KDP - Keurig Dr Pepper Inc.

Chethan Mallela: Good morning, and welcome, everyone. We appreciate you taking the time to join us today, both in-person in New York City and over the webcast. Before walking through the agenda, let me first draw your attention to the slide in recognition of the forward-looking statements we'll make today. Please also keep in mind that we will be citing non-GAAP financial measures throughout our remarks and in the presentation that is posted on our website. Now let's discuss what to expect during our time together. Our Chairman, Bob Gamgort, will kick off the formal presentation with welcome remarks, followed by our CEO, Tim Cofer, discussing our value creation framework and the strategic rationale for the JDE Peet's acquisition and our planned separation. Tim and Olivier Lemire, our newly appointed President of U.S. Coffee, will then walk through our future Global Coffee Co business in more detail. After a short break, Eric Gorli, our President of U.S. Refreshment Beverages, will discuss the future Beverage Co; SVP of Finance, Jane Gelfand, will provide an update on financials and capital structure; and Roger Johnson, our Chief Transformation and Supply Chain Officer, will walk through our integration and separation plans. Finally, Tim will provide an overview of Q3 earnings and share some final thoughts. In total, the prepared remarks portion of the day should take around 2.5 hours. We'll then break for 45 minutes to allow the in-person attendees to explore our product showcase, and then we'll return for a Q&A panel. We expect to conclude our event and the webcast at around 1:00 p.m. Eastern Time. We hope it will be a productive and insightful session for you. Let me kick things off by welcoming our Chairman, Bob Gamgort, to the stage, and he will introduce the rest of the Board members joining us today. Over to you, Bob. Robert Gamgort: Good morning. It's great to see everyone. Thanks for joining us here. We've got updates to provide on KDP in general on the transaction that we announced in August. We also have some great Q3 results to talk about. So we don't want to forget those either. As Chethan mentioned, we've got a number of directors here today. And what I'd like to do is just take a minute to introduce them. They are mostly are all located to our right over here. Pam Patsley is our Lead Independent Director. She chairs our Remuneration Committee. She's our longest-standing director, having been at Dr. Pepper Snapple Board prior to joining KDP. Tim Cofer, our CEO, you're going to hear a lot from him today. Juliette Hickman, right over there. Juliette serves on our Audit Committee and one of our very newest directors, Mike Van de Ven, who also serves on our Audit Committee. And the directors are going to be available to interact with you during breaks and during the product demonstration, so please engage with them. Pam and I are going to come back on stage with the management team at the end of the day and answer questions as part of the formal Q&A session. So my purpose today is really to represent the perspective of the Board, and I want to kick off today by offering five points that I think the Board would like to emphasize at the start here. And first of all, KDP has a long and consistent track record of delivering strong results. Since formation, 6% revenue CAGR, 11% EPS CAGR, and that places us in the top tier of CPG peers. But from a Board perspective, our job is not to look backwards and congratulate ourselves on good results. It's really to position the company for future success. And that's why we have conviction in this acquisition and separation. What's important is for you to have more detailed information, more insight in our thought process. And that's what we want to do today so that you can come along with us on our journey on how we came to that conclusion and why we continue to have great confidence in the value creation potential of the transactions. Having said that, we heard your feedback. We certainly noted the market reaction and they made it really clear to us that we needed a day like today to better explain the strategy and the thought process behind it, as I said. We also recognized we needed to change some of the executional elements of the transaction. You saw the press release today. Those are good developments, and we'll talk about more optionality going forward. And we really think that we're on the right track and are being very responsive to your feedback. So going from today to this future end state requires great execution. So in addition to talking about the end state, we need to give you confidence in execution. And we'll do that today by showing you our integration plans. But I think more importantly, we're going to give you exposure to more people on our management team who are actually responsible for that and for running the company and making sure that we continue to deliver great results like we just did in Q3. So you'll meet them. And then we're going to be flexible. I mean, you've seen that we've been flexible since announcement. We're going to look for other opportunities to maximize value. And we'll talk about some of the areas where we're thinking about flexibility going forward throughout this presentation. So I think there are three points that I would like to comment on before I turn it over to Tim because I'm in a unique position to do this. So, first of all, is the global coffee category. So you'll find it interesting, but the left-hand side there is my trophy from 1985. This was an on-campus competition sponsored by General Foods, and it was called the Maxwell House brand management challenge, and it was about the coffee category. And my team won it, which is why we have the trophy. It sparked my career in CPG. It also is how I entered General Foods, and it also started a 40-year relationship with the coffee category. So I've seen it over an extended period of time. So, there's no question in the post-COVID period, we saw a slowdown in the global coffee category. We also are beginning to see signs of recovery. And what typically happens is a three-year window starts to become reality. We never thought that this was anything more than temporary or cyclical. It's not structural. And if you look at the category over 40 years, you will see periods of time where the category slowed down only to accelerate rapidly afterwards. And that's exactly where we think we are right now. We're in the beginning of a recovery period. Over that 40-year period, the volume growth of coffee is a 2% CAGR. And we know that in CPG, volume growth, real growth is scarce and important. But it's undeniable when you look at a 40-year trend on coffee, the trajectory continues to be going in the right direction. Actually, Tim has a chart that will show you that very, very clearly. So let's think about this. If you believe it's cyclical, and we're in the beginning of a recovery. We have a strong business in KDP coffee anchored by Keurig. We really believe to succeed going forward in coffee, you got to be global. We'll talk a bit about that. So if you want to form a global coffee powerhouse, the best partner is JDE Peet's. This is a scarce and valuable asset. It's a high quality, and honestly, there is no alternative other than matching these two businesses together. And when you see the fit, it is striking how much each business complements each other. And we're confident that together, we will form a formidable global coffee competitor. So that gets to another question that came up from time to time in the past couple of weeks, which is what happened to the investment thesis? How has it changed? So I'll start with a real obvious comment, which is since we put the companies together seven years ago, a lot has changed in the world. Competitors, consumers, our customers in the way they think about it. Certainly, the macro environment is different. So I think it's natural and necessary to evolve our strategy as well. In 2018, the play was a really good insight at that point in time. We took two subscale beverage companies who are solely focused on North America. We brought them together to create a beverage challenger of scale, and it was wildly successful. If you take a look at what's happened over the past seven years, I gave you the aggregate financial performance. But beyond that, the strength of each individual company enhanced significantly over that time. So if we're going to put together these two companies to form a global coffee competitor, and we'll talk about why global is important later, we could run them together. It is an option to run them as one company, but we think it is optimal to separate them. One company focused on a global opportunity, which is a very different management mindset. Obviously, on one category, coffee across the entire world of all forms and the other to continue to run this very valuable North American refreshment beverage growth machine that has significant runway still in front of it. It also gives investors a choice in two different styles of running these companies. More to come on that, but it really shows that there was this natural evolution that started in 2018 and is our choice to run them separately. You're going to hear from a number of speakers. And I think the third area where I can offer unique perspective is my confidence in the management team. Tim, who you're going to hear from right after me, will run the combined businesses. And then upon separation, he will be the CEO of our stand-alone beverage company. Olivier, Eric and Roger, I have worked with since the take private of Keurig in 2016. My experience with Jane goes back further than that. Jane was at Barclays in 2012, and she was part of the team that supported the IPO of Pinnacle Foods, where I was CEO. And the reason I give you that time period of my experience is I have seen this team deliver across a wide variety of challenging situations time and time again. I have the highest level of confidence in their ability to execute, and that gives me confidence that we can get from where we are today to an outstanding end game when we separate these companies. So, with that, let me turn it over to Tim Cofer, our CEO. He'll take you through a significant amount of content along with all these other presenters. And as I said upfront, I look forward to being back up here at the end with Pam, and we'll be happy to answer your questions at that time. So, Tim? Over to you. Timothy Cofer: All right. Good morning, everyone. Great to see all of you again. I hope you've had a chance already to enjoy some of the amazing beverages that we have across these stations for those of you that are here live with us at NASDAQ. I can imagine the coffee stations were hit pretty hard it being a Monday morning and all. So, building on Bob's comments, we have strong conviction in the strategic and financial merits of this acquisition of JDE Peet's and the subsequent separation into these two pure-play companies. We are creating North America's most agile beverage challenger and a true global coffee powerhouse. At the same time, as Bob said, I have spent the last two months absorbing shareholder feedback, and of course, the initial market reaction post the announcement. And I recognize that there are a few areas of concern as well as some open questions that would benefit from more explanation. That is why we're here today. So, in my discussions with each of you, I think the questions have largely spanned these four areas. Why is JDE Peet's the right acquisition? What does the separation into Beverage Co and Global Coffee Co. uniquely enable? How will we optimize KDP's capital structure post the acquisition and establish appropriate balance sheets for each of these separate entities? And how will we ensure that KDP delivers with success throughout this process. Over the next couple of hours, we will answer these questions and more. Now before diving into these topics, let's reground you in our business and our strategy. We operate with a sole focus on beverages. I truly believe this is the best sector in CPG. It's large. It generates $1 trillion at a global level. It's growing. We expect a mid-single-digit CAGR in the coming years, supported by structural tailwinds to sustain that momentum. It's dynamic with ever-evolving consumer preferences that create endless opportunities to drive consistent growth through innovation, through mix management, through premiumization. It's financially attractive, strong profitability, compelling industry return profiles. So we understand this beverage industry very well, and we have a proven and successful value creation strategy. At the core of this, as you see on this slide, our five pillars. They serve as our blueprint for how we drive sustainable, consistent, compelling performance over time. The first three of those are commercial priorities, broadly geared around the top line. The true enterprise enablers support that growth in a profitable, efficient and high-return way. Let me touch very briefly on each one, championing consumer-obsessed brand building. This means being consumer-led, consumer-centric as we nurture and expand our iconic brands, shaping our now and next beverage portfolio to access growth accretive white spaces via our flexible build, buy or partner model, amplifying our route-to-market advantage, strengthening our multichannel leadership with differentiated distribution capabilities, generating fuel for growth by reinforcing a continuous productivity mindset and a lean overhead operating model and, of course, dynamically allocating capital to support that long-term value creation. How have we applied that to our businesses? Let's start with Refreshment Beverage. Our results speak for themselves. Our flagship Dr. Pepper, we've turned this into the CSD category's innovation and marketing leader. We've driven nearly a decade of consistent market share gains, and we've established ourselves as the #2 market share position in the category. We've thoughtfully built out meaningful incremental growth platforms in white spaces that we previously didn't compete in like energy and sports hydration. And we've strengthened our competitively advantaged route-to-market DSD network through capital-efficient territory expansions through brand partnerships and capability investments. The result of the efforts you see at the bottom of the page, a high single-digit net sales CAGR since 2018. And we're just getting started with business momentum that should support continued sustained growth into the future. What about in coffee? Look, we know the operating backdrop in U.S. Coffee has been more dynamic over the last few years, particularly in that post-COVID world and the multiple commodity cycles like the one we're in now. And yet, we've made important strides. We've reinforced Keurig's position as the #1 North American single-serve system across both brewers and pods. We've extended our portfolio into exciting growth areas like cold and super premium. We've continued to expand the number of households that brew Keurig every morning now at 47 million strong and growing. And we are preparing to catalyze the next chapter of our growth agenda with disruptive innovation. We've invested in unique assets that drive competitive advantage, including our differentiated and highly profitable direct-to-consumer e-commerce capabilities. All of these initiatives have supported a steady low single-digit sales CAGR in recent years, consistent with our go-forward expectations. So through these commercial achievements as well as robust productivity and thoughtful cash deployment, we've delivered strong results at an enterprise level. Since KDP's formation in 2018, as you see on this slide, we've grown net sales at a 6% CAGR. We've grown adjusted EPS at an 11% CAGR, while also returning meaningful cash to our shareholders. Now at the same time, both our businesses and the external environment have changed in significant ways since 2018. Just as Bob discussed earlier, the original merger thesis was really predicated on combining what at the time was two subscale businesses. We did that to create a North American beverage challenger. What's happened in the last seven years? Our refreshment beverage business is no longer subscale. In fact, it is the same size today as total KDP at merger. Our actions to evolve our ref bev portfolio to strengthen our route to market have also structurally raised the organic profile of this business relative to 2018. And in coffee, while we've made progress, we acknowledge that the category growth trend has fallen short of our expectations in recent years. And while we're the clear leader in North American single-serve, that business is arguably subscale in particular, relative to our global competitors that can leverage broader advantages in technology, in sourcing and who can participate across the entire global coffee category. So as a Board and a management team, we observed these changes since 2018. We discussed these and we reached a couple of conclusions. First, our refreshment beverage business has both the scale and the advantaged positioning to succeed, as Bob said, either as a combined company or a stand-alone. And second, while our coffee business has clear strengths, it is not yet optimized to reach its full potential in current form. And we decided as a Board that it needed further assessment, and it could benefit from potential enhancement. So the first step in that assessment was to step back and take a fresh look at the coffee category. You've heard Bob's story 40 years ago, the Maxwell House Award. I've also spent a lot of my career in coffee in a past life, different employer. We're long-term believers in the attractiveness of the global coffee category. We believe in the structural tailwinds supporting future growth, but we did the analysis once again to underwrite our confidence. Let's start with the consumer lens. Coffee remains a preferred way to address the universal human need for energy, and it's ever more important these days. Coffee is a highly emotional category. It evokes passion. It's artisanal. Craft specialization plays a key role in premiumizing the category, which is a clear growth tailwind. Coffee is habitual. Coffee has unmatched global frequency of consumption. And coffee is healthy, even as defined by regulators, both in this country and globally. Simply put, coffee is the #1 beverage American consumers cannot live without, and I am certainly one of them. And it enjoys a similar status in so many markets around the world. Now to see the evidence of this category's essential nature, look at the long-term trend on the chart. Bob mentioned this in his opening remarks. What you'll see over 40 years is a low single-digit global volume growth. And in dollar terms, recent growth trends are even faster. thanks to premiumization and innovation. Importantly, the structural factors supporting consumption growth remain as powerful as ever. And I would highlight that increased adoption, especially in emerging markets as younger generations embrace coffee culture and begin to shift versus historic tea culture is yet another growth tailwind long term. Now as with many categories, coffee goes through cycles, including most recently this post-COVID lull that we've experienced. But as Bob said, and as this chart, I think, pays off nicely, the historic pattern is that these lulls are temporary and the category recovers to its long-term growth trajectory. We're seeing signs of this -- right now in the United States, this post-COVID recovery is underway. Category volume trends bottomed out in 2022. They've been stabilizing ever since. And encouragingly, this dynamic also holds true this year, year-to-date 2025, even as this high inflation has fueled significant price increases. You see here that the elasticities on an absolute basis compare favorably to the historic trend. So that was our assessment, our step back assessment on the coffee category. With renewed confidence in the attractiveness of that global coffee category, our challenge was then to determine how do we optimize our coffee business. Our goal here was to create an even stronger business with higher growth prospects, greater resilience and improved operational efficiencies. And look, we considered all options. All options were on the table, sell the business, spin it off as a stand-alone, continue to operate it as part of KDP. But ultimately, after thorough diligence, our management team and our Board of Directors determined that the acquisition of JDE Peet's represented the most attractive and actionable path for maximizing the value of our coffee business. Here's the reality. Scale matters in coffee. The category addresses a universal need state. Common formats, common consumer trends, similar premiumization opportunities across markets. This means that consumer insights, innovation, technologies can be leveraged and reapplied across markets. And of course, in coffee, there are clear economies of scale in operations and costs. Bob said it in his opening remarks, JDE Peet's is one of the very few assets of global scale in this category, and it will step change Keurig in several ways. You see it on this chart. Our coffee net sales will more than triple to $16 billion, making us the second largest global coffee player and the largest pure play. We'll gain access to additional geographies, including many high-growth markets. We'll become a significantly larger manufacturer and the #1 coffee buyer in the world. These elements are critical to fortifying Keurig as an even stronger coffee player. In JDE Peet's, we also see a unique fit with the Keurig business. Through this combination, we can bring together the best of both companies. Keurig's North American leadership, know-how, innovation prowess and JDE Peet's global reach, leading brands and full format expertise. The resulting Global Coffee Co. will enjoy an advantaged and complementary portfolio, incremental revenue opportunities, visible, actionable, achievable cost synergies and greater resilience. Let's unpack each of these four. Starting with advantaged and complementary portfolio. The combined company will be able to benefit from global category growth, given its strong brand portfolio, including $4 billion-plus trademarks, broad participation across every coffee subsegment and geographic diversification. Moving to enhanced revenue potential. We see upside potential from scaling Keurig's system expertise and JDE Peet's format capabilities across more brands and more markets, capitalizing on the growth runway for Peet's here in the United States and extending Keurig's next-generation coffee systems beyond North America. The third is clear and actionable cost synergies. We will discuss this in more detail, but we have identified clear and actionable efficiencies that we know will generate $400 million in savings in the next three years. These synergies can fund reinvestment while also supporting earnings growth. And finally, increased resilience. Obviously, as a larger company with greater supply chain capabilities, we will be much better positioned to navigate external volatility like tariffs and commodity fluctuations. Together, the union of JD Peet's and Keurig will create a stronger business that is more efficient and more capable of delivering consistent, profitable growth. So, upon closure