Turning Point Brands, Inc.: Form 10-Q for the period ended Sep 30, 2025

You should read the following discussion of the historical financial conditions and results of operations in conjunction with our consolidated financial statements and accompanying notes, which are included elsewhere in this Quarterly Report on Form 10-Q. In addition, this discussion includes forward-looking statements which are subject to risks and uncertainties that may result in actual results differing from statements we make. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that could cause actual results to differ include those risks and uncertainties discussed in “Risk Factors” contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

The following Management’s Discussion and Analysis (“MD&A”) relates to the unaudited financial statements of Turning Point Brands, Inc., included elsewhere in this Quarterly Report on Form 10-Q. The MD&A is intended to enable the reader to understand the Company’s financial condition and results of operations, including any material changes in the Company’s financial condition and results of operations since December 31, 2024, and as compared with the three and nine months ended September 30, 2024. The MD&A is provided as a supplement to and should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this Quarterly report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Annual Report”).

In this MD&A, unless the context requires otherwise, references to “our Company” “we,” “our,” or “us” refer to Turning Point Brands, Inc., and its consolidated subsidiaries. References to “TPB” refer to Turning Point Brands, Inc., without any of its subsidiaries. Many of the amounts and percentages in this discussion have been rounded for convenience of presentation.

Overview

Turning Point Brands, Inc. is a leading manufacturer, marketer and distributor of branded consumer products. We sell a wide range of products to adult consumers consisting of staple products with our iconic brands Zig-Zag® and Stoker’s® to fulfill evolving consumer preferences. Among other markets, we compete in the alternative smoking accessories and Other Tobacco Products (“OTP”) industries. The alternative smoking accessories market is a dynamic market experiencing robust secular growth driven by cannabinoid legalization in the U.S. and Canada, and positively evolving consumer perception and acceptance in North America. The OTP industry, which consists of non-cigarette tobacco products, exhibited low-single-digit consumer unit annualized declines during the year ended December 31, 2024, as reported by Management Science Associates, Inc. (“MSAi”) a third-party analytics and information company. Our segments are led by our core proprietary and iconic brands: Zig-Zag® in the Zig-Zag products segment, and Stoker’s® along with FRE®, Beech-Nut® and Trophy® in the Stoker’s products segment. Our businesses generate solid cash flow which we use to invest in our business, finance acquisitions, increase brand support, expand our distribution infrastructure, and strengthen our capital position. We currently ship to approximately 900 distributors with an additional 600 secondary, indirect wholesalers in the U.S. that carry and sell our products. Under the leadership of a senior management team with extensive experience in the consumer products, alternative smoking accessories and tobacco industries, we have grown and diversified our business through new product launches, category expansions, and acquisitions while concurrently improving operational efficiency.

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

Discontinued Operations

On January 2, 2025, the Company contributed 100% of its interest in South Beach Brands LLC (“SBB”), the subsidiary that owned and operated the Company's former Creative Distribution Solutions (“CDS”) reportable segment, to General Wireless Operations, Inc. (“GWO”) in exchange for 49% of the issued and outstanding GWO common stock. GWO is a joint venture between the Company and Standard General, LP entered into in December 2018. CDS marketed and distributed liquid nicotine and ancillary products without tobacco and/or nicotine.

Refer to Note 3 and Note 9 of the Notes to Consolidated Financial Statements included in Item 1 of Part 1 in this Quarterly Report on Form 10-Q for further details regarding the CDS divestiture.

Products

We operate in two segments: Zig-Zag products and Stoker’s products segments. In our Zig-Zag products segment, we principally market and distribute (i) rolling papers, tubes and related products; (ii) finished cigars and make-your-own (“MYO”) cigar wraps; and (iii) lighters and other accessories. In addition, we have a majority stake in Turning Point Brands Canada which is a specialty marketing and distribution firm focused on building brands in the Canadian cannabis accessories, tobacco and alternative products categories. In our Stoker’s products segment, we (i) manufacture and market moist snuff tobacco (“MST”); (ii) contract for and market modern oral products; and (iii) contract for and market loose-leaf chewing tobacco products.

Operations

Our Zig-Zag products and Stoker’s products segments primarily generate revenues from the sale of our products to wholesale distributors who, in turn, resell the products to retail operations. Our net sales, which include federal excise taxes, consist of gross sales net of cash discounts, returns, and selling and marketing allowances.

We rely on long-standing relationships with high-quality, established manufacturers to provide the majority of our produced products. Approximately 75% of our production, as measured by net sales, is outsourced to suppliers. The remaining production consists primarily of our moist snuff tobacco operations located in Dresden, Tennessee and Louisville, Kentucky. Our principal operating expenses include the cost of raw materials used to manufacture the limited number of our products which we produce in-house; the cost of finished products, which are generally purchased goods; federal excise taxes; legal expenses; and compensation expenses, including benefits and costs of salaried personnel.

