Earnings Call Transcript - MO Q1 2026

Operator, Operator

Good day, and welcome to the Altria Group 2026 First Quarter Earnings Conference Call. I would now like to turn the call over to Mac Livingston, Vice President of Investor Relations. Please go ahead, sir.

Mac Livingston, Vice President of Investor Relations

Thanks, Alani. Good morning, and thank you for joining us. This morning, Billy Gifford, Altria's CEO; and Sal Mancuso, our CFO, will discuss Altria's 2026 first quarter business results. Earlier today, we issued a press release providing our results. The release, presentation and quarterly metrics are all available at altria.com. During our call today, unless otherwise stated, we're comparing results to the same period in 2025. 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 will report our financial results in accordance with U.S. generally accepted accounting principles. Today's call will contain various operating results on both a reported and adjusted basis. Adjusted results exclude special items that affect comparisons with reported results. Descriptions of these non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures are included in today's earnings release and on our website at 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.

William Gifford, Chief Executive Officer (CEO)

Thanks, Mac. Good morning, and thank you for joining us. We delivered a strong start to the year, growing adjusted diluted EPS by 7.3% in the first quarter. Our highly cash-generative businesses supported significant returns to shareholders through dividends and share repurchases, while we continue to invest in support of our vision. Our smokeable products segment generated strong income growth. Marlboro strengthened its position in the premium segment and PM USA continued to execute its total portfolio strategy with discipline. In the oral tobacco products segment, on! performed well in a highly competitive marketplace and Helix expanded on! PLUS nationwide. My remarks this morning will focus on first quarter performance from on! and an update on the state of the e-vapor category. I'll then turn it over to Sal, who will provide further detail on our business results and financial outlook. Let's begin with on! and the nicotine pouch category. Over the past six months, oral nicotine pouches drove the estimated 9.5% increase in total oral tobacco industry volume. In the first quarter, the nicotine pouch category grew 9.1 share points and now represents more than 58% of total oral tobacco. Against this backdrop, Helix delivered solid results in a highly competitive environment. Reported shipment volume for the total on! portfolio grew nearly 18% to over 46 million cans in the first quarter, reflecting continued demand for on! Classic and the pipeline shipments for the on! PLUS national expansion. At retail, on! and on! PLUS together represented 7.8% of the total oral tobacco category, down 0.8 share points year-over-year and up 0.2 share points sequentially. We began shipping on! PLUS nationwide in March. At the end of the first quarter, it was available in approximately 100,000 stores, representing 85% of nicotine pouch category volume. On! PLUS is the first and only product authorized under the FDA's pilot program, which we believe streamlines PMTA reviews for certain oral nicotine pouches. The brand is currently available in three flavors across two nicotine strengths and features our proprietary NICOSILK technology. To support the on! PLUS expansion, Helix recently launched a new retail trade program to strengthen execution across the full on! portfolio. The program is focused on increasing visibility and securing incremental fixture space to support on! PLUS today and future innovations over time. Today, the Helix trade program has secured premium retail positioning in contracted stores, representing approximately 90% of Helix volume. Additionally, on! PLUS is prominently featured across key retail touch points with coordinated signage from curb to counter. On! PLUS is supported by marketing that highlights the product experience, including visuals that showcase the pouch itself, communicate comfort and reinforce its positioning as the softest pouch on the planet. These materials are designed to give nicotine consumers a clear understanding of how the pouch looks, feels and fits. This messaging is complemented by initiatives such as in-person events, brand partnerships, paid social media and streaming audio that aim to increase awareness, drive trial and further strengthen on! brand equity. Importantly, these efforts are grounded in responsibility with safeguards to limit reach to underage audiences and with a strong focus on regulatory compliance. Through these actions, we believe we can position on! PLUS as a differentiated offering for adult nicotine consumers and responsibly grow the brand over the long term. On the regulatory front, the FDA is reviewing applications for on! PLUS Mint, Wintergreen and Tobacco in 12-milligram strengths under its pilot program. We have submitted applications for six additional varieties across three nicotine strengths. We believe the science and evidence supporting all of these applications is compelling and provides a basis for FDA authorization within the 180-day statutory timeline. Let's now turn to the e-vapor category. While illicit flavored disposable products remain prevalent, after several years of rapid growth, we began to see signs of moderation in the back half of 2025. We believe increased enforcement activity and supply-related marketplace disruption have slowed demand for these products, and those dynamics continued into the first quarter. At the end of March, we estimate there were approximately 20.5 million adult vapors, in line with the year-ago period. Over the same time frame, the estimated number of disposable e-vapor consumers declined modestly. Taken together, we believe these developments suggest early indications that the category's prior growth trajectory driven largely by illicit flavored disposable products may be evolving. From an enforcement perspective, we continue to see signs of a commitment from enforcement agencies and incremental progress. During the quarter, federal agencies worked alongside local law enforcement to combat illicit products, including a large-scale enforcement action in Northern Virginia supported by the Drug Enforcement Administration. In addition, in states where product directories are in place and properly enforced, we are seeing evidence that these frameworks are helping to reduce the presence of illicit products in tracked channels. In our view, consumer demand for e-vapor products demonstrates the potential for the category's role in tobacco harm reduction in the U.S. However, progress continues to be constrained by the limited number of FDA-authorized products. We see a clear pathway to restoring order and advancing harm reduction, anchored in a more efficient and predictable authorization process that supports reasonable responsible innovation and establishes a compliant legal marketplace of e-vapor products. When combined with sustained enforcement, we believe this would allow compliant manufacturers to provide adult nicotine consumers with authorized, high-quality products that are appropriate for the protection of public health. Overall, we delivered a strong start to the year. Our results this quarter reflected disciplined execution across our businesses, continued smoke-free progress amid a dynamic regulatory and competitive environment and our commitment to returning substantial capital to shareholders. Lastly, as you know, this will be my final earnings call as CEO. It has been a privilege to lead this company alongside so many talented colleagues and friends, and I'm proud of the progress we've made together. I've also thoroughly enjoyed engaging with the investment community along the way, and I thank you for your trust and support. As I step away, I do so with full confidence in our leadership team and the strategy in place going forward. I'll now turn it over to Sal to provide additional details on our business and financial results.

