Turning Point Brands, Inc.

Previous wording

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.”

Current wording

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, 2024.

Previous wording

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, 2023, and as compared with the three and nine months ended September 30, 2024. 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, 2023 (the “2023 Annual Report”).

Current wording

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, 2024, and as compared with the three months ended March 31, 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, 2024 (the*“2024 Annual Report”).

Previous wording

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 low-single-digit consumer unit annualized growth over the four-year period ended 2023 as reported by Management Science Associates, Inc. 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 820 distributors with an additional 650 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.

Current wording

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® 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 low-single-digit consumer unit annualized declines during the year ended December 31, 2024, as reported by Management Science Associates, Inc. (“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 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.

Previous wording

We believe there are meaningful opportunities to grow through investing in organic growth, acquisitions and joint ventures across all product categories. Our products are currently available in approximately 197,000 U.S. retail locations which, with the addition of retail stores in Canada, brings our total North American retail presence to an estimated 217,000 points of distribution. Our sales team targets widespread distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business.

Current wording

We believe there are meaningful opportunities to grow through investing in organic growth, acquisitions and joint ventures across all product categories. Our products are available in approximately 200,000 U.S. retail locations which, with the addition of retail stores in Canada, brings our total North American retail presence to an estimated 220,000 points of distribution. Our sales team targets widespread distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business.

Previous wording

We operate in three segments: Zig-Zag products, Stoker’s products and Creative Distribution Solutions (“CDS”). 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”) and (ii) contract for and market FRE, our modern oral product; and (iii) contract for and market loose leaf chewing tobacco products. In our Creative Distribution Solutions segment, we (i) market and distribute liquid nicotine products and certain other products without tobacco and/or nicotine; (ii) distribute a wide assortment of products to non-traditional retail via Beast Distribution (formerly known as VaporBeast), and (iii) market and distribute a wide assortment of products to individual consumers via the Company’s B2C online platform.

Current wording

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.

Previous wording

Our core 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 acquisition of Vapor Beast in 2016 expanded our revenue streams as we began selling directly to non-traditional retail outlets. Our acquisition of IVG in 2018 enhanced our B2C revenue stream with the addition of an online platform. Our net sales, which include federal excise taxes, consist of gross sales net of cash discounts, returns, and selling and marketing allowances.

Current wording

Our core 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.

Previous wording

The table and discussion set forth below displays our consolidated results of operations (in thousands):

Current wording

The table and discussion set forth below relates to our consolidated results of continuing operations:

Previous wording

Net Sales: For the three months ended September 30, 2024, consolidated net sales increased $3.9 million, or 3.8% compared to the prior year period, driven by an increase in the Zig-Zag and Stoker’s products segments, partially offset by a decline in the Creative Distribution Solutions segment.

Current wording

Net Sales: For the three months ended March 31, 2025, consolidated net sales increased $23.4 million, or 28.1% compared to the prior year period, driven primarily by an increase in the Stoker’s products segment.

Previous wording

For the three months ended September 30, 2024, net sales in the Zig-Zag products segment increased $2.6 million, or 5.5% compared to the prior year period. The increase in net sales was driven primarily by $1.4 million of growth in our cigar products, $1.2 million of growth in our U.S. papers and wraps, and $0.5 million of growth in our Canadian products business, partially offset by a decline of $0.8 million in our Clipper lighter business.

Current wording

For the three months ended March 31, 2025, net sales in the Zig-Zag products segment increased $0.6 million, or 1.2% compared to the prior year period. The increase in net sales was driven primarily by $1.5 million of growth in our cigar products and $0.5 million of growth in our Canadian products partially offset by a decline of $0.8 million in U.S. papers and wraps and $0.5 million in the Clipper lighter business.

Previous wording

For the three months ended September 30, 2024, net sales in the Stoker’s products segment increased $4.5 million, or 12.1% compared to the prior year period. For the three months ended September 30, 2024, sales volume of Stoker’s products increased 2.9% as compared with the prior year period contributing $1.1 million to the increase, and price/product mix increased 9.2% which contributed $3.4 million to the increase. The increase in net sales was driven by $3.9 million of growth in our modern oral product FRE and $0.8 million of growth of Stoker’s® MST, partially offset by a $0.3 million decline in net sales of loose-leaf chewing tobacco.