Key Factors Affecting Our Results of Operations

We consider the following to be the key factors affecting our results of operations:

• Our ability to further penetrate markets with our existing products;
• Our ability to introduce new products and product lines that complement our core business;
• Decreasing interest in some tobacco products among consumers;
• Price sensitivity in our end-markets;
• Marketing and promotional initiatives, which cause variability in our results;
• Cost related to increasing regulation of promotional and advertising activities;
• General economic conditions, including consumer access to disposable income and other conditions affecting purchasing power such as inflation and the interest rate environment;
• Labor and production costs;
• Cost of complying with regulation, including the “deeming regulation”, as well as the unpredictable nature of the regulatory regimes;
• Changes to U.S. trade policies, including tariffs;
• Counterfeit and other illegal products in our end-markets;
• Currency fluctuations;
• Our ability to identify attractive acquisition opportunities; and
• Our ability to successfully integrate acquisitions.

Critical Accounting Policies and Uses of Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Item 1 of Part I, “Notes to Consolidated Financial Statements - Note 2 - Summary of Significant Accounting Policies - Recent Accounting Pronouncements.”

Results of Operations

Summary

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

(in thousands)

31

Comparison of the Three Months Ended September 30, 2025, to the Three Months Ended September 30, 2024

Net Sales: For the three months ended September 30, 2025, consolidated net sales increased $28.3 million, or 31.2% compared to the prior year period, driven primarily by an increase in the Stoker’s products segment.

For the three months ended September 30, 2025, net sales in the Zig-Zag products segment decreased $5.2 million, or 10.5% compared to the prior year period. The decrease in net sales was driven primarily by declines of $5.5 million in U.S. papers and wraps, and $1.8 million in the Clipper lighter business, partially offset by a $2.4 million increase in our Canadian products. Clipper has not been a focus area for the Company over the past several quarters and the Company was able to sell the majority of its inventory at a discounted rate with extended payment terms. We do not expect meaningful additional revenue from Clipper in future periods.

For the three months ended September 30, 2025, net sales in the Stoker’s products segment increased $33.4 million, or 80.8% compared to the prior year period. For the three months ended September 30, 2025, sales volume of Stoker’s products increased 69.0% compared to the prior year period, which contributed $28.5 million to the increase, and price/product mix increased 11.8% compared to the prior year period, which contributed $4.9 million to the increase. The increase in net sales was primarily driven by $31.6 million of growth in modern oral products and $1.4 million of growth of Stoker’s® MST.

Gross Profit: For the three months ended September 30, 2025, consolidated gross profit increased $20.0 million, or 39.7% compared to the prior year period. Gross profit as a percentage of net sales increased to 59.2% for the three months ended September 30, 2025, compared to 55.6% for the three months ended September 30, 2024. The overall increase in gross profit was driven by increases in net sales in the Stoker's products segment and improved margin contribution from modern oral products.

For the three months ended September 30, 2025, gross profit in the Zig-Zag products segment decreased $1.9 million, or 7.1% compared to the prior year period. Gross profit as a percentage of net sales increased to 57.5% of net sales for the three months ended September 30, 2025, from 55.4% of net sales for the three months ended September 30, 2024, driven primarily by product mix.

For the three months ended September 30, 2025, gross profit in the Stoker’s products segment increased $22.0 million, or 95.2% compared to the prior year period. Gross profit as a percentage of net sales increased to 60.2% of net sales for the three months ended September 30, 2025, from 55.8% of net sales for the three months ended September 30, 2024, primarily driven by improved margin contribution from modern oral products.

Selling, General, and Administrative Expenses: For the three months ended September 30, 2025, selling, general, and administrative expenses increased $15.0 million, or 50.5% compared to the prior year period, primarily due to increased shipping and selling costs related to the increase in modern oral sales in the quarter compared to the prior year period. Selling, general and administrative expenses in the three months ended September 30, 2025, included $0.5 million of expense related to PMTA, $1.9 million of stock options, restricted stock and incentives expense, $0.4 million of legal expenses incurred in connection with litigation related to an insurance claim, $0.8 million of transaction costs and $0.2 million of expense related to corporate restructuring. Selling, general and administrative expenses in the three months ended September 30, 2024, included $1.8 million of stock options, restricted stock and incentives expense, $1.2 million of expense related to PMTA, $0.9 million of transaction costs, $0.2 million of expense related to the implementation of the new ERP and CRM systems, and $0.2 million of expense related to corporate restructuring.

Operating Income: For the three months ended September 30, 2025, consolidated operating income increased $5.1 million, or 24.4% compared to the prior year period. Operating income as a percentage of net sales decreased to 21.8% of net sales for the three months ended September 30, 2025 from 22.9% of net sales for the three months ended September 30, 2024, primarily driven by increased selling, general and administrative costs.

