Mac Livingston - Vice President of Investor Relations Billy Gifford - Chief Executive Officer Sal Mancuso - Chief Financial Officer

Good day everyone and welcome to the Altria Group 2024 Third Quarter Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Altria's management and 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, please go ahead sir.

Thanks, Ashley. Good morning and thank you for joining us this morning. Billy Gifford, Altria's CEO, and Sal Mancuso, our CFO, will discuss Altria's third quarter and first nine months 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 2023. 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 our Board of Directors. We 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 are included in today's earnings release and on our website 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 the third quarter. The smokable products segment delivered solid operating companies income growth behind the resilience of Marlboro. And in the oral tobacco products segment our MST brands continue to drive profitability while on maintaining momentum in the marketplace. We also continue to reward shareholders through our growing dividend and share repurchases while making investments in pursuit of our vision. My remarks this morning will begin by highlighting the significant progress made to reduce underage tobacco use. Then I'll discuss the continued momentum our smoke-free products making in the marketplace and a new initiative designed to modernize our processes, which we believe will accelerate progress toward our vision. I'll then turn it over to Sal, who will provide further details on our financial and business results. Recently, the FDA and CDC released their full report on tobacco product use among middle and high school students based on the 2024 National Youth Tobacco Survey, and the results are encouraging. Rates for legal tobacco products continue to decline and all five of the U.S. Department of Health and Human Services, Healthy People 2030 goals to reduce adolescent use of tobacco and nicotine products have been met or exceeded. This is tremendous progress for public health that we should all celebrate and it shows that with the work of many stakeholders we can keep tobacco and nicotine products from becoming an on ramp for youth while still making available FDA authorized smoke-free products as an off-ramp from cigarettes for adult smokers. Yet, even in the face of meaningful progress on overall underage rates, the illicit market remains an issue. NYPS data demonstrates that more than 55% of the youth who reported current use of e-cigarettes used a disposable product, the vast majority of which are illicit. As I'll discuss in a bit, strong action is needed to reset the regulatory system in a way that supports the needs of adult smokers with satisfying products and enforces the rules for all while continuing to keep an eye on underage use. Let's now turn to the e-vapor category, where we remain excited about NJOY and its potential as a competitive alternative with both smokers and vapors. This year, NJOY has focused on enhancing trial generation, distribution, visibility at retail and connections with consumers. As a result of these efforts, we've seen encouraging repeat purchase data, growing customer loyalty and strong share momentum. In the third quarter, NJOY pulled back on certain retail promotional offers to better understand consumer retention and underlying demand. Initial retention results were promising in the retail accounts where NJOY conducted tests. The promotion drove increased volume by approximately 85% compared to the pre-promotion period, and NJOY retained more than half of that volume growth following the promotional period. We believe these results reflect consumer interest in NJOY and their satisfaction after trying the brand and NJOY plans to continue testing trial focused investments with a view toward long-term profitability. NJOY's brand equity investments supporting its more to simply enjoy [ph] campaign are also yielding positive results today. NJOY's, Net Promoter Score, which measures consumer loyalty and satisfaction is over 20 points higher than in 2023. We believe this improvement is attributable to product satisfaction, improved visibility and positioning at retail, and the marketing activations the brand has deployed this year. Turning to marketplace performance. NJOY consumables shipment volume grew more than 15% to 10.4 million units. In the third quarter, consumable shipment volume for the first nine months was approximately 34 million units. NJOY device shipment volume for the quarter nearly tripled versus the prior year to 1.1 million units and was 3.9 million units for the first nine months. NJOY's third quarter retail share of consumables was 6.2 share points, up 2.8 share points versus the year ago period and 0.8 share points sequentially. While NJOY's results are encouraging in the context of the broader e-vapor category, category growth continues to be driven by the proliferation of illicit disposable products. At the end of the third quarter, we estimate the e-vapor category included approximately 19 million adult vapors, up 2.5 million versus a year ago. Over the last year, the number of vapors using illicit disposable products grew by approximately 45% to 12.4 million vapors, while pod vapors declined by more than 20% to 2.7 million. While we believe the growth in e-vapor is a proof-of-concept for tobacco harm reduction, there are too few FDA authorized products in the market and FDA enforcement is inadequate. For our part, we continue actively engaging with regulators, federal and state lawmakers, our trade partners, and other stakeholders to encourage action on these issues. At the federal level, we've seen some recent positive activity. This summer, the FDA, jointly with U.S. Customs and Border Protection, seized more than 50,000 unauthorized vapor products from China at the Chicago Port of Entry. In August, the FDA issued a proposed rule requiring all imported vapor