Q1 2025 Earnings Call Transcript

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Good day, and welcome to the Altria Group, Inc. 2025 First Quarter Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Altria's management and a question and answer session. To ask questions following the conclusion of 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, David. Good morning, and thank you for joining us. This morning, Billy Gifford, Altria's CEO, and Sal Mancuso, our CFO, will discuss Altria Group, Inc.'s first quarter 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, comparing results to the same period in 2024. 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 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 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. Morning, and thank you for joining us. Our highly profitable traditional tobacco businesses performed well in a challenging environment in the first quarter. The smokeable products segment delivered solid adjusted operating companies income growth behind the strength of Marlboro.

In the Oral Tobacco Products segment, ON! maintained momentum in a competitive marketplace as Helix invested strategically behind the brand. And shareholders continue to benefit from strong cash returns through dividends and share repurchases while we invested in pursuit of our vision. My remarks this morning will focus on encouraging first quarter results from ON!, the state of the e-vapor category and enforcement progress, and our path forward with e-vapor. I'll then turn it over to Sal who will provide further detail on our business results.

Let's begin with ON! The nicotine pouch category. Oral nicotine pouches drove the estimated 10% increase in all tobacco industry volume over the past six months. In the first quarter, oral nicotine pouches grew 8.7 share points and now represent nearly half of the oral tobacco category.

Helix delivered strong performance in a very competitive environment this quarter, growing ON! reported shipment volume to over 39 million cans representing 18% growth. ON! continued its momentum at retail, expanding its share of the oral tobacco category to 8.8%, an increase of 1.8 share points versus the prior year and one-tenth of a share point sequentially. In addition, ON!'s share of the nicotine pouch category was 17.9%, an increase of half a share point versus the prior year. Helix delivered these results while continuing to optimize promotional resources and as ON!'s price at retail increased year over year.

We believe Helix's ability to grow ON!'s volume and share while its retail price is increasing demonstrates ON!'s strengthening brand equity among loyal consumers. As a result of the responsible brand-building investments, including the new It's ON! campaign, consumer impressions of ON! grew by nearly five times versus the prior year, exceeding 200 million in the first quarter. And over the past six months, awareness of the ON! brand among current oral nicotine pouch consumers reached over 60%, an increase of nine percentage points. This year, Helix plans to maintain this momentum by bringing the It's ON! campaign to more consumers and focusing on equity investments behind the ON! brand in new and existing channels.

Let's now turn to the e-vapor category where the illicit flavored disposable market continues to drive category growth. At the end of the quarter, we estimate the e-vapor category included more than 20 million vapers, up over 2.6 million versus a year ago. During the same period, disposable vapers increased by an estimated 4 million to approximately 14 million. We estimate that illicit e-vapor products now represent more than 60% of the category.

To address the illicit e-vapor issue, we remain focused on advocating for regulatory reforms to accelerate product authorizations and enhance enforcement against illicit actors. We are actively engaging with members of Congress and key administrative staff to highlight the importance of this issue and are urging the new administration and the federal multi-agency task force established last year to take stronger, more coordinated action. We're also supporting state legislative remedies to address illicit vapor, including state directories. Today, two states have enacted directory legislation this year, and another 21 states have legislation pending.

State AGs are also becoming more active. In the first quarter, 10 state AGs announced various actions, including civil lawsuits, targeted investigations, and warning letters against illicit e-vapor manufacturers, wholesalers, and retailers. In April, Iowa's AG led a coalition of every Republican state AG in asking the Trump administration to continue combating the flood of illicit e-vapor from China into the U.S. Let's now turn to NJOY.

Since we acquired NJOY in 2023, the e-vapor marketplace has changed significantly to the detriment of legitimate e-vapor manufacturers like NJOY. Unfortunately, in the absence of FDA-authorized flavored choices, many consumers have turned to the illicit market. And NJOY has been further challenged by the ITC's exclusion order and cease and desist orders that took effect on March 31. To comply with the orders, NJOY discontinued the importation of NJOY ACE and ceased shipments to wholesale. These orders are yet another step backward for the e-vapor category.