Salvatore Mancuso, Chief Financial Officer (CFO)

Thanks, Billy. The smokeable products segment delivered strong financial performance in the first quarter, reflecting the continued resilience of our smokeable business. Segment adjusted OCI grew by 6.3% with adjusted OCI margins expanding to 65.1%, an increase of 0.7 percentage points. This performance was supported by solid net price realization of 6.3%. Additionally, we saw the decline in our smokeable volumes continue to moderate. In the first quarter, reported domestic cigarette volumes declined by 2.4%. When adjusted for trade inventory movements, we estimate domestic cigarette shipment volumes declined by 4%. At the industry level, when adjusted for trade inventory movements, we estimate domestic cigarette industry volumes declined by 5%, marking the fourth consecutive quarter of sequential year-over-year moderation. This trend was driven primarily by reduced cross-category movement between cigarettes and illicit flavored disposable e-vapor products. The macroeconomic environment remains challenging. Elevated everyday expenses and higher gas prices later in the quarter continued to weigh on discretionary income among more price-sensitive adult smokers. Although higher-than-normal tax refunds provided some short-term relief, these pressures were the primary driver of year-over-year discount segment retail share growth of 2.4 share points. This trade-down dynamic impacted Marlboro's overall retail share, which declined 1.4 share points versus the year-ago period and 0.1 share point sequentially. However, in the highly profitable premium segment where smoker purchasing behavior reflects higher levels of brand loyalty, Marlboro continued to demonstrate its competitive strength. In the first quarter, Marlboro expanded its share of the premium segment to 59.5%, up 0.1 share point versus the prior year and 0.2 share points sequentially, expanding its long-standing leadership position. 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. Basic's retail share grew 0.5 share points sequentially and 2.4 share points year-over-year. Total PM USA retail share grew 0.1 share point sequentially and 0.4 share points versus a year ago, demonstrating the strong execution of PM USA's total portfolio approach. In cigars, reported shipment volume was down slightly by 0.2%. John Middleton continued to outperform the large industry behind the strength of Black & Mild. Let's turn now to the oral tobacco products segment, which delivered over $400 million in total adjusted OCI in the first quarter. Adjusted OCI margins remained strong at 67.4% and were down 1.8 percentage points from a year ago, impacted by Helix marketing investments for in-person events and digital advertising as well as product mix between traditional moist smokeless tobacco and nicotine pouches. Total segment reported shipment volume decreased 3.1% as growth in on! was more than offset by lower moist smokeless tobacco volumes. When adjusted for trade inventory movements, we estimate that first quarter Oral Tobacco Products segment volumes declined by approximately 8.5%. Year-over-year trade inventory comparisons were impacted primarily by on! PLUS pipeline volume in the first quarter and elevated competitor volume in 2025. Oral Tobacco Products segment retail share declined by 5.5 percentage points. Overall, we remain encouraged by the performance of our oral tobacco businesses, as Copenhagen continued to lead in moist smokeless tobacco and Helix expanded its portfolio in the growing nicotine pouch category. Turning to our investment in ABI, we recorded $160 million in adjusted equity earnings in the quarter, up 9.6% versus the prior year. We continue to view our ABI stake as a financial investment and our goal remains to maximize the long-term value of the investment for our shareholders. We remain committed to returning significant value to shareholders and maintaining a strong balance sheet. In the first quarter, we paid approximately $1.8 billion in dividends and repurchased 4.5 million shares for $280 million. At the end of the quarter, we had $72 million remaining under our current share repurchase program, which expires at the end of the year. In addition, our balance sheet remains strong. We retired just over $1 billion of debt that matured in February and our total debt-to-EBITDA ratio as of March 31 was 1.9x, in line with our target. Finally, on guidance, we reaffirm our expectation to deliver 2026 full year adjusted diluted EPS in a range of $5.56 to $5.72, representing a growth rate of 2.5% to 5.5% from a base of $5.42 in 2025. As a result of the strong first quarter performance, we now expect 2026 adjusted diluted EPS growth to be more balanced between the first half and the second half of the year. Our reaffirmed guidance range now contemplates the impact of moderated industry growth on combustible and e-vapor product volumes and increased macroeconomic uncertainty facing adult nicotine consumers. Before we wrap up, I'd like to thank Billy for his leadership over his decades of service to Altria. I have enjoyed the privilege of working closely with Billy for many years, and he has positioned us well to succeed in the future. We are committed to building upon the strong foundation he's fostered and accelerating progress toward our vision. With that, Bill 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.

