Altria Group Q4 2025 Altria Group Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Altria Group Inc Earnings Call
Speaker #1: Please stand by. Your meeting is about to begin. Good day, and welcome to the ALTRIA GROUP 2025 fourth quarter and full year earnings conference call.
Speaker #1: Today's call is scheduled to last about one hour, including remarks by ALTRIA's management and a question-and-answer session. In order to ask a question, please press star followed by the number one on your touch-tone phone at any time.
Speaker #1: Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over.
Speaker #1: Vice President of Investor Relations. Please go ahead,
Speaker #2: Thanks, Chloe. sir.
Speaker #3: Good
Speaker #3: morning, and thank you for joining us. This morning, Billy Gifford, ALTRIA's CEO, and Sal Mancuso, our CFO, will discuss ALTRIA's 2025 fourth quarter and full year business results.
Speaker #3: Earlier today, we issued a press release providing our results. The release presentation quarterly metrics and our latest corporate responsibility reports are all available at ALTRIA.com.
Speaker #3: 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.
Speaker #3: 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.
Speaker #3: Future dividend payments and share repurchases remain subject to discretion of our board of directors. We report our financial results in accordance with U.S. generally accepted accounting principles.
Speaker #3: 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.
Speaker #3: 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 ALTRIA.com.
Speaker #3: references in today's remarks to Finally, all nicotine consumers or consumers within a specific nicotine category or segment refer to existing adult nicotine consumers 21 years of age or older.
Speaker #4: Good morning, and thank you for joining us. 2025 was a year of continued momentum for Altria—marked by strong financial performance, strategic progress across our smoke-free portfolio, new relationships in support of our long-term growth goals, and significant cash returns to shareholders.
Speaker #4: Our leading brands and talented teams enabled our corps of active businesses to deliver solid income growth and margin experience while we invested in our vision.
Speaker #4: For the full year, we grew adjusted diluted earnings per share by 4.4% and returned $8 billion to shareholders through dividends and share repurchases combined.
Speaker #4: As the year progressed, we achieved meaningful milestones that we believe advance our smoke-free portfolio and position us for sustained success in the U.S. nicotine space and for long-term adjacent growth.
Speaker #4: In 2025, Helix received marketing-granted orders from the FDA for certain OnePlus products. Horizon submitted a combined PMTA and MRTPA to the FDA for Plume and Marlboro heated tobacco sticks.
Speaker #4: We entered into a strategic collaboration with KT&G to advance international modern oral U.S. non-nicotine growth and traditional tobacco operating efficiencies. And we continue to advocate for a responsible and well-regulated marketplace.
Speaker #4: My remarks this morning will focus on our latest view of the U.S. nicotine space, our smoke-free progress, and our earnings guidance for 2026. I'll then hand it over to Sal, who will provide further details on our business and financial results.
Speaker #4: Let's begin with our view of the U.S. nicotine space. Over the past year, the estimated number of adult consumers in the paper and oral tobacco category grew by almost 30 million—nearly as large as the adult smoker population, and a reflection of the potential for tobacco harm reduction in the U.S.
Speaker #4: Total nicotine industry equalized volumes increased for the third consecutive year and grew by approximately 2% over the past five years on a compounded annual basis.
Speaker #4: And we estimate that smoke-free alternatives represented more than 50% of the total nicotine space, up 5 percentage points from the prior year. However, the primary driver of industry and smoke-free growth continues to be the widespread availability of illicit flavored disposable e-vapor products evading the regulatory process, which jeopardizes the long-term tobacco harm reduction opportunity.
Speaker #4: We estimate the e-vapor category grew approximately 15% in 2025, with illicit products representing approximately 70% of the category. At year-end, we estimate there were more than 20 million vapors with nearly 15 million using disposable products.
Speaker #4: We have long advocated for stronger enforcement against illicit products and an acceleration of FDA market authorizations for smoke-free products. In 2025, we saw increased engagement and action from federal agencies and government officials including fourth-quarter legislation requiring the FDA to allocate at least $200 million of tobacco user fees to enforcement activities.
Speaker #4: Early signs suggest that these efforts together with tariffs of Chinese manufactured goods are beginning to impact the illicit marketplace. We are also seeing early indication that growth in the total number of disposable vapors is moderating.
Speaker #4: In 2025, disposable e-vapor volumes grew approximately 30%, compared to over 50% in 2024. Growth in the number of disposable vapors also slowed, rising approximately 10% in 2025 versus over 40% in 2024.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero, and a member of our team will be happy to help you. Please stand by. Your meeting is about to begin. Good day, and welcome to the Altria Group 2025 Q4 and full year earnings conference call. Today's call is scheduled to last about one hour, including remarks by Altria's management and a question-and-answer session. In order to ask a question, please press star followed by the number 1 on your touchtone phone at any time. Representatives of the investment community, and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Mack Livingston, Vice President of Investor Relations. Please go ahead, sir.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero, and a member of our team will be happy to help you. Please stand by. Your meeting is about to begin. Good day, and welcome to the Altria Group 2025 Q4 and full year earnings conference call. Today's call is scheduled to last about one hour, including remarks by Altria's management and a question-and-answer session. In order to ask a question, please press star followed by the number 1 on your touchtone phone at any time. Representatives of the investment community, and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Mack Livingston, Vice President of Investor Relations. Please go ahead, sir.
Speaker #4: Additionally, the FDA's pilot program to streamline PMTA reviews for certain oral nicotine pouches could be a meaningful step toward improved regulatory speed and clarity required to deliver products that meet adult consumer preferences and regulatory standards.
Speaker #4: While we are encouraged by this early progress, additional action is needed to accelerate product authorization decisions and ensure a level playing field for all manufacturers.
Speaker #4: We're hopeful that 2026 will bring consistent enforcement and further improvements to the regulatory process. We continue to believe that responsible participation in the e-vapor category with products that meet consumer preferences supports our vision and our broader smoke-free strategy.
Speaker #4: We're making progress against our product pipeline and our executing with discipline and intention. The proliferation of illicit disposable products, pace of FDA authorizations, and the intellectual property landscape remain significant headwinds.
Speaker #4: We intend to maintain a measured approach to our investments in e-vapor until the regulatory framework is functioning as intended, and enforcement actions meaningfully address the illicit market.
Speaker #4: Let's now turn to the nicotine pouch category. Nicotine pouches continue to drive overall oral tobacco volume growth. Which increased an estimated 14% over the past six months.
Speaker #4: In the fourth quarter, oral nicotine pouches grew 10.4 share points versus the prior year, and now represent nearly 57% of the total oral category.
Speaker #4: Competitor promotional activity remained elevated during the fourth quarter, average retail prices for category competitors in the fourth quarter declined 3% sequentially and 12% year over year.
Speaker #4: In contrast, Helix remained focused on balancing profitability with retaining loyal on consumers. At retail, Owens Price increased by approximately 4% sequentially and 3% versus the prior year.
Mac Livingston: Thanks, Chloe. Good morning, and thank you for joining us. This morning, Billy Gifford, Altria's CEO, and Sal Mancuso, our CFO, will discuss Altria's 2025 Q4 and full year business results. Earlier today, we issued a press release providing our results. The release, presentation, quarterly metrics, and our latest corporate responsibility reports are all available at altria.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 US generally accepted accounting principles.
Mac Livingston: Thanks, Chloe. Good morning, and thank you for joining us. This morning, Billy Gifford, Altria's CEO, and Sal Mancuso, our CFO, will discuss Altria's 2025 Q4 and full year business results. Earlier today, we issued a press release providing our results. The release, presentation, quarterly metrics, and our latest corporate responsibility reports are all available at altria.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 US generally accepted accounting principles.
Speaker #4: For the full year, Helix successfully delivered against its plans and contributed profitable growth to our oral tobacco product segment. In this environment, Helix was relatively stable in the fourth quarter, growing on reported shipment volume to more than 44 million cans.
Speaker #4: For the full year, Helix grew on reported shipment volume by approximately 11% to more than 177 million cans. Owens Retail share of the total oral tobacco category was 7.7% for the fourth quarter and 8.2% for the full year.
Speaker #4: While Helix carefully stewarded Owens through disruptive second-half market conditions, the team also prepared to bring Owens Plus to the market. In December, the FDA authorized Owens Plus mint, wintergreen, and tobacco in six and nine milligram nicotine strings.
Mac Livingston: 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 altria.com. ... Finally, all references in today's remarks to nicotine consumers or consumers within a specific nicotine category or segment refer to existing adult nicotine consumers 21 years of age or older. With that, I'll turn the call over to Billy.
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 altria.com. ... Finally, all references in today's remarks to nicotine consumers or consumers within a specific nicotine category or segment refer to existing adult nicotine consumers 21 years of age or older. With that, I'll turn the call over to Billy.
Speaker #4: With the 12 milligram variants still in the review process. Following authorization, Helix resumed shipment of Owens Plus in Florida, North Carolina, and Texas. Innovation in pouch formats including wet pouches, broader flavor variety, and higher nicotine strength offerings is driving nicotine pouch growth.
Speaker #4: We believe Owens Plus is a premium differentiated product that is well positioned to meaningfully participate in this growth. Early consumer feedback indicates that its innovative pouch material with smooth flavor proposition is a competitive advantage in the marketplace.
William Gifford: Thanks, Mac. Good morning, and thank you for joining us. 2025 was a year of continued momentum for Altria, marked by strong financial performance, strategic progress across our smoke-free portfolio, new relationships in support of our long-term growth goals, and significant cash returns to shareholders. Our leading brands and talented teams enabled our core tobacco businesses to deliver solid income growth and margin expansion while we invested in our vision. For the full year, we grew adjusted diluted earnings per share by 4.4% and returned $8 billion to shareholders through dividends and share repurchases combined. As the year progressed, we achieved meaningful milestones that we believe advance our smoke-free portfolio and position us for sustained success in the US nicotine space and for long-term adjacent growth.
Billy Gifford: Thanks, Mac. Good morning, and thank you for joining us. 2025 was a year of continued momentum for Altria, marked by strong financial performance, strategic progress across our smoke-free portfolio, new relationships in support of our long-term growth goals, and significant cash returns to shareholders. Our leading brands and talented teams enabled our core tobacco businesses to deliver solid income growth and margin expansion while we invested in our vision. For the full year, we grew adjusted diluted earnings per share by 4.4% and returned $8 billion to shareholders through dividends and share repurchases combined. As the year progressed, we achieved meaningful milestones that we believe advance our smoke-free portfolio and position us for sustained success in the US nicotine space and for long-term adjacent growth.
Speaker #4: In recent research, Owens Plus mint achieved higher overall purchase intention scores than the leading nicotine pouch brand and distinguished itself with superior pouch comfort and mouth feel, critical attributes in the nicotine pouch category.
Speaker #4: In the fourth quarter, Helix began laying the foundation to expand Owens Plus nationally. Our teams made strategic investments in retail merchandising fixtures and equity to prepare for the Owens Plus national launch planned for the first half of this year.
Speaker #4: In 2026, Helix plans to focus on generating trial for Owens Plus and retaining adopters for Owens Classic. We anticipate Helix will continue to be profitable for the full year 2026.
Speaker #4: Looking to the future, Helix's strategy remains focused on innovation and responsibly delivering on consumer preferences. In November, Helix submitted PMTA applications for Owens Plus products in six additional flavor varieties across three nicotine strings.
