By Timothy S. Donahue
Top Takeaways:
- Q3 beat earnings: Revenue $119M (+31% YoY); adjusted EBITDA $31.3M (+17%); gross margin 59.2% (+360 bps).
- Modern oral surges: Sales $36.7M (+628% YoY; +22% QoQ); full-year modern oral guidance raised to $125–$130M.
- Outlook up & scaling: 2025 adjusted EBITDA guidance lifted to $115–$120M; $97.5M net ATM proceeds to accelerate Fre/on! and onshore white-pouch lines targeted for 1H 2026.
Turning Point Brands (TPB) reported significantly higher third-quarter results on Wednesday, highlighting strong growth in modern oral nicotine and ongoing cash flow from its legacy Stoker’s and Zig-Zag brands. Revenue increased 31% year over year to $119.0 million, while adjusted EBITDA grew 17% to $31.3 million.
Management increased the 2025 adjusted EBITDA guidance to $115–$120 million and raised the full-year modern oral sales guidance to $125–$130 million.
“Modern Oral sales were $36.7 million, increasing by 22% versus the prior quarter and 628% over the prior year,” said President and CEO Graham Purdy, adding that TPB now expects “to qualify our first U.S. white pouch production lines in the first half of 2026.” Turning-Point-Brands-Announces-…
Purdy told investors the quarter “exceeded expectations,” and highlighted the long-term economics of modern oral while the company focuses on Fre and on! and maintains cash flow from heritage brands. Stoker’s net sales increased 80.8% to $74.8 million, driven by modern oral and mid-single-digit gains in MST, with low-single-digit growth in loose leaf; Zig-Zag net sales decreased 10.5% to $44.2 million, aligning with company expectations.
Consolidated gross profit increased by 39.7% to $70.4 million. The company also strengthened its balance sheet and liquidity, ending the quarter with $201.2 million in cash and $267.8 million in total liquidity, while disclosing $97.5 million of net proceeds raised through its previously announced at-the-market program at an average price of $98.59 per share.
On the earnings call, Purdy opened by offering condolences to the Louisville community following a UPS air crash, before turning to the results: “Our consolidated third-quarter results were better than expected and demonstrated continued progress against our plan… We are particularly pleased with the growth of our white nicotine pouch brands. Their long-lasting, vibrant flavor options, comfortable mouthfeel, and flexible nicotine levels have resonated with consumers.”
He said white pouch sales “increased 628% year over year and 22% sequentially” and highlighted faster-than-planned retail tests for ALP. “Suffice it to say, we are pleased ALP is running ahead of schedule.” Management has raised its full-year consolidated nicotine pouch sales guidance to $125–$130 million, up from the previously stated range of $100–$110 million.
Chief Financial Officer Andrew Flynn outlined the quarter’s margin trends and expenses: gross margin was 59.2%, up 360 basis points year over year and 210 basis points sequentially, “mixed-driven, primarily related to our outsized growth in modern oral.” Reported SG&A was $44.5 million, increasing sequentially due to modern oral sales and marketing and outbound freight to support growth.
The adjusted EBITDA margin for the quarter was 26.3%. He reiterated the guidance increases for adjusted EBITDA and modern oral, and noted the effective tax rate of 23%–26% for modeling, with $4–$5 million of 2025 capex (excluding modern oral projects) and $3–$5 million expected to support modern oral premarket tobacco product applications (PMTAs).
Consolidating modern oral
Purdy said the modern oral category is consolidating around a few nationally distributed brands and reiterated TPB’s long-term share goal: “Our Q3 performance supports our long-term target of double-digit market share in the category.”
The quarter’s $36.7 million in modern oral revenue included $1.5 million of slotting fees recorded as contra-revenue and reflected growth across both Fre and on!. Flynn, asked to analyze the brand split, noted the company has not disclosed the Fre/on! breakout “given the sensitivity around the partnership,” but said TPB “saw healthy growth from both properties,” with on! “dominat[ing] from a D2C standpoint” and making inroads in brick-and-mortar tests; Fre “had a very nice quarter, both online as well as in bricks and mortar.”
Summer Frein, Senior Vice President and Chief Revenue Officer, outlined go-to-market priorities for Fre: “optimizing our approach to expand distribution, improve brand merchandising, and minimize out-of-stocks,” developing sales and merchandising tools to “establish shelf space” and a “premium look and feel at retail,” and broadening the assortment.
She highlighted the late-quarter launch of Fre Watermelon—“the fastest-growing fruit flavor in the nicotine pouch category”—with “a complete strengths offering.” Regarding brand building, she mentioned encouraging early results from the partnership with Professional Bull Riders and said the company is exploring collaborations that align with Fre’s “own-your-edge” positioning.
Retail execution and space battles were a key focus for analysts. Frein said large chains are “being really diligent and deliberate about how they’re allocating [back-bar] space across the segments,” and Flynn added TPB anticipates modern oral allocation “will grow, given the underlying growth of the category,” even if displacement varies regionally.
Regarding promotions, Flynn described Q3 as “a brutal promotional quarter, but not for us,” stating that TPB “maintained the integrity of our pricing at retail” while emphasizing distribution and shelf presence: “We’ll be opportunistic” with retail promo, but the main goal is “getting our platform right in the store” to boost conversion.
To support growth, Purdy outlined investments partially funded by the ATM raise: reallocating sales and marketing, doubling the sales force by the end of 2026 (already ahead of schedule on hiring), ramping up chain-account execution, expanding internationally, and building U.S. pouch manufacturing to improve unit economics and reduce freight and tariff risks.
