Q3 2025 Altria Group Inc Earnings Call
Good day and welcome to the Altria Group 2025 third quarter and nine months earnings Conference call.
Today's call is scheduled to last about one hour, including remarks by Altria as a management and a question and answer session.
In order to ask a question. Please press star followed by the number one on your Touchtone phone at any time.
I would now like to turn the call over to Mac Livingston.
Vice President of Investor Relations.
Please go ahead Sir.
Thanks, Angela good morning, and thank you for joining us this morning, Billy Gifford, <unk>, CEO and Sal Mancuso, our CFO, who will discuss <unk> third quarter and first nine months business results.
Earlier today, we issued a press release, providing our results release.
Lease presentation quarterly metrics and our latest corporate responsibility reports are all available at <unk> Dot com.
During our call today, unless otherwise stated we're comparing results to the same period in 2024.
Our remarks contain forward looking statements, including projections of future results.
Please review the forward looking and cautionary statements section at the end of today's earnings release for various factors that could cause actual results to differ materially from projections.
Future dividend payments and share repurchases remain subject to the discretion of our board of directors.
We report our financial results in accordance with U S. Generally accepted accounting principles today's call will contain various operating results on both a reported and adjusted basis.
Adjusted results exclude special items that affect comparisons with reported results.
Descriptions of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures are included in today's earnings release and on our website at <unk> Dot com.
Finally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment.
Refer to existing adult tobacco consumers 21 years of age or older.
With that I'll turn the call over to Bill.
Thanks, Matt Good morning, and thank you for joining us.
<unk> continued to build significant momentum in the third quarter with exciting progress across our businesses.
For the third quarter, we delivered strong financial performance.
Growing adjusted diluted earnings per share by three 6%.
And we continued to make meaningful progress across our smoke free portfolio.
And toward our long term adjacency girls.
One held steady in a highly competitive environment.
And helix announced plans to launch <unk> plus.
<unk> innovative next generation oral product.
Horizon also made important regulatory followings for a joint venture and heated tobacco products.
Looking at our long term adjacent growth opportunities, we announced a collaboration with <unk> to explore opportunities in international innovative smoke free products.
In U S non nicotine products.
And importantly, we continue to demonstrate our commitment to returning value to our shareholders.
In August we are.
Our sixth dividend increase and 56 years.
And yesterday, our board authorized an expansion of our share repurchase program.
My remarks. This morning will focus on results from <unk> and the launch of <unk> plus.
Updates on our heated tobacco and E vapor portfolio.
The state of the regulatory environment.
And our strategic relationship with <unk>.
I will then turn it over to Phil who will provide further details on our business results.
2025 outlook and our continued commitment to providing significant cash returns to shareholders.
Let's begin with one and the nicotine pouch category.
Oral nicotine pouches continue to be the primary driver of the estimated 14, 5% increase in oral tobacco industry volume over the past six months.
In the third quarter nicotine pouches grew to $55 seven share points.
An increase of $11 one share points year over year.
Competitor promotional activity was highly elevated during the third quarter, particularly during September.
Driving incremental growth for nicotine pouches.
We continue to monitor how this elevated promotional activity influences.
Longer term brand adoption.
Despite this competitive landscape helix was steady in the third quarter growing <unk> reported shipment volume to over 42 million cans.
Representing an increase of nearly 1% versus the prior year.
For the first nine months Helix group, one reported shipment volume to over 133 million cans, representing an increase of approximately 15% versus the prior year.
While third quarter shipment volumes for <unk> were in <unk>.
<unk> inventory dynamics, driven by promotional activity in the category.
We remain encouraged by the steady consumer demand reflected in our estimated retail takeaway.
In fact, <unk> retail share of the total oral tobacco category was eight 7% for the third quarter and first nine months Jim.
Demonstrating stability for the quarter and an increase of 0.8 share points for the first nine months.
Speaker #1: Vapor products from retailers and wholesalers , and the potential for further legal action . Ongoing seizures of illicit products , including seizure by Who and US Customs and Border Protection of more than 4 million units of illicit vapour products , with an estimated retail value of over $86 million .
Florence retail price increased by approximately one 5% in the third quarter versus the prior year in contrast to the balance of the nicotine pouch category, where average retail prices for the category declined 7% nationally.
Speaker #1: The largest seizure of this kind and a targeted nationwide operation led by the Drug Enforcement Administration focused on illicit activity at vape shops .
And more than 70% and one major retail chain, a clear reflection of the intense promotional activity during the quarter.
Yet helix as year over year results continued to be a meaningful contributor to the oral tobacco products segment, adjusted OCI stability and.
Speaker #1: These federal actions , alongside efforts at the state and local level , are signs of progress . However , we believe sustained and coordinated enforcement is necessary to materially impact the state of the market .
And adjusted OCI margin expansion in the third quarter.
Helix is positioning itself for long term sustainable success.
Speaker #1: We remain steadfast in our commitment to supporting a well-functioning regulatory system . It is critical to unlock the full potential of tobacco harm reduction .
<unk> recently launched <unk>, plus in Florida, North Carolina and Texas.
And we are encouraged by the recent actions from the FDA.
Signaled progress toward a more efficient and transparent authorization process for nicotine pouches, which I'll discuss later in my remarks.
Speaker #1: These ongoing enforcement efforts are essential to provide adult consumers with access to regulated products that are supported by science and are aligned with public health goals .
One plus launch with three flavors and three nicotine strengths.
We believe our complementary to the current portfolio.