William Gifford: In 2025, Helix received marketing granted orders from the FDA for certain on! PLUS products. Horizon submitted a combined PMTA and MRTPA to the FDA for Ploom and Marlboro heated tobacco sticks. We entered into a strategic collaboration with KT&G to advance international modern oral, US non-nicotine growth, and traditional tobacco operating efficiencies. We continue to advocate for a responsible and well-regulated marketplace. My remarks this morning will focus on our latest view of the US nicotine space, our smoke-free progress, and our earnings guidance for 2026. I'll then hand it over to Sal, who will provide further details on our business and financial results. Let's begin with our view of the US nicotine space.
In 2025, Helix received marketing granted orders from the FDA for certain on! PLUS products. Horizon submitted a combined PMTA and MRTPA to the FDA for Ploom and Marlboro heated tobacco sticks. We entered into a strategic collaboration with KT&G to advance international modern oral, US non-nicotine growth, and traditional tobacco operating efficiencies. We continue to advocate for a responsible and well-regulated marketplace. My remarks this morning will focus on our latest view of the US nicotine space, our smoke-free progress, and our earnings guidance for 2026. I'll then hand it over to Sal, who will provide further details on our business and financial results. Let's begin with our view of the US nicotine space.
Speaker #4: Helix looks forward to bringing these new products to the U.S. market. Turning to our international smoke-free efforts, we continue to focus on the fast-growing nicotine pouch category.
Speaker #4: In 2025, Owens Plus and our newly added Fumi brand competed across select international markets through e-commerce and targeted retail distribution. Fumi appeals to the 80% of consumers interested in slim pouch products.
Speaker #4: Early performance has been encouraging, supporting our expansion to 40,000 retail locations in seven markets. In addition, we added three new line extensions, bringing the brand to 12 unique flavor offerings.
Speaker #4: Our broadened nicotine pouch portfolio has accelerated international expansion. And is generating valuable consumer insights that will inform future product development. While these are early days, we believe our expanded international portfolio and the momentum from our efforts in 2025 put us on a path towards accomplishing our long-term international smoke-free growth goals.
William Gifford: Over the past year, the estimated number of adult consumers in the e-vapor and oral tobacco categories grew to almost 30 million, nearly as large as the adult smoker population, and a reflection of the potential for tobacco harm reduction in the US. Total nicotine industry equivalized volumes increased for the third consecutive year and grew by approximately 2% over the past five years on a compounded annual basis. We estimate that smoke-free alternatives represented more than 50% of the total nicotine space, up five percentage points from the prior year. However, the primary driver of industry and smoke-free growth continues to be the widespread availability of illicit flavored disposable e-vapor products evading the regulatory process, which jeopardizes the long-term tobacco harm reduction opportunity.
Over the past year, the estimated number of adult consumers in the e-vapor and oral tobacco categories grew to almost 30 million, nearly as large as the adult smoker population, and a reflection of the potential for tobacco harm reduction in the US. Total nicotine industry equivalized volumes increased for the third consecutive year and grew by approximately 2% over the past five years on a compounded annual basis. We estimate that smoke-free alternatives represented more than 50% of the total nicotine space, up five percentage points from the prior year. However, the primary driver of industry and smoke-free growth continues to be the widespread availability of illicit flavored disposable e-vapor products evading the regulatory process, which jeopardizes the long-term tobacco harm reduction opportunity.
Speaker #4: Moving to our 2026 financial outlook. We expect to deliver 2026 full-year adjusted diluted EPS in a range of $5.56 to $5.72. This range represents a growth rate of 2.5% to 5.5% from a $5.42 base in 2025.
Speaker #4: We expect growth to be weighted to the second half of the year, reflecting a progressive increase in cigarette import and export activity over the course of the year.
William Gifford: We estimate the e-vapor category grew approximately 15% in 2025, with illicit products representing approximately 70% of the category. At year-end, we estimate there were more than 20 million vapers, with nearly 15 million using disposable products. We have long advocated for stronger enforcement against illicit products and an acceleration of FDA market authorizations for smoke-free products. In 2025, we saw increased engagement and action from federal agencies and government officials, including Q4 legislation, requiring the FDA to allocate at least $200 million of tobacco user fees to enforcement activities. Early signs suggest that these efforts, together with tariffs of Chinese-manufactured goods, are beginning to impact the illicit marketplace. We are also seeing early indication that growth in the total number of disposable vapers is moderating.
We estimate the e-vapor category grew approximately 15% in 2025, with illicit products representing approximately 70% of the category. At year-end, we estimate there were more than 20 million vapers, with nearly 15 million using disposable products. We have long advocated for stronger enforcement against illicit products and an acceleration of FDA market authorizations for smoke-free products. In 2025, we saw increased engagement and action from federal agencies and government officials, including Q4 legislation, requiring the FDA to allocate at least $200 million of tobacco user fees to enforcement activities. Early signs suggest that these efforts, together with tariffs of Chinese-manufactured goods, are beginning to impact the illicit marketplace. We are also seeing early indication that growth in the total number of disposable vapers is moderating.
Speaker #4: Our guidance contemplates planned investments to support our contract manufacturing capabilities. Limited impact on combustible and e-vapor product volumes from a listed enforcement effort. And Enjoy ACE not returning to the marketplace in 2026.
Speaker #4: We remain committed to our vision and to building a portfolio of FDA-authorized smoke-free products for adult smokers and nicotine consumers who use smoke-free products.
Speaker #4: Our planned investment areas include marketplace activities in support of our smoke-free products, and continued smoke-free product research, development, and regulatory preparations. In summary, ALTRIA continued to build momentum in 2025.
Speaker #4: Our core businesses remain resilient. We advanced our smoke-free portfolio and we opened new pathways for long-term growth in international modern oral and non-US non-nicotine innovation.
William Gifford: In 2025, disposable e-vapor volumes grew approximately 30% compared to over 50% in 2024. Growth in the number of disposable vapers also slowed, rising approximately 10% in 2025 versus over 40% in 2024. Additionally, the FDA's pilot program to streamline PMTA reviews for certain oral nicotine pouches could be a meaningful step toward improved regulatory speed and clarity required to deliver products that meet adult consumer preferences and regulatory standards. While we are encouraged by this early progress, additional action is needed to accelerate product authorization decisions and ensure a level playing field for all manufacturers. We're hopeful that 2026 will bring consistent enforcement and further improvements to the regulatory process. We continue to believe that responsible participation in the e-vapor category with products that meet consumer preferences-...
In 2025, disposable e-vapor volumes grew approximately 30% compared to over 50% in 2024. Growth in the number of disposable vapers also slowed, rising approximately 10% in 2025 versus over 40% in 2024. Additionally, the FDA's pilot program to streamline PMTA reviews for certain oral nicotine pouches could be a meaningful step toward improved regulatory speed and clarity required to deliver products that meet adult consumer preferences and regulatory standards. While we are encouraged by this early progress, additional action is needed to accelerate product authorization decisions and ensure a level playing field for all manufacturers. We're hopeful that 2026 will bring consistent enforcement and further improvements to the regulatory process. We continue to believe that responsible participation in the e-vapor category with products that meet consumer preferences-...
Speaker #4: These efforts support our vision and enterprise goals. I am confident in our strategy energized by the opportunities ahead and grateful for our employees' commitment to delivering long-term shareholder value.
Speaker #4: I'll now turn it over to Sal to provide additional details on our business and financial results.
Speaker #2: Thanks, Billy. Our core tobacco businesses delivered solid financial performance again this year, in a dynamic external environment. The smokable product segment delivered over $11 billion in adjusted OCI for the full year, and expanded adjusted OCI margins by 1.8 percentage points to 63.4%.
Speaker #2: This performance was supported by robust net price realization of 8.4%. For the fourth quarter, adjusted OCI declined by 2.4%, and adjusted OCI margins contracted by 0.8 percentage points to 60.4%.
Speaker #2: Year-over-year cost per pack comparisons were impacted by higher manufacturing costs driven by investments to build PMUSA cigarette import and export capabilities. Smokable product segment domestic cigarette volumes declined by 7.9% in the fourth quarter, and 10% for the full year.
William Gifford: supports our vision and our broader smoke-free strategy. We're making progress against our product pipeline and are executing with discipline and intention. The proliferation of illicit disposable products, pace of FDA authorizations, and the intellectual property landscape remain significant headwinds. Accordingly, we intend to maintain a measured approach to our investments in e-vapor until the regulatory framework is functioning as intended, and enforcement actions meaningfully address the illicit market. Let's now turn to the nicotine pouch category. Nicotine pouches continue to drive overall oral tobacco volume growth, which increased an estimated 14% over the past six months. In Q4, oral nicotine pouches grew 10.4 share points versus the prior year, and now represent nearly 57% of the total oral category. Competitor promotional activity remained elevated during Q4.
supports our vision and our broader smoke-free strategy. We're making progress against our product pipeline and are executing with discipline and intention. The proliferation of illicit disposable products, pace of FDA authorizations, and the intellectual property landscape remain significant headwinds. Accordingly, we intend to maintain a measured approach to our investments in e-vapor until the regulatory framework is functioning as intended, and enforcement actions meaningfully address the illicit market. Let's now turn to the nicotine pouch category. Nicotine pouches continue to drive overall oral tobacco volume growth, which increased an estimated 14% over the past six months. In Q4, oral nicotine pouches grew 10.4 share points versus the prior year, and now represent nearly 57% of the total oral category. Competitor promotional activity remained elevated during Q4.
Speaker #2: When adjusted for calendar differences and trade inventory movements, domestic cigarette volumes declined by 7% in the fourth quarter, and 9.5% for the full year.
Speaker #2: At the industry level, when adjusted for trade inventory movements, calendar differences, and other factors, we estimate domestic cigarette volumes declined by 8% for the full year, and by 6.5% for the fourth quarter, representing a sequential improvement of approximately 1.5 percentage points.
Speaker #2: As Billy described, illicit flavor disposable e-vapor growth moderated slightly in 2025 compared to the prior year. We have closely monitored this trend, and its impact on cigarette industry decline rates.
Speaker #2: Based on our latest data, we are updating our cigarette category decomposition. We now estimate that cross-category impacts, primarily driven by illicit flavored disposable e-vapor, contributed approximately 2% to 3% to the cigarette industry decline over the past 12 months, versus our prior estimate of 3% to 4%.
William Gifford: Average retail prices for category competitors in Q4 declined 3% sequentially and 12% year-over-year. In contrast, Helix remained focused on balancing profitability with retaining loyal on consumers. At retail, on's price increased by approximately 4% sequentially and 3% versus the prior year. For the full year, Helix successfully delivered against its plans and contributed profitable growth to our oral tobacco product segment. In this environment, Helix was relatively stable in Q4, growing on reported shipment volume to more than 44 million cans. For the full year, Helix grew on reported shipment volume by approximately 11% to more than 177 million cans. On's retail share of the total oral tobacco category was 7.7% for Q4 and 8.2% for the full year.
Average retail prices for category competitors in Q4 declined 3% sequentially and 12% year-over-year. In contrast, Helix remained focused on balancing profitability with retaining loyal on consumers. At retail, on's price increased by approximately 4% sequentially and 3% versus the prior year. For the full year, Helix successfully delivered against its plans and contributed profitable growth to our oral tobacco product segment. In this environment, Helix was relatively stable in Q4, growing on reported shipment volume to more than 44 million cans. For the full year, Helix grew on reported shipment volume by approximately 11% to more than 177 million cans. On's retail share of the total oral tobacco category was 7.7% for Q4 and 8.2% for the full year.
