Altria Group, Inc.

I would now like to turn the call over to Mac Livingston, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Chloe. Good morning, and thank you for joining us. This morning, Billy Gifford, Austria's CEO, and Sal Mancuso, our CFO, will discuss Austria's 2025 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 2024. Our remarks contain forward-looking statements, including 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 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 reconciliation to the most comparable GAAP financial measures are included in today's earnings release and on our website at altria.com. Finally, all references in today's remarks to nicotine consumers or consumers within a specific nicotine category or segment refer to existing adult nicotine consumers 21 years of age or older. With that, I'll turn the call over to Billy.

Thanks, Mac. Good morning, and thank you for joining us. 2025 was a year of continued momentum for Altrio, marked by strong financial performance, strategic progress across our smoke-free portfolio, new relationships in support of our long-term growth goals, and significant cash returns to shareholders. Our leading brands and talented teams enabled our core tobacco businesses to deliver solid income growth and margin expansion while we invested in our vision. For the full year, we grew adjusted diluted earnings per share by 4.4% and returned $8 billion to shareholders through dividends, and share repurchases combined. As the year progressed, we achieved meaningful milestones that we believe advance our smoke-free portfolio and position us for sustained success in the U.S. nicotine space and for long-term adjacent growth. In 2025, Helix received marketing-granted orders from the FDA for certain OnPlus products. Horizon submitted a combined PMTA and MRTPA to the FDA for plume and Marlboro heated tobacco sticks. We entered into a strategic collaboration with KT&G to advance international modern oral, U.S. non-nicotine growth, and traditional tobacco operating efficiencies. And we continue to advocate for a responsible and well-regulated marketplace. My remarks this morning will focus on our latest view of the U.S. nicotine space, our smoke-free progress, and our earnings guidance for 2026. I'll then hand it over to Sal, who will provide further details on our business and financial results. Let's begin with our view of the U.S. nicotine space. Over the past year, the estimated number of adult consumers in the e-vapor and old tobacco categories grew to almost 30 million, nearly as large as the adult smoker population and a reflection of the potential for tobacco harm reduction in the U.S. Total nicotine industry-equivalent volumes increased for the third consecutive year and grew by approximately 2% over the past five years on a compounded annual basis. And we estimate that smoke-free alternatives represented more than 50% of the total nicotine space, up five percentage points from the prior year. However, the primary driver of industry and smoke-free growth continues to be the widespread availability of illicit flavored disposable eVapor products, evading the regulatory process, which jeopardizes the long-term tobacco harm reduction opportunity. We estimate the eVapor category grew approximately 15% in 2025, with illicit products representing approximately 70% of the category. At year end, we estimate there were more than 20 million vapers with nearly 15 million using disposable products. We have long advocated for stronger enforcement against the list of products and an acceleration of FDA market authorizations for smoke-free products. In 2025, we saw increased engagement and action from federal agencies and government officials including fourth quarter legislation requiring the FDA to allocate at least $200 million of tobacco user fees to enforcement activities. Early signs suggest that these efforts, together with tariffs of Chinese manufactured goods, are beginning to impact the illicit marketplace. We are also seeing early indication that growth in the total number of disposable vapors is moderating. In 2025, disposable evapor volumes grew approximately 30% compared to over 50% in 2024. Growth in the number of disposable vapors also slowed, rising approximately 10% in 2025 versus over 40% in 2024. Additionally, the FDA's POLIT program to streamline PMTA reviews for certain oral nicotine pouches could be a meaningful step toward improved regulatory speed and clarity required to deliver products that meet adult consumer preferences and regulatory standards. While we are encouraged by this early progress, additional action is needed to accelerate product authorization decisions and ensure a level playing field for all manufacturers. We're hopeful that 2026 will bring consistent enforcement and further improvements to the regulatory process. We continue to believe that responsible participation in the eVapor category with products that meet consumer preferences supports our vision and our broader smoke-free strategy. We are making progress against their product pipeline and are executing with discipline and intention. The proliferation of illicit disposable products, pace of FDA authorizations, and the intellectual property landscape remain significant headwinds. Accordingly, we intend to maintain a measured approach to our investments in eVAPOR until the regulatory framework is functioning as intended and enforcement actions meaningfully address the illicit