Speaker #1: Beyond enforcement , have been advocating for the FDA to accelerate product authorisations and establish a responsible marketplace for smoke free products . Regulatory speed and clarity are also essential to delivering innovative options that meet adult consumer preferences and advance harm reduction in September , the FDA launched a pilot program to streamline pmta reviews for oral nicotine pouches and helix was notified by the FDA that applications for Orange Plus are included in the program .
We believe one plus is a premium and differentiated product that we expect to appeal to both adults who dip.
And competitive nicotine pouch consumers.
Foreign plus uniquely delivers on three desirable attributes for pulp consumers.
Nicotine delivery and flavor satisfaction.
In recent research, we compared one plus mint against several leading competitive brands.
While a small sample size or <unk>, plus outperformed all competitive the brands and the sample.
Speaker #1: We're encouraged by this development from the FDA , and we're actively engaging with the FDA on these product applications . While the pilot only applies to certain nicotine pouches , we hope it signals broader FDA efforts to increase the speed of regulatory decisions across all smoke free platforms .
Foreign plus achieved the highest purchase intent score.
Given by the comfort of the pouch.
In addition, innovation and consumer preferences will remain at the forefront of helix strategy.
<unk> continues to build a pipeline of new volume plus flavors.
And looks forward to bringing them to the U S market.
Speaker #1: As we pursue the smoke free opportunity within the US . We remain committed to our long term adjacent growth goals . In September , we took another step forward when we announced a new collaboration with Ctag .
In heated tobacco.
Horizon completed a key milestone when its path to bring <unk> to the U S.
In August Horizon, Filenet combined PMT.
In our tpa with the FDA for plume and marble heated tobacco sticks.
Speaker #1: First , we are jointly exploring opportunities to grow global demand for nicotine pouch products , including the potential expansion of the on portfolio into select international markets .
We believe the science and evidence supporting Horizons applications are compelling and present, a strong case for FDA authorizations.
Our teams are working diligently on <unk> go to market plans and we look forward to engaging smokers with this innovative product.
Speaker #1: As part of our initial steps in international modern oral , we entered into an agreement with Ctag to acquire an ownership interest in another snooze factory .
Moving to our E vapor business and enjoy.
Speaker #1: The manufacturer of the loop nicotine Pouch brand . Loop is currently available in a range of strengths with unique flavors . Our research shows that complex flavors of driving growth for modern oral and international markets , and we are pleased to add our investment in ASF to complement our portfolio of on En plus and Fumi to effectively compete across all modern oral product segments .
We believe we have completed the product design of a modified enjoy a solution that addresses all four disputed patent.
Our teams are evaluating the potential pathways to bring the modified ace product to market.
During the third quarter, both enjoy and dual initiated new litigation against one another.
Jewel initiated litigation in Federal Court and before the ITC against enjoy.
Certain claims of patent infringement based on sales of enjoyed daily.
Speaker #1: Second , our collaboration includes the exploration of opportunities in US Non-nicotine specifically in the energy and wellness space with Ctags Korea , Ginseng Corporation leveraging their product expertise and our commercial capabilities .
And any other products enjoying may be developing that would infringe <unk> patents.
We do not expect a final determination.
From the ITC before early 2027.
And intend to vigorously defend our positions in this litigation.
Speaker #1: In addition , as part of our relationship with Ctag , we're exploring ways to improve operational efficiency in traditional tobacco with the potential benefits for both companies and our respective home regions .
In addition, enjoy initiated litigation against Jewel in Federal Court and before the ITC.
Turning claims of patent infringement.
Based on the sale of certain fuel products.
As we assess our path forward with Ace and worked diligently on our innovative product pipeline and E vapor the market remains saturated with flavored disposable E vapor products.
Speaker #1: We believe this collaboration further supports our enterprise goals and may strengthen our capabilities relevant to international nicotine products . We're excited about our new relationship with Ctag and look forward to providing updates on our joint efforts .
The majority of which we believe have abated the regulatory process.
At the end of the third quarter, we estimate that E vapor category included approximately 21 million vapors.
Speaker #1: In summary , Altria continued to build momentum in the third quarter . At core Tobacco businesses remained resilient . We advanced our smoke free portfolio and we opened new pathways for long term adjacent growth in international , modern , oral and US non-nicotine innovation .
Nearly $2 million versus a year ago.
During the same period disposable vapors increased by an estimated $2 4 million to nearly $15 million.
We believe that flavored disposable E vapor products continue to represent over 60% of the category.
Speaker #1: These efforts support the commitment to our vision and enterprise goals . I'm confident in our strategy , energized by the opportunities ahead and thankful for our team's continued dedication to delivering long term shareholder value .
This remains a significant issue, but we are encouraged by the recent enforcement actions and constructive regulatory dialogue.
That signal progress.
For some time, we have advocated for stronger enforcement against the list of products.
Speaker #1: I'll now turn it over to Sal to provide more detail on the business environment and our results .
As well as foreign acceleration and FDA market authorizations for smoke free products.
Speaker #2: Thanks , Billy . Altria delivered strong third quarter and first nine months financial performance , adjusted diluted earnings per share increased 3.6% in the third quarter , and by 5.9% for the first nine months in the Smokeable product segment , adjusted operating company's income grew by 0.7% to nearly $3 billion in the third quarter , and by 2.5% to $8.4 billion for the first nine months .
During the third quarter, we observed notable enforcement efforts.
Targeting of illicit products and welcomed positive plans from the FDA regarding the pace of authorizations.
Within the nicotine oral nicotine pouch category.
On the enforcement front, we continued to see elevated engagement and action from.
From federal agencies and government officials.
These actions included.
Coordinated raids executed by the federal multi agency tax task force across the U S, resulting in the seizure of hundreds of thousands of unlisted vapor vapor products from retailers and wholesalers.
