PMI(PM) - 2025 Q3 - Quarterly Results

Glossary of Key Terms, Definitions and Explanatory Notes This section provides definitions for key operational, financial, and smoke-free product terms used throughout the report, along with explanatory notes General Definitions and Operational Notes This section defines core company references (PMI), comparison standards, and key operational metrics like total industry volume, combustible tobacco products, in-market sales (IMS), and total shipment volume - PMI's segment reporting was updated in January 2025, incorporating Wellness & Healthcare segment results into Europe and renaming 'PMI Duty Free' to 'PMI Global Travel Retail' (EA, AU & PMI GTR)[4] - Total shipment volume is defined as the combined total of cigarette, heated tobacco, oral smoke-free products (excluding snuff, snuff leaf, and U.S. chew), and e-vapor shipment volume in equivalent units[4] Financial Definitions and Non-GAAP Measures This section explains key financial terms and non-GAAP measures used by PMI, such as Cost of sales, Marketing, administration and research costs, Adjusted Operating Income Margin, Adjusted EBITDA, and Net debt - PMI utilizes adjusted non-GAAP measures (e.g., adjusted net revenues, operating income, EPS, operating cash flow) to provide insight into underlying business trends by excluding currency impacts, acquisitions, divestitures, restructuring costs, tax items, and amortization/impairment of acquired intangibles[6] - Egypt was categorized as a highly inflationary economy effective October 1, 2024, requiring the U.S. dollar to be treated as the functional currency for local affiliates[9] - PMI recorded a pre-tax charge of $45 million in Q3 2024 for Egypt sales tax assessments (2014-2016) and a pre-tax loss of $199 million in 2024 (primarily a $198 million impairment in Q3) due to the sale of Vectura Group Ltd. on December 31, 2024[9] Smoke-Free Product Definitions This section defines key terms related to PMI's smoke-free business (SFB) and products (SFPs), including heated tobacco units (HTU), IQOS devices, oral smokeless products, and e-vapor products - The 'Smoke-free business (SFB)' encompasses all smoke-free products, wellness and healthcare products, and consumer accessories. 'Smoke-free products (SFPs)' are products providing nicotine without combusting tobacco, such as heat-not-burn, e-Vapor, and oral smokeless, designed to generate lower levels of harmful chemicals[9] - Total PMI SFPs users are estimated based on the Nicotine Containing Products Tracker (NCPT) and SFP multicategory offtake volume trends, combining IQOS, oral smokeless, and e-Vapor users, and accounting for poly-users across categories[11] - Conversion rates for oral smoke-free products include 15-20 pouches per can for nicotine pouches and 21 pouches equivalent per can for snus products. E-vapor products are converted at one milliliter of e-vapor liquid equivalent to 10 units[12] Select Financial Information and Reconciliations of Non-GAAP Financial Measures This section presents key financial schedules, including diluted EPS, net revenues, gross profit, operating income, balance sheets, debt ratios, and operating cash flow, with reconciliations to non-GAAP measures Schedule 1: Diluted Earnings Per Share (EPS) This schedule provides diluted EPS for the third quarter and nine months ended September 30, 2025 and 2024, along with a detailed reconciliation of various adjustments impacting EPS | Period | 2025 Diluted EPS | 2024 Diluted EPS | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Quarters Ended Sep 30 | $2.23 | $1.97 | $0.26 | 13.2% | | Nine Months Ended Sep 30 | $5.89 | $4.89 | $1.00 | 20.4% | | Period | 2025 Net Earnings (millions) | 2024 Net Earnings (millions) | | :--- | :--- | :--- | | Quarters Ended Sep 30 | $3,478 | $3,082 | | Nine Months Ended Sep 30 | $9,207 | $7,636 | Schedule 2: Reconciliation