Current wording

For the three months ended March 31, 2025, net sales in the Stoker’s products segment increased $22.8 million, or 62.7% compared to the prior year period. For the three months ended March 31, 2025, sales volume of Stoker’s products increased 55.1% compared to the prior year period, which contributed $20.0 million to the increase, and price/product mix increased 7.6% compared to the prior year period, which contributed $2.8 million to the increase. The increase in net sales was primarily driven by $20.0 million of sales in modern oral products and $2.4 million of growth ofStoker’s® MST.

Previous wording

Gross Profit: For the three months ended September 30, 2024, consolidated gross profit increased $2.1 million, or 4.0% compared to the prior year period. Gross profit as a percentage of net sales increased slightly to 50.8% for the three months ended September 30, 2024, compared to 50.7% for the three months ended September 30, 2023. The overall increase in gross profit was driven by increased margins in the Stoker’s products segment, partially offset by decreased margins in the Creative Distribution Solutions segment.

Current wording

Gross Profit: For the three months ended March 31, 2025, consolidated gross profit increased $11.3 million, or 23.3% compared to the prior year period. Gross profit as a percentage of net sales decreased slightly to 56.0% for the three months ended March 31, 2025, compared to 58.2% for the three months ended March 31, 2024. The overall increase in gross profit was driven by increases in net sales.

Previous wording

For the three months ended September 30, 2024, gross profit in the Zig-Zag products segment increased $0.6 million, or 2.2% compared to the prior year period. Gross profit as a percentage of net sales decreased to 55.4% of net sales for the three months ended September 30, 2024, from 57.2% of net sales for the three months ended September 30, 2023, driven primarily by growth in U.S. papers and Canadian products, which generate higher margins, offset by higher net sales of cigar products which generate lower margins than other products in the segment.

Current wording

For the three months ended March 31, 2025, gross profit in the Zig-Zag products segment increased $0.7 million and margins were flat on a sequential quarter basis. Compared to the first quarter of the prior year, gross profit decreased $2.0 million, or 7.2%. Gross profit as a percentage of net sales decreased to 54.1% of net sales for the three months ended March 31, 2025, from 59.0% of net sales for the three months ended March 31, 2024, driven primarily by a decrease in net sales of U.S. papers and wraps products, which generate higher margins, partially offset by higher net sales of cigar products which generate lower margins than other products in the segment.

Previous wording

Selling, General, and Administrative Expenses: For the three months ended September 30, 2024, selling, general, and administrative expenses increased $1.8 million, or 5.7% compared to the prior year period. Selling, general and administrative expenses in the three months ended September 30, 2024, included $1.8 million of stock options, restricted stock and incentives expense, $1.2 million of expense related to PMTA, $0.9 million of transaction costs, $0.2 million of expense related to the implementation of the new ERP and CRM systems, and $0.2 million of expense related to corporate restructuring. Selling, general and administrative expenses in the three months ended September 30, 2023, included $1.8 million of stock options, restricted stock and incentives expense, $0.3 million of expense related to PMTA, $0.2 million of expense related to corporate restructuring, $0.1 million of transaction costs and $0.1 million of expense related to the new ERP and CRM systems.

Current wording

Selling, General, and Administrative Expenses: For the three months ended March 31, 2025, selling, general, and administrative expenses increased $7.3 million, or 25.2% compared to the prior year period, primarily due to increased shipping and selling costs related to the increase in modern oral sales in the quarter compared to the prior year period. Selling, general and administrative expenses in the three months ended March 31, 2025, included $1.7 million of stock options, restricted stock and incentives expense, $1.6 million of expense related to PMTA, $0.2 million of transaction costs and $0.2 million of expense related to the implementation of the new ERP and CRM systems. Selling, general and administrative expenses in the three months ended March 31, 2024, included $2.1 million of stock options, restricted stock and incentives expense, $1.3 million of expense related to corporate restructuring, $0.8 million of expense related to PMTA and $0.1 million of expense related to the new ERP and CRM systems.

Previous wording

Operating Income (Loss): For the three months ended September 30, 2024, consolidated operating income increased $0.3 million, or 1.4% compared to the prior year period. Operating income as a percentage of net sales decreased to 19.4% of net sales for the three months ended September 30, 2024 from 19.9% of net sales for the three months ended September 30, 2023, primarily driven by decreased gross profit in the Creative Distribution Solutions segment, partially offset by increased gross profit in the Zig-Zag and Stoker’s products segments.