Speaker #2: Adjusted OCI margins expanded to 64.4% for the third quarter , and first nine months , representing impressive margin growth of 1.3 percentage points and 2.7 percentage points , respectively .
And the potential for further legal action.
Ongoing seizures of illicit products, including seizure by HHS and U S customs and border protection of more than 4 million units of illicit vapor products.
Speaker #2: Smokeable products segment reported domestic cigarette volumes declined by 8.2% in the third quarter , and 10.6% for the first nine months , when adjusted for trade inventory movements and calendar differences , the segment's domestic cigarette volumes for the third quarter declined by an estimated 9% , slightly above the estimated 8% volume declines at the industry level for the first nine months .
With an estimated retail value over $86 million the largest seizure, but at this time.
And a targeted nationwide operation.
Led by the drug enforcement administration.
Focused on illicit activity at vape shops.
These federal actions alongside efforts at the state and local level are signs of progress.
Speaker #2: When adjusted for calendar differences and trade inventory movements, the segment's domestic cigarette volumes declined by an estimated 10.5% and by 8.5% at the industry level.
However, we believe sustained and coordinated and enforcement is necessary to materially impact the state of the market.
We remain steadfast in our commitment to supporting a well functioning regulatory system.
Speaker #2: PMU rosé continues to execute on its strategy of maximizing profitability over the long term while maintaining its focus on Marlboro and the premium segment .
Is critical to unlock the full potential of tobacco harm reduction.
These ongoing enforcement efforts are essential to provide adult consumers with access to regulated products.
Speaker #2: PMU recognizes the opportunity to compete within the discount segment , guided by data driven strategies within the highly profitable premium segment . Marlboro maintained its long standing leadership in the category in the third quarter , Marlboro expanded its share of the premium segment by 3/10 to 59.6% versus the prior year , and by one tenth sequentially at the same time , PMU continued to strategically invest behind basic , appealing to a price sensitive cohort of adult smokers within the discount segment .
Our supported by science and are aligned with public health goals.
Beyond enforcement, we have been advocating for the FDA to accelerate product authorizations.
And established a responsible marketplace for smoke free products.
Regulatory speed and clarity are also essential to delivering innovative options that meet adult consumer preferences and advanced harm reduction.
In September the FDA and launched a pilot program to streamline <unk> reviews for all nicotine pouches.
And helix was notified by the FDA that applications for <unk> plus are included in the program.
Speaker #2: Many adult smokers continue to face discretionary spending pressures resulting from a variety of macroeconomic headwinds, including the compounding effects of inflation. Leveraging PM USA's data analytics and robust tools, Basic grew 0.9 share points sequentially and 1.4 share points year over year for the third quarter. The RGM segment of the industry expanded by 2.4 share points year over year, with Basic capturing over half of that growth.
We're encouraged by this development from the FDA and we are actively engaging with the FDA on these product applications.
While the pilot only applies to certain nicotine pouches.
We hope it signals broader FDA efforts.
To increase the speed of regulatory decisions across all smoke free platforms.
As we pursue the smoke free opportunity within the U S.
We remain committed to our long term adjacent growth goals.
In September we took another step forward, when we announced a new collaboration with KPMG.
Speaker #2: Importantly , our data show that most of basic share gains came from adult smokers already within the discount segment , with limited impact on Marlboro as a result of the combined efforts across the PMU essay portfolio of brands , cigarette retail share increased sequentially for the second consecutive quarter to 45.4% , growing 0.3 share points in the third quarter .
First we are jointly exploring opportunities to grow global demand for nicotine pouch products.
Including the potential expansion of the owned portfolio into select international markets.
As part of our initial steps in international modern oral we entered into an agreement with <unk>.
To acquire an ownership interest in another snus factory.
The manufacturer of the loop nicotine pouch brand.
Speaker #2: Cigars also continued to be a meaningful contributor to our Smokeable products segment . Results for the third quarter , and the nine months , Middleton reported shipment volume increased 2% and 1.1% , respectively , as Middleton outperformed in the large mass cigar industry .
Group is currently available in a range of strengths with unique flavors.
Our research shows that complex flavors of driving growth for modern oral in international markets.
And we are pleased to add our investment in ASF to complement our portfolio of on foreign plus and fumi to effectively compete across all modern oral product segments.
Speaker #2: Let's turn now to the oral tobacco products segment in the third quarter , adjusted OCI declined by less than 1% over the same period .
Second collaboration includes the exploration of opportunities in U S. Non nicotine spa.
Specifically in the energy and wellness space with <unk> Korea Ginseng Corporation.
Speaker #2: The segment saw improved profitability through impressive adjusted OCI margin expansion of 2.4 percentage points to 69.2% for the first nine months . Adjusted OCI increased by 3.3% with adjusted OCI margin expansion of 1.8 percentage points to 69% .
Leveraging their product expertise and our commercial capabilities.
In addition, as part of our relationship with KPMG were exploring ways to improve operational efficiency in traditional tobacco.
With the potential benefits for both companies and our respective home regions.
Speaker #2: Helix's year over year performance was a meaningful contributor to the stability of adjusted OCI in the third quarter and to the adjusted OCI growth for the first nine months .
We believe this collaboration further supports our enterprise goals.
And may strengthen our capabilities relevant to international nicotine products.
We're excited about our new relationship with <unk> and look forward to providing updates on our joint efforts.
Speaker #2: Total segment reported shipment volume decreased 9.6% for the third quarter , and 5.2% for the first nine months . As growth in on was more than offset by lower MST volumes .
In summary.
<unk> continued to build momentum in the third quarter.
Our core tobacco businesses remained resilient.