of the JDE Peet's acquisition, we will, for the first time, have scaled advantage platforms in both Refreshment Beverages and coffee. Through the subsequent separation, each of these businesses will become that focused pure play with attractive yet distinct profiles. Beverage Co., a growth-oriented player, supported by a leading brand portfolio, a competitively advantaged route to market. The business will be disruptive. The business will be entrepreneurial, and it will deliver an attractive growth profile with potential upside from strategic optionality over time. Global Coffee Co. will be a steady grower with strong and resilient cash flow, enhanced by near-term synergy capture opportunities. Performance will be supported by differentiated deep coffee capabilities and expertise. And as we've said earlier, while we could conceivably run these two businesses together, we believe the separation will provide clear benefits to both entities. What are those benefits? First, focus. Each company will tailor its strategy, its operating model, its capital allocation priorities to align with distinct category and geographic exposures. Culture. The respective leadership teams will have strategic clarity, and we can structure and incentivize our organizations accordingly. Strategic optionality. Each stand-alone entity can think creatively and flexibly in pursuing additional value creation opportunities. And finally, shareholder benefits. Investors will be offered the opportunity for two very attractive yet distinct investment opportunities. Now as I said at the beginning of my remarks, we have conviction in these transactions, and we have a clear view of the compelling destination once this is complete. It's now on us to execute with excellence. And that all begins with a robust plan and the right team. So we've recently established a transformation management office or a TMO. To drive this comprehensive integration program. Bob mentioned it earlier, it will be led by our newly appointed Chief Transformation and Supply Chain Officer, Roger Johnson. You'll hear more from Roger in a minute. The TMO structure is designed to establish the processes and the workflows to guide our integration teams while also importantly, freeing up the rest of the KDP organization to focus on maintaining that great base business momentum that you've seen us deliver again in Q3. The TMO will be comprised of a dedicated internal team in partnership with key advisers that will be responsible for the integration planning, the future company design for the value capture. Our Board of Directors and my executive steering committee will obviously provide support and oversight. Importantly, many of these leaders, team members, advisers, obviously have significant experience in executing complex transactions like this. As just one example, among others, I was fortunate enough to have a central role in the Kraft acquisition of Cadbury and the subsequent separation into Mondelez International and Kraft Foods Group. Many of the other leaders, including those you'll hear from today, have had similar experience with complex transactions like this. We will draw upon those collective experiences to further derisk the next steps. So one important element of executing these transactions is ensuring that we have the appropriate capital structures for KDP at acquisition close and importantly, for each independent entity upon separation. We are well aware that some investors were uncomfortable with our initially proposed post-transaction leverage. And as you've seen today in the press release, we've taken meaningful action to address those concerns. So we've announced two cost-efficient transactions, a minority investment into a newly created coffee manufacturing [ JDE ] and a private convertible investment into our future Beverage Co. These two equity-like instruments will help to shore up our balance sheet. As you see on this slide and in the release, we now expect net leverage to be below 5x when the acquisition closes, and we're also targeting initial leverage ranges for Bev Co. in a range of 3.5x to 4x and Global Coffee Co. in a range of 3.75x to 4.25x. Based on the anticipated cost of this new financing, we continue to expect very attractive returns on our JDE Peet's acquisition, including year-one EPS accretion of approximately 10%. These capital raises also have the benefit of partnering and aligning KDP with sophisticated strategic investors, including Apollo and KKR, who understand and appreciate our vision. Let me walk you through the key acquisition, integration and separation milestones from here. We said this back when we announced the deal in late August. We continue to expect that the JDE Peet's deal will close in the first half of 2026. Our path to separation will be milestone-based with a plan for us to be operationally ready by the end of 2026. But before separating, we want the following conditions to be in place. First, a quick start to synergy capture; second, balance sheet readiness for both companies. Third, an independent Board of Directors and experienced leadership team for each stand-alone company; and finally, market conditions that are conducive. But as we've said all along, we will be flexible in our approach to secure the best outcome. In that spirit, as we optimize from here, one element where we're taking a refreshed approach is to our leadership. We've made the decision to not name the leader of Global Coffee Co. at this time, and we no longer intend for Sudhanshu Priyadarshi to serve in that future role. We will name full leadership teams of both new companies at a future date closer to separation. So, before we unpack both Global Coffee Co. and Beverage Co., let me conclude with three priorities to maximize value creation. First, maintaining base business momentum. As you saw this morning, we reported strong Q3 results. In fact, we raised net sales outlook, and we reaffirmed our full year EPS guidance. You should have also seen that JDE Peet's this morning reaffirmed its full year guidance. Indeed, we are initiating this transformation from a position of strength. Second priority, integrating with excellence to achieve our key deal objectives. You'll hear more from Roger about the processes and the plans we're putting in place to underwrite successful outcomes. And third, setting up each company for success with focused strategies, tailored operating models, purposeful capital allocation. After the separation, we expect both companies will offer their shareholders quality, consistency, simplicity and be viewed as world-class leaders in their sectors. Okay. With that, let's move to Global Coffee Co. We're going to bring this new company to life in a couple of sections. First, I'll invite Olivier Lemire to stage. He's our recently appointed President of U.S. Coffee, and he'll give an overview of the attractive Keurig Coffee business. I'll then return to talk about JDE Peet's specifically and then the combined Global Coffee Co. Real quick additional intro on Olivier. He is a tremendous leader. He's been with KDP for 14 years. The last four, he was President of our KDP Canada business. And I can tell you, in that capacity, he led KDP Canada to significant coffee outperformance, consistently growing pod volume, brewer volume, net sales and operating income. Indeed, Olivier knows the coffee business. He has deep experience with integrations as well, including steering the former Keurig Canada and Canada Dry, Mott's integration. Overall, he built a very strong Canadian organization, and we're very excited for him to take this U.S. coffee desk. Olivier, over to you. Olivier Lemire: Thanks, Tim. Good morning, everyone. So after 14 years in the coffee and beverage industry, I've seen firsthand the unique power of coffee to bring people together, whether it's friends, families, colleagues, there's just no other beverage like it. And from my time in country of origin with coffee farmers to walking the floor of our different coffee labs and manufacturing facilities to building strong relationship with our many brand partners, my passion for coffee and strong conviction about the future of our coffee business has only grown. So it's a real honor to now lead our U.S. coffee business and the amazing team behind the Keurig system. And with this system, we've created and now drive a highly profitable subsegment of the coffee category. Over the last 12 months, we've driven $4.6 billion in net sales and $1.4 billion in adjusted EBITDA. We are trusted by some of the best coffee brands in the world with unmatched capability, quality and scale. Brand names like Starbucks, Lavzza, Dunkin', Peet's, McCafé, La Colombe and Tim Hortons and many more. And it goes as well for our own powerhouse coffee brands, Green Mountain Coffee, The Original Donut Shop and Van Houtte. Keurig is -- and it's all driven by the Keurig brand. Keurig is a beloved brand with 94% brand awareness. It is truly the undisputed leader in single-serve coffee. Keurig is one of those handful of businesses that have become synonymous with their categories. People don't say, I hope our vacation rental as a single-serve coffee maker. They say, I hope our Airbnb has a Keurig. And we don't take that lightly. Since 2019, we've added 13 million active households, reaching 47 million in North America by 2024. We've gone from being one in four coffee makers sold at retail to being one in three today. And the Keurig system over these years continue to gain market share in both the coffee makers but also the coffee categories, with K-Cup pods now being the largest coffee format and actually driving twice the retail sales to the next closest format. And from the start, the Keurig system was designed to offer variety and choice to our consumer. And this open system drives significant value for all of our stakeholders. Our consumer love us for quality, our convenience and the variety of brands and beverages they can enjoy. Our partners value our quality, our system expertise and coffee know-how. And the retailers would recognize that we've driven premiumization in the coffee category with single-serve and K-Cup pods driving more revenue per every cup of coffee. So this creates a very strong growth engine. More brands, more variety, appeals to more households, generating more profit to be reinvested in the system. We also have a very strong track record of building and accelerating coffee brands, starting with our very own Green Mountain Coffee, now realizing more than $800 million in retail sales annually and holding the #2 position in the Keurig system. It is part of a robust owned and licensed portfolio of brands that drives strong distribution and obviously, retail activation. Here are a few examples. McCafé was a brand in decline when it transitioned over in our system mid-2020 and has been growing share every year since. Lavazza is the fastest-growing brand since we took over the selling rights, and we see acceleration in distribution and retail activation. And finally, the original doughnut shop, we know flavored coffee is actually growing faster than black coffee and is the leader in flavored coffee growth with unique partnerships and beverage types. In addition, we have a very powerful asset in our business with keurig.com. The keurig.com consumer consumed twice the daily average and has a 5x lifetime value versus the average household. With Keurig -- while keurig.com is an excellent sales channel for our coffee business, it is also a significant driver of household penetration being the fourth largest sales channel for brewers in volume. The site enables us to have a one-on-one relationship with more than 1.5 million consumers each month. If it were to be part of our retail channels, Keurig.com would be amongst our top five with other industry giants. For those that know our brand history, know that Keurig was actually founded in the workplaces, delivering a fresh brewed solution over the dreaded still pot of office coffee. And on that foundation, we've built a very strong business in away-from-home with now 650,000 workplaces with active brewers and 1.2 million hotel rooms. And we actually see significant upside in large away-from-home areas, primarily corporate workplaces, manufacturing, health care, construction. There is a powerful synergistic relationship between our out-of-home and at-home channels. with workplaces serving as a great trial environment for both the Keurig system and our many brands in the portfolio. Our coffee business has actually delivered meaningful productivity over the last five years, averaging 4% in year-over-year cost saving through a series of initiatives ranging from tactical to strategic. These programs include brewer-direct import, [ large nested compact ], lightweight cups and meaningful reductions across process and product waste. Our productivity initiatives usually serve dual purpose of generating cost savings and advancing our sustainability agenda, reducing packaging, eliminating waste and driving a more efficient logistics. So by being cost conscious and driving a productivity mindset throughout the organization, we unlock fuel to reinvest in our business. And with that fuel, we can actually drive and accelerate our strategic imperatives. We know our business is strong, and we know we can improve. And over the last year, we've actually refined our consumer-centric strategy, and we're focused on four key areas: driving household penetration, growing premium coffee, scaling cold coffee solution and defining the future coffee system. In terms of Keurig, we're excited about our new marketing campaign hitting in Q4. It will have strong in-market presence, and we believe that with consumer insights and strong data-driven campaigns, we will be able to continue to unlock household penetration. With premium coffee, we are on the eve of launching our first-ever coffee brand with the Keurig name, the Keurig Coffee Collective. It will be our first scaled and premium owned premium brand. It features elevated packaging will -- sorry, elevated packaging. It will have 30% more coffee within each cups and will have distinctively delicious blends. And we're leaning into cold coffee solutions with innovations across brewers, pods and ready-to-drinks. We've actually recently launched new refreshers based on TikTok trends, and we found new ways to offer consumer the way to customize their favorite cold beverages. And as you would have seen in the product showcase and invite you to do so at the break, we are getting ready to disrupt once again the coffee category with the launch of a breakthrough system, Keurig Alta. Alta uses K-round plastic-free and aluminum-free pods. It is designed to offer a large range of barista-style beverages, including rich cups of coffee, authentic espresso and a variety of coffee shop style beverage, either hot or cold. We have completed multiple rounds of in-home testing with the Keurig Alta system, supported by pilot production of the K-rounds. And we are looking forward to sharing this innovative format with consumers soon. And while it's early days, we are excited to think about scaling this innovation in the future. So, with that, I'd like to welcome Tim back up to speak to JDE Peet's and how these two complementary businesses will be even stronger together. Thank you. Timothy Cofer: All right. I will put in a plug for those last two coffees that Olivier shared with you. If you've not tried our new Keurig Coffee collective, for those of you in the room, it's in that station belt back there, my favorite new K-Cup pod, outstanding cup of coffee. And then Alta, please be sure and try Alta before you go today. So I will start this next section with thoughts on JDE Peet's, including an overview of the business, why we think it's such a compelling asset and some of the recent strategic changes that are underway at that management team. Then I'll discuss Global Coffee Co. and highlight how the complementary nature of JDE Peet's and Keurig creates this attractive pure play that's truly positioned to win. So if you're wondering, what am I doing here? Why am I the guy talking about JDE Peet's? The answers are, number one, I will be responsible for it while we run for a period of time as a combined company. Number two is I do have an up close perspective on this, having spent months of diligence on this acquisition and getting to meet and interact with this leadership team. And number three is, believe it or not, I used to run some of these brands back in the past life, brands like Jacobs, Tassimo, Kenco, Gevalia and others. So I actually think I know firsthand the strength of these brands and the roles that they play in the lives of our consumers and our customers. I also want to tell you, we are very pleased that we actually have the CEO of JDE Peet's, Rafa Oliveira, in the room. Rafa, you can give a quick wave. There he is. He's in the audience. Rafa and I, as you might imagine, have gotten to know each other pretty well over the last few months, and he's actually here stateside for a couple of days. Tomorrow, he'll be at our Boston headquarters as we're advancing our integration and transformation agenda. So let's talk about JDE Peet's. JDE Peet's is a unique asset. It's large. It's profitable. It is a global pure-play coffee company, $11 billion in net sales, nearly $2 billion in adjusted EBITDA. The company holds the #1 or the #2 share position in dozens of markets around the world, reflecting an enviable portfolio of leading coffee brands. The business is anchored by billion-dollar icons like Peet's, L'OR, Jacobs, but it also boasts a sizable regional and local portfolio, brands like Pilão, Moccona and Friele, among others. JDE is also distinguished by its rich coffee heritage. This company has deep, deep coffee expertise. Its participation in coffee dates back to the 1700s with the founding of Douwe Egberts in the Netherlands, and its capabilities are quite strong. As one example, we put it on this chart, the company has the ability to produce over 1,000 distinct coffee blends. You can imagine that's a skill and capability, especially useful in times of extreme coffee inflation and the tariff volatility. For me, one of the simplest ways to understand this company's strength is by looking at a map of the world. Many countries have large and vibrant coffee categories, and JDE Peet's is present in most of those countries, often with a leading position. Coffee is a category in which the market leader is frequently a regional or local favorite, not necessarily a global brand. Consumers are fiercely loyal to their local brands, particularly in the largest and most developed coffee markets. And JDE Peet's has a portfolio aligned to that reality. So in the Netherlands and Belgium, Douwe Egberts is the category standard. In the U.K., it's Kenco. In Brazil, it's Pilão. In Germany and actually much of Central and Eastern Europe, it's Jacobs. And in France, it's L'OR. And that's just scratching the surface of their market leadership. So we recognize that this company's brands may be less familiar to an American audience. But as you can see, they're powerful equities with strong resonance in their core markets. And I'd be remiss to say that these brands also produce a very good tasting cup of coffee, each very individualized kind of taste of the nation qualities. Again, for those of you that are here, there's a station on my back left there that will give you a nice assortment of their brands, and I highly recommend, if you haven't had enough coffee already, please try it at the next break. Another hallmark of JDE Peet's is the broad category participation. The company has an offering spanning all major coffee formats, from whole bean, roast and ground, single-serve, liquid, ready-to-drink concentrate. The portfolio also captures the full price tiers from mainstream to super premium. The channel diversity is universal, including all major at-home and away-from-home channels where coffee is consumed. You can imagine there are significant strategic benefits to this broad category participation. Now given its advantaged brand portfolio and strong capabilities, it's probably no surprise that JDE Peet's is also a leading partner to retailers across the globe. I'll give you one example. This chart here of a retailer -- major retailer in France. L'OR actually holds the distinction as the #1 brand in all of CPG, driving growth for the retail trade in France over the last 10 years, ahead of even the biggest global trademarks like Coca-Cola. These photos that you see on the slide underscore the level of in-store activation that retailers support because of the power of these coffee brands and the central role that they play in building shopper basket and driving category growth. JDE Peet's Pet's brand strength also extends to the consumer. Its portfolio has beloved trademarks, obviously evidenced by those strong market shares I showed you. But what's equally important and I think encouraging for future growth prospects is the brand's particular resonance among younger consumers. In some markets, here are three examples, the sub-30-year-old demographic prefers the leading JDE Peet's brand by nearly a 2:1 margin relative to the next largest player. That type of brand loyalty among the next generation is priceless. As younger consumers grow their spending and influence in coffee as they age, JDE Peet's appeal to these groups should represent a growth tailwind. The company also has brands with a demonstrated ability to stretch. And I'll give you two examples on this chart. Take L'OR. L'OR began as a roast and ground coffee staple, but it's now expanded into basically all other consumable formats, including into appliances. And these adjacencies now account for a meaningful percent of total L'OR brand sales. The other example, Jacobs. Jacobs started as a German icon. But over the last couple of decades has successfully established #1 positions across Central and Eastern Europe, in fact, in 19 markets. Now more than half the sales of Jacobs is outside of its home country of Germany. I think this is notable because one of the incremental revenue opportunities from combining Keurig and JDE Peet's is the pairing of our technology and our innovation with JDE Peet's brands. We believe the stretch potential of these JDE Peet's trademarks can create intriguing growth opportunities down the road. Beyond the commercial success, the JDE Peet's business has also demonstrated resilient financial performance. I'm sure I don't need to tell anyone in this room. In fact, a few chats I did prior to the start reflect this, that the last few years has been marked by quite a bit of unusual level of green coffee inflation, triple-digit cumulative cost pressure on Arabica and Robusta. You see the numbers on this chart. And yet, even as a coffee pure play, this business has delivered steady and consistent gross profit growth. I think another indication of brand strength. Bringing it all together, it's clear for us that JDE Peet's has a strong structural foundation. This is a good business. It's got iconic brands. It's got significant capabilities. Yet it's also true that it's a business with significant value creation potential that has yet to be fully realized. To be clear, JDE Peet's management team recognized this, and they've already begun the important work to begin to capture that potential