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Item 2 — Management's Discussion and Analysis
Turning Point Brands, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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You should read the following discussion of the historical financial conditions and results of operations in conjunction with our consolidated financial statements and accompanying notes, which are included elsewhere in this Quarterly Report on Form 10-Q. In addition, this discussion includes forward-looking statements which are subject to risks and uncertainties that may result in actual results differing from statements we make. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that could cause actual results to differ include those risks and uncertainties discussed in “Risk Factors” contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
The following Management’s Discussion and Analysis (“MD&A”) relates to the unaudited financial statements of Turning Point Brands, Inc., included elsewhere in this Quarterly Report on Form 10-Q. The MD&A is intended to enable the reader to understand the Company’s financial condition and results of operations, including any material changes in the Company’s financial condition and results of operations since December 31, 2025, and as compared with the three and six months ended June 30, 2025. The MD&A is provided as a supplement to and should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this Quarterly report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 Annual Report”).
In this MD&A, unless the context requires otherwise, references to “our Company” “we,” “our,” or “us” refer to Turning Point Brands, Inc., and its consolidated subsidiaries. References to “TPB” refer to Turning Point Brands, Inc., without any of its subsidiaries. Many of the amounts and percentages in this discussion have been rounded for convenience of presentation.
Overview
Turning Point Brands, Inc. is a leading manufacturer, marketer and distributor of branded consumer products. We sell a wide range of products to adult consumers consisting of staple products with our iconic brands Zig-Zag® and Stoker’s® and our next-generation products to fulfill evolving consumer preferences. Among other markets, we compete in the alternative smoking accessories and Other Tobacco Products (“OTP”) industries. The alternative smoking accessories market is a dynamic market experiencing robust secular growth driven by cannabinoid legalization in the U.S. and Canada and positively evolving consumer perception and acceptance in North America. The OTP industry, which consists of non-cigarette tobacco products, exhibited flat consumer unit annualized growth during the full year period ended 2025 as reported by MSAi a third-party analytics and information company. Our segments are led by our core proprietary and iconic brands: Zig-Zag® in the Zig-Zag products segment and Stoker’s® along with FRE®, Beech-Nut® and Trophy® in the Stoker’s products segment. Our businesses generate solid cash flow which we use to invest in our business, finance acquisitions, increase brand support, expand our distribution infrastructure, and strengthen our capital position. We currently ship to approximately 900 distributors with an additional approximately 600 secondary, indirect wholesalers in the U.S. that carry and sell our products. Under the leadership of a senior management team with extensive experience in the consumer products, alternative smoking accessories and tobacco industries, we have grown and diversified our business through new product launches, category expansions and acquisitions while concurrently improving operational efficiency.
We believe there are meaningful opportunities to expand through investing in organic growth via acquisitions and joint ventures across all product categories. Our products are currently available in approximately 220,000 retail locations in North America. Our sales team targets widespread distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business.
Recent Developments
On February 20, 2026, the U.S. Supreme Court issued a ruling regarding tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the United States, concluding that such tariffs were unauthorized. The Company paid approximately $17.9 million in IEEPA tariffs.
The ruling did not address the availability, timing, or amount of any potential refunds. Subsequently, the U.S. Court of International Trade ("CIT") ordered U.S. Customs and Border Protection ("CBP") to refund the collected IEEPA tariffs. On April 20, 2026, CBP launched the Consolidated Administration and Processing of Entries ("CAPE") system to facilitate IEEPA tariff refunds. In June 2026, the Company received approximately $17.8 million of tariff refunds from CBP related to previously paid IEEPA tariffs. The refund consisted of $5.5 million in costs that were capitalized and on the balance sheet with the remaining $12.3 million recognized as a reduction of cost of goods sold.
The Company continues to monitor developments related to the ruling, including any ongoing legal, regulatory, or administrative actions. In addition, following the U.S. Supreme Court's decision, the U.S. administration announced additional tariffs under Section 122 of the Trade Act of 1974 and could implement additional tariffs in the future. Changes in U.S. and foreign trade, import, and export policies could have a material impact on the Company's financial position, results of operations, and cash flows.
Products
We operate in two segments: Zig-Zag products and Stoker’s products segments. In our Zig-Zag products segment, we principally market and distribute (i) rolling papers, tubes and related products; (ii) finished cigars and make-your-own (“MYO”) cigar wraps; and (iii) lighters and other accessories. In addition, we have a majority stake in Turning Point Brands Canada which is a specialty marketing and distribution firm focused on building brands in the Canadian cannabis accessories, tobacco and alternative products categories. In our Stoker’s products segment, we (i) manufacture and market moist snuff tobacco (“MST”); (ii) contract for and market modern oral products; and (iii) contract for and market loose-leaf chewing tobacco products.
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Operations
Our Zig-Zag products and Stoker’s products segments primarily generate revenues from the sale of our products to wholesale distributors who, in turn, resell the products to retail operations. Our net sales, which include federal excise taxes, consist of gross sales net of cash discounts, returns, and selling and marketing allowances.
We rely on long-standing relationships with high-quality, established manufacturers to provide the majority of our produced products. Approximately 75% of our production, as measured by net sales, is outsourced to suppliers. The remaining production consists primarily of our moist snuff tobacco operations located in Dresden, Tennessee and Louisville, Kentucky. Our principal operating expenses include the cost of raw materials used to manufacture the limited number of our products which we produce in-house; the cost of finished products, which are generally purchased goods; federal excise taxes; legal expenses; and compensation expenses, including benefits and costs of salaried personnel.
