Good morning, and welcome to the Turning Point Brands Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Andrew Flynn, Chief Financial Officer. Please go ahead.

Good morning, everyone. Earlier today, we issued a press release covering our fourth quarter results. available in the Investor Relations section of our website at www.turningpointbrands.com. During this call, we'll discuss consolidated and segment operating results, the operating environment and our progress against our strategic plan. Before we begin, please refer to the forward-looking statements and risk factors in our press release and SEC filings. We'll also reference certain non-GAAP financial measures. Reconciliations and explanations are included in today's earnings release. With that, I'll turn the call over to our CEO, Graham Purdy.

Thanks, Andrew. Good morning, everyone, and thank you for joining our call. We are pleased with how the year wrapped up and the momentum we built for 2026. Revenue increased 29% to $121 million for the fourth quarter, including $41.3 million in Modern Oral net revenue. Adjusted EBITDA increased 14% to $30 million for the quarter. We are initiating 2026 Modern Oral gross revenue guidance at a range of $220 million to $240 million in Modern Oral net revenue at a range of $180 million to $190 million. As we've stated in the past, we are ready, willing and able to increase our investment behind our white pouch brands and expect a portion of that investment to be accounted for as contra revenue under GAAP. Accordingly, we think it's valuable for us to provide transparency into difference between gross and net to evaluate our progress over time. Our focus is on building lasting consumer relationships that require front-loaded investment. Once consumers enter the franchise, we tend to see consistent repeat purchasing that supports revenue over many years. While this category is still in the early stages, we believe the average consumers with lifetime value could last decades. In addition, we expect first quarter 2026 consolidated adjusted EBITDA to be between $24 million and $27 million. We are currently working on several significant and exciting sales and marketing initiatives and investments for white pouch that make it difficult to accurately project EBITDA beyond Q1. Obviously, when looking back at 2025, we are most pleased with the growth of our white nicotine pouch brands, they're long-lasting vibrant flavor options, comfortable mouth feel and flexible nicotine levels continue to win with consumers. Both FRE and ALP have cultivated strong brand identities that resonate with their respective consumer bases. During the quarter, net white…

Thank you, Graham. As he noted, we continue to make significant investments to support our go-to-market strategies, prioritizing FRE while also maximizing the cash flow from our legacy brands. Throughout the quarter, we continued to expand our efforts and our initiatives to support the growth of FRE, focused on sales and marketing. We remain committed to optimizing our approach to expand distribution, improving brand merchandising and ensuring adequate inventory conditions. We are seeing the early benefits of the new sales and merchandising tools referenced in prior quarters, which are enabling our sales team to secure the ideal assortment, establish shelf space and execute a premium look and feel at retail. We finished 2025 strong with our continued progress in large-scale chains and look forward to sharing further progress throughout 2026. We were grateful to have recently spent time with some of you at the sold-out Professional Bull Riding event in Madison Square Garden. These events are high octane and nationally televised providing a unique opportunity to engage with our consumer base and build brand awareness. We look forward to sharing other opportunities that we're exploring, which align with FRE's Own Your Edge, tagline and brand [ ethos ]. With regards to Zig-Zag, we continued executing product, retail and cultural initiatives that build upon our 145-year legacy and strengthen our premium position across the segment. During the quarter, we advanced the rollout of natural lease flat wraps, expanding distribution and awareness in this fast-growing tobacco segment. We also supported trial of our legacy paper products through targeted regional programs and sampling tied to major sporting weekends in key markets. We continue to advance the brand's evolution into a lifestyle platform with new apparel lines and culturally relevant brand activations that embody Zig-Zag's life fast burn slow ethos. In the quarter, we also had some exciting news from Stoker's with the launch of a new flanker brand, Stoker's Proud. Stoker's Proud offers a traditional long cut while delivering the same 100% American-made quality dip that Stoker's is known for. It's designed to attract value-seeking can consumers while insulating the broader brand from category pricing pressure. We'll share more about this expansion in coming quarters. In closing, we continue to build our brands for the long term, execute and deliver against our omnichannel plan and win consumers. Our focus is to prioritize strategic investments that maximize the value of our world-class brands and further strengthen and leverage our distribution capabilities. Let me now turn the call back over to Andrew to go through our financial results.