upside. They hosted a Capital Markets Day back in July, and they set a path to become a more agile, more focused, more commercially capable organization. I visited Amsterdam a few times with Rafa and team, and I can already see the early stages of this important cultural shift taking hold. The centerpiece of their approach is an evolved strategy, and they aptly call it reignite the amazing. Now there are many elements to the plan, but I'll just highlight a few notable points. an emphasis on fewer, bigger bets with resources and management attention going towards the largest brands, greater consumer centricity and commercial excellence and a stepped-up productivity flywheel to unlock savings, flexibility and agility. The strategy makes sense, and it's definitely aligned with CPG best practices and operating principles. And upon integrating JDE Peet's with Keurig, we would expect to continue this work and harmonize it into a combined strategic playbook for Global Coffee Co. It remains early days as they've embarked on this new strategy, but I would tell you, there's already some initial proof points showing up from this refined strategic approach. I'll give you a couple of examples. On big bets, JDE Peet's is prioritizing leveraging insights and infrastructure to launch compelling innovations and ideas across multiple brands and multiple geographies in a highly efficient and profitable way. As one example, right now, there's a hot trend out there called Dubai Chocolate. JDE Peet's was able to quickly launch a Dubai Chocolate coffee mix across multiple brands in 20 markets this year using this platforming approach. Less visibly, but no less critically, the company has also made progress in refining its marketing approach and building capabilities in key areas like revenue growth management. We certainly know from experience, the payback from these investments can be very high when you get it right. And finally, JDE Peet's is also beginning to progress its productivity program that they unveiled on their Capital Markets Day. The plan targets EUR 500 million in savings through 2032 with roughly half being reinvested in the business. Four primary areas underpinning this target. Portfolio simplification across brands and SKUs and the manufacturing and distribution footprint, simplified ways of working, which involves removing complexity and generating savings accordingly, continuous improvement in sourcing, in design and plant level productivity and driving improvements in the company's asset-light route-to-market system. As you can imagine, we carefully vetted this program as part of our diligence, and we're confident that the savings are achievable. JDE Peet's has already begun to implement this program, including some plant closures and other operating efficiencies that they announced this morning in their press release. So you've now heard Olivier talk about the strengths and our future growth plans for Keurig. You've now heard me walk through the virtues of JDE Peet's. Let's now talk about what happens when we put these businesses together. So let's start with some background. These businesses are strong in their own right. They've proven resilient, and they've delivered solid performance in a very challenging operating backdrop the last few years. You see on this chart, sales growth and adjusted EBITDA ranging in the low single digits. And importantly, each business has proven highly cash generative. For example, you see here, Keurig, we expect to deliver more than $600 million of free cash flow this year. And JDE Peet's this morning reaffirmed its outlook for the year of EUR 1 billion, about $1.2 billion. When we put these two companies together, we expect even stronger top and bottom line growth going forward. And let me take you through why we believe that. To start, Global Coffee Co. will be an advantaged market leader in the $400 billion global coffee category. And as I said previously, scale matters in coffee. This business will have it. Global Coffee Co. will be the #2 coffee player in the world by revenue and the #1 pure play operating across 100 countries. It will have a strong portfolio of brands, diversified across formats, across channels. It will have a strong financial profile, $16 billion in net sales and over $3 billion in adjusted EBITDA. The combined entity will have a broader product line than either stand-alone company had, but in particular, relative to Keurig. Prior to the combination, as you see on this first bar, our business was almost exclusively focused on the single-serve subcategory here in North America. But with the addition of JDE Peet's, you now see Global Coffee Co. will have a format mix that's far more closely aligned with the global category split and yet still with a favorable skew to the high-margin single-serve segment and other more value-add areas. What does that mean? Global Coffee Co. can then fully participate in the growth of the entire category, both in meeting existing consumer preferences and emerging growth opportunities. Similarly, as a true multinational now, Global Coffee Co. will be better positioned to capture a fair share of category growth. At the category level, coffee has two large structural growth drivers. We think both of these are evergreen. The first is per cap consumption growth. This has been and we expect will continue to be a tailwind for the category. It's supported by elements like a rising middle class and ongoing preference shifts, particularly in non-coffee legacy markets of preferences driven by youth from tea to coffee. The second is premiumization as measured by value per cup. This trend is occurring across all formats. And you see it most evident in the growth of premium solutions like single-serve, but it's occurring across brands as well with premium trademarks growing faster than mainstream and value. So while per capita consumption is a greater opportunity perhaps in less developed coffee markets and premiumization is a bigger trend than established countries, we actually see significant runway in both of these structural growth drivers. The business will also enjoy unique revenue opportunities arising from this very complementary combination. Let me quickly talk to these five formats. Given the potential to expand Keurig's brand equities now into new subcategories, leveraging JDE Peet's full segment exposure, technology, especially in brewers, Keurig is best-in-class in brewers. We've been an innovation leader. We know how to produce them at an efficient and profitable manner. We can provide insights to some of JDE Peet's systems like Senseo, Tassimo and L'OR. Channels, we can capitalize on our complementary footprints, including in away-from-home. Next generation. next-generation exciting Keurig Alta and K-rounds innovation now has the potential to think about expansion beyond North America and brands, targeting growth opportunities for specific brands in the portfolio. And one I'll call attention to is Peet's, and I'll give you more in a moment. As you see, the synergistic growth opportunities are ample and indeed global. Let me talk a little bit more about Peet's, just to bring that to life. We all know that brand, I think, pretty well here in the U.S. It has a rich heritage. It's a coffee pioneer. It's got strong brand awareness, premium coffee credentials across the U.S. But as this map shows, the map on the left, its market penetration is very much concentrated in the West Coast, and in particular, California, the home territory. And its commercial execution at point of buying meaningfully lags Keurig's. But as a combined entity, Global Coffee Co. can utilize Keurig's significant commercial scale, our very strong customer relationships to improve Peet's geographic footprint. I'll give you one example with numbers. You see that on the far right. We have the ability to achieve -- well, today, Keurig achieves almost 4x the feature and display activity of brand Peet's. We can and we will close that gap. The result can be a much larger, faster-growing Peet's premium brand over time. So we've talked about the revenue opportunities, but we also see visible cost synergies at Global Coffee Co. Our $400 million synergy target in the first three years spans several areas. In procurement, we will benefit from enhanced scale across green coffee sourcing as well as direct and indirect spend pools. In manufacturing and logistics, we have plans for network optimization for route-to-market consolidation and other go-to-market efficiencies. And for SG&A, we've already identified corporate scale efficiencies as well as IT infrastructure and other system savings. Importantly, these synergies have been scoped and we've developed concrete and actionable plans to deliver on these cost synergies, if not exceed them. Ultimately, we expect Global Coffee Co. will generate consistent, attractive profit growth. This will be driven by a few factors. First, obviously, profitable top line growth. This company will be well positioned to capture its fair share of the coffee category's volume growth, which, as you've heard a couple of times, consistently grows on a volume basis at a low single-digit rate over time. This will obviously generate fixed cost absorption, operating leverage benefits. And in addition to that, the innovation that you've heard about today, our price pack architecture and RGM work, promotional effectiveness can further translate that top line growth into nice bottom line growth. Next, Keurig and JDE Peet's each have robust productivity programs, even beyond the deal synergies I just covered. And obviously, some of these savings will be earmarked for reinvestment, but others will flow through to the bottom line. And finally, it's not built into our baseline financial outlooks, but it's our belief that current coffee prices are clearly well above the long-term trend, and they do not appear to be supported by market fundamentals. I'm not going to try to predict commodity market gyrations on this stage, but it is worth noting that any normalization in this cost would clearly drive a cyclical profit tailwind. Bringing these elements together, the business' structural advantages the potential revenue synergies, the cost synergies of the combination, the other profit levers available to the business, Global Coffee Co. will support an attractive growth algorithm. Now there certainly can be some year-to-year volatility in top line due to commodity volatility. But over time, we project low single-digit net sales growth and high single-digit adjusted EPS growth. And we would expect this business to be highly cash generative. As you see on this chart, anticipated cumulative free cash flow of more than $5 billion from '26 to '28. We are excited to create this global coffee powerhouse the world's largest coffee pure play and a stable of the best loved brands powered by advantaged capabilities. All right. I think you've earned a well-deserved break. Let's take a 15-minute break, and we will come back and talk about Beverage Co. Thank you. [Break] Chethan Mallela: We're starting in one minute. Everyone find your seats. Please welcome Eric Gorli, President of U.S. Refreshment Beverages. Eric Gorli: Right. You all hear me? Excellent. Good morning. Thrilled to be here getting to represent this great business. And most likely, I'm a new face to most of you. Believe it or not, I've actually been in this industry closing in now on 30 years. I spent the first 20 in the [ R.E.D. ] system, and I just hit my 10th year anniversary here at KDP. And look, as I've told Tim, Bob, our Board, there is absolutely no other place than I'd rather be right now than here with this collection of iconic brands and the incredible team that we've been able to assemble. So let me tell you why I feel that way. Tim hit some of this to start with, we work in a fantastic industry. It is large, over $300 billion in retail sales. And most importantly, year after year, it has demonstrated the ability to consistently grow sales dollars north of 3%. And what fuels that growth is just how dynamic the consumer and her ever-increasing demands are. Underlying megatrends, these are things we all experience in our day-to-day lives, convenience, wellness, the need for functionality. The fuel a cycle of innovation and the opportunity to continuously participate in new pockets of growth. And this landscape is way more fragmented than most people realize. We view this as an opportunity for future expansion, particularly with our unique build, buy, partner model. So let's talk a bit about Bev Co. and why we feel like we are uniquely positioned to be a formidable challenger in this industry. We have scale. We exited 2024, as you saw in Tim's slides, north of $11 billion in net sales. Our business is profitable. Our EBITDA margin is at 30%. And again, importantly, we're growing. Since 2018, we've averaged a top line growth rate of 8%. We have incredible portfolio of brands with incredible organic growth upside. That's going to be most of my presentation today, just the confidence we have in these products. We also have an advantaged commercial and route-to-market model. This includes one of only three national direct store delivery systems for nonalcoholic beverages here in the U.S. And we've invested significantly in our operations to support network expansion. And yet we still have so much room for improvement. So I'll now get into the details on why I personally have so much confidence we can maintain this momentum into the next chapter. So one of the things that is so very special about beverages is just how they are so very personal. These are products where consumers create deep lifelong relationships with their favorite brands. We have many of these brands inside our portfolio, brands that consumers love, brands that our retailers value. So a few facts and figures. On the slide, you'll see over 25 brands that have over $100 million in annual retail sales. They are led by our $3 billion trademarks, brand Dr. Pepper, fast approaching the $6 billion mark as well as category leaders like Canada Dry and Mott's. Some other key brands, you'll see icons like Snapple, A&W, 7UP, as well as a few fast-growing disruptors like Bloom, GHOST and Electrolit. Today, we believe we have a portfolio that not only provides us with exposure to growing categories, but it creates scale for us with our customers and efficiency inside of our operations. So over the past several years, we've done a really nice job of being very thoughtful in how we want to evolve our portfolio. As you heard Tim mention, we employ a flexible but disciplined model that's really centered around building, buying or partnering. It all starts with build. And you can see on the slide where we have demonstrated a really strong track record of bringing innovation. No better example of this than inside of our CSD portfolio. Here, we are repeatedly recognized by our retailers for our market-leading innovation. We've also been very purposeful in our approach to utilizing different ways to go expand the portfolio, particularly our partnership model. Our approach to partnerships is very, very unique in the industry. We work hard to ensure that there is a win-win in the relationship that we have aligned incentives and that both partners are in it for the long term. These partnerships are able to go leverage our DSD network and allow us to rapidly participate in growth pockets with a very capital-efficient model. And in a number of cases, they provide us with a superior risk-adjusted return that we likely could achieve on our own through a build model. So we'll start now with the portfolio with my favorite brand, our flagship brand Dr. Pepper. I literally could speak for an hour to some brand Dr. Pepper alone. It is a brand that has had incredible success, and yet we still believe tremendous headroom for growth. A couple of years ago, you heard Tim say, Dr. Pepper became the #2 most consumed soft drink brand. This year, 2025, we will complete our ninth consecutive year of share growth. This is all built upon a consumer obsession for the brand. You can see that demonstrated in category-leading household penetration growth as well as industry recognition for our marketing campaigns. We believe we have a repeatable playbook that works. It starts with Dr. Pepper's unique flavor, its distinct positioning. It plays firmly and wins in what we call the treat demand space. We're able to take that positioning and then make meaningful connections with what consumers really care about and where their passions are. Right now, you can see that on Any Given Saturday come to life in season 8 of our highly successful Fansville campaign. We also leverage winning innovation, innovation that creates excitement not only with our consumers, with our retailers and our distributors. That drives some of the scale retail activation you'll see in market for the full trademark. Importantly, not only for the innovation, this also attracts new households into our base flavor, we execute this well. So this is great, but what excites me the most is the runway we still have ahead of us. Let me talk about Dr. Pepper Zero Sugar, still very much in its early days. You'll see in your scan data, it's already the #2 Zero Sugar CSD, but still has significant opportunity in terms of distribution, display presence, even consumer awareness. As a percentage of the trademarks mix, we're still only about 60% of the development of the #1 Zero Sugar CSD. Point number two, Dr. Pepper is Gen Z's most popular beverage brand, and we've rapidly been adding households within this cohort. If you are like myself, a student of our industry, you know that this type of trend is highly encouraging for longer-term consumption growth. And then finally, we have outsized growth opportunities in specific geographies. While we're currently approaching a 13% share nationally, however, in any given local market, we could be as high as the mid-20s in our heartlands or mid-single digits on the coast. What's really encouraging right now is we are growing share across all market types. In lower share markets, our innovation has been the most impactful in actually bringing new households into the trademark. And then final point, as good as the marketing has been on Brand Dr. Pepper, we honestly believe we can get even better. This year, we've begun to leverage some of our new capabilities in precision and personalized marketing. This is now allowing us to go reach target consumers with relevant content in a hyper-efficient approach. We'll speak a little bit more about that in a couple of minutes. So this playbook, we think it's a repeatable model that we can go apply to other parts of our portfolio. And let me just give you two quick examples of work in flight today. So Canada Dry, #1 ginger ale, a long track record of growth. Canada Dry plays in the relaxed man space. It also has a unique and ownable position. Here, we've seen innovation also play an important role. Back in 2024, we launched what we call our fruit splash platform. That year, it was recognized as the #1 CSD innovation. We're bringing the second flavor in for 2026. And much like brand Dr. Pepper, Canada Dry also has geographic opportunities. While it's a 3 share nationally, it's as high as a 12 share here in parts of the Northeast. And let's take a minute to talk about Mott's. Mott's, #1 apple juice and sauce brand, a staple for moms, incredible equity and health. Here, though, we still have potential for growth. Great example you see on the slide is in our sauce portfolio. Inserted formats like cup and jars, we're north of a 50% share, but we have been a relatively small player in the growing pouch segment. Over the past year, with a focused marketing and commercial activation plan specifically against pouch, we've been able to unlock significant growth. So I'll let you see on the right-hand side of the slide. You can see a host of other iconic brands within our portfolio that we think we can deploy the same playbook to unlock organic growth. For those of you, probably most of the audience here, local to New York City, you may have noticed Snapple has both a new campaign, and just last week, the return of its iconic glass packaging in five classic flavors, honoring the city where it was born and its five boroughs. So let me shift gears here. Another space I probably consume too much of, but we're excited about as a company, the energy category. Energy now, the third largest category in beverages, $28 billion. If you look at the standard data growing rapidly. What's really remarkable about energy is just how over the past two decades, this category has continued to reinvent itself. It's been able to leverage different product profiles, whether it be ingredients, caffeine amounts, serving sizes, brand positionings. The category has been able to continually unlock additional occasions and bring in new households. Right now, we're really seeing the latest iteration of this with the female-targeted product lines. Three years ago, we rounded honestly to a zero share in energy. We knew this was a big opportunity, so we set out to go create a portfolio to win where we saw the growth occurring, products with great taste, products that played in the zero sugar space, products that we could target against distinct demand spaces with unique authentic brands. Today, we believe we have a complementary portfolio of brands that can win within their respective segments, especially when you couple that with our commercial approach and our national distribution network. You'll see in your scanner data over the past four weeks, we've now surpassed the 7.5% share, and we have line of sight to our stated goal of the 10% share in the next few years. So aside from energy, we've also established platforms in several other high-growth categories over the past two years. Through our long-term distribution partnership with Electrolit, we now have a strong play in sports hydration. Specifically, we are the #1 player in the rapid hydration segment. This is a $2 billion segment that is growing at a blistering pace. This summer, we entered the prebiotic CSD space with Bloom Pop, building on Bloom's incredible success to date in energy. In its launch retailer, velocity per SKU was on par with the market leaders. We're really excited about Bloom Pop's potential, and we just began scaling this nationally at the end of Q3 through our DSD network. And then finally, earlier this summer, we had an acquisition, a company called Dyla brands, which has allowed us to go play in the drink mix space. Dyla is bringing both brands as well as capabilities. Additionally, it's going to let our broader portfolio to instantly access this high-growth and attractive functional powder segment. So a lot of effort has gone into building this portfolio. However, entering a category is one thing. The bigger question, can you effectively sustain the success? And you can see on the slide across a variety of time horizons in a spectrum of categories, how we have been able to significantly increase our market share relative to pre-KDP distribution. This reinforces that access to our network, it's more than distribution. It's our ability to step change the selling and activation for a brand all the way from the national buying desk down to the outlet level. So, part of the secret, whether it's successful innovation or some of