Key Factors Affecting Our Results of Operations
We consider the following to be the key factors affecting our results of operations:
● Our ability to further penetrate markets with our existing products;
● Our ability to introduce new products and product lines that complement our core business;
● Decreasing interest in some tobacco products among consumers;
● Competition;
● Price sensitivity in our end-markets;
● Marketing and promotional initiatives, which cause variability in our results;
● Cost related to increasing regulation of promotional and advertising activities;
● General economic conditions, including consumer access to disposable income and other conditions affecting purchasing power such as inflation and the interest rate environment;
● Labor and production costs;
● Cost of complying with regulation, including the “deeming regulation”, as well as the unpredictable nature of the regulatory regimes;
● Changes to U.S. trade policies, including tariff policies, as well as the unpredictable nature and legality of tariff schemes;
● Counterfeit and other illegal products in our end-markets;
● Currency fluctuations;
● Our ability to identify attractive acquisition opportunities; and
● Our ability to successfully integrate acquisitions.
Critical Accounting Policies and Uses of Estimates
There have been no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Annual Report on Form 10-K.
Recent Accounting Pronouncements
See Item 1 of Part I, “Notes to Consolidated Financial Statements - Note 2 - Summary of Significant Accounting Policies - Recent Accounting Pronouncements.”
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Results of Operations
Summary
The table and discussion set forth below relates to our consolidated results of continuing operations:
(in thousands) Three Months Ended June 30,
2026 2025 % Change
Consolidated Results of Operations Data:
Net sales
Zig-Zag products $ 35,381 $ 47,018 -24.8 %
Stoker’s products 107,579 69,616 54.5 %
Total net sales 142,960 116,634 22.6 %
Cost of sales 49,256 50,011 -1.5 %
Gross profit
Zig-Zag products 22,623 23,099 -2.1 %
Stoker’s products 71,081 43,524 63.3 %
Total gross profit 93,704 66,623 40.6 %
Selling, general, and administrative expenses 76,991 40,296 91.1 %
Operating income
Zig-Zag products 8,751 14,741 -40.6 %
Stoker’s products 29,929 30,079 -0.5 %
Total segment operating income 38,680 44,820 -13.7 %
Corporate unallocated (21,967 ) (18,493 ) 18.8 %
Total operating income 16,713 26,327 -36.5 %
Other expense, net 63 - NM
Interest expense, net 4,251 5,140 -17.3 %
Investment loss (gain) 1,089 (78 ) -1496.2 %
(Income) loss from equity method investment (2,674 ) 61 NM
Income from continuing operations before income taxes 13,984 21,204 -34.1 %
Income tax (benefit) expense 3,683 4,244 -13.2 %
Consolidated net income from continuing operations 10,301 16,960 -39.3 %
Net income attributable to non-controlling interest 6,703 2,480 170.3 %
Net income from continuing operations attributable to Turning Point Brands, Inc. $ 3,598 $ 14,480 -75.2 %
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Comparison of the Three Months Ended June 30, 2026, to the Three Months Ended June 30, 2025
Net Sales: For the three months ended June 30, 2026, consolidated net sales increased $26.3 million, or 22.6% compared to the prior year period, driven primarily by an increase in the Stoker’s products segment.
For the three months ended June 30, 2026, net sales in the Zig-Zag products segment decreased $11.6 million, or 24.8% compared to the prior year period. The decrease in net sales was driven primarily by declines of $4.7 million in U.S. papers and wraps, $6.2 million in the Clipper lighter business, and $1.0 million in our Canadian products. We were able to sell the majority of the Clipper inventory in the prior year and do not expect meaningful additional revenue from Clipper in future periods.
For the three months ended June 30, 2026, net sales in the Stoker’s products segment increased $38.0 million, or 54.5% compared to the prior year period. The increase in net sales was primarily driven by $38.4 million of growth in modern oral products.
Gross Profit: For the three months ended June 30, 2026, consolidated gross profit increased $27.1 million, or 40.6% compared to the prior year period. Gross profit as a percentage of net sales increased to 65.5% for the three months ended June 30, 2026, compared to 57.1% for the three months ended June 30, 2025. The overall increase in gross profit was driven by increases in net sales in the Stoker's products segment, margin contribution from modern oral products, and $12.3 million reduction in cost of sales as a result of tariff refunds.
For the three months ended June 30, 2026, gross profit in the Zig-Zag products segment decreased $0.5 million, or 2.1% compared to the prior year period. Gross profit as a percentage of net sales increased to 63.9% of net sales for the three months ended June 30, 2026, from 49.1% of net sales for the three months ended June 30, 2025, driven primarily by product mix and by $2.4 million reduction in cost of sales as a result of tariff refunds.
For the three months ended June 30, 2026, gross profit in the Stoker’s products segment increased $27.6 million, or 63.3% compared to the prior year period. Gross profit as a percentage of net sales increased to 66.1% of net sales for the three months ended June 30, 2026, from 62.5% of net sales for the three months ended June 30, 2025, primarily driven by margin contribution from modern oral products and $9.9 million reduction in cost of sales as a result of tariff refunds.
Selling, General, and Administrative Expenses: For the three months ended June 30, 2026, selling, general, and administrative expenses increased $36.7 million, or 91.1% compared to the prior year period, primarily due to increased shipping and selling costs related to the increase in modern oral sales, increased salaries and benefits resulting from additional sales headcount, and higher sales and advertising expenses to support the modern oral growth in the quarter compared to the prior year period. Selling, general and administrative expenses in the three months ended June 30, 2026, included $3.2 million of expense related to PMTA, $2.7 million of stock options, restricted stock and incentives expense, $0.7 million of legal expenses incurred in connection with litigation related to an insurance claim, and $0.1 million of expense related to corporate restructuring. Selling, general and administrative expenses in the three months ended June 30, 2025, included $1.6 million of stock options, restricted stock and incentives expense, $1.7 million of expense related to PMTA, $0.8 million of elevated non-recurring outbound freight costs due to ERP transition, $0.5 million of legal expenses incurred in connection with litigation related to an insurance claim, and $0.6 million of transaction costs.