We advanced our smoke free portfolio.
Speaker #2: When adjusted for calendar differences and trade inventory movements , we estimate that third quarter and first nine months oral tobacco Products segment volumes declined by an estimated 5.5% and 3.5% , respectively .
And we opened new pathways for long term adjacent growth and international modern oral and U S. Non nicotine innovation.
These efforts support the commitment to our vision and enterprise goals.
Im confident in our strategy energized by the opportunities ahead and thankful for our team's continued dedication to delivering long term shareholder value.
Speaker #2: The oral tobacco products segment retail share was 31.1% for the third quarter and 32.9% for the first nine months. In the highly profitable moist smokeless tobacco segment, Copenhagen continued to maintain its longstanding premium leadership.
I'll now turn it over to <unk> to provide more detail on the business environment and our results.
Thanks Billy.
<unk> delivered strong third quarter and first nine months financial performance.
Speaker #2: Turning to Abi's financial results , we recorded $157 million of adjusted equity earnings in the third quarter , up 9% versus the prior year .
Adjusted diluted earnings per share increased three 6% in the third quarter and by five 9% for the first nine months.
And the smokable products segment.
Speaker #2: As Billy mentioned , our businesses performed well in a dynamic environment during the first nine months of the year , and we effectively maintained the strength of our core tobacco businesses while investing toward our vision as a result , we raised the lower end of our 2025 guidance range .
Adjusted operating companies income grew by 0.7% to nearly $3 billion in the third quarter and by two 5%.
284 billion for.
For the first nine months.
Adjusted OCI margins expanded to 64, 4% for the third quarter and first nine months representing.
Speaker #2: We now expect to deliver adjusted diluted EPs in a range of $5.37 to $5.45 , representing a growth rate of 3.5% to 5% from a base of $5.19 in 2020 .
Representing impressive margin growth of one three percentage points and two seven percentage points respectively.
Smokable products segment reported domestic cigarette volumes declined by eight 2% in the third quarter and 10, 6% for the first nine months.
Speaker #2: For , we expect EPs growth to moderate in the fourth quarter as we lap the lower share count associated with the 2024 accelerated share repurchase program and the benefit of the MSA Legal Fund expiration .
When adjusted for trade inventory movements and calendar differences the segments domestic cigarette volumes for the third quarter declined by an estimated 9%.
Speaker #2: We are also mindful of the challenged state of tobacco consumers and will continue to closely monitor their purchasing behaviors . Our strong financial performance for the first nine months enabled us to return nearly $6 billion to our shareholders , including $5.2 billion in dividends and $712 million in share repurchases .
Slightly above the estimated 8% volume declines at the industry level.
For the first nine months when adjusted for calendar differences and trade inventory movements the segments domestic cigarette volumes declined by an estimated 10, 5%.
And by eight 5% at the industry level.
PM USA continues to execute on its strategy of maximizing profitability over the long term.
Speaker #2: We remain committed to providing cash returns to our shareholders as demonstrated by our recent dividend increase and share repurchase announcement in August . Our board increased our regular quarterly dividend by 3.9% significant to one dollars $0.06 per share , marking our 60th dividend increase in 56 years .
While maintaining its focus on Marlboro in the premium segment.
PM USA recognizes the opportunity to compete within the discount segment.
Diluted by data driven strategies.
Within the highly profitable premium segment Marlboro maintained its long standing leadership in the category.
In the third quarter Marlboro expanded share of the premium segment by 310 to.
Speaker #2: This milestone underscores our legacy of delivering consistent shareholder value and highlights the resilience of our businesses through decades of change in today , we announced that our board authorized the expansion of our existing share repurchase program from $1 billion to $2 billion , which now expires on December 31st , 2026 .
<unk> hundred 59, 6% versus the prior year and by 110 sequentially.
At the same time.
<unk> continued to strategically invest behind basic.
Peeling to a price sensitive cohort of adult smokers within the discount segment.
Many adult smokers continue to face discretionary spending pressures, resulting from a variety of macroeconomic headwinds, including the compounding effects of inflation.
Speaker #2: Lastly, our balance sheet remained strong. Our debt to EBITDA ratio as of September 30th was 2 times, in line with our target of approximately 2 times.
Leveraging PM Usa's data analytics and robust our GM tools.
Speaker #2: With that , we'll wrap up and Billy and I will be happy to take your questions . While the calls are being compiled , I'll remind you that today's earnings release and our non-GAAP reconciliations are available on Altria .
Basic grew 0.9 share points sequentially.
And one four share points year over year for the third quarter.
The discount segment of the industry expanded by two four share points year over year with basic capturing over half of that growth.
Speaker #2: Com we've also posted our usually our usual quarterly metrics , which include pricing , inventory and other items . Operator let's open the question and answer period .
Importantly, our data show that most of basic share gains came from adult smokers already within the discount segment with limited impact on Marlboro.
Speaker #3: Thank you . Once again . As a reminder , if you would like to ask a question , please press the star key , followed by the number one on your touchtone phone at this time , investors , analysts , and media representatives are now invited to participate in the question and answer session .
As a result of the combined efforts across the PM USA portfolio of brands.
Cigarette retail share increased sequentially for the second consecutive quarter to 45, 4%.
Speaker #3: We will take questions from the investment community first . Our first question comes from Matt Smith with Stifel . Please go ahead .
Growing 0.3 share points in the third quarter.
<unk> also continued to be a meaningful contributor to our smokable products segment results.
Speaker #4: Hi . Good morning , Billy , and thank you for taking my question . Sal , you raised the low end of the guidance again , which is nice to see here , but the the fourth quarter implies a deceleration in the earnings growth .