Operator, Operator

Our first question comes from Faham Baig with UBS.

Mirza Faham Baig, Analyst (UBS)

Brilliant. I have two, please. The first one, I guess, is on your performance. At the full year stage, you spoke about a second half weighted performance this year, but Q1 came in seemingly stronger than expected. What were the areas that surprised you positively relative to the guidance in February? And I guess given the stronger-than-expected quarter, why have you chosen not to raise or narrow the guidance for the full year? So that's the first question. And the second question is on cigarette volumes. Clearly, over the last six months, there has been an improvement in volumes. But it seems to be entirely driven by the deep discount segment. So I guess what are the key drivers that are helping this particular segment? And why may it not be supporting the premium segment too?

Salvatore Mancuso, Chief Financial Officer (CFO)

Yes. Thank you for the questions. We do a terrific job of forecasting the year, I would say. What you saw in the first quarter was stronger volume performance, and that's primarily driven in the smokeable category by a moderation of the cross-category movement that I discussed in my opening remarks. As the year plays out, we see growth being more balanced between the first half and the second half of the year. So that was the primary driver that we're seeing. We thought it was prudent to reaffirm guidance. We're a quarter into the year and, obviously, the macroeconomic environment remains challenging and uncertain. Gas prices increased significantly at the end of the quarter. There have been some short-term offsets as we've seen tax refunds higher than in past years, and that may be somewhat short term. So we'll see how the rest of the year plays out. Obviously, if there are any updates to our guidance as the year progresses, we would communicate that. But we feel really good about our ability to reaffirm guidance for the year. Regarding cigarette volumes, again I mentioned the cross-category moderation that we've seen. The consumer does remain under pressure, and that's been a driver of the growth in the discount category. We are really happy with PM USA's total portfolio strategy, which allows Basic to capture share of that discount category. So we feel really good about PM USA's performance for the quarter and very pleased with Marlboro's performance where it grew its share of premium sequentially and year-over-year.

Operator, Operator

Our next question comes from Matt Smith with Stifel.

Matthew Smith, Analyst (Stifel)

And Billy, first off, I just want to wish you well in your retirement in the upcoming weeks here. Just wanted to dig into smokeable OCI a bit. The performance was quite strong in the quarter. And on a per-pack basis, operating costs were below the level from the second half of last year. I think less volume deleverage was likely a benefit. But can you provide some more color on the other factors in smokeable? It seems like the duty drawback grew in size. And did you see that drop-through profit more efficiently in the quarter?

