard Lorber: Operating income from the tobacco segment in the second quarter was 103 million, an increase of $9 8 million or 10, 5% compared to the prior year period.

Howard Lorber: Liggett's total retail market share remained stable at five 8% during the second quarter of 2024 at the same time months. He goes national retail market share grew to four 1% up from three 5% in the prior year period.

Nicholas Anson: Our portfolio of brands provides for a substantial income base. Eagle 20s and Pyramid offer significant market presence, while Montego enhances our potential for long-term earnings growth. Montego, which is now delivering incremental margin, is demonstrating strong consumer demand. The brand remains the largest discount cigarette brand in the United States and the country's fourth largest brand. Our ability to consistently improve our growth profit margin while maintaining our market share is a result of our diligent market analysis, strategic brand positioning, broad-based distribution, and excellent retail execution. As a result, we are pleased to note that in the second quarter of 2024, Montego's distribution expanded to more than 103,000 stores, up from approximately 89,000 stores in the prior year period.

Nicholas P. Anson: Our portfolio of brands provides for a substantial income base. Eagle 20s and Pyramid offer significant market presence, while Montego enhances our potential for long-term earnings growth. Montego, which is now delivering incremental margin, is demonstrating strong consumer demand. The brand remains the largest discount cigarette brand in the United States and the country's fourth largest brand. As a result, we are pleased to note that in the second quarter of 2024, Montego's distribution expanded to more than 103,000 stores, up from approximately 89,000 stores in the prior year period. However, despite cooling inflation, prices remain elevated, and disposable income among many consumers remains under pressure.

Howard Lorber: Our portfolio of brands provides for substantial income base Eagle Twenty's and pyramid off a significant market presence, while montego enhances our potential for long term earnings growth.

Howard Lorber: Once you go which is now delivering incremental margin is demonstrating strong consumer demand. The brand remains the largest discount cigarette brand in the United States and the country's fourth largest brand.

Howard Lorber: Our ability to consistently improve our gross profit margin, while maintaining our market share is or was.

Howard Lorber: If our diligent market analysis strategic brand positioning broad based distribution and excellent retail execution.

Howard Lorber: As a result, we are pleased to note that in the second quarter of 2024 months. He goes distribution expanded to more than 103000 stores up from approximately 89000 stores in the prior year period.

Nicholas Anson: Despite calling inflation, prices remain elevated and disposable income among many consumers remains under pressure. As a result, the deep discount market segment remains strong and continues to outperform the overall U.S. cigarette market. During the second quarter of 2024, based on Management Science Associates, retail data volumes in the deep discount category increased 5.4%, while industry volumes declined 10% compared to the prior year period. The deep discount segment comprised 16.3% of the overall market in the second quarter, up from 13.9% in the same period a year ago and 15.9% in the first quarter of 2024. This segment continues to present an attractive price option for consumers, and we are confident that our value-focused brand portfolio and nationwide footprint provide a ligate with a meaningful competitive advantage as the migration to lower price products continues.

Howard Lorber: Despite cooling inflation prices remain elevated and disposable income among many consumers remains under pressure.

Nicholas P. Anson: As a result, the deep discount market segment remains strong and continues to outperform the overall U.S. cigarette market. The Deep Discount segment comprised 16.3% of the overall market in the second quarter, up from 13.9% in the same period a year ago and 15.9% in the first quarter of 2024. This segment continues to present an attractive price option for consumers, and we are confident that our value-focused brand portfolio and nationwide footprint provide Legate with a meaningful competitive advantage as the migration to lower-priced products continues. The difference between our retail and wholesale shipment performance reflects the inconsistent nature of short-term wholesaler purchasing patterns. I will now turn to the Consolidated Tobacco Financials of Liggett Group and Vector Tobacco.

Howard Lorber: As a result.

Howard Lorber: Discount market segment remains strong and continues to outperform the overall U S cigarette market.