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Operating Income: For the three months ended June 30, 2026, consolidated operating income decreased $9.6 million, or 36.5% compared to the prior year period. Operating income as a percentage of net sales decreased to 11.7% of net sales for the three months ended June 30, 2026 from 22.6% of net sales for the three months ended June 30, 2025, primarily driven by increased selling, general and administrative costs, partially offset by $12.3 million reduction in cost of sales as a result of tariff refunds.
For the three months ended June 30, 2026, operating income in the Zig-Zag products segment decreased $6.0 million, or 40.6% compared to the prior year period. Operating income as a percentage of net sales decreased to 24.7% of net sales for the three months ended June 30, 2026 from 31.4% of net sales for the three months ended June 30, 2025, primarily driven by an increase in sales and marketing costs, partially offset by $2.4 million reduction in cost of sales as a result of tariff refunds.
For the three months ended June 30, 2026, operating income in the Stoker’s products segment decreased $0.2 million, or 0.5% compared to the prior year period. Operating income as a percentage of net sales decreased to 27.8% of net sales for the three months ended June 30, 2026 from 43.2% of net sales for the three months ended June 30, 2025, primarily driven by higher sales and marketing costs offset by margin contribution of modern oral products and $9.9 million reduction in cost of sales as a result of tariff refunds.
Included in consolidated operating income are costs of the Company which are not assigned to one of the two reportable segments and include: (i) corporate overhead expense, including executive management, finance, legal and information technology salaries, and professional services, such as audit, external legal costs and information technology services, as well as (ii) costs related to the FDA premarket tobacco product application. For the three months ended June 30, 2026, unallocated costs were $22.0 million compared to $18.5 million in the prior year period, an increase of $3.5 million or 18.8%, primarily driven by joint venture related corporate expenses.
Other Expense, net: For the three months ended June 30, 2026, other expense increased $0.1 million compared to the prior year period due to an honorarium gift in the current year period that was not made in the prior year period.
Interest Expense, net: For the three months ended June 30, 2026, interest expense, net decreased $0.9 million or 17.3% due to an increase in interest income as a result of interest of $0.6 million received on the tariff refund.
Investment Loss (Gain): For the three months ended June 30, 2026, investment loss was $1.1 million, compared to $0.1 million investment gain in the prior-year period, primarily driven by higher realized loss from a non-cash valuation adjustment during the period.
Income From Equity Method Investments: For the three months ended June 30, 2026, income from investments in equity securities increased $2.7 million compared to the prior year period as a result of GWO.
Income Tax Expense: Our income tax expense of $3.7 million was 26.3% of income before income taxes for the three months ended June 30, 2026. Our effective income tax rate was 20.0% for the three months ended June 30, 2025. The change in tax rate is primarily attributable to the release of a valuation allowance on deferred tax assets in the current year period.
Net Income Attributable to Non-Controlling Interest: Net income attributable to non-controlling interest was $6.7 million and $2.5 million, respectively, for the three months ended June 30, 2026 and 2025. The increase in non-controlling interest compared to the prior year period is primarily due to higher sales volumes and improved net income of our joint venture.
Net Income Attributable to Turning Point Brands, Inc.: Due to the factors described above, net income attributable to Turning Point Brands, Inc. for the three months ended June 30, 2026 and 2025, was $3.6 million and $14.5 million, respectively.
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Summary
The table and discussion set forth below relates to our consolidated results of continuing operations:
Six Months Ended June 30,
2026 2025 % Change
Consolidated Results of Operations Data:
Net sales
Zig-Zag products $ 72,050 $ 94,283 -23.6 %
Stoker’s products 195,188 128,787 51.6 %
Total net sales 267,238 223,070 19.8 %
Cost of sales 105,239 96,837 8.7 %
Gross profit
Zig-Zag products 43,568 48,665 -10.5 %
Stoker’s products 118,431 77,568 52.7 %
Total gross profit 161,999 126,233 28.3 %
Selling, general, and administrative expenses 132,802 76,717 73.1 %
Operating income
Zig-Zag products 19,982 31,672 -36.9 %
Stoker’s products 49,700 54,212 -8.3 %
Total segment operating income 69,682 85,884 -18.9 %
Corporate unallocated (40,485 ) (36,368 ) 11.3 %
Total operating income 29,197 49,516 -41.0 %
Other (income) expense, net 126 - NM
Interest expense, net 8,674 9,554 -9.2 %
Investment loss (gain) 938 (519 ) -280.7 %
(Income) loss from equity method investment (5,657 ) 211 NM
Loss on extinguishment of debt - 1,235 NM
Income from continuing operations before income taxes 25,116 39,035 -35.7 %
Income tax expense 873 6,284 -86.1 %
Consolidated net income from continuing operations 24,243 32,751 -26.0 %
Net income attributable to non-controlling interest 8,978 3,876 131.6 %
Net income from continuing operations attributable to Turning Point Brands, Inc. $ 15,265 $ 28,875 -47.1 %
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Comparison of the Six Months Ended June 30, 2026, to the Six Months Ended June 30, 2025
Net Sales: For the six months ended June 30, 2026, consolidated net sales increased $44.2 million, or 19.8% compared to the prior year period, driven primarily by an increase in the Stoker’s products segment.
For the six months ended June 30, 2026, net sales in the Zig-Zag products segment decreased $22.2 million, or 23.6% compared to the prior year period. The decrease in net sales was driven primarily by declines of $12.0 million in U.S. papers and wraps, $8.0 million in the Clipper lighter business, and $2.0 million in our Canadian products. We were able to sell the majority of the Clipper inventory in the prior year and do not expect meaningful additional revenue from Clipper in future periods.