They severely limit FDA-authorized choices for consumers and undermine public health. NJOY intends to appeal the ITC's decision to the U.S. Court of Appeals for the Federal Circuit, and our teams continue to work to finalize a product solution that we believe addresses all four patents. Looking ahead, we believe it is critical to compete in the e-vapor category with products that align with the evolving expectations of today's consumers.

We see the exit of NJOY ACE from the market saturated with illicit products as an opportunity to refine and strengthen our e-vapor product portfolio. To that end, we are combining the talent and capabilities we gained in the NJOY acquisition with our evolved view on today's vapers to broaden NJOY's pipeline of innovative e-vapor products. We continue to believe in the promise of a fully regulated e-vapor category. As I've said before, the FDA has all the resources and tools necessary to accomplish that goal by expediting the authorization process and forcefully enforcing its rules.

In the meantime, we are positioning ourselves to reenter a properly regulated market where we can compete on a level playing field and make significant progress for their vision. I'll now turn it over to Sal to provide more detail on our business results.

Thanks, Billy. Turning to our first quarter business results. The smokeable products segment grew adjusted operating company's income or OCI by 2.7%. Adjusted OCI margins were 64.4, an increase of 4.2 percentage points versus a year ago.

This performance was supported by robust net price realization of 10.8%. Total Smokable Products segment reported domestic cigarette volumes declined by 13.7% in the first quarter. When adjusted for calendar differences, in trade inventory movements, we estimate that our domestic cigarette volumes declined by 12% over the same period. At the industry level, when adjusted for trade inventory movements, calendar differences, and other factors, we estimate that domestic cigarette volumes declined by 9%.

During the quarter, cigarette industry volume declines remained elevated partly due to the growth of illicit flavored disposable e-vapor products and continued discretionary income pressures on consumers. Smokers remain under economic pressure due to the compounding effects of inflation exceeding overall wage growth, especially among low-income consumers. Although the year-over-year increase in the rate of inflation moderated in the quarter, high prices on everyday expenses continued to constrain disposable income. As a result, we've seen smokers continue to seek price relief at retail, either within their regular brand or in the form of discount products.

In the first quarter, the discount cigarette segment grew by 1.8 share points. Marlboro retail share declined by one share point versus the year-ago period and 0.3 share points sequentially. Within the highly profitable premium segment, where smoker purchasing behavior tends to reflect high levels of brand loyalty, Marlboro maintained its longstanding leadership in the category. In the first quarter, Marlboro expanded its share of the premium segment by 0.1 share point to 59.3% while other competitive brands ceded share.

We are encouraged by Marlboro's resilient performance and believe it is a testament to its positioning as the aspirational brand in the category, strong brand loyalty, and PM USA's RGM, and data analytics capabilities. PM USA uses its RGM tools to manage the Marlboro franchise holistically, supporting Marlboro at the state, store, and consumer levels. As I discussed at CAGNY, national metrics like average price gaps are too generalized to be meaningful and are not reflective of how PM USA delivers value or manages the business. As a result, beginning in the first quarter, we are no longer providing the Marlboro price gap versus the lowest effective price in our quarterly metrics.

In cigars, reported shipment volume decreased 2.9%. Middleton continued to outperform in the large mass cigar behind the strength of Black and 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 69.2%, down slightly from a year ago.

Total segment reported shipment volume decreased 5%. As growth in ON! was more than offset by lower MST volumes. When adjusted for calendar differences in trade inventory movements, we estimate that first quarter oral tobacco product segment volumes declined by approximately 1%. Oral Tobacco Products segment retail share declined by 3.1 percentage points.

As declines in our MST brands were not fully offset by continued share growth of ON!. Overall, we remain encouraged by the performance of our oral tobacco products as ON! grew volume and share in a highly competitive category, and Copenhagen remained a significant contributor to adjusted OCI as the leading moist smokeless tobacco brand for consumers who want a high-quality premium product experience. Let's turn to an update on our e-vapor reporting unit. As Billy mentioned, the ITC orders related to the NJOY ACE went into effect at the end of the first quarter.

