Good day, and welcome to the Altria Group 2021 Fourth Quarter Earnings Conference Call. Today's call is scheduled to last about 1 hour, including remarks by Altria's management and a question-and-answer session. 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 Mac Livingston, Vice President of Investor Relations for Altria Client Services. Please go ahead, sir.

Thanks, Leo. Good morning, and thank you for joining us. This morning, Billy Gifford, Altria's CEO; and Sal Mancuso, our CFO, will discuss Altria's fourth quarter 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 2020. Our remarks contain forward-looking and cautionary statements and 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 Altria's Board. Altria reports its 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 are included in today's earnings release and on our website at altria.com. Finally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment refer to existing adult tobacco consumers 21 years of age or older. With that, I'll turn the call over to Billy.

Thanks, Mac. Good morning, and thank you for joining us. Altria delivered outstanding results in 2021 across our businesses, including strong financial performance, progress toward our vision and advancements in our ESG efforts. This morning, we'll highlight our accomplishments in each of these areas. First, Altria grew its 2021 adjusted diluted earnings per share by 5.7%, driven in part by the resiliency of our cigarette, cigar and moist smokeless tobacco businesses. Additionally, we returned more than $8.1 billion in cash to shareholders through dividends and share repurchases. This total represents the third largest single year cash return in Altria's history and the largest annual return since 2002. We have continued to make progress toward our vision of responsibly leading the transition of adult smokers to a smoke-free future. Our teams took several steps forward in 2021, including accelerating the retail share growth of on! and further enhancing the capabilities to expand heated tobacco and other new U.S. tobacco products, advancing the science, research and development behind our smoke-free products, advocating for tobacco harm reduction by encouraging the FDA and other stakeholders to address the widely held nicotine misperceptions in society. And we made excellent strides in establishing a best-in-class consumer engagement system to support smoker transition to smoke-free products. Our system leverages robust transactional data and our advanced analytic capabilities to engage with consumers at the point of purchase. Finally, some of our achievements across our responsibility focus areas, included publishing six corporate responsibility reports, summarizing our progress in critical areas such as harm reduction and underage prevention and publishing our inaugural task force on climate-related financial disclosures report. We were recognized for the second consecutive year with a AA rating from CDP for climate and water stewardship. And we advanced our internal talent and cultural goals, embraced workplace flexibility and embedded inclusion and diversity considerations within our performance review process to hold our leaders accountable. We're excited to share more about our responsibility efforts and our consumer engagement system next month at CAGNY. 2021 was a dynamic year for the U.S. tobacco industry, and total industry volumes were influenced by several factors, including pandemic-induced shifts in consumer purchasing behavior and tobacco usage occasions, a continued trend towards smoke-free alternatives and an evolving regulatory and legislative landscape. Despite year-over-year volatility due to pandemic-related factors, total tobacco volume trends remained stable. In fact, we estimate that overall tobacco space volumes have decreased by 0.3% annualized for the past two years and by 0.8% over the last five years on a compounded annual basis. Diving deeper, total estimated equivalized volumes for smoke-free products in the U.S. grew to 3.8 billion equivalized units in 2021 and represented approximately 24% of the total tobacco space. We estimate the year-over-year increases in smoke-free volumes were driven by the e-vapor category, which resumed its growth after a temporary pause in 2020 and oral nicotine pouches, which continue to grow rapidly from a small base. 2021 smoke-free volumes also benefited from the geographic expansion of IQOS in the heated tobacco category. But we're pressured by modest declines in the MST category due to shifts in consumer