Turning Point Brands, Inc. (TPB) Q4 2021 Earnings Report, Transcript and Summary

Good morning and welcome to the Turning Point Brands Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. All lines have been placed on mute to prevent any background noise. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Louie Reformina, Chief Financial Officer. Please go ahead.

Thank you. Good morning, everyone. This is Louie Reformina, our Chief Financial Officer. Joining me are Turning Point Brands’ President and CEO, Yavor Efremov; and Graham Purdy, Chief Operating Officer. This morning we issued a news release covering our fourth quarter results. This release is located in the IR section of our website at www.turningpointbrands.com. There is also a presentation we will be reviewing [ph] on the call available on the site. Now turning to Page 1, in this call we will discuss our consolidated and segment operating results and provide our perspective on our progress against our strategic plans. As is customary, I direct your attention to the discussion of forward-looking and cautionary statements in today’s press release and the risk factors in our filings with the Securities and Exchange Commission. On the call today, we will reference certain non-GAAP financial measures. These measures and reconciliations to GAAP can be found in today’s earnings release, along with reasons why management believes that they provide useful information. Turning the slide over, I would now like to introduce our new CEO, Yavor Efremov.

Thank you, Louie. I would like to this brief so we can allow for more time on Q&A. First, I would like to state how excited I am about the opportunity to lead Turning Point Brands. I joined the Board in July 2021 and spent most of July, August and September working in different segments of the company in frontline capacity either as a [indiscernible] or a trainee, depending on the position. I started with two weeks working in different departments of our MST plant in Dresden, Tennessee followed by another week on the production side on the line in Louisville. I can tell all about MST and how exactly it is made because some of the product result in Q4 was made by me. That was followed by a week of seeking [ph] and packaging in our fulfillment center in Louisville. Then I spent one week in Florida as a sales rep trainee in the second week and then was on my own as a sales rep with my own van visiting stores and doing the job of a TSM. I then proceeded to spend a few days in each of our Miami and LA offices. Given the nature of the work there, Undercover Boss was not a good format, but I did meet with each and every employee in those locations individually and spent time understanding what they do and how they do it. It goes without saying that I have spent also a ton of time with management, board members, in reviewing the company's financial performance and current position. Throughout that time, I have witnessed a business that is already performing very well and has significant potential for continued organic and inorganic growth, which is also the answer as to why I took the job. We are currently viewed as a small cap tobacco company and even though our metrics are like solid organic growth and substantial free cash flow generation, that is not reflected in our share price. We have brands that provide us with a strong model, solid balance sheet and impressive cash flow, and yet we trade at a heavy discount. To solve that, we have to move towards a place where we are much larger and more diversified. To that end, we are looking to do two things from a strategy perspective. Number one, execute on the plan. As stated in our press release, we are guiding yet again to solid growth in Zig-Zag and Stoker's and are looking to stay in line with EBITDA despite pressure from NewGen. Continuing to perform in our current business is, has been, and remains job one. To maintain the momentum, we will invest in the business in targeted ways. You will see us invest more in Zig-Zag as a brand. We have already started that with the launch of Zig-Zag Studios and expect to do more in that area. You will see us invest in our IT infrastructure, including upgrading our ERP systems to modern levels in order to drive substantial efficiencies. This is something identified as a need over the summer, and we have been working to prepare for it ever since. We are currently in ERP scope with the consulting arm of a big four accounting firm and expect to launch an actual implementation of a new ERP by this summer. On a side note, in addition to the typical efficiencies, and cost savings from an ERP implementation, we have the additional benefit of cost savings coming from integrating the IT systems we inherited from prior acquisitions. This is a financial benefit that we will get without spending additional resources. Second, and perhaps most important, we will hunt for acquisitions that will help get us out of the small cap status. In that regard, I would like to be clear on two items. Number one, investment in minority stakes with no capital control is not something that we will prioritize going forward. I have learned to never say never, but that is not a strategy we will actively pursue. In terms of timing, sometimes the right deal appears quickly and sometimes it takes time to find it. When I handled the deals at Liberty, I learned to be patient. That is specifically true when you're looking for deals in size. I would like to assure you that we will be cautious with your capital and we will only undertake transactions that we find compelling from a shareholder value perspective. Putting it all together, I believe that our organization infrastructure provides a strong platform to invest further and deliver both organic and inorganic growth. I have gotten to know our employees well over the last six, seven months and would like to thank them for delivering yet another outstanding quarter and welcoming me into the organization. With that, let me turn it back over to Louie to go through the results.