products to include a PMTA submission tracking number. Closing this loophole is something for which we have long advocated. We provided our comments in support of this rule and encouraged additional actions such as extending it to cover nicotine pouch products. And last week, the federal task force announced a joint seizure of unauthorized e-vapor products valued at $76 million. A strong course correction is needed to protect the harm reduction opportunity for the 30 million adult smokers in the U.S. and moving forward, we hope to see more meaningful enforcement action. Before moving on, I want to mention our ongoing litigation before the U.S. International Trade Commission. As you know, Juul has asserted patent infringement claims against NJOY, and NJOY has done the same against Juul, with both parties seeking import bans. In August, the administrative law judge in Juul's case against NJOY issued an initial determination supporting Juul's allegations and recommending an exclusion order. Last week, in response to NJOY's petition, the ITC granted review of the initial determination with respect to aspects of two of the four patents Juul asserted against NJOY. The ITC is scheduled to issue a final determination in Juul’s case against NJOY by late December. Also last week, the same judge in Juul's case against NJOY extended the deadline for her initial determination in NJOY's case against Juul to December 6, 2024. As a result of the extension, the ITC is scheduled to issue a final determination in the case by early April. As a reminder, NJOY has developed strategies that we believe would allow ACE to remain on the market or limit sales disruption in the event of certain adverse litigation outcomes. We continue to believe in the strength of NJOY's claims and are vigorously defending against all Juul’s allegations. Moving now to the oral tobacco product category. In the third quarter, oral nicotine pouches grew 11.4 share points and now represent nearly 44% of the category. Oral nicotine pouches were the primary contributor to the estimated 7.5% increase and oral tobacco industry volume over the past six months. Helix continued to participate in the category growth as on! reported shipment volume grew by 46% to nearly 42 million cans during the third quarter. on!'s strong sales growth has increasingly been driven by repeat purchasers. Repeat purchases of the brand have increased by 40% to approximately 700,000 consumers versus the prior year and contributed more than 80% of on!’s volume in the third quarter. Helix plans to continue this momentum by executing plans that build brand awareness and generate trial and adoption among consumers. on! also continued its momentum at retail, growing its share of the oil tobacco product category to 8.9% in the third quarter, an increase of 2 share points versus the prior year and 0.8 share points sequentially. We believe on!’s ability to grow volume and share demonstrates the strength of its product portfolio and increasing brand equity. Unfortunately, and similar to e-vapor, we've identified more than 1,000 illicit nicotine pouch SKUs at retail and online. Many of these are synthetic nicotine pouch products, which are an emerging issue. According to federal law, it is illegal to sell or distribute a synthetic nicotine product in the United States that has not received a marketed granted order from the FDA by July 2022. Today, the FDA has not authorized any synthetic pout products. Despite the clarity of the statute the FDA's refusal to enforce the law is causing confusion among legitimate manufacturers and we call on the agency to clarify its enforcement posture on synthetic products. The momentum behind NJOY and on! is exciting. Going forward, we plan to build our smoke-free progress and maintain our focus on the opportunity to advance our vision and enterprise goals. To that end, we're launching a multiphase, optimize and accelerate initiative designed to modernize the way we work and become a faster, more efficient organization. We believe that by doing so we will accelerate progress toward our vision. We plan to centralize work, streamline and standardize processes, further leverage artificial intelligence, intelligence and automation, and outsource certain transactional tasks. By optimizing processes and better using technology and external partners, we expect to free up significant employee time and financial resources. A key component of this initiative will be the establishment of an accelerated business solutions organization. This will be a centralized organization responsible for driving efficiency and process improvement across our companies in partnership with external service providers. We expect the initial phases of the initiative will deliver at least $600 million in cumulative cost savings over the next five years, which we plan to reinvest in our businesses in support of our vision and enterprise goals. We estimate total pretax charges for the initial phases of approximately $100 million to $125 million. Although we are still evaluating certain aspects of the initial phases of the initiative, we expect to record the majority of the cost as special items excluded from adjusted EPS by the end of the first half of 2025. With the initial cost being recorded beginning in the fourth quarter of 2024. By evolving our ways of working, implementing new technology and better leveraging external partners, we can drive further progress toward our vision and position ourselves for long-term sustainable growth in this dynamic environment. We continue to believe Altria is uniquely positioned to responsibly lead the transition of adult smokers to a smoke-free future. The tobacco harm reduction opportunity remains in front of us and we believe we have the right strategies to make it a reality. Those strategies, together with the strength of our smoke free portfolio and talented employees, give me confidence that we can achieve our vision. I'll now turn it over to Sal to provide additional detail on our business and financial results.