purchasing behavior and movement to other smoke-free categories. And in combustibles, volume declined to approximately 11.8 billion equivalized units driven by several factors, which Sal will discuss later in his remarks. Turning to our smoke-free product portfolio. We're excited by the exceptional performance of on! in oral nicotine pouches. on! retail share of oral tobacco increased by nearly a full share point sequentially, reaching 3.9 share points for the fourth quarter and nearly doubling its share over the past six months. These strong results were primarily driven by an increase in multi-can purchases. As of the end of the year, on! was available for sale in approximately 117,000 in U.S. retail stores. The on! nicotine pouch category reached a total oral tobacco retail share of 17.9 percentage points in the fourth quarter, growing 7.4 share points year-over-year. We're encouraged that on! represented more than 1/3 of this growth and the brand is proving to be a highly competitive product in the space. Our premarket tobacco applications for the entire on! portfolio remain pending with the FDA. And we believe that the FDA should determine that the marketing of these products is appropriate for the protection of public health. We are also working -- actively working on modified risk tobacco product applications for on! and expect to submit these applications to the FDA by the end of this year. We believe an MRTP claim would be an impactful point of differentiation for the brand and an important tool in educating and ultimately transitioning smokers to less harmful products. In heated tobacco, our teams made excellent progress with IQOS in the Northern Virginia market with Marlboro HeatSticks achieving a 1.9% retail share of the cigarette category in stores with distribution for the month of October. Unfortunately, PM USA had to remove IQOS from the market in November due to the International Trade Commission's importation ban and cease and desist orders. PMI is responsible for IQOS manufacturing, and we have been in contact regarding product availability. At the present time, we do not expect to have access to IQOS devices or Marlboro HeatSticks in 2022. However, we remain focused on returning IQOS to the market as soon as possible. Our teams are actively working on re-entry plans and we expect to be ready to bring IQOS back to U.S. consumers when available. Our agreement with PMI contemplates disruptions such as those caused by the ITC orders and requires the parties to negotiate in good faith to amend the agreement appropriately. In the second quarter of 2020, we disclosed two milestones in our IQOS agreement with PMI necessary for PM USA to maintain its exclusive license and distribution rights for IQOS in the U.S. and to earn the renewal option for an additional five-year term. The initial five-year term does not expire until April of 2024. But we believe that PM USA has already met these milestones based on the strong performance of IQOS in the Charlotte and Northern Virginia markets. PMI has communicated that it disagrees with our position. We expect to continue discussing these matters with PMI. We firmly believe that heated tobacco products can play an important role in U.S. harm reduction, and we are continuing our efforts to support the category's growth. We have gained significant knowledge from our IQOS commercialization efforts, which we expect to use going forward. Our teams learned how to educate U.S. smokers on a brand-new tobacco category and how to effectively support their transition journey to smoke-free alternatives. We demonstrated improved performance in each successive market and gained valuable knowledge on leveraging MRTP claims to transition smokers. Additionally, we have built a robust post-market surveillance system, all of which we believe will position us to successfully achieve our objective of moving beyond smoking. Moving to the e-vapor category. The 2021 Monitoring the Future study was recently released, and the data showed positive improvements in underage usage trends. Both underage use of nicotine vaping products and JUUL specifically show continued signs of decline. The latest data shows that JUUL underage usage is down by 70% from 2019 with total underaged nicotine vaping down 27% over the same period. We are encouraged by the progress, but more still needs to be done, and we remain committed to continuing our work to reduce underage use of all tobacco products. Turning to the regulatory environment. The FDA is currently weighing several decisions that we