Snapshot
22nd Century Group, Inc. reported $4M of revenue in Q1 2026, up -31.1% year over year, with diluted EPS of $-361.60 and an operating margin of -74.0%.
- Revenue
- $4M
- YoY growth
- +-31.1%
- Diluted EPS
- $-361.60
- Operating margin
- -74.0%
$4M
Revenue
+-31.1%
YoY growth
$-361.60
Diluted EPS
-74.0%
Operating margin
01 Key takeaways
What management said
- •During today's call, we may also discuss non-GAAP financial measures, including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, and amortization, as adjusted for certain non-cash or non-operating expenses.
- •We anticipated additional shipments of our VLN products to be minimal while the initial stocking orders were worked through, which allowed time for in-store placement, setup, retailer education, and awareness, among other activities.
- •As a broad overview, looking at 2026, the shift for our company is now 100% focused on execution and growth.
- •Following the rate of sale patterns that we've seen in the early stage of the VLN rollout, we believe we will see measurable growth from all the markets we are in.
- •On the marketing side, with our restructured balance sheet and our retail distribution expanding, we are now at the stage where we're investing in consumer marketing as the highest return on our resources.
- •On the financial side, we are addressing the remaining low or no-margin products that we still produce.
- •For the first quarter of 2026, net revenue was $4.1 million, compared to $3.5 million in the fourth quarter of 2025, an increase of approximately 16.1% on a sequential basis.
- •As Larry noted, while first-quarter revenue improved sequentially, overall top-line and profitability performance still remain below where we are targeting.
- •Finally, adjusted EBITDA for the quarter was negative $2.6 million, compared to negative $2.4 million in the fourth quarter of 2025.
- •While our near-term profitability metrics remain under pressure, our operating focus continues to be on scaling revenue, improving gross margin mix, and managing costs in a disciplined way as we expand the platform.
- •Capital allocation remains disciplined, with resources directed toward distribution growth, VLN commercial support, marketing initiatives, and key opportunities for advancement of our reduced nicotine pipeline.
What went well
- •Net revenue grew approximately 16.1% sequentially to $4.1 million from $3.5 million in Q4 2025, an early indicator of commercial progress as distribution expands.
- •Gross loss narrowed to $0.6 million from $0.8 million in Q4 2025, reflecting improving margin mix.
- •Secured distribution with the number three purveyor of tobacco products in the U.S. for Pinnacle-branded products, where on a sales-per-retail-outlet basis they rank number one.
- •Secured distribution of 22nd Century VLN with the number two purveyor of cigarettes in the U.S. in a limited Illinois market, with consumers finding and buying the products.
- •Restructured balance sheet enabled a shift to investing in consumer marketing, including hiring a new VP of Marketing to drive VLN awareness and adoption.
What went wrong
- •Operating loss widened slightly to $3 million from $2.8 million in Q4 2025.
- •Adjusted EBITDA was negative $2.6 million, worse than negative $2.4 million in Q4 2025.
- •Top-line and profitability performance remained below targeted levels despite sequential improvement.
- •Additional VLN shipments were minimal during the quarter as initial stocking orders were worked through, limiting top-line growth.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Retail outlets | End of 2026 | — | Close to target of 5,000 retail outlets | |
| Distribution expansion | Rest of Q2 and Q3 2026 | — | Adding New York, New Jersey, and Southern California for Pinnacle (approx. 200 outlets); Southeast in Q3 for a new retailer with initial shipments late Q3/early Q4 | |
| Commercial momentum | Back half of 2026 | — | Potential to show much stronger commercial momentum than the first half |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Net revenue | — | Sequential increase of approximately 16.1% to $4.1 million from $3.5 million in Q4 2025 as distribution expanded and product mix evolved |
| Gross loss | — | Improved sequentially to $0.6 million from $0.8 million in Q4 2025 on better mix |
| Operating loss | — | Widened to $3 million from $2.8 million in Q4 2025 as near-term profitability remained under pressure |
| Adjusted EBITDA | — | Negative $2.6 million versus negative $2.4 million in Q4 2025 |
| Cash and cash equivalents | — | Ended the quarter at $9.5 million with disciplined capital allocation |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Strategic focus | 2025 was the transition year from restructuring to growth | Company now 100% focused on execution and growth in retail outlets, points of distribution, and consumer marketing | |
| Consumer marketing | Limited marketing to establish a baseline at launch | Began promoting Pinnacle VLN with cross-promotions and digital fuel rewards; hiring VP of Marketing as consumer adoption is the unlock | |
| Product mix / margins | Exiting unprofitable contracts | Addressing remaining low/no-margin products via pricing first while continuing to exit unprofitable contracts, expecting gross profit improvement as the year progresses |