As a result, we performed an interim impairment assessment of the goodwill and recorded a noncash impairment charge of $873 million. Despite the withdrawal of NJOY ACE from the marketplace, we believe we gained valuable assets and capabilities in the NJOY acquisition that can be applied toward a future e-vapor pipeline that meets consumer preferences over the long term. Turning to ABI's financial results. We recorded $146 million of adjusted equity earnings, down 11.5% versus the prior year.

This decline was driven by a lower ownership interest compared to the year-ago period, reflecting the sale of a portion of our ABI investment. 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 $1.7 billion in dividends and repurchased 5.7 million shares for $326 million.

At the end of the first quarter, we had $674 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 March 31 was 2.1 times, in line with our target of approximately two times. Let's move now to guidance.

Where we expect to deliver 2025 full-year adjusted diluted EPS in a range of $5.30 to $5.45, representing a growth rate of 2% to 5% from a base of $5.19 in 2024. As noted in today's press release, beginning in the first quarter, we changed our treatment of our amortization expense associated with definite-lived intangible assets and now exclude it from our adjusted results. We believe that operating results adjusted for this item better reflect the underlying performance of our businesses and provide a better comparison to prior operating results. As a result, our guidance reflects a recast of the guidance range and 2024 base.

Our growth rate expectation is unchanged. Our guidance assumes limited impact on combustible and e-vapor product volumes from enforcement efforts in the illicit e-vapor market and assumes NJOY ACE does not return to the marketplace this year. The guidance range also includes the reinvestment of anticipated cost savings related to our previously announced optimize and accelerate initiative and lower expected net periodic benefit income. In addition, our guidance range contemplates limited impact of increased tariffs on our costs and potential impacts on our consumers.

Based on presently available information about tariffs, we will continue to closely monitor the state of our consumers, including how the economic impact of tariffs could affect their purchasing behaviors. With that, we'll wrap up, and Billy and I will be happy to take your questions. 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. Call. Investors, analysts, and media representatives are now invited to participate in a question and answer session. We will take questions from the investment community first. Our first question comes from Matt Smith with Stifel. Please go ahead. Your line is open.

Hi, good morning. Thank you for taking my question.

Good morning, Matt.

Billy, maybe to start, Altria has a unique perspective or a great perspective on the consumer. You talked about some of the macroeconomic pressure the consumer is facing. And when we look at the bridge and the underlying cigarette volume chart that you provide, it looks like the macroeconomic factor is less of an impact relative to the cross-category factors that you're calling out. Can you talk about the current state of the consumer?

And are you seeing that inflationary pressure on the consumer play a role in that elevated cross-category movement?

Yes. It's a great question, Matt. We certainly are seeing the consumer under and we've been noting it for a number of quarters, as you recall. It's the cumulative impact of the inflation.

It's not just one quarter stand-alone. The cumulative impact over time. And we are seeing, to your point, in the cross-category, especially to illicit e-vapor. We're seeing pricing from a consumer perspective move up.

It's certainly not number one. Flavors are still number one, and the flexibility they have in the amount of choices they have in the marketplace being the number one thing. But price is certainly moving up in that and is becoming a more prominent factor.

Thank you, Billy. And as a follow-up, can you talk about what you're seeing from the consumer that gives you the confidence in continuing to seek pretty robust pricing in the cigarette category? You announced an additional price increase recently. And can you talk about the confidence in the consumer for that pricing or perhaps more flexibility with that pricing to reinvest more in Marlboro to sustain strong performance you're seeing in the premium segment?

Thank you.

Yeah. I think it's the key point you had at the end. It's the flexibility. It's a little bit of both.

Certainly, the strength of Marlboro, but the tools we have available to us with data analytics and revenue growth management allows us to apply resources where they're needed by the consumer. You'll recall us describing it. We can do it at the store level. We're certainly in progress to try to do it to the individual level, but we certainly do it to the store level pretty effectively.

And we're pleased with the results Marlboro's had in the marketplace from a market share standpoint.

We'll take our next question from Gaurav Jain with Barclays.

Hi, good morning, Billy. Good morning, Sal. Three questions from me. One is on, you know, the brand you have, Basic. Seems that you have repositioned it down almost to the price of Lucky Strike. So and how you know, I'm picking that data from Nielsen. So maybe my reading is correct. But can you just help us understand how you are thinking about approaching the discount segment?

