ALTRIA GROUP, INC. Q3 FY2024 earnings call

• Underage Tobacco Use: FDA and CDC report encouraging decline in legal tobacco product use among youth, but illicit market remains an issue. - E-vapor Category (NJOY): NJOY showed strong momentum with consumables shipment volume growth >15% in Q3, but illicit nicotine pouches and unclear FDA enforcement on synthetic products are issues. - Oral Tobacco Products (on!): on! reported shipment volume grew 46% in Q3, with repeat purchasers contributing >80% of volume, and grew share to 8.9% in Q3. - Initiative to Modernize Processes: Launching a multiphase initiative aiming for $600M cumulative cost savings over 5 years with initial pretax charges of $100M-$125M.

Smokable Products Segment: Adjusted operating company's income grew 7.1% in Q3 and 0.9% for first nine months. Domestic cigarette volumes declined 8.6% in Q3 and 10.6% for first nine months. Adjusted OCI margins were 63.1% in Q3 and 61.7% for first nine months. Oral Tobacco Products Segment: Adjusted OCI grew 2% in Q3 and 2.7% for first nine months. Third quarter and first nine months adjusted OCI margins were 66.8% and 67.2% respectively. Total segment reported shipment volume increased 1.2% in Q3 but decreased 1.3% for first nine months. Investment in ABI: Recorded $144 million of adjusted equity earnings in Q3, up 0.7% vs prior year.

• 2024 Full-Year Adjusted Diluted EPS: Expected to be in range of $5.07 to $5.15, representing 2.5%-4% growth from 2023's $4.95. - Dividends and Share Repurchases: Paid ~$1.7B in dividends in Q3, raised dividend by 4.1% in August. Repurchased 13.5 million shares for $680M in Q3, with $310M remaining under current program to complete by year-end.

• Litigation: Juul has patent infringement claims against NJOY, with final determinations in late 2024 and early 2025. - Illicit Market: Significant number of illicit nicotine pouch SKUs and synthetic nicotine products, with FDA's unclear enforcement on synthetic products. - Regulatory Uncertainty: Uncertainty around FDA's enforcement of laws regarding synthetic nicotine products and pace of vaping import rulemaking.

Q: Reiterated guidance and Q4 puts and takes A: Sal mentioned MSA legal fee expiration and extra shipping day in Q4, comfortable with guidance.

Q: Discount category share dynamics and premium vs discount consumer trends A: Billy attributed to economic strain on consumers, impact of illicit products on discount share.

Q: Guidance maintenance despite strong Q3 A: Sal said dynamic market with illicit products impacting categories, extra shipping day in Q4, but overall comfortable with guidance.

Q: Relative price gap and strategy A: Sal discussed RGM allowing better pricing application, strategy to maximize profitability in combustible category, Marlboro's premium segment growth.

Q: Patent infringement lawsuit against NJOY A: Billy discussed final determination timeline, PMP exemptions for patents, negotiations with JUUL, and contingency with FDA SE applications.

Q: Partnership with Japan Tobacco and proposed vaping import rule A: Billy mentioned JV with JT for Ploom device progressing, no impact from JT's acquisition, and uncertainty on timeline for proposed vaping import rule.