the partnership scaling I just spoke about are some of the top-tier capabilities that we've been able to create in our marketing and commercial functions. I mentioned earlier with brand Dr. Pepper, my excitement around our new capabilities to go amplify what we already believe is world-class marketing. This is all grounded in new abilities to go leverage AI-powered data and analytics to go create a deeper understanding of the consumer. This helps us guide our innovation. It's helping us set brand strategy. And now it's also allowing us to create highly relevant personalized content and creative. Our marketing and communication platforms are increasingly connected across both channels and platforms. This is going to let us unlock precision media capabilities, allowing us to go target the individual and drive efficiency and effectiveness in how we fight our marketing investments. Right now, at KDP, we think we have access to the right data, the right systems and most importantly, the right talent, underpinned by an agile operating model to measure and react almost real time to ensure we're driving the best returns for our marketing investments. This fall, we started to go deploy this with our Fansville campaign. You're going to hear us talk a lot more about this in the future. And then an area that I've spent a great deal of my time helping to go build out is the middle part of the slide is what we call our commercial engine. So this is the function which really serves as the critical link between our brands and ultimately our routes to market. So inside the gears of the engine, you see some of the best-in-breed capabilities we've created. It could be omni marketing, revenue management, category management, how we show up with our customers. These are capabilities that allow us to effectively represent our products with our customers with a high degree of confidence in the ability to go create value. The advantage of us doing this well, so regardless of the brand owner or the route to market is we can create a seamless experience for our retailers, bring them meaningful commercial solutions that can fully take advantage of the breadth of what our portfolio has to offer. And then final point on the slide, we all know it, strong national distribution, absolutely critical to go win in beverages. Right now, we have six different options that we can go use and it really depends on what is the right fit for the product or what is the need of the retailer. So let me speak a bit more about those options. So I'll talk more about company-owned DSD. We have it both here in the U.S. and in Mexico. But we also are able to go leverage some leading bottlers that complement our company-owned DSD footprint in specific geographies. For some products, we still utilize the effect of warehouse direct model, particularly for categories that have lower velocities or where there's a real preference by the retailer for that mode. Fountain foodservice and on-premise, extremely important. These channels provide access to high-value away-from-home occasions. These are critical for building brands. Notable, brand Dr. Pepper is the most pervasively available fountain beverage. This allows us to go have direct relationships with most major operators and customers in the foodservice space. And finally, winning in e-com has become increasingly important. By our measures today, roughly one in eight cold beverages, the purchases are occurring in a digitally oriented means. And in many categories and retailers, it's providing over 100% of the growth. We are making the right investments to ensure we've got the specialized capabilities to effectively partner for growth, whether it's a pure play or our omnichannel retailers. So let's talk a bit more about DSD. Why does it matter so much for beverages? Well, when you get into it, great DSD execution is more than just a replenishment model. Done well is a powerful competitive advantage that allows you to build brands over time. DSD provides access to outlets that are not serviced by warehouse direct. Most of the convenience retail channel, most of on-premise cannot get there with that DSD. And even within retail channels, it allows a local selling associate to build a meaningful relationship with decision-makers at the outlet level. These relationships, coupled with the merchandising resources we provide can translate into a superior retail presence for our brands as well as getting you critical access to cold drink equipment and other means of trial. Scale is what makes a DSD system work. To generate the local brand-building benefits, there is significant labor and fixed costs. Scale drives a virtuous cycle that benefits from the leverage on that infrastructure and done well, it enables further reinvestment and growth. So let me orient you to our DSD network. These are the trucks that carry the majority of our portfolio. Again, we have one of only three systems that can cover the entirety of the U.S. footprint. Our company-owned trucks, they're depicted in the maroon on the slide. They cover roughly 80% of the population base. And for the balance of the country, we have long-standing strong strategic relationships with leading independent distributors who operate with scale in their own respective geographies. Look, I've had the chance over the past few years to spend a great deal of time with some of the 13,000 DSD employees that we have. When you get a chance to experience the passion these team members have for our brands, the expertise they bring to our customers every day, hitting almost 200,000 outlets, you can see firsthand why this is such a powerful competitive advantage. So we're really proud over the past six years of the work we've done to go strengthen our DSD network. Look, we're improving every day in terms of both the service, the capabilities that we're providing our retailers. So let me talk about each of these vectors, we'll start with territories. Since 2019, as Tim mentioned, we've made over 30 acquisitions, some relatively modest, a few rather large. What's universal though is where we made these investments, we've been very satisfied with the returns that they've generated. That said, there is not a one-size-fits-all model here. Our primary goal is to have a scaled and relevant DSD operation that puts the right focus on our brands, whether it's a partner or something we own, access is what is key. Let me shift the portfolio. One of the goals of our portfolio expansion has actually to go help us generate additional scale for our company-owned DSD operations, meaningful participation in categories like energy or sports hydration, they've had a material impact within specific channels. No better example than inside of convenience retail. Here, we've been able to improve our drop sizes close to 70% and in some instances, have had the opportunity to go revisit our service frequency to go map better to some of our customers' needs. Again, a great example of that virtuous flywheel I spoke about a moment ago and how it can strengthen our ability to go capture growth, particularly in C-stores, which is an extremely profitable space. So final point on the slide is going to reference some of our digital capabilities. These here are really focused on our frontline selling. We're rolling these out recently in the market, really pleased with the results. The one I'll highlight is our perfect daughter. This is an application that's leveraging algorithms based on outlet-specific data to help pre-generate the order for the next delivery. And just to bring this home, if you think about a big box store, generally a couple of hundred thousand square feet, we may have 250 different SKUs spread across that store that a sales associate is responsible for writing the next delivery order for. Where we've been able to deploy this application, we are seeing meaningful improvement in in-stock rates as well as a significant reduction in the time it takes spent on lower-value activities, and counting walking around the outlet. So with that additional time, we can enable these same individuals to shift their focus to local selling activities. Here, we're also implementing real-time access to outlet-specific data. We're starting to enable it with AI to help generate specific insights, that's going to help aid in their ability to work with the local customer decision-maker to unlock growth inside of that outlet. Extremely excited about where this is going to go. So shift gears a minute. Let's talk about Mexico. We also have a fast-growing profitable $1 billion-plus business in Mexico. Though it's at an earlier stage, we think the same model that has driven success in the U.S. also can be leveraged here. We have a leading brand. It starts with our flagship brand Peñafiel. If you are not familiar with Brand Peñafiel, is a 100-year-old locally sourced icon that is the #1 mineral water in Mexico. We're now seeing that brand have success moving into some adjacent spaces. We also believe some of our U.S. trademarks can play a much bigger role in the Mexican market, particularly Brand Dr. Pepper. Finally, like the U.S., we continue to make meaningful investments in expanding our DSD network. Much like the U.S., for Mexico, a critical enabler of brand development, particularly in a market where the traditional trade is still thriving. Today, our company-owned footprint, we reach about half of the marketplace. We cover population centers in the central and northern part of the country. All this together is why we feel great about our ability to generate strong returns from Mexico for many years to come. So spoken a lot about growth. I also want to emphasize, though, we are focused on the right kind of growth, growth that's going to allow us to go expand our margins over time. Pricing, critical lever. We are very well positioned to drive sustained net price realization across our major categories. Another key thing is our largest category, CSDs, we still believe has a very, very attractive price-to-value ratio, particularly when you compare that to other beverage options for purchase. Let's talk about mix management. We have very strong revenue management capabilities. Done well, we're able to go meet both some affordability requirements, but also identify different levers to improve our unit economics, whether it's through promotional optimization or package and product mix. I highlighted the virtuous cycle in convenience stores. The ability to continue to grow immediate consumption soft drink occasions as well as energy, these are really profitable levers to continue to go get great margin accretive mix in your portfolio. And then finally, I'll touch on productivity. We all know productivity, it supports reinvestment back into the brands, ideally can help expand margins. Annually, we target 3 to 4 points of productivity, and we've been able to consistently deliver in that range over the past few years. Specific focus areas where we have made and will continue to make investments are in our network, both within our manufacturing and our distribution facilities, we've got opportunities to further leverage automation and optimize our footprint. Digital, I spoke a lot about frontline a few moments ago. We also have digital initiatives in flight to help step change our demand and supply planning visibility across the vast network. And then finally, operating model. We're continuing to strengthen how we manage this productivity pipeline, increasingly driving accountability down to our local orbits. So when you bring it all together, Bev Co. has delivered consistent strong financial results. Since 2018, on a compounded annual basis, top line growth approaching 8%, EBITDA growth almost 12%. And look, we've achieved these outcomes through what I covered today, strong base business momentum and share gains, deliberate capital-efficient portfolio reshaping initiatives and targeted actions, which we were able to mitigate inflation and help us go reinvest back against the core tenets of our business. And we expect to sustain this momentum. That supports the algorithm you'll see up on the page, mid-single-digit net sales growth and high single-digit adjusted EPS growth. Additionally, we expect to generate significant free cash flow, which will, as Tim mentioned, provide optionality for us to either invest against organic or potentially inorganic additional growth levers. So a few points to reiterate as I close here. This is a powerful platform in a fantastic industry. Over the past six years, this team has proven its ability to consistently deliver attractive financial returns. We now head into the future. We're equipped with a fortified portfolio, the right brands, the exposure to high-growth demand spaces, which we believe can meet our growth goals organically. Additionally, we're poised to benefit from a step change in our new digitally enabled marketing capabilities. We have a model against our portfolio that creates optionality against how we can add to the portfolio in a very capital-efficient manner. We are strengthening our network, and we're going to continue to recognize the benefits of improved execution. These improvements will drive growth in margin-accretive categories, packages and channels. And then finally, we have demonstrated the ability to unlock meaningful productivity, and we believe we have a robust pipeline of opportunities to come. So as you assess some of these efforts, I think now, hopefully, you can understand why I have so much confidence in this team. And as we head into the next chapter for Bev Co., confidence about our future and our ability to go deliver this very attractive algorithm we have up on the page. Thank you guys so much for your attention this morning. I'm now going to turn the podium over to Jane. Jane Gelfand: [Audio Gap] Each independent company remain the same as we outlined in August. For Beverage Co., that includes an outlook of mid-single-digit net sales growth and high single-digit adjusted EPS growth. And for Global Coffee Co, we envision an outlook and long-term targets consistent with low single-digit net sales growth and high single-digit EPS growth. These will be strongly cash flow generative businesses with Bev Co. projected to generate over $6 billion of cash flow -- free cash flow over the next three years and Global Coffee Co. set to produce more than $5 billion. While the exact dividend at each company will be determined closer to separation, what we can commit to you today is that across the two, we'll maintain the level of our current dividend to start. And we also come to you today with a clear view of starting net leverage for each stand-alone company. Upon separation, we expect Beverage Co. to have net leverage between 3.5x and 4x, with Global Coffee Co targeted between 3.75x and 4.25x. Of course, both companies will continue to delever and strengthen their balance sheets following the separation as we keep to a commitment to strong investment-grade profile. Let's zoom in on each company in a little bit more detail, and this will build on the remarks of my colleagues. For Beverage Co., the financial algorithm and capital structure that we've laid out are carefully designed to enable its growth potential, its growth strategy and continued outperformance. As you just heard from Eric, our Refreshment Beverages business has already proven itself to be an agile challenger in North American beverages, and we fully intend to build on this standing with long-term targets that reflect that. Multiple factors are expected to contribute to mid-single-digit net sales growth. Over the last several years, we have worked really hard to evolve our portfolio mix towards a faster-growing weighted category average, which now features a well-balanced set of volume, mix and price drivers. On top of that, we layer a proven track record of market share gains supported by strong innovation and commercial capabilities. And in addition, our ability to enter white spaces and activate capital-efficient partnerships now and in the future, they're attacked, which means further growth optionality as we move through this period of integration and then afterwards during -- after the separation. So combined with operating margin upside and some below-the-line leverage, what becomes clear is the path to high single-digit EPS growth for the Beverage Co. And to facilitate this, we expect the capital structure at separation will be only modestly above where KDP's would have been prior to the deal with cash flow to delever quickly thereafter. Separately, we will optimize Global Coffee Co. for more resilient growth and strong cash flows. What that means is our vision remains to create a pure-play cash-generative global coffee company. How does that manifest financially? A combination of low single-digit net sales growth over time with some volatility up and down over the course of commodity cycles due to pricing pass-through dynamics and high single-digit EPS growth, thanks to a combination of actionable cost synergies, continuous productivity and below-the-line leverage. This combination should drive more steadily growing cash flow with upward potential should the coffee price normalize from here. And for Global Coffee Co. too, what we want is a balanced capital structure out of the gate, which means net leverage likely between 3.75x and 4.25x at separation. So you now kind of better understand the financial vision, and I'd like to shift the discussion to how we get there. Over the last several weeks, we set out to optimize our acquisition financing mix with two objectives. The first was to lower leverage at acquisition close. And the second was to establish a clear line of sight to solid capital structures for each of the individual separated companies. That process successfully culminated in today's announcement of a combined $7 billion strategic equity investment anchored by two leading global investment firms, Apollo and KKR. I would highlight several benefits to the revised financing package. One, we will, in fact, reinforce our investment-grade profile as a combined company with net leverage at close now approximately a turn lower than our original plan entailed. Secondly, we will have greater visibility to investment-grade worthy capital structures for each independent company akin to what I just described. And even though the new capital is equity-like, it comes with a reasonable cost while pairing us up with world-class investors who see the strength of the opportunity at KDP and its successor companies. All in, against the backdrop of more comfortable leverage and attractive year-one EPS accretion of approximately 10%, we hope this update will allow the strategic logic and value of the deal to take center stage in your evaluation. I'll take a closer look at the structure of the deal. Under our previously announced plan, assuming a June 2026 close, net leverage at 2026 year-end was projected in the low 5s. What that meant was a starting point at close that would have been at approximately 5.6x. After today, we expect initial leverage at close to be in the mid-4s. And from there, we plan to delever at roughly 0.5 turn a year, thanks to a strong focus on cash flow. The new investments will allow us to replace the full balance of junior subordinated notes and a smaller portion of senior debt that were originally intended to be part of the financing package. And all in, the weighted average cost of capital of the deal is expected to be only modestly higher than original plan. The new instruments we've stood up take two forms. Let's start with the creation of a new Global Coffee Co. joint venture with a consortium of investors led by Apollo and KKR. The JV will focus on single-serve manufacturing in North America with the earnings from pod manufacturing to be split among the partners, including KDP. In fact, KDP will retain a controlling interest in the JV as well as operational control of the assets. And in establishing the JV, we'll receive $4 billion in total proceeds at a cost of capital of just above 7% in a 7.3% to 7.4% range, an addition projected. In addition, KKR and Apollo have made a strategic investment into KDP and ultimately, the Beverage Co., yielding $3 billion of incremental capital. The second instrument is an attractively priced convertible security. It features a preferred dividend of 4.75% to be netted against any common dividends and the conversion price is $37.25. That's a 6% premium to where KDP last traded prior to the announcement of the acquisition, an outcome that speaks to the upside potential we all see here. I should mention that we plan to offer our shareholder partners an opportunity to participate in this financing. To help with your modeling, you'll find a page in the appendix that outlines the accounting implications of each instrument. And when you run your models, what you'll see is that we've been able to effectively drive leverage lower while making a manageable trade-off in terms of accretion and cost of capital. Based on your feedback, which informed our decisions over the last several weeks, we believe this is a more optimal balance to strike. As Tim said, ensuring solid balance sheet for each company is one of the critical milestones towards a successful separation, and we expect to be operationally ready to go by year-end 2026. In the meantime, our job will be to focus on EBITDA growth and cash flow generation to facilitate that time line. However, should we want to further accelerate the deleveraging path, there are other levers that we could employ to raise additional capital. For instance, we might consider monetizing select noncore minority stakes and nonstrategic brand assets. And we may also evaluate a partial IPO of Beverage Co. to begin the separation process, which could raise additional primary proceeds. To be clear, these are simply options for us to consider. The only concrete commitment on this page and on this stage is the strong free cash flow generation to support our transformational vision of the future. And speaking of commitments, we recognize we have come to you with quite a bit of news today, and we're focused on supporting your full understanding. So of all the messages I hope you'll take away from my presentation, it's the following: we will ensure an appropriate capital structure for KDP at transaction close as well as each individual company at separation and beyond. Our focus is on strong cash flow to support deleveraging as well as maintaining our competitive and attractive dividend. Through all of this, our unwavering goal is to set Beverage Co. and Global Coffee Co. up for financial success and operational success. And as we do so, we will stay consistent and transparent in our financial communications to help build and maintain your confidence. With that, thank you very much, and I'll pass it on to Roger Johnson. Roger Johnson: Good. Okay. My name is Roger Johnson, and I have the privilege of being the Chief Transformation Officer and Chief Supply Chain Officer here at Keurig Dr. Pepper. And in my capacity of Chief Transformation Officer, I am responsible for the integration of JDE Peet's into KDP and then the subsequent separation into Global Coffee Company and beverage company. So I'd like to take a few minutes today to just walk through our approach and the execution of the transformation and maybe give you some more details of how