Speaker #2: In the discount segment, persistent discretionary income pressures remain the primary driver of growth. We also believe that the discount cigarette segment was most affected by the change in cross-category impact.
Speaker #2: For the fourth quarter, and full year, discount retail share grew by 2.6 share points, and 2.2 share points, respectively. Continued discount segment growth pressured marble retail share, which declined 1.5 share points in the fourth quarter, and 1.2 share points for the full year.
Speaker #2: In the premium segment, competitive dynamics during the fourth quarter contributed to marble share of premium decreasing 0.1 share point to 59.2%. For the full year, marble remained the undisputed leader in the highly profitable premium segment, growing its share to 59.4%, up 0.1 share point versus the prior year.
William Gifford: While Helix carefully stewarded on! through disruptive second half market conditions, the team also prepared to bring on! PLUS to the market. In December, the FDA authorized on! PLUS Mint, Wintergreen, and Tobacco in 6mg and 9mg nicotine strengths, with the 12mg variant still in the review process. Following authorization, Helix resumed shipments of on! PLUS in Florida, North Carolina, and Texas. Innovation in pouch formats, including wet pouches, broader flavor variety, and higher nicotine strength offerings, is driving nicotine pouch growth. We believe on! PLUS is a premium, differentiated product that is well positioned to meaningfully participate in this growth. Early consumer feedback indicates that its innovative pouch material with smooth flavor proposition is a competitive advantage in the marketplace.
While Helix carefully stewarded on! through disruptive second half market conditions, the team also prepared to bring on! PLUS to the market. In December, the FDA authorized on! PLUS Mint, Wintergreen, and Tobacco in 6mg and 9mg nicotine strengths, with the 12mg variant still in the review process. Following authorization, Helix resumed shipments of on! PLUS in Florida, North Carolina, and Texas. Innovation in pouch formats, including wet pouches, broader flavor variety, and higher nicotine strength offerings, is driving nicotine pouch growth. We believe on! PLUS is a premium, differentiated product that is well positioned to meaningfully participate in this growth. Early consumer feedback indicates that its innovative pouch material with smooth flavor proposition is a competitive advantage in the marketplace.
Speaker #2: Basic continued to capture share in the discount segment, reflecting PMUSA's data-driven total portfolio approach to meeting a broad set of consumer needs. In the fourth quarter, Basic retail share grew by 0.6 share points sequentially, and 1.9 share points year-over-year.
Speaker #2: Basic's strong performance demonstrates PMUSA's ability to deploy advanced RGM capabilities to effectively complete in the most price-sensitive stores. While minimizing incremental impact to marble.
William Gifford: In recent research, on! Mint achieved higher overall purchase intention scores than the leading nicotine pouch brand, and distinguished itself with superior pouch comfort and mouthfeel, critical attributes in the nicotine pouch category. In Q4, Helix began laying the foundation to expand on! nationally. Our teams made strategic investments in retail merchandising fixtures and equity to prepare for the on! national launch planned for the first half of this year. In 2026, Helix plans to focus on generating trial for on! and retaining adopters for on! Classic. We anticipate Helix will continue to be profitable for the full year 2026. Looking to the future, Helix's strategy remains focused on innovation and responsibly delivering on consumer preferences. In November, Helix submitted PMTA applications for on! products in six additional flavor varieties across three nicotine strengths.
In recent research, on! Mint achieved higher overall purchase intention scores than the leading nicotine pouch brand, and distinguished itself with superior pouch comfort and mouthfeel, critical attributes in the nicotine pouch category. In Q4, Helix began laying the foundation to expand on! nationally. Our teams made strategic investments in retail merchandising fixtures and equity to prepare for the on! national launch planned for the first half of this year. In 2026, Helix plans to focus on generating trial for on! and retaining adopters for on! Classic. We anticipate Helix will continue to be profitable for the full year 2026. Looking to the future, Helix's strategy remains focused on innovation and responsibly delivering on consumer preferences. In November, Helix submitted PMTA applications for on! products in six additional flavor varieties across three nicotine strengths.
Speaker #2: In cigars, Middleton continued to outperform in the large mass cigar industry. For the fourth quarter and full year, Middleton reported shipment volume increased 4.2% and 1.8%, respectively.
Speaker #2: Let's turn now to the oral tobacco product segment. Strategic investments behind ON! and ON! Plus contributed to a 4.6% decline in adjusted OCI for the fourth quarter.
Speaker #2: Over the same period, segment-adjusted OCI margins contracted by 5 percentage points to 64.5%. For the full year, adjusted OCI increased by 1.3%, and adjusted OCI margins expanded modestly by 0.1 percentage points to 67.9%.
Speaker #2: Total segment reported shipment volume decreased 6.3% for the fourth quarter, and 5.5% for the full year, as growth in ON was more than offset by lower MST volumes.
William Gifford: Helix looks forward to bringing these new products to the US market. Turning to our international smoke-free efforts, we continue to focus on the fast-growing nicotine pouch category. In 2025, on!, on! PLUS, and our newly added FUMi brand competed across select international markets through e-commerce and in targeted retail distribution. FUMi appeals to the 80% of consumers interested in slim wet pouch products. Early performance has been encouraging, supporting our expansion to 40,000 retail locations in seven markets. In addition, we added three new line extensions, bringing the brand to 12 unique flavor offerings. Our broadened nicotine pouch portfolio has accelerated international expansion and is generating valuable consumer insights that will inform future product development.
Helix looks forward to bringing these new products to the US market. Turning to our international smoke-free efforts, we continue to focus on the fast-growing nicotine pouch category. In 2025, on!, on! PLUS, and our newly added FUMi brand competed across select international markets through e-commerce and in targeted retail distribution. FUMi appeals to the 80% of consumers interested in slim wet pouch products. Early performance has been encouraging, supporting our expansion to 40,000 retail locations in seven markets. In addition, we added three new line extensions, bringing the brand to 12 unique flavor offerings. Our broadened nicotine pouch portfolio has accelerated international expansion and is generating valuable consumer insights that will inform future product development.
Speaker #2: When adjusted for trade inventory movements and calendar differences, we estimate that fourth quarter and full year oral tobacco product segment volumes declined by 6% and 4.5%, respectively.
Speaker #2: Oral tobacco products segment retail share was 29.6% for the fourth quarter, and 31.9% for the full year. Let's turn to an update on our e-vapor reporting unit.
Speaker #2: As Billy mentioned, while enforcement activity has increased, efforts thus far have not meaningfully reduced illicit e-vapor volumes to date. We now believe that effective, sustained enforcement will develop over time at a more gradual pace.
Speaker #2: Given this dynamic, we performed impairment assessments of the e-vapor definite live intangible assets and goodwill in the fourth quarter. Based on these assessments, we recorded non-cash impairment charges of 1.3 billion dollars.
William Gifford: While these are early days, we believe our expanded international portfolio and the momentum from our efforts in 2025 put us on a path towards accomplishing our long-term international smoke-free growth goals. Moving to our 2026 financial outlook. We expect to deliver 2026 full-year Adjusted Diluted EPS in a range of $5.56 to $5.72. This range represents a growth rate of 2.5% to 5.5% from a $5.42 base in 2025. We expect growth to be weighted to the second half of the year, reflecting a progressive increase in cigarette import and export activity over the course of the year.
While these are early days, we believe our expanded international portfolio and the momentum from our efforts in 2025 put us on a path towards accomplishing our long-term international smoke-free growth goals. Moving to our 2026 financial outlook. We expect to deliver 2026 full-year Adjusted Diluted EPS in a range of $5.56 to $5.72. This range represents a growth rate of 2.5% to 5.5% from a $5.42 base in 2025. We expect growth to be weighted to the second half of the year, reflecting a progressive increase in cigarette import and export activity over the course of the year.
Speaker #2: We continue to believe we gained valuable assets and capabilities in the enjoy acquisition that can be applied to a future e-vapor pipeline to consumer preferences over the long term.
Speaker #2: Before moving on from e-vapor, I'd like to point out a change you will see in our 2025 financials. In accordance with accounting standards, we updated our reportable segments for the full year 2025 to also include the e-vapor product segment, which consists of our NJOY business.
Speaker #2: Turning to ABI's financial results, we recorded 161 million dollars of adjusted equity earnings in the fourth quarter. Up 1.3% versus the prior year. We continue to view the ABI stake as a financial investment, and our goal remains to maximize the long-term value of the investment for our shareholders.
William Gifford: Our guidance contemplates planned investments to support our contract manufacturing capabilities, limited impact on combustible and e-vapor product volumes from illicit enforcement efforts, and NJOY ACE not returning to the marketplace in 2026. We remain committed to our vision and to building a portfolio of FDA-authorized smoke-free products for adult smokers and nicotine consumers who use smoke-free products. Our planned investment areas include marketplace activities in support of our smoke-free products and continued smoke-free product research, development, and regulatory preparations. In summary, Altria continued to build momentum in 2025. Our core businesses remain resilient. We advanced our smoke-free portfolio, and we opened new pathways for long-term growth in international modern oral and US non-nicotine innovation. These efforts support our vision and enterprise goals.
Our guidance contemplates planned investments to support our contract manufacturing capabilities, limited impact on combustible and e-vapor product volumes from illicit enforcement efforts, and NJOY ACE not returning to the marketplace in 2026. We remain committed to our vision and to building a portfolio of FDA-authorized smoke-free products for adult smokers and nicotine consumers who use smoke-free products. Our planned investment areas include marketplace activities in support of our smoke-free products and continued smoke-free product research, development, and regulatory preparations. In summary, Altria continued to build momentum in 2025. Our core businesses remain resilient. We advanced our smoke-free portfolio, and we opened new pathways for long-term growth in international modern oral and US non-nicotine innovation. These efforts support our vision and enterprise goals.
Speaker #2: Before I conclude, I'd like to highlight that as we continue to invest for the long-term success of the business, we are, at the same time, returning significant value to shareholders.
Speaker #2: In 2025, we paid 7 billion dollars in dividends, and our board raised our dividend by 3.9% in August, marking our 60th increase in the last 56 years.
Speaker #2: We also repurchased more than for 1 billion dollars for our 2 billion dollars share repurchase program. At the end of the fourth quarter, we had 1 billion dollars remaining under the current program, which expires at the end of 2026.
Speaker #2: We effectively balanced our capital allocation priorities during the year, and our balance sheet remained strong. Our total debt to EBITDA ratio as of December 31st was 2.0 times, in line with our target.
William Gifford: I am confident in our strategy, energized by the opportunities ahead, and grateful for our employees' commitment to delivering long-term shareholder value. I'll now turn it over to Sal to provide additional details on our business and financial results.
I am confident in our strategy, energized by the opportunities ahead, and grateful for our employees' commitment to delivering long-term shareholder value. I'll now turn it over to Sal to provide additional details on our business and financial results.
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, a reminder that today's earnings release and our non-GAAP reconciliations are available at altria.com.