Howard Lorber: During the second quarter of 2024 based on management Science Associates retail data volumes and the deep discount category increased five 4% while industry volumes declined 10% compared to the prior year period.

Howard Lorber: The deep discount segment comprised 16, 3% of the overall market in the second quarter up from 13, 9% in the same period, a year ago and 15, 9% in the first quarter of 2024.

Howard Lorber: This segment continues to present an.

Speaker Change: An attractive price option for consumers and we are confident that our value focused brand portfolio a nationwide footprint provide leggate with a meaningful competitive advantage is the migration to lower priced products continues.

Nicholas Anson: Ligate second quarter retail shipments declined by 9.6% compared to the same period in 2023, while industry retail shipments declined by 10%, according to data from Management Science Associates. While our second quarter retail shipments modestly outperform the industry, Ligate's wholesale shipments for stronger declining by 5.1%, while the industry wholesale shipments declined by 10.5% compared to the same period in 2023. The difference between our retail and wholesale shipment performance reflects the inconsistent nature of short term wholesaler purchasing patents. In the second quarter, wholesaler purchasing patents were primarily driven by speculations surrounding the timing of manufacturer's price increases and offsetting inventory reductions we faced in the first quarter.

Speaker Change: Liggett's second quarter retail shipments declined by nine 6% compared to the same period in 2023, while industry retail shipments declined by 10%. According to data from management Science Associates.

Speaker Change: While our second quarter retail shipments modestly outperformed the industry liggett's wholesale shipments were stronger declining by five 1% while the industry.

Howard Lorber: <unk> shipments declined by 10, 5% compared to the same period in 2023.

Howard Lorber: The difference between our retail and wholesale shipment performance reflects the inconsistent nature short term wholesale of purchasing patterns in the second quarter wholesaler purchasing patents were primarily driven by speculation surrounding the timing of manufacturers' price increases and offsetting inventory reductions we faced in the first quarter.

Speaker Change: Uh huh.

Nicholas Anson: As we have noted in the past, we believe that retail shipments are a significantly more reliable indicator of industry volume performance. For the six months ended June 30, 2024, Ligate's wholesale shipments declined 7.8% compared to a 10.1% decline in industry shipments. As a result, Ligate's longer term wholesale market share reflects the same stability as our retail share.

Howard Lorber: As we have noted in the past, we believe that retail shipments are a significantly more reliable indicator of industry volume performance for the six months ended June 32024, Liggett's wholesale shipments declined seven 8% compared to 10, 1% decline in industry shipments.

Howard Lorber: As a result, they get for longer term wholesale market share reflects the same stability as our retail share.

Nicholas Anson: I will now turn to the consolidated tobacco financials from Ligate Group and back to tobacco. For the three months ended June 30, 2024, revenues increased 1.7% to 371.9 million from 365.7 million in the second quarter of 2023. The increase with the result of a 7.1% increase in pricing, partially offset by a 5.1% decrease in wholesaler shipments during the period. For the six months ended June 30, 2024, revenues were 600 and 96.5 million, a 0.5% decrease from 699.8 million for the corresponding period in 2023. The roughly flat results reflect a 7.8% increase in pricing, offset by a similar 7.8% decrease in wholesale shipments volume.

Howard Lorber: I will now turn I will now turn to the consolidated tobacco financials for Liggett group and vector tobacco.

Nicholas P. Anson: For the three months ended June 30, 2024, revenues increased 1.7% to $371.9 million from $365.7 million in the second quarter of 2023. The increase was the result of a 7.1% increase in pricing partially offset by a 5.1% decrease in wholesaler shipments during the period. The roughly flat results reflect a 7.8% increase in pricing offset by a similar 7.8% decrease in wholesale shipment volume. This $27.8 million increase in operating income was primarily the result of a lack of an $18 million accrual related to our second quarter settlement last year with the state of Mississippi, along with higher gross margins.

Howard Lorber: For the three months ended June 32020, full revenues increased one 7% to $371 9 million from $365 7 million in the second quarter of 2023, the increase with the result of a seven 1% increase in pricing partially offset.