Yeah. It's a good question, Gaurav. I look, I wouldn't see it as a strategy shift. This is very common to what we do with factory time.

If you think about it, when we were increasing the profitability on Basic in our history, we were used positioning L&M to capture those smokers that were unable to move up with the price increases on Basic. You're seeing the exact opposite now as we increase profitability on L&M, we ran some tests with our Basic brand in the marketplace, were pleased with the test that it was able to capture those consumers that move up or were unable to move up with the increased price and we were able to capture them with the brand. So we expanded that as we moved into this year. We are still a premium-focused company.

We want to have a presence in discount, but we are not interested in growing the discount segment. The profitability is still in the premium segment. You recall at CAGNY, and it's still true as we ended the first quarter, the dollar market share of Marlboro still exceeds its overall market share from a volume perspective.

Thank you so much. And my second question is on ON!. So still pretty robust growth, 18% YoY. Clearly, growth has slowed down, you know, and, you know, we have the biggest competitor, you know, increasing guidance last week.

More bullish. So do you think there is a risk to ON!'s trajectory as we go into the second half of the year? And do you need to pursue a multi-brand strategy, maybe enter synthetic nicotine? So could you just help us understand how you're thinking about ON!?

Yeah. I'll try to disassemble. There are a couple of questions in there. And I'll try to answer them individually.

I think look. We're pleased with ON!. Some of it's just math as the base grows certainly from a percentage standpoint it's going to slow a bit. But it's a competitive marketplace.

We're certainly seeing the entry of various, as you mentioned, synthetic nicotine products into the marketplace. With different traits to the consumer and the consumers are trying those. But we're pleased with it. And I would highlight again back to our pipeline.

We're excited for authorization for ON! PLUS to bring it to the marketplace. Certainly, it was the adult dipper that moved first and they were desiring something a bit larger from a pouch perspective. And so we're excited to be able to bring ON!

PLUS and we feel good about ON! and we'll continue to drive its momentum in the marketplace.

Thank you. And lastly, on e-cigarettes. So, you know, it is clearly a big category and now you can't sell your devices. So is it that you will just exit the market or because that doesn't seem to be a viable strategy long term? So how should we think about approaching the e-cigarette market here on?

Yes. Certainly, we can't ship anything after March 30. So we see shipments. Anything that was at wholesale or retail can continue to be sold through. I think your broader question is what is our strategy in e-vapor?

And as we try to express both in this earnings call and at CAGNY, we believe e-vapor is something we need to participate in long term. Because it has been the most successful in the U.S. converting adult smokers to smoke-free products. From this standpoint, it's important to step back and think about the nature of the marketplace that currently taking place. You heard in my remarks over 60% of the market is illicit e-vapor products that completely went around the regulatory process.

So we're certainly advocating for quicker authorizations because you can see the success of moving the consumer from smokable or combustible products to smoke-free products that e-vapor has. And that we need authorizations because the consumer is desiring it but we also need enforcement for those products that go around the system. Our interest is to learn from the consumer the traits and characteristics of the disposables that they like, enhance our pipeline, and that's where we're investing. Certainly, we're going to, we had final design for the last patent that we were found to be infringed upon.

We'll continue to challenge and legalize, don't want you to think we're giving up the legal challenges. But we are close to having worked around all of the four patents that we were found to have infringed upon. We're excited to bring pods back. But remember the pod category itself is shrinking.

It's disposable that's growing. And so there were traits there and we've included those traits in our pipeline of products and are excited to move forward and be able to bring NJOY back to the marketplace.

Thank you so much.

We'll take our next question from Bonnie Herzog with Goldman Sachs. Please go ahead. Your line is open.

All right. Thank you. Good morning. I guess I'm hoping to hear your perspective on the loss shipment and retail share in the quarter and maybe how concerned you are and are further share gains factored into the low end of your guidance?

And then despite the volume and share pressures, you still were able to generate, you know, OCI growth in smokable, but, you know, I think primarily due to the lower legal fees. So just trying to think through this and, you know, how's it gonna manage, you know, some of these factors next year? When you lap that?