Thanks, Billy. Consistent with our 2024 expectation for second half weighted EPS growth, Altria grew adjusted diluted earnings per share by 7.8% in the third quarter and by 1.6% in the first nine months. We reaffirm our guidance to deliver 2024 full-year adjusted diluted EPS in a range of $5.07 to $5.15, representing a growth rate of 2.5% to 4% from a base of $4.95 in 2023. Turning to our business results. The Smokable Products segment continued to deliver on the strategy of maximizing profitability while appropriately balancing investments in Marlboro with funding the growth of smoke-free products. This segment grew its adjusted operating company's income by 7.1% in the third quarter and by 0.9% for the first nine months. Adjusted OCI margins expanded meaningfully to 63.1% and 61.7% for the third quarter and first nine months respectively. This performance was supported by strong net price realization of 10.6% for the quarter and 9.7% for the first nine months. Smokable Products segment reported domestic cigarette volumes declined 8.6% in the third quarter and 10.6% for the first nine months. When adjusted for trade inventory movements and calendar differences, domestic cigarette volumes for the third quarter and the first nine months declined by an estimated 11.5% and 11% respectively. At the industry level when adjusted for the same factors, we estimate that adjusted domestic cigarette volumes declined by 9% in the third quarter and the first nine months. During the third quarter, cigarette industry volume declines continued to be elevated partly due to the growth of illicit flavored disposable e-vapor products and continued discretionary income pressures on consumers. While the rate of inflation has softened in recent months, we believe smokers remain under economic pressure as the cumulative impacts from prolonged inflation persist and constrain discretionary income. The latest data show that wages have not offset rising prices for smokers and consumer debt and credit delinquency rates are rising. At retail, total discount segment share grew by 1.5 share points in the third quarter and by 1.1 share points for the first nine months. Marlboro retail share of the cigarette category declined 610s [ph] versus the year ago period and 310 [ph] sequentially. Within the highly profitable premium segment, Marlboro remains the undisputed leader in the category. In the third quarter, Marlboro expanded its share of premium to 59.3%, an increase of 0.3 share points year-over-year while other competitive brands ceded share. We are encouraged by Marlboro's resilient performance and believe it is a testament to its positioning within the premium segment as the aspirational brand with strong consumer loyalty. In cigars reported shipment volume decreased 1.6% in the third quarter, yet outperformed the large mass cigar industry which declined 5.2%. Middleton continued to contribute to smokable products segment financial results and Black & Mild remained the leader in the highly profitable machine made large cigar segment. Turning to the oral tobacco products segment, adjusted OCI grew 2% in the third quarter and 2.7% for the first nine months. Third quarter and first nine months adjusted OCI margins remained strong at 66.8% and 67.2% respectively. Margins contracted by 2.5 percentage points for the third quarter and 1.7 percentage points for the first nine months. Primarily due to mix as on! becomes a more significant portion of our oral tobacco products segment. Total segment reported shipment volume increased by 1.2% in the third quarter. For the first nine months, reported shipment volume decreased by 1.3%. When adjusted for calendar differences and trade inventory movements, we estimate that third quarter and first nine months oral tobacco products segment volumes declined by approximately 1% and 2.5% respectively. Oral tobacco products segment retail share declined by 4.2 percentage points in the third quarter as declines in our MST brands were partially offset by continued on! share gains. Overall, we continue to be encouraged by the performance of our oral tobacco products as on! grew volume and share in a competitive category and Copenhagen remained the number one brand in MST. Turning to our investment in ABI, we recorded $144 million of adjusted equity earnings for the third quarter, up 0.7% versus the prior year. These earnings include the impact of a lower ownership interest compared to the year ago period due to the partial sale of our ABI investment earlier this 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. In October, we reached an agreement with the IRS regarding the tax treatment of the ordinary losses related to our former investment in JUUL. Of the approximately $12.8 billion in losses and pursuant to our agreement with the IRS, we have claimed $4 billion of ordinary losses and $4.1 billion of capital losses on our 2023 tax return. $3.2 billion of these capital losses offset capital gains related to the IQOS transaction and the partial sale of our investment in ABI. We have $5.6 billion of capital losses remaining from the Juul investment, including $900 million that are available to offset capital gains through 2028. For financial statement purposes, none of the tax benefit for the $5.6 billion has been recognized. We remain committed to returning significant value to shareholders and maintaining a strong balance sheet. We demonstrated this commitment in the third quarter when we paid approximately $1.7 billion in dividends and raised our dividend by 4.1% in August, marking our 59th increase in the last 55 years. In the third quarter, we repurchased 13.5 million shares for $680 million. At the end of the third quarter, we had $310 million remaining under our current share repurchase program, which we expect to complete by the end of the year. In addition, our balance sheet remains strong. Our total debt to EBITDA ratio as of September 30th was 2.1 times in line with our target of approximately two times. 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] Our first question comes from Matt Smith with Stifel. Please go ahead.