of Diluted EPS to Adjusted Diluted EPS, excluding Currency This schedule reconciles reported diluted EPS to adjusted diluted EPS, both excluding currency impacts, for the third quarter and nine months ended September 30, highlighting the effect of various special items | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Reported Diluted EPS | $2.23 | $1.97 | 13.2% | | Reported Diluted EPS, excl. Currency | $2.15 | $1.97 | 9.1% | | Adjusted Diluted EPS | $2.24 | $1.91 | 17.3% | | Adjusted Diluted EPS, excl. Currency | $2.16 | $1.91 | 13.1% | | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Reported Diluted EPS | $5.89 | $4.89 | 20.4% | | Reported Diluted EPS, excl. Currency | $5.87 | $4.89 | 20.0% | | Adjusted Diluted EPS | $5.83 | $5.01 | 16.4% | | Adjusted Diluted EPS, excl. Currency | $5.81 | $5.01 | 16.0% | Schedule 3: Net Revenues by Product Category (Quarters Ended September 30) This schedule details net revenues by product category (Combustible Tobacco and Smoke-Free) and by region for the third quarter, showing reported figures and adjustments for currency, acquisitions, and divestitures | Metric | 2025 (millions) | 2024 (millions) | % Change | % Change excl. Currency | % Change excl. Currency & A/D | | :--- | :--- | :--- | :--- | :--- | :--- | | Total PMI Net Revenues | $10,845 | $9,911 | 9.4% | 5.5% | 5.9% | | Total Combustible Tobacco | $6,400 | $6,134 | 4.3% | 1.0% | 1.0% | | Total Smoke-Free | $4,445 | $3,777 | 17.7% | 12.9% | 13.9% | - Europe's Smoke-Free net revenues grew by 19.5% (14.1% excluding currency & A/D) to $2,241 million in Q3 2025, while Wellness & Healthcare within Europe declined by 24.3% (but grew 21.7% excluding currency & A/D)[24] Schedule 4: Net Revenues by Product Category (Nine Months Ended September 30) This schedule presents net revenues by product category and region for the nine months ended September 30, with adjustments for currency, acquisitions, and divestitures | Metric | 2025 (millions) | 2024 (millions) | % Change | % Change excl. Currency | % Change excl. Currency & A/D | | :--- | :--- | :--- | :--- | :--- | :--- | | Total PMI Net Revenues | $30,286 | $28,172 | 7.5% | 7.1% | 7.5% | | Total Combustible Tobacco | $17,786 | $17,399 | 2.2% | 2.2% | 2.2% | | Total Smoke-Free | $12,500 | $10,773 | 16.0% | 15.0% | 16.1% | - The Americas region showed strong growth in Smoke-Free net revenues, increasing by 27.9% (28.2% excluding currency & A/D) to $2,073 million for the nine months ended September 30, 2025[27] Schedule 5: Reconciliation of Gross Profit (Quarters Ended September 30) This schedule reconciles reported gross profit to adjusted gross profit, excluding currency and acquisition/divestiture impacts, for combustible tobacco, smoke-free products, and total PMI for the third quarter | Metric | 2025 (millions) | 2024 (millions) | % Change | % Change excl. Currency | % Change excl. Currency & A/D | | :--- | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $7,358 | $6,545 | 12.3% | - | - | | Adjusted Gross Profit | $7,363 | $6,559 | 12.3% | 8.6% | 8.7% | | Combustible Tobacco Adjusted Gross Profit | $4,253 | $3,947 | 7.7% | 4.8% | 4.8% | | Smoke-Free Adjusted Gross Profit | $3,110 | $2,612 | 19.1% | 14.4% | 14.8% | - Amortization of intangibles in Smoke-free products impacted cost of goods sold for both 2025 and 2024 third quarters[30] Schedule 6: Reconciliation of Gross Profit (Nine Months Ended September 30) This schedule reconciles reported gross profit to adjusted gross profit, excluding currency and acquisition/divestiture impacts, for combustible tobacco, smoke-free products, and total PMI for the nine months ended September 30 | Metric | 2025 (millions) | 2024 (millions) | % Change | % Change excl. Currency | % Change excl. Currency & A/D | | :--- | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $20,480 | $18,266 | 12.1% | - | - | | Adjusted Gross Profit | $20,496 | $18,312 | 11.9% | 11.6% | 11.8% | | Combustible Tobacco Adjusted Gross Profit | $11,737 | $11,173 | 5.1% | 5.2% | 4.9% | | Smoke-Free Adjusted Gross Profit | $8,759 | $7,139 | 22.7% | 21.7% | 22.5% | - Smoke-Free Adjusted Gross Profit showed significant growth of 22.7% (22.5% excluding currency & A/D) for the nine months ended September 30, 2025[34] Adjustments of Operating Income for the Impact of Currency and Acquisitions / Divestitures This section provides a reconciliation of operating income, adjusted for currency and acquisition/divestiture impacts, across different regions for both the third quarter and nine months ended September 30 | Metric | 2025 (millions) | 2024 (millions) | % Change | % Change excl. Currency & A/D | | :--- | :--- | :--- | :--- | | Operating Income (Q3) | $4,263 | $3,654 | 16.7% | 10.8% | | Operating Income (9M) | $11,519 | $10,143 | 13.6% | 11.6% | Schedule 8: Reconciliation of Operating Income to Adjusted Operating Income, excluding Currency and Acquisitions / Divestitures This schedule reconciles reported operating income to adjusted operating income, excluding currency and acquisition/divestiture impacts, for total PMI and by region for the third quarter and nine months ended September 30, detailing the impact of special items | Metric | 2025 (millions) | 2024 (millions) | % Change | % Change excl. Currency & A/D | | :--- | :--- | :--- | :--- | | Adjusted Operating Income (Q3) | $4,670 | $4,153 | 12.4% | 7.5% | | Adjusted Operating Income (9M) | $12,706 | $11,169 | 13.8% | 12.5% | Schedule 9: Reconciliation of Reported Operating Income to Adjusted Operating Income (Quarters Ended September 30) This schedule provides a detailed reconciliation of reported operating income to adjusted operating income for the third quarter, breaking down the impact of special items by total PMI and by region | Item | 2025 (millions) | 2024 (millions) | Change Fav./(Unfav.) | | :--- | :--- | :--- | :--- | | Reported Operating Income | $4,263 | $3,654 | $609 | | Loss on sale of Vectura Group | — | $(198) | $198 | | Amortization of intangibles | $(250) | $(256) | $6 | | Germany excise tax classification litigation charge | $(176) | — | $(176) | | RBH (Canada) Plan Implementation | $19 | — | $19 | | Egypt sales tax charge | — | $(45) | $45 | | Adjusted Operating Income | $4,670 | $4,153 | $517 | - The Americas region experienced a significant decline in reported operating income by 76.6% to $32 million in Q3 2025, primarily due to a negative price variance of $(204) million, despite a positive volume/mix impact of $136 million[47] Schedule 10: Reconciliation of Reported Operating Income to Adjusted Operating Income (Nine Months Ended September 30) This schedule provides a detailed reconciliation of reported operating income to adjusted operating income for the nine months ended September 30, breaking down the impact of special items by total PMI and by region | Item | 2025 (millions) | 2024 (millions) | Change Fav./(Unfav.) | | :--- | :--- | :--- | :--- | | Reported Operating Income | $11,519 | $10,143 | $1,376 | | Restructuring charges | $(243) | $(168) | $(75) | | Impairment of goodwill and other intangibles | $(41) | $(27) | $(14) | | Egypt sales tax charge | — | $(45) | $45 | | Loss on sale of Vectura Group | — | $(198) | $198 | | Germany excise tax classification litigation charge | $(176) | — | $(176) | | RBH (Canada) Plan Implementation | $19 | — | $19 | | Amortization of intangibles | $(746) | $(588) | $(158) | | Adjusted Operating Income | $12,706 | $11,169 | $1,537 | - For the nine months, Europe's Adjusted Operating Income increased by 12.9% to $5,853 million, while the Americas saw a 7.5% increase to $1,072 million, despite a negative price variance of $(60) million[50][53] Schedule 11: Reconciliation of Adjusted Operating Income Margin, excluding Currency and Acquisitions / Divestitures This schedule