For the third quarter and the nine months Middleton reported shipment volume increased 2% and one 1%, respectively as Middleton outperformed and the large mass cigar industry.
Speaker #4: You called out lapping the share repurchase and the MSA legal fee expiration . Are there any other key puts and takes as we think about the fourth quarter and more importantly , the path to growing smokeable OCI again ?
Let's turn now to the oral tobacco products segment.
Speaker #4: Thank you .
Speaker #2: Thank you Matt . No . As you as you mentioned , we did talk about the share repurchase and MSA legal fund . I also say we continue to monitor consumer spending .
In the third quarter, adjusted OCI declined by less than 1%.
Over the same period the segments saw improved profitability through impressive adjusted OCI margin expansion of two four percentage points to 69, 2%.
Speaker #2: The the marketplace remains dynamic . So I would I would really focus on that . But we feel really good about the ability to narrow guidance by raising the bottom .
For the first nine months adjusted OCI increased by three 3%.
Speaker #2: We're very pleased with the first nine month financial performance . And then Smokeable profitability again . We feel really good about PMU performance , their ability to expand margins for Marlboro remain strong within the premium segment .
With adjusted OCI margin expansion of one eight percentage points to 69%.
Helix is year over year performance was a meaningful contributor to the stability of adjusted OCI in the third quarter and to the adjusted OCI growth for the first nine months.
Speaker #2: So we feel really good about the Smokeable business and , you know , happy to be able to provide the guidance .
Total segment reported shipment volume decreased nine 6% for the third quarter and five 2% for the first nine months as growth in on which more than offset by lower MST volumes.
Speaker #4: Thank you . And as a follow up , you called out the underlying cigarette industry rate of decline moderating on a sequential basis .
Speaker #4: Billy , I know you provide the 12 month bridge that shows the macroeconomic factor , but with , you know , sometimes that 12 month bridge can not move as much on a quarter to quarter basis .
When adjusted for calendar differences and trade inventory movements, we estimate that third quarter and first nine months oral tobacco products segment volumes declined by an estimated five 5% and three 5% respectively.
Speaker #4: So when we think about the moderation that we saw sequentially , can you talk about the drivers that you think are leading to that ?
Speaker #4: Thank you . Pass it on that .
Speaker #1: Yeah . Thanks for the question , Matt . I think when you step back and look at it , you're right . The 12 month doesn't move quite as quickly .
Oral tobacco products segment retail share was 31, 1% for the third quarter and 32, 9% for the first nine months.
Speaker #1: I think what you're seeing in the marketplace and look , our consumer is still under pressure . Again , they don't need improvement .
Speaker #1: They just need consistency . And we've seen a bit of consistency around gas prices , inflation , things of that nature . And we'll see how that continues through the year .
In the highly profitable moist smokeless tobacco segment, Copenhagen continued to maintain its longstanding premium leadership.
Speaker #1: And I think we're starting to see some of the, and I talked about in my remarks, some of the stepped-up enforcement in e-vapor.
Speaker #1: It puts consumers back at play . We would love to be able to keep them in the in the smokeless category . But when when enforcement happens , it certainly puts them at play .
Turning to <unk> financial results, we recorded $157 million of adjusted equity earnings in the third quarter.
Speaker #1: And they consider other nicotine categories .
Up 9% versus the prior year.
As Bill mentioned, our businesses performed well in a dynamic environment during the first nine months of the year.
Speaker #3: And we'll take our next question from Bonnie Herzog with Goldman Sachs . Please go ahead .
Speaker #5: All right . Thank you . Good morning . I guess I have a question first on the nicotine pouch category . You know , the competitive environment has really intensified .
And we effectively maintained the strength of our core tobacco businesses, while investing toward our vision.
Speaker #5: So could you touch on what you're seeing and whether I guess you've been happy with the performance and positioning of on considering the moderating growth .
As a result, we raised the lower end of our 2025 guidance range.
We now expect to deliver adjusted diluted EPS in the range of $5 37.
Speaker #5: And then could you talk about some of your initiatives that you're implementing , I guess , to maybe turn the performance around ? I guess I'm kind of wondering , do you feel that you need to step up promotional spend and then finally , could you maybe share early feedback on the rollout of On plus ?
To $5 45.
Representing a growth rate of three 5% to 5% from a base of $5 19.
In 2024.
We expect EPS growth to moderate in the fourth quarter as we lap the lower share count associated with the 2020 for accelerated share repurchase program and the benefit of the MSA legal fund exploration.
Speaker #5: And I guess assuming it's positive , you know , should we assume you'll roll out that brand nationally ?
Speaker #1: Yeah . Thanks for the question , Bonnie . You're right . The competitive environment significantly stepped up and we tried to dimensionalize it .
Speaker #1: You know , on was moving up . Call it 1.5% at retail from a price perspective . While the entire category was down 7% on a national basis .
We are also mindful of the challenged state of tobacco consumers and will.
<unk> to closely monitor their purchasing behaviors.
Speaker #1: But as much as 70% in a major retail . So it was significant shift in promotional spending by competitors . You know , we we had that early on with the on in the , in the marketplace when we launched and we talked about how we're bringing the revenue growth management tools over to the category .
And our strong financial performance for the first nine months enabled us to return nearly $6 billion to our shareholders, including $5 2 billion in dividends and $712 million in share repurchases.
Speaker #1: So we're extremely pleased with the performance where we were moving up in retail price and the category was moving down significantly . I know people get hung up on some of the shipment volume .
We remain committed to providing significant cash returns to our shareholders as demonstrated by our recent dividend increase and share repurchase announcement.