Hey, good morning.

Good morning Matt.

If we could start with you reiterated the guidance and that implies a fairly wide range of growth for the fourth quarter. Can you talk about some of the puts and takes we should keep in mind for the fourth quarter? You'll have the benefit of the MSA legal fee expiration, but any other detail that we should keep in mind would be helpful.

Yes. Good morning Matt. I think you touched on one of the issues. Definitely. It's the MSA benefit from the expiration of the legal fund. I'll remind you too that we have an extra shipping day in the fourth quarter as well. So we were pleased to provide you with the guidance and very comfortable with it.

Thank you. And as my second question, I'd like to ask about the discount category share dynamics. Marlboro had an impressive performance in the premium category, but discount share reaccelerated on a sequential basis. You have a lot of deep consumer insights data. Are you seeing diverging trends between cross category movement for the premium versus the discount consumer?

I think there's a little bit of that happening, Matt. I would point to really it's the economic strain that the consumer is under. I think you've seen it, we've been highlighting it. You see it in some of the C-store traffic that the consumer is under economic strain. And so from that standpoint, if they're staying with the cigarette category, they feel that economic strain. I would also highlight from a cigarette perspective not directly to your discount question is the impact of illicit and the number of consumers that are moving over.

Thank you, Billy. I'll pass it on.

Thanks.

Thank you. We will take our next question from Bonnie Herzog with Goldman Sachs. Please go ahead.

All right, thank you. Good morning. I actually wanted to circle back on the guidance because. And maybe ask a little differently. Despite the stronger than expected Q3, you did choose to maintain your guidance and not narrow the range despite really only two months left in the year. So could you maybe help us understand the reasoning behind this? And if in some way you have limited visibility and then also your guidance assumes Q4 EPS growth will decelerate sequentially despite another extra shipping day and then the MSA stuff. So, I guess I assume a key driver of this is due to the unwind of the overshipments in Q3. And so if you could talk about that, if I just do a quick calculation, it looks like the shipment timing in Q3 was a two point benefit versus maybe a one point benefit from the extra day. So any color there would be helpful and how we should think about that for Q4.

Sure, we're pleased to be able to reaffirm our guidance. And certainly in the dynamic market that the tobacco industry is under in the U.S. with the lack of enforcement and things taking place that we're seeing the consumer being swayed by the number of illicit products, both the nicotine pouch and e-vapor, that's impacting across all categories. I think when you think about tightening, we feel good about it. Bonnie, there are always puts and takes quarter-to-quarter. As far as your question around shipments and inventories, you remember we had an extra shipping day in the third quarter. We have an extra shipping day in the fourth quarter. From an overall inventory standpoint, nothing really to highlight. I think you've seen it, you have fluctuations, but over the long term it tends to balance out.