believe will shape the future of harm reduction in the U.S. In the e-vapor category, the FDA has issued marketing denial orders for many e-vapor PMTAs, predominantly applications for open systems and flavored e-liquids. These denial orders have resulted in significant litigation across the country. In the meantime, PMTAs for most leading e-vapor products, including JUUL, are still in an FDA review. The FDA granted its first e-vapor market order last year for the tobacco variant of a Cigalike product. The FDA has not reached a final decision for that manufacturer's menthol variant but did deny its submissions for its other flavored cartridges. In oral tobacco, PMTAs for the leading oral nicotine pouch products, including on! remain pending with the FDA. Last year, the FDA granted the first market authorizations among innovative oral tobacco products for our Verve Discs and Chews in the flavors of Green Mint and Blue Mint. These were also the first flavored product authorizations for newly deemed tobacco products. Additionally, MRTP applications previously submitted for Copenhagen Snuff and competitive Snus products remain an FDA review. Finally, in combustibles, the FDA has stated that they are on track to issue a proposed product -- to issue proposed product standards by April 2022 regarding menthol in cigarettes and characterizing flavors in cigars. As a reminder, the FDA rule-making process for these and all potential product standards has multiple steps and provide several opportunities for stakeholders to provide input. There are formal requirements related to public notice and comment and steps requiring the office of management and budget to assess economic consequences at several points in the process. Importantly, if the FDA chooses to move forward with their final rules, they must address all comments received throughout the rule-making process. Of course, any final rule must take into account the potential for unintended consequences and would be subject to legal challenges. We plan to review the proposed rules in detail and intend to engage with the FDA throughout the rulemaking process on each of these issues. We remain optimistic about the future of harm reduction in the U.S. We believe we have an unprecedented opportunity to lead the way in shifting millions of smokers away from cigarettes if we follow the science and foster innovation with the support of reasonable regulation. We are encouraged that the FDA has authorized a product in each of the 3 major smoke-free categories. Going forward, this year, we expect the FDA to carefully consider the scientific merits of each remaining application, and we're hopeful for significant progress in product marketing and claim authorizations. I would like to end my commentary regarding 2021 with the message to Altria's employees. Thank you for your dedication, passion and creativity through a difficult period. We experienced several challenges last year in both our professional and personal lives, and I admire your resiliency and fortitude. You are a driving force in moving beyond smoking and we are very appreciative of your efforts and commitment. Let's now move to our financial outlook for 2022. Our plans for the year ahead include a continuation of our strategy to balance earnings growth and shareholder returns with investments toward our vision. For 2022, our planned investment areas include digital consumer engagement, smoke-free product research, development and regulatory preparations and marketplace activities in support of our smoke-free products. The external environment remains dynamic, however, and we're monitoring various factors such as the economy, including the impact of increased inflation; the impact of current and potential future COVID-19 variants and mitigation strategies; tobacco consumer dynamics, including tobacco usage occasions and available disposable income; and regulatory and legislative developments. Taking these factors into consideration, we expect to deliver 2022 full year adjusted diluted EPS in a range of $4.79 to $4.93. This range represents an adjusted diluted EPS growth rate of 4% to 7% from a $4.61 base in 2021. We expect 2022 adjusted diluted EPS growth to be weighted toward the second half of the year. Our guidance includes anticipated inflationary increases in master settlement agreement expenses and direct materials expenses and our current expectation that we will not have access to the IQOS system in 2022. I'll now turn it over to Sal to provide more detail on the business environment and our results.