Speaker #1: I think the the encouraging aspect that we see is on the retail takeaway volume . And when you look at that , that's the true demand by the consumer .
In August our board increased our regular quarterly dividend by three 9% to $1 <unk> per share.
Speaker #1: And that was steady even in that highly competitive environment , much too early on . On plus to really mention , we are certainly excited about the differentiation that product has .
Marking our sixth dividend increase and 56 years.
Speaker #1: And research . And we're excited to be able to bring that to market and expand it . When it's appropriate .
This milestone underscores our legacy of delivering consistent shareholder value.
Speaker #5: All right . Thanks for that . And then I just wanted to also ask about your cptg partnership . You know , it was recently expanded and you touched on this , but just hoping for a little more color on the operational efficiencies .
And highlights the resilience of our businesses through decades of change.
And today.
We announced that our board authorized the expansion of our existing share repurchase program from $1 billion to $2 billion, which now expires on December 31 2026.
Speaker #5: You see , especially as it relates to , you know , opportunities to maybe take advantage of the double duty drawback . Also , could you give us a little more color on , you know , I guess opportunities for alternative revenue streams as well as , you know , further expansion internationally given this partnership .
Lastly, our balance sheet remained strong our debt to EBITDA ratio as of September 30 was two times in line with our target of approximately two times.
Speaker #5: Thank you .
Speaker #1: Yeah . Thanks , Bonnie . And you touched on two of the three . We really see it as three pronged . Certainly the modern oral initiative being able to expand on and on .
With that.
Speaker #1: Plus and international markets is something that we'll be exploring . Rounding out our portfolio with the inclusion of loop into that . So we feel like that completes the portfolio and we look forward to continuing discussions with them on how to think about expanding and internationally into other markets .
We'll wrap up and Billy and I will be happy to take your questions.
While the calls are being compiled I'll remind you that today's earnings release, and our non-GAAP reconciliations are available on <unk> Dot com.
We've also posted our usually our usual quarterly metrics, which include pricing inventory and other items.
Speaker #1: The second point is certainly the non-nicotine opportunities, and I tried to highlight a little bit where we would explore working with them.
Speaker #1: They have certainly the product expertise and the Korean red ginseng , and we would look to work with them based on our commercial distribution strength in the US of what are the opportunities there and certainly we'll share more when it's appropriate .
Operator, let's open the question and answer period.
Thank you.
Once again as a reminder, if you would like to ask a question. Please press the Starkey followed by the number one on your Touchtone phone at this time.
Speaker #1: And the third was the operational efficiencies . And what we saw there was it was the ability to adapt our manufacturing center for cigarettes , for items that are specific to international markets , whether that be pack size or trace and tracking and things of that nature .
Investors analysts and media Representatives are now invited to participate in the question and answer session.
We will take questions from the investment community first.
Our first question comes from Matt Smith with Stifel. Please go ahead.
Hey, Good morning billion Salvi can you for taking my question.
Speaker #1: Certainly, to your point, it allows us to take advantage of duty drawback. That's a benefit of it. But it also opens up the door for us to think about international opportunities in the future.
So you raised the low end of the guidance again, which is nice to see here, but the.
The fourth quarter implies a deceleration of the earnings growth you called out lapping the share repurchase and the MSA legal fee exploration are there any other key puts and takes as we think about the fourth quarter and more importantly, the path to growing smokable OCI again. Thank you.
Speaker #5: All right . Thank you . I'll pass it on .
Speaker #6: Thanks .
Speaker #3: And as a reminder , it is star one . If you'd like to ask a question , we'll go next to Eric Sirota with Morgan Stanley .
Thank you Matt.
Speaker #3: Please go ahead .
No as you as you mentioned, we did talk about the share repurchase and MSA legal final I'll also say we continue to monitor.
Speaker #7: Thanks , guys . Good morning . Billy . Starting on on plus realize that the very early days . But you did mention it premium positioning .
Consumer spending.
Marketplace remains dynamic.
So I would really focus on that but we feel really good about the ability to narrow guidance by raising the bottom. We're very pleased with the first nine months financial performance.
Speaker #7: Can you talk a bit about the price point as we launch in the three states where we did, arising simply a matter of weeks or less.
Speaker #7: But how are you thinking about the relative price point of on plus relative to on and relative to competitors , which I realize are moving target at the moment ?
And then <unk>.
Smokable profitability again, we feel really good about.
PM Usa's performance.
Their ability to expand margins for <unk> remains strong within the premium.
Speaker #7: Then Sal controllable costs and smokables were up pretty significantly year on year . Realize they were down in a year ago , so there was perhaps a comparison issue .
<unk> segment.
So we feel really good about the smokable business and.
Happy to be able to provide the guidance.
Thank you and as a follow up you called out the underlying cigarette.
Speaker #7: But how are you thinking about controllable costs going forward? Where is there any additional color you could talk about in the quarter? And, you know, the smokable OCI growth was relatively muted at less than 1%.
Industry rate of decline moderating on a sequential basis.
I know you provide the 12 month bridge that shows the macroeconomic factor but.
Sometimes that 12 month bridge Ken.
Not moved as much on a quarter to quarter basis. So when we think about the moderation that we saw sequentially can you talk about the drivers that you think are leading to that thank you sit on it.
Speaker #7: You know , was that really the controllable costs or are there other factors that you'd point to that constrain the OCI growth in the quarter ?
Yes. Thanks for the question, Matt I think when you step back and look at it Youre right the 12 months.
Speaker #7: Thank you .
It doesn't move quite as quickly.