For the three months ended September 30, 2025, operating income in the Zig-Zag products segment decreased $1.8 million, or 10.3% compared to the prior year period. Operating income as a percentage of net sales increased to 35.3% of net sales for the three months ended September 30, 2025 from 35.2% of net sales for the three months ended September 30, 2024, primarily driven by improved margins on product mix.

For the three months ended September 30, 2025, operating income in the Stoker’s products segment increased $12.1 million, or 70.6% compared to the prior year period. Operating income as a percentage of net sales decreased to 39.1% of net sales for the three months ended September 30, 2025 from 41.5% of net sales for the three months ended September 30, 2024, primarily driven by higher margin contribution of modern oral products offset by higher marketing costs to drive sales.

Included in consolidated operating income are costs of the Company which are not assigned to one of the two reportable segments and include: (i) corporate overhead expense, including executive management, finance, legal and information technology salaries, and professional services, such as audit, external legal costs and information technology services, as well as (ii) costs related to the FDA premarket tobacco product application. For the three months ended September 30, 2025, unallocated costs were $19.0 million compared to $13.7 million in the prior year period, an increase of $5.2 million or 38.1%, primarily driven by joint venture related expenses.

Other (income) expense, net: For the three months ended September 30, 2025, other income increased $4.9 million compared to the prior year period due to an employee retention credit refund received in the current year period that was not applicable in the prior year period.

Interest Expense, net: For the three months ended September 30, 2025, interest expense, net decreased $0.3 million compared to the prior year period as a result of interest income generated from the employee retention credit received in the current year period.

Investment Gain (Loss): For the three months ended September 30, 2025, investment gain increased $0.7 million compared to the prior year period. The investment gain for the three months ended September 30, 2025, is primarily due to the gain on the sale of an available-for-sale marketable security.

(Income) losses from equity method investment: For the three months ended September 30, 2025, income from investments in equity securities increased $2.1 million compared to the prior year period as a result of the acquisition of the Canadian distribution business by GWO.

Income Tax Expense: Our income tax expense of $6.5 million was 21.4% of income before income taxes for the three months ended September 30, 2025. Our effective income tax rate was 27.1% for the three months ended September 30, 2024. The decrease in tax rate compared to the prior year period is due to the inclusion of permanent tax differences related to stock options that were exercised in the third quarter 2025.

Net Income (Loss) Attributable to Non-Controlling Interest: Net income (loss) attributable to non-controlling interest was $2.7 million and $0.0 million, respectively, for the three months ended September 30, 2025 and 2024. The increase in non-controlling interest compared to the prior year period is due to the consolidation of a joint venture starting in December 2024.

Net Income Attributable to Turning Point Brands, Inc.: Due to the factors described above, net income attributable to Turning Point Brands, Inc. for the three months ended September 30, 2025 and 2024, was $21.1 million and $12.5 million, respectively.

Summary

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

34

Comparison of the Nine Months Ended September 30, 2025, to the Nine Months Ended September 30, 2024

Net Sales: For the nine months ended September 30, 2025, consolidated net sales increased $75.1 million, or 28.1% compared to the prior year period, driven primarily by an increase in the Stoker’s products segment.

For the nine months ended September 30, 2025, net sales in the Zig-Zag products segment decreased $8.1 million, or 5.5% compared to the prior year period. The decrease in net sales was driven primarily by declines of $8.9 million in U.S. papers and wraps, $2.5 million in our cigar products, partially offset by an increase of $2.0 million in the Clipper lighter business and a $1.6 million increase in our Canadian products. Clipper has not been a focus area for the Company over the past several quarters and the Company was able to sell the majority of its inventory at a discounted rate with extended payment terms.

For the nine months ended September 30, 2025, net sales in the Stoker’s products segment increased $83.1 million, or 69.0% compared to the prior year period. For the nine months ended September 30, 2025, sales volume of Stoker’s products increased 62.9% compared to the prior year period, which contributed $75.8 million to the increase, and price/product mix increased 6.1% compared to the prior year period, which contributed $7.3 million to the increase. The increase in net sales was primarily driven by $77.7 million of sales in modern oral products and $5.0 million of growth of Stoker’s® MST.

Gross Profit: For the nine months ended September 30, 2025, consolidated gross profit increased $47.5 million, or 31.9% compared to the prior year period. Gross profit as a percentage of net sales increased to 57.5% for the nine months ended September 30, 2025, compared to 55.9% for the nine months ended September 30, 2024. The overall increase in gross profit was driven by increases in net sales in the Stoker's products segment as a result of improved contribution margin from modern oral products.

For the nine months ended September 30, 2025, gross profit in the Zig-Zag products segment decreased $7.7 million, or 9.4% compared to the prior year period. Gross profit as a percentage of net sales decreased to 53.5% of net sales for the nine months ended September 30, 2025, from 55.8% of net sales for the nine months ended September 30, 2024, driven primarily by sales of Clipper lighters at a discounted rate.

