ALTRIA GROUP, INC. Q1 FY2025 earnings call

• ON! Performance: Oral nicotine pouches drove industry volume growth. ON! reported shipment volume to over 39 million cans representing 18% growth, expanding its share in the oral tobacco and nicotine pouch categories. Consumer impressions of ON! grew nearly five times versus the prior year, and Helix plans to maintain momentum with the It's ON! campaign.
• E-vapor Category: Illicit flavored disposable market drives category growth; Altria advocates for regulatory reforms and enforcement against illicit actors, engaging with Congress and state AGs.
• NJOY Update: Impacted by ITC orders, NJOY discontinued importation of NJOY ACE and ceased shipments to wholesale, but intends to appeal and refine its product portfolio.
• Smokeable Products Details: Cigarette volume declines due to factors like illicit e-vapor and consumer economic pressure; discount cigarette segment grew, Marlboro maintained premium segment share through brand loyalty and data analytics.
• Dividends and Share Repurchases: Paid approximately $1.7 billion in dividends and repurchased 5.7 million shares for $326 million in the first quarter, with $674 million remaining under the share repurchase program.

The smokeable products segment grew adjusted operating company's income (OCI) by 2.7% with adjusted OCI margins of 64.4%, an increase of 4.2 percentage points versus the prior year. Total Smokable Products segment reported domestic cigarette volumes declined by 13.7% in the first quarter. The Oral Tobacco Products segment delivered over $400 million in total adjusted OCI in the first quarter with adjusted OCI margins remaining strong at 69.2%, down slightly from a year ago. Total segment reported shipment volume decreased 5%. In the e-vapor category, illicit e-vapor products now represent more than 60% of the category, and since acquiring NJOY in 2023, the e-vapor marketplace has changed significantly to the detriment of legitimate e-vapor manufacturers like NJOY, which was impacted by ITC orders leading to a noncash impairment charge of $873 million.

• 2025 full-year adjusted diluted EPS expected in a range of $5.30 to $5.45, representing a growth rate of 2% to 5% from 2024's $5.19.
• Guidance assumes limited impact on combustible and e-vapor product volumes from illicit e-vapor enforcement and NJOY ACE not returning this year.
• Includes reinvestment of cost savings from the optimize and accelerate initiative and lower expected net periodic benefit income, and contemplates limited impact of increased tariffs.

• Illicit e-vapor products making up over 60% of the category, posing challenges to legitimate manufacturers.
• ITC orders impacting NJOY's operations and product availability.
• Tariff impacts on costs and potential effects on consumer purchasing behavior.

Q: Matt Smith with Stifel asked about the current state of the consumer and inflationary pressure's role in cross-category movement.

A: Billy Gifford stated the consumer is under cumulative inflation impact, with price becoming a more prominent factor in cross-category movement.

Q: Matt Smith followed up on consumer confidence in cigarette pricing.

A: Billy Gifford mentioned the strength of Marlboro and use of data analytics and revenue growth management tools to apply resources where needed.

Q: Gaurav Jain with Barclays asked about approaching the discount segment and ON!'s trajectory.

A: Billy Gifford said it's not a strategy shift, ON! growth will slow due to base growth, and they're excited for ON! PLUS authorization.

Q: Gaurav Jain asked about Altria's e-cigarette strategy.

A: Billy Gifford stated they advocate for quicker authorizations and enforcement, are learning from consumer traits, and working on product pipeline refinement.

Q: Bonnie Herzog with Goldman Sachs asked about loss shipment and retail share and MSA settlement payments.

A: Billy Gifford discussed strategy in combustible segment and Sal Mancuso mentioned settlement payment drivers including legal fund expiration.

Q: Faham Baig with UBS asked about tariffs on disposable vapes, synthetic vape products, and MSA settlement payments.

A: Billy Gifford talked about early tariff impact signs and synthetic vape product interest, Sal Mancuso discussed settlement payment drivers like legal fund expiration.

Q: Emma Rumney with Reuters asked about tariffs, Trump administration signals, and FDA/CTP changes.

A: Sal Mancuso discussed tariff impact on costs and consumer, Billy Gifford expressed hope for stepped-up enforcement and proper FDA/CTP regulation.