Sal Mancuso: Thanks, Billy. Our core tobacco businesses delivered solid financial performance again this year in a dynamic external environment. The smokable product segment delivered over $11 billion in adjusted OCI for the full year and expanded adjusted OCI margins by 1.8 percentage points to 63.4%. This performance was supported by robust net price realization of 8.4%. For Q4, adjusted OCI declined by 2.4%, and adjusted OCI margins contracted by 0.8 percentage points to 60.4%. Year-over-year cost per pack comparisons were impacted by higher manufacturing costs, driven by investments to build PM USA cigarette import and export capabilities. Smokable product segment domestic cigarette volumes declined by 7.9% in Q4 and 10% for the full year.
Sal Mancuso: Thanks, Billy. Our core tobacco businesses delivered solid financial performance again this year in a dynamic external environment. The smokable product segment delivered over $11 billion in adjusted OCI for the full year and expanded adjusted OCI margins by 1.8 percentage points to 63.4%. This performance was supported by robust net price realization of 8.4%. For Q4, adjusted OCI declined by 2.4%, and adjusted OCI margins contracted by 0.8 percentage points to 60.4%. Year-over-year cost per pack comparisons were impacted by higher manufacturing costs, driven by investments to build PM USA cigarette import and export capabilities. Smokable product segment domestic cigarette volumes declined by 7.9% in Q4 and 10% for the full year.
Speaker #2: We've also posted our usual quarterly metrics, which include pricing, inventory, and other items. 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 star key followed by the number one on your touch-tone phone at this time.
Speaker #2: 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.
Speaker #2: first question comes Our from Matt Smith with
Speaker #2: Stifel. Your line is
Speaker #2: open. Hi, good morning.
Speaker #3: Thank
Speaker #3: you for taking my question. Morning,
Speaker #4: Good morning, Matt.
Speaker #3: Billy. The fiscal 2026 outlook ranges. You know what the benefit from import-export activity building in the second half? Can you provide any color on the scope of the program?
Speaker #3: We calculate today that the percent of PACs with the FET benefits around 3%. And if the second half benefits are more weighted towards cost normalizing associated with the initiative versus increased volume throughput that would unlock greater tax efficiency?
Sal Mancuso: When adjusted for calendar differences and trade inventory movements, domestic cigarette volumes declined by 7% in Q4 and 9.5% for the full year. At the industry level, when adjusted for trade inventory movements, calendar differences, and other factors, we estimate domestic cigarette volumes declined by 8% for the full year and by 6.5% for Q4, representing a sequential improvement of approximately 1.5 percentage points. As Billy described, illicit flavored disposable e-vapor growth moderated slightly in 2025 compared to the prior year. We have closely monitored this trend and its impact on cigarette industry decline rates. Based on our latest data, we are updating our cigarette category decomposition.
When adjusted for calendar differences and trade inventory movements, domestic cigarette volumes declined by 7% in Q4 and 9.5% for the full year. At the industry level, when adjusted for trade inventory movements, calendar differences, and other factors, we estimate domestic cigarette volumes declined by 8% for the full year and by 6.5% for Q4, representing a sequential improvement of approximately 1.5 percentage points. As Billy described, illicit flavored disposable e-vapor growth moderated slightly in 2025 compared to the prior year. We have closely monitored this trend and its impact on cigarette industry decline rates. Based on our latest data, we are updating our cigarette category decomposition.
Speaker #3: Thank you.
Speaker #4: Yeah, it's
Speaker #4: A little bit of both, Matt. We're a bit reluctant to share any of the specifics there, but certainly there's some upfront investments that are moderated as we go through the year.
Speaker #4: We think those investments are wise. Not only are we able to make those investments and afford ourselves the opportunity of the duty drawback, but it also sets the manufacturing center that we have here in Richmond up to be available to produce for any market internationally.
Speaker #4: With some of the changes and differences in international markets versus the US market. In addition, as we've said previously, with the duty drawback, we're looking to not be at a competitive disadvantage regarding that, and we'll continue to look for opportunities to
Speaker #4: expand. Appreciate that perspective.
Speaker #3: And as a follow-up before I pass it along, the 2026 CapEx guide is elevated. I think that's associated with the investments you're talking about to unlock the double duty drawback efficiency.
Sal Mancuso: We now estimate that cross-category impacts, primarily driven by illicit flavored disposable e-vapor, contributed approximately 2% to 3% to the cigarette industry decline over the past 12 months versus our prior estimate of 3% to 4%. In the discount segment, persistent discretionary income pressures remain the primary driver of growth. We also believe that the discount cigarette segment was most affected by the change in cross-category impact. For the Q4 and full year, discount retail share grew by 2.6 share points and 2.2 share points, respectively. Continued discount segment growth pressured Marlboro retail share, which declined 1.5 share points in the Q4 and 1.2 share points for the full year.
We now estimate that cross-category impacts, primarily driven by illicit flavored disposable e-vapor, contributed approximately 2% to 3% to the cigarette industry decline over the past 12 months versus our prior estimate of 3% to 4%. In the discount segment, persistent discretionary income pressures remain the primary driver of growth. We also believe that the discount cigarette segment was most affected by the change in cross-category impact. For the Q4 and full year, discount retail share grew by 2.6 share points and 2.2 share points, respectively. Continued discount segment growth pressured Marlboro retail share, which declined 1.5 share points in the Q4 and 1.2 share points for the full year.
Speaker #3: The 300 to 375 million investment level is that, should we think of this as a one-time increase in CapEx, or do you expect kind of a multi-year higher CapEx level as we look forward?
Speaker #3: The 300 to 375 million investment level is that, should we think of this as a one-time increase in CapEx, or do you expect kind of a multi-year higher CapEx level as we look forward?
Speaker #3: Thank you. Yeah,
Speaker #5: thanks for the question. You are correct. The primary driver of the increase is the investments for import-export business. I'll repeat what Billy said. It not only provides us the ability to participate in the duty drawback, but it does provide us with capabilities for longer-term or longer-term vision.
Speaker #5: I would say obviously we're not going to guide for future CapEx, but we are making investments today. They generally proceed the volume, if you think about it, for the import-export.
Speaker #5: But we're also making investments in our smoke-free portfolio. Obviously, we want to have the appropriate manufacturing capability for products like ONPLUS and future pipeline products.
Sal Mancuso: In the premium segment, competitive dynamics during Q4 contributed to Marlboro share of premium decreasing 0.1 share point to 59.2%. For the full year, Marlboro remained the undisputed leader in the highly profitable premium segment, growing its share to 59.4%, up 0.1 share point versus the prior year. Basic continued to capture share in the discount segment, reflecting PM USA's data-driven total portfolio approach to meeting a broad set of consumer needs. In Q4, Basic retail share grew by 0.6 share points sequentially and 1.9 share points year-over-year. Basic's strong performance demonstrates PM USA's ability to deploy advanced RGM capabilities to effectively compete in the most price-sensitive stores, while minimizing incremental impact to Marlboro. In cigars, Middleton continued to outperform in the large mass cigar industry.
In the premium segment, competitive dynamics during Q4 contributed to Marlboro share of premium decreasing 0.1 share point to 59.2%. For the full year, Marlboro remained the undisputed leader in the highly profitable premium segment, growing its share to 59.4%, up 0.1 share point versus the prior year. Basic continued to capture share in the discount segment, reflecting PM USA's data-driven total portfolio approach to meeting a broad set of consumer needs. In Q4, Basic retail share grew by 0.6 share points sequentially and 1.9 share points year-over-year. Basic's strong performance demonstrates PM USA's ability to deploy advanced RGM capabilities to effectively compete in the most price-sensitive stores, while minimizing incremental impact to Marlboro. In cigars, Middleton continued to outperform in the large mass cigar industry.
Speaker #5: We believe that for a company of our size, it's still a relatively low-level of capital expenditures, but we're going to be disciplined and diligent when we make those capital
Speaker #5: investments. Thank
Speaker #3: you, Sal. I'll pass it
Speaker #3: on. We'll move next
Speaker #2: to Bonnie Herzog with Goldman Sachs. Your line is
Speaker #2: open. Okay, thank
Speaker #6: Good morning, everyone. I guess I also had a couple of questions on the double duty drawback. I guess, first, is it fair to assume your aggressive promotional strategy behind Basic?
Speaker #6: Which is weighing on your net price realization and dollar OCI growth in smokable. I mean, has that been implemented with the idea that these pressures can be offset this year as you ramp your import-export activity with KT&G?
Speaker #6: And I guess, without a pretty big step-up of this activity, it does seem like your smokable dollar profit growth will likely remain negative, which could put you at the low end of your full-year EPS guidance range.
Sal Mancuso: For the fourth quarter and full year, Middleton reported shipment volume increased 4.2% and 1.8% respectively. Let's turn now to the oral tobacco product segment. Strategic investments behind ON and ON+ contributed to a 4.6% decline in adjusted OCI for the fourth quarter. Over the same period, segment adjusted OCI margins contracted by 5 percentage points to 64.5%. For the full year, adjusted OCI increased by 1.3%, and adjusted OCI margins expanded modestly by 0.1 percentage points to 67.9%. Total segment reported shipment volume decreased 6.3% for the fourth quarter and 5.5% for the full year, as growth in ON was more than offset by lower MST volumes.
For the fourth quarter and full year, Middleton reported shipment volume increased 4.2% and 1.8% respectively. Let's turn now to the oral tobacco product segment. Strategic investments behind ON and ON+ contributed to a 4.6% decline in adjusted OCI for the fourth quarter. Over the same period, segment adjusted OCI margins contracted by 5 percentage points to 64.5%. For the full year, adjusted OCI increased by 1.3%, and adjusted OCI margins expanded modestly by 0.1 percentage points to 67.9%. Total segment reported shipment volume decreased 6.3% for the fourth quarter and 5.5% for the full year, as growth in ON was more than offset by lower MST volumes.
Speaker #6: be appreciated. So just any thoughts on that would
Speaker #4: Yeah, I would disaggregate those two. Everyone wants to keep combining those two decisions, and we see them as independent of one another. Certainly, we're not going to be at a competitive disadvantage for the duty drawback as we discussed earlier.
Speaker #4: I think when you think about the strategy around basic, remember that only deployed in, call it roughly over 30,000 stores. So it's not a nationwide type effort.
Speaker #4: What we saw there were a number of stores where the consumer has been under severe economic pressures. And that's really the major cause of that has been the cumulative inflation that the consumer has been experiencing.
Speaker #4: And we felt it wise and prudent to invest behind Basic, not much different than if you go back in history—Basic before, and then L&M at other times. Now, we're repositioning Basic.
Speaker #4: And so in those 30,000 stores, we were able to apply the revenue growth management analytics that we have invested in. And you see the superb performance of basic, what it does is it captures consumers that would have gone to deep discount.
Sal Mancuso: When adjusted for trade inventory movements and calendar differences, we estimate that Q4 and full year oral tobacco product segment volumes declined by 6% and 4.5%, respectively. Oral tobacco products segment retail share was 29.6% for Q4 and 31.9% for the full year. Let's turn to an update on our e-vapor reporting unit. As Billy mentioned, while enforcement activity has increased, efforts thus far have not meaningfully reduced illicit e-vapor volumes to date. We now believe that effective, sustained enforcement will develop over time at a more gradual pace. Given this dynamic, we performed impairment assessments of the e-vapor definite-lived intangible assets and goodwill in Q4. Based on these assessments, we recorded non-cash impairment charges of $1.3 billion.
