Good day, everyone and welcome to the Philip Morris International Fourth Quarter 2024 and Full Year Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Philip Morris International Management and the question-and-answer session. [Operator Instructions] As a reminder today's call is being recorded. I will now turn the call over to James Bushnell, Vice President of Investor Relations and Financial Communications. Please go ahead, sir.

Welcome. Thank you for joining us. Earlier today, we issued a press release containing detailed information on our 2023 fourth quarter and full year results. The press release is available on our website at www.pmi.com. A glossary of terms, including the definition for smoke-free products as well as adjustments, other calculations and reconciliations to the most directly comparable U.S. GAAP measures for non-GAAP financial measures cited in this presentation, and additional net revenue data are available in Exhibit 99.2 to the company's Form 8-K dated February 8, 2024, and on our Investor Relations website. Today’s remarks contain forward-looking statements and projections of future results. I direct your attention to the forward-looking and cautionary statements disclosure in today’s presentation and press release for a review of the various factors that could cause actual results to differ materially from projections or forward-looking statements. I’m joined today by Jacek Olczak, Chief Executive Officer, and Emmanuel Babeau, Chief Financial Officer. Over to you, Jacek.

Thank you, James, and welcome everyone. PMI delivered another strong operating performance in 2023. We achieved our third consecutive year of positive volumes and high single-digit organic top line growth, driven by smoke-free products. Smoke-free products delivered accelerated accretion to profitability in the fourth quarter, as our IQOS business delivered meaningful 2023 operating leverage, mitigating a significant drag from combustibles. I am also very pleased to report the continued outstanding growth of ZYN, which was not included in organic metrics until mid-November. Importantly, smoke-free products reached nearly 40% of total PMI net revenues in the fourth quarter and over 40% of gross profit. For the year, smoke-free gross profit increased by 19% organically and we expect smoke-free organic growth to accelerate for both net revenues and gross profit in 2024. ZYN delivered exceptional growth in its first year within PMI with U.S. pro forma volumes up by over 60% for the year and over 75% in the quarter four. Oral smoke-free is accretive to both our smoke-free business and the overall group, with Swedish Match contributing 50 basis points organic uplift to Q4 OI margins from only 50 days of the period. Our IQOS business continues to deliver excellent results with 15% adjusted in-market sales growth for heated tobacco units reflecting broad-based momentum in Europe, Japan, and emerging markets. The rollout of IQOS ILUMA is substantially complete, now present in 51 markets representing over 95% of IQOS geographies by volume excluding Russia and Ukraine. The superior experience and design of ILUMA combined with the strong premium brand equity of IQOS and our unrivalled commercial infrastructure enabled IQOS to outgrow the heat-not-burn category, despite holding a category share of over 75%. Importantly, as we have seen in Japan, the launch of ILUMA is a multiyear growth driver consistent with past IQOS…

Thank you, Jacek. Let’s start with the headline numbers. We finished the year strongly with Q4 organic net revenue growth of 8.3%. This includes 14% growth from smoke-free products despite slower HTU shipment growth due to comparison effects, and also 5% growth from combustibles. Pricing was a strong driver for both categories, with smoke-free pricing including the impact of retail price increases on HTUs. While Swedish Match was only included in organic metrics as of November 12, it contributed 0.8 percentage points to Q4 organic top line growth and grew by an excellent 26% on a pro forma basis. Operating income grew organically by a very good 8%, including a Swedish Match contribution of 2.2 points. As expected, Q4 margins were broadly stable organically, and grew excluding the technical effects mentioned by Jacek. This enabled our business to deliver another quarter of double-digit currency neutral adjusted diluted EPS growth at 12.2%. This exceeded our prior expectations with ZYN’s remarkable growth a notable contributor. Despite this strong currency-neutral result, Q4 adjusted diluted EPS of $1.36 was adversely affected by a greater than expected currency impact of $0.20. This includes a $0.09 balance sheet related impact under hyperinflationary accounting in Argentina, following the devaluation of the peso in mid-December. As with the previously mentioned impact in Q3, this reflects the depreciation of monetary net assets denominated in pesos, which are subject to capital controls. By its nature, this does not carry forward to future periods. Turning to the full year. Net revenues grew by plus 7.8% organically, representing the third straight year of high single-digit growth. Similar to Q4, this reflects continued excellent IQOS momentum and strong combustible pricing. In 2023, Swedish Match, led by ZYN, grew pro forma ex-currency net revenues by 20%. Operating income grew by plus 3.7% organically, reflecting…