Thank you, Yavor. Turning to Page 3, which is our consolidated segment overview, Q4 sales were in line with the previous year at $105 million with strong Zig-Zag and Stoker's growth offset by decline in NewGen. This is above the previous guidance of $93 million to $103 million without performance relative to our expectations in each segment led by Zig-Zag. Adjusted gross margin was down 170 basis points year-over-year or down 100 basis points without the consolidation of TPB Canada. This was primarily due to product mix within Zig-Zag and $2 million of inventory write downs and reserves in NewGen. Adjusted EBITDA was down $2 million year-over-year, primarily due to the inventory write down and the increased freight expenses from PACT Act implementation. Turning now to Page 4, Zig-Zag products. Zig-Zag sales grew 13.6% year-over-year to $46.1 million with 12.2% from volume and 1.4% from price mix. Growth would have been 3% without consolidation of TPB Canada. Adjusted [indiscernible] for COVID-related headwind in our Wraps business growth would have been much stronger. Wraps revenue for Q4 was consistent with our average in the first three quarters of the year. On a year-over-year basis Wraps was down 70% due to a $5 million headwind from a COVID-related back-order fill in the fourth quarter of 2020. During the quarter, we introduced Zig-Zag Natural Leaf wraps in limited markets and reintroduced Zig-Zag Hemp wraps and expect those products to be tailwinds for us as they ramp in 2022. Our U.S. Papers & E-commerce business was up 28% year-over-year driven by more than a doubling of e-commerce and paper cones sales. E-commerce was up 2.5 times and now 3% of sub-segment with strong growth expected in 2022. As an anecdote, our accessory sales through e-commerce which was nonexistent two years ago, touched $1 million in sales in 2021. Sales of cones product was up 2.8 times and now 21% of the sub-segment. Zig-Zag remains the number one premium and overall paper brand in MSAi measured market with 35.1% share. Zig-Zag is also the number one brand in the paper cones category per MSAi with 38.9% share, up 530 basis points year-over-year. Cones remains a large opportunity with only one third of stores receiving paper products, also receiving cones during the quarter in the major markets. The paper category showed strong growth in the MSAi measured market at 5.6%. We were also excited by the launch of the Zig-Zag Studio concept in December with an exciting set of videos, limited edition apparel and collaborations with partners that have a wide adult audience reach. We were encouraged by the reception to the launch and look forward to our 2022 marketing initiatives to continue to grow the Zig-Zag brand. Canada more than tripled during the quarter due to the consolidation of TPB Canada, which added $4.5 million in revenue with the majority coming from the DBW [ph] acquisition. TPB Canada would have contributed $1.1 million of organic growth during the quarter or more than the tripling of its base business, had the old recreation marketing business been consolidated in the previous year. The Cigars and Others subcategory grew this year after years of decline. The acquisition of Unitabac assets provides a launching point for our re-entry into the large and growing $2.5 billion manufacturer revenue cigars category, with our Zig-Zag Natural Leaf cigar being introduced later in Q1. Gross margins declined 490 basis points during the quarter. The consolidation of TPB Canada was the biggest driver of decline given low margins from DBW [ph] acquisition earlier in the year. Margins would have been down 220 basis points, excluding TPB Canada, which was driven by higher growth and lower margin products like paper cones. The tough comps in the $5 million Wraps back-fill in Q4 of 2020, which carried high variable contribution margins, led to a year-over-year operating income decline of $1.3 million during the quarter. The declined from Wraps is partially offset by growth in e-commerce which has lower contribution margins. We also consolidated a $0.4 million loss from TPB Canada which we expect to improve through 2022. Overall Zig-Zag accounted for 60% of our segment operating income in the fourth quarter and continues to be our fastest growing segment. Turning now to Page 5, our Stoker's products. Stoker's products net sales increased 8.3% to $31.2 million in the quarter with 2.1% volume growth and 6.2% from price mix. Net sales for the MST portfolio grew 16% and represented 63% of Stoker's revenues in the quarter, up from 59% a year earlier. The category was down 0.9% while we were up 1.7% as our share grew 10 basis points to 5.7% during the quarter according to MSAi. Our share in stores selling remained at 9.1%, which Stoker's now in stores representing 63% of industry volumes, which still provides a long runway for growth. Chewing tobacco declined 3% from the previous year with the category down 5.1% and TPB outperforming the category. Stoker's Chew was the number one chewing brand in the fourth quarter gaining 120 basis points of share to 26.4% according to MSAi. With the continued secular shift into the value category and Stoker's positioning as a leading value brand, the chewing tobacco business is well placed to provide us with a stable annuity stream of cash flow going forward. Second, gross margins expanded by 100 basis points to 54.3% during the quarter, driven by price across the segment. Operating margins were stable from the previous year, despite higher shipping and promotional costs. Turning to Page 6, the NewGen products, we continued to manage through a disruptive environment with sales down 22% from the previous year to $28 million. Our base distribution business saw 16% decline due to the market dynamics