When adjusted for trade inventory movements and calendar differences, we estimate that Q4 and full year oral tobacco product segment volumes declined by 6% and 4.5%, respectively. Oral tobacco products segment retail share was 29.6% for Q4 and 31.9% for the full year. Let's turn to an update on our e-vapor reporting unit. As Billy mentioned, while enforcement activity has increased, efforts thus far have not meaningfully reduced illicit e-vapor volumes to date. We now believe that effective, sustained enforcement will develop over time at a more gradual pace. Given this dynamic, we performed impairment assessments of the e-vapor definite-lived intangible assets and goodwill in Q4. Based on these assessments, we recorded non-cash impairment charges of $1.3 billion.
Speaker #4: And it allows us to capture it with late-in equity, and as the economic situation changes for our consumers, adjust.
Speaker #4: accordingly. All
Speaker #6: right. And then any thoughts on just this notion of if you don't get a lot more activity, the import-export, just thinking about the EPS range you put out there, which is pretty wide?
Speaker #4: It's not any wider, Bonnie, if you go back. We typically open the year with about a 3% range, and then we think accordingly as we move through the year and have more insight to how the year is going to play out.
Speaker #4: We feel very pleased to be able to provide the range that we provided, and look forward.
Speaker #4: to continuing through the year. Okay.
Speaker #6: And maybe just a little bit of a follow-up to just as we're talking about basic, but so then it does beg a question on Marlborough.
Speaker #6: Your retail share on the brand did drop below 40% for the first time, I think, ever. So how are you thinking about your strategy behind Marlborough?
Speaker #6: And then how much of your promotional strategy on basic is maybe cannibalizing Marlborough? So I guess, Billy, maybe I'd love to hear whether or not you might consider changing your strategy on Marlborough and are you maybe rethinking your strategy to balance share with the goal of driving
Sal Mancuso: We continue to believe we gained valuable assets and capabilities in the NJOY acquisition that can be applied to a future e-vapor pipeline to meet consumer preferences over the long term. Before moving on from e-vapor, I'd like to point out a reporting change you will see in our 2025 financials. In accordance with accounting standards, we updated our reportable segments for the full year 2025, to also include the e-vapor product segment, which consists of our NJOY business. Turning to ABI's financial results, we recorded $161 million of adjusted equity earnings in the fourth quarter, up 1.3% versus the prior year. We continue to view the ABI stake as a financial investment, and our goal remains to maximize the long-term value of the investment for our shareholders.
We continue to believe we gained valuable assets and capabilities in the NJOY acquisition that can be applied to a future e-vapor pipeline to meet consumer preferences over the long term. Before moving on from e-vapor, I'd like to point out a reporting change you will see in our 2025 financials. In accordance with accounting standards, we updated our reportable segments for the full year 2025, to also include the e-vapor product segment, which consists of our NJOY business. Turning to ABI's financial results, we recorded $161 million of adjusted equity earnings in the fourth quarter, up 1.3% versus the prior year. We continue to view the ABI stake as a financial investment, and our goal remains to maximize the long-term value of the investment for our shareholders.
Speaker #6: profitability? Yeah, I think
Speaker #4: it's important, Bonnie, to remember the strategy we used to manage the smokable stuff. It's to maximize profitability over the long term. While making appropriate investments in Marlborough and growth stories.
Speaker #4: We feel like we're executing against that. And so when you think about Marlborough overall, we feel very good about the strength of the brand.
Speaker #4: Certainly, the store you saw product availability and the vapor related to enforcement. And I think it's intuitive that the consumer was feeling some price break when they moved over to e-vapor.
Speaker #4: As that price availability is no longer available. And I don't want you to think that the consumers moved back and forth. It's primarily dual consumers.
Speaker #4: Those that are using cigarettes and those that are using e-vapor. And they decide on the occasion which product to use. As product availability was much less due to enforcement and they went back to more cigarette occasions in their day, it's intuitive that discounts brands benefited from that.
Sal Mancuso: Before I conclude, I'd like to highlight that as we continue to invest for the long-term success of the business, we are at the same time returning significant value to shareholders. In 2025, we paid $7 billion in dividends, and our board raised our dividend by 3.9% in August, marking our 60th increase in the last 56 years. We also repurchased more than 17 million shares for $1 billion under our $2 billion share repurchase program. At the end of Q4, we had $1 billion remaining under the current program, which expires at the end of 2026. We effectively balanced our capital allocation priorities during the year, and our balance sheet remains strong. Our total debt-to-EBITDA ratio as of December 31 was 2x in line with our target.
Before I conclude, I'd like to highlight that as we continue to invest for the long-term success of the business, we are at the same time returning significant value to shareholders. In 2025, we paid $7 billion in dividends, and our board raised our dividend by 3.9% in August, marking our 60th increase in the last 56 years. We also repurchased more than 17 million shares for $1 billion under our $2 billion share repurchase program. At the end of Q4, we had $1 billion remaining under the current program, which expires at the end of 2026. We effectively balanced our capital allocation priorities during the year, and our balance sheet remains strong. Our total debt-to-EBITDA ratio as of December 31 was 2x in line with our target.
Speaker #4: I think through time we'll see if that holds true or not. I think, from a standpoint of your question related to Marlboro versus Basic, we feel like, with our analytics, we feel comfortable that it's not impacting or cannibalizing Marlboro in the marketplace.
Speaker #4: Certainly from a mathematical standpoint, the more basic grows, its share grows, and it affects other brands in the marketplace. But we don't feel like it's having any outsized impact on Marlborough.
Speaker #6: Okay, that's helpful. I'll pass it on. Thank
Speaker #6: you. Thank
Speaker #4: you. We'll take our next question
Speaker #2: from Eric Serrato with Morgan Stanley. Your line is open.
Speaker #2: open. Yeah,
Speaker #7: thanks for the question. Just wondering first if you have any commentary or color around some of the articles and kind of popular press lately about increased smoking incidents among younger 20-something legal-aged nicotine users.
Sal Mancuso: 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.com. We've also posted our usual quarterly metrics, which include pricing, inventory, and other items. Operator, let's open the question and answer period.
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.com. We've also posted our usual quarterly metrics, which include pricing, inventory, and other items. Operator, let's open the question and answer period.
Speaker #7: You don't really seem to see it in the data yet, but you guys have better data on this than anyone. So, wondering if you're seeing any increased incidents among any of the younger legal cohorts.
Speaker #7: And then a separate question, looking at On+—could you talk a bit about the pricing strategy there, where you plan to position it as you get past initial introductory and trial periods?
Operator: ... 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. We will take questions from the investment community first. Our first question comes from Matt Smith with Stifel. Your line is open.
Operator: ... 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. We will take questions from the investment community first. Our first question comes from Matt Smith with Stifel. Your line is open.
Speaker #7: Do you think that that could command a premium to the classic and what you're thinking about in terms of
Speaker #7: pricing there? Yeah,
Speaker #4: Thanks for the questions. I think, related to your first one, I would refer you to their vision, which is to move consumers in a responsible fashion to smoke-free products. Nothing in the trends that I would point to.
Matt Smith: Hi, good morning, and thank you for taking my question.
Matt Smith: Hi, good morning, and thank you for taking my question.
Speaker #4: I've seen some of the same stories you have. And that is why we've been after the FDA for an expedited authorization process so that you can get smoke-free products in the marketplace.
William Gifford: Good morning, Matt.
Billy Gifford: Good morning, Matt.
Matt Smith: Morning, Billy. The fiscal 2026 outlook ranges, you know, the benefit from import-export activity building in the second half, can you provide any color on the scope of the program? We calculate today that the percent of packs with the FET benefits around 3%. And if the second half benefits are more weighted towards cost normalizing associated with the initiative versus increased volume throughput, that would unlock greater tax efficiency. Thank you.
Matt Smith: Morning, Billy. The fiscal 2026 outlook ranges, you know, the benefit from import-export activity building in the second half, can you provide any color on the scope of the program? We calculate today that the percent of packs with the FET benefits around 3%. And if the second half benefits are more weighted towards cost normalizing associated with the initiative versus increased volume throughput, that would unlock greater tax efficiency. Thank you.
Speaker #4: And inform consumers about the risk of the various forms of nicotine in the marketplace. As far as on-plus pricing, while I'll be careful not to play out our whole strategy, we do believe on-plus is a differentiated product and commands a premium in the marketplace.
Speaker #4: And I would really direct you to go on nicotine.com. And what you can see is the price differential where e-commerce now is live on a national basis.
William Gifford: Yeah, it's a little bit of both, Matt. We're a bit reluctant to share any of the specifics there, but certainly there are some upfront investments that are moderated as we go through the year. We think those investments are wise. Not only are we able to make those investments, and afford ourselves the opportunity of the duty drawback, but it also sets the manufacturing center that we have here in Richmond up to be available to produce for any market internationally, with some of the changes and differences in international markets versus the US market. In addition, as we've said previously, with the duty drawback, we're looking to not be at a competitive disadvantage regarding that, and we'll continue to look for opportunities to expand.
Billy Gifford: Yeah, it's a little bit of both, Matt. We're a bit reluctant to share any of the specifics there, but certainly there are some upfront investments that are moderated as we go through the year. We think those investments are wise. Not only are we able to make those investments, and afford ourselves the opportunity of the duty drawback, but it also sets the manufacturing center that we have here in Richmond up to be available to produce for any market internationally, with some of the changes and differences in international markets versus the US market. In addition, as we've said previously, with the duty drawback, we're looking to not be at a competitive disadvantage regarding that, and we'll continue to look for opportunities to expand.
Speaker #4: You'll see the price differential that On! Plus is listed at there versus On! Classic. So, we feel good about the strategy. Certainly, as we introduce to retail, we'll have various introductory price promotions, and that can vary state by state.
Speaker #4: So we'll continue to use our analytics but we feel very excited about the differentiation we have and the consumer feedback related to that differentiation.
Speaker #3: Great. And then just one follow-up on the double-duty drawback. Not to be the dead horse here, but just in terms of sizing the potential here, can you talk or provide any color on what you're doing here that may be apart from the KTMG partnership or relationship?
Matt Smith: Appreciate that perspective. As a follow-up, before I pass it along, the 2026 CapEx guide is elevated. I think that's associated with the investments you're talking about to unlock the double duty drawback efficiency. The $300 to $375 million investment level. Should we think of this as a one-time increase in CapEx, or do you expect kind of a multiyear higher CapEx level as we look forward? Thank you.
Matt Smith: Appreciate that perspective. As a follow-up, before I pass it along, the 2026 CapEx guide is elevated. I think that's associated with the investments you're talking about to unlock the double duty drawback efficiency. The $300 to $375 million investment level. Should we think of this as a one-time increase in CapEx, or do you expect kind of a multiyear higher CapEx level as we look forward? Thank you.
Speaker #3: Are there things that are already in place? Things that are set to ramp? I guess separate from the KTMG? Just looking for to see if there's any scope apart from that one partnership here.
Sal Mancuso: Yeah, thanks for the question. You are correct. The primary driver of the increase are the investments for import-export business. I'll repeat what Billy said. It not only provides us the ability to participate in the duty drawback, but it does provide us with capabilities for longer term, our longer-term vision. I would say, obviously we're not gonna guide for future CapEx, but we are making investments today. They generally precede the volume, if you think about it, for the import-export. But we're also making investments in our smoke-free portfolio. Obviously, we want to have the appropriate manufacturing capability for products like on! PLUS and future pipeline products.