we're approaching the work in front of us. First off, we are genuinely excited about the opportunities ahead for both stand-alone companies. And as Bob and Tim mentioned earlier, we have strong support and oversight from our Board of Directors and the specially created transaction committee. To guide this transformation, we've established an executive steering committee that meets weekly to provide critical oversight and timely strategic direction. We've also added rigor through a transformation management office or our TMO, which is focused on capturing synergies and driving growth opportunities. To keep everyone focused, we've named a dedicated internal TMO team to lead these initiatives, allowing most of our teams to continue driving base business momentum. This process is fostering strong communication between JDE Peet's and KDP leadership as well as our both internal functional experts. And to ensure success, we've partnered with outside advisers who bring deep experience in integrations and complex transactions, and they are long-standing relationships, both for us and JDE Peet's, which means we can leverage their detailed knowledge of our collective businesses and their proven expertise from hundreds of similar processes across industries worldwide. Let me add some more context in the scope of our transformation management office. We fully stood up critical work streams focused on objectives of integration planning, future company designs, separation, synergy value capture and spin readiness. For both Global Coffee Company and beverage company, these efforts have been mobilized in collaborative but discrete work streams. We've organized these objectives into three primary focus areas for execution. First and foremost, change management. We're engaging the hearts and minds of our organizations, showcasing future opportunities and creating that winning culture as we move towards stand-alone success. In commercial and supply chain, we're leveraging this unique moment to optimize and unlock growth and the potential across marketing, selling organizations and key go-to-market opportunities. And then finally, for enterprise functions, we are focused on building fit-for-purpose teams calibrated to each company's unique needs and scale, ensuring both organizations have the strength and agility to succeed. As we fully mobilize the TMO, I've seen fantastic collaboration across our teams in these early days. It's really inspiring to watch our leaders really lean in to the road ahead. Together, we've shifted into the next gear and planning against key milestones. First of all, I'd say we're focused on integration planning following the acquisition close with detailed action plans to capture synergies. And we're also accelerating readiness work, developing future company operating models for both global coffee company and beverage company and getting into the functional-specific preparation required for success. Secondly, we're deep into separation planning to ensure clean operational readiness for two world-class public companies. Our goal is to be ready to separate by year-end 2026. And that means everything within our control will be stood up and ready by then. As Tim mentioned earlier, the actual timing will depend on achievement of multiple milestones, including our own. But our commitment is clear, secure operational readiness as early and as robustly as possible while actively capturing cost synergies. And our goal is clear to build a global coffee powerhouse and the most agile North American beverage leader. This transformation approach will make that vision a reality. To make sure both stand-alone organizations reach their full potential, we placed a heavy focus on communications and change management. Recently, we had the chance to spend meaningful time with the JDE Peet's team on International Coffee Day, very fitting. And it was a fantastic event in Amsterdam, where we shared our vision, answered questions and amplified the excitement across both teams. The shared love of coffee brought the teams together and really gave everyone, including myself, a glimpse of what a true coffee powerhouse could feel like. At the same time, we launched aligned communications approaches, high-frequency town halls, feedback loops, multichannel digital outreach, both internally and externally. And this really ensures we're reaching every employee and engaging top leadership, including our director and above populations. For many, this is the first time in their careers, they've experienced a transformation of this scale and enrolling them in the journey is an exciting opportunity. To reinforce collaboration, we've shared clear guiding principles and leadership commitments on how we will work together for the outstanding outcomes we expect. We believe a consistent drumbeat of communication is critical to a seamless integration and eventual separation without missing a beat. So far, employee feedback has been very positive, especially around leadership transparency, communication depth and the opportunities ahead of us. And I can tell you firsthand from Amsterdam, Frisco, Burlington, all over, our colleagues are energized about the future potential of these two great companies. As mentioned earlier, our Coffee company value capture plan, about $400 million is well underway with opportunities across procurement, manufacturing and SG&A and IT. This target has been validated through both top-down and detailed bottoms-up planning, and we see it as highly actionable. As Tim highlighted, these efficiencies are balanced across the three major buckets of procurement, manufacturing and logistics, SG&A and IT. And ahead of close, we've established clean teams to ensure that work can happen outside the day-to-day business so we can move quickly once the acquisition closes. Immediately after close, we'll activate each functional focus area to deliver on our three-year synergy capture plan. And we're confident these cost synergies, combined with future growth opportunities will set Global Coffee Company up for long-term success. And our job is to do the same for beverage company, minimizing dis-synergies before and after separation. We expect that impact to be approximately $75 million, and we largely plan to offset it. That means we got to redesign organizations and spend structures with agility in mind, keeping any leakage manageable within the beverage company's overall P&L. I hope you can see and feel my excitement and confidence in our ability to land the right structure, build two successful companies and create value for everyone throughout this transformation. So thank you for your time and engagement. And I'm going to turn it over back to Tim to give a Q3 earnings update. Thank you. Timothy Cofer: We are coming down the home stretch. Thank you, Roger. Look, one of the main objectives, obviously, in establishing that TMO is not only to do the hard work around separation -- integration separation, but importantly, to minimize the disruption of that activity so that our core teams can focus and deliver on the base business quarter after quarter. And I think our Q3 results that you've probably already seen in the press release are a testament to this approach. We continue to operate with focus, with discipline. We delivered another strong quarter here in Q3, even with that tough macroeconomic backdrop. So let me share some highlights on the quarter. Net sales accelerated in Q3. They accelerated sequentially, they increased at a double-digit rate with strengthening performance across all three of our reported segments. We gained market share in key categories like CSDs and energy. We successfully implemented another round of pricing on our coffee business. And in international, we drove healthy relative trends among challenging macro conditions. So as you've heard throughout the morning, we are advancing a lot of exciting initiatives right now at KDP across both Refreshment Beverage and coffee. And these are, as evidenced in the results, really contributing to this near-term performance and I think continued momentum. Having said that, as expected, inflationary pressures ramped during Q3. And even despite this, we delivered solid bottom line growth and generated meaningful cash flow in the third quarter. So with one quarter remaining in the year, as you've heard, we are raising our constant currency net sales outlook and reaffirming our EPS growth guidance. We're confident that our robust commercial plans, our innovation plans, our operating rigor will help us achieve these updated targets and finish 2025 on a strong note. So let's move to the consolidated results. You see it on this slide. Net sales specifically grew 10.6%, led by about a 6.5% increase in volume mix with strong results in U.S. ref bev and international. The GHOST integration continues to perform very well. It's meeting all of our key metrics that we set out and delivering on year-one of our investment thesis. It's contributed 4.4 points to the top line. Net price increased 4.2% primarily, that's reflecting the pricing actions we took on our coffee business. in response to obviously, sea price inflation. On the bottom line, operating income increased roughly 4% net sales growth, productivity savings were partially offset by that inflationary pressure I referenced. All in, EPS grew 6% to $0.54, and that included a modest below-the-line benefit from a minority partnership gain. Okay. Let's do a quick tour of the three reported segments, starting with Refreshment Beverage. We maintained what I characterize as exceptional momentum on this business with net sales growing 14.5%, driven by volume/mix increase of over 11% Net price was also a driver. It added about 3 points to net sales. GHOST clearly was a strong contributor to our growth, but also our base business. In fact, our base business accelerated in Q3, increasing in the high single digits, led by CSDs, energy, sports hydration. Overall, the segment results in ref bev were prepared by that growth playbook that Eric took you through just a few minutes ago, brand building, innovation, commercial execution, each contributing to the strong performance you see. And we see significant runway for future growth in ref bev, and we have strong plans in place going into '26 to ensure we deliver on that momentum. What about segment operating income? You see it grew 10% with net sales gains and ongoing productivity savings more than offsetting the impacts of inflation as well as lapping earned equity gains that were larger in the prior year. Let's shift to U.S. Coffee. In U.S. Coffee, we continued our recovery trend. We drove modest growth in both the top and bottom line. Net sales increased 1.5%. Net price realization was 5.5% as we implemented additional pricing actions on our pods business and our brewers business in response to inflation. This was obviously partially offset by a volume mix decline of about 4 points, primarily driven by lower brewer shipments. And I will tell you, during the quarter, retailers are continuing to manage brewer inventory very tightly, and there's some adjustment to the recent price increases by consumers. Pod shipments also declined, but more modestly and the elasticities are remaining quite manageable and within our overall expectation. Overall, the coffee category remains resilient in our view relative to the significant increase in input costs, and we're also seeing improvements in our own business. Admittedly, the commodity backdrop is difficult and price overall is driving our top line. Olivier told you earlier, we're actively advancing robust innovation plans. He covered many of them, marketing plans, driving more brewer sales, some exciting news going into '26 with Keurig Coffee Collective and beyond. And overall, we would say, while pod shipments declined, we feel good about what we're seeing from an elasticity standpoint. Let's talk about segment operating income. It grew about 2.5% with pricing and cost savings more than offsetting inflationary pressures. We're improved by -- we're -- sorry, we're encouraged by the improved trajectory on the bottom line, but we do expect impact from green coffee inflation and tariffs to build into the fourth quarter. All right. Now international. Net sales grew 10% in constant currency. That's a 6% increase in net price, a 4% increase in volume mix. Results reflected strong relative performance in Mexico despite what you know are widely reported macro challenges as well as the pricing-led growth in our Canadian coffee business. International operating income declined about 4%, primarily reflecting the impact of inflationary pressures as well as a tough year ago comparison. This was partially offset by the strong top line growth that I referenced in productivity savings. Overall, in international, I would tell you, we continue to see significant potential for this segment to have outsized top and bottom line contribution over time. These Q3 results also underscored the cash generative nature of our business. Free cash flow was more than $500 million in the quarter, bringing that year-to-date total to $955 million. But importantly, and you see it in this box, this year-to-date figure includes the unfavorable onetime impact of the $225 million GHOST distribution payment that we made in Q1 as we acquired this business and took over distribution. Obviously, excluding the impact of this one-timer, we would have generated more than $1.1 billion in free cash flow on a year-to-date basis, representing obviously a sizable step-up from last year. Looking ahead, you've heard us say it, and Jane mentioned it, we expect strong cash generation, both in Q4, obviously, on a full year basis and in the years to come, which will help support those deleveraging goals that Jane shared with you earlier. All right. Let's move to guidance. Three quarters of the year behind us, we are raising our constant currency net sales outlook to high single digit from mid-single digit previously. We're also reaffirming and remain on track to deliver HSD EPS growth guidance. We recognize that the environment remains dynamic, especially when you think about tariffs, the building inflationary impacts, but we've got the innovation. We've got the commercial plans. We've got execution in a great place as well as disciplined expense management and all of that for us means we can continue to deliver on our guidance and for our shareholders. All right. Let's wrap this up, and then we'll go to a break before Q&A. So we've reviewed the strong Q3 results. I want to now come back to the four questions I put up right when I took the stage this morning. And I think over the last couple of hours, I hope you'd agree, we provided meaningful updates and further details on our transformative value creation plans. Let's go back to these four questions. First, why the acquisition? Because after careful consideration, we concluded that the acquisition of JD Peet's is a unique opportunity to strengthen our coffee business by adding substantial complementary global scale. This combination will catalyze meaningful revenue opportunities, cost synergies and in turn, drive strong financial delivery and sustainable competitive advantage. Second question, why separate it all? You have the option to run it as a combined company? Because we believe in the power of focus. We believe strong and distinct cultural identities at Global Coffee Co. and Beverage Co. can create even greater alignment and more purposeful action. And we believe that strategic optionality should be more available and accessible to each business as a stand-alone. Third question, how do we tailor our capital structures to enable these outcomes by making revisions. We've solved for a more comfortable leverage at acquisition close with a different and attractive financing mix. And we've enhanced visibility to two properly calibrated balance sheets for each of these independent companies. And finally, how do we ensure success, by focusing on milestones rather than dates, by putting the right processes in place to achieve those milestones and by appointing the right leaders with the right experience to drive towards those goals. All right. Let me wrap it up by stating the obvious, and it's on this slide. We are truly just getting started. The market reaction after August 25 was not what we hoped for. But I can tell you the reaction from our other stakeholders, including commercial partners, customers, KDP employees and future colleagues at JDE Peet's have all been strongly positive. We've given folks a very inspiring destination and they're ready to go. We're excited about this future transformation as well. But I also want to be clear, we're not in a rush. We are making a big bet because we see enormous potential. And we're going to be highly deliberate in how we go about unlocking it. I hope you sense that after today. Our management team, our Board of Directors see a tremendous amount of value creation opportunity from this two-step transaction, and we will not rest until we get that done. So as you heard today, this was a slide Bob started with. We do have a consistent and proven track record of creating value in beverages. We create vibrant businesses through a playbook that works. We have deep insights that underpin our conviction in this deal, and we have a clear plan to deliver on its promise. At the same time, we're listening and we are adjusting as and when needed. And this leadership team has the confidence, it has the experience to successfully carry out this transaction. But we also have the wisdom, we have the willingness to stay flexible in our approach. Again, I hope you've seen that today, and you will continue to see that as we chart our course to establishing North America's most agile beverage challenger and a true global coffee powerhouse. Thank you for your time. Those of you that are here with us at NASDAQ, we're going to take a break before we come back for Q&A. I again encourage you to take full advantage of these fabulous beverage stations. And those that are joining verbally, we are going to -- or sorry, virtually, we are going to come back at 12:15 East Time. Thank you very much. [Break] Operator: Ladies and gentlemen, please welcome members of Keurig Dr. Pepper's Board of Directors and management team to the stage. Chethan Mallela: Thank you. I hope you enjoyed that break. We're able to try some of our great beverages. I will now move to a Q&A session with the panel. So we're happy to take your questions. Dara? Timothy Cofer: Dara, right here in the front row, okay. Dara Mohsenian: So, Tim, it's been a couple of months now since you announced the transaction. Just can you give us an update as you've done more detailed work and look more under the hood at any incremental opportunities as you see it on the JDE side as you've looked at the business the last couple of months? And specifically on the cost synergy side, potential maybe for upside there, level of visibility that you can deliver the savings you outlined? And then just secondly, on the base KDP business today, can you just give us an update on the tariff situation, what's embedded in '26 guidance, how we should think about incrementality in '27, but also really wanted to understand how you're managing pricing on both the coffee side as well as the CSD side, given what we're seeing with tariffs and the volatility there. Timothy Cofer: Yes. Thanks, Dara. I'll start. And Roger, I might kick it to you on cost synergies and then I come back on the tariff and cost outlook. Look, over the last eight weeks, as I said, I've spent a lot of time with our colleagues at JDE Peet's multiple trips into Amsterdam, et cetera. You can imagine we did a great deal of due diligence prior to announcing this acquisition. But at some point, that's kind of public company due diligence. So now being able to really get underneath the hood, meet the leadership team, review things like brand plans, early thoughts on innovation and so on. What I'm seeing is, number one, this is a good business. These are good bones, the brands, the positions, et cetera. And you saw a lot of supporting evidence on stage earlier today. I think the other is improved confidence in our synergies, both on a revenue basis in terms of the growth opportunities everything from what we can do on the brewer side, one of many towering strengths of legacy Keurig is our brewer know-how, our brewer innovation, our brewer cost structure and our brewer economics. And having seen the other side brewers and having run one of those businesses in my past life, I think there's real benefits there. I think a lot of the -- take Keurig legacy brands, think of Green Mountain and The Donut Shop and take it across all formats now in a more profitable way, that's an opportunity for us. Then we start talking about things like Alta, et cetera. So I'm -- the more that I learn, the more excited I am on the base business itself, the early stages of the reignite the amazing strategy that, that team is embarking upon as well as the synergies. You want to talk a little more on cost, Roger? Roger Johnson: Yes. So in the remarks that I had, we talked about from a cost side, procurement, manufacturing, logistics and SG&A and IT. And after the diligence work concluded, kind of had a chance to dive in deeper and really start to underpin that, right, learn more about the reignite the amazing and then see what's complementary. And I'd echo what Tim said around maybe more obvious things, brewers or otherwise. But then things about manufacturing footprint, routes to market and associated IT systems that I would -- I have confidence as we're building out the plans as best we can as two separate companies that I'm confident in it. And then we'll get into the clean rooms a little more detail over the next couple of weeks to substantially underpin those more. Timothy Cofer: And then on tariff, lastly and then next, Kevin, looks like is -- look, first of all, unique to U.S., right? So it's not a global impact here for the others. No doubt that cost pressure is a back half '25, early '26 phenomenon. So that pressure will continue into that. As part of your phrasing the question, what's built into '26 guidance, there is no '26 guidance. That's not the purpose of today. You guys know we have an algorithm. That's an algorithm that we feel strongly about. But today is not the day for '26 guidance. I will tell you, cost pressure will continue to mount in Q4 and carry over into the front half of next year. Kevin Grundy: Great. Kevin Grundy, BNP Paribas. Two questions, just kind of taking a step back. Strategically with respect to the deal, maybe just spend a moment on the structure of the deal and why the Board believed it made more sense than potentially a spin or sale of the coffee business. where you still get sort of the strategic focus that, that sort of transaction would lend itself to? And then relatedly, what learnings does the Board take from this and the market reaction in terms of the way you think about capital allocation, communication with your large shareholders and things of that nature? I'd appreciate your thoughts. Robert Gamgort: Okay. I'll start off on there. Yes. I think -- I mean, Kevin, I think we were incredibly transparent in one of the slides that Tim had today that said we contemplated all potential alternatives, status quo, selling, spinning and then