Speaker #1: Yeah . Thanks , Eric . And so I'll kick us off and then Sal can follow up with the question for him . I think when you think about on plus we certainly see that as a premium priced product because of the differentiation in the satisfaction we think it brings in the experience to the consumer .
I think what youre seeing in the marketplace and look at our consumer still under pressure.
Again, they don't need improvement, they just need consistency and we've seen a bit of consistency around gas prices inflation things of that nature, and we'll see how that continues through the year and I think we're starting to see some of the and I talked about in my remarks. Some of the stepped up enforcement in E vapor puts consumers backup play I believe wed love to be able to keep them in the <unk>.
Speaker #1: In our research , the consumers choose that as the top product in their from a total experience standpoint , and we think it can demand a premium price at retail , certainly in any introduction you have introductory price promotions .
This category, but when when enforcement happens it certainly puts them at play and they consider other.
Speaker #1: We know as soon as we get it in consumers hands , they experience that differentiation that I'm trying to highlight to you . And so we'll certainly have introductory price promotions as as we look to expand when appropriate .
Nicotine categories.
And we will take our next question from Bonnie Herzog with Goldman Sachs. Please go ahead.
Speaker #2: Good morning Eric and as far as controllable costs go , I guess I'd start by by saying that I would not look at controllable costs quarter by quarter .
Alright, Thank you good morning.
Amit question first on the nicotine patch category and the competitive environment hubs really intensified so could you touch on <unk> and whether I guess.
Speaker #2: I think I really believe you need to look at the costs over the long term . Exactly . For the reasons you highlighted in the question .
And happy with the profile from a positioning of on considering the moderating growth.
Speaker #2: There are some comparison issues . Costs are not linear . There's timing within the quarter . So you touched on that in the question .
And then could you talk about.
Okay.
Implementing a destination terminal performance around I guess I'm kind of wondering.
Speaker #2: I think you were you were right to point that out as far as controllable costs going forward . I'm going to be careful not to kind of lean into future guidance and things like that .
Do you feel that you need to step up promotion of span.
And then finally could you maybe share early feedback on the rollout of on question I guess, assuming it's positive and should we assume the overall outback brand last time.
Speaker #2: But I would tell you how we think about costs , obviously , in a declining category like Smokeable and cigarettes in particular , cost management is an important part of the growth algorithm , along with pricing .
Yeah. Thanks for the question Bonnie Youre right.
Competitive environment significantly stepped in when we tried to dimensionalize it.
Onward, moving up call. It one 5% at retail from a price perspective, while the entire category was down 7% on a national basis, but as much as 70% and a major retail. So it was a significant shift in promotional spending by competitors.
Speaker #2: We do manage our overall costs . Obviously , we've shared with you the optimized and accelerate program that that program is not just about effective cost management and cost reductions .
We had that early on with the on in the.
In the marketplace, when we launched and we've talked about how we're bringing the revenue growth management tools over to the category. So we're extremely pleased with the performance, where we were moving up in retail price.
Speaker #2: It's also about better performance and speed to market . And we are taking those cost savings and reinvesting that in our future . I'll also share that , you know , we we spend a lot of time continuing to hone our data analytics and our revenue growth management tools , and that has been extremely helpful .
The category was moving down significantly.
People get hung up on some of the shipment volume I think the encouraging aspect that we see is on the retail takeaway volume and when you look at that that's the true demand by the consumer and that was steady even in that highly competitive environment.
Speaker #2: And while it manifests itself as price realization in the PNL , I look at that as productivity because we are better able to use promotional investments to support our brands and PM USA and our data analytics team continue to terrific job of using data analytics .
Much too early on on costs to really mention that we are certainly excited about the differentiation of that product has and research and.
Excited to be able to bring that to market and expand it when it's appropriate.
Alright, Thanks for that and then I just wanted to also ask about Dr. K Tianjin partnership.
Speaker #2: And those tools extremely effectively . So we're very happy about that . And then you know , OCI for Smokeable , I really would look at that over a longer term .
<unk> recently expanded and you touched on this.
Hoping for a little more color on the operational efficiencies you see especially as it relates to opportunities to maybe take advantage of the double duty drawback.
Speaker #2: Again , not a particular quarter . Smokeable is up 2.5% on a year to date basis . Very pleased with its performance , especially when you see the strength of Marlboro within the premium segment .
And also could you give us a little more color on I guess opportunities for alternative revenue streams as well as further expansion internationally given this partnership thank you.
Speaker #7: Great . Thanks so much . I'll pass it on .
Yeah, Thanks, Bonnie and you touched on two of the three we really see this three pronged certainly the moderate oral initiative being able to expand on an owned plus and international markets is something that we'll be exploring rounding out our portfolio with the inclusion of loop into that so we feel like that completes the portfolio.
We look forward to continuing discussions with them on how to think about expanding internationally into other market.
The second point is certainly the non nicotine opportunities and I tried to highlight a little bit where we would explore working with them. They have certainly the product expertise and the Korean red ginseng.
And we would look to work with them based on our commercial distribution strength in the U S of what are the opportunities there and certainly we'll share more when its appropriate and the third was the operational efficiencies and what we saw there was it was the ability to.
Adapt our manufacturing center for cigarettes.
For items that are specific to international markets, whether that'd be pack size are tracing tracking and things of that nature.
Certainly to your point allows us to take advantage of duty drawback, that's a benefit of it.
But it also opens up the door for us to think about international opportunities in the future.
Alright, Thank you I'll pass it on.
Okay.
And as a reminder, it is star one if you'd like to ask a question.
We'll go next to Eric <unk> with Morgan Stanley. Please go ahead.
Thanks, guys good morning.
Bill starting on on plus.
At the very early gains.
But you did mention it.