Thank you, Emmanuel. Let me now take a moment to cover our key strategic priorities for 2024. First is supporting the sustained growth momentum of IQOS through continuous innovation. This includes leveraging the rollout of ILUMA to maximize user growth, while innovating further on both devices and consumables. Second is to continue the strong U.S. growth of ZYN, supported by targeted commercial investment, long-term capacity expansion and organizational infrastructure, which will also support IQOS. Outside the U.S., we intend to continue developing our integrated multi-category offering to adult nicotine users with further launches of ZYN and, where relevant, our VEEV e-vapor portfolio. Of course, 2024 will be a landmark year for IQOS in the U.S. While the ultimate launch of IQOS ILUMA is the main priority, we continue to prepare for the first city tests of the IQOS 3 blade product starting in Q2 this year. These small-scale pilot launches will allow us to experiment with different aspects of commercialization and support our drive for at-scale commercial success once ILUMA is authorized. While we have no update on the expected PMTA timeline, the patent settlement agreement announced last week allows for commercialization of both blade and induction products while mitigating risks of patent-related disruption and enables us to leverage the scale, optimized cost and flexibility of our global supply chain. In combustibles, we continue to target a stable category share over time despite the impact of IQOS cannibalization, while taking judicious pricing actions to drive a positive profit contribution. Our capital allocation priorities are crystal clear. We will continue to invest in the growth of smoke-free products, and our commitment to the dividend remains steadfast. Following the acquisition of Swedish Match, deleveraging remains our key balance sheet objective. We aim to continue our excellent progress on sustainability initiatives, including those…

[Operator Instructions] Our first question will come from Bonnie Herzog with Goldman Sachs.

Hi, everyone. I actually wanted to ask a high-level question on the year. You originally guided FX-neutral EPS growth in '23 of 7% to 9%. Yet, you really did finish out the year a lot stronger, reporting 11% currency-neutral EPS growth. So as you look back, what were some of the key areas of outperformance versus your initial expectations? And then as you think about this year, you're initially guiding to 7% to 9% FX-neutral EPS growth again. So just trying to understand how conservative this may be, especially considering your 9% to 11% midterm growth target?

So Bonnie, with regards to 2023, I think the momentum which we have in the category is in Japan, is really well worth singling out. And despite the fact that as you know IQOS occupies a very sizable part of the segment, I mean where we capture well above our segments, I think we captured about 80% of the entire segment growth in Japan. So this is very strong. Japan is on the forefront of a smoke-free transformation. We're approaching the year 10 anniversary of IQOS in Japan. And if I just look over the last few weeks how category is continuously expansions in Japan, I think in the Tokyo area, the smoke-free products now about exceeded the size of the cigarette category. So if IQOS continues after 10 years participating in this phenomenal growth, this is really worth singling out. Clearly, ZYN and as we indicated very much, we've been very keen and very pleased that we could conclude the acquisition of Swedish Match, that adds the important element of our portfolio of alternative smoking, the pouches and obviously, creates a very good opening for us in entering the U.S. market and that ZYN is clearly is growing above their expectations. What is very important is we hear from time-to-time, quite rightly, conversations about some unintended consequences about the use of the product. I am so pleased with both IQOS and with ZYN actually are delivering of as they were designed for, i.e. going after adult smokers in the U.S. above 21 years. We're all familiar with the CDC data, less than 80% youth usage, the same is for IQOS and international. So we have a good -- my view is we have a very good, sustainable growing two fabulous propositions in a smoke-free product, and we're also trying…