market. Let's now turn to the nicotine pouch category. Nicotine pouches continue to drive overall oral tobacco volume growth, which increased an estimated 14% over the past six months. In the fourth quarter, oral nicotine pouches grew 10.4 share points versus the prior year, and now represent nearly 57% of the total old category. Competitor promotional activity remained elevated during the fourth quarter. Average retail prices for category competitors in the fourth quarter declined 3% sequentially and 12% year-over-year. In contrast, Helix remained focused on balancing profitability with retaining loyal orange consumers. At retail, orange price increased by approximately 4% sequentially and 3% versus the prior year. For the full year, Helix successfully delivered against its plans and contributed profitable growth to our old tobacco product segment. In this environment, Helix was relatively stable in the fourth quarter growing on reported shipment volume to more than 44 million cans. For the full year, Helix grew on reported shipment volume by approximately 11% to more than 177 million cans. Oren's retail share of the total old tobacco category was 7.7% for the fourth quarter and 8.2% for the full year. While Helix carefully stewarded Orn through disruptive second half market conditions, the team also prepared to bring Orn Plus to the market. In December, the FDA authorized Orn Plus mint, wintergreen, and tobacco in six and nine milligram nicotine strengths, with the 12 milligram variants still in the review process. Following authorization, Helix resumes shipments of Orem Plus in Florida, North Carolina, and Texas. Innovation in pouch formats, including wet pouches, broader flavor variety, and higher nicotine strength offerings is driving nicotine pouch growth. We believe Orem Plus is a premium, differentiated product that is well positioned to meaningfully participate in this growth. Early consumer feedback indicates that its innovative pouch material with smooth flavor proposition is a competitive advantage in the marketplace. In recent research, Orem Plus Mint achieved higher overall purchase intention scores than the leading nicotine pouch brand and distinguished itself with superior pouch comfort and mouthfeel, critical attributes in the nicotine pouch category. In the fourth quarter, Helix began laying the foundation to expand ORMplus nationally. Our teams made strategic investments in retail merchandising fixtures and equity to prepare for the ORMplus national launch planned for the first half of this year. In 2026, Helix plans to focus on generating trial for ORMplus and retaining adopters for ORMclassic. We anticipate Helix will continue to be profitable for the full year 2026. Looking to the future, Helix's strategy remains focused on innovation and responsibly delivering on consumer preferences. In November, Helix submitted PMTA applications for OM Plus products in six additional flavor varieties across three nicotine strengths. Helix looks forward to bringing these new products to the U.S. market. Turning to our international smoke-free efforts, we continue to focus on the fast-growing nicotine pouch category. In 2025, On, On Plus, and our newly added Fumi brand competed across select international markets through e-commerce and its targeted retail distributions. Fumi appeals to the 80% of consumers interested in slim, wet pouch products. Early performance has been encouraging, supporting our expansion to 40,000 retail locations in seven markets. In addition, we added three new line extensions, bringing the brand to 12 unique flavor offerings. Our broadened nicotine pouch portfolio has accelerated international expansion and is generating valuable consumer insights that will inform future product development. While these are early days, we believe our expanded international portfolio and the momentum from our efforts in 2025 put us on a path towards accomplishing our long-term international smoke-free growth goals. Moving to our 2026 financial outlook, We expect to deliver 2026 full-year adjusted diluted EPS in a range of $5.56 to $5.72. This range represents a growth rate of 2.5% to 5.5% from a $5.42 base in 2025. We expect growth to be weighted to the second half of the year reflecting a progressive increase in cigarette import and export activity over the course of the year. Our guidance contemplates planned investments to support our contract manufacturing capabilities, limited impact on combustible and evapor product volumes from illicit enforcement efforts, and enjoy ACE not returning to the marketplace in 2026. We remain committed to our vision and to building a portfolio of FDA authorized smoke-free products for adult smokers and nicotine consumers who use smoke-free products. Our planned investment areas include marketplace activities in support of our smoke-free products and continued smoke-free product research, development, and regulatory preparations. In summary, Altria continued to build momentum in 2025. Our core businesses remained resilient. We advanced our smoke-free portfolio, and we opened new pathways for long-term growth in international modern oil and U.S. non-nicotine innovation. These efforts support our vision and enterprise goals. I am confident in our strategy, energized by the opportunities ahead and grateful for our employees' commitment to delivering long-term shareholder value. I'll now turn it over to Sal to provide additional details on our business and financial results.