Salvatore Mancuso, Chief Financial Officer (CFO)

Yes. As you stated, we had really strong first quarter performance from our smokeable segment, so a great job by PM USA and John Middleton in that segment. As far as spending goes, as we've stated earlier, we do have some investments in our import-export business, which are more weighted to the first half. So I wouldn't overread a particular quarter, but the per-pack controllable costs did receive a benefit from the higher volume as well as the export volume that we've broken out for you in our financial statements. Overall OCI was driven primarily through pricing and the stronger cigarette volume performance that you saw play out through the year, and again that's primarily driven by the moderation of the cross-category movement between vapor and the cigarette category.

Matthew Smith, Analyst (Stifel)

And as a follow-up to the full year guidance question, there's a lot of reinvestment this year, whether it's behind on! or the carryover from Basic repositioning and some other upcoming activities in smokeable. If you continue to see resiliency in the consumer, how do you balance the earnings growth potential against leaning more heavily into reinvestment this year given some of the flexibility you have?

William Gifford, Chief Executive Officer (CEO)

Yes. I think you have to think about it in totality. When you think about investment, we don't feel like we're under-investing in any of our growing categories, and so we'll continue to invest appropriately in those areas. I think the strength of the consumer is the wild card with the economic outlook the way it is with higher gas prices and other pressures. As Sal mentioned, there were certain offsets. We'll see how those offsets play out throughout the year and how gas prices continue to trend, and we'll make any changes when it's appropriate.

Operator, Operator

Our next question comes from Bonnie Herzog of Goldman Sachs. Please go ahead.

Bonnie Herzog, Analyst (Goldman Sachs)

All right. And congratulations again, Billy and Sal, and Billy, I also wish you all the best in your retirement; it's really been great working with you. I have a question on the duty drawback. I was hoping for some more color on the expected phasing of the benefits you now expect this year. I believe you did start to import in the quarter, and I do see the stepped-up benefit in Q1 versus Q4. So just curious, should we expect a steady increase in the benefit each quarter as the year progresses? And did this activity play a role in any way in your updated guidance phasing to be more evenly split between the first half and second half? I'm trying to think if there was any type of pull-forward in the quarter that we should be aware of?

Salvatore Mancuso, Chief Financial Officer (CFO)

Bonnie, thank you for the question. You will see increases in the export volume and the benefit of the duty drawback as the year progresses, so you are right in that assumption. I would tell you that the more balanced diluted EPS growth between first half and second half is more driven by the moderation in cross-category movement and the benefit of the volume in the smokeable segment. Of course, we're paying close attention to the economic conditions our consumers are facing — they are under significant economic pressure from the cumulative impact of inflation and rising costs of everyday items, including gas. We'll pay close attention to that. But I would say that's the main driver of the balance between first half and second half.

William Gifford, Chief Executive Officer (CEO)

Thanks for the kind words, Bonnie. The only thing I would add is I think it's important to think about the two drivers that are affecting the interaction between smokeable and e-vapor. One is enforcement. As product is not available for the consumer, they revert to their total consideration set. The other is saturation of the marketplace with e-vapor products and a slowdown in that transition. It's hard to predict exactly when that saturation point will be reached, and we think we're starting to see signs that we have. That's why we've been actively urging the FDA to consider both enforcement and authorization, and we think they can achieve much faster authorization by publishing clear policies and processes.

Bonnie Herzog, Analyst (Goldman Sachs)

Okay. That's helpful. And then just one other question, if I may, on Marlboro. You're rolling out Cowboy Cut soon. Maybe a little color on the rollout and expected state allocations. And could you provide a little color on how you're going to manage Cowboy Cut relative to, say, Marlboro Black in terms of pricing? Ultimately, how should we think about the contribution to profitability, how you're going to manage versus Marlboro Black, et cetera?

Salvatore Mancuso, Chief Financial Officer (CFO)

Sure, Bonnie. Cowboy Cut will expand distribution later in the year, specifically in the second quarter. You should think of Cowboy Cut a couple of ways. One is as a tool within our revenue growth management toolbox. It provides price-sensitive Marlboro consumers with an option, and we believe that's important. So you should expect it to be competitively priced. With revenue growth management, you may see different price points depending on the market. Cowboy Cut also allows us to build on Marlboro's heritage during a time when the country is celebrating its 250th anniversary, so it supports Marlboro's overall equity strength in the marketplace. We're really excited about it; it's a strong product, and you will see broader distribution as the quarter plays out.