Okay, fair. But if I may, Billy, I mean just based on what you report with your shipments versus the adjusted inventory, for the quarter, I mean there was a little bit of a timing benefit in the quarter and so maybe that's going to. Yes.

Well, from a comparison standpoint, you certainly have the extra shipping day that occurred in the third quarter. And I would remind you you're going to have the extra shipping day that occurs in the fourth.

Okay, I can take it offline. I'm just trying to make sure. I understand. Just because you're adjusted volume X trade inventory, you know, it was down a 11.5, which is like a three point difference in reported shipments. So again suggest that there was, some timing differences in the quarter that could unwind in Q4. Okay.

To make it terrible year-over-year, you adjust that shipping day out.

Right. But I mean, I can take it offline. I didn't think it would be one extra, not three points. I didn't think based on my math, unless you really overshipped in one extra day. Anyway, I do have another question, if I may, on your relative price gap. It certainly continues to widen and it's now at 47% and you've implemented four list prices price increases this year. So I guess I'd love to hear at this point if there's any change in your strategy and sort of how concerned are you about this widening price gap between Marlboro and the lowest competitive cigarette brand in the market? And I'm thinking about in the context of everything you called out with the pressures on the consumer and, some of the market share gains we've been seeing from deep discount manufacturers as there, there has been some down trading pressure. Any color there would be helpful. Thank you.

Sure. I appreciate the question, Bonnie. I think it's important to remember that price gap that we're showing on the metrics is the national price gap. Remember, as we've implemented RGM, it's allowed us to really look at price gaps in a store. And then you can look at within the portfolio of Marlboro of different price points within Marlboro. And implementing that, we're able to, we believe, more effectively, more efficiently apply the resources to the marketplace. Our idea would be to get to a consumer by consumer basis. We're not quite there yet, but it allows us to, from a pricing standpoint, these past pricing, take pricing and then implement what we need to in the marketplace. You know, I would remind you the strategy of the overall combustible category is to maximize profitability over the long term while making appropriate investments in Marlboro balanced with the growth areas. And so we feel like we are successfully doing that. You highlighted that Marlboro continues to grow in the premium segment and we'll continue to monitor it as we move forward.

Thank you. [Operator Instructions] So we will take our next question from Faham Baig with UBS. Please go ahead.

Good morning everyone. If it's okay, I might take the liberty of three questions. The first one goes back to your patent infringement lawsuit that JUUL has against NJOY. I know you shared a bit on this. And then there is a final determination date set for 23 of December, after which I understand there is a 60-day period before an exclusion order could be granted and NJOYs products have to. You have to stop importing NJOYs products. Previously, you've highlighted a couple of things, right? You've highlighted substantial equivalence applications as well as negotiating with JUUL to come up with a resolution. So can you please give us a bit more information on those SE applications when you expect to receive approvals, whether you've been able to now work around the four patents at concern as well as where the negotiation trends are, then I'll come back with my next two.

Sure. Yes, just. You nailed it. As far as timing, we would expect the final determination towards the end of December. You are correct, the President has or trade representative, which is officially the President has up to 60 days. If that elapses, an exclusion order would go into effect or if the trade representative notifies the ITC of approval before the 60 days. We did file PMP exemptions for three out of the four patents and they were really for simple changes to the exterior of our NJOY product that we believe avoid those patents. And so we filed those. We've been in conversations with the FDA. They have let us know that they'll be looking at those applications as we progress towards the end of the year. Our teams internally are working for being able to have an avoidance of the fourth patent that was mentioned in the ITC case. And so we're looking at the whole process as part of the contingency because you never know how litigation would turn out and we feel good about that. As far as the negotiations with JUUL and through the mediator, nothing really to report there.

Great, thanks. And the second question goes back to your pretty impressive EBIT margin performance in the smokables division. 350 basis points, if I remembered correctly. If I do the math, your controllable costs seem to be down about high single digits, which is pretty impressive given that they were running up double digits in the first half. Again, that's dependent on my math. But could you help clarify and if the math is right, what's driven that, please?