this combination here. And we analyzed each one of those and looked at the potential value creation from that. The problem with selling it is that you need a party on the other side who's willing to buy it and buy it at a price that you think is fair. And this is a really large asset. Spinning it off on its own does nothing. It weakens the business. It's -- I talked about before about creating a scale player on a global basis. Spinning off Keurig on its own is one that we thought would have destroyed value, and we would have lost a lot of the synergies and the scale that we get as a combined company. Theoretically, to one of the questions, I think we were talking at a break that you could spin it and then merge it at some point in time. Well, that's an unknown. You're not actually not allowed to spin it tax-free and have a prenegotiated deal, so we couldn't do that. And then you're left with a lot of uncertainty. And some of these spin, sale conversations are because there are a group of investors, and I understand it, who think that coffee is a problem. They don't like the coffee business. We actually do like the coffee business. And we, as a Board, are responsible for creating value across our portfolio. So separating it so that people could come in and buy the refreshment beverage business and then let the coffee business language out there is not the Board's responsibility. And so when we took a look at all of the possibilities, we firmly believe, and you see that today, that the combination of KDP's coffee business anchored by Keurig and JDE Peet's is a perfect match. These are complementary businesses that create a real global leader in coffee. And this was the way that we chose to get there. I don't know, Pam, to take the second part in terms of lessons from the Board or build on that one before I take this over too much. Pamela Patsley: No, that's okay. I'll take the easy part. We did learn a lot. And otherwise, we wouldn't be here again today. almost just two months after some of us spoke to you all the first time. And I think taking time and we did have a lot of outside advisers, as you would expect, all summer long, spring, summer. We solicited other input, other advisers. And certainly, everyone in this room also was listened to and was heard. And so I think I'm not sure there'll ever be another one of just this thing again. But so that part is definitely a learning. I will emphasize what Bob said that -- and you heard it both from Bob and Tim in the more formal remarks that we did consider a lot of alternatives. And along that way, because we've heard feedback about JAB and question marks about that, when we were doing some of that strategic analysis, survey of the market, survey of alternatives, whenever it involved JDE Pets or something, we had a separate committee of the Board of disinterested and independent directors. So that feedback and survey part of the market always went to just that group. So I feel very good about our governance, our rigor around governance and our respect of independence and competing interest. I think we've done a very good job. But there's no question, maybe just taking our time a little bit would -- slowing a few decisions down would be the biggest takeaway in terms of learnings. I hope that was helpful. Christopher Carey: Chris Carey, Wells Fargo. Two questions, please. First, on the free cash flow outlook, 2026 to 2028. Is this a view on free cash flow conversion? Or are you implicitly giving any expectations for net income growth in that time frame? I'm conscious that the algorithms that you've laid out today are longer term, but are you also underwriting high single digits over 2026 to 2028 for those two businesses from an earnings growth perspective. So perhaps you can give any context on that. I mean, obviously, we've gotten concrete expectations for 2026 to 2028 free cash flow. That's why I'm kind of testing that. The second thing would be, in what backdrops would you tap into these additional financing paths, if you will, right, beverage IPO, selling of minority stakes, green coffee inflation is going to carry into the front half of next year. Potentially that has EBITDA risks, okay, if EBITDA comes in a bit lower, now we finance -- or we tap into these financings. What are the thresholds by which those become near-term realities, so the free cash flow and then the financing? Timothy Cofer: I think most of you in this room know Jane and know her well. She's our Head of IR and CFO International. But in addition, over the last few months, Jane has jumped into an expanded role as SVP of Strategic Finance and Capital Markets. And Jane, you're well placed to answer Chris' two questions. Jane Gelfand: Thanks for teeing me up the questions, Chris. So first on free cash flow. What -- our goal and objective for today is to give you more clarity, more data points against which to plan and model and just understand better what we mean by the vision for Beverage Co. and Global Coffee Co. In doing so, we thought it would be prudent to give you a view of what we think the cash generation potential of each of those businesses is over the next several years rather than pinning you down to any particular year. And so what I would interpret the over $6 billion for Bev Co. and over $5 billion for Global Coffee Co. in free cash flow generation to be is truly a three-year view, and we will unpack that as we go forward, as we give you more perspective on 2026 specifically. But I think what you're hearing us do is try and give you a view as we operate as a combined company into each of the pieces because we know ultimately, that will be what you are -- we're all marching towards. Then anyone else want to chime in on alternatives. Otherwise, I'll take it. So look, what we've done here over the last several weeks is take a fresh look at the financing, right, and make sure that we're solving for the things that we know are important for the company and for shareholders, which is a balance sheet that is solid and visibility to balance sheets that are appropriate for the individual pieces. I think we've done that very successfully today, moving your point of view from 5.6x to 4.6x at transaction close, assuming June 2026. You also have a view of what the deleveraging potential is of the business, right, at about 0.5 turn a year. So very quickly, you see that particularly with a muscle that we already have proven over time around emphasizing cash flow generation, we can get to a blended point for net leverage that gives us real visibility to that separation. Now businesses naturally are variable, markets are variable, conditions change. And so what you should expect us to do is to evaluate all of our options, right? To build on what Pam said, like the lesson is you got to be flexible. You know where you're marching. You got to get there in a value-maximizing way. And what you're hearing from us is that there is a set of potential options and levers we could pursue, but we will only pursue those if we believe they unlock maximum value and better outcomes for the business. Chethan Mallela: Andrea? Andrea Teixeira: So, Andrea Teixeira, JPMorgan. So my question is on the synergies. I understand that the $400 million is on top of the EUR 500 million from the JDEP, and we have the details for the JDEP. Obviously, there is a lot of kind of optimization of the brands and facilities as well. So I was hoping to see out of that $400 million, I understand, Tim, you said a lot of this is SG&A. But thinking of like how the hedging of the commodities and procurement can be with to all of these. And then I understand JDEP has a very strong capability for hedging. So thinking of how that can be linked and how conservative were you setting that guidance of $400 million and how to think as investors? Timothy Cofer: Thanks, Andrea. Let's -- first, I want to just clarify the baseline here, and then I'll ask Roger to build from his unique position, both as Head of Supply Chain and Procurement and Chief Transformation Officer. For clarity to Andrea's question, the JDE Peet's cost-out program is EUR 500 million over seven years, half of which will be reinvested in the business. The acquisition integration synergies are $400 million over three years as a result of the combination. And we have spent a great deal of time leading up to the acquisition announcement first at a high level. And in the last eight weeks at a far more detailed level as we've kicked off this transformation management office and with external advisers as well who have worked with both our company and JDE Peet's company to comfort ourselves that those two numbers over those two time frames are incremental. Roger, what else would you say on Andreas, double-click? Roger Johnson: Yes. So from a building the -- to the extent we can, right, understanding the -- each of the programs, right, and independent programs, I think we've arrived at a good place where we have confidence in the underpinnings. We always preserve the right to get smarter, but one of the principles we have is best of both, right? And really bringing that to light as we're really underpinning the plans. Again, the next step is to get into the clean room and understand detailed policies and what have you. The coffee market is a fairly efficient market on its own. And I think there's other opportunities there as we look at the capabilities, whether it's technology, whether it's development or what have you, to really bring some flexibility to unlock further places to look, specifically around coffee formulation and what have you. And so I'm looking forward to the next couple of weeks of getting into that. I'll be in Amsterdam next week to start that process of going into the next click of it. But to date, what we've seen is underpinning the numbers in a way that we feel confident, and we reserve the right to accelerate that more and drive where we see opportunities. We know we have to phase it. We know we have to make choices, right? We can't do everything all at once. But sitting here today, I have confidence in that number. And then as we learn more about policies and how to action those numbers, we'll come back to you with the schedules after we build them. Chethan Mallela: Peter Grom, and then Filippo. Peter Grom: Peter Grom from UBS. So, two coffee questions, just maybe a follow-up on that. So the long-term algorithm of low single-digit top line growth into high single-digit EPS growth. Is that inclusive of the synergies? Or are there other factors that drive that degree of operating leverage? And then just on the business itself, so just ball mix for coffee this quarter, it didn't really change that much sequentially despite pricing stepping higher. So how much of that is actually the mix component versus shipments actually holding stable? And then just on elasticities, how are you thinking about that through the balance of the year? Timothy Cofer: Yes. I can start. I think the first answer is inclusive. Obviously, that's near term. That's a long-term algorithm. -- near term, that's an enabler for that. On the coffee quarter, the second question, do you want to take that, Jane, Olivier? Jane Gelfand: I'll start, Olivier, if you want to add. I had a conversation with some of you offline about, hey, what gives you confidence in the coffee category recovery. And I think if you zoom out, right, we've had a couple of years now of sequential volume improvement. We're not where we expect to be longer term. But this year and the year-to-date experience, I think, would be very supportive of this trend, right? There is record pricing in the market because we have record sea prices. And yet despite that, what we are seeing is very manageable elasticity. So to answer your question specifically, Peter, you did see some volume trade-off as more pricing was enacted in the market. At the same time, you had favorable mix. within that sort of U.S. coffee segment. I will say that pods are quite resilient. You are seeing more elasticity on the brewers, but that would have been expected. Chethan Mallela: Filippo, go ahead. Filippo Falorni: Filippo Falorni, Citi. So going back to the coffee category more long term. Bob and Tim, you talked both about the attractiveness of the category. Maybe can you expand a little bit more on the rationale of the deal? Why was coffee the best category to double down compared to maybe some of the fastest growth categories within beverages? And even from a long-term standpoint, like we've seen some of the categories taking some share in terms of caffeine consumption like energy drinks. So what gives you the confidence that, that 2% 40-year CAGR is still kind of the right trajectory? Robert Gamgort: Given that I've been around for 40 years, I'll start with the last one. I seem to be an expert on that, and then Tim can talk about the piece about the second -- the first part of the question. So I'm going to go back to 1985 in that case study. You know what the case study was, how do you fix the coffee category given that everyone at below a certain age is switching to diet Coke. That was the case that was on campus in 1985. And so the point is there are always the short-term trends where categories are challenged by new formats, new varieties. But that's why it's always important, I think, in CPG to step back and take a long-term view. And I could give you 25 examples of short-term trends that never panned out. What's really interesting about coffee and the reason that it is so powerful over the long term is what Tim said in his section. There's an emotional element to it. There's a premiumization element to it. There's a comfort element to it. And also, it is one of the few food and beverage products I have worked on in my 40-year career where it is deemed healthy. Other than water, I haven't worked on one that the government wasn't trying to limit some version of consumption. And so this is a rare situation where it's energy and it has all the other attributes, and it has a health tailwind to it. And that's why there is no suggestion over the long term that it's going to change. And all of the diagnostics that we were doing, even post-COVID when it was slowing down, there's nothing negative we could find about coffee. If you do some analysis, you'll always find something on the fringe. If you did in 1985, you would have saw the diet Coke coming in was replacing some of the occasions for a period of time. You see the same thing now to a degree on energy, but we have 0 belief that, that is something that is a long-term structural change in the category. Timothy Cofer: You said it well. Chethan Mallela: Okay. Rob? Robert Moskow: Rob Moskow, TD Cowen. I wanted to know about the high single-digit EPS growth target for coffee. There's a lot of leverage there implied because the net sales target is only low single digit. And what gives you confidence that there's enough leverage to bridge those two? And if I could also come back to your 40 years of experience, the volume growth, I know it's in the USDA chart, shows volume growth over the last five years in coffee. Volume has grown over the past five years, but KDP's volume is down and JDE's volume is down, too. So who's taking all that coffee? Like who -- where is all that volume going, if not to the European leader and the single-serve leader here? Timothy Cofer: You want to take the first one on HSD? Jane Gelfand: Sure. Look, I mean, what we're laying out for you are very identifiable actionable cost synergies that we're going after in short order and then longer-term opportunities, both in terms of top line and kind of continuous productivity and the reignite the amazing target through 2032 is a part of that. All of which is to say, when we think about HSD, certainly in the first years out of the gate, that's very visible from a cost synergy standpoint, right? But -- and also deleveraging can help bridge that. As you go forward, you're going to have that much more traction on the various opportunities that Tim unpacked for you and you'll also drive a more resilient business such that you can get more ongoing operating -- but we'll have to prove it to you, right? Again, out of the gate, you have a lot of visibility between below-the-line leverage and the cost synergies, and you heard Roger talk about his confidence there. Olivier Lemire: Yes. Maybe from a total at-home consumption, obviously, last four years, we saw a spike in consumption in at-home through COVID and then decline in in-home as people return to normal life and work. This has been stabilized over the last few years. And we're coming from a very strong foundation with 47 million households and very good intel that we've got tens of millions of high-value households that have yet to convert into the Keurig system. So with strong marketing campaigns coming up hitting in Q4 with good promise to consumer, great coffee without the grind and a series of innovation, and we saw new coffee system, we're very confident that we'll be able to return to growth from a volume standpoint. Chethan Mallela: Lauren, and then Steve Powers. Lauren Lieberman: Lauren Lieberman from Barclays. So I think I sensed a change potentially on time line to separation is sort of like at or before by year-end '26 or we'll be ready to go. So at the risk of word-sniffing, like confirm if that's right or not. But notwithstanding the comments on like lessons learned and we should go more slowly, I'm just curious why, like what the determining factors would be to decide to move more slowly or to do it right away? What you'd be looking to achieve or benefit from going more slowly? And then secondly, I feel like we're spending a lot of time talking about coffee, why coffee, coffee, coffee. What changes, if anything, for Bev Co. going forward? And I'd love to hear about that. Timothy Cofer: Great. I'll take the first one. And Eric, why don't you take a shot at the second? Lauren, I would say I'm not sure you heard a definitive change in time line. What we said on August 25 was we anticipated that this could close by the mid of next year and separate by the end of next year. You heard something similar today, but there was a shift around we still expect mid of next year for the close and that we will be ready to separate year-end. So those times are the same. The difference is in that nuance. And I think what you heard from us today is it will be milestone-based. We are not going to commit to a hard date to you today. And recall what those milestones are, right? We want to be sure that our business is continuing to perform well. Guess what, you saw it again today, it is, and we're committed to that. We want to be sure that we have the right capital structures in place. And you heard us make big steps today towards that in terms of improved leverage at close and stated targets at separation. You also heard us say we need to be sure we've got world-class independent Boards of Directors and proven, experienced, high-caliber leadership teams. And you heard even an update on one of those points today around leadership of Global Coffee Co., which we're beginning a process to find that right leader. And then you also heard, let's make sure from a market condition standpoint that we've got the right conditions that could support a potential option, not yet a firm decision. We'll stay flexible and agile, and Jane covered that in her section. So I think the broad time line, Lauren, and group here is similar to what we said on 825, but with an important nuance where we'll be milestone-based and we'll do it at the right time when we're ready to get the right outcome for our shareholders. Do you want to talk about Bev Co. and what an independent Bev Co. looks like? Eric Gorli: I was able to talk to you guys for about 25 minutes on kind of our playbook, playbook that has been driving success. We really feel like that playbook is going to work in the future as well, and I gave a number of examples. I think the separation, Tim hit on it, the focus on the Bev Co. entity from the management team, from our supporting functions, from the Board, I think that's probably going to be the biggest benefit. There is definitely a different culture for a fast-moving soft drink-centric, DSD-centric organization versus a warehouse model. I think the amplification of that and just how we go about creating the company's culture, coupled with the management team's focus will probably be the biggest underpinnings. That said, we've got a playbook that's working, and I would expect you're going to see more of the same. Timothy Cofer: No doubt. And the only build on Eric's point, for sure, around focus and culture. I think there are upside benefits to a stand-alone pure-play rev business. The other that I briefly mentioned in my remarks was around strategic optionality. And certainly, today, I'm not going to give you the list of here are the five5 things. But I would say, as you continue to advance a scaled strong brand portfolio, many different categories of participation, strengthen that DSD muscle, there could be options down the road that present themselves around ownership in different levers of the business, brands, distribution, et cetera. So we'll take a step at a time. But I do think an option like that longer term is enhanced. It's more accessible, more available, more actionable, should we choose that that's in the best interest of the shareholder as a stand-alone ref bev company. Chethan Mallela: Steve? Stephen Robert Powers: I was actually going to ask along a similar line, which shocking. We have a habit of doing that. So, it's Steve Powers from Deutsche Bank. So I get the -- that future focus and optionality post transaction. But as you assess this initiative today going out and kind of doubling down on coffee and separating coffee, that's a big project that wasn't envision. So just the opportunity -- how do you get comfortable with the risk and opportunity costs of pursuing that and maintaining all the good that you've been doing on refresh and beverages? How do you handicap that? And how big of a consideration was that really my main question. I do have a secondary question, which probably is for Jane. Just on the separation, I think the base case is to spin coffee. But then earlier, when you talked about the different optionalities, you talked about partial IPO of beverages. Just what that means for the existing debt that KDP has? Does that stay with Beverage Co.? Does that go to Coffee code? Do we know? Timothy Cofer: I'll start with the first one, and Jane can take the second one. Look, Steve, it is all about execution. This is not something that's unique in the world. We would agree that it's a big undertaking and has complexity to it. That's not daunting for us. As I shared on stage, many of us on this stage right now have experience in large acquisitions, integrations, separations, right? We've done it before. Many of these people on stage. And then it's really about do you have a great plan, set of processes. That's why we elected today to also ask Roger to unpack our transformation management office and our approach to that, obviously, external advisers, et cetera, carving off a group of individuals who are focused on that to then allow the vast majority of our 29,000 colleagues at KDP to deliver their mission day after day after day. And I think Q3, quite honestly, is an early proof point. This was a challenging