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Vector Group Ltd (VGR) Q1 2024 Earnings Call Transcript Highlights: Key Financial Metrics and ...

GuruFocus Research
·4-min read

  • Cash and Cash Equivalents: $333 million as of March 31, 2024.

  • Investment Securities and Long-term Investments: Fair value of approximately $179 million.

  • Revenue: $324.6 million for Q1 2024, down from $334.1 million in Q1 2023.

  • Net Income: Increased to $34.8 million in Q1 2024 from $34.7 million in Q1 2023.

  • Earnings Per Share (EPS): $0.22 per diluted common share, consistent year-over-year.

  • Adjusted EBITDA: Increased to $82.8 million in Q1 2024 from $79.1 million in Q1 2023.

  • Adjusted Net Income: Increased to $37.2 million or $0.24 per diluted share in Q1 2024 from $34 million or $0.22 per diluted share in Q1 2023.

  • Tobacco Operating Income: Increased by 5.6% to $83 million in Q1 2024.

  • Tobacco Adjusted EBITDA: Increased 5.5% to $84.4 million in Q1 2024.

  • Gross Margin: 32.9% of revenues in Q1 2024, up approximately 240 basis points from Q1 2023.

  • Retail Market Share: Stable at 5.8% for Liggett.

  • Montego National Retail Market Share: Grew to 4% in Q1 2024 from 3.4% in the prior year period.

  • Store Locations: Montego's distribution expanded to approximately 97,500 stores, up from 82,500 stores in the prior year period.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Vector Group Ltd (NYSE:VGR) reported an increase in net income to $34.8 million in Q1 2024, up from $34.7 million in the same period last year.

  • Adjusted EBITDA for Vector Group Ltd (NYSE:VGR) rose to $82.8 million in Q1 2024 from $79.1 million in Q1 2023.

  • The tobacco segment's operating income increased by 5.6% compared to the prior year period.

  • Montego, the largest discount cigarette brand in the U.S., increased its national retail market share to 4% in Q1 2024, up from 3.4% in the prior year period.

  • Vector Group Ltd (NYSE:VGR) maintained significant liquidity with cash and cash equivalents of approximately $333 million as of March 31, 2024.

Negative Points

  • Overall revenue for Vector Group Ltd (NYSE:VGR) declined to $324.6 million in Q1 2024 from $334.1 million in the corresponding 2023 period.

  • Wholesale shipments for the tobacco segment decreased by 10.8%, which was a larger decline than the industry average of 9.8%.

  • The deep discount segment, while growing, is becoming increasingly competitive, posing challenges for maintaining market share.

  • The ongoing regulatory uncertainties around menthol products could impact future operations and market dynamics.

  • Retail shipments of tobacco products declined by 8.7% compared to the same period in 2023, indicating a potential decrease in consumer demand.

Q & A Highlights

Q: Can you discuss the market share potential for Montego given its recent performance and strategic price increases? A: Nicholas Anson, President and COO of Liggett and Liggett Vector Brands, highlighted Montego's strong performance despite price increases, drawing parallels with other successful brands like Grand Prix and Pyramid. He emphasized the brand's continued growth and excellent retail execution, expressing confidence in Montego's market position and its alignment with the company's mission to offer the best value.

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Q: What impact do you foresee from the delayed government decision on menthol regulation, and how might state-level bans affect the industry? A: Nicholas Anson expressed satisfaction with the delay, viewing it as the correct decision. He anticipates potential state-level bans but expects these to vary by state. The company remains watchful of how these regulatory changes could impact the market.

Q: Is Montego's current distribution nearing its peak, or is there room for further expansion? A: Nicholas Anson noted that while Montego's distribution has significantly increased, there is still potential for growth. The total distribution capacity for Liggett Vector Brands is about 125,000 stores, suggesting further expansion opportunities.

Q: How do you view the long-term industry trends given the current high rate of decline in cigarette sales? A: Nicholas Anson acknowledged the elevated decline rates influenced by macroeconomic factors and the growth of illicit markets. He expects these conditions to persist in the near term but remains optimistic about the discount segment's growth, where Vector Group leads.

Q: With the deep discount category growing, how is the competitive landscape changing, especially with premium brands discounting their products? A: Nicholas Anson remarked that while there is increased discounting from larger competitors, it hasnt significantly impacted the deep discount segment. He believes that Montego's extensive distribution network and regional strategies will effectively manage these competitive pressures.

Q: Can you provide an update on the financial strategy regarding the upcoming maturity of the 10.5% notes in 2026? A: J. Bryant Kirkland, CFO of Vector Group, reassured that the company is evaluating its options with a strong cash position and reduced dividend payouts relative to earnings. The company is working with investment bankers to assess the best strategies moving forward.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.