Thanks, Billy. Our core tobacco businesses delivered solid financial performance again this year in a dynamic external environment. The smokable product segment delivered over $11 billion in adjusted OCI for the full year and expanded adjusted OCI margins by 1.8 percentage points to 63.4%. This performance was supported by robust net price realization of 8.4%. For the fourth quarter, adjusted OCI declined by 2.4% and adjusted OCI margins contracted by 0.8 percentage points to 60.4%. Year-over-year cost per pack comparisons were impacted by higher manufacturing costs driven by investments to build PMUSA cigarette import and export capabilities. Smokable product segment domestic cigarette volumes declined by 7.9% in the fourth quarter and 10% for the full year. When adjusted for calendar differences and trade inventory movements, domestic cigarette volumes declined by 7% in the fourth quarter and 9.5% for the full year. At the industry level, when adjusted for trade inventory movements, calendar differences and other factors, We estimate domestic cigarette volumes declined by 8% for the full year and by 6.5% for the fourth quarter, representing a sequential improvement of approximately 1.5 percentage points. As Billy described, illicit flavor disposable evapor growth moderated slightly in 2025 compared to the prior year. we have closely monitored this trend and its impact on cigarette industry decline rates. Based on our latest data, we are updating our cigarette category decomposition. We now estimate that cross-category impacts, primarily driven by illicit flavored disposable evapor, contributed approximately 2% to 3%, to the cigarette industry decline over the past 12 months versus our prior estimate of 3% to 4%. In the discount segment, persistent discretionary income pressures remain the primary driver of growth. We also believe that the discount cigarette segment was most affected by the change in cross-category impact. For the fourth quarter and full year, Discount retail share grew by 2.6 share points and 2.2 share points, respectively. Continued discount segment growth pressured Marble retail share, which declined 1.5 share points in the fourth quarter and 1.2 share points for the full year. In the premium segment, Competitive dynamics during the fourth quarter contributed to Marble's share of premium decreasing 0.1 SharePoint to 59.2%. For the full year, Marble remained the undisputed leader in the highly profitable premium segment, growing its share to 59.4% of 0.1 SharePoint versus the prior year. BASIC continued to capture share in the discount segment, reflecting PMUSA's data-driven, total portfolio approach to meeting a broad set of consumer needs. In the fourth quarter, BASIC retail share grew by 0.6 share points sequentially and 1.9 share points year over year. BASIC's strong performance demonstrates PMUSA's ability to deploy advanced RGM capabilities to effectively compete in the most price-sensitive stores while minimizing incremental impact to Marlboro. In cigars, Middleton continued to outperform in the large mass cigar industry. For the fourth quarter and full year, Middleton reported shipment volume increased 4.2% and 1.8% respectively. Let's turn now to the oral tobacco product segment. Strategic investments behind On and On Plus contributed to a 4.6% decline in adjusted OCI for the fourth quarter. Over the same period, segment adjusted OCI margins contracted by 5 percentage points to 64.5%. For the full year, adjusted OCI increased by 1.3% and adjusted OCI margins expanded modestly by 0.1 percentage points to 67.9%. Total segment reported shipment volume decreased 6.3% for the fourth quarter and 5.5% for the full year. as growth in on was more than offset by lower MST volumes. When adjusted for trade inventory movements and calendar differences, we estimate that fourth quarter and full year oral tobacco product segment volumes declined by 6% and 4.5% respectively. Oral tobacco products segment retail share was 29.6% for the fourth quarter and 31.9% for the full year. Let's turn to an update on our evapor reporting unit. As Billy mentioned, while enforcement activity has increased, efforts thus far have not meaningfully reduced illicit evapor volumes to date. We now believe that effective, sustained enforcement will develop over time at a more gradual pace. Given this dynamic, we performed impairment assessments of the eVAPOR definite lives intangible assets and goodwill in the fourth quarter. Based on these assessments, we recorded non-cash impairment charges of $1.3 billion. We continue to believe we gained valuable assets and capabilities in the Enjoy acquisition that can be applied to a future eVapor pipeline to meet consumer preferences over the long term. Before moving on from eVapor, I'd like to point out a reporting change you will see in our 2025 financials. In accordance with accounting standards, we updated our reportable segments for the full year 2025. to also include the eVapor product segment, which consists of our Enjoy business. Turning to ABI's financial results, we recorded $161 million of adjusted equity earnings in the fourth quarter, up 1.3% versus the prior 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. Before I conclude, I'd like to highlight that as we continue to invest for the long-term success of the business, we are at the same time returning significant value to shareholders. In 2025, we paid $7 billion in dividends and our board raised our dividend by 3.9% in August, marking our 60th increase in the last 56 years. We also repurchased more than 17 million shares for $1 billion under our $2 billion share repurchase program. At the end of the fourth quarter, we had $1 billion remaining under the current program, which expires at the end of 2026. We effectively balanced our capital allocation priorities during the year, and our balance sheet remained strong. Our total debt to EBITDA ratio as of December 31st was two times in line with our target. 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. Operator, let's open the question and answer period.