For the six months ended June 30, 2026, net sales in the Stoker’s products segment increased $66.4million, or 51.6% compared to the prior year period. The increase in net sales was primarily driven by growth in modern oral products.
Gross Profit: For the six months ended June 30, 2026, consolidated gross profit increased $35.8 million, or 28.3% compared to the prior year period. Gross profit as a percentage of net sales increased to 60.6% for the six months ended June 30, 2026, compared to 56.6% for the six months ended June 30, 2025. The overall increase in gross profit was driven by increases in net sales in the Stoker's products segment, margin contribution from modern oral products and $12.3 million reduction in cost of sales as a result of tariff refunds.
For the six months ended June 30, 2026, gross profit in the Zig-Zag products segment decreased $5.1 million, or 10.5% compared to the prior year period. Gross profit as a percentage of net sales increased to 60.5% of net sales for the six months ended June 30, 2026, from 51.6%of net sales for the six months ended June 30, 2025, driven primarily by product mix, and $2.4 million reduction in cost of sales as a result of tariff refunds.
For the six months ended June 30, 2026, gross profit in the Stoker’s products segment increased $40.9 million, or 52.7% compared to the prior year period. Gross profit as a percentage of net sales increased to 60.7% of net sales for the six months ended June 30, 2026, from 60.2% of net sales for the six months ended June 30, 2025, primarily driven by net sales growth, margin contribution from modern oral products and $9.9 million reduction in cost of sales as a result of tariff refunds.
Selling, General, and Administrative Expenses: For the six months ended June 30, 2026, selling, general, and administrative expenses increased $56.1 million, or 73.1% compared to the prior year period primarily due to increased shipping and selling costs related to the increase in modern oral sales, increased salaries and benefits resulting from additional sales headcount, and higher sales and advertising expenses in the current year period compared to the prior year period. Selling, general and administrative expenses in the six months ended June 30, 2026, included $3.5 million of expense related to PMTA, $5.6 million of stock options, restricted stock and incentives expense, $0.8 million of legal expenses incurred in connection with litigation related to an insurance claim, and $0.2 million of expense related to corporate restructuring. Selling, general and administrative expenses in the six months ended June 30, 2025, included $3.2 million of expense related to PMTA, $3.3 million of stock options, restricted stock and incentives expense, $0.7 million of transaction costs, and $0.2 million of expense related to the implementation of the new ERP and CRM systems.
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Operating Income: For the six months ended June 30, 2026, consolidated operating income decreased $20.3 million, or 41.0% compared to the prior year period. Operating income as a percentage of net sales decreased to 10.9% of net sales for the six months ended June 30, 2026 from 22.2% of net sales for the six months ended June 30, 2025, primarily driven by increased selling, general and administrative costs, partially offset by $12.3 million reduction in cost of sales as a result of tariff refunds.
For the six months ended June 30, 2026, operating income in the Zig-Zag products segment decreased $11.7 million, or 36.9% compared to the prior year period. Operating income as a percentage of net sales decreased to 27.7% of net sales for the six months ended June 30, 2026 from 33.6% of net sales for the six months ended June 30, 2025, primarily driven by an increase in sales and marketing costs offset by improved margins on product mix and $2.4 million reduction in cost of sales as a result of tariff refunds.
For the six months ended June 30, 2026, operating income in the Stoker’s products segment decreased $4.5 million, or 8.3% compared to the prior year period. Operating income as a percentage of net sales decreased to 25.5% of net sales for the six months ended June 30, 2026 from 42.1% of net sales for the six months ended June 30, 2025, primarily driven by higher sales and marketing costs, margin contribution of modern oral products offset by $9.9 million reduction in cost of sales as a result of tariff refunds.
Included in consolidated operating income are costs of the Company which are not assigned to one of the two reportable segments and include: (i) corporate overhead expense, including executive management, finance, legal and information technology salaries, and professional services, such as audit, external legal costs and information technology services, as well as (ii) costs related to the FDA premarket tobacco product application. For the six months ended June 30, 2026, unallocated costs were $40.5 million compared to $36.4 million in the prior year period, an increase of $4.1 million or 11.3%, primarily driven by joint venture related corporate expenses.
Other Expense, net: For the six months ended June 30, 2026, other expense increased $0.1 million compared to the prior year period due to an honorarium gift in the current year period that was not made in the prior year period.
Interest Expense, net: For the six months ended June 30, 2026, interest expense, net decreased $0.9 million or 9.2% due to an increase in interest income as a result of interest of $0.6 million received on the tariff refund.
Investment Loss (Gain): For the six months ended June 30, 2026, investment loss was $0.9 million compared to investment income of $0.5 million in the prior-year period, primarily due to higher realized loss from a non-cash valuation adjustment during the period.
Income From Equity Method Investments: For the six months ended June 30, 2026, income from investments in equity securities increased $5.9 million compared to the prior year period as a result of GWO.
Loss on Extinguishment of Debt: There was no loss on extinguishment of debt for the six months ended June 30, 2026. Loss on extinguishment of debt for the six months ended June 30, 2025 was $1.2 million as a result of the redemption of the 2026 Notes in February 2025.
Income Tax (Benefit) Expense: Our income tax expense of $0.9 million was 3.5% of income before income taxes for the six months ended June 30, 2026. Our effective income tax rate was 16.1% for the six months ended June 30, 2025. The change in tax rate is primarily attributable to the release of a valuation allowance on deferred tax assets in the current year period.
Net Income Attributable to Non-Controlling Interest: Net income attributable to non-controlling interest was $9.0 million and $3.9 million, respectively, for the six months ended June 30, 2026 and 2025. The increase in non-controlling interest compared to the prior year period is primarily due to higher sales volumes and improved net income of our joint venture as well as tariff refunds related to products sold through our joint venture company.