Sal Mancuso: Yeah, thanks for the question. You are correct. The primary driver of the increase are the investments for import-export business. I'll repeat what Billy said. It not only provides us the ability to participate in the duty drawback, but it does provide us with capabilities for longer term, our longer-term vision. I would say, obviously we're not gonna guide for future CapEx, but we are making investments today. They generally precede the volume, if you think about it, for the import-export. But we're also making investments in our smoke-free portfolio. Obviously, we want to have the appropriate manufacturing capability for products like on! PLUS and future pipeline products.
Speaker #3: And how you're thinking about adding capacity.
Speaker #4: Yeah, I think when you think about it, the cap on that opportunity is truly the matching of exports with imports. And as much as you can match on those, that is the—if you will—the cap, through time, related to what the opportunity is.
Speaker #4: As far as around individual companies or partners that we have relationships with, I'm not going to get into the detail there. Know that we are continuing to seek opportunities because we're not going to be put at a competitive disadvantage related to those other competitors that have both foreign or international manufacturing capacity and US-based.
Speaker #4: So, we'll continue to seek opportunities as we go through.
Speaker #4: time. Great.
Speaker #3: I'll
Speaker #3: pass it on. Thank you. Thank
Speaker #4: you.
Sal Mancuso: We believe that for a company of our size, it's still a relatively low level of capital expenditures, but we're gonna be disciplined and diligent when we make those capital investments.
Speaker #2: We'll take our next question from Faham Bike with UBS. Your line is
We believe that for a company of our size, it's still a relatively low level of capital expenditures, but we're gonna be disciplined and diligent when we make those capital investments.
Speaker #2: open. Good morning, Billy.
Speaker #8: Good morning, Sal. A couple of questions from me as well. If I could come back to the controllable costs, I calculate they're up to 14 and a half percent in the quarter and that sort of compares to a nine-month run rate of nine and a half percent.
Matt Smith: Thank you, Sal. I'll pass it on.
Matt Smith: Thank you, Sal. I'll pass it on.
Operator: We'll move next to Bonnie Herzog with Goldman Sachs. Your line is open.
Operator: We'll move next to Bonnie Herzog with Goldman Sachs. Your line is open.
Bonnie Herzog: Okay, thank you. Good morning, everyone.
Bonnie Herzog: Okay, thank you. Good morning, everyone.
Speaker #8: Was the investment behind this important export, the sole reason behind the different outcome in the fourth quarter, or would there be any other factors that you would point to?
William Gifford: Good morning.
Billy Gifford: Good morning.
Bonnie Herzog: I guess I also had a couple of questions on the duty drawback. I guess, you know, first, is it fair to assume your aggressive promotional strategy behind Basic, you know, which is weighing on your net price realization and dollar OCI growth and smokable, I mean, has that been implemented with the idea that these pressures can be offset this year as you ramp your import-export activity with KT&G? And I guess, you know, without a pretty big step up of this activity, it does seem like your smokable dollar profit growth will likely remain negative, which, you know, could put you at the low end of your full year EPS guidance range. So just any thoughts on that would be appreciated.
Bonnie Herzog: I guess I also had a couple of questions on the duty drawback. I guess, you know, first, is it fair to assume your aggressive promotional strategy behind Basic, you know, which is weighing on your net price realization and dollar OCI growth and smokable, I mean, has that been implemented with the idea that these pressures can be offset this year as you ramp your import-export activity with KT&G? And I guess, you know, without a pretty big step up of this activity, it does seem like your smokable dollar profit growth will likely remain negative, which, you know, could put you at the low end of your full year EPS guidance range. So just any thoughts on that would be appreciated.
Speaker #8: I would think the former is one-off in nature, but it would be good if you could clarify that as well. And I guess, secondly, I have a few clarifications on nicotine pouches.
Speaker #8: Do I understand that you will be national with On! Plus in the first half of this year, or do you plan to start the national rollout?
Speaker #8: And I presume, as you've sort of passed this comment, there aren't any sort of supply chains issues that you would be worried about. And then the second clarification is on the momentum in on-plus.
William Gifford: Yeah, I would disaggregate those two. Everyone wants to keep combining those two decisions, and we see them as independent of one another. Certainly, we're not gonna be at a competitive disadvantage for the duty drawback, as we discussed earlier. I think when you think about the strategy around Basic, remember that only deployed in, call it, roughly over 30,000 stores, so it's not a nationwide type effort. What we saw there was a number of stores where the consumer has been under severe economic pressures, and that's really the major cause of that has been the cumulative inflation that the consumer's been experiencing. We felt it wise and prudent to invest behind Basic. Not much different than if you go back in history, Basic before and then L&M at other times. Now we're repositioning Basic.
Billy Gifford: Yeah, I would disaggregate those two. Everyone wants to keep combining those two decisions, and we see them as independent of one another. Certainly, we're not gonna be at a competitive disadvantage for the duty drawback, as we discussed earlier. I think when you think about the strategy around Basic, remember that only deployed in, call it, roughly over 30,000 stores, so it's not a nationwide type effort. What we saw there was a number of stores where the consumer has been under severe economic pressures, and that's really the major cause of that has been the cumulative inflation that the consumer's been experiencing. We felt it wise and prudent to invest behind Basic. Not much different than if you go back in history, Basic before and then L&M at other times. Now we're repositioning Basic.
Speaker #8: I know it's been in the market for a few weeks now. Are you able to provide any in-state data from a market share perspective that you may have seen in the early readings that we can try and extrapolate from,
Speaker #8: please? Yeah.
Speaker #4: So we'll try to unpack all of those. I'll let Sal start with controllable costs. But if we miss any, please follow up.
Speaker #8: Yeah, Faham, you are correct. It is predominantly the investments we are making around our manufacturing process for import-export. If you think about it, there are different pack configurations, as an example.
Speaker #8: There are different capabilities we need for international markets. An example would be track and trace. Capabilities. So those investments precede really the volume and revenue you get from the export volume.
William Gifford: So in those 30,000 stores, we're able to apply the revenue growth management analytics that we have invested in. As you see the superb performance of Basic, what it does is it captures consumers that would have gone to deep discount, and it allows us to capture it with latent equity, and as the economic situation changes for our consumers, adjust accordingly.
So in those 30,000 stores, we're able to apply the revenue growth management analytics that we have invested in. As you see the superb performance of Basic, what it does is it captures consumers that would have gone to deep discount, and it allows us to capture it with latent equity, and as the economic situation changes for our consumers, adjust accordingly.
Speaker #8: So that is the
Speaker #8: So that is the driver that you are seeing. Yeah.
Speaker #4: As far as nicotine pouches, you're correct. We'll be national through the first half of this year 2026. As far as momentum, while I would love to be able to share exact volumes or exact shares, it was a bit messy.
Speaker #4: You'll recall we launched in three states. Then we halted shipments to those three states related to the pilot program that was kicked off by the FDA.
Bonnie Herzog: All right. And then any thoughts on just, you know, this notion of if you don't get, you know, a lot more activity, the import-export, you know, just thinking about the EPS range you put out there, which is pretty wide?
Bonnie Herzog: All right. And then any thoughts on just, you know, this notion of if you don't get, you know, a lot more activity, the import-export, you know, just thinking about the EPS range you put out there, which is pretty wide?
Speaker #4: We have now launched back into those three states or resumed shipments. And again, we'll be national through the first half of this year. What we can share is the positive feedback anecdotally we received from consumers.
William Gifford: It's not any wider, Bonnie, if you go back, we typically open the year with about a 3% range, and then we spend accordingly as we move through the year and have more insight to how the year is gonna play out. We feel very pleased to be able to provide the range that we provided and look forward to continuing through the year.
Billy Gifford: It's not any wider, Bonnie, if you go back, we typically open the year with about a 3% range, and then we spend accordingly as we move through the year and have more insight to how the year is gonna play out. We feel very pleased to be able to provide the range that we provided and look forward to continuing through the year.
Speaker #4: It really supported some of the research we had, where the consumer really sees differentiation in the mouthfeel and the softness of the pouch, paired with great flavor.
Speaker #4: And so we're excited to be able to bring that national as we progress through the first half of this year.
Bonnie Herzog: Okay, and then maybe just a little bit of a follow-up. It just, you know, as we're talking about Basic, but, you know, so then it does beg a question on Marlboro. You know, your retail share on the brand did drop below 40% for the first time, I think, ever. So how are you thinking about your strategy behind Marlboro? And then, you know, how much of, you know, your promotional strategy on Basic is maybe cannibalizing Marlboro? So I guess, Billy, maybe I'd love to hear, you know, whether or not you might consider changing your strategy on Marlboro and, you know, are you maybe rethinking your strategy to balance share with the goal of driving profitability?
Bonnie Herzog: Okay, and then maybe just a little bit of a follow-up. It just, you know, as we're talking about Basic, but, you know, so then it does beg a question on Marlboro. You know, your retail share on the brand did drop below 40% for the first time, I think, ever. So how are you thinking about your strategy behind Marlboro? And then, you know, how much of, you know, your promotional strategy on Basic is maybe cannibalizing Marlboro? So I guess, Billy, maybe I'd love to hear, you know, whether or not you might consider changing your strategy on Marlboro and, you know, are you maybe rethinking your strategy to balance share with the goal of driving profitability?
Speaker #8: Thanks,
Speaker #8: guys. Thank
Speaker #4: you. We'll move next
Speaker #2: to Palav Mittal with Barclays. Your line is
Speaker #2: open. Good morning.
Speaker #9: Thank you for taking my question. So I have three of them. Firstly, just a follow-up. So on this on-plus distribution, if I could just ask, I mean, why are you starting with just three states and not go out national from the start?
Speaker #9: Have the distribution in place because you do already. And just to check, is there any inventory benefit from On! Plus in the Q4?
William Gifford: Yeah, I think it's important, Bonnie, to remember the strategy we use to manage the smokable segment. It's to maximize profitability over the long term while making appropriate investments in Marlboro and the growth categories. And we feel like we're executing against that. And so when you think about Marlboro overall, we feel very good about the strength of the brand. Certainly in the fourth quarter, you saw product availability in the e-vapor related to enforcement. And I think it's intuitive that the consumer was feeling some price break when they moved over to e-vapor, as that product availability is no longer available. And I don't want you to think that the consumer's moving back and forth. It's primarily dual consumers, those that are using cigarettes and those that are using e-vapor, and they decide on the occasion which product to use.
Billy Gifford: Yeah, I think it's important, Bonnie, to remember the strategy we use to manage the smokable segment. It's to maximize profitability over the long term while making appropriate investments in Marlboro and the growth categories. And we feel like we're executing against that. And so when you think about Marlboro overall, we feel very good about the strength of the brand. Certainly in the fourth quarter, you saw product availability in the e-vapor related to enforcement. And I think it's intuitive that the consumer was feeling some price break when they moved over to e-vapor, as that product availability is no longer available. And I don't want you to think that the consumer's moving back and forth. It's primarily dual consumers, those that are using cigarettes and those that are using e-vapor, and they decide on the occasion which product to use.
Speaker #9: numbers? Yeah.
Speaker #4: So from a standpoint, really no benefit in Q4. Remember, we had just initially started distribution in the three states, and then we halted that as we progressed through the end of the year.
Speaker #4: So, we had very minimal, and it was a bit messy. I think when you think about why the three states versus national, it was easy.