Thank you, Summer. Sales were up 29% year-over-year to $121 million for the quarter. Growth was driven primarily by Modern Oral, while we continue to invest in sales and marketing to support that expansion. For the quarter, gross margin was 55.9%, which is flat versus last year. Reported SG&A was $47.7 million for the quarter, which was up $3.1 million sequentially, the increase is driven by our planned commitment to invest in Modern Oral related sales and marketing as well as increased outbound freight charges. Adjusted EBITDA was up 14% year-over-year to $30 million for the quarter, at a 24.8% margin. Going into segment performance. Zig-Zag segment net sales were down 13% year-over-year to $40 million for the quarter, which was in line with our expectations. For the quarter, Zig-Zag gross margin was 54.6%, which was up 40 basis points versus last year. Stoker's segment net sales increased 70% year-over-year to $81 million for the quarter. The Stroker's segment now accounts for 67% of consolidated net sales. Legacy Stoker's brands increased by 9% year-over-year to $39.7 million for the quarter, driven by continued share growth in [ MST ] that was partially offset by anticipated declines in loose leaf. Modern Oral nicotine pouch net sales FRE and ALP were up 266% year-over-year achieving total revenue of $41.3 million. For the quarter, white pouch now accounts for 34% of consolidated net sales, up from 12% a year ago. We ended the quarter with $222.8 million of cash. Free cash flow for the fourth quarter was $19.2 million. CapEx for the quarter was $3.3 million. On to guidance and other items, as previously noted, we are initiating full year 2026 Modern Oral gross sales guidance of $220 million to $240 million and net sales guidance of $180 million to $190 million. We expect first quarter 2026 EBITDA of $24 million to $27 million, inclusive of increased white pouch sales and marketing investments. For modeling purposes, the effective income tax range is 23% to 26% on a go-forward basis. Budgeted CapEx for 2026 is $4 million to $5 million, exclusive of projects related to our Modern Oral business. We expect to spend between $3 million to $5 million for the full year to supplement our Modern Oral PMTAs. Now let me turn it back to Graham.

To conclude, we are pleased with our year-end results and excited about our prospects for 2026. I'll now turn it over to questions.

[Operator Instructions] Our first question comes from the line of Eric Des Lauriers with Craig-Hallum Capital Group.

Congrats on another very impressive quarter here. First one for me on the investment opportunity. So you mentioned you're already willing and able to invest in nicotine pouch growth this year. It sounds like you have some investments picking up in Q1 with that EBITDA guide. Just wondering if you could provide a bit more color on the sales and marketing sort of opportunities that you see in front of you right now? And just how we should be thinking about that for this year?

Eric, Andrew here. for the question. So yes, the way we're thinking about the EBITDA guide is that we are investing in sales and marketing. And we're also preparing ourselves for the launch of ALP in bricks and mortar in Q2. So we'll need to invest dollars upfront in order to have a successful launch in the second quarter.

All right. That's helpful. And then on domestic production, it's nice to hear the progress there. I think you said initial lines to be qualified in the coming months. Could you just expand on the domestic production outlook for the year, whether that's how many lines you expect to bring online? Or how do you think about the mix of domestic versus international production and how that should evolve throughout the year?

Yes. So we expect to qualify the lines in the next couple of months. And really, what we've done is we've -- in 2025, we spent CapEx dollars investments in infrastructure of the building. These are things like HVAC systems, electrical, plumbing, et cetera. We've got those lines and those lines are becoming more efficient week by week. So we're encouraged with the progress that they've made. We will have -- we will continue to use our Indian partner because both brands are growing. And so the U.S. will supplement the growth. So we think that between the 2 locations, we'll have no supply chain constraints, in terms of enhanced margins, it's going to take a while to get the inventory out of the -- in the U.S. and through our P&L. So we expect to see some green shoots in margin enhancements towards the end of the year. But one thing I will say is what we're doing to help with the margin profile is we are very much focused on freight. Our inbound freight. There are some opportunities for us to optimize there, and we've taken advantage of that.