resulting from the regulatory environment along with the implementation of the PACT Act which acquired a twitch from the USPS and alternative distribution infrastructure. Our Other NewGen business was down 49% as our other vape products were impacted by the regulatory disruption. Adjust the gross margins were down 690 basis points during the quarter as we took $2 million of inventory write downs and reserves, mostly related to Other NewGen products that were impacted by the industry regulatory dynamics. Adjusted operating income for the segment was down $3.7 million due to the lower gross profit, which was partially offset by lower variable SG&A. Encouragingly we received the USPS exemption for B2B shipments to qualified customers in December, and we continue to build our last mile distribution infrastructure for B2C shipments. Now myself being in the PMTA process, as the industry continues to await progress in the FDA. We have talked about the challenging environment we are currently operating in with our vape distribution business, in detail in past calls. Ultimately, we still believe that all the short term challenges the industry is facing presents an opportunity for us in the long-term given our size, and ability to navigate the regulatory environment. Turning now to Page 7, our balance sheet and liquidity, we ended the quarter with over $128 million of cash on the balance sheet and $150 million of available liquidity, providing flexibility on capital deployment. We repurchased $18.2 million of shares during the quarter and $6.4 million in January. We recorded a gain from the forgiveness of a $7.5 million PPP loan, but recorded a $7.1 million impairment related to our investment in dosist. Turning now to Slide 8, our CLIPPER Distribution Agreement. This morning we also issued a press release announcing a partnership with Flamagas for exclusive distribution of CLIPPER Lighters in the U.S. and Canada. CLIPPER is the number one reusable lighter and number two overall lighter in the world, including number one share in several developed markets in Europe. This is a large opportunity for us with a lighter market that is approximately $1 billion in retail revenue and $500 million in the wholesale revenue, which roughly equals the size of the U.S. Papers and Wraps market. CLIPPER is currently a small player with approximately 3% share in the U.S., but it has had success in our playbook growing their presence in other markets by partnering with other rolling paper companies with strong distribution. The CLIPPER Lighter is the preferred product in the roll-your-own cannabis market with very strong presence in the alternative channel, but it's currently underrepresented in convenience store channel given lack of distribution. We believe this presents strong cross-selling opportunities for TPB and Zig-Zag which have strong presence in convenience stores, but is currently underrepresented in the alternative channel. We expect fast selling CLIPPER products late in Q2 with a gradual ramp through the second half of the year and we'll report it in the Zig-Zag segment. While we do not currently expect contribution of profitability to be meaningful for the year, we believe this is a tremendous long-term opportunity for our company. Furthermore, the choice of Zig-Zag and TPB as a partner was a deliberate decision by Flamagas and is a testament to the value of the reach of our distribution infrastructure, and demonstrates our ability to expand our addressable markets by carrying complementary products. Moving to Page 9 or guidance. With limited visibility around the PMTA regulatory landscape, we are limiting our top line guidance to our Zig-Zag and Stoker's products segment. With that backdrop, we project for 2022, Zig-Zag products sales of $193 million to $203 million, which represents 12% growth at the midpoint. Our base Canadian business outside of TPB Canada can have quarterly fluctuations depending on timing of orders. Just as a reminder, our full year revenue on our base business was $12.1 million in 2021. Q1 of 2021 was $5.9 million due to timing of orders. So as a reminder, we will face a tough comp of approximately $3 million headwind in Q1. We also had a $2 million pull forward in our Wraps business with a trade inventory build in Q2 of last year that pulled from Q3. Stoker's product sales of $127 million to $134 million, which represents 5% growth in the midpoint. Our current expectation is to generate consolidated EBITDA in line with fiscal year 2022, despite anticipated volatility in the NewGen products segment. With the ramp in new products in Zig-Zag, as well as continued improvement in our vape and logistics infrastructure, we expect the second half of the year to be stronger than the first half. Our other projections include stock compensation and non-cash incentive expense of $7 million and cash interest expense of $18.5 million and GAAP interest expense of $21 million. We expect our effective income tax rate to be between 22% to 24%. With regard to CapEx, we are currently reviewing projects that we believe will drive value for the organization. We do expect an increase in CapEx this year, but can give further color as the projects gets underway. One of those projects involving the improvement of a manufacturing process is moving from detailed planning stages through last year into late-stage design phase today, with planned completion next year, carrying with it a very attractive return profile. The project costs include the ERP upgrade Yavor mentioned where we are currently in the planning stages, with implementation likely to begin later this year into next year. With that, I'd like to thank you for participating in the call today and we'd like to open the call now for questions.

