Altria Group, Inc.

Good day and welcome to the Altria Group 2021 Second 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 a question during this time, simply press star then the number one on your telephone keypad. 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 Mack Livingston, Vice President of Investor Relations for Altria Client Services. Please go ahead, sir.

Thanks, Christelle. Good morning, and thank you for joining us. This morning, Billy Gifford, Altria's CEO, and Sal Mancuso, our CFO, we'll discuss Altria's second quarter and first half business results. Earlier today, we issued a press release providing our results. The release, presentation, and quarterly metrics are all available on our website 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 statement 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 the second quarter thanks to the continued strength of our tobacco businesses and the hard work of our highly talented employees. Our teams have continued their commitment to moving beyond smoking by deepening their understanding of tobacco consumer preferences, expanding the awareness and availability of our smoke-free product portfolio, and amplifying our voice on harm reduction within the scientific and public health communities. Their passion in pursuit of our vision gives me even greater confidence that we can responsibly lead the transition of adult smokers to a smoke-free future. Let's now turn to our business results. Altria grew its second quarter adjusted diluted earnings per share 12.8% to $1.23, primarily through the strength of our tobacco businesses. The smokable product segment continued to deliver on its strategy of maximizing profitability in combustibles, while appropriately balancing investments in Marlboro with funding the growth of smoke-free products. Marlboro continued to lead the cigarette category, while second quarter adjusted operating companies' income grew 11%. For the first half, the segment generated adjusted OCI growth of 5.3%. In the oral tobacco product segment, Copenhagen continued to lead the MST category and delivered strong profit performance. The oral tobacco product segment grew adjusted OCI by 3.5% in the second quarter and by 3.3% for the first half as strength in MST more than offset investments in support of Ong. The oil nicotine pouch category continued to grow, and Helix remained focused on expanding capacity, broadening distribution, and driving awareness and trial. The team has successfully achieved unconstrained manufacturing capacity for the current U.S. market And as the category grows, Helix plans to further increase on capacity ahead of expected demand. Additionally, Helix and AGDC broadened on retail distribution to 105,000 retail stores, which represents approximately 80% of U.S. oral tobacco volume and 70% of U.S. cigarette volume. In the second quarter, on retail share of oral tobacco was two percentage points, up three-tenths sequentially. In a heightened competitive environment, we believe Helix has made consistent progress against its 2021 goals, having achieved unconstrained manufacturing capacity, increased distribution, and nearly doubling on retail share over the first half. Helix deploys a broad suite of marketing tools to continue to build on-brand equity and transition smokers. At retail, Helix uses disruptive point of sale and trial and awareness generating promotions. Retail initiatives are complemented by one-to-one communications and digital marketing channels, which we believe provide a more immersive and educational on experience. These communications are tailored based on consumer preferences and insights to better resonate with individual smokers and dippers. Turning to heated tobacco, PMUSA expanded Icos and Marlboro heat sticks to retail stores across Georgia, Virginia. PMUSA expanded Icos and Marlboro heat sticks to retail stores across Georgia, Virginia, North Carolina, and South Carolina. This over two thirds of US cigarette volume is sold through the convenience store channel. So we believe the ability to effectively educate smokers about the ICO system in C stores is critical to the long term success of the product. Although early, we're encouraged that nearly half of second quarter ICOs device sales came from convenience stores. This highlights the impact of our sales force and their strong relationships with key retail partners. In line with our strategy to build ICOs in large metro markets, PMUSA expanded ICOs and marble heat sticks to Northern Virginia, its fourth metro market. We believe our commercialization team continues to improve its execution as we move into new metro markets. In early Northern Virginia metro market results, device penetrations as a percent of the smoker population has surpassed the performance of the Atlanta and Charlotte rollouts. We've discussed for some time the importance of bringing a strong commercialization package to smokers to help them on their journey. In the Northern Virginia market, we have deployed our full range of flexible marketing tools such as kiosk, mobile units, and experts. We also opened an I-Coast boutique in the Tysons Corner Mall, which is the center point for the area. We believe the favorable results in Northern Virginia reflect the strategic locations and enhanced execution within these marketing channels, the availability of the I-Coast 3 device, and built up awareness from the Richmond market. We previously stated the importance of responsibility and discipline in our ICOS expansion approach. PMUSA has been mindful of the pending International Trade Commission case, which may result in a ban on the importation of ICOS and marble heat sticks into the United States. Due to this uncertainty, PMUSA has delayed further expansion of ICOS and marble heat sticks. Each quarter, we make progress toward our vision. As we do so, we strengthen the capabilities that we believe are necessary to effectively transition smokers to our current and future innovative product portfolio. These capabilities include a flexible manufacturing system, which allows us to quickly redeploy our highly skilled employees and existing footprint in support of smoke-free products. a robust consumer engagement system that includes enhanced data collection, a portfolio of smoker engagement tools, and our trade partner relationships, and strong regulatory capabilities, including the talent to develop compelling PMTAs for smoke-free products, and the establishment of required post-market surveillance infrastructure. Tobacco harm reduction must be grounded in sound science, encouraged by reasonable regulation, and executed responsibly. We believe it's critical to have transparent and constructive dialogue about the science and evidence supporting tobacco harm reduction with all stakeholders. So far this year, we've published 10 articles in scientific journals, participated on four panels, and presented 24 posters at scientific and policy conferences. Unfortunately, not all stakeholders believe that industry participants should be part of these exchanges. Recently, a scientific organization decided to ban industry participation at its annual conference. We believe this is a mistake and that limiting the exchange of scientific research impedes tobacco harm reduction and hurt smokers looking for less harmful products. We will continue to advocate for open and inclusive dialogue among all stakeholders, which we believe is essential to addressing the significant public health opportunity in front of us. Let's now turn to guidance. With our strong financial performance in the first half, we've raised the lower end of our four-year 2021 adjusted diluted EPS guidance to be in the range of $4.56 to $4.62. This range represents a growth rate of 4.5% to 6% from a $4.36 base in 2020. This updated guidance reflects continued confidence in our tobacco businesses investment in smoke-free products, and the expected impact of the recently announced agreement to sell our St. Michelle Wine Estates business. I'll now turn it over to Sal to provide more detail on the business environment and our results.