Turning Level Manufacturers, Inc. (TPB) Q2 2023 Earnings Name Transcript

Turning Level Manufacturers, Inc. (NYSE:TPB) Q2 2023 Earnings Convention Name August 2, 2023 10:00 AM ET

Firm Individuals

Louie Reformina – CFO

Graham Purdy – CEO

Summer season Frein – Chief Income Officer

Convention Name Individuals

Vivien Azer – TD Cowen

Michael Legg – The Benchmark Firm

Eric Des Lauriers – Craig-Hallum

Operator

Good morning, and welcome to the Turning Level Manufacturers’ Second Quarter 2023 Earnings Convention Name. All individuals will probably be in listen-only mode. All traces have been positioned on mute to stop any background noise. [Operator Instructions] After as we speak’s presentation, there will probably be a chance to ask questions. Please notice that this occasion is being recorded.

I’d now like to show the convention over to Louie Reformina, Chief Monetary Officer. Please go forward.

Louie Reformina

Thanks. Good morning, everybody. That is Louie Reformina, Chief Monetary Officer. Becoming a member of me are Turning Level Manufacturers’ President and CEO, Graham Purdy; and Chief Income Officer, Summer season Frein. This morning, we issued the information launch overlaying our second quarter outcomes. This launch is positioned within the IR part of our web site, www.turningtpointbrands.com. Throughout this name, we’ll focus on our consolidated and section working outcomes and supply a perspective on the working atmosphere and our progress in opposition to the strategic plan.

As mentioned, could I direct your consideration to the dialogue of forward-looking and cautionary statements in as we speak’s press launch and the danger components in our filings with the SEC. On the decision as we speak, we’ll reference sure non-GAAP monetary measures. These measures and reconciliations to GAAP may be present in as we speak’s earnings launch, together with explanation why administration believes that they supply helpful info.

I’ll now flip the decision over to our CEO, Graham Purdy.

Graham Purdy

Thanks, Louie. Good morning, everybody, and thanks for becoming a member of our name. Our second quarter outcomes demonstrated continued progress in opposition to our plan. Through the June quarter, we confirmed income progress of each Stoker’s and Zig-Zag as we proceed to realize traction from the initiatives we put in place and customers are responding as demonstrated by market share positive aspects in most of our main classes.

Given our strong begin to the yr, we’re elevating our annual EBITDA steering to $90 million to $95 million. In fact, our enterprise like many different shopper oriented firms just isn’t with out challenges. Our outcomes proceed to replicate the impacts of extended inflation and better rates of interest. As we have shared beforehand, our wholesale prospects, significantly patrons of our Zig-Zag paper and wraps portfolio have been rigorously monitoring stock ranges in response to the upper price of financing their working capital.

Whereas we predict the majority of our wholesale prospects’ stock changes are largely behind them, we nonetheless noticed additional destocking with sure prospects within the second quarter. Regardless of this transitory dynamic, we’re assured that the Zig-Zag model continues to strengthen primarily based on a number of components we observe. Our sell-through was higher than our reported outcomes and we’re inspired by our wholesale prospects and retail prospects’ response to our increasing portfolio, which incorporates CLIPPER lighters and our current new product introductions.

We’re additionally inspired by our continued penetration of the choice channel, pushed by continued secular tailwinds which might be increasing our addressable market. We’re having success in not solely successful new untapped different prospects, however our new and current different prospects are displaying extra curiosity in taking over extra full Zig-Zag portfolio. This not solely will increase our order sizes, but additionally offers priceless shelf house and merchandising actual property inside these shops to construct model consciousness as we fulfill evolving in shopper preferences.

As lots of you possibly can in all probability see in your hometowns, the choice channel is constantly increasing by advantage of extra states greenlighting medical and leisure hashish. Along with extra authorized dispensaries, different different shops and manufacturing processing services are drafting off this pattern. Our Zig-Zag B2B e-commerce enterprise promoting into that channel was up over 30% through the quarter, excluding CLIPPER, which additionally contributed to our gross sales inside the channel.