Howard Lorber: By a five 1% decrease in wholesale shipments during the period.

Howard Lorber: For the six months ended June 32024 revenues were $696 5, million% to 5% decrease from $699 8 million for the corresponding period in 2023.

Howard Lorber: The roughly flat results reflect a seven 8% increase in pricing offset by a similar seven 8% decrease in wholesale shipment volumes.

Nicholas Anson: James. Legacy operating income for the three months ended June 30, 2024, with 102.9 million compared to 75.1 million in the corresponding 2023 period. This 27.8 million increase in operating income was primarily the result of a lack of an $18 million accrual related to our second quarter settlement last year with a state of Mississippi, along with higher gross margins. Legit adjusted operating income for the three months ended June 30, 2024, increased 10.5% to 103 million compared to 93.2 million in the corresponding 2023 period. During the same period, our second quarter gross margin equated to 34.2% of revenues, representing an increase of approximately 230 basis points compared to the corresponding 2023 period.

Howard Lorber: Liggett's operating income for the three months ended June 30th 2024 was $103 9 million compared to $75 $1 million in the corresponding 2023 period.

Howard Lorber: This $27 8 million increase in operating income was primarily the result of a lack of an $18 million accrual related to our second quarter settlement last year with the state of Mississippi, along with higher gross margins.

Howard Lorber: Adjusted operating income for the three months ended June 32024 increased 10, 5% to 103 million compared to $93 2 million in the corresponding 2023 period.

Howard Lorber: During the same period, our second quarter gross margin equated to 34, 2% of revenues, representing an increase of approximately 230 basis points compared to the corresponding 2023 period.

Nicholas Anson: Tobacco adjusted EBITDA in the second quarter increased 10.2% to 104.4 million compared to 94.7 million for the corresponding 2023 period. For the six months ended June 30, 2024, tobacco adjusted EBITDA increased 8.1% to 188.8 million compared to 174.6 million for the corresponding 2023 period.

Nicholas P. Anson: Tobacco-adjusted EBITDA in the second quarter increased 10.2% to $104.4 million compared to $94.7 million for the corresponding 2023 period. In summary, the operational and financial performance of our tobacco business remains strong, and our stable retail market share and profit growth validate our long-term strategy and ongoing competitive advantages in the discount segment.

Howard Lorber: Tobacco adjusted EBITDAR in the second quarter increased 10, 2% to $104 4 million compared to $94 7 million for the corresponding 2023 period.

Howard Lorber: For the six months ended June 32020 for tobacco adjusted EBITDA increased eight 1% to $188 8 million compared to $174 6 million for the corresponding 2023 period.

Nicholas Anson: In summary, the operational and financial performance of our tobacco business remain strong, and our stable retail market share and profit growth validate our long-term strategy and ongoing competitive advantages in the discount segment. We are the leader in the only growth segment in the U.S. market and remain committed to providing American consumers with the best value propositions in the industry. With our leadership in the discount segment and proven track record, we are ideally positioned to sustain our momentum and strengthen our foundations for long-term earnings growth.

Howard Lorber: In summary, the operational and financial performance of our tobacco business remains strong and stable retail market share and profit growth validate our long term strategy and ongoing competitive advantages in the discount segment.

Nicholas Anson: Thanks for your attention, and back to you have.

Howard Lorber: Thank you, Nick. In summary, we are pleased with our second quarter operating results as well as our long-standing practice of paying your quarterly cash dividend. We expect that this dividend policy will continue.

Unknown Executive: Now Operator, please open the call for questions.

Operator: Now, operator, please open the call for questions. Thank you. And at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may remove yourself from the queue at any time by pressing star in two, and we will pause for a moment to allow questions to queue.

Operator: Thank you, and at this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star and 2, and we will pause for a moment to allow questions to queue.