Current wording

Operating Income: For the three months ended March 31, 2025, consolidated operating income increased $3.9 million, or 20.3% compared to the prior year period. Operating income as a percentage of net sales decreased to 21.8% of net sales for the three months ended March 31, 2025 from 23.2% of net sales for the three months ended March 31, 2024, primarily driven by decreased gross profit in the Zig-Zag products segment, partially offset by increased gross profit in the Stoker’s products segments.

Previous wording

For the three months ended September 30, 2024, operating income in the Zig-Zag products segment increased $0.7 million, or 4.2% compared to the prior year period. Operating income as a percentage of net sales increased to 16.5% of net sales for the three months ended September 30, 2024 from 16.4% of net sales for the three months ended September 30, 2023, primarily driven by increased gross profit in our Canadian products business, U.S. papers and cigar products, combined with lower operational costs.

Current wording

For the three months ended March 31, 2025, operating income in the Zig-Zag products segment decreased $1.1 million, or 5.9% compared to the prior year period. Operating income as a percentage of net sales decreased to 35.8% of net sales for the three months ended March 31, 2025 from 38.5% of net sales for the three months ended March 31, 2024, primarily driven by lower gross profit in our Canadian products business, U.S. papers and cigar products, combined with higher operational costs.

Previous wording

For the three months ended September 30, 2024, operating income in the Stoker’s products segment increased $1.5 million, or 9.3% compared to the prior year period. Operating income as a percentage of net sales increased to 16.2% of net sales for the three months ended September 30, 2024 from 15.4% of net sales for the three months ended September 30, 2023, primarily driven by Stoker’s MST net sales growth at higher margins, and higher net sales of FRE which represented a higher percentage of the segment’s sales compared to the prior year period and has lower margins than other products in the segment.

Current wording

For the three months ended March 31, 2025, operating income in the Stoker’s products segment increased $8.7 million, or 56.8% compared to the prior year period. Operating income as a percentage of net sales decreased to 40.8% of net sales for the three months ended March 31, 2025 from 42.3% of net sales for the three months ended March 31, 2024, primarily driven by higher net sales of modern oral products which represented a higher percentage of the segment’s sales compared to the prior year period at lower margins than other products in the segment, partially offset by Stoker’s MST net sales growth at higher margins.

Previous wording

Included in consolidated operating income are costsof the Company which are not assigned to one of the three reportable segments and includes: (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 September 30, 2024, unallocated costs were $13.7 million compared to $11.7 million in the prior year period, an increase of $2.1 million or 17.6%.

Current wording

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 March 31, 2025, unallocated costs were $17.9 million compared to $14.1 million in the prior year period, an increase of $3.7 million or 26.5%, primarily driven by joint venture corporate related expenses.

Previous wording

Income Tax Expense: Our income tax expense of $4.6 million was 27.1% of income before income taxes for the three months ended September 30, 2024. Our effective income tax rate was 25.7% for the three months ended September 30, 2023.

Current wording

Income Tax Expense: ** **Our income tax expense of $2.0 million was 11.4% of income before income taxes for the three months ended March 31, 2025. Our effective income tax rate was 23.4% for the three months ended March 31, 2024. The decrease in tax rate compared to the prior year period is due to the inclusion of permanent tax differences related to the Company's restricted stock units that were issued in the quarter ended March 31, 2025.

Previous wording

Net Income (Loss) Attributable to Non-Controlling Interest: Net income attributable to non-controlling interest was $0.1 million for the nine months ended September 30, 2024 compared to a $0.4 million loss for the nine months ended September 30, 2023.

Current wording

Net Income Attributable to Non-Controlling Interest: ** **Net income attributable to non-controlling interest was $1.4 million and $0.2 million, respectively, for the three months ended March 31, 2025 and 2024. The increase in non-controlling interest compared to the prior year period is due to the consolidation of a joint venture starting in December 2024.

Previous wording

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 September 30, 2024 and 2023, was $12.4 million and $10.8 million, respectively.

Current wording

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 March 31, 2025 and 2024, was $14.4 million and $12.0 million, respectively.

Previous wording

We define “EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, depreciation, and amortization. We define “Adjusted EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, provision for income taxes, 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.

Current wording

We define “EBITDA” as net income 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.

Previous wording

As of September 30, 2024, we have $33.6 million of cash on hand and have $58.8 million of availability under the 2023 ABL Facility. Our principal uses for cash are working capital, debt service, and capital expenditures.