Operator, Operator

Next question comes from Andrei Andon with Jefferies.

Andrei Andon-Ionita, Analyst (Jefferies)

Three for me, please. Number one, could you please tell us a bit more about the factors that drove the improvement for Marlboro within the premium combustible segment? Then two questions on oral nicotine pouches: I know it's early days for on! PLUS and there was a shipment benefit for Q1 volumes, but is there any color you could give us around early consumer offtake for the new product on! PLUS? And finally, just a clarification: the six new flavors that you've submitted applications for with the FDA — are they also part of the fast-track nicotine pouch pilot program?

William Gifford, Chief Executive Officer (CEO)

I'll try to unpack those three questions. For Marlboro in the premium segment, there are really two factors. Marlboro remains the aspirational brand in the cigarette category, and with the tools we have in data analytics and revenue growth management, we can make it very competitive on a store-by-store basis while remaining profitable, and that's driving Marlboro's growth in premium. Regarding oral nicotine pouches, it's very early. We went national toward the end of March, so we're excited, but it's early days. We know flavors will play an important role in the future of the nicotine pouch category, and that ties into your third question about flavors. Those six flavors are not part of the pilot program at this point. We believe it's straightforward for the FDA to review them because the underlying science is the same as what they've already authorized; it primarily involves flavor differences, and we've already provided the supporting science for the products.

Operator, Operator

Our next question is from Eric Serotta with Morgan Stanley.

Eric Serotta, Analyst (Morgan Stanley)

Great. Can you give us a little bit of color on how you're thinking about the potential macro impact from the low-end consumer? Since the conflict began, we're now, call it, eight weeks or so into it — there's a lot of noise with weak consumer confidence overall, but higher tax refunds. What are you seeing? And in past times of sharp spikes in gas prices, what has been the typical lag based on your research for an impact on your categories? Second, you noted more favorable trends around illicit vapor enforcement. How is that impacting your thinking about your broader e-vapor strategy? For the past year or so, you seemed to be working behind the scenes on resolving IP issues and not rushing to get back into a market that had clear challenges. Is that evolving with the improved enforcement and improved performance of the market that you're describing?

Salvatore Mancuso, Chief Financial Officer (CFO)

Eric, you framed the macroeconomic situation well. Later in the quarter, you did see a significant increase in gas prices, and that impacts discretionary spending for consumers who are already under pressure as everyday items remain at elevated prices. There are some shorter-term tailwinds related to higher levels of tax refunds based on IRS data. So we have to pay close attention to that. You are seeing growth in the discount category within the cigarette segment, driven by the macroeconomic difficulties consumers are facing. You've seen us use revenue growth management, data analytics and our tool set to position Basic in heavily discounted stores where we can capture consumer purchases that may have otherwise gone to other discount brands. Cowboy Cut is another competitively priced product that will engage Marlboro consumers under economic pressure. We believe we have the tools to manage through this situation, but we'll continue to monitor consumer economic conditions as the year progresses.

William Gifford, Chief Executive Officer (CEO)

On e-vapor, while we're encouraged by the early signs of enforcement, it's important to look at the category in context. It's still the case that approximately 70% of the volume is illicit flavored disposables, so the marketplace is still heavily affected by illicit products. We're making significant progress on intellectual property issues you referenced related to patent infringements, and we feel good about that. We're excited to bring appropriate products back to market at the right time, but we'll do it in a disciplined fashion while the marketplace is still disproportionately driven by illicit products. That's why we continue to push the FDA to focus on both enforcement and making authorizations more readily available so compliant manufacturers can provide authorized products to adult nicotine consumers.

Operator, Operator

Our next question comes from Damian McNeela of Deutsche Bank.

Damian McNeela, Analyst (Deutsche Bank)

Just one question for me. In your prepared remarks, you mentioned that on! PLUS was getting allocated additional shelf space in the roughly 100,000 stores that it's listed in. Can you give an indication of where that shelf space is coming from? Are you winning it back from other nicotine pouch brands, or is it coming from traditional oral tobacco products?

William Gifford, Chief Executive Officer (CEO)

It's a good question. We're excited about what our sales force achieved. You can think of that category primarily as its own space within retail, and the additional fixture and premium positioning are within the nicotine pouch category. So the placement and space are being achieved within the broader nicotine pouch retail footprint.