Okay. Thank you. That was helpful. And then I did want to ask a little bit more on margins. Just hoping for a little bit more color on your margins in Q4, especially in Americas, where they were actually negative. I'm assuming, I think you called this out, a key driver of this is your investments ahead of the IQOS relaunch in the U.S. in May. So in the context of this, how should we think about operating income growth in Americas this year? Will it continue to be negative? And then for the full year of '24 year, just total company, your guidance is for FX-neutral revenue growth and operating income growth does imply operating margin expansion. So could you maybe touch on your expectations for gross margin and OpEx in the context of that?

Yes, Bonnie, Emmanuel can chip in a little more details. I think in the Americas segment, where it's more the impact of the devaluation in Argentina which drove the margins down rather than the U.S. market. Specifically about the U.S. market, yes, there is the increased investment also to continue supporting ZYN growth, and ZYN expansion, but also in preparing Swedish Match organization or Philip Morris International in the U.S. organization for being able to handle IQOS soon and obviously have the organizations, which is after the opportunities and the challenges of the U.S. market. So there are some investments which are already flowing through the P&L even ahead of the IQOS process start of the commercialization. Emmanuel, do you want to?

Yes, just to complement -- to answer your question, Bonnie, and complement what Jacek was saying on what is behind the higher-than-expected performance for '23. Clearly, as I described, a very strong dynamic on the volume on the commercial dimension, if you want. But we've been very pleased as well with the development of our margin on our smoke-free product. And we are today seeing the margin both on IQOS and on ZYN being above the average margin on CC. We are making progress on the profitability of the IQOS product and we have some price increase in Q4 overall. So that was the planned dynamic, but it is happening maybe even a bit better than what we're expecting, and we expect that to continue in Q4. And in that perspective, I mean, clearly, the U.S. is a fantastic market. We've described the fact that the margin of ZYN in the U.S. is best-in-class among our portfolio of products. And therefore, make no mistake, even if indeed, we're going to continue to invest in the U.S., the U.S. is going to be super nicely accretive in all parameters of our P&L at the level of the, of course, revenue growth but also at the level of the margin evolution and at the level of the operating income. And we reflect the fact that we talk about double-digit growth and very strong double-digit growth. U.S. is a very powerful contributor to our financial performance.

Okay. Emmanuel, if I may just clarify something then. For this year, you are expecting gross margin and possibly op margin expansion? Based on your guidance, it implies op margin.

Yes. We do absolutely, Bonnie. Yes.

Okay. All right. Thank you.

We'll go next to Gaurav Jain with Barclays.

Hi, good morning. Two questions from me. One is just to clarify the Argentinian peso impact. So you have a $0.19 impact this year, which is linked to balance sheet revaluation. And on the slide, you are using the Argentinian peso rate, which is equal to the spot rate. So there shouldn't be any further balance sheet revaluation down, which means that there is an automatic $0.19 benefit to EPS. Isn't that the way the math works?

Look, of course, we cannot speculate on any further devaluation of the peso. The reality is that the amount in dollar terms has been significantly reduced by the last devaluation. So a further devaluation would impact to a much lower amount. Now I don't know whether more devaluation could come. Frankly, we're not able to anticipate this kind of thing. What you have to take into account is that the basis has been -- in fact, as basically with the devaluation in December. So any further devaluation would apply to a lower base in Argentinian peso.

Sure. Maybe I can ask it separately. And my second question is around ZYN. We are hearing a lot of statements. We had a statement by Chuck Schumer. A lot of investors are concerned, they think that regulation is coming on, then flavors will get banned. So how do you plan to get ahead of this entire potential controversy that could emerge around ZYN?