reconciles adjusted operating income margin, excluding currency and acquisition/divestiture impacts, for total PMI and by region for both the third quarter and nine months ended September 30 | Metric | 2025 | 2024 | % Points Change | | :--- | :--- | :--- | :--- | | Adjusted Operating Income Margin (Q3) | 43.1% | 41.9% | 1.2 | | Adjusted Operating Income Margin excl. Currency (Q3) | 42.8% | 41.9% | 0.9 | | Adjusted Operating Income Margin excl. Currency & A/D (Q3) | 42.5% | 41.9% | 0.6 | | Metric | 2025 | 2024 | % Points Change | | :--- | :--- | :--- | :--- | | Adjusted Operating Income Margin (9M) | 42.0% | 39.6% | 2.4 | | Adjusted Operating Income Margin excl. Currency (9M) | 41.7% | 39.6% | 2.1 | | Adjusted Operating Income Margin excl. Currency & A/D (9M) | 41.5% | 39.6% | 1.9 | Schedule 12: Condensed Statements of Earnings This schedule presents condensed statements of earnings for the third quarter and nine months ended September 30, detailing net revenues, cost of sales, gross profit, operating income, and net earnings attributable to PMI | Item | 2025 (millions) | 2024 (millions) | Change Fav./(Unfav.) | | :--- | :--- | :--- | :--- | | Net Revenues (Q3) | $10,845 | $9,911 | 9.4% | | Gross profit (Q3) | $7,358 | $6,545 | 12.4% | | Operating Income (Q3) | $4,263 | $3,654 | 16.7% | | Net Earnings attributable to PMI (Q3) | $3,478 | $3,082 | 12.8% | | Item | 2025 (millions) | 2024 (millions) | Change Fav./(Unfav.) | | :--- | :--- | :--- | :--- | | Net Revenues (9M) | $30,286 | $28,172 | 7.5% | | Gross profit (9M) | $20,480 | $18,266 | 12.1% | | Operating Income (9M) | $11,519 | $10,143 | 13.6% | | Net Earnings attributable to PMI (9M) | $9,207 | $7,636 | 20.6% | Schedule 13: Condensed Balance Sheets This schedule provides condensed balance sheets as of September 30, 2025, and December 31, 2024, detailing assets, liabilities, and stockholders' (deficit) equity | Item | Sep 30, 2025 (millions) | Dec 31, 2024 (millions) | | :--- | :--- | :--- | | Total assets | $67,061 | $61,784 | | Total liabilities | $76,045 | $71,654 | | Total PMI stockholders' deficit | $(10,914) | $(11,750) | - Total assets increased by $5,277 million from December 31, 2024, to September 30, 2025, while total liabilities increased by $4,391 million[63] Schedule 14: Calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios This schedule presents the calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA ratios for the year ended September 30, 2025 (12 months rolling) and December 31, 2024, along with the components of Adjusted EBITDA | Ratio | Year Ended Sep 30, 2025 (12 months rolling) | Year Ended Dec 31, 2024 | | :--- | :--- | :--- | | Total Debt to Adjusted EBITDA | 2.92 | 2.93 | | Net Debt to Adjusted EBITDA | 2.69 | 2.66 | | Item | 12 months rolling (Sep 30, 2025) (millions) | Year Ended Dec 31, 2024 (millions) | | :--- | :--- | :--- | | Net Earnings | $9,112 | $7,503 | | Provision for income taxes | $2,934 | $3,017 | | Interest expense, net | $1,074 | $1,143 | | Depreciation, amortization and impairment of goodwill and other intangibles | $1,993 | $1,814 | | Adjusted EBITDA | $17,131 | $15,580 | Schedule 15: Reconciliation of Operating Cash Flow to Operating Cash Flow, excluding Currency This schedule reconciles net cash provided by operating activities (operating cash flow) to operating cash flow excluding currency impacts for the third quarter and nine months ended September 30 | Metric | 2025 (millions) | 2024 (millions) | % Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities (Q3) | $4,462 | $3,342 | 33.5% | | Net cash provided by operating activities, excl. currency (Q3) | $4,200 | $3,342 | 25.7% | | Metric | 2025 (millions) | 2024 (millions) | % Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities (9M) | $7,524 | $8,215 | (8.4)% | | Net cash provided by operating activities, excl. currency (9M) | $7,193 | $8,215 | (12.4)% |