Sure. Yes. You are right. Controllable costs for this quarter are down. But if you go back, if you rewind the clock to April, when we were talking in the first quarter, controllable costs were up and at the time I shared it, we expected timing to play a factor in that and that's what you're really seeing. So as expected, we think that you're seeing a more Normalized pattern over the long term, but within a short window, like a quarter, timing of costs does impact the controllable cost.

Okay, so it's not something we should expect continues.

No, I would not look at a quarter in a short window like that and extrapolate it. I would look at it over a longer period of time.

Okay, thanks. And one final question. I think one of your peers has recently launched a heated tobacco offering which you'll be very familiar with. Can you maybe remind us what your expectations are for the success of this category over, let's say, the next five years and how it could potentially impact the current cigarette trends? Please.

Yes. If you recall all the way back to our Investor Day when we talked about the three, what we saw is the three growing categories, unless something draconian comes out of the FDA, we expected e-vapor to be the largest because it was already in place and entrenched. Next was going to be nicotine pouch and then heat [indiscernible]. It's something that we'll monitor. You recall that we have a joint venture with JT for the Ploom device, which we are still excited about. We look to file a combined PMTA MRTP in the first half of 2025. And so from that standpoint, we feel like it's something to monitor, but as far as the size of the categories, we feel like e-vapor will be the largest.

Thank you so much. Appreciate it.

Thank you.

Thank you. We will move next to Callum Elliott with Bernstein. Please go ahead.

Hi. Good morning, guys. Thank you for the questions. Firstly, just a quick follow up maybe on the litigation with JUUL. So you mentioned the tweaked product that you've submitted the SE [ph] application for. You also mentioned how you've tweaked this product to get around three of the four patents in question in the ITC case. My question is, how confident are you, given that the revised product still sort of infringes on this one patent, that the revised product would not be subject to an import ban from ITC?

Yes, certainly anything can happen in litigation. The remaining patent was one of them that the ITC granted review of. With our petition, our teams, internally, as any good team will do, is working feverishly to avoid that patent as well. And so they're making great progress there. I think when you look underneath this column, if you want to draw a positive out of it, I think it shows that JUUL is worried about the success that NJOYs had in the marketplace thus far. And so we'll continue to move forward, but we're certainly pleased that we were able to file those PMTA exemptions for, like I said earlier, simple changes to the exterior of the product.

Just a quick follow up on that, Billy. If you make a further change to the product to circumvent this force patent, would that restart the timeline on the SE process or not?

Yes. So from a standpoint of the final one, it would be considered a different application. Again, we believe with these kind of simple, if you will, exterior changes that the SE exemption process was really a contingency and the utmost of caution to go to the FDA. It really doesn't change how the device functions, what goes in and what comes out of the device. And we provided that data to the FDA.

Okay, perfect. And then my second question is actually on something else that you mentioned, which is your partnership with Japan Tobacco for the Ploom device. And obviously JT have recently closed an acquisition in the U.S. Cigarette space and become a more meaningful competitor there. So is there any change to that partnership following that acquisition, is my question.

Yes, from the JV. It's progressing along. Remember, we set that up to really run into perpetuity. The teams are working well together on the application process. We're excited to continue progress there. And we really see no impact to the, the JV we have for the Ploom device.

Okay, perfect. That's clear. And my final question is on the proposed rule that you mentioned, requiring the vaping imports to have a PMTA tracking number, hoping that you can maybe walk us through your expected timeline to get to the end of this process.

Yes. What we told the FDA is we didn't really think it needed to go through the proposed rule process, that it was part of their jurisdiction already. So we'll see how they respond to that and how they respond to other comments that they receive. And we encourage them to expand it to nicotine pouch as well because we're seeing the same manufacturers that were putting illicit vapor in the marketplace, just expanded their portfolio and putting a list of pouches in the marketplace.

But any sort of rough guidelines of when you think it could come into place.

I would like to be able to predict timing with the FDA, but we've been unable to do that thus far.

Okay, thanks, Billy.

Thank you.

[Operator Instructions] And it does appear that we have no further questions at this time. I would now like to turn the call over back to Mac Livingston for any closing remarks.

Thanks to everybody for joining us and have a great day.

Thank you. And this does conclude today’s program. You may disconnect at any time.