Yes. So we observed over the last few weeks, I heard a lot of conversations around Brazil in social media and generally Internet and media. I think, look, ZYN is in the U.S. market for 10 years, okay? And if you look at the numbers, CDC latest data on the underage usage, et cetera, it stays very below. I think it's 50% which is the lowest from any product nicotine and also other products where there's some major restrictions applied. I think we know what about the Swedish Match marketing practices, and we were taking this very seriously during the acquisition of the (inaudible). We have said that the alignment with Service Match was not only that they were pursuing the smoke-free trajectory, but also that they have a very responsible and a disciplined approach to the marketing as we are on -- with IQOS, with heat-not-burn and the international. We have reached out to the few people who have been the most vocal too in these conversations with general consumer, but also to FDA and I think the facts are different than sometimes it is being -- trying to be the positions in the media. So the product is helping adult smokers with very strict with the age verifications. Obviously, when it comes to the conversations among the adults in the social media, that's going a little -- well, going anticipating, frankly speaking, in the territories we wouldn't have a control. ZYN is not using any paid ambassadors or whatever this is being called in the social media. So we think what we're doing is put the right product from the potential of the reduction of the harm where the product is based on science position and the risk reduction continuum, frankly speaking, it is the best nicotine alternative to any another nicotine product, very much obviously versus the cigarette. We have a pending PMTA with FDA and feel the science is very strong and very conclusive on the site. So I feel very confident. From the very beginning of our transformation, solid Swedish Match, we put the marketing team and very much the protection of the youth very, very high on our agenda. So I think it gives me the confidence that, as I said earlier to Bonnie's question, we have a progress, phenomenal growth on the products, which are delivered in a very sustainable manner to adult smoker.

We'll go now to Pamela Kaufman with Morgan Stanley.

Good morning. I have a question about ZYN as well. It's seen phenomenal growth in the U.S. Can you talk about what's driving the acceleration in growth in ZYN in the U.S.? And are there any particular regions where you're seeing stronger growth? And just on the ZYN guidance, it implies about 35% growth in U.S. shipments, but that seems conservative given the strength that we've seen. So is there anything that would temper ZYN's growth outlook relative to what we're observing?

Yes. So the ZYN, as you might remember from our Investors Day, the profile of the ZYN, when it comes toward the smoke or where the adults are coming from, there is any sourcing very nicely from a combustible cigarette, obviously, serves from the overall categories, including the tobacco-containing pouches, Swedish snus or similar products, but also resourcing from the vape category. So it is being recognized by the growing number of adults, the convenience of usage of Brazil. It is -- another way of looking at ZYN, it is a natural innovation or extension of the Swedish snus product, the tobacco-containing pouches. Obviously, as we know them, some people were not maybe comfortable of having a tobacco in the pouch. There are some optical hygienic type where they may be constraints, et cetera, and ZYN is something which is -- looks cleaner and is white, it doesn't contain tobacco, which might have been for a -- might be for some consumer create some resistance. So this is what I can say. I think the product has a good trajectory. The market is a large market in the U.S. with a well-developed e-vape category, obviously, still a very sizable combustible cigarette category and also many other oral tobacco forms, so it's a nice sourcing for ZYN, which is appealing to these audiences. With regards to your comments about the number of accounts forecasted, naturally related to our guidance for next year. We are very well familiar with that slightly trend in the U.S. Can ZYN surprise us to the positive? Yes. Can -- but guidance is built on the number of the assumptions, right? I mean it's a global business, multi-category and there are some headwinds, which we are aware today. I'm not sure whether there's a lot of materialized, but I think it's a matter of prudence is that this part of the year at the beginning of the year to single them amount and be prudent, but there are also some upsides and the tailwinds, which we are well aware of. The year-end faults will come to the Q1. I mean as a player, we build the confidence as you go through the year.

Yes. And Pam, to clarify the guidance here, we are coming with a growth year-on-year that would be similar than the one we've been experiencing in terms of total volume growth and not in a big percentage year versus '23 and '22. So these are similar volume growth. It's related to a reduction in the growth rate. We'll see whether your -- we have still going even higher than what we are forecasting for the time being.

Okay. Thank you. That makes sense. And a question on the patent settlement with BAT. Can you elaborate on the implications of that? I know you've been investing in manufacturing capabilities in the U.S. for IQOS. How does the settlement influence your ability to import into the U.S.? And does it change your manufacturing strategy?