Thanks, Billy. I'd like to begin with an update on consumer disposable income, mobility and retail store traffic. We believe rising gas prices, inflation and the reduction of COVID-19 relief programs led to a decrease in disposable income on a sequential and year-over-year basis. In addition, increased consumer mobility versus the prior year, offer consumers more options for their discretionary spending and led to fewer tobacco usage occasions. At retail, fourth quarter trends were unchanged sequentially. We estimate that compared to pre-pandemic levels the number of tobacco consumer trips to the store continue to be depressed, but tobacco expenditures per trip remain elevated. Moving to our businesses. The smokable products segment delivered excellent financial performance once again. Our strategy for this segment continues to be maximizing profitability while balancing investments in Marlboro with funding the growth of our smoke-free portfolio. We believe our teams are successfully executing this strategy and the segment has delivered strong profit growth and stable Marlboro marketplace performance throughout the pandemic period. In the fourth quarter, the segment grew its adjusted OCI by 4.9% and expanded its adjusted OCI margins to 56.2%. The segment also reported strong net price realization of 8.8%. Fourth quarter smokable segment reported domestic cigarette volumes declined by 5.9%. When adjusted for trade inventory movements and other factors, we estimate that segment domestic cigarette volumes for the fourth quarter declined by 8%, and that industry volumes declined by 6.5% over the same period. As a reminder, adjusted cigarette volumes were strong in the fourth quarter of 2020. With our smokable segment adjusted cigarette volumes declining by just 1% and industry volumes growing by 1.5%. For the full year, smokable segment adjusted OCI grew 3.1% to $10.4 billion. Adjusted OCI margins expanded by 1.2 percentage points to 57.6%. These strong full year results were supported by robust net price realization, up 9.1%. Full year smokable segment reported domestic cigarette volumes declined 7.5% due to the strong comparison period and the continuation of pandemic-driven changes in the consumer behavior. When adjusted for trade inventory movement, calendar differences and other factors, we estimate that smokable segment cigarette volumes declined by 6% and that the full industry declined by 5.5%. We believe it's important to analyze cigarette volume trends over the longer term as decline rates in any 1 year can be influenced by various factors. The COVID-19 pandemic has certainly been one of these distorting factors. And we believe the best way to assess cigarette volumes during this period is looking at 2020 and 2021 volumes combined. In fact, the 2-year average decline rates for adjusted smokable segment and industry cigarette volume declines were 4% and 3%, respectively, well within the range of historic norms. Turning to marketplace performance. Marlboro remains strong and has demonstrated resilience. The cigarette category remains very competitive. After market share gains in the first half of 2021, Marlboro did see share in the fourth quarter. We believe the sequential share decline occurred due to macroeconomic pressures on consumer disposable income. While the vast majority of Marlboro consumers are highly brand loyal, we do know that cigarette brand selection for a subset of smokers is dependent on economic conditions. These consumers are more likely to select premium brands during economic upswings as demonstrated by Marlboro share gains in the first half of 2021, but they are also more likely to trade down in tougher economic situations. We remain focused on the long-term strength of Marlboro. And we are very pleased that its full year share grew 0.2 to 43.1% and that the brand remained stable since the beginning of the pandemic. In discount, total segment retail share in the fourth quarter continued to fluctuate, increasing 0.7 sequentially to 26% driven primarily by deep discount products. We believe the share increases observed in the discount segment or due to the previously mentioned macroeconomic factors that pressured the consumer in the fourth quarter. For the full year, discount segment share increased 0.5 to 25.4%, which was at the high end of its historical ranges. We expect fluctuation in discount segment shares to continue as the cohort of price-sensitive consumers react to their short-term economic conditions. And in cigars, Middleton provided strong contributions to smokable segment financial results. Reported cigar shipment volume was essentially unchanged for the year, as Middleton maintained the strength of the iconic Black & Mild brand and successfully managed its supply chain during a challenging year. Turning to the oral tobacco products segment. Adjusted OCI and adjusted OCI margins contracted for the full year, primarily due to increased investments behind on!. Total segment reported shipment volume was unchanged for the year. When adjusted for trade inventory movements and calendar differences, we estimate that total oral tobacco segment volumes declined by 0.5%. We remain pleased with the overall performance of the segment as Copenhagen continues to generate significant income in the high-margin MST category, and we're excited about the growth demonstrated by on!. Oral Tobacco Products segment retail share for the fourth quarter was down slightly sequentially as strong share gains from on! nearly offset declines in MST. The segment declined 1.6 percentage points versus the fourth quarter last year due to the continued growth of the oral nicotine pouch category. Turning to our investment in ABI. We recorded $172 million of adjusted equity earnings in the fourth quarter, representing Altria's share of ABI's third quarter results. For the full year, we recorded $639 million in adjusted equity earnings, up 18.3% versus 2020. As we shared in our previous earnings call, we view our ABI stake as a financial investment, and our goal is to maximize the long-term value of the investment for our shareholders. In our all Other operating category, we continue to make progress on our wind down of Philip Morris Capital Corporation. At year-end, the net finance assets balance was $114 million, down more than $200 million since the end of 2020 due to rents received and asset sales. As previously announced, we expect to complete the PMCC wind down by the end of 2022. Turning to capital allocation. We remain committed to creating long-term shareholder value through the pursuit of our vision and our significant capital returns. As Billy mentioned in his opening remarks, we returned more than $8.1 billion in cash last year to shareholders through dividends and share repurchases. These record cash returns included paying $6.4 billion in dividends, raising the dividend for the 56th time in 52 years and repurchasing nearly 36 million shares during the year totaling $1.7 billion. We also sold Ste. Michelle Wine Estates and expanded our share repurchase program from $2 billion to $3.5 billion. We have approximately $1.8 billion remaining under this expanded program, which we expect to complete by December 31, 2022. We continue to have a strong balance sheet, and our goal is to maintain an investment-grade credit rating. As of year-end, our debt-to-EBITDA ratio was 2.3x and our weighted average coupon was 4%. 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. Let's open the question-and-answer period. Operator, do we have any questions?