Stoker’s had one other sturdy quarter with revenues up 7.3% and market share positive aspects in each the MST and free leaf chewing tobacco classes as its worth proposition continues to resonate with customers. MST continues to broaden distribution and achieve market share, whereas our Turning Level Manufacturers turned the primary producer of free leaf merchandise for the primary time in its historical past.

On FRE, our trendy oral product, we’re more and more optimistic about our prospects and given constructive shopper suggestions and leads to current take a look at markets. We additionally proceed to be proactive in optimizing our capital construction and opportunistically bought one other $15.1 million notional of our convertible notes through the second quarter, bringing the overall as of the tip of the quarter to $39 million, whereas sustaining a robust money steadiness to assist handle future maturities.

With that, let me hand the decision over to Summer season to stroll by some progress and outcomes of a few of our particular go-to-market initiatives.

Summer season Frein

Thanks, Graham. As mentioned in prior quarters, our deal with rising the Zig-Zag model is a vital component of our plan. We proceed to execute in opposition to our multiyear street map to solidify Zig-Zag as a way of life model, particularly within the different channel, which is clearly increasing throughout america. We acknowledge the immense worth of rising model consciousness, trial and conversion and finally changing into a ubiquitous model {that a} shopper is ready to discover anyplace.

To that finish, and as an vital instance of our progress, we’re proud to share that now we have partnered with two of the highest 5 largest multi-state dispensary operators or MSOs, to construct devoted in-store presence for our merchandise. Final quarter, we additionally expressed the worth of product innovation to the Zig-Zag portfolio as a necessary necessity to broaden our on-shelf presence throughout commerce courses, together with the launch of Palm rolls and 70 millimeter cones. Each units of recent choices and particularly the 70-millimeter cones have confirmed to resonate nicely with each the commerce and our customers and present momentum within the market.

Along with consumable product innovation, we additionally imagine it is very important develop different equipment and merchandise comparable to attire, which has beforehand had nice success. As a part of our technique to each broaden our product traces and gross sales channels, we lately launched in Zumiez, one of many largest brick-and-mortar specialty attire shops with over 600 areas throughout america. Increasing these partnerships serves as a big gross sales and advertising and marketing alternative for the Zig-Zag model and speaks to the power of the model as now we have obtained encouraging suggestions and engagement up to now.

Turning to CLIPPER. As we have mentioned, the model is a well known prime lighter model in worldwide markets and we imagine now we have a confirmed observe document of leveraging our gross sales pressure and advertising and marketing engines to develop manufacturers within the U.S. We proceed to extend distribution and broaden product assortment throughout all gross sales channels, whereas constructing model consciousness and engagement by educating customers on the CLIPPER model at retail. As well as, we see traction on Amazon and throughout our social channel.

Amazon was a brand new channel for CLIPPER in america, launching in Q1 2023 and has confirmed to be an vital gross sales avenue for customers. Our social channels spotlight that buyers have an interest within the factors of distinction of CLIPPER versus aggressive lighter manufacturers by means of vital and growing engagement. As famous in earlier calls, we imagine this class is complementary to our current enterprise and are optimistic that loads of alternative stays on this roughly $500 million market.

Shifting to smokeless, Graham already talked about the continued power in Stoker’s through the quarter. On the product innovation entrance and as famous in prior calls, we stay dedicated to profitably competing within the rising $1 billion white pouch class with the FRE model. Our progress throughout the channels by which we compete offers us confidence that we’ll carve out a aggressive and distinct place available in the market. We look ahead to sharing extra detailed plans and stay dedicated to scaling on this section over time.

In abstract, we proceed to deal with maximizing the worth of our manufacturers, executing in opposition to the plan we have established and rising our enterprise at each our retail and finish customers. We’re hyper targeted on maximizing the worth of our world-class manufacturers and intensive distribution capabilities.

Let me now flip the decision again over to Louie to undergo our outcomes.