Well, it actually allows us now to also connect IQOS in the U.S. to the supply chain, which is on the international supply chain from day 1, which is operating with all the benefits of economies of scale, et cetera. So obviously, as the mitigating type of a strategy we have been implementing in parallel the alternative manufacturing in the U.S., but that obviously is the first factory, first volumes. We would obviously result in the increased or elevated cost both on the devices and the HeatSticks and it will take a while until U.S., on a stand-alone basis, would close at the same level of the benefits of the cost, if you like, as we had on international. So for us, it clears the path for IQOS, top blend and ILUMA. So we're bringing a lot of -- or removing that, I should say, uncertainty from today and going forward. And IQOS because it is U.S., it's just another market which we added to the geographical family of IQOS presence from a day one, will have an access as I said to the pipeline of the products and its economic cost benefits as an international market. So for us, actually, is clarity and acceleration which we gain through this agreement. And obviously, as we all know, the patent litigation territory has a high degree of uncertainty. And we're running a very sizable business and we plan to have even more sizable business with the addition now of U.S. and that clarity and the visibility going forward is very important which I believe is also important for investors too.

We'll go next to Faham Baig with UBS.

Hi, guys. Good afternoon. Thank you for the questions. I have a couple as well, please. Firstly, you're guiding for another impressive year of mid-teens heated tobacco in-market sales growth. You've highlighted Europe will be within that range. Historically, Europe has done slightly better. What markets make up the sort of difference to help you to still get to the mid-teens growth? If you could allude to the larger markets. And within that, are you assuming any contribution from Taiwan, Saudi Arabia, you mentioned? And what should we expect for the U.S. as well, please?

So maybe I start with the U.S. I mean the U.S., we will do the test market on IQOS three point -- what we called IQOS 3.0 blade product, which is literally for us the high cost and we keep looking forward to get more visibility from FDA with regards to the PMTA MRTPA for IQOS which would allow us to accelerate the broader, more national type of a commercialization. So what we have assumed in 2024 in terms of the volume contribution of IQOS from U.S., it's very minimal. We are not treating this as testing the engine, commercial, the consumer phasing type of a solution rather than a lowered the current version of the product at the full scope. We have assumed -- we made some assumptions with regards of opening the markets in which IQOS today is not allowed. The trade not on the list is obviously Taiwan. Okay, that's each other assumptions and we might be right or wrong, but these are the assumptions which we made. It obviously hinges on the speed of some regulatory decisions and the laws being passed and et cetera. And with regards to Europe, look, I mean although I believe and the history have shown with the flavor type of regulations in the different categories, in the different places, that over a period of time, they don't have much of an impact to the dollar. But we're going in a period that some markets or markets will be implementing these regulations. I think they need to be cautious that there might be some distortions. I mean that they put in a guidelines and these will be transparent and still give you potential with headwind, which we take in, in the volume outlook for IQOS, but we'll have to see where this materializes. Not materialize, I think it's a matter of who then we should talk about this. Other than that, the underlying IQOS growth, if I look at the value of a share evolution, essentially, our European market is pretty strong despite the fact that very much in Central Europe, there is maybe more of the pricing competition from other heat-not-burn participants. But we also have a very strong price competition, extremely strong price competition, I should say, both on the devices and the consumables, consumables in Japan. And over the period of time, IQOS navigates for this highly sometimes aggressive competitive pricing environment very well. So that's essentially where we are. Germany grows very nicely. Italy continues with a very strong growth momentum. Again, the major driver is Spain. We make the -- we start making a significant progress. So that's it for me.

Thank you. And then just one other question, please. So you're expecting a smoke-free acceleration in 2024, but that's not translating into group net revenue growth acceleration in 2024. Are you expecting a softer performance in combustibles in '24? Is that the discrepancy?