Thank you. [Operator Instructions] Your first question comes from Vivien Azer from Cowen. Please go ahead.

Thank you. Good morning, and congratulations on the new role. My first question, please, is on the comment more about your M&A philosophy. I appreciate kind of the rationale for large scale M&A, but I was hoping you could kind of square that with some of the historical minority stakes that the company has taken specifically around cannabis. Are we meant to understand that perhaps cannabis is less of a priority or pending legislative catalysts? How do we square those two concepts? Thanks.

Yes so, cannabis is evolving quite rapidly in multiple directions. At this stage, I think it's pretty hard to pick a winner. There's quite a few contenders, if you will, and no clear contender will come out of this. So going out and putting a lot of money on brands that existed yesterday and were fashionable yesterday and then today have gone, to me is a risky way to deploy shareholders capital. That being said, some of our portfolio I think would perform quite well in a fully legalized cannabis situation. So to the extent cannabis ever gets legalized, if we were in a position where our existing assets are well developed and strong, I think we'll be exactly where we need to be. That being said, I will say, look, and I'll never say never, if we see something that is attractive and large and meets all the criteria, specifically around size and control and cash flow, I think we're going to be taking a hard look. But I think the best thing we can do in terms of kind of addressing the potential legalization of cannabis is to invest in our current brands, and invest heavily and make sure that they are perceived as the number one kind of leading brands in whatever category they are in.

I understand. That's helpful. Thank you. And my second question is on the ERP implementation, obviously, that's not a simple endeavor to undertake, and certainly can drive some lumpiness in your results. Louie, is it fair to understand that there shouldn't be any really disruption to your business in the first quarter, given that you're still in the planning phases, and any kind of inventory movements and adjustments that you guys will be making to build safety stock around an ERP implementation would be more back half loaded? Any other color would be helpful, too. Thanks.

Yes, I think that's fair. I mean, we're early in the process. As Yavor mentioned, we're still in the scoping phases, so we don't expect implementations to really begin until late in the year and even at that we're at the beginning stages of the implementation.

Okay, fair enough. Thank you very much.

Your next question comes from Susan Anderson from B. Riley. Please go ahead.