quarter. One might argue a quarter where there were some distractions, right? And look, we put up a pretty good quarter here that we're proud of. And so it is just about the right plan, the right governance around it, the right people with the right experience executing well. Jane Gelfand: Steve, good question on separation plans. You're right that we've now named a couple of options to pursue a separation. The common element across those is it's a tax-free separation, and that piece is sacrosanct, and we're going to solve for that first and foremost. Secondarily, we got to think about, well, what's the optimal separation mechanism, and that depends on the circumstances in the market. And again, what we think will create the most value, right, for our shareholders. And so one potential is a tax-free spin. Another is this partial IPO concept, which would allow all of our shareholders to participate as we could consider floating a small portion of Bev Co. as well as bring in additional participants, right, and raise primary proceeds, which can be used to accelerate deleveraging. We haven't made a decision. I think what you should expect us to do is to solve for optionality as long as possible and then think about, to your point, the debt structure, how we raise the debt, how we think about those moving pieces to maximize our flexibility. Not all of that has been decided yet, but that is something that we are very actively considering. Chethan Mallela: Michael? Michael Lavery: Michael Lavery, Piper Sandler. Just wanted to come back to some of the milestones you laid out, one of which is operational performance. Would that include both businesses running on the algo targets? And then second question, just on the pace of delevering. Originally, you had expected about a 5.6x at close and 5.2x at the end of the year, around half a year, obviously, around 0.4 turn. Now you're calling out about 0.5 turn on a full year. But did anything change? Or is that conservative? How do we think about the half turn? Timothy Cofer: Again, I'll take the first. Jamie can take the second. Look, our expectation is we continue to perform at a high level at both KDP and JDE Peet's. You've seen us do it so far this year, and that's the expectation going forward. And yes, we do believe, I said it on stage earlier, we're doing this transformational next step from a position of strength, and we think that's the best position to launch two new companies. Jane Gelfand: As it relates to the leverage, right? So just to clarify because there are a bunch of numbers that we've thrown around, and I want to ground us in what we're talking about. The original plan, as was announced in late August, would have contemplated a net leverage at acquisition close, assuming June 2026 at 5.6x. We've made a set of announcements today that give us visibility to about 4.6x on the same time frame. You're also right that we've talked about pace of deleveraging, right? And there is a little bit of delta between what we're seeing today, which we feel very, very good about, right, the half a turn a year and some of the assumptions that were built into the 5.2x, which would have included some synergy capture in year one. And so look, I think what you're hearing from us is the commitment to maximize, right, cash flow and get to a very quick pace on deleveraging. I wouldn't read too much into exactly this number versus this number, the half a turn and then the commitment to see if we can accelerate that responsibly is what you should anchor to from here. Chethan Mallela: Kaumil? Kaumil Gajrawala: Kaumil Gajrawala from Jefferies. I guess a couple of things as you responded to the market reaction and you were thinking about all of your options. Why was the Apollo, KKR option? Why were they the best partners? I believe they have a Board member coming on. Will that Board member be on both sides of future co, just one of the sides? And then when we think about -- we only had five hours to think about this, but when we think about the new structure, you've talked about all the benefits, why it should work, everything that's -- how everything is intended to go. But what were the risks that you considered under this new structure on what if things don't go right, how much flexibility do we have to be able to get to where we're looking to go? Timothy Cofer: I think Pam will take the Board member question. Do you want to take the two new investors, KKR, Apollo? Jane Gelfand: Yes. Look, we're extremely excited to partner with Apollo and KKR. Obviously, there is real strategic merit in the investments that they've underwritten, right? You see an expressed conviction in each of the future successor companies, right, and the value of the assets there and the upside opportunity, particularly as you think about Bev Co. and all of the optionality that we've talked about here, but also in terms of the single-serve prospects in North America and in the JV. Beyond just the sort of economic profile of all of that, we get the benefit of some of the smartest minds in the financial world with a ton of experience in transactions, complicated transactions across industries, across the world. And we're excited to partner together and leverage that insight. I will pass it on to Pam in terms of the Board member and all of those Board dynamics. But I'll just say all of the work that we've done over the last several weeks have absolutely been confirmatory of that partnership and the mindset with which we're walking into these strategic investments and partnerships, and we're excited. Pamela Patsley: Great. With regard to what was in the press release this morning about it would be our intent to name Brian Driscoll as put him forward in the proxy for election to our Board of Directors. I believe the press release said in conjunction with the transactions, which we were outlining in that press release. However, we are initiating and have a very robust process using an outside search firm to help us because at the end of the day, whenever separation comes, we will have to stand up, as you've heard, two fully independent boards able to field the requisite committees, and it is our goal to make those best-in-class. While we may have some supposition and ideas in our head as to who might go where, we are way not at that point to begin to talk about that because we don't have enough people to field both. So it's going to be an iterative process, and we will use someone from the outside, and we have an internal committee that will be doing a lot of the leg work on behalf of the full Board, but of independent directors and of course, Tim and Bob participating as we go through the interview process and looking at candidates. We always look for diversity of background, diversity of skills and filling in gaps in terms of capabilities as we look around the Board table. And we have to keep that in mind now for two Boards ultimately. So, hopefully, that answers your question. Chethan Mallela: Great. I think that's about all the time we have today. So I just want to thank everybody joining us in person and on the webcast for your interest in KDP. I think you've heard very clearly about our conviction in the acquisition of JDE Peet's and the planned separation into two pure-play companies, and we hope you share our excitement about the future for KDP. Thank you.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper's Earnings Call for the Second Quarter of 2025. This conference call is being recorded, and there will be a question-and-answer session at the end of the call. I would now like to introduce Jane Gelfand, Senior Vice President, Finance at Keurig Dr Pepper. Ms. Gelfand, please go ahead. Jane Gelfand: Thank you, and [indiscernible]. Earlier this morning, we issued a press release detailing our second quarter results, which we will discuss during this conference call. An accompanying slide presentation can be viewed in real time on the live webcast. Before we get started, I'd like to remind you that our remarks will include forward-looking statements which reflect KDP's judgment, assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting KDP's business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to our earnings release and the risk factors discussed in our most recent Form 10-K and the latest 10-Q, which will be filed with the SEC later today. Consistent with previous quarters, we will be discussing our Q2 performance on a non-GAAP adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings materials. Here with us today to discuss our results are Keurig Dr Pepper's Chief Executive Officer, Tim Cofer; and Chief Financial Officer and President, International, Sudhanshu Priyadarshi. I'll now turn it over to Tim. Timothy Cofer: Thanks, Jane, and good morning, everyone. We delivered strong second quarter results, closing out a very good first half of the year. Our resilient performance is testament to our advantaged business model, execution and agility while operating in a dynamic environment. Looking ahead, the balance of 2025 will present challenges in the form of rising cost pressures, including from tariffs that remain highly fluid as well as continued consumer caution. Despite this, we remain on track to achieve our full year outlook, thanks to strong first half delivery and well calibrated back half plans. . While driving hard to deliver on our 2025 commitments, we continue to advance KDP's long-term value creation strategy. As a reminder, our strategic road map is focused in 5 areas. Our entire organization is galvanized around these goals with forward progress being made each quarter. Let me share some examples from Q2. Starting with consumer-obsessed brand building. In June, we published KDP's inaugural State of Beverages trend report, reinforcing our thought leadership in the beverage industry. Drawn from national surveys and our own proprietary data this insight-rich report underscores the important role beverages play in consumers' lives and how evolving preferences are shaping demand. With consumers' ever-changing needs at the heart of everything we do, it's no surprise that this report captures many of the trends we have been actioning against. For instance, we know that nearly half of all Americans and almost 3/4 of Gen Z consumers try a new beverage every month. This year, we are satisfying their thirst and curiosity through a robust flavor-oriented innovation slate in carbonated soft drinks, which has been highly successful to date. In fact, Dr. Pepper Blackberry ranks as the #1 new product in the category this year. While iconic 7UP is enjoying renewed momentum on the back of winning flavors like tropical as well as a refreshing endless summer limited time offering. Our second pillar is reshaping our now and next portfolio, and we continue to increase our exposure to attractive white spaces. Energy is a major focus for us. and I'll speak more about our early success in that category in a moment, but we have also made exciting progress in other adjacencies. In sports hydration, electrolyte is the fastest-growing scaled brand in the category, benefiting from strong velocities, DSD enabled distribution expansion and product and packaging innovation. The brand registered over 30% retail sales growth and gained more than 1.5 points of share in Q2, yet has still only scratched the surface of its potential. We're also beginning to build a presence in new categories and segments. During the second quarter, we took 100% ownership of Dilo brands, a key player in powdered drink mixes and liquid water enhancers. This small tuck-in builds on our productive multiyear partnership as a minority investor. Now with full ownership, we will leverage [indiscernible] know-how and capabilities to expand our presence in an attractive and growing category, including by extending more KDP brands into the space. Prebiotics CSDs are another fast-growing area of interest, having quickly captured nearly 3% market share of the $46 billion carbonated soft drink category. In Q3, we're entering this subsegment with the launch of Bloom pop, a great tasting soda combining bold bubbly flavor with gut health benefits. This launch builds on our successful energy partnership with Bloom, which has rapidly scaled to nearly a share point in energy drinks and has strong crossover potential into prebiotic CSDs. Consistent with our third strategic pillar, we are amplifying our route-to-market advantage, particularly in DSD. This starts with investing in our existing system, including through enhanced digital tools, and continues with selected network expansion opportunities. Last year, we acquired bottling and distribution operations in Arizona and I'm pleased with the high standard of execution that our teams have brought to this important geography. And later this year, we are capitalizing on a unique opportunity to add Dr. Pepper to our DSD portfolio in critical parts of California and Nevada as well as certain areas in the Midwest. Our teams are actively preparing for this transition, which will enable us to directly influence point-of-sale trends, drive greater efficiencies across our DSD network and generate halo effects that benefit our other DSD brands. Our focus on generating fuel for growth is ongoing and has taken on even more importance in the current inflationary environment. We have a robust productivity program that delivered strong efficiencies in Q2, and we remain on track to achieve the high end of our 3% to 4% savings target this year. We also continue to manage overhead costs with discipline as was evident in our quarterly results. And finally, our capital allocation approach remains balanced and dynamic. During the second quarter, we generated strong free cash flow and fortified our balance sheet by refinancing a portion of our debt. Moving to Q2 results. We delivered strong enterprise growth with net sales increasing 7%. Growth included contributions from both price and volume mix reflected continued momentum in our U.S. refreshment beverages and International segments and illustrated encouraging sequential progress in coffee. We managed operating expenses with discipline, protecting our margins and helping to translate our top line gains into double-digit EPS growth. Let's dive deeper into the segments and begin with U.S. refreshment beverages. Net sales grew almost 11% in the quarter, driven by a combination of core strength and rapid expansion in recently entered white spaces. Starting with the core, our CSD performance was strong, and we again gained market share in a growing category led by Dr. Pepper as well as 7UP and Canada Dry. When it comes to Dr Pepper, our multiyear momentum is underpinned by many sustainable growth drivers, some of which were apparent in Q2. These include innovation and renovation with Dr. Pepper Blackberry proving highly incremental to the franchise and our recent graphics refresh for Dr. Pepper Cherry, driving a meaningful acceleration in sales growth, velocity and buyers. Distribution and merchandising, particularly in Dr Pepper Zero, where we drove a double-digit increase in total distribution points and enhanced display activity contributing to 35% retail sales growth in the quarter and consumer engagement, including a successful marketing tie-in with the summer blockbuster Jurassic World Rebirth, which we amplified through media and in-store activations. Other core brands are also benefiting from the same playbook. For example, marketplace growth in mods our powerhouse, mom and kid focused brand accelerated in the back half of 2024 behind product and packaging innovation and a new brand campaign. Mott’'s has sustained this momentum into 2025 with more exciting news on tap for the fall, including the introduction of Mott’'s fruit smoothie pouches in time for the back-to-school season. Beyond the core recent portfolio evolution is beginning to more substantially move the needle at the segment level. This is most evident in energy where we believe our multi-brand approach will be the key to winning in this attractive high-growth category. Our 4 complementary brands GHOST, C4, Bloom and Black Rifle now combine to represent over $1 billion in annual run rate net sales for KDP and are scaling rapidly. Each of these energy brands contributed to our Q2 results. The GHOST acquisition was a meaningful top line driver and brand momentum continues to build under our ownership. GHOST point-of-sale trends markedly accelerated since we took over distribution in late Q1 as evidenced by our market share gains in Q2. C4's core performance platform also continues to outpace the category, propelled by innovative new flavors like classic lemonade and healthy base velocities. Meanwhile, Bloom is scaling at an impressive rate, it has garnered nearly a full point of market share just a year after introduction and has quickly established its credentials in the female forward energy space. Together, our brands are well positioned to achieve our goal of a double-digit share position within the fast-growing $26 billion energy category. With 7% market share already, KDP's energy portfolio is making quick progress against this target. And for comparison, just a few years ago, our share was below 1%. A combination of strategic portfolio construction and excellent KDP execution has powered these gains including nearly 1 point of market share growth in 2025 year-to-date and 30% plus retail sales growth in Q2. Given the robust runway for further growth, we are allocating meaningful resources to support our category ambitions led by a dedicated internal organization focused solely on energy. Simply put, we are confident we have the right brands, commercial playbook and go-to-market prowess to continue to win in this important space. The Q2 results demonstrate how KDP is successfully building out a broad-based refreshment beverages portfolio beyond our core CSD stronghold. As we capitalize on the expansion opportunity for our emerging brands, in categories like energy and sports hydration, we expect these areas to become increasingly important growth drivers for our U.S. refreshment beverage business and for KDP as a whole. Moving to U.S. coffee. The second quarter demonstrated sequential progress for the category and KDP. Starting with the category, both at home and single-serve sales growth accelerated from the first quarter as incremental pricing to offset inflation flowed through and volume remained resilient. The manageable category elasticity to date is encouraging, particularly as additional industry pricing actions have been announced, including our increase that will take effect during Q3. KDP's U.S. coffee business also exhibited sequentially improving trends in Q2. We made encouraging progress in pods with a better relationship between pricing and volume mix in brewers, though shipments remained pressured, point-of-sale consumption was stable. Looking to the back half, the U.S. coffee segment will need to manage through impacts from higher commodity inflation, increased tariffs and consumer uncertainty in the face of additional pricing. As a result, we expect segment performance to remain subdued for the balance of the year. Even as we navigate some quarter-to-quarter volatility, we continue to advance multiple initiatives designed to return our coffee business to consistent long-term growth. To provide a few examples, we continue to expand our premium and cold offerings into consumer preferred subsegments. In the premium set in Q2, we began rolling out Lavazza, flavored K-Cup varieties inspired by classic Italian desserts like tiramisu. Already a best-selling premium brand, Lavazza's entry into flavored coffee extends the brand into an attractive category subsegment that over-indexes to frequent consumers. We're also seeing strong results in ready-to-drink coffee, one of our key cold initiatives. This superior Lackalone brand continues to generate triple-digit retail sales growth as it attracts new and younger consumers to the category. In brewers, we are innovating at both opening and premium price points. During Q2, we launched K-Mini Mate, our smallest brewer ever, featuring a new consumer-preferred visual identity with a more modern and colorful aesthetic, all at an affordable entry-level price point. And next month, we will introduce K-Kreme, a premium brewer with the ability to produce crematoped coffees from traditional K-Cup pods. Both brewers address unmet consumer needs and will help attract incremental households and occasions to the Keurig ecosystem. Finally, we are making great progress advancing our next-generation vision with the Keurig Ulta brewer and Karoun plastic-free aluminum-free pods. Ongoing in-home consumer beta testing is providing valuable user feedback while validating that the new system delivers a premium best-in-class at-home coffee experience. We're applying the learnings from our beta test to our commercial plans in support of a targeted launch in late 2026. These initiatives across pods, brewers and next-generation systems are all indicative of our sharp strategic focus in the U.S. coffee segment. Combined with encouraging category trends, we are confident they will help return our structurally attractive business to sustainable growth over time. In our International segment, Q2 performance remained quite solid, particularly considering tough year-ago comparisons and the softer backdrop in Mexico. Net sales increased 6%, led by pricing and operating income return to growth. We continued to drive strong relative performance across our business with market share gains in key categories, such as mineral water in Mexico and K-Cup pods in Canada. Our CSD portfolio also remained healthy across markets, benefiting from new campaigns and 0 franchise gains for brands like Dr Pepper and Crush as well as high-quality execution. As we look to the back half, we expect to maintain our relative momentum in international, thanks to strong base plans, our entry into the Canadian ready-to-drink tea category with Neste and additional pricing to help offset inflation and tariffs. Overall, I'm pleased with our enterprise performance during the second quarter. We're building a track record of delivery by executing with excellence and agility while remaining focused on the strategic framework that will position KDP for sustainable multiyear growth. I'll now turn the call to Sudhanshu and I'll return at the end with some closing thoughts. Sudhanshu Priyadarshi: Thanks, Tim, and good morning, everyone. We delivered a strong second quarter results, capping off a very healthy first half in a fluid operating environment. Robust commercial plans, coupled with sharp execution are driving our business momentum and we continue to target an unchanged full year outlook. Second quarter net sales increased 7.2% in constant currency. Our top line momentum was broad-based with double-digit gains in U.S. refreshment beverages, solid mid-single-digit growth in international and encouraging sequential improvement in U.S. coffee. Net sales growth was supported by multiple drivers. Net price increased 2.2% with positive contributions across all 3 segments. Pricing reflected the continued impact of actions taken to combat rising inflation, particularly in U.S. coffee and international. Volume mix grew 5% in the quarter. We experienced growth across our core liquid refreshment beverages portfolio and the GHOST acquisition