Ian Zaffino: And we will take our first question from Ian Zatino with Oppenheimer. Hi, great. Thank you very much. Very strong quarter. I wanted to ask you, what's the driving, the really strong market share? I don't know, maybe give us the relative pricing at Montego versus the relative pricing at non-Montego brands. Just to understand, it's a little bit better. Thank you.

Unknown Attendee: I wanted to ask you, you know, what's been driving the really strong market share and, I don't know, maybe give us the relative pricing at Montego versus the relative pricing at non-Montego brands. I'm just trying to understand this a little bit.

Howard Lorber: Cause I'm trying to understand this a little bit better. Thank you.

Nicholas Anson: Nick, maybe you want to do that? Yeah, absolutely. Look, as I alluded to in my earlier remarks, we're continuing to reap the benefits of the strategic investment in Montego while at the same time managing two other core brands of Avigot 20s and Pyramid. Look, we're laser focused on the right segment of the market and our ability to improve the margins while at the same time maintaining the market share. It's the result of our retail execution and brand position. I mean, we've done an excellent job in this second quarter, and we're expecting those results to continue from a pricing perspective.

Speaker Change: Nick maybe one word.

Speaker Change: Yeah, absolutely look as I alluded to in my earlier remarks, where we're continuing to reap the benefits of the strategic investment in until you go while at the same time managing our two other core brands of <unk>.

Speaker Change: Eagle Twenty's and pyramid.

Nicholas P. Anson: Look, we're laser-focused on the right segment of the market, and our ability to improve margins while at the same time maintaining market share is the result of our retail execution and brand positioning. I mean, we did an excellent job in this second quarter, and we're expecting those results to continue. From a pricing perspective, the price gap remains stable. With respect to Montego, you're looking at between a 45% to 50% discount on Marlboro, and that's obviously a compelling value proposition for those smokers looking for value in this day and age.

Speaker Change: We are laser focused on the right segment of the market and.

Howard Lorber: Our ability to improve the margins while at the same time, maintaining the market share is the result of our retail execution and brand positioning I mean, you've done there.

Speaker Change: Excellent job in the second quarter, and we're expecting those results to continue from a pricing perspective.

Nicholas Anson: The price gap remains stable with respect to Montiga; you're looking at between a 45% to 50% discount to Marlborough, and that's an obviously compelling value proposition for those smokers looking for value in this day and age.

Speaker Change: The price gap remains stable.

Speaker Change: With respect to Monte Youre looking at between 45% to 50% discount to tomorrow, and that's obviously a compelling value proposition for those.

Speaker Change: Those smokers looking looking for value in this day and age.

Ian Zaffino: Okay, thank you.

Unknown Attendee: Okay, thank you. And then I guess the second question would be, if I heard this right, you said that you're enjoying right now a trade down because of, I guess, economic conditions. How does the business eventually do if, you know, economic conditions Unknown Attendee, Pallav Mittal, Hale Holden, Karru Martinson, Gaurav Jain, Vector

Speaker Change: Okay. Thank you and then I guess the second question on gains and if I heard this right you said that you're in.

Ian Zaffino: And then I guess the second question would be, and if I heard this right, you said that you're enjoying right now a trade down because of, I guess, economic conditions. How does the business eventually do if, you know, economic conditions continue to deteriorate? Does that well and then fall off, or?

Speaker Change: Joining right now are trade down because of I guess economic conditions.

Speaker Change:

Nicholas Anson: How do we think about maybe the reference, like the financial crisis or, you know, to recession, basically how, you know, this category would that do if we see continued. I mean, I would say, and if we see continued economic weakness, we're going to see continued down trading as the pressure gets on the, the pressure continues on the on the consumer. So again, we're in a very good place to take advantage of that kind of situation. Even if the economic environment improves, I would argue that a premium segment at the moment is not a good option under any economic scenario for smokers.