Net Income Attributable to Turning Point Brands, Inc.: Due to the factors described above, net income attributable to Turning Point Brands, Inc. for the six months ended June 30, 2026 and 2025, was $15.3 million and $28.9 million, respectively.
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EBITDA and Adjusted EBITDA
To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures including EBITDA and Adjusted EBITDA. We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA is used by management to compare our performance to that of prior periods for trend analyses and planning purposes and is presented to our Board of Directors. We believe that EBITDA and Adjusted EBITDA are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to operating performance. In addition, our debt instruments contain covenants which use Adjusted EBITDA calculations.
We define “EBITDA” as net income attributable to Turning Point Brands, Inc. before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation and amortization. We define “Adjusted EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation, amortization, other non-cash items and other items we do not consider the ordinary course in our evaluation of ongoing operating performance noted in the reconciliation below. Among other items that we adjust Adjusted EBITDA for is FDA PMTA expense. The Company believes it is appropriate to adjust for this spend as the costs are incurred in connection with what we view as a non-traditional regulatory process that requires applications be submitted for covered products that are already on the market. As a result, Company’s management believes it is most appropriate to assess the performance of the Company’s business – the sale of our various products - without regard to these costs and believes that adjusting for these costs provides investors and the public markets with the most meaningful metrics to assess performance of the business. The Company reconciles its EBITDA metrics to Net income attributable to Turning Point Brands, Inc. because that measure reflects the Company’s portion of the profitability from consolidated joint ventures after removing results attributable to our partners in such joint ventures.
Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. Adjusted EBITDA excludes significant expenses required to be recorded in our financial statements by U.S. GAAP and is subject to inherent limitations. Other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. The tables below provide reconciliations between net income and Adjusted EBITDA.
Three Months Ended Six Months Ended
(in thousands) June 30, June 30,
2026 2025 2026 2025
Net income attributable to Turning Point Brands, Inc. $ 3,598 $ 14,480 $ 15,265 $ 28,875
Add:
Interest expense, net 4,388 5,140 8,957 9,541
Loss on extinguishment of debt - - - 1,235
Income tax expense 3,974 4,244 1,482 6,284
Depreciation expense 939 842 1,733 1,670
Amortization expense 1,429 1,048 2,714 1,870
EBITDA $ 14,328 $ 25,754 $ 30,151 $ 49,475
Components of Adjusted EBITDA
Corporate restructuring (a) 133 - 231 -
Stock based compensation (b) 2,701 1,628 5,639 3,292
Transactional expenses and strategic initiatives (c) 94 569 239 746
Non-recurring legal (d) 667 504 820 504
FDA PMTA (e) 3,170 1,651 3,460 3,242
Mark-to-market loss (gain) on Canadian inter-company note (f) 598 (665 ) 481 (350 )
Tariff adjustment (g) (8,475 ) - (2,572 ) -
Manufacturing start-up costs (h) 657 - 1,251 -
Honorarium (i) 63 - 126 -
Non-cash asset impairment (j) 1,307 908 1,307 908
Gain on investment (k) - (714 ) - (714 )
Non-recurring freight (l) - 837 - 837
ERP/CRM (m) - - - 211
Adjusted EBITDA $ 15,243 $ 30,472 $ 41,133 $ 58,151
(a) Represents costs associated with corporate restructuring, including severance and early retirement.
(b) Represents non-cash stock options, restricted stock, PRSUs, etc.
(c) Represents the fees incurred for transaction expenses.
(d) Represents legal expenses incurred in connection with litigation related to an insurance claim.
(e) Represents costs associated with applications related to FDA premarket tobacco product application (“PMTA”). The PMTA regime requires the Company to submit an application to the FDA to receive marketing authorization to continue to sell certain of its product lines with continued sales permitted during the pendency of the applications. The application is a one-time resource-intensive process for each covered product line; however, due to the nature of the implementation process for those product lines already in the market, applications can take multiple years to complete rather than the typical one-time submission. The Company has only two product lines currently subject to the PMTA process, having utilized other regulatory pathway options available for our other product lines. The Company does not expect to submit additional PMTA applications for any new product lines after the submission for the remaining two are complete.
(f) Represents a mark-to-market gain attributable to foreign exchange fluctuation.
(g) Represents adjustment to current period costs of goods sold to exclude tariffs subject to refund or refunded.
(h) Represents non-recurring expenses incurred during the start-up of manufacturing lines.
(i) Represents an honorarium gift included in other expense, net.
(j) Represents impairment of investment assets.
(k) Represents gain on investments.
(l) Represents elevated non-recurring outbound freight costs due to ERP transition.
(m) Represents costs associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses.
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Liquidity and Capital Resources
As of June 30, 2026, we have $268.3 million of cash on hand and $70.7 million of availability under the 2023 ABL Facility. We have no borrowings outstanding under our 2023 ABL Facility as of June 30, 2026. Our principal uses for cash are working capital, debt service, and capital expenditures.
Our adjusted working capital, which we define as current assets less cash and current liabilities, increased $24.2 million compared to the prior year end. The increase in working capital is primarily the result of a $25.4 million increase in inventory and a $15.0 million increase in other current assets, partially offset by a decrease of $3.0 million in accounts receivable, an increase of $14.9 million in accounts payable and a $1.7 million decrease in accrued liabilities. With our strong cash balance, free cash flow generation and borrowing availability under the 2023 ABL Facility, we expect to have ample liquidity to satisfy our operating cash requirements for the foreseeable future.
