Q2 2026 22nd Century Group Inc Earnings Call Transcript
Key Points
- Expanded distribution of Pinnacle VLN to nearly 150 high-visibility stores in Metro New York and Northern New Jersey through a major retailer, boosting brand awareness and potential high-margin revenue.
- Launched Pinnacle Pure, a new product in the premium Tier 2 cigarette category, which has limited competition and offers differentiation and shelf-space opportunities.
- Gross loss narrowed to $0.3 million in Q2 2026 from $0.6 million in Q1 2026, reflecting a shift toward higher-margin branded products and improved pricing discipline.
- Targeting expansion from approximately 2,000 to 5,000 retail stores by year-end 2026 across 35 states, with recent entries in key markets like California and Metro New York.
- Maintained a strong balance sheet with $6.1 million in cash and no outstanding debt, supporting disciplined capital allocation toward growth initiatives.
- Net revenue declined 29% sequentially to $2.9 million in Q2 2026, reflecting the intentional wind-down of low-margin contract manufacturing, which may pressure short-term top-line growth.
- Gross margin remained negative in Q2 2026, with a gross loss of $0.3 million, indicating that the pace of margin improvement has been slower than planned.
- Operating loss widened to $3.3 million in Q2 2026 from $3.0 million in Q1 2026, and adjusted EBITDA was negative $3.5 million, showing continued cash burn.
- The company expects legacy CMO volume to continue declining over the next two to three quarters, which could further reduce revenue and factory utilization, impacting absorption.
- The transition away from low-margin CMO business has led to customer losses, as some clients moved to lower-cost suppliers, potentially reducing overall scale and market presence.
Thank you. Welcome to the 22nd Century Group's second quarter 2026 conference call and webcast. (Operator Instructions)
It is now my pleasure to turn the call over to Dan Otto, Chief Financial Officer of 22nd Century Group.
Good morning, everyone, and welcome to 22nd Century Group's second quarter 2026 earnings conference call. Thank you for joining us. With me on the call today is Larry Firestone, Chief Executive Officer.
Before we begin, please note that today's remarks include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements. Please refer to the company's earnings release and SEC filings, including our most recent annual report on Form 10-K, for a discussion of these risks and other factors.
In addition, during today's call, management may refer to certain non-GAAP financial measures. Reconciliations of those measures to the most directly comparable GAAP
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