Thank you. Once again, as a reminder, if you would like to ask a question, please press the star key followed by the number 1 on your touchtone phone at this time. Investors, analysts, and media representatives are now invited to participate in the question and answer session. We will take questions from the investment community first. Our first question comes from Matt Smith with Stiefel. Your line is open.

Hi, good morning. Thank you for taking my question. Good morning, Matt. Good morning, Billy. The fiscal 2026 outlook ranges, you note the benefit from import-export activity building in the second half. Can you provide any color on the scope of the program? We calculate today that the percent of PACs with the FET benefits Around 3%. And if the second half benefits are more weighted towards cost normalizing associated with the initiative versus increased volume throughput that would unlock greater tax efficiency. Thank you.

Yeah, it's a little bit of both, Matt. We're a bit reluctant to share any of the specifics there, but certainly there's some upfront investments that are moderated as we go through the year. We think those investments are wise. Not only are we able to make those investments and afford ourselves the opportunity of the duty drawback, but it also sets the manufacturing center that we have here in Richmond up to be available to produce for any market internationally. with some of the changes and differences in international markets versus the U.S. market. In addition, as we've said previously, with the duty drawback, we're looking to not be at a competitive disadvantage regarding that, and we'll continue to look for opportunities to expand.

Appreciate that perspective. And as a follow-up before I pass it along, the 2026 CapEx guide is elevated. I think that's associated with the investments you're talking about to unlock the double-duty drawback efficiency. The $300 to $375 million investment level, should we think this is a one-time increase in CapEx, or do you expect kind of a multi-year higher CapEx level as we look forward? Thank you.

Yeah, thanks for the question. You are correct. The primary driver of the increase are the investments for import-export business. I'll repeat what Billy said. It not only provides us the ability to participate in the duty drawback, but it does provide us with capabilities for longer-term vision. I would say... Obviously, we're not going to guide for future capex, but we are making investments today. They generally precede the volume, if you think about it, for the import-export. But we're also making investments in our smoke-free portfolio. Obviously, we want to have the appropriate manufacturing capability for products like OnPlus and future pipeline products. We believe that for a company of our size, it's still a relatively low level of capital expenditures, but we're going to be disciplined and diligent when we make those capital investments.