June 30, December 31,
(in thousands) 2026 2025
Current assets $ 231,827 $ 194,390
Current liabilities 88,216 75,007
Adjusted working capital $ 143,611 $ 119,383
Cash Flows from Continuing Operations
Our cash flows from continuing operations as reflected in the Consolidated Statements of Cash Flows are summarized as follows:
(in thousands) Six Months Ended
June 30,
Cash provided by (used in): 2026 2025
Operating activities $ 4,068 $ 29,230
Investing activities $ (11,595 ) $ (8,626 )
Financing activities $ 52,759 $ 40,312
Cash Flows from Operating Activities
For the six months ended June 30, 2026, net cash provided by operating activities was $4.1 million, a decrease of $25.2 million compared to the prior year period. The decrease is primarily due to $14.0 million in working capital, decrease in net income, net of non-cash items of $15.2 million, and partially offset by, $4.0 million in other assets. The primary drivers of non-cash items were a $3.1 million increase in deferred tax benefit, a $5.9 million increase in income from equity method investment, $1.2 million increase in gain on investments, $2.3 million increase in stock compensation expense and a $1.2 million decrease in loss on extinguishment of debt compared to the prior year period. The decrease in cash from working capital compared to the prior year period was primarily driven by the timing of payments.
Cash Flows used Investing Activities
For the six months ended June 30, 2026, net cash used in investing activities was $11.6 million, an increase of $3.0 million due to payment on an option agreement of $4.9 million partially offset by a reduction in capital expenditures and payments for equity investments.
Cash Flows from Financing Activities
For the six months ended June 30, 2026, net cash provided by financing activities was $52.8 million, an increase of $12.4 million compared to the prior year period, primarily due to an increase of equity offering proceeds of $59.6 million, offset by to a net decrease in cash of $42.7 million related to the February 2025 issuance of the 2032 Notes, $2.5 million decrease for tax distributions, and $1.3 million related to stock compensation activity.
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Dividends, Share Issuances, and Shares Repurchases
A dividend of $0.08 per common share was paid on July 10, 2026, to shareholders of record at the close of business on June 19, 2026.
On February 25, 2020, our Board of Directors approved a $50.0 million share repurchase program, which is intended for opportunistic execution based upon a variety of factors including market dynamics. The program is subject to the ongoing discretion of the Board of Directors. On October 25, 2021, the Board of Directors increased the approved share repurchase program by $30.7 million, and by $24.6 million on February 24, 2022. On November 6, 2024, the Company's Board of Directors increased the Company’s share repurchase authorization by $77.9 million to an aggregate amount of $100.0 million. On November 4, 2025, the Company's Board of Directors increased the share repurchase authorization by $100.0 million to an aggregate amount of $200.0 million. For the six months ended June 30, 2026, there were no repurchases under the share repurchase program. As of June 30, 2026, there was $200.0 million in remaining repurchase authority under the plan.
The Company entered into an at-the-market offering program (the "ATM Program") on December 13, 2024, with B. Riley Securities Inc. and Barclays Capital Inc. During the quarter ended June 30, 2026, the Company sold 672,884 shares of our Common Stock under the ATM Program at an average selling price of $90.30 per share for gross proceeds of $60.8 million, less underwriter's commission and expenses of approximately $1.2 million, for net proceeds of $59.6 million. The shares were issued from repurchased common stock on a first in first out basis. The Company recorded the gain, corresponding to the difference in between the reacquisition cost of treasury stock and the value of treasury stock reissued, into APIC within the Consolidated Statements of Changes in Stockholders' Equity. As of June 30, 2026, there was $139.2 million of capacity remaining under the ATM Program.
Long-Term Debt
Notes payable and long-term debt consisted of the following at June 30, 2026 and December 31, 2025, in order of preference:
June 30, December 31,
2026 2025
2032 Notes $ 300,000 $ 300,000
Less deferred financing costs (5,855 ) (6,375 )
Notes payable and long-term debt $ 294,145 $ 293,625
2032 Notes
In February 2025, the Company closed a private offering of $300.0 million aggregate principal amount of 7.625% senior secured notes due to mature on March 15, 2032 (the “2032 Notes”). Interest on the 2032 Notes is payable semi-annually on March 15 and September 15 of each year, commencing on September 15, 2025. We used the proceeds from the offering (i) to repay all obligations under and redeem all of our 5.625% senior secured notes due 2026 (the "2026 Notes), (ii) to pay related fees, costs and expenses and (iii) for general corporate purposes. The 2032 Notes are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by each current and future wholly-owned domestic restricted subsidiary of the Company that guaranteed the 2026 Notes (collectively, the “Guarantors” as defined in the indenture governing the 2032 Notes or the “2032 Notes Indenture”). The 2032 Notes and the related guarantees are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. Proceeds from the offering were approximately $293.0 million.
The 2032 Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to: (i) grant or incur liens; (ii) incur, assume or guarantee additional indebtedness; (iii) sell or otherwise dispose of assets, including capital stock of subsidiaries; (iv) make certain investments; (v) pay dividends, make distributions or redeem or repurchase capital stock; (vi) engage in certain transactions with affiliates; and (vii) consolidate or merge with or into, or sell substantially all of our assets to another entity. These covenants are subject to several limitations and exceptions set forth in the 2032 Notes Indenture. For instance, the Company is generally permitted to make restricted payments, including the payment of dividends to shareholders, provided that, at the time of payment, or as a result of payment, the Company is not in default on its debt covenants; however, there are earnings and market capitalization requirements that if not met could limit the aggregate amount of quarterly dividends payable during a fiscal year. The 2032 Notes Indenture provides for customary events of default. The Company was in compliance with all covenants under the 2032 Notes as of June 30, 2026.
We incurred debt issuance costs attributable to the 2032 Notes of $7.3 million which are amortized to interest expense using the straight-line method over the expected life of the 2032 Notes.