Thank you. [Operator Instructions] We will take questions from the investment community first. Our first question comes from Pamela Kaufman from Morgan Stanley.

Hi, good morning.

Pam, this is Mac. Just one quick second before your question. We understand that there were some technical issues associated with the webcast. So I want to apologize for the disruption to those listening there. We will work to get our recorded remarks up on the website as soon as possible. Thanks, and go ahead, Pam.

Thanks. So how would you characterize the current competitive environment within the cigarette category. The deep discount segment continues to invest in price and is gaining share. Given the headwinds that you highlighted that are impacting the tobacco consumer, how are you thinking about managing price gaps versus the discount segment? And are you prioritizing stabilizing Marlboro market share? Thanks

Good morning, Pamela, and thanks for your question. I think I would start with Marlboro's share. I mean when you look at Marlboro's share performance over the past eight quarters, it has been stable. So you can look at kind of this period in the pandemic to pre-pandemic levels and you see Marlboro has remained strong throughout that period. I think when we went through the pandemic, though, there were several macroeconomic tailwinds. So - and we've mentioned them before. There was lower consumer mobility, there is higher government stimulus payments in what we believe led to increased smoking occasions. And when you think about that, that led to increase or higher discretionary income for competitive adult smokers who then traded up to Marlboro. And I think that really showed the continued appeal of premium brands. Now as we start seeing some of those pressures you're referring to put pressure or decrease the discretionary spend of some of our consumers, you see the more price-sensitive adult smokers moving back to discount brands. And I think that would be expected. Look, we believe that the current discount share, to your point, is at the high end of historical norms. But we do expect quarterly fluctuations in share to continue until the economy begins to stabilize from the pandemic. I think overall, from a pricing standpoint, and I'll be careful not to talk about future pricing. You recall the four factors that we look at to make pricing decisions: strength of the brands; the economic health of our consumers; the demographics or relevancy of the brands across the various age cohorts and corporate objectives. And I think when you think about the strength of the brand, I would remind you that like Marlboro has over 90% loyalty, and that, I think, has shown through the eight quarters of stability.

Thanks. That's helpful. And then just a question on the smokeless segment. Profitability and margins have been under pressure in smokeless over the last several quarters. Can you elaborate on the investments you're making there? And how are you thinking about smokeless investments and profitability in 2022?

Yes, it's a great question. I appreciate you raising it. I think when you think about it Pamela, we had talked, as we progressed through 2020 that we were really focused on getting past the manufacturing capacity constraints. And that would allow us to really start engaging with the consumer -- so now being in the 117,000 stores, you want to have a nice look at retail. You're going to want to engage with smokers with equity messages that go to the consumer, whether through direct mail or through digital. And then because you're introducing a new category and is growing, you want to have some disruption at retail, both with the look and with some price off and so you have price promotions that take place in the marketplace. So those are the major factors that as we're investing on it and it's growing impact the overall oral tobacco category from a margin standpoint. I know you would like me to say this is the exact date we expect to end that. But I think as you think about a growing category and on! certainly participated in that growth, we're going to invest appropriately as that category continues to grow.

Thank you.

Thank you.

We'll take our next question from Bonnie Herzog of Goldman Sachs.

Hi, thank you. Good morning, everyone.

Good morning, Bonnie.