Current wording

As of March 31, 2025, we have $99.6 million of cash on hand and have $62.2 million of availability under the 2023 ABL Facility. We have no borrowings outstanding under our ABL as of March 31, 2025. Our principal uses for cash are working capital, debt service, and capital expenditures.

Previous wording

Our adjusted working capital, which we define as current assets less cash and current liabilities, increased $57.9 million compared to the prior year end. The increase in working capital is primarily a result of a $60.2 million decrease in current liabilities due to the July 15, 2024 maturity of our Convertible Senior Notes which were retired with cash on that date. 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.

Current wording

Our adjusted working capital, which we define as current assets less cash and current liabilities, decreased $6.5 million compared to the prior year end. Excluding assets and liabilities held for sale at December 31, 2024, our adjusted working capital increased $3.0 million for the quarter ended March 31, 2025. The increase in working capital is primarily the result of a $18.8 million increase in current assets, partially offset by an increase of $15.3 million in accounts payable. 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.

Previous wording

Our cash flows from operations as reflected in the Consolidated Statements of Cash Flows are summarized as follows:

Current wording

Our cash flows from continuing operations as reflected in the Consolidated Statements of Cash Flows are summarized as follows:

Previous wording

For the nine months ended September 30, 2024, net cash provided by operating activities was $49.3 million, an increase of $9.3 million compared to the prior year period, primarily dueto an increase in net income, net of non-cash items of $4.6 million, and an increase in the change in other current assets of $4.5 million. The primary drivers of non-cash items were a $8.4 million decrease in loss on investments compared to the prior year period, partially offset by a $1.1 million increase in stock compensation expense and a $1.8 million decrease in gains on extinguishment of debt compared to the prior year period. The increase in cash from other current assets was primarily driven by the Berteau settlement receivable of $4.0 million and an insurance deposit receivable of $3.0 million, both received in cash in the nine months ended September 30, 2024.

Current wording

For the three months ended March 31, 2025, net cash provided by operating activities was $17.4 million, a decrease of $1.8 million compared to the prior year period, primarily due to an unfavorable change in working capital of $7.7 million, partially offset by an increase in net income, net of non-cash items of $6.0 million. The primary drivers of non-cash items were a $1.6 million increase in deferred tax expense and a $1.2 million increase 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.

Previous wording

For the nine months ended September 30, 2024, net cash used in investing activities was $9.1 million, an increase of $4.7 million compared to the prior year period, primarily due to the net purchase of $4.3 million in investments by our captive insurance subsidiary.

Current wording

For the three months ended March 31, 2025, net cash used in investing activities was $5.2 million, a decrease of $2.8 million compared to the prior year period, primarily due to a net decrease in purchases in investments of $6.9 million by our captive insurance subsidiary compared to the prior year period, partially offset by increases in equity investments of $2.8 million and capital expenditures of $1.8 million.

Previous wording

A dividend of $0.07 per common share was paid on October 4, 2024, to shareholders of record at the close of business on September 13, 2024.

Current wording

A dividend of $0.075 per common share was paid on April 11, 2025, to shareholders of record at the close of business on March 21, 2025.

Previous wording

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, in each case bringing the aggregate approval back to $50.0 million. On November 6, 2024, the Board of Directors of the Company increased the Company’s share repurchase authorization by $77.9 million to an aggregate amount of $100.0 million. In the three and nine months ended September 30, 2024, the Company repurchased $1.1 million and $4.2 million of common stock, respectively.

Current wording

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 Board of Directors of the Company increased the Company’s share repurchase authorization by $77.9 million to an aggregate amount of $100.0 million. In the three months ended March 31, 2025, there were no repurchases under the share repurchase program.

Previous wording

The Senior Secured 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 a number of limitations and exceptions set forth in the Senior Secured 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 Senior Secured Notes Indenture provides for customary events of default. We were in compliance with all covenants as of September 30, 2024.

Current wording

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.

Previous wording

We incurred debt issuance costs attributable to the issuance of the Senior Secured Notes of $6.4 million which are amortized to interest expense using the straight-line method over the expected life of the Senior Secured Notes.

Current wording

We incurred debt issuance costs attributable to the 2032 Notes of $7.1 million which are amortized to interest expense using the straight-line method over the expected life of the 2032 Notes.