Yes. I mean look, this is the blended -- at this moment in time, at the beginning of the year, the blended outlook for the group revenue is combustibles, oral and, obviously, heat-not-burn. There's few other in smaller things. But we have managed last year to deliver a very strong pricing variance. I think again, it's fair to assume that the driver of a pricing variance may not be repeatable this year. But there is obviously a pricing potential, which we baked in, in the -- or included in the guidance. Look, for some of these things, we need a little bit more visibility to start increasing our confidence. I still believe that if I compare what Philip Morris is delivering now, number of the years when we leave the revenue top line above 7%. And remember very well the times when we started transformations when they were the 3% to 5%, now I think a quality what counts for us, and this is what we pay a lot of attention, that we not only want to lead in a sustainable matter the revenue growth, but obviously important is the quality of that revenue growth. So having a 3-year total group volumes to start with above was no decline, not even flat, but growing, when you start overlaying this by pricing and managing to -- focusing to avoid the risk of some down-trading, et cetera, I think that the 7% is there, well, above 7% revenue growth is the pretty -- from a qualitative perspective, not just from the nominal growth perspective, I would think that is all that EBITDA.

Just to add to what Jacek has just been saying. I mean indeed, it's taking into account that 2023 was exceptional when it comes to price increase with close to 9% on the combustible portfolio and we don't intend to repeat that. We are guiding to a mid-single-digit price increase for 2024. So of course, that will have an impact and make a difference on the growth of our revenue on the combustible business.

We'll go next to Callum Elliott with Bernstein.

Hi, good morning. Thank you for the questions, guys. I just wanted to start with disposable vaping products. We've obviously seen these products have huge success in the U.S. in 2023 and the U.K. also driving us a steeper volume decline for commutable cigarettes in those markets. Obviously, your combustible cigarette business in those two markets is not huge, if nonexistent, obviously, in the U.S. So not a huge impact on your business so far. But my question is why do you think we haven't seen equivalent success for these products in the markets that are big markets for your business and the EU in particular? And do you think this could be a threat to your business in 2024?

You mean the threat to our business coming from the e-vape products? Look, there a number of factors, right? So one is that I think that the category of the e-vape product is being disposable; it's not disposable. It's very much focused in terms of the offering and innovation, frankly speaking, into the flavors, right? Then we very often forget that the core of the smokers' market-by-market with literally few exceptions are very much and if I would characterize is a traditional tobacco type of experience flavor, et cetera. So this creates sort of a more dual consumption or occasional consumption. But I think for some smokers and we know it from our experience of IQOS, it actually triggers curiosity to try, but at the same time, triggers the bottleneck in terms of a full-time type of a switching adoption. So that's one of the factors, okay? And then obviously, other factors at play.

I guess I understand that, yes. But why hasn't that -- it seems like in the U.S. and the U.K., that hasn't been an impediment to these products' success over the past 12, 18 months.

Results, so the focus, right? Because U.K. was on the forefront as was U.S., if I remember historically, of the forefront of this category partially, I guess, also attracted by the underlying margins in the CC category. So obviously, people are going with alternatives to the places which create some sort of that underlying margin opportunity with the relative freedoms also to talk about these products. As you know, Europe very much, but also in international, some countries, these products are not very -- let me put it that way, warmly welcomed. So let's leave aside the hybrid action principles. But some other opinions and views at play. Look, we know that we enter a e-vape category, but we're trying to be very disciplined or focused I should say and it's very easy to enter into this category without too much of the path to sustainable profitability. And we don't want to focus the company from some other opportunities which we're pursuing, which, in our view, are more sustainable and offer the good start for the margins and the underlying profitability But when we enter with this product, Italy, Czech, a few other markets, I mean our products despite the fact that we're relatively late into the -- from a category history perspective, and then we have gained double-digit shares in this market in the speed of -- span of less than 12 months or so. So it also tells you there is a lot of lack of loyalties in place. There's a lot of yes, I know that we see the volumes, but there's a lot of trial. I should not ban category and the pouches judge by performance in the U.S. And then by definition, the consumer is more loyal, more focused, more discipline in how they navigate it also.