Yes. No, I appreciate your question, Bonnie. I would remind you of our strategy in the combustible segment. Remember, it's to maximize profitability over the long term while balancing investments in Marlboro and the smoke-free categories.

And that's exactly what you saw take place in the first quarter. Certainly, we're going to look at trends over the long term. We're not going to react from a quarter-to-quarter basis. We're again pleased with the way Marlboro is performing in the market with the consumer under extreme economic conditions that they're facing.

Certainly, your view towards what you believe will happen in the macroeconomic is a factor. And when you believe that consumers have experienced enough choices in the e-vapor category that that potentially slows through time of that conversion over. So those are things that we're thinking about. We certainly think about the strength of the brand.

The economic pressures that the consumer is under but that's where we have the RGM tools to be able to bring those consumers that are under extreme pressure bring them relief in portions of the Marlboro brand. And so we'll continue to monitor it, especially the tariff impact as that's a very fluid environment, how that impacts the consumer. But we're pleased with the first quarter results.

Okay. Thanks for that. And then just maybe a little bit of a follow-on question, but different. You know, just wanted to ask a couple of on the relative price gap.

I mean, first, I guess I'm curious to hear why you're no longer providing this in your metric sheet. And then second, how are you thinking about the gap right now considering they remain very wide between Marlboro and the lowest-priced cig brand in the market. I guess, how are you thinking about it in the context of the pressures we were just talking about the pressures on the consumer and the potential move into recession this year. I guess, essentially, are you doing to try and prevent further down trading pressures?

Just thinking about the share? Question I asked earlier.

Yes. I think I understand your question, but if I answer it wrong, you want to follow back up Bonnie? I think when you think about it, remember, and we've tried to describe this through various with you all and the investor base, is that that price gap that we were showing was a national average. And we're really executing making decisions in the business at the store level, and that's where the price gap matters.

And you remember at CAGNY, Sal laid out for you all. Here's the price gap of Marlboro in a store. Here's what certain segments of the Marlboro brand and franchise would be at, like Marlboro Black for instance, in some stores was low as a price gap of 5%. So we're really monitoring it and executing our RGM tools at the store level.

What we came to realize is that we kept getting asked questions about the national price gap and that's not the way we're managing the business. And so it was causing confusion. So we felt like people were asking about it because we were publishing it, but that wasn't the way we were managing the business and having to explain how we were actually managing the business. And that was the decision to remove it from the quarterly metrics.

Okay. Thank you. I'll pass it on.

We'll take our next question from Faham Baig with UBS. Please go ahead. Your line is open.

Hi, guys. Three questions this morning. Firstly, I appreciate it is very early days, but there have been significant tariffs implemented on products imported from China, which would include the disposable vapes. Have you seen any impact on the imports, availability, and pricing for the disposable vapes from China post these tariffs?

Yeah. I think it's too early to see the true indications of how I think that trend will play out as we progress through the year. Our hope is with revenue dollars available to the government, there will be much more enforcement taking place at the borders, and maybe we're starting to see the green shoots of that a little bit. With certain crackdowns at the borders.

But certainly with revenue, our hope is that there will be more attention paid to cracking down on these products coming into the U.S.

And secondly, one of your peers noted recently acquired a portfolio of synthetic disposable vapes that could potentially look to compete with the disposable vapes from China. What is your view on synthetic vape products? And is this an area that Altria could increase activity without having to go around the PMTA filings? Would be interesting to know.

Yeah. Certainly, view on synthetic has evolved through time. As you recall last with the year-end earnings release, we talked about our view was that synthetic was illegal because of the way the statute was written. It's certainly the indications with the activities from the FDA.

It appears they're using enforcement discretion in enforcing against those products. So it certainly moved synthetic nicotine up on our radar, and so we're looking at all available opportunities to assess what the right move in that direction.

Thanks. And maybe the third question is for Sal. The settlement payments in the quarter were down about 20% or $170 million. Anything that you would call out on the drivers behind this and any phasing that may be behind the payments this year?

Yes. Remember, there's a lot of variables that go into the calculation of the MSA and settlement payments. I would point out that there was the expiration of the legal fund. You started to see that in the fourth quarter of last year. That will continue. So on a comparative basis, you will see that benefit in the first three quarters of this year.