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2023 ABL Facility
On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $75.0 million asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank Plc, as administrative agent (the “Administrative Agent”) and as collateral agent and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”). Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) Loans. The 2023 ABL Facility includes a $40.0 million accordion feature. In connection with the 2023 ABL Facility, Turning Point Brands contributed certain existing inventory to the ABL Borrower. The 2023 ABL Facility is secured on a first priority basis (subject to customary exceptions) by all assets of the ABL Borrower.
The 2023 ABL Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) the lesser of (1) 85% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) 85% of the cost of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (2) 85% of the net orderly liquidation value (“NOLV”) percentage of the lower of (1)(A) or (1)(B); plus (b) 85% of the face value of all eligible accounts of the ABL Borrower minus (c) the amount of all eligible reserves. The 2023 ABL Facility also includes a LILO borrowing base equal to the sum of (a) the lesser of: (1) 10% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) the cost of the sum of eligible inventory, plus eligible in-transit inventory and (2) 10% of the NOLV percentage of the lower of (1)(A) or (1)(B); plus (b) 10% of the face amount of eligible account; minus (c) the amount of all eligible reserves.
Amounts borrowed under the 2023 ABL Facility are subject to an interest rate margin per annum equal to (a) from and after the closing date until the last day of the first full fiscal quarter ended after the closing date, (i) 1.25% per annum, in the case base rate loans, and (ii) 2.25% per annum, in the case of revolving credit loans that are secured overnight financing rate (“SOFR”) loans, (b)(i) 2.25% per annum, in the case of LILO loans that are base rate loans, and (ii) 3.25% per annum, in the case of LILO loans that are SOFR loans, (c) on the first day of each fiscal quarter, the applicable interest rate margins will be determined from the pricing grid below based upon the historical excess availability for the most recent fiscal quarter ended immediately prior to the relevant date, as calculated by the Administrative Agent.
Applicable Margin Applicable Margin
Level Historical Excess Availability for SOFR Loans for Base Rate Loans
I Greater than or equal to 66.66% 1.75% 0.75%
II Less than 66.66%, but greater than or equal to 33.33% 2.00% 1.00%
III Less than 33.33% 2.25% 1.25%
The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters if excess availability is less than the greater of (a) 12.5% of the line cap and (b) $9.4 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i) 12.5% of the line and (ii) $9.4 million for thirty (30) consecutive calendar days with the $9.4 million level automatically increased in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any incremental facility.
The 2023 ABL Facility will mature on the earlier of (x) November 7, 2027 and (y) the date that is 91 days prior to the maturity date of any material debt of the ABL Borrower or the Company or any of its restricted subsidiaries (subject to customary extensions agreed by the lenders thereunder); provided that clause (y) will not apply to the extent that on any applicable date of determination (on any date prior to the date set forth in clause (y)), (A) the sum of (x) cash that is held in escrow for the repayment of such material debt pursuant to arrangements satisfactory to the Administrative Agent, (y) cash that is held in accounts with the Administrative Agent and/or the Additional Collateral Agent, plus (z) excess availability, is sufficient to repay such material debt and (B) the ABL Borrower has excess availability of at least $15.0 million after giving effect to such repayment of material debt, including any borrowings under the commitments in connection therewith.
The Company has not drawn any borrowings under the 2023 ABL Facility but has letters of credit of approximately $2.3 million outstanding under the facility and has an available borrowing base of $70.7 million based on the borrowing base as of June 30, 2026.
The Company incurred debt issuance costs attributable to the 2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility.
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Additional Information with Respect to Unrestricted Subsidiaries
Under the terms of the 2032 Notes, and the 2026 Notes that were redeemed with proceeds from the February 2025 issuance of the 2032 Notes, the Company designated certain of its subsidiaries as “Unrestricted Subsidiaries”, including Interchange Partners LLC and Intrepid Brands, LLC. The Company is required under the terms of the indenture governing the 2032 Notes to present additional information that reflects the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Company’s Unrestricted Subsidiaries as of and for the periods presented. This additional information is presented below.
Income Statements for the three and six months ended June 30, 2026 and 2025 (unaudited):
Three Months Ended June 30,
2026 2025
Company and Company and
Restricted Unrestricted Restricted Unrestricted
Subsidiaries Subsidiaries Consolidated Subsidiaries Subsidiaries Consolidated
Net sales $ 90,185 $ 52,775 $ 142,960 $ 99,905 $ 16,729 $ 116,634
Cost of sales 27,444 21,812 49,256 43,468 6,543 50,011
Gross profit 62,741 30,963 93,704 56,437 10,186 66,623
Selling, general, and administrative expenses 53,565 23,426 76,991 35,236 5,060 40,296
Other operating income - - - - - -
Operating income 9,176 7,537 16,713 21,201 5,126 26,327
Other expense, net - 63 63 - - -