For the nine months ended September 30, 2025, gross profit in the Stoker’s products segment increased $55.2 million, or 81.9% compared to the prior year period. Gross profit as a percentage of net sales increased to 60.2% of net sales for the nine months ended September 30, 2025, from 55.9% of net sales for the nine months ended September 30, 2024, primarily driven by improved contribution margin from modern oral products.

Selling, General, and Administrative Expenses: For the nine months ended September 30, 2025, selling, general, and administrative expenses increased $33.4 million, or 38.0% compared to the prior year period, primarily due to increased shipping and selling costs related to the increase in modern oral sales in the period compared to the prior year period. Selling, general and administrative expenses in the nine months ended September 30, 2025, included $5.2 million of stock options, restricted stock and incentives expense, $3.7 million of expense related to PMTA, $0.8 million of elevated non-recurring outbound freight costs due to the ERP transition, $1.6 million of transaction costs, $0.9 million of legal expenses incurred in connection with litigation related to an insurance claim and $0.2 million of expense related to the implementation of the new ERP and CRM systems. Selling, general and administrative expenses in the nine months ended September 30, 2024, included $5.7 million of stock options, restricted stock and incentives expense, $3.1 million of expense related to PMTA, $1.7 million of expense related to corporate restructuring, $1.0 million related to transaction costs and $0.8 million of expense related to the implementation of the new ERP and CRM systems.

Other Operating Income: For the nine months ended September 30, 2025, other operating income decreased $1.7 million compared to the prior year period due to a federal excise tax refund received in the prior year period that did not repeat in the current year period.

Operating Income: For the nine months ended September 30, 2025, consolidated operating income increased $12.5 million, or 19.8% compared to the prior year period. Operating income as a percentage of net sales decreased to 22.0% of net sales for the nine months ended September 30, 2025 from 23.6% of net sales for the nine months ended September 30, 2024, primarily driven by increased selling, general and administrative costs.

For the nine months ended September 30, 2025, operating income in the Zig-Zag products segment decreased $6.4 million, or 11.9% compared to the prior year period. Operating income as a percentage of net sales decreased to 34.1% of net sales for the nine months ended September 30, 2025 from 36.6% of net sales for the nine months ended September 30, 2024, primarily driven by sales of Clipper lighters at a discounted rate.

For the nine months ended September 30, 2025, operating income in the Stoker’s products segment increased $33.1 million, or 65.6% compared to the prior year period. Operating income as a percentage of net sales decreased slightly to 41.0% of net sales for the nine months ended September 30, 2025 from 41.8% of net sales for the nine months ended September 30, 2024, primarily driven by higher margin contribution of modern oral products offset by higher marketing costs to drive sales.

Included in consolidated operating income are costs of the Company which are not assigned to one of the two reportable segments and include: (i) corporate overhead expense, including executive management, finance, legal and information technology salaries, and professional services, such as audit, external legal costs and information technology services, as well as (ii) costs related to the FDA premarket tobacco product application. For the nine months ended September 30, 2025, unallocated costs were $55.4 million compared to $41.1 million in the prior year period, an increase of $14.3 million, or 34.7%, primarily driven by joint venture related expenses.

Other (income) expense, net: For the nine months ended September 30, 2025, other income increased $4.9 million compared to the prior year period due to an employee retention credit refund received in the current year period that was not applicable in the prior year period.

Interest Expense, net: For the nine months ended September 30, 2025, interest expense, net increased $2.7 million compared to the prior year period as a result of the issuance of the 2032 Notes in February 2025 which bear interest at a higher rate and have a higher outstanding principal amount than the 2026 Notes which were repaid with proceeds from the issuance of the 2032 Notes partially offset by interest income generated by the employee retention credit received in the period.

Investment Gain (Loss): For the nine months ended September 30, 2025, investment gain was $0.9 million compared to a loss of $2.3 million in the prior year period. The $0.9 million investment gain for the nine months ended September 30, 2025, is primarily due to gains on available-for-sale marketable securities of $1.4 million, offset by a $0.9 million impairment charge related to our investment in Old Pal. In the prior year period, we recognized impairment charges on our investments of $1.8 million for Bomani and $0.8 million for Old Pal.

(Income) Losses from Equity Method Investment: For the nine months ended September 30, 2025, income from investments in equity securities increased $2.1 million compared to the prior year period as a result of the acquisition of the Canadian distribution business by GWO.

Loss on Extinguishment of Debt: Loss on extinguishment of debt for the nine months ended September 30, 2025 increased $1.2 million compared to the prior year period as a result of the redemption of the 2026 Notes in February 2025.

Income Tax Expense: Our income tax expense of $12.8 million was 18.4% of income before income taxes for the nine months ended September 30, 2025. Our effective income tax rate was 25.4% for the nine months ended September 30, 2024. The decrease in tax rate compared to the prior year period is due to the inclusion of permanent tax differences related to the Company's restricted stock units that were issued and stock options that were exercised in the nine months ended September 30, 2025.