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

We'll move next to Bonnie Herzog with Goldman Sachs. Your line is open.

Okay, thank you. Good morning, everyone. I guess I also had a couple of questions on the double-duty drawback. I guess, you know, first, is it fair to assume your aggressive promotional strategy behind BASIC is which is weighing on your net price realization and dollar OCI growth in smokable. I mean, has that been implemented with the idea that these pressures can be offset this year as you ramp your import-export activity with KT&G? And I guess, you know, without a pretty big step-up of this activity, it does seem like your smokable dollar profit growth is will likely remain negative, which could put you at the low end of your full-year EPS guidance range. So just any thoughts on that would be appreciated.

Yeah, I would disaggregate those two. Everyone wants to keep combining those two decisions, and we see them as independent of one another. certainly we're not going to be at a competitive disadvantage for the duty drawback, as we discussed earlier. I think when you think about the strategy around basic, remember that's only deployed in, call it, roughly over 30,000 stores, so it's not a nationwide-type effort. What we saw there were a number of stores where the consumer has been under severe economic pressures, and that's really the major – Cause of that has been the cumulative inflation that the consumer has been experiencing. And we felt it wise and prudent to invest behind BASIC, not much different than if you go back in history, BASIC before and then L&M at other times. Now we're repositioning BASIC. And so in those 30,000 stores, we're able to apply the revenue growth management strategy analytics that we have invested in, and you see the superb performance of BASIC. What it does is it captures consumers that would have gone to deep discount, and it allows us to capture it with latent equity, and as the economic situation changes for our consumers, adjust accordingly.

All right. And then any thoughts on just, you know, this notion of if you don't get, you know, a lot more activity, the import-export, you know, just thinking about the EPS range you put out there, which is pretty wide.

It's not any wider, Bonnie, if you go back. We typically open the year with about a 3% range. And then we spend accordingly as we move through the year and have more insight to how the year is going to play out. We feel very pleased to be able to provide the range that we provided and look forward to continuing through the year.

Okay. And maybe just a little bit of a follow-up that just, you know, as we're talking about basic, but, you know, so then it does beg a question on Marlboro. You know, your retail share on the brand did drop below 40% for the first time, I think, ever. Okay. How are you thinking about your strategy behind Marlboro? And then how much of your promotional strategy on BASIC is maybe cannibalizing Marlboro? So I guess, Billy, maybe I'd love to hear whether or not you might consider changing your strategy on Marlboro. And are you maybe rethinking your strategy to balance share with the goal of driving profitability?

Yeah, I think it's important, Bonnie, to remember the strategy we use to manage the smokable substance. It's to maximize profitability over the long term while making appropriate investments in Marlboro in the growth categories. And we feel like we're executing against that. And so when you think about Marlboro overall, we feel very good about the strength of the brand. Certainly in the fourth quarter, you saw product availability in the eVapor related to enforcement. And I think it's intuitive that the consumer was feeling some price break when they moved over to eVapor as that product availability is no longer available. And I don't want you to think that the consumer's moving back and forth. It's primarily dual consumers, those that are using cigarettes and those that are using eVapor. And they decide on the occasion which product to use. As product availability was much less due to enforcement, and they went back to more cigarette occasions in their day, it's intuitive that discounts, brands benefited from that. I think through time, we'll see if that holds true or not. I think from a standpoint of your question related to Marlboro versus Basic, we feel like with our analytics, we feel comfortable that it's not impacting or cannibalizing Marlboro in the marketplace. Certainly from a mathematical standpoint, the more base it grows, its share grows and it affects the brands in the marketplace, but we don't feel like it's having any outsized impact on Marlboro.

Okay, that's helpful. I'll pass it on. Thank you.

Thank you.

We'll take our next question from Eric Serrata with Morgan Stanley. Your line is open.