Previous wording

On February 11, 2021, we closed a private offering (the “Offering”) of $250 million aggregate principal amount of our 5.625% senior secured notes due 2026 (the “Senior Secured Notes”). The Senior Secured Notes bear interest at a rate of 5.625% and will mature on February 15, 2026. Interest on the Senior Secured Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021.We used the proceeds from the Offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs, and expenses and (iii) for general corporate purposes.

Current wording

On February 11, 2021, we closed a private offering of $250.0 million aggregate principal amount of our 5.625% senior secured notes due 2026 (the “2026 Notes”). The 2026 Notes incurred interest at a rate of 5.625%. Interest on the 2026 Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2021.We used the proceeds from the offering (i) to repay all obligations under and terminate the 2018 First Lien Credit Facility, (ii) to pay related fees, costs and expenses and (iii) for general corporate purposes. In February 2025, we redeemed the 2026 Notes with the proceeds from the offering of the 2032 Notes.

Previous wording

Obligations under the Senior Secured Notes are guaranteed by the Company’s existing and future wholly-owned domestic subsidiaries (the “Guarantors”) that guarantee any credit facility (as defined in the indenture governing the Senior Secured Notes or the “Senior Secured Notes Indenture”) or capital markets debt securities of the Company or Guarantors in excess of $15.0 million. The Senior Secured 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.

Current wording

Obligations under the 2026 Notes were guaranteed by the Company’s existing and future wholly-owned domestic subsidiaries (the “Guarantors”) that guarantee any credit facility (as defined in the indenture governing the 2026 Notes or the “2026 Notes Indenture”) or capital markets debt securities of the Company or Guarantors in excess of $15.0 million. The 2026 Notes and the related guarantees were secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. We were in compliance with all covenants under the 2026 Notes as of December 31, 2024.

Previous wording

In connection with the Offering, we also entered into a $25.0 million senior secured revolving credit facility (the “2021 Revolving Credit Facility”) with the lenders party thereto and Barclays Bank PLC, as administrative agent and collateral agent (in such capacity, the “Agent”). This facility was terminated in November 2023 in connection with the entry by a subsidiary of the Company in a new asset-backed revolving credit facility. See “2023 ABL Facility” below. We incurred debt issuance costs attributable to the issuance of the 2021 Revolving Credit Facility of $0.5 million, with the remaining $0.2 million written off to gain on debt extinguishment upon termination of the facility in November 2023.

Current wording

We incurred debt issuance costs attributable to the issuance of the 2026 Notes of $6.4 million, with the remaining $1.2 million written off to loss on debt extinguishment upon redemption.

Previous wording

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 (the “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.

Current wording

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.

Previous wording

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 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.

Current wording

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.

Previous wording

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 balance of $58.8 million based on the borrowing base as of September 30, 2024.

Current wording

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 balance of $62.2 million based on the borrowing base as of March 31, 2025.

Previous wording

Our Convertible Senior Notes matured on July 15, 2024 and were retired with cash. We have no borrowings outstanding under our ABL as of September 30, 2024.

Current wording

The Company's 2.5% convertible senior notes matured and were retired with cash on July 1, 2024. No principal amounts remained outstanding as of December 31, 2024.

Previous wording

During the nine months ended September 30, 2024, we executed and have outstanding various foreign exchange contracts for the purchase and sale of €1.5 million with maturity dates ranging from October to December 2024. The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.0 million included in Other current assets and a liability of $0.0 million included in Accrued liabilities at September 30, 2024. During 2023, we executed various foreign exchange contracts for the purchase of €20.1 million and sale of €15.2 million. At December 31, 2023, we had foreign currency contracts outstanding for the purchase of €15.2 million and sale of €15.2 million. The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.3 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities at December 31, 2023.

Current wording

At March 31, 2025, we had foreign currency contracts outstanding for the purchase and sale of €0.9 million with maturity dates ranging from April to June 2025. The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.0 million included in Other current assets and a liability of $0.0 million included in Accrued liabilities at March 31, 2025. During 2024, we executed various foreign exchange contracts for the purchase and sale of €3.6 million. At December 31, 2024, we had foreign currency contracts outstanding for the purchase and sale of €2.1 million. The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.0 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities at December 31, 2024.

Previous wording

Inflation in general, coupled with increases in gas prices have had 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 would be difficult in the current 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 successful procurement regarding our tobacco products and, in part, to our existing contractual agreement for the purchase of our premium cigarette papers.

Current wording

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.