Louie Reformina

Thanks, Summer season. Beginning with our consolidated quarterly outcomes. Q2 gross sales have been up 2.6% to $105.6 million. Adjusted gross margin was down 30 foundation factors to 49.7% attributable to section and product combine. Adjusted EBITDA was $25.3 million, up 2.2% year-over-year. Go into section efficiency — going into the section efficiency. Zig-Zag gross sales elevated 1.1% year-over-year to $46.7 million.

Our U.S. papers and wraps companies have been down as we noticed additional commerce stock rightsized through the quarter, however we proceed to stay inspired by finish market demand. Our e-commerce enterprise, significantly B2B different gross sales grew double-digits. Our Canadian and different smoking equipment class noticed sturdy progress through the quarter, each aided by CLIPPER gross sales.

Gross margins declined 60 foundation factors to 56.6% through the quarter, pushed primarily by product combine. However the commerce stock fluctuations now we have seen this yr, finish demand for our papers and cones merchandise proceed to be sturdy. Q2 2023 U.S. paper and e-commerce gross sales are double the degrees of the second quarter of 2019, which speaks to the cycle of progress developments and our market share positive aspects over the previous couple of years.

On to Stoker’s. Stoker’s merchandise web gross sales elevated 7.3% to $36.1 million within the quarter, with a 0.7% quantity improve and a 6.6% value combine improve. Internet gross sales for the MST portfolio grew double-digits. Stoker’s volumes was up 2.5% regardless of class quantity down 5.6% and with share rising 60 foundation factors year-over-year to six.9% in response to MSAi. Its share in retailer promoting was up 30 foundation factors year-over-year to 10.3% and Stoker’s now in shops representing 67% of trade volumes, which nonetheless offers a protracted runway for progress.

Chew gross sales have been down mid-single digits from the earlier yr. Stoker’s Chew was the primary chewing model within the quarter, that means 280 foundation factors of share to 30.7% in response to MSAi. Total, TPB free leaf quantity was down 2.8% versus the class, which declined 8.5%. The class efficiency was pushed by a bigger decline in premium free leaf in comparison with low cost manufacturers with TPB’s volumes benefiting from shopper commerce down as Stoker’s volumes grew from the earlier yr. Gross margin elevated 160 foundation factors to 55.4%, primarily attributable to MSC pricing wants.

Shifting to CDS, our wholly-owned distribution subsidiary. Gross sales have been $22.8 million and adjusted gross margins have been 26.7%.

Shifting to our steadiness sheet. We repurchased $15.1 million notional worth of our convertible bonds through the quarter. And we ended the quarter with $100.5 million of money and $124.1 million of accessible liquidity, offering flexibility for additional capital deployment. We proceed to intently monitor the monetary markets forward of our July 2024 convertible notice maturity. We imagine our present money steadiness and free money circulate technology present us the mandatory flexibility to regulate the maturity of the remaining $133.5 million of convertible notes.

With our first half efficiency, we now anticipate consolidated adjusted EBITDA of $90 million to $95 million for fiscal yr 2023 in comparison with earlier outlook of $88 million to $94 million. Different projections embody efficient revenue tax fee of 24% to 26%. We proceed to anticipate CapEx to be briefly elevated this yr, as much as $13 million with $9 million associated to a producing mission, which we anticipate to finish late this yr though timing of funds could slip to the primary quarter of 2024.

We anticipate CapEx to return to extra normalized ranges in 2024. We additionally anticipate to spend $12 million to $15 million in capitalized software program implementation prices associated to our ERP and CRM implementations, that are nonetheless anticipated to be accomplished by the tip of the yr. We presently anticipate to spend roughly $2 million for the complete yr on PMTAs associated to our trendy world merchandise, which stay beneath overview by the FDA.

Now let me flip it again to Graham.

Graham Purdy

Thanks, Louie. To conclude, we had a strong begin to the yr and we stay targeted on demonstrating additional progress for the steadiness of the yr. Thanks for taking part within the name as we speak.

And with that, I would prefer to open the decision for questions.

Query-and-Reply Session

Operator

[Operator Instructions] Your first query comes from the road of Vivien Azer from TD Cowen.

Vivien Azer

Hello. Good morning.

Louie Reformina

Hello, Vivien.

