PMI(PM) - 2025 Q2 - Quarterly Results

Glossary of Key Terms, Definitions and Explanatory Notes This section provides a comprehensive glossary of general, financial, and smoke-free product terminology used throughout the report General Definitions This section defines general corporate and operational terminology, including company references, comparison periods, and key volume metrics for cigarettes and heated tobacco units - PMI's total industry volume, shipment volume, and market share data generally include both cigarettes and heated tobacco units (HTUs)[4] - Regional acronyms are defined as "SSEA, CIS & MEA" for South & Southeast Asia, Commonwealth of Independent States, and Middle East & Africa, and "EA, AU & PMI GTR" for East Asia, Australia and PMI Global Travel Retail[4] - Effective Q1 2025, the "PMI Duty Free" business was renamed "PMI Global Travel Retail" (PMI GTR), and Wellness & Healthcare segment results are now included in the Europe segment following the Vectura Group sale[4] Financial Definitions This section defines key financial terms and non-GAAP measures like Adjusted Operating Income and Adjusted EBITDA, emphasizing organic, currency-neutral growth rates - Management reviews performance using adjusted, non-GAAP measures like adjusted net revenues, adjusted operating income, and adjusted EPS, excluding currency effects, acquisitions/divestitures, and restructuring costs[6] - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and equity income/loss, excluding restructuring costs, impairment of intangibles, and unusual items[6] - Due to high inflation, PMI uses the U.S. dollar as the functional currency for its affiliates in Argentina (since July 2018), Turkey (since April 2022), and Egypt (since October 2024)[9] - In December 2024, PMI completed the sale of Vectura Group, resulting in a pre-tax loss of $199 million in 2024[9] Smoke-Free Product Definitions This section defines terminology for PMI's smoke-free business, including 'Smoke-free products' (SFPs), 'Heated Tobacco Units' (HTUs), and user metrics like 'Total IQOS users' - Smoke-free products (SFPs) are defined as products providing nicotine without combusting tobacco, including heat-not-burn, e-Vapor, and oral smokeless products[9] - Heated tobacco units (HTUs) refer to heated tobacco consumables, including brands like HEETS and TEREA, as well as licensed KT&G brands[9] - Total IQOS users are estimated as legal-age users for whom PMI HTUs constitute at least a portion of their daily tobacco consumption in the past seven days[11] - Conversion rates for shipment volume calculations specify 15 nicotine pouches per can in the U.S. and one milliliter of e-vapor liquid equivalent to 10 units[12] Select Financial Information and Reconciliations of Non-GAAP Financial Measures This section provides key financial schedules and reconciliations of non-GAAP measures, detailing performance metrics like EPS, net revenues, gross profit, operating income, and leverage ratios Schedule 1: Diluted Earnings Per Share (EPS) This schedule presents Diluted EPS for Q2 and H1 2025, showing significant growth and attributing changes to operational performance, tax impacts, and fair value adjustments Diluted EPS Performance | Period | 2025 Diluted EPS | 2024 Diluted EPS | % Change | | :--- | :--- | :--- | :--- | | Quarter Ended June 30 | $1.95 | $1.54 | 26.6% | | Six Months Ended June 30 | $3.67 | $2.92 | 25.7% | - For Q2, the $0.41 increase in Diluted EPS from 2024 was primarily driven by operations (+$0.31), fair value adjustments (+$0.17), and favorable tax impacts (+$0.18), partially offset by restructuring charges (-$0.13) and amortization (-$0.12)[16] Schedule 2: Reconciliation of Reported and Adjusted Diluted EPS This schedule reconciles reported GAAP EPS to adjusted non-GAAP EPS, highlighting strong currency-neutral growth of 18.9% for Q2 2025 and 17.7% for the first six months Q2 2025 EPS Reconciliation | Metric | Value (per share) | YoY % Change | | :--- | :--- | :--- | | Reported Diluted EPS | $1.95 | 26.6% | | Adjusted Diluted EPS | $1.91 | 20.1% | | Adjusted Diluted EPS, excluding Currency | $1.89 | 18.9% | Six Months 2025 EPS Reconciliation | Metric | Value (per share) | YoY % Change | | :--- | :--- | :--- | | Reported Diluted EPS | $3.67 | 25.7% | | Adjusted Diluted EPS | $3.60 | 16.1% | | Adjusted Diluted EPS, excluding Currency | $3.65 | 17.7% | Schedule 3: Net Revenues Reconciliation (Q2) This schedule details Q2 2025 net revenues, showing total growth of 7.1% to $10.14 billion, with organic growth of 6.8% driven by Smoke-Free products Q2 2025 Net Revenue Growth vs. Q2 2024 | Category | Reported Growth | Organic Growth (Excl. Currency & Acq.) | | :--- | :--- | :--- | | Total Combustible Tobacco | 2.1% | 2.0% | | Total Smoke-Free | 15.2% | 14.5% | | Total PMI | 7.1% | 6.8% | - Smoke-Free products now constitute approximately 41% of total net revenues, reaching $4.16 billion in Q2 2025, up from $3.61 billion in Q2 2024[21] Schedule 4: Net Revenues Reconciliation (Six Months) This schedule presents H1 2025 net revenues, with total growth of 6.5% to $19.44 billion and robust organic growth of 8.4%, primarily from Smoke-Free products Six Months 2025 Net Revenue Growth vs. Six Months 2024 | Category | Reported Growth | Organic Growth (Excl. Currency & Acq.) | | :--- | :--- | :--- | | Total Combustible Tobacco | 1.1% | 2.9% | | Total Smoke-Free | 15.1% | 17.3% | | Total PMI | 6.5% | 8.4% | - The Americas region showed the highest organic revenue growth for the six-month period at 24.0%, followed by Europe at 7.9%[24] Schedules 5 & 6: Gross Profit Reconciliation These schedules reconcile gross profit, showing total adjusted organic growth of 11.2% for Q2 2025 and 13.5% for H1 2025, driven by Smoke-Free products Adjusted Gross Profit Organic Growth (Excl. Currency & Acq.) | Category | Q2 2025 YoY Growth | Six Months 2025 YoY Growth | | :--- | :--- | :--- | | Combustible Tobacco | 4.8% | 5.0% | | Smoke-Free | 21.5% | 27.0% | | Total PMI | 11.2% | 13.5% | Schedules on Operating Income (Pages 15-18) This series of schedules reconciles operating income, showing Q2 2025 adjusted organic growth of 14.9% to $4.2 billion, driven by favorable pricing and volume/mix Q2 2025 Adjusted Operating Income Performance | Metric | Q2 2025 | Q2 2024 | Reported % Change | Organic % Change | | :--- | :--- | :--- | :--- | :--- | | Reported Operating Income | $3,712M | $3,444M | 7.8% | 6.2% | | Adjusted Operating Income | $4,246M | $3,656M | 16.1% | 14.9% | Six Months 2025 Adjusted Operating Income Performance | Metric | H1 2025 | H1 2024 | Reported % Change | Organic % Change | | :--- | :--- | :--- | :--- | :--- | | Reported Operating Income | $7,256M | $6,489M | 11.8% | 12.1% | | Adjusted Operating Income | $8,036M | $7,016M | 14.5% | 15.4% | - Key adjustments to Q2 2025 operating income included -$243 million for restructuring charges, -$41 million for goodwill impairment, and -$250 million for amortization of intangibles[42] Schedule 11: Adjusted Operating Income Margin Reconciliation This schedule details the adjusted operating income margin, showing an organic expansion of 300 basis points for Q2 2025 and 250 basis points for H1 2025, reflecting improved profitability Adjusted OI Margin (Excl. Currency & Acq.) | Period | 2025 Margin | 2024 Margin | Basis Point Change | | :--- | :--- | :--- | :--- | | Q2 Total PMI | 41.6% | 38.6% | +300 bps | | H1 Total PMI | 40.9% | 38.4% | +250 bps | - In Q2 2025, the EA, AU & PMI GTR segment had the highest organic adjusted OI margin at 48.5%, followed by Europe at 45.5%[50] Schedule 12: Condensed Statements of Earnings This schedule provides condensed income statements for Q2 and H1 2025, showing Q2 net revenues grew 7.1% to $10.14 billion and net earnings increased 26.3% to $3.04 billion Q2 2025 Condensed Statement of Earnings | Metric ($ in millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $10,140 | $9,468 | 7.1% | | Gross Profit | $6,861 | $6,123 | 12.1% | | Operating Income | $3,712 | $3,444 | 7.8% | | Net Earnings attributable to PMI | $3,039 | $2,406 | 26.3% | Schedule 13: Condensed Balance Sheets This schedule presents the condensed balance sheet as of June 30, 2025, showing total assets increased to $68.5 billion and total liabilities to $78.5 billion Key Balance Sheet Items ($ in millions) | Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $4,138 | $4,216 | | Total assets | $68,506 | $61,784 | | Total debt (Current + Long-term) | $48,922 | $45,558 | | Total liabilities | $78,518 | $71,654 | | Total PMI stockholders' deficit | $(11,966) | $(11,750) | Schedule 14: Debt to Adjusted EBITDA Ratio Calculation This schedule calculates leverage ratios, showing Adjusted EBITDA for the last twelve months at $16.6 billion and Net Debt to Adjusted EBITDA ratio at 2.85x Leverage Ratios | Metric | As of June 30, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Adjusted EBITDA (LTM) | $16,600M | $15,580M | | Total Debt | $51,462M | $45,695M | | Net Debt | $47,324M | $41,479M | | Total Debt to Adjusted EBITDA | 3.10x | 2.93x | | Net Debt to Adjusted EBITDA | 2.85x | 2.66x | Schedule 15: Operating Cash Flow Reconciliation This schedule reconciles operating cash flow, showing net cash from operating activities for H1 2025 at $3.06 billion, a 37.2% decrease from the prior year Operating Cash Flow ($ in millions) | Period | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Q2 Net cash from operating activities | $3,412 | $4,632 | (26.3)% | | H1 Net cash from operating activities | $3,062 | $4,873 | (37.2)%