Interest expense (income), net 4,636 (385 ) 4,251 5,493 (353 ) 5,140
Investment (gain) loss 1,155 (66 ) 1,089 (105 ) 27 (78 )
(Income) loss from equity method investment (2,627 ) (47 ) (2,674 ) - 61 61
Income before income taxes 6,012 7,972 13,984 15,813 5,391 21,204
Income tax (benefit) expense 1,586 2,097 3,683 3,165 1,079 4,244
Consolidated net income 4,426 5,875 10,301 12,648 4,312 16,960
Net income (loss) attributable to non-controlling interest 2,989 3,714 6,703 64 2,416 2,480
Net income attributable to Turning Point Brands, Inc. $ 1,437 $ 2,161 $ 3,598 $ 12,584 $ 1,896 $ 14,480
Six Months Ended June 30,
2026 2025
Company and Company and
Restricted Unrestricted Restricted Unrestricted
Subsidiaries Subsidiaries Consolidated Subsidiaries Subsidiaries Consolidated
Net sales $ 178,216 $ 89,022 $ 267,238 $ 192,231 $ 30,839 $ 223,070
Cost of sales 68,788 36,451 105,239 84,309 12,528 96,837
Gross profit (loss) 109,428 52,571 161,999 107,922 18,311 126,233
Selling, general, and administrative expenses 92,627 40,175 132,802 67,270 9,447 76,717
Operating income 16,801 12,396 29,197 40,652 8,864 49,516
Other (income) expense, net - 126 126 - - -
Interest expense (income), net 9,483 (809 ) 8,674 10,096 (542 ) 9,554
Investment (gain) loss 881 57 938 (345 ) (174 ) (519 )
(Income) loss from equity method investment (5,478 ) (179 ) (5,657 ) - 211 211
Loss on extinguishment of debt - - - 1,235 - 1,235
Income before income taxes 11,915 13,201 25,116 29,666 9,369 39,035
Income tax expense 411 462 873 4,776 1,508 6,284
Consolidated net income 11,504 12,739 24,243 24,890 7,861 32,751
Net (loss) income attributable to non-controlling interest 2,917 6,061 8,978 (257 ) 4,133 3,876
Net income attributable to Turning Point Brands, Inc. $ 8,587 $ 6,678 $ 15,265 $ 25,147 $ 3,728 $ 28,875
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Balance Sheet as of June 30, 2026 (unaudited):
Company and
Restricted Unrestricted
Subsidiaries Subsidiaries Eliminations Consolidated
ASSETS
Current assets:
Cash $ 222,727 $ 45,580 $ - $ 268,307
Accounts receivable, net 17,312 5,386 - 22,698
Inventories 123,591 9,843 - 133,434
Other current assets 67,989 7,706 - 75,695
Total current assets 431,619 68,515 - 500,134
Property, plant, and equipment, net 39,455 248 - 39,703
Right of use assets 15,689 - - 15,689
Deferred financing costs, net 858 - - 858
Goodwill 135,830 - - 135,830
Other intangible assets, net 63,419 - - 63,419
Master Settlement Agreement (MSA) escrow deposits 29,684 - - 29,684
Other assets 53,631 16,248 - 69,879
Investment in unrestricted subsidiaries - 14,630 (14,630 ) -
Total assets $ 770,185 $ 99,641 $ (14,630 ) $ 855,196
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 23,652 $ 11,640 $ - $ 35,292
Accrued liabilities 9,577 43,347 - 52,924
Total current liabilities 33,229 54,987 - 88,216
Deferred tax liabilities, net 7,851 - - 7,851
Notes payable and long-term debt 294,145 - - 294,145
Other long-term liabilities - - - -
Lease liabilities 10,960 - - 10,960
Total liabilities 346,185 54,987 - 401,172
Commitments and contingencies
Stockholders’ equity:
Total Turning Point Brands, Inc. Stockholders’ Equity/Net parent investment in unrestricted subsidiaries 419,952 24,776 (14,630 ) 430,098
Non-controlling interest 4,048 19,878 - 23,926
Total stockholders’ equity 424,000 44,654 (14,630 ) 454,024
Total liabilities and stockholders’ equity $ 770,185 $ 99,641 $ (14,630 ) $ 855,196
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Balance Sheet as of December 31, 2025:
Company and
Restricted Unrestricted
Subsidiaries Subsidiaries Eliminations Consolidated
ASSETS
Current assets:
Cash $ 179,344 $ 43,416 $ - $ 222,760
Accounts receivable, net 23,335 2,391 - 25,726
Inventories, net 103,408 4,581 - 107,989
Other current assets 55,515 5,160 - 60,675
Total current assets 361,602 55,548 - 417,150
Property, plant, and equipment, net 36,107 140 - 36,247
Right of use assets 14,480 - - 14,480
Deferred financing costs, net 1,180 - - 1,180
Goodwill 136,097 - - 136,097
Other intangible assets, net 64,042 - - 64,042
Master Settlement Agreement (MSA) escrow deposits 29,887 - - 29,887
Other assets 48,810 15,857 - 64,667
Investment in unrestricted subsidiaries - 11,069 (11,069 ) -
Total assets $ 692,205 $ 82,614 $ (11,069 ) $ 763,750
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 11,857 $ 8,563 $ - $ 20,420
Accrued liabilities 10,651 43,936 - 54,587
Total current liabilities 22,508 52,499 - 75,007
Deferred tax liabilities, net 8,289 - - 8,289
Notes payable and long-term debt 293,625 - - 293,625
Other long-term liabilities 4,138 - - 4,138
Lease liabilities 10,708 - - 10,708
Total liabilities 339,268 52,499 - 391,767
Commitments and contingencies
Stockholders’ equity:
Total Turning Point Brands, Inc. Stockholders’ Equity/Net parent investment in unrestricted subsidiaries 351,576 13,797 (11,069 ) 354,304
Non-controlling interest 1,361 16,318 - 17,679
Total stockholders’ equity 352,937 30,115 (11,069 ) 371,983
Total liabilities and stockholders’ equity $ 692,205 $ 82,614 $ (11,069 ) $ 763,750
Off-balance Sheet Arrangements
At June 30, 2026 and December 31, 2025 we had no foreign currency contracts outstanding.
Inflation
Inflation has a substantial negative effect on the purchasing power of consumers. While historically, we have been able to increase prices at a rate equal to or greater than that of inflation, doing so could be difficult in an inflationary environment. However, we have implemented price increases in areas where doing so has been feasible. In addition, we have been able to maintain a relatively stable variable cost structure for our products due, in part, to our existing contractual agreements for the purchases of tobacco and our premium cigarette rolling papers.
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