Okay. And I have a follow-up that is related but maybe a slightly more philosophical question. In a number of markets and especially the U.S. related to some of these disposable vaping products, we've been seeing this formation of -- I would describe it as like a dual-tiered market that's been forming with big legacy players such as yourselves who are forced to play by the rules and hold themselves to a certain set of standards, marketing only to existing nicotine users and all of us will have seen your video on ZYN last week, I would imagine. But at the same time, we also have a secondary set of smaller new businesses who seem to be doing basically whatever they want and often illegally, but having great success within the marketplace and attracting lots of consumers. And so I guess my question is, do you think that this dual-tiered structure that seems to be forming in a number of markets, structurally impairs the attractiveness of your business and your brands when it seems like you're just being forced to play on a playing field which is not level?

Well, look, obviously, companies like ours is not even thinking about doing something which would be against or crossing the line of regulations or even, I would say, societal expectations. So obviously, I mean, our ability to come to you, these are -- it isn't what you're asking, grossly different than some other operators or participants in the market, especially people who don't have a view of 10 years or 15 years outlook, but it's essentially hit and run almost type of operation. And I think we know what has happened or what is happening in the U.S. There is, I understand, some discipline in the market is now underway. But frankly speaking, it's a long overdue because there is a lot of -- pardon my language, but a mess created in the market by the fact that regulators, law enforcements and other design for this designated for these agencies were a bit slow. And I think it's, frankly speaking, a replica, which we have for many years, and still in some places, kind of on a cigarette market, and it forms of an illicit type of a participation in the market. It's not only marketing practices, but also products, product standards, all of these things creates completely around distortions in the market at the expense of the legitimate category manufacturers and also diverts the conversation from how further we can progress and have reductions and divert them into the things which relatively easily should be fixed.

Okay, thanks, Jacek.

Thank you.

Our final question will come from Matt Smith with Stifel.

I think you asked second, Emmanuel, wanted to ask a follow-up question about investment levels embedded in the 2024 outlook. If we consider the expectation for gross and operating profit margin expansion on an organic basis, can you talk about the areas where you're seeing a step up meaningfully in incremental investment? Last year, you called out $150 million of explicit investments, including $75 million or so in the U.S. It would seem like the growth in ZYN would allow you to step that investment level up while still being able to achieve your double-digit profit expectations in the market.

Yes. So a lot depends, obviously, we target adjusted the live growth above on the revenue growth. So obviously, we are assuming some improvement in the margins. But on the other hand, I think we will have enough of the resources to support that revenue growth. So it is -- if we were to completely stop investing, obviously, the expansions on a wide growth would be much more significant, margin expansions will be much more significant, but we are -- it is not what we see in our strategy. So I think once we operate it at scale and we build, like the consumer has there, so the scale in the U.S., the revenue is very substantial over there, at least by the market standard. And the revenue, which we generate from a small crew, but also combustibles on international with that sort of a revenue growth rate, I think we have a room to provide for the investments to support today's and tomorrow's growth while also allowing for driving the margin expansion. We also have provided here some inflationary pressure. And I think, especially on the combustible, I -- we assume that the 2024 is sort of the last year of this extra ordinary life of inflation under pressure. And as of 2025, in other words, we should start seeing easing when the COGS pressures, and this is about delivering some other materials. And I think every incremental IQOS and every incremental ZYN is obviously requires proportionally less of the investment with the first IQOS and the first ZYN. So, I mean, the scale offer is going forward, there's opportunity for supporting the margin.

Thank you, Jacek. I can leave it there and pass it on.

Thank you, Matt.

That concludes today's question... End of Q&A:

Sorry. Before closing our call, I'd like to remind you that we will be presenting at the CAGNY conference on February 21, and we hope you'll be able to join either in person virtually. Thank you again for joining us today. If you have any follow-up questions, please contact the Investor Relations team, and hope you have a great day.

Thank you, all. Speak to you soon.

Thank you.

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