Net Income Attributable to Non-Controlling Interest: Net income attributable to non-controlling interest was $6.6 million and $0.1 million, respectively, for the nine months ended September 30, 2025 and 2024. The increase in non-controlling interest compared to the prior year period is due to the consolidation of a joint venture starting in December 2024.

Net Income Attributable to Turning Point Brands, Inc.: Due to the factors described above, net income attributable to Turning Point Brands, Inc. for the nine months ended September 30, 2025 and 2024, was $50.0 million and $37.6 million, respectively.

EBITDA and Adjusted EBITDA

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, we use non-U.S. GAAP financial measures including EBITDA and Adjusted EBITDA. We believe Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations. Adjusted EBITDA is used by management to compare our performance to that of prior periods for trend analyses and planning purposes and is presented to our Board of Directors. We believe that EBITDA and Adjusted EBITDA are appropriate measures of operating performance because they eliminate the impact of expenses that do not relate to operating performance. In addition, our debt instruments contain covenants which use Adjusted EBITDA calculations.

We define “EBITDA” as net income attributable to Turning Point Brands, Inc. before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation and amortization. We define “Adjusted EBITDA” as net income before interest expense, gain (loss) on extinguishment of debt, income tax expense, depreciation, amortization, other non-cash items and other items we do not consider the ordinary course in our evaluation of ongoing operating performance noted in the reconciliation below. Among other items that we adjust Adjusted EBITDA for is FDA PMTA expense. The Company believes it is appropriate to adjust for this spend as the costs are incurred in connection with what we view as a non-traditional regulatory process that requires applications be submitted for covered products that are already on the market. As a result, Company’s management believes it is most appropriate to assess the performance of the Company’s business – the sale of our various products - without regard to these costs and believes that adjusting for these costs provides investors and the public markets with the most meaningful metrics to assess performance of the business. The Company reconciles its EBITDA metrics to Net income attributable to Turning Point Brands, Inc. because that measure reflects the Company’s portion of the profitability from consolidated joint ventures after removing results attributable to our partners in such joint ventures.

Non-U.S. GAAP measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with U.S. GAAP. Adjusted EBITDA excludes significant expenses required to be recorded in our financial statements by U.S. GAAP and is subject to inherent limitations. Other companies in our industry may calculate this non-U.S. GAAP measure differently than we do or may not calculate it at all, limiting its usefulness as a comparative measure. The tables below provide reconciliations between net income and Adjusted EBITDA.

(in thousands)

(a) Represents costs associated with corporate restructuring, including severance and early retirement.

(b) Represents cost associated with scoping and mobilization of new ERP and CRM systems and cost of duplicative ERP licenses.

(c) Represents non-cash stock options, restricted stock, PRSUs, etc.

(d) Represents the fees incurred for transaction expenses.

(e) Represents elevated non-recurring outbound freight costs due to ERP transition.

(f) Represents legal expenses incurred in connection with litigation related to an insurance claim.

(g) Represents costs associated with applications related to FDA premarket tobacco product application (“PMTA”). The PMTA regime requires the Company to submit an application to the FDA to receive marketing authorization to continue to sell certain of its product lines with continued sales permitted during the pendency of the applications. The application is a onetime resource-intensive process for each covered product line; however, due to the nature of the implementation process for those product lines already in the market, applications can take multiple years to complete rather than the typical one-time submission. The Company has only two product lines currently subject to the PMTA process, having utilized other regulatory pathway options available for our other product lines. The Company does not expect to submit additional PMTA applications for any new product lines after the submission for the remaining two are complete.

(h) Represents a mark-to-market gain attributable to foreign exchange fluctuation.

(i) Represents impairment of investment assets.

(j) Represents gain on investments.

(k) Represents a federal excise tax refund included in other operating income.

(l) Represents an employee retention credit refund received included in other (income) expense, net.

(m) Represents an honorarium gift included in other (income) expense, net.

37

Liquidity and Capital Resources

As of September 30, 2025, we have $201.2 million of cash on hand and $66.6 million of availability under the 2023 ABL Facility. We have no borrowings outstanding under our 2023 ABL Facility as of September 30, 2025. Our principal uses for cash are working capital, debt service, and capital expenditures.

Our adjusted working capital, which we define as current assets less cash and current liabilities, increased $16.7 million compared to the prior year end. Excluding assets and liabilities held for sale at December 31, 2024, our adjusted working capital increased $26.1 million for the quarter ended September 30, 2025. The increase in working capital is primarily the result of a $18.2 million increase in accounts receivable, an $16.5 million increase in inventory and a $20.0 million increase in other current assets, partially offset by an increase of $12.9 million in accounts payable and a $15.6 million increase in accrued liabilities. With our strong cash balance, free cash flow generation and borrowing availability under the 2023 ABL Facility, we expect to have ample liquidity to satisfy our operating cash requirements for the foreseeable future.