Hi, good morning. Nice job on the quarter. I was wondering for Zig-Zag the growth for this year that you're guiding to, maybe if you could just break out volume versus pricing expectations and then also the major drivers there such as are there going to be new products or market share gains or industry growth?

Yes, let me, for Zig-Zag I mean, we're looking mostly to drive our growth through bindings. So it's a combination, we got a number of new products that we are launching in the market. We mentioned Natural Leaf, the reintroduction of Wraps and the reintroduction of our cigars products. So we expect those to be big drivers for growth and we expect to see market share gains, especially as we continue to increase our penetration in the alternative channel.

And look, this is just, this is Yavor, just to add to what Louie was saying, as I mentioned in my prepared remarks before, we are looking to invest more in kind of pushing the Zig-Zag brand out, the Zig-Zag Studios and other initiatives of that site. It will also take a little bit of time to take hold, obviously they don’t happen overnight, but we like the brand, we like where we are and we think that the best thing we can do is to continue to invest behind Zig-Zag and building out Zig-Zag. And specific to the question, if you think of the price volume mix, one of the things that are encouraging about Zig-Zag is the vast majority of gains are coming from volume. We're not taking price there in any way that's material.

Got it, that's helpful. And then did you guys say, I think you said that Zig-Zag Wraps were going to be delayed in the first quarter, did you say how much that was?

No what we mentioned was on the Wraps side there was a bit of a pull forward and as we model out the year, we mentioned in Q2 of last year, we had a pull forward from Q3 into Q2 due to a trade inventory load that impacted the quarter, $2 million in Q2, so that will be a tough headwind but it is a tailwind for us in Q3 this year.

Got it, okay. And then lastly, I guess just on the last mile network, I guess, when do you guys expect to have that fully complete?

Look, it's tough to say complete, we're working very hard on it. I'll try to give you a little bit of insight baseball, we started preparing the PACT Act. As soon as it came out, we ran a number of tests, starting in I think, April, May of last year. So we've been testing our network ever since. The only way to run a full test is to effectively shift all of our shipping off of carriers we were using at the time, which would have been prohibitively expensive, essentially, we would have been taking the hit we're taking now much earlier and kind of for no reason. So we've been doing this for over a year, well for a year now. We're built out quite well, we're continuing to build out obviously, we're continuing to talk to the big shippers as well. It's difficult to give you a kind of 100% completion date, because most of the last mile is done by individual local carriers. So that's a much harder thing to come along. I think I'm happy with the progress we've made, highlighted vape a lot as kind of the long-term potential. I understand how that is obviously not a great place to be right now, but I do believe over time it's going to work out. So all I can tell you is, we're working very hard on it. We're very focused, and I'm spending a lot of time on vape. I've been to Miami three times this year. So whenever I've been there three times, I'm going back there in two weeks. We're spending a lot of time on it. We are focused on it. I don't know if we'll ever get to a full 100% of each and every corner of the United States, but we're sure as hell pushing to get as close to that as we can.

Great, very helpful. Thanks so much. Good luck this year.

Thank you.

Your next question comes from Eric Des Lauriers from Craig-Hallum. Please go ahead.

Great. Thanks for taking my questions and congrats on a great quarter here.

Thank you.

I was hoping you could expand a bit more on CLIPPER's, alternative distribution share. And then just give us a bit more color on that relationship with you guys and sort of how you're looking to leverage that to get into more alternative channels? Thanks.

Yes, so I mean, it's a great opportunity for us because if you go to the head shops and dispensaries you'll find CLIPPER Lighters. So they've got very strong presence in the alternative channel, where we with Zig-Zag are underrepresented. So it's a great selling point for us. We now have a essentially a must carry item in the alternative channel that we can kind of piggyback with Zig-Zag. On the flip side, they've got very limited presence in the convenience stores where most lighters are sold in the United States. So that is a huge opportunity for us to be able to take what we think is a great product into our kind of our strength, which is the C-store, the measure channel.