Vivien Azer

Good morning. So I wished to begin on Zig-Zag. Actually a pleasant transfer sequentially and good to listen to that lots of the stock nodes is behind you. Is there any means so that you can quantify form of what you assume may be a possible stock headwind in both the third quarter or the again half? And possibly simply form of extra broadly, holistically, how we must always take into consideration modeling the sequential revenues, specifically, in gentle of the brand new partnership with the MSOs that you simply introduced as we speak? Thanks.

Louie Reformina

Sure. Vivian, on a sequential foundation, I’d say that we predict largely stock [indiscernible] you’re nonetheless seeing it in sure areas. I’d say that we must always proceed to see sequential enchancment in Q3 versus Q2 on Zig-Zag as I used to be going to mannequin it out. I’d form of level out that final yr, we did have if you take a look at a year-over-year comparability, we did level out Q3 of final yr had $5 million of pull ahead given the applications that we ran throughout that interval final yr.

Vivien Azer

Famous. That is actually useful. After which as we form of take into consideration the gross margin development on Zig-Zag, seemingly form of only a higher prime line efficiency has helped slender the speed of gross margin compression in 2Q versus 1Q? Is that proper? And are there incremental issues, stock or in any other case, possibly a unfavourable combine from the MSO partnership that we must be cognizant of as we take into consideration the Zig-Zag margins within the again half.

Louie Reformina

Yeah. So the massive driver that we had from Q1 to Q2 is that when you recall, the merchandise that have been topic to the commerce stock discount in Q1 the place our papers and wraps, which carry increased gross margins. So clearly, these rebounded in Q2 sequentially. So we had a pleasant elevate in gross margin in Q2. And going ahead, as we proceed to develop our paper cones and CLIPPER on a few of our different form of decrease gross margin companies, I’d anticipate gross margins to have that very same form of headwind as we have skilled previously.

Vivien Azer

Tremendous useful. Possibly pivoting to FRE, the fashionable oral class has been extremely topical this earnings season out of your bigger opponents. Any incremental insights you possibly can supply round form of efficiency, the way you guys are feeling about contraction it is getting with customers, the 3-milligram providing? Something incremental on that will be nice.

Summer season Frein

Yeah. Hello, Vivien. That is Summer season. We proceed to get actually nice suggestions from each the commerce and our customers. We have now the power to essentially take a look at what customers are doing inside our personal web sites and our buy patterns, and we stay actually inspired by what we’re seeing. We additionally really feel actually nice about our product assortment. As you famous, our factors of distinction in milligram power kind of separate us and we’re enthusiastic about what we’re seeing there as nicely. As we take into consideration the playbook going ahead, clearly, we have realized quite a bit about how you can go to market by the success we have had with Stoker’s, and so borrowing from that playbook will certainly be influencing our go-to-market methods within the close to future.

Vivien Azer

Obtained it. Final one for me. On Stoker’s, good segue. We’re seeing some adjustments within the aggressive panorama in cigarettes. I do not assume it is but form of impacted the broader conventional moist smokeless tobacco class. However any form of insights you possibly can supply on the aggressive panorama in MST extra broadly?

Graham Purdy

Yeah. Hello, Vivian. It is Graham. Look, I feel the kind of the story of two cities, the worth class, I feel, continues to achieve success in MST and the premium manufacturers are struggling at this cut-off date. I feel slightly little bit of that has to do with kind of a macroeconomic atmosphere, but additionally the pricing exercise that they are taking. We kind of stay dedicated to this down the road plan that we have had for a few years. proceed to get — win extra shops, proceed to win extra chain accounts, proceed to opportunistically value when that enables, and we’re excited concerning the continued runway that now we have with Stoker’s.

Vivien Azer

Sounds good. Thanks for all that guys.

Graham Purdy

Thanks, Vivien.

Operator

Your subsequent query comes from Michael Legg from The Benchmark Firm.

Michael Legg

Thanks. Nice quarter, guys. I admire you see these leads to a troublesome atmosphere. I need to perceive slightly bit concerning the MSOs guiding two of the highest 5. Are you able to speak slightly bit about whether or not you are displacing different merchandise that is there if it is additive for the MSOs and what you are wanting ahead to getting in there over time? Thanks.

