Turning Point Brands Q2 2026 earnings: Modern Oral growth lifts sales as spending weighs on profit

Turning Point Brands (NYSE: TPB) reported Q2 2026 net sales of $142.9 million, up 22.6% year over year, while diluted EPS fell to $0.18 from $0.79. Modern Oral drove the revenue increase, but higher sales and marketing investment, freight costs and other expenses pushed adjusted EBITDA down 50.0% to $15.2 million.

Core earnings data

Top-line growth did not translate into earnings growth. SG&A expense increased 91.1% to $76.9 million, more than offsetting the benefit of higher sales and contributing to a 36.5% decline in operating income.

Reported gross profit also included an out-of-period benefit related to a tariff refund. Excluding the related cost-of-goods-sold adjustment, gross profit was $81.5 million rather than $93.7 million, implying an adjusted gross margin of approximately 57.0%.

The reported gross margin should be interpreted cautiously because the tariff-related benefit materially increased the quarter’s gross profit. The adjusted figure indicates that underlying gross margin was close to the prior-year reported level despite the changing business mix.

Business and segment performance

Stoker’s generated 75% of company net sales and was the source of consolidated growth. Zig-Zag accounted for the remaining 25% and continued to contract, although its product mix supported a higher adjusted gross margin.

Modern Oral represented 48% of total company net sales, up from 26% a year earlier. Growth in the category supported Stoker’s gross profit of $71.1 million, or $61.2 million after excluding the tariff-related adjustment.

However, Stoker’s adjusted gross margin declined to 56.9% from 62.5%. The company attributed that decrease to higher penetration of chain retailers, indicating that wider distribution came with lower segment margin.

Zig-Zag’s gross profit declined only 2.1% to $22.6 million despite the larger drop in sales. Excluding the tariff-related adjustment, gross profit was $20.3 million, while adjusted gross margin increased to 57.3% from 49.1% because of product mix.

Modern Oral growth has not yet translated into earnings growth

Modern Oral is now nearly half of TPB’s sales, but the expansion is requiring substantial commercial investment. Spending on retail distribution, sales capabilities and brand development contributed to the 91.1% increase in SG&A, alongside higher outbound freight costs.

That spending helps explain why net sales rose 22.6% while adjusted EBITDA fell by half. The decline in Stoker’s adjusted gross margin also shows that expanding through chain retailers can increase market access without producing the same rate of profit growth.

The tariff refund further widened the difference between reported gross profit and underlying operating performance. Even with reported gross profit up 40.6%, operating income and adjusted EBITDA both declined substantially.

Profitability, cash flow and the balance sheet

Consolidated net income was $10.3 million, compared with $17.0 million a year earlier. Of the current-quarter total, $6.7 million was attributable to non-controlling interests, up from $2.5 million, leaving $3.6 million attributable to Turning Point Brands shareholders.

Cash flow data were provided for the six months ended June 30 rather than for the quarter alone. First-half operating cash flow fell to $4.1 million from $29.2 million. Inventory consumed $25.7 million of cash and other current assets used $15.1 million, partly offset by a $13.6 million increase in accounts payable.

Inventory reached $133.4 million at June 30, up from $108.0 million at the end of 2025. TPB ended the quarter with $268.3 million in cash, reported net debt of $31.7 million and total liquidity of $339.0 million, including $70.7 million available under its revolving credit facility. The cash balance also benefited from approximately $59.6 million raised through an equity offering during the quarter.

2026 guidance

TPB raised its full-year Modern Oral gross and net sales ranges. The midpoint of the gross sales outlook increased by approximately 17%, while the midpoint of the net sales range increased by approximately 22%.

The adjusted EBITDA range includes continued investment in Modern Oral sales, marketing and trade promotions. The release did not provide a previous EBITDA range, so its direction cannot be determined from the available information.

Management commentary

President and CEO Graham Purdy said investment in retail distribution, commercial capabilities and brand development was supporting consumer adoption and expanding market access for the FRE and ALP brands. Management’s strategy remains centered on the continuing shift in nicotine consumption toward Modern Oral products, even as near-term spending weighs on profitability.

Recent insider transactions

The supplied six-month insider summary records 170,915 shares under purchases across 18 transactions and 6,000 shares sold across two transactions, resulting in a net increase of 164,915 shares. The detailed records show that most recent additions were stock awards rather than open-market purchases, so they should not be interpreted as discretionary buying.

The latest 10 entries consist of nine stock awards and one sale. The available information does not establish a broader conclusion about insiders’ outlook for the company.

Risks investors should monitor

• Commercial investment is pressuring profit: Modern Oral sales are growing rapidly, but SG&A nearly doubled and adjusted EBITDA fell 50.0%.
• Distribution mix is reducing Stoker’s margin: Greater chain-retailer penetration contributed to a decline in adjusted gross margin from 62.5% to 56.9%.
• Zig-Zag remains a revenue headwind: Segment net sales declined 24.8% year over year, leaving consolidated growth increasingly dependent on Modern Oral.
• Cash conversion weakened: First-half operating cash flow fell to $4.1 million as inventory and other current assets absorbed cash.
• Reported gross profit included an unusual benefit: The tariff refund increased reported gross profit, making the headline margin less representative of underlying performance.

Summary

Turning Point Brands’ second-quarter growth was driven by Modern Oral, which reached 48% of company net sales and prompted management to raise its full-year category sales outlook. The central issue is profitability: distribution and brand-building investment, freight costs and lower Stoker’s margins contributed to steep declines in operating income, adjusted EBITDA and EPS. Future results will depend on whether Modern Oral growth can begin to outpace the associated spending while Zig-Zag stabilizes and working-capital demands ease.