Speaker #4: The salesforce had already sold it into retailers. It was easy to turn those shipments back on. And they're in the process of doing that on a national basis.
Speaker #4: So that'll follow as we progress through the first half of 2026. I think that got all of your questions, but if I missed one, please follow up.
Speaker #4: up. Oh, that was
Speaker #9: The first one. So, secondly, if I can ask—in your comments, you said that the pricing from competitors in nicotine pouches was down 3% sequentially.
William Gifford: As product availability was much less due to enforcement and they went back to more cigarette occasions in their day, it's intuitive that discount brands benefited from that. I think through time, we'll see if that holds true or not. I think from a standpoint of your question related to Marlboro versus Basic, we feel like with our analytics, we feel comfortable that it's not impacting or cannibalizing Marlboro in the marketplace. Certainly from a mathematical standpoint, the more Basic grows, its share grows, and it affects the brands in the marketplace, but we don't feel like it's having any outsized impact on Marlboro.
As product availability was much less due to enforcement and they went back to more cigarette occasions in their day, it's intuitive that discount brands benefited from that. I think through time, we'll see if that holds true or not. I think from a standpoint of your question related to Marlboro versus Basic, we feel like with our analytics, we feel comfortable that it's not impacting or cannibalizing Marlboro in the marketplace. Certainly from a mathematical standpoint, the more Basic grows, its share grows, and it affects the brands in the marketplace, but we don't feel like it's having any outsized impact on Marlboro.
Speaker #9: And 12% YOY. But that is not what I think the scanner data is suggesting. And it seems pricing is rather up for the larger players.
Speaker #9: So can you just help us understand what we are missing there? Is there anything in terms of promotions or trade margins or some other factors?
Speaker #4: Yeah. So you're correct. We did say down 3% sequentially, 12% for the year from a competitive standpoint. That's all competitors combined. I think what you saw was a significant competitor promotion that took place in the third quarter into the fourth where free cans were distributed for any nicotine purchase.
Bonnie Herzog: Okay, that's helpful. I'll pass it on. Thank you.
Bonnie Herzog: Okay, that's helpful. I'll pass it on. Thank you.
Speaker #4: That had a significant impact on competitor pricing in the marketplace. As far as, and we're excluding, if you will, on!classic from on!classic, we were up in price both sequentially and total year.
William Gifford: Thank you.
Billy Gifford: Thank you.
Operator: We'll take our next question from Eric Serotta with Morgan Stanley. Your line is open.
Operator: We'll take our next question from Eric Serotta with Morgan Stanley. Your line is open.
Eric Serotta: Yeah, thanks for the question. Just wondering first if you have any commentary or color around some of the articles in, you know, kind of popular press lately about an increase in smoking incidence among younger, twenty-something legal-aged nicotine users. You don't really seem to see it in the data yet, but you guys have better data on this than anyone. So wondering if you're seeing any increased incidence among any of the younger legal cohorts. And then a separate question. Looking at On Plus, could you talk a bit about the pricing strategy there, where you plan to position it, sort of as you get past the initial, you know, introductory and trial periods?
Eric Serotta: Yeah, thanks for the question. Just wondering first if you have any commentary or color around some of the articles in, you know, kind of popular press lately about an increase in smoking incidence among younger, twenty-something legal-aged nicotine users. You don't really seem to see it in the data yet, but you guys have better data on this than anyone. So wondering if you're seeing any increased incidence among any of the younger legal cohorts. And then a separate question. Looking at On Plus, could you talk a bit about the pricing strategy there, where you plan to position it, sort of as you get past the initial, you know, introductory and trial periods?
Speaker #4: So that was the comparison we were trying to draw that there's significant promotional activity in nicotine pouch both in the third quarter and the fourth
Speaker #4: quarter. Sure.
Speaker #9: Thank
Speaker #9: you.
Speaker #2: and one. We'll take our questions, that is star next question from Damien McNeila with Deutsche. Your line is
Speaker #2: open.
Speaker #10: Yeah.
Speaker #10: Good morning, gents. Thanks for taking the questions. The first question is just on the basic strategy. Can you clarify or confirm that the 30,000 stores that you're targeting is kind of the ceiling, or are there any potential stores that we may consider entering into during the course of '26?
Eric Serotta: You know, do you think that could command a premium to the classic, and what you're thinking about in terms of pricing there?
You know, do you think that could command a premium to the classic, and what you're thinking about in terms of pricing there?
Speaker #10: Is the first question—the second question is just, are you able to sort of indicate the payback time from the investment that you're making in manufacturing facilities to help import-export?
William Gifford: Yeah, thanks for the questions. I think, related to your first one, I would refer you to their vision, which is to move consumers in a responsible fashion to smoke-free products. Nothing in the trends that I would point to. I've seen some of the same stories you have, and that is why we've been asking the FDA for an expedited authorization process, so you can get smoke-free products in the marketplace and inform consumers about the risk of the various forms of nicotine in the marketplace. As far as on! PLUS pricing, while I'll be careful not to play out our whole strategy, that we do believe on! PLUS is a differentiated product and commands a premium in the marketplace.
Billy Gifford: Yeah, thanks for the questions. I think, related to your first one, I would refer you to their vision, which is to move consumers in a responsible fashion to smoke-free products. Nothing in the trends that I would point to. I've seen some of the same stories you have, and that is why we've been asking the FDA for an expedited authorization process, so you can get smoke-free products in the marketplace and inform consumers about the risk of the various forms of nicotine in the marketplace. As far as on! PLUS pricing, while I'll be careful not to play out our whole strategy, that we do believe on! PLUS is a differentiated product and commands a premium in the marketplace.
Speaker #10: And then the last one is just on the step-up in costs that you saw in Q4. Are they likely to repeat in Q1 and Q2, or are they done now, and it's the second half we'll see an improvement because you're seeing improved import-export?
Speaker #10: volumes? Yeah.
Speaker #4: So I'll take the first one, and then I'll turn it over to Sal. As far as basic—again, slightly over 30,000 stores currently. We'll continue to monitor the situation.
Speaker #4: We want to be there for our consumer. That's under economic pressure. We feel like it's prudent. Basic has performed very well. As I mentioned earlier, L&M used to play that role for us, and we've increased profitability on L&M.
William Gifford: And I would really direct you to onnicotine.com, and what you can see is the price differential, where e-commerce now is live on a national basis. You'll see the price differential that on! PLUS is listed at there versus on! classic. So we feel good about the strategy. Certainly, as we introduce to the retail, we'll have various introductory price promotions, and that can vary state by state. So we'll continue to use our analytics, but we feel very excited about the differentiation we have and the consumer feedback related to that differentiation.
And I would really direct you to onnicotine.com, and what you can see is the price differential, where e-commerce now is live on a national basis. You'll see the price differential that on! PLUS is listed at there versus on! classic. So we feel good about the strategy. Certainly, as we introduce to the retail, we'll have various introductory price promotions, and that can vary state by state. So we'll continue to use our analytics, but we feel very excited about the differentiation we have and the consumer feedback related to that differentiation.
Speaker #4: And it allows us, as the economic situation changes, we're still in connection and the consumer is in our portfolio of brands. We're able to have conversations with them through time.
Speaker #4: And as that economic situation changes, you can look to see us adjust price promotions in the marketplace. So we feel like it's good. As far as number of stores, we'll make adjustments around the fringes, but we feel like we're in the right group of stores, but we'll continue to monitor that as we go through 2026.
Speaker #1: And two questions. The return on investment for the import-export is very strong. Payback is less than a year. As far as continued spending, as Billy pointed out earlier, the back half weighted nature of our EPS growth guidance really is both volume and cost.
Eric Serotta: Great. And then just one follow-up on the double duty drawback, not to beat a dead horse here. But just in terms of sizing the potential here, can you talk or provide any color on what you're doing here that may be apart from the KT&G partnership or relationship? Are there things that are already in place, things that are set to ramp, you know, I guess, separate from the KT&G? Just looking for to see if there's any scope apart from that one partnership here and how you're-
Eric Serotta: Great. And then just one follow-up on the double duty drawback, not to beat a dead horse here. But just in terms of sizing the potential here, can you talk or provide any color on what you're doing here that may be apart from the KT&G partnership or relationship? Are there things that are already in place, things that are set to ramp, you know, I guess, separate from the KT&G? Just looking for to see if there's any scope apart from that one partnership here and how you're-
Speaker #1: So, there are some incremental costs that continue to happen before you realize the revenue, and that happens when you enter different markets or different partnership arrangements.
Speaker #1: So yes, we expect some elevated investments upfront as you get more volume through the import-export
Speaker #1: process. Great.
Speaker #10: Thanks, Vicky.
William Gifford: Yeah
Billy Gifford: Yeah
Eric Serotta: thinking about adding capacity.
Eric Serotta: thinking about adding capacity.
Speaker #4: Thank
Speaker #4: you.
William Gifford: Yeah, I think when you think about it, the capital in that opportunity is truly the matching of exports with imports... and as much as you can match on those, that is the, if you will, the cap through time related to what's the opportunity. As far as specifics around individual companies or partners that we have relationships with, I'm not gonna get into the detail there. Know that we are continuing to seek opportunities because we're not gonna be put at a competitive disadvantage related to those other competitors that have both foreign or international manufacturing capacity and US-based. So we'll continue to seek opportunities as we go through time.
Billy Gifford: Yeah, I think when you think about it, the capital in that opportunity is truly the matching of exports with imports... and as much as you can match on those, that is the, if you will, the cap through time related to what's the opportunity. As far as specifics around individual companies or partners that we have relationships with, I'm not gonna get into the detail there. Know that we are continuing to seek opportunities because we're not gonna be put at a competitive disadvantage related to those other competitors that have both foreign or international manufacturing capacity and US-based. So we'll continue to seek opportunities as we go through time.
Speaker #2: There appears to be
Speaker #2: no further questions at this to Mac Livingston for any closing time. I would like to turn the call back over
Speaker #2: remarks. Thanks, everybody, for joining us
Speaker #4: Have a great day. And if you have further questions, please feel free to reach out to Investor Relations.
Speaker #1: Relations .
Speaker #2: This today's call . concludes Thank you for your participation . You may disconnect at time . You may disconnect at any any time .
Pallav Mittal: Great. I'll pass it on. Thank you.
Eric Serotta: Great. I'll pass it on. Thank you.
William Gifford: Thank you.
Billy Gifford: Thank you.
Operator: We'll take our next question from Faham Baig with UBS. Your line is open.
Operator: We'll take our next question from Faham Baig with UBS. Your line is open.
Faham Baig: Good morning, Billy, good morning, Sal. A couple of questions from me as well. If I could come back to the controllable costs, I calculate they were up 14.5% in the quarter, and that sort of compares to a nine-month runway of 9.5%. Was the investment behind this import and export the sole reason behind the different outcome in Q4, or would there be any other factors that you would point to? I would think the former is one-off in nature, but it would be good if you could clarify that as well. And I guess secondly, I have a few clarifications on nicotine pouches.
Faham Baig: Good morning, Billy, good morning, Sal. A couple of questions from me as well. If I could come back to the controllable costs, I calculate they were up 14.5% in the quarter, and that sort of compares to a nine-month runway of 9.5%. Was the investment behind this import and export the sole reason behind the different outcome in Q4, or would there be any other factors that you would point to? I would think the former is one-off in nature, but it would be good if you could clarify that as well. And I guess secondly, I have a few clarifications on nicotine pouches.