The Company entered into an at-the-market offering program (the "ATM Program") on December 13, 2024, with B. Riley Securities Inc. and Barclays Capital Inc. The Company is filing an amendment to the prospectus supplement to increase the aggregate dollar amount of shares of common stock that it may sell under the ATM Program by an additional $200,000,000. Between August 15, 2025, and September 11, 2025, the Company sold 1,014,262 shares of our Common Stock under the ATM Program at an average selling price of $98.59 per share for gross proceeds of $100.0 million, less underwriter's commission and expenses of approximately $2.5 million, for net proceeds of $97.5 million.

(in thousands)

Cash Flows from Continuing Operations

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

(in thousands)

Cash Flows from Operating Activities

For the nine months ended September 30, 2025, net cash provided by operating activities was $32.5 million, a decrease of $12.4 million compared to the prior year period. The decrease is primarily due to unfavorable changes of $20.6 million in working capital and $10.2 million in other assets, partially offset by an increase in net income, net of non-cash items of $18.3 million. The primary drivers of non-cash items were a $4.3 million increase in deferred tax expense, a $1.3 million increase in depreciation and amortization, a $3.2 million decrease in loss on investments, a $2.3 million decrease in income from equity method investment and a $1.2 million increase in loss on extinguishment of debt compared to the prior year period. The decrease in cash from working capital compared to the prior year period was primarily driven by the timing of payments.

Cash Flows from Investing Activities

For the nine months ended September 30, 2025, net cash used in investing activities was $28.4 million, an increase of $19.3 million compared to the prior year period, primarily due to the purchase of the option by Turning Point Brands Canada to acquire the Canadian distribution business for $8 million, an increase in capital expenditures of $6.7 million, an increase of $4.0 million for purchases of investments, $1.5 million increase for purchases of non-marketable equity investments, partially offset by an increase of $1.0 million for proceeds from the sales of investments.

Cash Flows from Financing Activities

For the nine months ended September 30, 2025, net cash provided by financing activities was $148.3 million, an increase of $275.8 million compared to the prior year period, primarily due to a net increase in cash of $42.8 million related to the February 2025 issuance of the 2032 Notes, an increase of $11.0 million from Interchange subscription agreement proceeds, $97.5 million increase related to ATM Program proceeds, and $2.2 million related to stock compensation activity, as well as $4.2 million of common stock repurchases in the prior year period that did not repeat in 2025.

Dividends and Shares Repurchases

A dividend of $0.075 per common share was paid on October 10, 2025, to shareholders of record at the close of business on September 19, 2025.

On February 25, 2020, our Board of Directors approved a $50.0 million share repurchase program, which is intended for opportunistic execution based upon a variety of factors including market dynamics. The program is subject to the ongoing discretion of the Board of Directors. On October 25, 2021, the Board of Directors increased the approved share repurchase program by $30.7 million, and by $24.6 million on February 24, 2022. On November 6, 2024, the Company's Board of Directors increased the Company’s share repurchase authorization by $77.9 million to an aggregate amount of $100.0 million. On November 4, 2025, the Company's Board of Directors increased the share repurchase authorization by $100.0 million to an aggregate amount of $200.0 million. For the nine months ended September 30, 2025, there were no repurchases under the share repurchase program. As of September 30, 2025, there was $100.0 million in remaining repurchase authority under the plan.

Long-Term Debt

Notes payable and long-term debt consisted of the following at September 30, 2025 and December 31, 2024, in order of preference:

2032 Notes

In February 2025, the Company closed a private offering of $300.0 million aggregate principal amount of 7.625% senior secured notes due to mature on March 15, 2032 (the “2032 Notes”). Interest on the 2032 Notes is payable semi-annually on March 15 and September 15 of each year, commencing on September 15, 2025. We used the proceeds from the offering (i) to repay all obligations under and terminate the 2026 Notes (as defined below), (ii) to pay related fees, costs and expenses and (iii) for general corporate purposes. The 2032 Notes are fully and unconditionally guaranteed on a senior secured basis, jointly and severally, by each current and future wholly-owned domestic restricted subsidiary of the Company that guaranteed the 2026 Notes (collectively, the “Guarantors” as defined in the indenture governing the 2032 Notes or the “2032 Notes Indenture”). The 2032 Notes and the related guarantees are secured by first-priority liens on substantially all of the assets of the Company and the Guarantors, subject to certain exceptions. Proceeds from the offering were approximately $293.0 million.

The 2032 Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its restricted subsidiaries to: (i) grant or incur liens; (ii) incur, assume or guarantee additional indebtedness; (iii) sell or otherwise dispose of assets, including capital stock of subsidiaries; (iv) make certain investments; (v) pay dividends, make distributions or redeem or repurchase capital stock; (vi) engage in certain transactions with affiliates; and (vii) consolidate or merge with or into, or sell substantially all of our assets to another entity. These covenants are subject to several limitations and exceptions set forth in the 2032 Notes Indenture. For instance, the Company is generally permitted to make restricted payments, including the payment of dividends to shareholders, provided that, at the time of payment, or as a result of payment, the Company is not in default on its debt covenants; however, there are earnings and market capitalization requirements that if not met could limit the aggregate amount of quarterly dividends payable during a fiscal year. The 2032 Notes Indenture provides for customary events of default.