Summer season Frein

Yeah. Hello. That is Summer season. By way of entering into the MSOs, I feel for us, it is about getting broader presence within the crucial retail environments for us in order that Zig-Zag continues to carve out its house in that atmosphere. I will not go into the aggressive nature there when it comes to what will probably be taking the shelf house of or not. However for us, it is actually about persevering with to get into the choice house, broaden our footprint there and the expansion alternatives that stay.

Michael Legg

Okay. Nice. Thanks. After which simply on CLIPPER, are you able to speak about the place you see your penetration as we speak? I imply, are we 10% into the market? Are we — how rather more runway is there so that you can go? Thanks.

Summer season Frein

Yeah. In order famous, that class is fairly great for us in america. We have been at it for nearly a yr now, and we proceed to see distribution broaden quarter-over-quarter, and we’re persevering with to realize distributors as nicely, each within the conventional and the choice house. So making inroads there, proceed to see progress in that house, each in-store and as shared, we’re on Amazon now as nicely. So the expansion there may be encouraging as nicely.

Michael Legg

Nice. After which with the Zumiez, I imply, what sort of degree of attire gross sales are we pondering? Is that this only a small piece to begin? Or are there lots of different retailers you are speaking with? And the place do you see that going?

Summer season Frein

Yeah. So for us, it is as a lot of a gross sales alternative as it’s a advertising and marketing alternative. Introducing into Zumiez actually affords us the chance to be on the desk with different partnerships as nicely. And once we take into consideration going into Zumiez, we take into consideration creating strolling billboards for our model, and that may be a great advertising and marketing alternative for Zig-Zag. And the truth that it is resonating within the early days of us entering into Zumiez could be very thrilling for us and it is the chance the model has going ahead.

Michael Legg

And what sort of margin potential do you assume you will have in attire?

Summer season Frein

I do not know if we’re sharing what the margin potential is kind of but with attire, however actually can comply with up on that.

Michael Legg

Thanks. Okay. Nice quarter. Thanks, guys.

Summer season Frein

Thanks.

Operator

And your last query comes from Eric Des Lauriers from Craig-Hallum Capital Group.

Eric Des Lauriers

Nice. Thanks for taking my questions. First one for me, a follow-up on certainly one of Vivien’s questions simply on the kind of continued sturdy efficiency of Stoker’s MST and simply total, that kind of worth segments persevering with to achieve success in opposition to premium. You known as out that you simply’re in 67% of the shops by quantity. Clearly, leaving about one-third of the market obtainable to you guys. So a robust alternative there. It appears to me like that chance has form of been on the market for some time. So I am simply form of questioning what the general kind of street map there seems to be like? And possibly one other mind-set about it could be simply kind of what may trigger you to lean into that chance possibly greater than you will have previously? Thanks.

Graham Purdy

Yeah. Look, nice query, Eric. I do not assume that we have made any modifications to our strategic method round Stoker’s. It truly is kind of trench warfare. It is 1 retailer at a time. It is a chain at a time. On the similar time, we have kind of maintained this ethos about being worthwhile whereas we do it, so not going out in — you are rationally spending cash to realize distribution. And so I feel that the pathway we’re on, we proceed to develop that weighted distribution. We proceed to win shops. We proceed to win chain accounts.

So I feel that, that lengthy runway is one thing that is very thrilling for us, particularly with the pricing dynamics within the class. We’re one of many few that is truly rising quantity within the house. So clearly, that leaves share progress. And we have got the advantage of quick following pricing from a big competitor. So lot of nice dynamics. I would not anticipate any change to our present fascinated with how we go to market there.

Eric Des Lauriers

Okay. No, that actually is smart to me. Clearly, persevering with to learn in additional methods than one was simply form of established order. In order that actually is smart to me. Shifting to Zig-Zag right here. Undoubtedly very encouraging to listen to that the B2B different channel gross sales are up 30%. I feel it was — in order that’s nice to listen to that these kind of initiatives are form of catching momentum right here.