Yeah, thanks for the question. I'm just wondering first if you have any commentary or color around some of the articles in popular press lately about increased smoking incidents among younger 20-something legal-aged nicotine users. You don't really seem to see it in the data yet, but you guys have better data on this than anyone. So wondering if you're seeing any increased incidents among any of the younger legal cohorts. And then a separate question, looking at OnPlus, could you talk a bit about the pricing strategy there, where you plan to Position it sort of as you get past the initial introductory and trial periods. Do you think that that could command a premium to the classic and what you're thinking about in terms of pricing there?

Yeah, thanks for the questions. I think related to your first one, I would refer you to their vision, which is to move consumers in a responsible fashion to smoke-free products. Nothing in the trends that I would point to, I've seen some of the same stories you have, and that is why we've been asking the FDA for an expedited authorization process so that you can get smoke-free products in the marketplace and inform consumers. about the risk of the various forms of nicotine in the marketplace. As far as ONPLUS pricing, while I'll be careful not play out our whole strategy, that we do believe Olin Plus is a differentiated product and commands a premium in the marketplace. And I would really direct you to go on nicotine.com. And what you can see is the price differential where e-commerce now is live on a national basis. You'll see the price differential that Olin Plus is listed at there versus Olin Classic. So we feel good about the strategy. Certainly, as we introduce the retail, we'll have various introductory price promotions And that can vary state by state. So we'll continue to use our analytics, but we feel very excited about the differentiation we have and the consumer feedback related to that differentiation.

Great. And then just one follow-up on the double-duty drawback, not to be the dead horse here, but just in terms of sizing the potential here, can you talk or provide any color on what you're doing here that may be apart from the KT&G partnership or relationship? Are there things that are already in place things that are set to ramp, you know, I guess separate from the KT&G, just looking to see if there was any scope apart from that one partnership here and how you're thinking about adding capacity.

Yeah, I think when you think about it, the cap on that opportunity is truly the matching of exports with imports. And as much as you can match on those, that is the, if you will, the cap through time related to what's the opportunity. As far as specifics around individual companies or partners that we have relationships with, I'm not going to get into the detail there. Know that we are continuing to seek opportunities because we're not going to be put at a competitive disadvantage related to those other competitors that have both foreign or international manufacturing capacity and U.S.-based. So we'll continue to seek opportunities as we go through time. Great. I'll pass it on. Thank you. Thank you.

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

Good morning, Billy. Good morning, Sal. A couple of questions from me as well. If I could come back to the controllable costs, I calculate they were up 14.5% in the quarter, and that sort of compares to a nine-month run rate of of 9.5%, was the investment behind this import and export the sole reason behind the different outcome in the fourth quarter, or would there be any other factors that you would point to? I would think the former is one-off in nature, but it would be good if you could clarify that as well. And I guess, secondly, I have a few clarifications on on nicotine pouches. Do I understand that you will be national with En Plus in the first half of this year, or you plan to stop the national rollout? And I presume, as you've sort of passed this comment, there aren't any sort of supply chain issues that you would be worried about. And then the second clarification is, is on the momentum and on plus. I know it's been in the market for a few weeks now. Are you able to provide any in-state data from a market share perspective that you may have seen in the early readings that we can try and extrapolate from, please?

Yeah, so we'll try to unpack all of those. I'll start with controllable cost, but if we miss any, please follow up.

Yeah, Faham, you are correct. It is predominantly the investments we are making around our manufacturing process for import-export. You know, if you think about it, there are different pack configurations, as an example. There are different capabilities we need for international markets. An example would be track and trace capabilities. So those investments precede, really, the volume and revenue you get from the export volume. So that is the driver that you are seeing.

Yeah, as far as nicotine pouches, you're correct. We'll be national through the first half of this year, 2026. As far as momentum, while I would love to be able to share exact volumes or exact shares, it was a bit messy. You'll recall we launched in three states. Then we halted shipments to those three states related to the the pilot program that was kicked off by the FDA. We have now launched back into those three states or resumed shipments. And again, we'll be national through the first half of this year. What we can share is the positive feedback anecdotally we received from consumers. It really supported some of the research we had where the consumer really sees differentiation in the mouthfeel and the softness of the pouch paired with great flavor. And so we're excited to be able to bring that national as we progress through the first half of this year. Thanks, guys. Thank you.