Faham Baig: Do I understand that you will be national with on! PLUS in the first half of this year? Or you plan to start the national rollout, and I presume, as you've sort of passed this comment, there aren't any sort of supply chain issues that you would be worried about. And then the second clarification is on the momentum in on! PLUS. I know it's been in the market for a few weeks now. Are you able to provide any in-state data from a market share perspective that you may have seen in the early readings that we can try and extrapolate from, please?
Do I understand that you will be national with on! PLUS in the first half of this year? Or you plan to start the national rollout, and I presume, as you've sort of passed this comment, there aren't any sort of supply chain issues that you would be worried about. And then the second clarification is on the momentum in on! PLUS. I know it's been in the market for a few weeks now. Are you able to provide any in-state data from a market share perspective that you may have seen in the early readings that we can try and extrapolate from, please?
William Gifford: Yeah. So we'll try to unpack all of those. I'll let Sal start with controllable costs, but if we miss any, please follow up.
Billy Gifford: Yeah. So we'll try to unpack all of those. I'll let Sal start with controllable costs, but if we miss any, please follow up.
Sal Mancuso: Yeah, Faham, you, you are correct. It is predominantly the investments we are making around our manufacturing process for import/export. You know, if you think about it, there are different pack configurations, as an example. There are different capabilities we need for international markets. An example would be track and trace capabilities. So those investments precede really the volume and revenue you get from the export volume. So that is the driver that you are seeing.
Sal Mancuso: Yeah, Faham, you, you are correct. It is predominantly the investments we are making around our manufacturing process for import/export. You know, if you think about it, there are different pack configurations, as an example. There are different capabilities we need for international markets. An example would be track and trace capabilities. So those investments precede really the volume and revenue you get from the export volume. So that is the driver that you are seeing.
William Gifford: Yeah, as far as nicotine pouches, you're correct. We'll be national through the first half of this year, 2026. As far as momentum, while I would love to be able to share exact volumes or exact shares, it was a bit messy. You'll recall we launched in three states, then we halted shipments to those three states related to the pilot program that was kicked off by the FDA. We have now launched back into those three states or resumed shipments, and again, we'll be national through the first half of this year. What we can share is the positive feedback anecdotally we received from consumers, that really supported some of the research we had, where the consumer really sees differentiation in the mouthfeel and the softness of the pouch, paired with great flavor.
Billy Gifford: Yeah, as far as nicotine pouches, you're correct. We'll be national through the first half of this year, 2026. As far as momentum, while I would love to be able to share exact volumes or exact shares, it was a bit messy. You'll recall we launched in three states, then we halted shipments to those three states related to the pilot program that was kicked off by the FDA. We have now launched back into those three states or resumed shipments, and again, we'll be national through the first half of this year. What we can share is the positive feedback anecdotally we received from consumers, that really supported some of the research we had, where the consumer really sees differentiation in the mouthfeel and the softness of the pouch, paired with great flavor.
William Gifford: And so, we're excited to be able to bring that national as we progress through the first half of this year.
And so, we're excited to be able to bring that national as we progress through the first half of this year.
Faham Baig: Thanks, guys.
Faham Baig: Thanks, guys.
William Gifford: Thank you.
Billy Gifford: Thank you.
Operator: We'll move next to Pallav Mittal with Barclays. Your line is open.
Operator: We'll move next to Pallav Mittal with Barclays. Your line is open.
Pallav Mittal: Good morning. Thank you for taking my question. So I have three of them. Firstly, just a follow-up. So on this, On+ distribution, if I could just ask, I mean, why are you starting with just three states and not go out national from the start? Because you do have the distribution in place already. And just to check, is there any inventory benefit from On+ in the Q4 numbers?
Pallav Mittal: Good morning. Thank you for taking my question. So I have three of them. Firstly, just a follow-up. So on this, On+ distribution, if I could just ask, I mean, why are you starting with just three states and not go out national from the start? Because you do have the distribution in place already. And just to check, is there any inventory benefit from On+ in the Q4 numbers?
William Gifford: Yeah. So, from a standpoint, really no benefit in Q4. Remember, we had just initially started distribution in the three states, and then we halted that as we progressed through the end of the year. So we had very minimal, and it was a bit messy. I think when you think about why the three states versus national, it was easy. The sales force had already sold it into retailers. It was easy to turn those shipments back on, and they're in the process of doing that on a national basis. So that'll follow as we progress through the first half of 2026. I think that got all of your questions, but if I missed one, please follow up.
Billy Gifford: Yeah. So, from a standpoint, really no benefit in Q4. Remember, we had just initially started distribution in the three states, and then we halted that as we progressed through the end of the year. So we had very minimal, and it was a bit messy. I think when you think about why the three states versus national, it was easy. The sales force had already sold it into retailers. It was easy to turn those shipments back on, and they're in the process of doing that on a national basis. So that'll follow as we progress through the first half of 2026. I think that got all of your questions, but if I missed one, please follow up.
Pallav Mittal: That was the first one. So, secondly, if I can ask, in your comments, you said that the pricing from competitors and nicotine pouches was down 3% sequentially and 12% Y-o-Y. But that is not what I think the scanner data is suggesting, and it seems pricing is rather up for the larger players. So can you just help us understand what we are missing there? Is there anything in terms of promotions or trade margins or some other factors?
Pallav Mittal: That was the first one. So, secondly, if I can ask, in your comments, you said that the pricing from competitors and nicotine pouches was down 3% sequentially and 12% Y-o-Y. But that is not what I think the scanner data is suggesting, and it seems pricing is rather up for the larger players. So can you just help us understand what we are missing there? Is there anything in terms of promotions or trade margins or some other factors?
William Gifford: Yeah. So you're correct. We, we did say down 3% sequentially, 12% for the year from a competitive standpoint, that's all competitors combined. I think what you saw was a significant competitor promotion that took place in Q3 into Q4, where free cans were distributed for any nicotine purchase. That had a significant impact on competitive pricing in the marketplace. As far as, and, and we're excluding, if you will, on classic. From on classic, we were up in price, both sequentially and total years. So that was the comparison we were trying to draw, that there's significant promotional activity in nicotine pouch, both in Q3 and Q4.
Billy Gifford: Yeah. So you're correct. We, we did say down 3% sequentially, 12% for the year from a competitive standpoint, that's all competitors combined. I think what you saw was a significant competitor promotion that took place in Q3 into Q4, where free cans were distributed for any nicotine purchase. That had a significant impact on competitive pricing in the marketplace. As far as, and, and we're excluding, if you will, on classic. From on classic, we were up in price, both sequentially and total years. So that was the comparison we were trying to draw, that there's significant promotional activity in nicotine pouch, both in Q3 and Q4.
Eric Serotta: Sure. Thank you.
Pallav Mittal: Sure. Thank you.
Operator: Once more for your questions, that is star and one. We'll take our next question from Damian McNeela with Deutsche. Your line is open.
Operator: Once more for your questions, that is star and one. We'll take our next question from Damian McNeela with Deutsche. Your line is open.
Damian McNeela: Yep, good morning, gents. Thanks for taking the questions. The first question is just on the basic strategy. And can you clarify or confirm that the 30,000 stores that you've targeted is kind of the ceiling, or are there any potential stores that we may con- you may consider entering into during the course of 2026? Is the first question. The second question is just, are you able to sort of indicate the payback time from the investment that you're making in manufacturing facilities to help import, export? And then the last one is just on the step-up in costs that you saw in Q4, are they likely to repeat in Q1 and Q2, or are they done now, and it's just the second half we'll see an improvement because you're seeing improved import-export volumes?
Damian McNeela: Yep, good morning, gents. Thanks for taking the questions. The first question is just on the basic strategy. And can you clarify or confirm that the 30,000 stores that you've targeted is kind of the ceiling, or are there any potential stores that we may con- you may consider entering into during the course of 2026? Is the first question. The second question is just, are you able to sort of indicate the payback time from the investment that you're making in manufacturing facilities to help import, export? And then the last one is just on the step-up in costs that you saw in Q4, are they likely to repeat in Q1 and Q2, or are they done now, and it's just the second half we'll see an improvement because you're seeing improved import-export volumes?
William Gifford: Yeah. So I'll take the first one, and then I'll turn it over to Sal. As far as Basic, again, slightly over 30,000 stores currently. We'll continue to monitor the situation. We want to be there for our consumer that's under economic pressure. We feel like it's prudent. Basic has performed very well. As I mentioned earlier, L&M used to play that role for us, and we've increased profitability on L&M. And it allows us, as the economic situation changes, we're still in connection with the consumers in our portfolio of brands. We're able to have conversations with them over time. And as that economic situation changes, you can look to see us adjust price promotions in the marketplace. So we feel like it's good.
Billy Gifford: Yeah. So I'll take the first one, and then I'll turn it over to Sal. As far as Basic, again, slightly over 30,000 stores currently. We'll continue to monitor the situation. We want to be there for our consumer that's under economic pressure. We feel like it's prudent. Basic has performed very well. As I mentioned earlier, L&M used to play that role for us, and we've increased profitability on L&M. And it allows us, as the economic situation changes, we're still in connection with the consumers in our portfolio of brands. We're able to have conversations with them over time. And as that economic situation changes, you can look to see us adjust price promotions in the marketplace. So we feel like it's good.
William Gifford: As far as number of stores, we'll make adjustments around the fringes, but we feel like we're in the right group of stores, but we'll continue to monitor that as we go through 2026.
As far as number of stores, we'll make adjustments around the fringes, but we feel like we're in the right group of stores, but we'll continue to monitor that as we go through 2026.
Sal Mancuso: Sure. And Damian, for other questions, the return on investment for the import-export is very strong. The payback is less than a year. As far as, you know, continued spending, as Billy pointed out earlier, the back half-weighted nature of our EPS growth guidance really is both volume and cost. So there are some incremental costs that continue to happen before you realize the revenue, and that happens when you enter different markets or different partnership arrangements. So yes, we expect some elevated investments upfront as you get more volume through the import-export process.
Sal Mancuso: Sure. And Damian, for other questions, the return on investment for the import-export is very strong. The payback is less than a year. As far as, you know, continued spending, as Billy pointed out earlier, the back half-weighted nature of our EPS growth guidance really is both volume and cost. So there are some incremental costs that continue to happen before you realize the revenue, and that happens when you enter different markets or different partnership arrangements. So yes, we expect some elevated investments upfront as you get more volume through the import-export process.
Damian McNeela: Great. Thanks, very clear.
Damian McNeela: Great. Thanks, very clear.
William Gifford: Thank you.
Billy Gifford: Thank you.
Operator: There appears to be no further questions at this time. I would like to turn the call back over to Mack Livingston for any closing remarks.
Operator: There appears to be no further questions at this time. I would like to turn the call back over to Mack Livingston for any closing remarks.
William Gifford: Thanks, everybody, for joining us today. Have a great day, and if you have further questions, please feel free to reach out to Investor Relations.
Mac Livingston: Thanks, everybody, for joining us today. Have a great day, and if you have further questions, please feel free to reach out to Investor Relations.
Operator: This concludes today's call. Thank you for your participation. You may disconnect at any time.
Operator: This concludes today's call. Thank you for your participation. You may disconnect at any time.