I used to be questioning when you may broaden a bit on the Zig-Zag innovation pipeline. You touched on it a bit within the ready remarks. I am simply questioning when you may broaden on that, whether or not there’s any distinction within the kind of measured channel versus the choice channel? And simply total, when you may give a bit extra perception into the innovation pipeline for Zig-Zag and the way you are form of anticipating that to translate to total gross sales progress? Thanks.

Summer season Frein

Yeah. Positive. In order famous on the decision, we lately put into market palm rolls and 70-millimeter cones. We have particularly seen lots of nice traction throughout each the choice and the standard channel with 70-millimeter cones. Simply tells us that buyers are each within the Zig-Zag model in addition to involved in that individual product assortment or lineup. So I feel there’s lots of runway for us to nonetheless get into shops there. And on palm rolls, extra targeted on the choice facet at this level, however it looks as if customers and the dispensary homeowners are very involved in that assortment as nicely.

Louie Reformina

Yeah. I am going to add that the all-channel e-commerce platform, [indiscernible] offers form of a terrific channel for us to check out merchandise and show it out earlier than we launch it into the Z-stores. So we have been doing that with a few of our new innovation.

Eric Des Lauriers

That is nice. And as we go ahead, so we kind of had palm rolls and particularly the 70-millimeter cones serving to to drive outcomes presently and within the current previous. I am simply questioning on the street map, like kind of as we glance into 2024, ought to we anticipate a major proliferation within the variety of SKUs you guys are servicing? Is it actually form of specializing in these discovering one or two that actually work and form of investing behind these a bit. I am simply form of questioning how we must always take into consideration the innovation pipeline going ahead, simply contemplating how a lot it has been a driver of the expansion right here.

Summer season Frein

Yeah. So for us, two issues are actually vital. One, what’s the shopper wanting from us, proper? And staying forward of the patron is de facto vital for us, particularly as we take into consideration rising the Zig-Zag model into the longer term. And as we take into consideration what these numerous channels are searching for. Moreover, I’d add that getting shelf house within the different channel is de facto vital for us.

And in order Louie famous, testing within the different channel for what merchandise make sense is the worthwhile means for us to consider progress on this house as nicely and never over investing in product innovation is a crucial be careful for us. So I feel it is a very balanced method we’re attempting to strike in order that we’re staying forward of the patron, but additionally staying related with the product innovation that we convey to market in a worthwhile means.

Eric Des Lauriers

That is smart. After which the final one for me is form of just like the Stoker’s MST outlook right here. I simply wished to circle again on the FRE pouches. Simply questioning when you’re seeing any form of inexperienced shoots of any inflection in market share? Or if there’s any kind of anticipation of a major ramp within the FRE pouch gross sales? Or that is going to be kind of that comparable trench warfare? I imply, clearly, it is a very excessive class with many huge gamers right here. Is it that kind of one-by-one trench warfare or is there something that you simply guys are seeing any inexperienced shoots to form of name out on any inflection level in progress right here? Thanks.

Summer season Frein

Yeah. So we’re very inspired by the progress up to now. I feel you hit the nail on the pinnacle if you refer again to Stoker’s and numerous research progress there. I do assume it is a truthful level on the ditch warfare piece as nicely. So we’re very conscious of that profitably rising within the house is a prime focus for us. So I feel the Stoker’s reference was proper on.

Eric Des Lauriers

Okay. Nice. Admire it. Thanks.

Summer season Frein

No drawback.

Graham Purdy

Thanks, Eric.

Operator

The subsequent query comes from Andrew Rem (ph).

Unidentified Participant

Hey, guys. I bought to say, I actually just like the intro music, fairly certain that is the first purpose your inventory is up as we speak. So kudos on that.

Graham Purdy

Thanks, Andrew.

Unidentified Participant

Summer season, simply in your final remark there relating to modern merchandise. While you say take a look at, are you able to — what’s an instance of testing?