Perfect. Thank you, guys.

Thank you.

And once again, if you would like to ask a question, we'll take our next question from Emma Rumney with Reuters. Please go ahead. Your line is open.

Thank you for taking my question. Well, I have a few, if that's all right. The first one is on the tariffs and whether you can see any kind of discernible impact on consumer sentiment in the U.S. as a result of the tariffs and the uncertainty surrounding tariffs? Any color you have on that would be great.

Sure. Good morning. So as I said in my opening remarks, our guidance does consider the impact of tariffs. Remember, we are predominantly a U.S. company with a U.S.-focused supply chain.

So while certain materials may be impacted, for example, tin and aluminum that are used in some of our packaging, the impact on our costs are limited, especially compared to other CPG companies and other industries. Of course, we do and continue to closely monitor the potential impact to our consumers as the year plays out.

Okay. But so far, are you seeing any sort of discernible impact from the tariffs that have been imposed or that are threatened?

Yes. On a cost basis, nothing material. From a consumer standpoint, obviously, they've been under economic pressure for quite a while. A lot of it, the sustained level of inflation that has taken place, the cumulative impact of that.

So tariffs, I think, has impacted consumer confidence. You haven't necessarily seen it so much in the everyday items, but everyday items are up just because of inflation. So the consumer's under pressure. It's early days.

And we'll see how this plays out throughout the year. And then it is something we run a lot of scenarios when we're thinking about providing the investment community guidance. And there are always puts and takes as the year plays out. I think we are well-positioned to adjust.

Got it. Thank you. And obviously, tariffs, there's still a lot of uncertainty around the duration or the rate that will be applied. Could you talk a little bit about how you kind of plan for the long term and in your guidance whether you're using a particular percentage for tariffs as part of the sort of base case?

Or if yes, I assume that you're looking at kind of 10% perhaps or 20% on aluminum, but it'd be great if you could talk me through the numbers that you're including in your base case scenario.

Yes. I understand the question. It's a fair question. I'm not going to get into specific numbers and details.

What I would tell you is that when you look at the cost of our products, specifically our biggest income generator, the cigarette business. The predominant cost is really driven by federal excise tax, settlement payments, things like that. The cost for materials, leaf, conversion, is pretty low compared to most CPG companies. So it is something we consider.

We have a really terrific supply chain group that is looking at alternative suppliers and we feel really good about their ability to continue to think about this long term and manage it appropriately. So again, we'll continue to monitor the situation. It is very early days. We believe that we've got the ability to adjust as time goes on.

And again, we'll pay close attention to the impact on the consumer.

Got it. Thank you. And then last one for me, if I may, on unauthorized vapes. You talked a minute ago about the potential for tariffs to increase enforcement at the border.

And that's interesting. But I wondered if more broadly, you've seen any other positive signals from the Trump administration so far? And how do you interpret the changes that have been either implemented or proposed at the FDA and CTP?

Certainly, we're hopeful, hopeful that they take a position of authorized and enforcing. And you heard me earlier say and you referred to it, certainly with the potential for additional revenue to the U.S. government, we're hopeful that there will be stepped-up enforcement at the borders. But more importantly is exactly where you went, which is the FDA and the CTP. Did they take seriously the regulatory act that was passed by Congress?

It shows with these illicit vapes in the marketplace that the consumer wants to move. And so they need to increase their authorization, have a very disciplined process. You remember the act itself called for products to be authorized within 180 days. And I can't recall any product even coming close to meeting that deadline.

And so certainly authorization so that you fill the pipeline with products that the consumer wants and then enforcement for those that just completely shirk the regulatory process that was laid forth by Congress and the intentions there. So certainly hopeful. I think we saw some early actions with the removal of the proposed rule for both menthol in cigarettes and flavored cigars. And we're hopeful that that activity and momentum continues.

Okay. Thank you very much.

Thank you.

And there appears to be no further questions at this time. I would like now like to turn the call back over to Mac Livingston for any closing remarks.

Just thanks to everybody for joining us and have a great day.

We'll talk to you soon. Thanks.

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