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

2026 Notes

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

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

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

2023 ABL Facility

On November 7, 2023, TPB Specialty Finance, LLC, a wholly-owned subsidiary of the Company (the “ABL Borrower”), entered into a new $75.0 million asset-backed revolving credit facility (the “2023 ABL Facility”), with the several lenders thereunder, and Barclays Bank Plc, as administrative agent (the “Administrative Agent”) and as collateral agent and First-Citizens Bank & Trust Company as additional collateral agent (the “Additional Collateral Agent”). Under the 2023 ABL Facility, the ABL Borrower may draw up to $75.0 million under Revolving Credit Loans and Last In Last Out (“LILO”) Loans. The 2023 ABL Facility includes a $40.0 million accordion feature. In connection with the 2023 ABL Facility, Turning Point Brands contributed certain existing inventory to the ABL Borrower. The 2023 ABL Facility is secured on a first priority basis (subject to customary exceptions) by all assets of the ABL Borrower.

The 2023 ABL Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) the lesser of (1) 85% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) 85% of the cost of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (2) 85% of the net orderly liquidation value (“NOLV”) percentage of the lower of (1)(A) or (1)(B); plus (b) 85% of the face value of all eligible accounts of the ABL Borrower minus (c) the amount of all eligible reserves. The 2023 ABL Facility also includes a LILO borrowing base equal to the sum of (a) the lesser of: (1) 10% of the lower of (A) the market value (on a first in first out basis) of the sum of eligible inventory, plus eligible in-transit inventory of the ABL Borrower and (B) the cost of the sum of eligible inventory, plus eligible in-transit inventory and (2) 10% of the NOLV percentage of the lower of (1)(A) or (1)(B); plus (b) 10% of the face amount of eligible account; minus (c) the amount of all eligible reserves.

Amounts borrowed under the 2023 ABL Facility are subject to an interest rate margin per annum equal to (a) from and after the closing date until the last day of the first full fiscal quarter ended after the closing date, (i) 1.25% per annum, in the case base rate loans, and (ii) 2.25% per annum, in the case of revolving credit loans that are secured overnight financing rate (“SOFR”) loans, (b)(i) 2.25% per annum, in the case of LILO loans that are base rate loans, and (ii) 3.25% per annum, in the case of LILO loans that are SOFR loans, (c) on the first day of each fiscal quarter, the applicable interest rate margins will be determined from the pricing grid below based upon the historical excess availability for the most recent fiscal quarter ended immediately prior to the relevant date, as calculated by the Administrative Agent.

The 2023 ABL Facility also requires the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any four consecutive fiscal quarters if excess availability is less than the greater of (a) 12.5% of the line cap and (b) $9.4 million, at any time and continuing until excess availability is equal to or exceeds the greater of (i) 12.5% of the line and (ii) $9.4 million for thirty (30) consecutive calendar days with the $9.4 million level automatically increased in proportion to the amount of any increase in the aggregate revolving credit commitments thereunder in connection with any incremental facility.

The 2023 ABL Facility will mature on the earlier of (x) November 7, 2027 and (y) the date that is 91 days prior to the maturity date of any material debt of the ABL Borrower or the Company or any of its restricted subsidiaries (subject to customary extensions agreed by the lenders thereunder); provided that clause (y) will not apply to the extent that on any applicable date of determination (on any date prior to the date set forth in clause (y)), (A) the sum of (x) cash that is held in escrow for the repayment of such material debt pursuant to arrangements satisfactory to the Administrative Agent, (y) cash that is held in accounts with the Administrative Agent and/or the Additional Collateral Agent, plus (z) excess availability, is sufficient to repay such material debt and (B) the ABL Borrower has excess availability of at least $15.0 million after giving effect to such repayment of material debt, including any borrowings under the commitments in connection therewith.

The Company has not drawn any borrowings under the 2023 ABL Facility but has letters of credit of approximately $2.3 million outstanding under the facility and has an available balance of $66.6 million based on the borrowing base as of September 30, 2025.

The Company incurred debt issuance costs attributable to the 2023 ABL Facility of $2.6 million which are amortized to interest expense using the straight-line method over the expected life of the 2023 ABL Facility.

Convertible Senior Notes

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

Additional Information with Respect to Unrestricted Subsidiaries

Under the terms of the 2032 Notes, and the 2026 Notes that were recently redeemed with proceeds from the February 2025 issuance of the 2032 Notes, the Company designated certain of its subsidiaries as “Unrestricted Subsidiaries” as of December 31, 2024, including Interchange Partners LLC and Intrepid Brands, LLC. The Company is required under the terms of the indentures governing the Notes to present additional information that reflects the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Company’s Unrestricted Subsidiaries as of and for the periods presented. This additional information is presented below.