I have a question on your '22 EPS guidance. You mentioned you plan to balance earnings growth and shareholder returns with investments towards your vision, which includes increased smoke-free product R&D. But at the same time, you don't expect to have IQOS in the market. So two questions. One, can you give us a sense of your investment spend in R&D? For instance, will your investments in this effort be elevated above '21 levels? And then two, can you share maybe just a little bit more with us about your 2030 vision and how the development of an additional smoke-free product could fit into your portfolio. I'd be curious to hear what that product might look like, when it might be ready to test? Just be curious to hear if it's closed or is this still a year or two out? Thanks.

Yes. Thanks for the question, Bonnie. And it was pretty packed up, so I'll try to unpack it. But if I miss any point, please follow up. I think when you think about guidance overall, right, we run a range of scenarios across all the categories we participate in. And there are always puts and takes in those various scenarios. And it's important to remember we’re mindful that we're still in a pandemic environment and that we want to ensure we have the flexibility to adapt to our adult consumers as we progress through the year and they're making different choices. As far as the investment areas, I know you would like us to say this is exactly when we're going to bring this product and here's what it looks like. I think it's important to step back and think about where we're investing. And it really is marketplace activities for support of the products we have in the marketplace. It's also investing in the digital consumer engagement, being able to get closer to the consumer on a one-on-one basis, and we'll share more details with that at CAGNY. And then it's not just research and development, it's also the regulatory preparations that take place. So for instance, in 2022, we're preparing the MRTP application for the on! portfolio. And so there's a vast array of investments. It does include product development in R&D. And so that's kind of how we look at 2022 and how we're moving forward. I think when you look at the vision, even if you look overseas where they're able to innovate much quicker, you see the consumer constantly moving from a technology standpoint through the various options that are available to them. And so we want to make sure that we're investing appropriately to stay at pace or actually be ahead of where the consumer is going to be as we progress through time. And so that's how we think about product development in the -- from a fitting into the portfolio to address that point of your question.

Okay. That's helpful. And then just speaking or thinking about your 2030 vision, could you give us maybe an update on that? And I just keep thinking about any guidepost you guys could share with us that you expect to hit for this business or your business, I should say, in the next three to five years? What ultimately is a realistic target in terms of converting your business to non-combustible products. And then in the context of that and executing on this vision, curious to hear if you're open to M&A to accelerate this? Or are you going to continue to remain focused on things that you develop in-house?

Yes. I think from a guidepost standpoint, and we get this question often, is I think it's a bit different in the U.S. where we're predominantly based versus overseas. Remember, everything has to go through the FDA authorization process and really the entire harm reduction opportunities in front of us in the U.S. And so I think as we progress and we start seeing some of the FDA authorizations come through, we'll be sure to share some guideposts on how we're thinking about measuring going forward. I know that's what you and the investors want. It's just that we need to get through the FDA authorization process and understand how they're going to think about and authorize these products going forward and then we can provide some guideposts to be measured against in that regard. I think overall, though, and we've shared this before, call it, roughly half to slightly over half of adult consumer -- cigarette consumers in the U.S. prefer or would desire an alternative product that satisfies them and has the potential to reduce the risk associated with using nicotine through time. So we want to consistently provide those consumers the products and transition them to the smoke-free products. From a standpoint of the 2030 vision, I mentioned that the entire RRP opportunity is in front of us. And what we feel like we have is we have the infrastructure to support that, whether you think about government affairs or regulatory affairs, a top-notch sales force, we have product development. We engage with the largest number of U.S. adult tobacco consumers through our premium brands and our digital capabilities. And if you step back and we have strong core businesses that produce lots of cash that allow us to fund our investments, and I believe if you ask consumers, we have credibility with the adult tobacco consumer. So your last question, if I recall them all correctly, was M&A versus internal. Look, we monitor what's taking place around the world, and we're extremely focused on our organic development, staying close to the consumer as we continue with that process.

Our next question is from Owen Bennett of Jefferies.

I just had a question around some of the details on the automatic renewal of the IQOS agreement. And firstly, did you need to hit certain market share levels by April 24? And then two, it sounds like from what you're saying, you believe you already hit these levels in 2020. And would that be right? It just sounds like if that's the case, the share targets were set really low. And then three, if you believe you've already hit these share targets, what exactly is being renegotiated with PMI currently?