And just to add to that, it's Yavor, the thing about CLIPPER is obviously it’s a leading brand. They have found ways to beat their largest competitor in selling in their home market and we're very excited about partnering with them. Keep in mind we get, I wouldn’t say inundated but pretty much inundated with offers from people to distribute their stuff through our network. Obviously, we have a strong sales force and bold digital and brick and mortar. So we're omni channel. We declined about 99% of the offers to distribute stuff. But this was one where it made so much sense because it was the right partner. They're good people to deal with, easy relationship and we look forward to success there.

Okay, I appreciate the color. And then on the cigars and hemp, I guess cigars and wraps outlook here, understanding that there's a bit of kind of volatility quarter-to-quarter last year that won't necessarily repeat this year, but if you can kind of just take a step back maybe this is more of a year-to-year than a quarter-to-quarter type question here, but can you just kind of help us understand what type of ramp we should expect in cigars and wraps now that you guys have that IP under your belt, and you're looking to get these products out here, just a bit of a, help us frame the sort of ramp in the cigars and wraps? Thank you.

Sure, I mean there's two separate parts there. I'll take the wraps questions and will let Graham answer the cigar piece of it. So on the wraps side, in the growth really, in the game, the category overall is growing. And then within wraps, we've got two new products, one of which is a natural leaf wraps that we're pretty excited about. It's double digit percentage of the market today and we're not, we're underrepresented right now. We expect our Natural Leaf product to ramp through the year. We've also got a hemp wraps product that we reintroduced under the Zig-Zag brand late last year that we expect to ramp for us as well.

Yes, hey, it is Graham. With respect to the cigar business, you've got a tale of two cities there. So you've got the marginalized tobacco leaf or the HTL cigars. The units of back deal that we did last year, I think positions us well in the HTL cigar business. When you look at where sort of the action energy is with cigars it is in the Natural Leaf segment. As I'd mentioned on the last call, our plan is to launch at the end of this quarter, natural leaf cigars under this exact brand. So we're pretty excited about sort of the energy that natural leaf has, you know, Louie mentioned natural leaf wraps and then the complement with natural leaf cigars. So we're pretty excited about sort of building out our natural leaf portfolio, as we think about Q2 and beyond.

Yes, I think overall, when you think about kind of Zig-Zag, what we've been doing over the last couple of years is, really increasing the addressable markets that we're playing in and cigars being the largest addressable market within the cannabis accessories portfolio. And CLIPPER is just another edition of that the extent of kind of the opportunities that we have in front of us.

So that's all very helpful. Thank you very much.

[Operator Instructions] And your next question comes from Gaurav Jain from Barclays. Please go ahead.

Hi, good morning. Thanks a lot. I have a few questions here. So number one is, Yavor on your plan to make TPB into a much larger company, your stock is trading at 10 times the approximately and the free cash flow is about $50 million. So how do you use either your equity or free cash flow to become a much bigger company?

Yes, look I think you use the combination of both and you have it, it is going to be very much dependent on the target and on the deal structure. It has been done before. I've done it before. I did it at Liberty when the vehicle Liberty used to acquire Formula One at that time had about $1 billion of cash and acquired an $8 billion after. So how does that happen? With a lot of structuring and some outside investment and I am also talking to investors. So it is possible to buy somebody who is much bigger than yourself. Are we setting our sights that high for our first acquisition? We are not going to say no if it showed up. At the same time, I would interpret my comments primarily to mean that we're out of the small minority investment business. Again, never say never. But our preference will be hundreds of millions and above and all of that with the proper structuring, with some outside capital should be doable. Again, depends on the target, depends on the situation, depends on the structure. But I'm not a stranger to complex structuring. I've done it before. I'm not a stranger to raising capital from outside investors. I've done it twice in size. I raised $1.5 billion for Formula One. I raised $2 billion in cash for Charter and that's from calling people, showing them a proper structure, showing them a target explaining the strategy. It's not easy. It doesn't happen overnight. But it can be done fairly quickly, with the right target and the right structure.

Sure, and which industries would be your focus? Would it be tobacco? Would it be cannabis and cannabis I guess, to Vivian's question, you almost are downplaying it, or it could be something like I just read today that Standard General has acquired a media company. So could it be completely outside of how we think about turning point ramps?