Nicholas Anson: Prices are high, and with our 45% to 50% discount, again, it's a good value proposition and alternative for smokers. So, I mean, we've seen as well when the condition is doing, in fact, improve based on the quality of your cigarettes. People stay with the discount segment. I mean, it's a good quality cigarette; it provides the same kind of satisfaction as a premium cigarette. So we're confident in the long term that we can sustain this momentum.

Ian Zaffino: All right, great. Thank you very much. Good quarter again.

Unknown Attendee: All right, great. Thank you very much. Good quarter again.

Hale Holden: Thank you. And our next question comes from Hill Holden with Barclays. Thank you, morning.

Hale Holden: Thank you. And our next question comes from Hale Holden with Barclays.

Nicholas Anson: Nick, I was wondering if you could talk a little bit about, you know, what you're seeing by different retail channel. So we've heard, you know, some that are softer than others. And I was wondering if there are places where you were seeing strength, or if it was just sort of universal across different channels and outlets or regions. Yeah, sure. How I mean, and certainly our independence remain very, very strong when Montego is doing well, but, you know, certainly we've got a very strong presence in both Dollar General and Family Dollar, and those kind of discount stores at the moment are performing very, very well.

Speaker Change: I was wondering if you.

Hale Holden: Could I talk a little bit about, you know, what you're seeing across different retail channels? We've heard some that are softer than others, and I was wondering if there are places where you are seeing strength or if it was just sort of universal across different channels and outlets or regions.

Speaker Change: Could talk a little bit about what youre seeing by different retail channels.

Speaker Change: So we've heard you know some that are softer than others and I was wondering if there are places where you were seeing strength or if it was just sort of a universal across different channels and outlets or regions.

Speaker Change: Yeah sure.

Speaker Change: All of our independents remained very very strong women's igo is doing well, but.

Speaker Change: Certainly we've got a very strong presence in both dollar general and family dollar and those kind of discount stores at the moment are performing very very well in all our a placement and.

Nicholas Anson: And our placement and the visibility that we have in those stores and the partnerships where we have are really paying dividends. So very pleased with the way those key chains are operating at the moment.

Speaker Change: The.

Speaker Change: The visibility that we have in those stores and the partnerships. We have are really paying dividends. So very pleased with the way those those key chains are operating at the moment hail.

Nicholas P. Anson: And I just sort of follow up on the first question you guys had. You know, I think a couple of years ago, if we'd said that the discount share was going to be 16, 17%, it would have seemed a little heroic, but here you are.

Hale Holden: Great. I just sort of follow up to the first question you guys got. You know, I think a couple of years ago, if we'd said that the discount share was going to be 16-17%, it would have seemed a little heroic. But here you are.

Speaker Change: Great.

Speaker Change: Just sort of as a follow up to the to the first question you guys got.

Speaker Change: You know I think a key.

Speaker Change: Couple of years ago, if we'd said that the discount share was going to be 16% to 17%. It would have seemed a little heroic but here you are.

Speaker Change:

Nicholas Anson: So I guess the question is, you kind of continue to see that expanding as course to numbers continue to decline from the premium sector, so that from my perspective, Hale, again, I mean, you're seeing that the premium players continue to take, you know, higher price increases, more frequent price increases as the volumes in that bad challenge decrease. They also need those price increases to sustain the investments and never reduce risk products. So again, I do not see the premium segment being a good option for the smoke over the long term. So again, we're feeling good about the trends in the marketplace, and certainly at the leaders of the discount segment, we're feeling good about our position within that.

Nicholas P. Anson: So, from my perspective, Hale, again, you're seeing that the premium players continue to take, you know, higher price increases and more frequent price increases as the volumes in that channel decrease. They also need those price increases to sustain the investments in their reduced risk products. So again, I do not see the premium segment being a good option for the smoker over the long term. But we're feeling good about the trends in the marketplace. And certainly, as the leaders of the discount segment, we're feeling good about our position within Hale.

Hale Holden: Great. Thank you so much. I appreciate it, fellas.

Operator: Thank you.

Karru Martinson: Thank you. And our next question comes from Karru Martinson with Jefferies. Good morning.