Our next question will come from the line of Ian Zaffino with Oppenheimer.

As far as the investment and the ramp of Modern Oral, what should we expect as far as timing of all this investment? And maybe the better way to ask it is what does that investment look like exiting '26? So how much will it come down? And maybe what are your view as kind of a sustainable rate?

Yes. I think the way we're thinking about it is that the investment will be somewhat lumpy through the year as we see opportunities to invest that we think are high ROI projects, we will do that. And so to give you an exact figure in terms of investment ratio, I think it's going to be -- it's going to modulate quarter-to-quarter.

Okay. And then would you be able to give us kind of a sense of what to expect as far as the store count ramp for ALP? Should it be similar to what we've seen in FRE recently? Just maybe use that as a benchmark.

Yes. Thanks, Ian. Look, I think that we're, number one, incredibly excited about the ALP launch in Q2. We've laid some groundwork here as of late. And so we think that we're going to come out of the gate very strong there. As we think about it, we're entering 2026 with a ton of enthusiasm and a ton of excitement around both potential for FRE and ALP and really putting some investment dollars behind that to yield the strong growth. That said, we think that the store count growth will probably look similar to the sort of early days of the FRE launch. As we focus in and hone in on areas where we've gotten free distribution currently, so we can round up the portfolio inside of those particular retail stores. And we have a specific focus around fee this year with chain wins. So we're pretty excited about sort of all the above relative to both FRE and ALP.

Our next question comes from the line of Aaron Grey with Alliance Global Partners.

First question for me, just want to piggyback off the last 1 here and maybe focus more on that free distribution, which you just alluded to there, Graham. So I appreciate the color that you provided on ALP distribution, but for FRE, which has been kind of the main horse for brick-and-mortar distribution. It seems like you still see some opportunities for wins in white space in 2026. So maybe some more color in terms of expectations there? And you mentioned some change there, so I know that can be sometimes a big step change in uncertainty in terms of the timing. So any color there would be appreciated.

Yes. Look, I think that there's still tremendous amount of store opportunity out there in both sort of the chain environment, which we view as substantial at this point in time. as well as continued growth in our independent customers. We also see green shoots relative to the level of distribution that we have in stores and specifically our share of shelf and what we see in our internal in terms of what that yields. So it's not necessarily at all times about raw store count adds. It's about the maturity of each of the stores that we get in distribution and making sure that we're winning inside those specific stores, but we do expect continued store growth this year. It may be a little bit lumpy relative to when chains come online, but we continue to expect upward trajectory there.

I appreciate the detail there. Second question for me. I just wanted to get some control of how are you thinking about innovation in the category, the need to stay ahead on that front as other large players aim to introduce new products, particularly given the FDA's new fast track PMTA program. So I know we've talked about flavors a lot, but also more it seems like that's a big initiative for some of the larger players. So how are you thinking about innovation in the category? Any color there would be helpful.

Yes. Look, I think our first focus is winning with the existing products that we have. We think we have a tremendous edge relative to our flavor profiles, our satisfaction levels within our product, our moisture level, the majority of the category today is sold in sort of the [ Montandintergreen ] environment. We feel very confident that we're sort of covered up where the biggest portion of the market is. In terms of long-term innovation, as we continue to grow our store count, we continue to grow the business, we certainly see opportunities down the road to make some investments behind additional flavor options. But at this point in time, we think we've got a portfolio with both FRE and ALP that we can win.

Our next question comes from the line of Nick Anderson with ROTH Capital Partners.

First one for me, just on nicotine pouch consumption, it looks like U.S. consumers are using more on a per day basis than they were a year ago. But that's still well below some of the more developed international regions. Just curious how you see growth evolving in this industry near term? Will it be more from existing consumers using more or new users entering the category? Any color there would be helpful.

I think the great news is both. And as you pointed out, the consumption patterns of existing consumers continues to grow as Modern Oral becomes a greater share of their nicotine requirements. And as you see the growth in the category, certainly, we're seeing consumer uptake from other tobacco products, specifically cigarettes and even vapes. So I think it's just a tremendous opportunity where sort of both provide growth vectors for the category.