Summer season Frein

Yeah. That is a terrific query. So what now we have the chance to do within the all channel and on our e-commerce channels, is put a product into market and kind of achieve that understanding of what customers really feel about it when it comes to buy patterns, giving suggestions by our web site, getting suggestions by the dispensary channel after which figuring out if it is smart primarily based on the curiosity to broaden it out additional.

It is actually so simple as that if we discover a product, does it make sense and it solely going to be a brief providing, for instance, we can’t broaden it out additional. We had a product earlier this yr, rose wraps, that we concluded simply made sense for us to have as a brief product. And we’ll resolve later if it is one thing we broaden additional, however that is an instance of once we take a look at it, understood it was nice for a second. And extra to come back as we’ll do one thing past, however I feel that is an instance of a take a look at that we did and the way we give it some thought.

Unidentified Participant

So do you — if you take a look at, are there particular shops or geographies? And what’s the period of a take a look at?

Summer season Frein

Yeah. I feel it varies from product to product primarily based in the marketplace circumstances and the product that we’re testing.

Unidentified Participant

Do you begin with some preliminary timeframe? After which primarily based on as outcomes come again, which will broaden or shorten, so it’s totally very similar to a suggestions loop.

Summer season Frein

Completely.

Unidentified Participant

Okay. Additionally, may you speak about — I do not know precisely how you can say this, however CLIPPER and FRE, what’s the advertising and marketing street map? If it is like a Part I, II, III, however form of stroll by every of these merchandise, possibly CLIPPER because it’s newer. However simply understanding when you concentrate on advertising and marketing, what are the completely different phases {that a} new product like that goes by?

Summer season Frein

For CLIPPER, once we first launched the product, we actually broadly targeted on constructing product consciousness. And that was finished in a reasonably conventional means throughout in-store and on-line. So I feel in-store point-of-sale, promoting shows, that kind of factor is fairly typical to different companies. And when it comes to on-line, utilizing social channels comparable to Instagram or TikTok to market that model, so a reasonably conventional playbook because it pertains to CLIPPER.

Because it pertains to FRE, comparable story when it comes to the advertising and marketing channels that we have been leveraging, albeit for FRE, beginning on a smaller given the background that we have talked about earlier than associated to the class, and I simply eager to study and be very methodical about our in-market method.

Unidentified Participant

So do you employ TikTok for example, are you utilizing influencers? You are creating your individual content material? How do you do this?

Summer season Frein

It actually varies because it pertains to CLIPPER. We have now finished slightly little bit of each.

Unidentified Participant

Sorry, am I nonetheless on?

Graham Purdy

You might be.

Unidentified Participant

I am sorry. So the final a part of what you mentioned lower off.

Summer season Frein

No drawback. I mentioned because it pertains to CLIPPER, I feel your query was particular to TikTok and the promoting method we leverage there. It is slightly little bit of each.

Unidentified Participant

Okay. After which on the Zumiez collaboration or partnership there. Why Zumiez is an efficient preliminary accomplice? And then you definitely additionally talked about taking a look at that as a chance to broaden. So I puzzled like would a sizzling matter as a model match nicely with what you are attempting to perform there?

Summer season Frein

So Zumiez is nice as a result of they’ve a broad brush of shops throughout america. They are a specialty attire retailer. For us, as famous in a previous query, I feel the chance with partnerships like that afford us as a lot of a advertising and marketing alternative as it’s a gross sales alternative. As we take into consideration partnerships past Zumiez, I feel we’ll take it on a case-by-case foundation, however Zumiez is a good proxy for us to consider different potential retail partnerships sooner or later.

Unidentified Participant

Okay. Thanks quite a bit, guys. Admire it. Nice quarter.

Graham Purdy

Thanks, Andrew.

Summer season Frein

Thanks.

Operator

There aren’t any additional questions at the moment. Mr. Graham Purdy, I flip the decision again over to you.

Graham Purdy

Yeah. Thanks, operator. I admire everyone’s time as we speak. We’re excited concerning the leads to Q2 and we stay dedicated to our plan for the steadiness of the yr. So thanks for becoming a member of, and we’ll speak to you guys quickly.