We'll move next to Pallav Mittal with Barclays. Your line is open.

Good morning. Thank you for taking my question. So I have three of them. Firstly, just to follow up on this ONPLUS distribution, if I could just ask, I mean, why are you starting with just three states and not go out nationally from the start? Because you do have the distribution in place already. And just to check, is there any inventory benefit from ONPLUS in the Q4 numbers?

Yeah, so from a standpoint, really no benefit in Q4. Remember, we had just initially started distribution in the three states, and then we halted that as we progressed to the end of the year. So we had very minimal, and it was a bit messy. I think when you think about why the three states versus national, it was easy. The Salesforce had already sold it into retailers. It was easy to turn those shipments back on. and they're in the process of doing that on a national basis. So that'll follow as we progress through the first half of 2026. I think that got all your questions, but if I missed one, please follow up.

That was the first one. So secondly, if I can ask, in your comments, you said that the pricing from competitors and nicotine pouches was down 3% sequentially and 12% YOY. But That is not what I think the scanner data is suggesting. And it seems pricing is rather up for the larger players. So can you just help us understand what we are missing there? Is there anything in terms of promotions or trade margins or some other factors?

Yeah, so you're correct. We did say down 3%, sequentially 12% for the year. From a competitive standpoint, that's all competitors combined. I think what you saw was a significant competitor promotion that took place in the third quarter into the fourth, where free cans were distributed for any nicotine purchase. That had a significant impact on competitor pricing in the marketplace. As far as, and we're excluding, if you will, on classic. From on classic, we were up in price both sequentially and total years. So that was the comparison we were trying to draw, that there's significant promotional activity in nicotine pouch both in the third quarter and the fourth quarter.

Sure, thank you.

And once more for your questions, that is star and one. We'll take our next question from Damian McNeila with Deutsche. Your line is open.

Yeah. Good morning, gents. Thanks for taking the questions. The first question is just on the basic strategy. And can you clarify or confirm that the 30,000 stores that you've targeted is kind of the ceiling? Or are there any potential stores that you may consider entering into during the course of 26 is the first question. The second question is just Are you able to sort of indicate the payback time from the investment that you're making in manufacturing facilities to help import exports? And then the last one is just on the step up in costs that you saw in Q4. Are they likely to repeat in Q1 and Q2 or are they done now? And it's the second half we'll see an improvement because you're seeing improved import export volumes.

Yeah, so I'll take the first one, and then I'll turn it over to Sal. As far as basic, again, slightly over 30,000 stores currently. We'll continue to monitor the situation. We want to be there for our consumer that's under economic pressure. We feel like it's prudent. Basic has performed very well. As I mentioned earlier, L&M used to play that role for us, and we've increased profitability on L&M. And it allows us, as the economic situation changes, we're still in connection and the consumer is in our portfolio of brands, we're able to have conversations with them through time. And as that economic situation changes, you can look to see us adjust price promotions in the marketplace. So we feel like it's good as far as number of stores. We'll make adjustments around the fringes, but we feel like we're in the right group of stores, but we'll continue to monitor that as we go through 2026.

Sure. And, Damian, to your other two questions, the return on investment for the import-export is very strong. The payback is less than a year. As far as, you know, continued spending, as Billy pointed out earlier, the back half-weighted nature of our EPS growth guidance really is both volume and cost. So there are some incremental costs that continue to happen before you realize the revenue, and that happens when you enter different markets or different partnership arrangements. So, yes, we expect some elevated investments up front as you get more volume through the import-export process.

Great. Thanks, Ray Cleary.

Thank you.

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

Thanks, everybody, for joining us today. Have a great day, and if you have further questions, please feel free to reach out to Investor Relations.

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