I appreciate that. Second one for me on the tax landscape within Modern Oral, but we're seeing several safe considering tax hikes on nicotine pouches. Just wondering if you could provide some color on the potential for these increases this year. And just how that might impact the pricing and promotional environment going forward?

Yes. So taxes are something that the tobacco companies have dealt with for decades now. And I think the good news on the tax front is if you think about taxation in a specific state level, it impacts every product that's within that state. So there's no disadvantage for one manufacturer or another manufacturer relative to the tax landscape. We would anticipate that taxes will, over the long haul, will continue to grow and look more like sort of the existing tobacco products. But for us, that the absolute opportunity of winning inside the states where taxes are aren't at this point in time, that doesn't really matter to us because playing fields level, and we think we've got a winning product.

Our final question will come from the line of Gerald Pascarelli with Needham & Company.

Great. I know you don't provide a breakout by brand, understandable, but I was hoping that you could maybe broadly unpack for us the revenue performance between FRE and ALP this quarter. Just wondering specifically if you saw a slowdown in ALPs [ DTC ] growth or if you had better-than-expected performance in FRE, which we know is lower gross margin? So the basis of the question is just trying to reconcile some of the drivers behind the negative mix that you cited in terms of the Stoker's segment level gross margin in the quarter. So any color there would be great.

Yes. For internal reasons, we haven't split out specifically ALP in FRE. But what I can say is both brands performed within our expectation in the quarter.

Okay. And then for Graham, just I guess, a high-level question. Now that we're through year 1 of the white pouch rollout, if you could just talk about any learnings you've had where you view the biggest white space opportunities from a distribution perspective? And how you balance getting into some of these larger national chains, which are seemingly more expensive versus maybe doubling back to retail locations where you're currently present and where you've done very well historically to get more shelf space and more facings to build out your presence at some of these retail locations you're currently in? So any color there would be great.

Sure. Sort of reference prior answer here on this call. Sort of green shoots all over the place for us. When you think about the leaning into ALP and the retail distribution there as we ramp that tons of white space. It's virtually all white space for ALP out there, FRE still a tremendous amount of store level distribution opportunities. Still a tremendous amount of opportunities relative to expanding the portfolio inside of existing stores. And so we're focused on really all of the above because we think that there's so much opportunity out there. We've made a tremendous amount of investment in our sales force to really solidify sort of the ground troops to be able to go out and tackle that opportunity. You can see sort of how we're thinking about this coming year and ramping up our investment, we think that there's opportunities to invest in trade programs. There's opportunities to invest in further strategic partnerships to build out our brand profiles. And so ultimately, what we think is long term, brands are going to win in this space. And for us, we think about ALP as probably one of the leading sort of brand properties in the space given the connection there. The large [ D2C ] footprint, FRE has done a great job relative to leaning into its equities with the [ Probo Writing ] Association partnership. We think that there's other opportunities out there that we're incredibly excited to invest behind. And so I think that it's really all of the above, more stores, more facings, more product in there for both FRE and ALP. And we think as we continue to build the brand profiles that we have a winning combination and ultimately, our goal is to be a strong challenger brand in the space where we think, the combination of those two brands could achieve a #4 position in the space and maybe with a little bit of upside.

I do want to circle back to your first question about the gross margin performance in Stroker's. So one thing to keep in mind is that we had an elevated tariff rate in the fourth quarter. And so that had an impact on the Stroker's margins because of the white pouch. We did -- we had an [ add ] back in EBITDA, but that's in the adjusted EBITDA. It's not in the gross margins.

This concludes our question-and-answer session, and I will now hand the call back over to Graham for any closing comments.

Thank you, operator. Really appreciate everybody getting on the call. We feel great about how we finished 2025. And I can tell you how enthusiastic and excited we are about the opportunities in front of us in 2026. So we look forward to talking to you in a few months here, and we'll talk to you then.

This concludes today's call. Thank you all for joining. You may now disconnect.