Income Statements for the three and nine months ended September 30, 2025 and 2024 (unaudited):

41

Balance Sheet as of September 30, 2025 (unaudited):

42

Balance Sheet as of December 31, 2024:

Off-balance Sheet Arrangements

At September 30, 2025, we had no foreign currency contracts outstanding. During 2024, we executed various foreign exchange contracts for the purchase and sale of €3.6 million. At December 31, 2024, we had foreign currency contracts outstanding for the purchase and sale of €2.1 million. The fair value of the foreign currency contracts were based on quoted market prices and resulted in an asset of $0.0 million included in Other current assets and a liability of $0.1 million included in Accrued liabilities at December 31, 2024.

Inflation

Inflation has a substantial negative effect on the purchasing power of consumers. While historically, we have been able to increase prices at a rate equal to or greater than that of inflation, doing so could be difficult in an inflationary environment. However, we have implemented price increases in areas where doing so has been feasible. In addition, we have been able to maintain a relatively stable variable cost structure for our products due, in part, to our existing contractual agreements for the purchases of tobacco and our premium cigarette rolling papers.

Foreign Currency Sensitivity

During the nine months ended September 30, 2025, there have been no material changes in our exposure to exchange rate fluctuation risk, as reported within our 2024 Annual Report on Form 10-K. Please refer to our ‘Quantitative and Qualitative Disclosures about Market Risk’ included in our 2024 Annual Report on Form 10-K filed with the SEC.

Credit Risk

During the nine months ended September 30, 2025, there have been no material changes in our exposure to credit risk, as reported within our 2024 Annual Report on Form 10-K. Please refer to our ‘Quantitative and Qualitative Disclosures about Market Risk’ included in our 2024 Annual Report on Form 10-K filed with the SEC.

Interest Rate Sensitivity

In February 2025, we issued the 2032 Notes in an aggregate principal amount of $300.0 million. We carry the 2032 Notes at face value. Since the 2032 Notes bear interest at a fixed rate, we have no financial statement risk associated with changes in interest rates. Our remaining debt instrument is the 2023 ABL Facility, which as of September 30, 2025 and the filing date of this report had no borrowings outstanding.

We have carried out an evaluation under the supervision, and with the participation of, our management including our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and Chief Accounting Officer (“CAO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934), as of September 30, 2025. Based upon the evaluation, our CEO, CFO, and CAO concluded our disclosure controls and procedures are not effective as of such date solely due to a material weakness in internal controls over financial reporting that was disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, during our evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, we concluded that our internal control over financial reporting was not effective solely due to the existence of the following material weakness:

We did not design and maintain effective internal controls related to our information technology general controls (“ITGCs”) in the areas of user access and program change-management over certain information technology (“IT”) systems that support the Company’s financial reporting processes. Our business process controls

(automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. We believe that these control deficiencies were a result of: IT control processes lacking sufficient documentation such that the successful operation of ITGCs was overly dependent

upon knowledge and actions of certain individuals with IT expertise and inherent system limitations.

The material weakness did not result in any identified misstatements to our financial statements for any period, and there were no changes to previously released financial results. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time, and management has concluded through testing that these controls are operating effectively.

Remediation Plan

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) completing the implementation of a new ERP system, which was completed in April 2025; (ii) engaging third-party consultants to assist in the review, planning and implementation of systems and tools designed to support the remediation processes; (iii) developing and maintaining documentation underlying ITGCs; (iv) implementing an IT management review and testing plan to monitor ITGCs with a specific focus on systems that support our financial reporting processes; (v) providing training for control owners and reviewers with a specific focus on identifying, addressing and documenting risks; and (vi) providing enhanced quarterly reporting on the remediation progress to the Audit Committee of the Board of Directors.

While we have made significant progress in strengthening our internal controls, the previously identified material weakness was not fully remediated as of September 30, 2025. We expect to complete the remediation by the end of fiscal year 2025, as at that time we believe the referenced controls will have been in place for a sufficient period of time to demonstrate operating effectiveness.

Role of the Audit Committee in Material Weakness Remediation

The Audit Committee of the Board of Directors is actively overseeing the remediation of the material weakness. Working closely with management, as well as with the Company’s internal audit, finance teams, and independent auditors, the Audit Committee has and will continue to monitor and evaluate the progress of the remediation throughout the fiscal year ending December 31, 2025. Regular updates on the remediation have been and will continue to be provided to the Board of Directors, with the Audit Committee ensuring management’s testing of the remediated controls is completed as soon as practicable.

Changes in Internal Controls over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In addition to the other information set forth in this report, carefully consider the factors discussed in the ‘Risk Factors’ section contained in our 2024 Annual Report on Form 10-K. There have been no material changes to the Risk Factors set forth in the 2024 Annual Report on Form 10-K.