Operator, Operator

Our next question comes from Callum Elliott of Bernstein.

Callum Elliott, Analyst (Bernstein)

Hopefully you can hear me, and congratulations on your upcoming retirement, Billy — all the best. My first question is on your nicotine pouch strategy. One of your tobacco peers has been rolling out a nicotine pouch product under a legacy tobacco brand. Do you have thoughts about trying the same with Copenhagen or Skoal, or do you think your initiatives with on! are sufficient to get the consumer response you're hoping for? Second, on Basic and its interaction with Marlboro: the data shows discount share gain of 240 basis points year-on-year in Q1 and Basic also gaining 340 basis points. It seems the discount sector share gain is coming from Basic. As Basic annualizes the repositioning, should we expect discount share gains to slow as a whole and maybe Marlboro to start doing a bit better? Would you expect other discount brands to start doing better once Basic annualizes its launch?

William Gifford, Chief Executive Officer (CEO)

On the nicotine pouch category, USSTC was the only smokeless company to have signed the Master Settlement Agreement, which prevents us from using certain legacy tobacco brand names in products that do not contain tobacco. We feel very good about on! and on! PLUS and how they're positioned from an equity standpoint. We believe we can compete very well in the nicotine pouch space with on!.

Salvatore Mancuso, Chief Financial Officer (CFO)

Callum, we're very pleased with Basic's performance. Remember that Basic promotions were in limited retail distribution and that distribution was driven by the data analytics we have. Basic is being promoted in stores that over-index on discount shoppers, which allows PM USA to capture consumer purchases that might have gone to other discount brands without materially impacting Marlboro. That's why you're seeing Marlboro continue to grow share in the premium category while Basic captures discount share. The strategy is driven by data analytics and revenue growth management tools across PM USA's portfolio.

Callum Elliott, Analyst (Bernstein)

Maybe a quick follow-up, if that's okay. The stronger-than-expected performance in Q1 — does that give you the possibility to further extend distribution for Basic beyond the plateau we seemed to have originally envisioned, given that you seem to have increased flexibility within the 2026 guidance? Or is that not something we should expect?

Salvatore Mancuso, Chief Financial Officer (CFO)

I don't think the strong performance is what drives that decision. It's really the data. If there are opportunistic retail locations to promote Basic and limit the impact on Marlboro, then we'll make that decision, but it's driven by the analytics rather than the quarter's financial performance alone.

Operator, Operator

Next question comes from Dave with the Richmond Times-Dispatch.

Unknown Analyst (Dave), Analyst / Reporter (Richmond Times-Dispatch)

I was hoping you could talk a little bit more about the enforcement for the disposable vapes. You probably know that here in Virginia, the legislature has passed new permitting and enforcement legislation for vape shops. I'm wondering if this is something that brings enforcement to a new front and if it might be significant in terms of other states being interested in this kind of approach. Have you been monitoring that?

William Gifford, Chief Executive Officer (CEO)

We have been monitoring it. When you think about state-level efforts and federal efforts, the goal is to ensure that consumers in the vape category have access to authorized products that the FDA has reviewed. That's what we're advocating. Across the U.S., you see a number of tools available at the state level — you've mentioned permitting in Virginia, and other states have directories. It all comes down to how well those frameworks are enforced. Where we see enforcement take place, consumers revert to their total consideration set: some go to nicotine pouches, some come back to cigarettes, and in some states you see products that are in a gray area where applications are with the FDA and awaiting decisions. Again, that's why we're urging the FDA to think about both enforcement and authorization so compliant manufacturers can provide authorized products.

Unknown Analyst (Dave), Analyst / Reporter (Richmond Times-Dispatch)

Could the Virginia legislation be a model for other states?

William Gifford, Chief Executive Officer (CEO)

We've seen similar model legislation used across states. Some states adopt model approaches that increase enforcement and focus on authorized products in the marketplace. Ultimately, the effectiveness is driven by how well those laws are enforced.

Operator, Operator

There appear to be no further questions at this time. I would like to turn the call back over to Mac Livingston for any closing remarks.

Mac Livingston, Vice President of Investor Relations

Thanks, everybody, for joining today's call. Please reach out to Investor Relations if you have further questions. Have a great day.

Operator, Operator

This concludes today's call. Thank you for your participation. You may disconnect at any time.