Karru Martinson: And our next question comes from Karru Martinson with Jefferies. Good morning.

Karru Martinson: Good morning. We've seen growth in the pouch segment of tobacco, such as Zin. Is this a challenge to the deep discount market, or would this be an area of potential growth for you?

Nicholas Anson: We've seen growth in the pouch segment of tobacco, such as in; is it a challenge to the deep discount market, or would this be an area of potential growth for you? Yeah, I mean, we're not seeing necessarily that the pouch segment is impacting the combustible segment, certainly not the discount segment. I mean, it's certainly growing. Karru, but it's off a very, very small base at the moment. So we're not concerned about the growth segment. I mean, we're looking at it as we do with all new reduced risk products. Karru, we evaluated it and certainly it's the right investment opportunity that came along.

Nicholas Anson: We would take advantage of it, but at the moment, we continue to remain focused on our core competencies in the discount segment in the only growing segment of the combustible market and remain laser focused on that at the moment. All right.

Speaker Change: Our core competencies in the discount segment.

Speaker Change: And the only growing segment of the combustible.

Speaker Change: Combustible market and remain laser focused on that at the moment.

Speaker Change: Alright, and then on the.

Nicholas Anson: And then, on the regulatory front, is there anything new? It seems to have gone quite there. Yeah, I'll answer that. Yes. The fact is it seems to have gone quite because it has gone quite, and obviously politics plays a role in that. And that may be why. It's just like on the, you wouldn't want to be in the marijuana business these days because every few months, they say it's going to be federally legalized. And then when Democrats came into office, they were positive who was going to be legalizing. Guess what? No. So it's hard to say.

Speaker Change: Regulatory front is there anything new it seems to have gone quiet there.

Speaker Change: I'll answer that yes. It is the fact that it seems to have gone quiet because it has gone quiet.

Speaker Change: So obviously politics plays.

Speaker Change: I wrote a role on that and that may be why.

Nicholas P. Anson: You know, it's just like a game on the, you wouldn't want to be in the marijuana business these days because every few months they say it's going to be federally legalized. And then when the Democrats came into office, they were positive it was going to be legalized, and guess what? No. So it's hard to say; it's hard to play that game.

Speaker Change: It's just like.

Speaker Change: On the.

Speaker Change: You wouldn't want to be in the marijuana business. These days because every every few months. They say, it's gonna be federally legalized and and then when you bought when they were Democrats came into office. They were positive it was gonna be legalized. It guess what no. So it's it's hard to it's hard to say, it's hard to play yeah, no. It's not.

Howard Lorber: It's hard to play, you know; it's hard to play that game.

Speaker Change: To play that game.

Howard Lorber: But I think, as Nick has said, we're really in a perfect position at this particular point. And with that perfect position, how are you guys thinking about the Capitol structure these days? Well, we're going to have bonds that come due, and we're ready to maybe get started on working on that, and I think the capital structure is good. I think we're building cash, which is good, and we'll see if we can do something with the cash that makes sense. Thank you very much, guys. Appreciate it.

Speaker Change: But I think as Nick said, we're really in a perfect position at this particular point.

Unknown Executive: Well, we are going to have bonds that come due, and I think the capital structure is good. I think we're building cash, which is good. It's always good. And we'll see if we can do something with the cast that, you know, makes sense. Thank you very much, guys. I appreciate it. Okay, thank you.

Operator: Okay, thank you.

Operator: Thank you.

Operator: Thank you. Ladies and gentlemen, those are all the questions that we have for today. Thank you for joining us on Vector Group's quarterly earnings conference call. On behalf of all of us at Vector Group and Leggett, we thank you for your participation, and this concludes today's call.

Operator: Ladies and gentlemen, those are all the questions that we have for today. Thank you for joining us on Vector Group's quarterly earnings conference poll.

Operator: On behalf of all of us at Vector Group in Ligette, we thank you for your participation, and this concludes today's call. Thank you.