“We expect to qualify the first production lines in the first half of 2026,” he said. Flynn told analysts that onshoring should yield “immediate savings in terms of inbound freight as well as avoidance around tariff… at the gates once we actually qualify the lines,” with further improvements as volume ramps up.
Stoker’s (which houses MST, loose leaf, and TPB’s white pouch brands) was the quarter’s engine. Flynn said MST sales rose 6% to $27 million with in-store share up 130 bps year over year to 12.1%; loose leaf increased 4% to $11 million; and modern oral surged as noted.
He also explained why Stoker’s gross margin has risen above 60% in recent quarters despite a higher modern oral mix: a larger share of D2C within modern oral increases reported gross margin, although some freight costs are included in SG&A and “you will see some compression… at the EBITDA line.” Looking ahead, he anticipates Stoker’s gross margin to “come down just a bit” as the mix and tariffs change.
Within Zig-Zag, Summer said the company is leaning into the brand’s 145-year heritage while launching activations that “solidify our premium position,” including “Zig-Zag for Life” (a promotion awarding a lifetime supply of cones to consumers who have or get a Zig-Zag tattoo), the Zig-Zag Studio creator program, and the upcoming Natural Leaf Flat Wraps to compete in a fast-growing segment. Purdy acknowledged the segment’s 11% revenue decline—“ahead of our expectations”—and mentioned that some opportunity costs reflect the focus on modern oral.
On route-to-market, Summer said TPB is making progress in “new chains and expanding our SKU assortment in existing chains,” with chains now evaluating 2026 planograms. “We’re in those conversations, same as our competitors,” she said. Flynn added there is “tremendous white space for both brands” in brick-and-mortar, and the company is encouraged by stores that carry both Fre and on! on the same platform.
Asked about loyalty and subscriptions, Summer said rewards programs on D2C are “a smart strategy” to deepen engagement with high-value repeat buyers and to build first-party data: “We’re really focused on [understanding] their preferences.” Flynn added TPB is “particularly excited” about subscriber adoption on both Fre and on!, though the company hasn’t disclosed figures.
Amid a competitive market, Flynn said the company is striking “a healthy balance between growth and profitability,” deploying resources “around high-return projects.” Purdy, asked about the promotional environment, said he remains bullish on category expansion: three large, well-financed manufacturers are “converting cigarette consumers into modern oral,” which is how the category reaches $10 billion in manufacturers’ revenue “by the end of the decade.”
TPB, he said, will “strike in the areas that make sense for our brands,” relying on flavor variety, nicotine strengths, and mouthfeel to convert trial into repeat.
Positioned well for 2026
TPB raised its 2025 adjusted EBITDA forecast to $115–$120 million and increased its projected full-year modern oral sales to $125–$130 million. The company ended Q3 with $300.0 million in total gross debt, $98.8 million in net debt, and $267.8 million in liquidity (cash plus revolver availability).
Management stated it plans to amend its ATM prospectus supplement and buyback authorization to provide $200 million of capacity under each program; there are no current plans to transact under the updated authorizations. Turning-Point-Brands-Announces-…
Flynn reviewed near-term modeling points: an effective tax rate of 23%–26%; $4–$5 million in 2025 capital expenditures excluding modern oral projects; and $3–$5 million in 2025 spending to support modern oral PMTAs. He noted that Q3 free cash flow was negative $1 million, partly due to the first coupon on TPB’s 7.625% high-yield notes issued in February, and reiterated that promotional contra-revenue related to modern oral (such as slotting) can create a gap between gross and net sales during periods of rapid shelf wins.
During the Q&A, Flynn discussed capacity: existing third-party manufacturing is in a strong position, and U.S. capacity will add to it, with inventory “in a really good position” today. He mentioned TPB is “highly encouraged” by early in-store share-of-selling data where available, and noted that although industry promotions have been intense for over a year, TPB did not follow the deeper discounting seen in Q3.
“We continued to focus on the things that we know win for our brands,” he said—shelf space, presence, and platform execution—while using the D2C channel for rapid read-and-react on consumer preferences.
Purdy emphasized that modern oral growth is expanding the market and that TPB’s balance sheet now positions it well to invest where it matters. The company raised $100 million gross (about $97.5 million net) through the ATM during the quarter at an average price of $98.59 per share, capital it plans to “opportunistically deploy… to accelerate the growth of our modern oral business.”
Meanwhile, TPB is “ahead of schedule” on its plan to double the sales force by the end of 2026, and continues to build its commercial strength for both chains and independents, along with enhancing digital capabilities for D2C.
Looking ahead to 2026, the milestone to watch is U.S. white-pouch onshoring—with the first lines expected to be qualified in the first quarter of 2026—that Flynn said should provide immediate freight and tariff relief, followed by scale-driven unit-cost improvements as volume increases.
Management reiterated confidence in the brands and the category. “I remain bullish on the category,” Flynn said, citing the ability of large manufacturers to fund conversion from cigarettes to pouches and TPB’s opportunity to “win consumers because of our brand as well as the features and benefits of the product.”
Purdy wrapped up the call by reinforcing momentum into the year-end and beyond: “We’re really excited about our Q3 results and really excited to talk to you as we bend around to 2026.”
The company will start 2026 with more cash, a broader distribution network, a stronger modern oral product mix, and a clear path to U.S. manufacturing—all while maintaining a disciplined focus on profitability as it competes for shelf space against much larger rivals.