I would say all of the above. We don’t want to preclude an opportunity. I can tell you that it's highly unlikely that you would see us investing in space tourism. There are areas that are going to be completely outside of our scope. Anything we buy is kind of the only point to make us larger and more diversified, and enhance our balance sheet and therefore, to me, that means decent cash flow; there's a growth story, what we believe is going to be a growth story behind it. We need to bring something more than just, hey, we can find capital for you, in it. So, there's got to be some logic to it that makes sense. And above all, the way I do my job is, that job number one continues to be running the business. There’s no cadence [ph] or exceptions to that rule. Job number two is capital allocation. So, I will allocate capital in a way that drives value to shareholders. And if that happens to be in tobacco or someplace else, so be it, so long as it is value driven to shareholders. Again, our preference would be to diversify. So, the bar for tobacco is going to be higher in terms of the multiple that we’re willing to pay. But again, if it checks out all the boxes that will result in plantations.

Sure. And if I were to look at the prior acquisitions of Turning Point Brands and this NewGen segment, which was built through acquisition, so its performance has been quite sketchy, and I would argue that it has actually led to the destruction of a lot of shareholder value. So, before you embark on your M&A strategy, would you look to unwind some of these past transactions or shut down some of the businesses which are loss making, get a higher stock price and multiple, which will then also help you to do some deals?

Sure. So, let me explain this in two parts, if you will. There are for any company or us, I have done M&A for 20 years, I have seen a lot of companies do M&A, nobody has 100% batting average that I know of. There are people who tell that they have it, and if you actually dig into it, you see that, that’s not quite true. So, when it comes to unwinding or undoing something that’s already been done, I want to differentiate between situations where we're experiencing temporary headwinds, which are severe to your point, which I agree with in situations where, there's just no future in which an asset recovers. So let me talk about Vape a little bit, because obviously it's on everybody's mind. To my mind and that's the analogy I've given internally, the Vape industry, which is why our NewGen segment is, is a little bit like a harbor that's being beaten by a storm. And there's a lot of ships in the harbor, they are the big, solid, well run, well managed ships, anything that describes our Vape operation. Like I said, I've spent a lot of time in Miami. That's where the management team for that group sits. I think they're doing an outstanding job given the situation they're in. But like any other ship inside the harbor that's being beaten by a storm, they are taking damage, there's no question about it. But I do believe that when the storm is over and at some point it is going to be over, the ships that remain are going to be a handful and they're going to be in a very good position in an industry that's not going anywhere. Whether we like it or not, vaping is here to stay in my mind. It needs to be regulated. We're fully supportive of the regulator. We're spending a lot of time with the FDA. We're very much on the same page that the industry needs guidance and once that happens, I think we're going to be in a good position to be one of the good guys. We've already been recognized as the good guy by the USPS. It's a question of surviving the storm and if you look to the history of other companies, there have been plenty of cases where that has happened. You can look at -- in my own experience, you can look at serious extent which was on the verge of bankruptcy and everybody had written off and John Malone was patient and went in and stayed and ended up with a phenomenal asset. You can look at Charter, after Charter five more than cable, there was a time when everybody thought that the world is coming to an end and it turned out that the management team was correct and Charter is still to my mind one of the best assets to own. So, the fact that we are in a tough spot, the question is not so much that what do we do now? The question is what does the future look like when the dust settles? And I think when the dust settles, we're going to be in a much-much better position internally and much better position relative to other competitors.

Thanks a lot, Yavor. And if I could just sneak in one last quick question. So share buybacks are now off the table?

I wouldn't say that they are off the table. I wouldn't say that they are completely kind of -- we were not going to be pressing the gas pedal all the way down, nor are we taking our foot off the gas pedal. I think we will maintain flexibility to do what we view as appropriate, but we certainly are not saying never on the buyback.

Thanks a lot.

Thank you.

And there are no further questions at this time. I will turn the call back over to the presenters for closing remarks.

Thank you, everyone, and we'll see you next time on our next call.

Thank you

Thank you

This concludes this conference call. You may now disconnect.