Yes. I appreciate it. I want to appreciate your question. Look, we disclosed what we felt like we could from a standpoint. Remember, we have cross-confidentiality in place with PMI. And we disclosed that in 2020 because we thought it was important for you guys and the investors to know that there were performance objectives in the contract. We feel like we have hit those as far as the extension or renegotiation that's taken place. Look, we described that we feel like we hit on PMIs in this agreement with that and their mechanisms in the contract to be able to settle any disputes that take place. You can see with any 2 parties that have an agreement, there can be disputes or disagreements. And that was all contemplated in the agreement.

We'll take our next question from Vivien Azer of Cowen.

I really appreciate the commentary on the health of the consumer and some of the normalization in terms of down trading behavior. Billy, as I kind of think back to the evolution of the Marlboro franchise over the last decade, there was a big push, if I recall correctly, coming out of the last recession to balance out the price points that were available for Marlboro. So can you just remind us where special blend fits into the total Marlboro franchise? And I recognize your revenue growth management tools have gotten a lot more sophisticated over the last decade. But the role that you envision special blend playing to the extent that we see sustained down trading?

Yes. Thanks for the question, Vivi. I think when you think about the entire Marlboro portfolio, remember that services 4 out of every 10 consumers that go to the marketplace, you have consumers that Marlboro brand appeals to them. And I mentioned it earlier, those price-sensitive consumers, it still appeal to them. And when they have extra discretionary income, they want to trade up. Across the portfolio with the tools that you mentioned, we can provide the consumer a safe landing with various parts of the portfolio where they can stay in the Marlboro franchise. And we see that's better for them than actually losing them or having them trade out and try to win them back later. And so we have the advanced analytics. We have this robust data coming in from retail. And now with those tools, we're trying to drive it closer and closer to the individual consumer. And we feel like we have the tools that allow us to navigate this type of pressure that the consumer is under. I think it's important, though, to remember that our goal is not to grow Marlboro share through time, it's to stabilize it so that we can grow profitability through time. And so that's where our overall goal is specific to the Marlboro franchise, and then we use the tools in the portfolio to be able to do that.

That's really helpful. And then just my follow-up question is on the on! franchise. Clearly, the promotional investments that you guys are making are translating to market share gains, which is great to see. I was wondering if you could offer any color on where you see on!’s promotional spending relative to the broader competitive backdrop?

Sure. I think when you think about the promotional spending there, look, we had to get past manufacturing capacity constraints. So we certainly had a competitor get out that much earlier than us. And so we want to be a bit disruptive in the marketplace to disrupt the consumers from their normal purchasing behaviour in the category or if they're thinking about the category. The same tools that you think agree with that we have in the cigarette category. We're using those tools in this space as well. So we're constantly using those tools with the data we're getting from retail, with the feedback we're getting from consumers and understanding what's effective and what's not effective. And so we'll be continually adjusting those as we move through time to improve the share growth and through -- once we get past the investment period to get increased margins profitability.

Our next question is from Chris Growe of Stifel.

I had a question, first of all, and this is not even in the situation in the last kind of 1.5 years or 2, but you did not provide a volume outlook for the year, for example, for your cigarette business or smokeless business overall. And I'm just curious, not maybe getting to a number, but just to understand, is that volatility in volume maybe the uncertainty around that, kind of the main factor that could push your EPS around within that range, is the worst volume conclusion for the year? What likely drives the lower end of your EPS range and a better volume performance or at the higher end? Is that 1 of the main driving factors of your guidance range for the year as you see it?

I think when you think about cigarettes, certainly an important factor in that, but there are always puts and takes that take place in the P&L. And so as I mentioned, Chris, we run a range of scenarios. And in those scenarios, we have puts and takes that take place across the various categories. Certainly, cigarette volume is 1 of the factors, but it's not the only factor.