And premium positioning could you talk a bit about the price point as the launch and.
The three states, where you did rising.
Only a matter of weeks or less but how are you thinking about the relative price point.
On plus relative to <unk> and relative to competitors, which I realize are a moving target at the moment.
<unk>.
Our controllable costs and smokable holes were up pretty.
Pretty significantly year on year, whereas they were down.
And a year ago scenarios, perhaps.
Yes.
Ericsson's issue, but how are you thinking about controllable costs going forward, where is there any additional color you could talk about in the quarter.
<unk>.
The smokable OCI growth was relatively muted at less than 1%.
Was that really the controllable costs.
Or are there other factors that you'd point to that constrained the OCI growth from a quarter. Thank you.
Yes, thanks, Eric So I'll kick softened in south and follow up with a question for him.
When you think about loan plus we certainly see that as a premium priced product because of the differentiation and the satisfaction. We think it brings and the experience for the consumer and our research the consumers choose that.
BOP product in there from a total experience standpoint, and we think in demand the premium priced at retail certainly in any introduction you have introductory price promotions, we know as soon as we get it in consumers' hands.
<unk> experienced that differentiation that I'm trying to highlight to you and so we will certainly have introductory price promotions as as we look to expand when appropriate.
Good morning, Eric.
As far as controllable costs go I guess I'd start by.
By saying that I would not look at controllable cost quarter.
Quarter by quarter, I think it really believe you need to look at the cost over the long term exactly for the reasons you highlighted in the question.
There are some comparison issues.
<unk>.
Costs are not linear there is timing within a quarter or so.
You touched on that in the question I think youre right to point that out.
As far as controllable costs going forward.
I'm going to be careful not to.
<unk>.
Lean into future guidance and things like that but I would tell you. How we think about cost obviously in a declining category like smokable and cigarettes in particular cost management is an important part of the growth algorithm along with pricing.
We do manage our overall cost obviously.
We shared with you the optimize and accelerate program.
That.
That program is not just about effective cost management and cost reductions social about better performance and speed to market and we are taking those cost savings and reinvesting that in our future I'll also share that.
We spend a lot of time, continuing to hone our data analytics and our revenue growth management tools and that has been extremely helpful and while it manifest itself as price realization in the P&L I look at that as.
Productivity, because we are better able to use promotional investments to support our brands and PM USA and our data analytics team continue to do.
Terrific job of using data analytics, and those or GM tools extremely effectively so.
We're very happy about that and then OCI for Smokable I really would look at that over a longer term again not.
A particular quarter.
<unk> is up two 5% on a year to date basis very pleased with its performance, especially when you see the strength of Marlboro within the premium segment.
Great. Thanks, so much I'll pass along.
Sure.
We'll go next to Farha Berg with UBS. Please go ahead.
Thanks, guys good morning, everyone.
A couple from me as well first.
If I could come back on the Qt.
Drawbacks.
We take a bigger look at the.
The picture Altria is likely to make around $3 million in federal excise tax payments this year.
Should this be the amount that we think about the potential.
Benefit from from the Juicy drawbacks and is this likely to be the sort of key engine that drives group EPS growth to high single digits over the next couple of years two to meet the mid single digits.
<unk> Q2 2028. So that's the first question. This is a second one.
<unk>.
Coming back to.
The pilot program that the FDA is.
It's running.
Does this could this impact your decision to go ahead with the national launch on Us.
Thus I E.
You may wait for for the decision on this or you may take a decision irrespective of the program.
And the second one on that is is why do you think it's possible for the FDA to accelerate this process on nicotine pouches.
It's not possible to do so and vapor.
Which is arguably a much.
Larger category and review staff began much earlier.
Yes.
Quite a few things in that question. So if I don't.
Please follow up I think when you think about the duty drawback I wouldn't jump to a conclusion at this point in time, it's really about our relationship with international players how do we think about producing cigarettes for international some of the other benefits that we get certainly drawback is an additional benefit to that when you think about the.
A pilot program I want to be clear that we want a functioning regulatory system. So we're going to always make our decisions based on whats. The long term best interest of the company with an eye towards what is the best to get a functioning regulatory system I think your question related to pouches versus paper.
I think from comments from them, but just the interpretation of it being called a pilot program. They wanted to start where it made sense to start and Thats in nicotine pouches are fairly set category, even though we've seen some players maybe end of the marketplace illicitly. It gives them a way to think about thinking about the category in total and then <unk>.
Differentiated products and what's different between individual products in the marketplace, which.
Should speed up.
Their review of that I think when you think about vapors that the marketplace is a mess right now and so I think the nature of Apollo program is to learn they will learn manufacturers, including US will learn it has been a very collaborative process with constant engagement through the application review.
Process, which is very different and very encouraging from the FDA, we experienced under the previous administration. So I think once you add those learnings, we would hope and encourage the FDA to expand it to other categories.
I guess, just a quick follow up could you clarify that.
The EPS growth is.
Suggest it to accelerate to high single digits over the next couple of years in order to.
Meet your mid single digit EPS CAGR is that still the ambition.
Our ambition is the goal we haven't changed our goals from an overall CAGR that we stated previously.
And Thats been our stated goal so yes, that's the way.
Would take about how we're going to manage the business going forward.
Great. Thank you.
There appears to be no further questions at this time I would now like to turn the call back over to Mac Livingston for any closing remarks.
Thanks to everybody for joining us today and have a great day.
This concludes today's call. Thank you for your participation you may disconnect at any time.
Yeah.
Sure.
[music].
Okay.
[music].
Uh-huh.
Uh huh.
[music].
Okay.
Yes.
Hum.
<unk>.
Oh.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Mhm.