Okay. And then I just had a question in relation to Marlboro and share. There's been a few questions on that front. But just 1 thing I was curious about is that some of your price increases over the last year, 1.5 years, maybe last year, you've set aside some funds that you were going to put towards investing behind Marlboro. I guess I just want to get a sense of, based on the performance and largely flat performance in share, even though it's been up and down. I guess, are those funds being utilized as you expected behind Marlboro? Do you see the need based on some of the growth in deep discount share, for example, to continue to increase that rate of spending behind Marlboro?

It's something -- we'll certainly monitor, Chris, going through time. And we talked about, look, we're mindful of keeping pace and understanding how we need to adapt to our consumers across all of our categories. I think I go back to the comment I made to Vivian. Our goal with Marlboro is not to grow share through time, its to have stable share and be able to grow profitability. And I think you see we were very successful with that in 2020.

We'll take our next question from Callum Elliott of Bernstein.

Look, Billy, I appreciate the color on the dispute resolution process with PM. My question is, do you guys have contingency plans in place in heated tobacco in the event that, that dispute resolution process goes against you and the licensing agreement isn't extended beyond 2024.

Yes. I'm not going to go into the hypothetical there, Callum. I think you can appreciate that we feel like we can resolve it. It was pre-thought-out with the agreement that the mechanism is in place to settle disputes. And so we'll go through that process. But we're in continued discussions with PMI.

Okay. And just a quick follow-up, on Vivien's question about sort of promotional environment in nicotine pouches. I guess my question is, are you concerned at all that, that heavy promotional environment for on! might damage the brand equity, and selling today at a huge discount to the market leader, as you mentioned, are you not at all concerned that, that might impact the long-term brand perception here?

We are not. If you think about -- even if you go back to the cigarette category, when we launch Chews and whether it be on Marlboro or any of our other brands, you always had introductory price promotions. It's important to remember when our consumer is going to and C-stores is 1 of the primary locations they go to, they're making that decision in 10 to 15 seconds. It's the snap of an eye almost. And so when you think about that, you want to disrupt them at retail, not only with price promotions, but with a great look at retail or disrupt them either in their mailbox or their e-mail box through digital. And so we're going to use all of those tools available to us. We feel like we have strong equity and building strong equity with on!.

At this time, we'd be happy to open up the queue for our media representatives. We'll take a question from Jennifer Maloney of the Wall Street Journal.

I wanted to follow up on Bonnie's question about your R&D and your 2030 vision. Can you speak specifically to your -- how e-vapor fits into your 2030 vision and RP portfolio?

Yes. I think from an R&D portfolio, I'll take that first. You'll remember our agreement with JUUL precludes us from being able to do any organic development in e-vapor. So that's 1 category that we do not have any organic development going on. If you think about the 2030 vision, the way we think about the e-vapor category, certainly as the entire category is going through the FDA authorization process as they make decisions, the e-vapor category will be in a bit of transition. But we believe the e-vapor category and JUUL included in that can play an important role in the U.S. in harm reduction and the future of harm reduction. So when you think about that, e-vapor can play an important role, but it's going to be in a bit of a transition as it goes through the FDA authorization process.

You only have a minority stake in JUUL. So do you -- I mean, what's your strategy there for this 2030 vision in the e-vapor category. It’s just you'll only be able to participate in the e-vapor category through your minority stake in JUUL? Or do you have some other strategy there?

There -- our only participation in the e-vapor category would be through our minority investment in JUUL. And I think if you step back and see the success JUUL’s had in the marketplace with converting adult smokers to the e-vapor category, you’ll see that it still has the lead in market share in the U.S. with adult tobacco consumers.

Thank you. At this time, I would like to turn the call back to Mac Livingston for closing comments.

Thanks, Leo, and thank you all for joining us. I'll remind you, once again, we're going to work quickly to get the recording of the remarks back up on the webcast for those who were disrupted there. So apologies for that again. If you have any other further questions, please contact the Investor Relations team. Thanks

This does conclude today's call. You may now disconnect your lines. And everyone, have a great day.