also added 4 percentage points to the top line. Gross margin contracted 110 basis points versus the prior year due to inflationary pressures that more than offset pricing and productivity savings. Strong SG&A leverage served as a counterbalance to the gross margin compression reflecting disciplined expense management across the organization. All in, our top line gains translated into 7% operating income growth as operating margins held steady with the prior year. EPS grew double digits in the second quarter, bringing first half growth to nearly 10% consistent with our expectation of a front half weighted year. Moving to the segments. U.S. Refreshment Beverages delivered another good quarter with net sales growing 10.5%. Volume mix was the primary driver, increasing 9.5% including a 6.6 percentage point contribution from GHOST. Net price realization also added 1% to the top line. Our base business trends remained solid with positive momentum in Dr Pepper and 7UP in CSDs, electrolyte in sports hydration and across our energy portfolio. We are gaining market share within overall liquid refreshment beverages and have compelling back half commercial plans to sustain our strong relative performance. Segment operating income increased a healthy 8%, fueled by top line growth and productivity savings, which were partially offset by cost pressures. In the U.S. coffee segment, net sales declined modestly down 0.2% in the second quarter. Our top line demonstrated notable sequential improvement from the first quarter underpinned by the encouraging category trends that Tim discussed earlier. Net price realization has strengthened to 3.6%. This primarily reflected a building contribution from the early 2025 price increase across our owned and licensed portfolio, which was taken in response to escalating green coffee costs. We expect a further step-up in net price realization in the back half as additional already announced [indiscernible] and brewer pricing actions flow through in the market. Segment volume mix declined 3.8%. Trends in parts improved sequentially, reflecting manageable category elasticity and effective commercial programming. On the other hand, tighter inventory management by retailers weighed on brewer results, pressuring shipments despite stable consumer sell-through. Segment operating income grew 2%, building net pricing benefits and continued strong productivity helped to offset commodity inflation, though operating income also benefited from some cost phasing. With tariffs and higher cost coffee hedges due to play a larger role in the coming quarters and given uncertain future category elasticity, we continue to expect some segment operating income pressure in the remainder of 2025. In International, net sales grew 5.7%. This was driven by net price realization, up 5.3% and a volume mix increase of 0.4% with the latter against a very difficult year ago comparison. The macro backdrop was challenging in the quarter, particularly in Mexico, where unfavorable weather was also a factor. Despite this, our international portfolio as a whole, maintained good relative market momentum supported by innovation and activation, strong in-market execution and ongoing investments in route to market. Segment operating income increased 2.6%, reflecting an improving balance between pricing, productivity and higher costs. On a go-forward basis, while we aren't immune to marketplace realities, we have well constructed plans for the back half and expect to deliver healthy international top and bottom line growth. Moving to cash flow and capital allocation. We generated $325 million in free cash flow in the second quarter, which sequentially strengthened from the first quarter. We expect cash flow to accelerate further in the second half and we remain on track for healthy cash generation for the full year. Our capital allocation priorities are unchanged. Organic and inorganic investments to further our growth, continuing to strengthen our balance sheet and returning cash to shareholders through a steadily growing dividend and we are opportunistic share buybacks. Improving cash flow generation enables us to dynamically action against these priorities based on the most compelling opportunities we see. Our current balance sheet also provides ample near-term flexibility with today's leverage at a comfortable 3.3x, though we remain committed to our long-term goal of 2.5x or lower over time. Shifting now to our 2025 guidance. Our constant currency outlook is unchanged. We continue to expect mid-single-digit net sales growth with a bias towards the high end of the range and high single-digit earnings per share growth. Based on current rates, we now anticipate that FX will represent approximately 0.5 percentage point headwind to the top and bottom line for the full year which equates to about a $0.01 impact to EPS. Below the line, our guidance now reflects the following assumptions: interest expense of approximately $700 million and effective tax rate of approximately 23% and approximately 1.36 billion diluted weighted average shares outstanding. Taking a step back, the operating backdrop continues to actively evolve and certain external factors, most notably trade policy remain uncertain and outside of our control. We are actively evaluating proposed future tariffs, potential mitigation steps and implementation time lines for those strategies all oriented around delivering solid full year performance. Specific to the balance of year, our guidance assumes our top line momentum sustains, but cost pressures mount. As a result, we continue to expect some margin pressure in the back half which should contribute to a moderating EPS growth rate relative to the first half. In closing, we are pleased with how our teams translated robust plan into a strong execution and results in the first half of the year. Our focus remains on delivering the full year while building a foundation for attractive long-term performance. With that, I will turn the call back to Tim for closing remarks. Timothy Cofer: Thank you, Sudhanshu. With our strong first half results in the books, we remain on track to deliver our 2025 outlook even in a highly dynamic operating landscape. At the same time, we continue to advance our long-term value creation strategy with steady progress year-to-date across each of our strategic pillars. . In an environment that places a premium on operational excellence, we're proud of our team's ability to balance near-term executional rigor with long-term-oriented thinking. We strongly believe that operating with this sort of discipline should support consistent and compelling results for KDP over time. With that, we're now happy to take your questions. Operator: [Operator Instructions] And the first question comes from Chris Carey with Wells Fargo Securities. Christopher Carey: I wanted to ask about the U.S. refreshment portfolio with the split between kind of partner assets and core. Regarding the partner side or which I would actually include cost in this bucket, can you just talk about how you see the evolution or the relative contribution of these businesses a bit more medium term, say, over the next 12 to 18 months? And where you're most excited about incremental contribution. You're talking about electorally doing over 30% growth. You've got Bloom pop coming. Bloom is still scaling, GHOST POS is accelerating. So can you just give us a sense of where we are in the journey of these parts of the portfolio and where they could go. And just connected on the base business with Dr Pepper, you've been so successful with share gains on the base and also innovation. Do you think that the brand is starting to see any healing? Or do you still see some runway for incremental LTO or permanent innovation, you got to move on DSD. So just where you see kind of the runway on the base Dr Pepper business. So thanks for the split of the U.S. refreshment portfolio along those lines. Timothy Cofer: Thanks, Chris. Yes, I mean, look, overall, you see our Q2 results in U.S. Refreshment Beverage. And I think performance was strong. And you break it apart and you see really solid contributions from both the base business and the new partner additions. And as you said, certainly the GHOST acquisition. It's pretty broad-based momentum. We'll start with CSDs, carbonated soft drinks. Robust growth continued in Q2, underpinned by market share gains led by flagship Dr. Pepper. By the way, this year, we are on track for our ninth consecutive year of market share growth with Brand Dr Pepper. We also saw share growth with 7UP behind some of the new innovation I spoke to in the prepared remarks and market share gains in Canada Dry. So it starts with a really healthy base. And quite honestly, we expect that to continue. Then next, I would speak to energy. We're seeing rapid expansion in energy. I spoke to it in our prepared remarks that we've -- this has been probably the best example of portfolio transformation in the last few years. Just a few years ago, we have less than 1 share -- now as of Q2, we have a 7 share and that full portfolio of brands, GHOST, C4 Bloom and Black Rifle I think, are a winning combination in energy. And we expect that to be an even more meaningful contributor to the overall USRV growth profile going forward. Electrolyte is next on the list for sure, a new partner addition for us. growing 30% in the second quarter. In the subsegment of sports hydration, that is the most dynamic and that is rapid hydration, and you see us take share through our KDP DSD excellence, distribution expansion, strong innovation, growing TDPs. So really strong Q2. I think those are the key components to speak to. As you look at the back half, kind of going forward, as you said, look, the operating environment is going to stay dynamic, but we expect USRB segment growth will remain robust. And we expect, as you saw in the first half, it will be a balance of both solid base business growth as well as new partner growth and importantly, contribution from GHOST and the energy portfolio. And all of this will support that MSD contribution from USRV to our long-term algorithm. Operator: And your next question comes from Peter Grom with UBS. Peter Grom: So I was hoping to get some perspective just on coffee. Some solid sequential progress the best organic performance in a couple of years. So maybe just to start, when you look at the second quarter, how did it compare to your expectations? And then just as we think about the balance of the year, Tim, you mentioned subdued performance -- can you maybe put some guardrails around what that means from a top line perspective? I think the prior thought was for a sequential improvement in the segment as we move through the year. So just curious if that's still the case from a sales growth standpoint. Timothy Cofer: Yes. Thanks, Peter. Look, I am pleased with the sequential improvement you see in U.S. coffee in the second quarter, and that performance was really underpinned by a strengthening pod category that translated to improving pod revenue and pod shipment trends as well as healthy cost efficiencies. While I'm encouraged by the progress in U.S. coffee in the second quarter, there's no doubt as we roll into the back half of the segment we'll face some challenges. And some of it's ongoing, some of it's incremental. . Commodity inflation will build as we roll into the back half and we roll into our higher cost hedges on green coffee. The tariff impacts will become prominent. And we all know that, that tariff situation is a bit fluid. We have included all tariffs as implemented as of today. And we know that those tariff impacts will be more prominent and put some additional pressure. I also think our retail partners will likely continue to manage their inventory levels tightly, in particular on brewers. And then finally, you know we did a round of pricing at the beginning of the year. We've announced another round of pricing that will take effect next month, and we'll need to closely monitor how that elasticity evolves. We feel good about the elasticity response we've seen so far. But rolling into the back half, we'll keep a close eye on that. So I think we have good plans in place to manage through these dynamics, but we still expect some impact. And that's why we are planning for some segment OI pressure in the second half. And at the same time, of course, that is captured as part of our enterprise guidance. I think overall, the business is on the right track. The path may not be completely linear, but we feel good and confident that over a long time horizon, we'll get U.S. coffee back to its rightful role of LSD contributor. Operator: And your next question comes from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: I am I had a question on your outlook for top line growth. Once you lap the GHOST acquisition, which was another nice boost to your net sales in the quarter. I guess, how should we think about the levers and maybe confidence you have to continue to hit your mid-single-digit long-term growth Algo without another acquisition. And then despite the strong top line growth, in the quarter, you're still seeing a fair amount of operating deleverage or just not much leverage. So -- how should we think about that in the back half of the year? And then maybe what initiatives or cost savings you have or could realize to mitigate some of these pressures. . Sudhanshu Priyadarshi: Bonnie, this is Sudhanshu. So our long-term algorithm is MSD sales and HST EPS, and we delivered that last year, and we just guided that we will deliver -- reaffirm our guidance, we will deliver in 2025 too. And basically, it's made up of. We have talked publicly U.S. instruction beverages will grow MSD. That's the expectation, and that's the role they play. U.S. coffee, [indiscernible] sales growth. I know we are behind slightly, but that's our long-term growth algorithm for U.S. coffee and international HSD sales growth. And if you look at last 4, 5 years, this is consistent with what these businesses have proven they can deliver over time. Obviously, operating income that drives the EPS is to outpace our top line growth and we have opportunity to expand margin across all of these segments and the typical levels are price, productivity, mix and overhead. We're doing higher end of our productivity target. We are also focused on SG&A and overhead. And all of those things will help us deliver -- continue to deliver MSD sales and HST EPS. Your question about the second half margin, yes, in Q2, gross margin contracted, but we were expecting it as price realization and healthy productivity did not offset inflation on a margin basis. but the relationship was more favorable on a dollar basis and we grew gross profit dollar. I talked about we're managing cost with discipline and that's supporting our healthy operating income growth and a stable OI margin. I talked on the prepared remarks, second half, we expect some operating margin pressure, but we will still grow profit dollar. And you all know in the second half, we have some incremental cost headwinds like commodity inflation. Tim talked about tariff beginning to more prominently impact our results. And we also have some one-off last year in Q3 and Q4 with some [indiscernible] gains. But on the flip side, pricing should build productivity will be strong in the back half. And those are the regions that will support profit dollar growth. Operator: And your next question comes from Kaumil Gajrawala with Jefferies. Kaumil Gajrawala: Congratulations on the picking up of the Dr Pepper brand in California and some other places. Can you maybe just talk about the infrastructure within your existing DSD network? Do you have as much infrastructure as is necessary to be able to take on a brand of that size? And is it the beginning of perhaps the turning over of the Dr. Pepper brand to more and more regions over time? Timothy Cofer: Thanks for the question. Look, you've heard me say this many times. I'm a big believer in the power of DSD. I think direct store delivery is such a critical and really scarce asset in beverages. And I believe as we strengthen it, it provides our business with a sustainable competitive advantage. And accordingly, we prioritize investments in our DSD to further strengthen our network, build our capabilities and really improve how we serve our customers and our consumers. And you see that and what we've done over these last few years. We're building capabilities. We're investing in digital tools to drive greater efficiency, drive our in-store effectiveness. We're broadening our geographic footprint, and I'll speak specifically to the to the example you gave. But we -- you've seen us over the last many years, expand our network through opportunistic expansions of geographic territories. Last year, we did that in Arizona picking up that acquisition. And now we've got our trucks rolling and we've got manufacturing and warehousing in that key growth state. And then the other thing to keep in mind is as we enhance our portfolio, as we bring in the electro leads in sports hydration, telocolones and registering coffee, the GHOST and C4s in energy. We are increasing our scale by adding high-quality, high-velocity volume to our portfolio, which allows us to make that economic flywheel and that virtuous cycle of growth go turn even faster because that scale allows us to then have greater drop sizes, greater store frequency, improve the efficiency and economics of the fixed costs associated with DSD. Now to the specific case that you referenced, we are a on a new opportunity. And that opportunity is to add the distribution of Dr Pepper in critical parts of California, Nevada, certain areas in the Midwest. I will say this is a unique opportunity. And in this case, we certainly believe it was right for us to pursue. It gave us an opportunity to build on a scale that we already had in that region. We had existing operations there, and this added more scale to that DSD operation. Obviously, adding flagship Dr Pepper is a unique opportunity for us to build out that scale. And in this case, it was, I would say, a unique contract structure that gave us the option to repatriate or not. And so in this case, a lot of work underway to ensure a successful transition. Our teams are energized to do this right. Distribution transitions like this do come generally with some short-term disruption and clearly, some initial investment, but we're prepared for all of that, as you'd expect us to, and we've captured that in the outlook. And we're confident long term, you'll see us continue to unlock substantial commercial and financial outcomes as it relates DSD expansion. Operator: And your next question comes from Rob Ottenstein with Evercore. Robert Ottenstein: I was just wondering if you could talk to us a little bit about the pricing dynamics in the U.S. on liquid refreshment beverages, I get a sense from the results that some products are probably up a lot, others may be down, so maybe a little bit of a better understanding there. And then how you're seeing the consumer, we've heard from other companies that affordability is becoming more important, maybe how you're pulling on various RGM levers to address that? . Unknown Executive: So the U.S. RB, first of all, as Tim said, we are very happy with the first half performance for U.S. RB, was strong, high-quality. Our growth reflected a combination of GHOST, base business of volume mix and net price realization. And in back half also, we expect the segment performance to remain robust. -- with contribution from the same factors. Specific to net price, we have seen positive contribution year-to-date primarily been driven by CSD. We also announced a typical CSD price increase that took impact in Q1, which should continue to flow through to our results for the entire year. They are all where you will see some quarterly variability in actual net price realization in our P&L, but you should look at more in first half, second half basis. And we feel good about where we are in H2. Tim, do you want to talk about the consumer. Timothy Cofer: Consumer, sure. Yes, Rob, I'll take the consumer part of the question. I mean, we put the consumer at the center of everything we do as you'd imagine, we monitor their health closely, and that's everything from the public data, you would see our own proprietary data -- and then the other thing that to Kaumil's question is we have a real-time feedback loop in the form of DSD where every day, we get a good sense of in-store shopping behavior and trends in real time. I would say for us, we're seeing a fairly resilient consumer even in this backdrop of an inflationary and somewhat uncertain environment. At the same time, there is some caution out there. And our consumers are being selective in how and where they shop. I think this is particularly true for the lower income consumer where that purchasing power is most constrained. And you see this manifest in a couple of different ways. I mean first is there are some pullbacks in certain more discretionary channels, QSRs and our Away-From-Home fountain business, a little softer convenience slightly softer, especially in the first part of the year towards the end of Q2, you're seeing that come back a bit. And so you see consumers instead gravitating towards those more value-based channels, right? The dollar value channels, the club, big mass EDLP formats. And a little bit around deal periods and promotional periods. I think for us, we feel good. I think we have many advantages where we have shown time and time again that an environment like this we can continue to deliver strong growth. Our categories remain durable. These are essential categories for consumers, and we think less sensitive to macro changes. Our beverages continue to offer great value for our consumers and a simple indulgent pleasure of a carbonated soft drink or health and wellness oriented beverages from energy to sports hydration. So I think our portfolio is demonstrating strong momentum. Innovation is a big part of it and despite some areas of concern on the macro environment, we feel good overall about our portfolio and our ability to continue to deliver on that MSD sales growth. Operator: Our next question comes from Dara Mohsenian with Morgan Stanley. Dara Mohsenian: Tim, you made some changes recently on the marketing side with the new CMO appointed last year, including a heightened digital focus. I just was hoping you could give us a review of the biggest changes you put in place. How you think that might drive demand and impact ROI going forward? And if you're seeing any fruits from those efforts so far that's more going forward from here. Timothy Cofer: Yes. Thanks, Dara. You guys know our first strategy here at KDP is a consumer-obsessed brand builders. And marketing excellence will be foundational to the growth model and remains a top priority. And there, we talked a few weeks ago when we were together. We did make a change on the Chief Marketing Officer and feel very good, early days about what we're seeing in terms of -- a bit of a marketing transformation here at KDP. It is one where we are putting data, technology and digital at the center of the marketing flywheel. And that's really to enable more powerful real-time insights, create more precise consumer segmentation, consumer targeting, generate more effective sometimes AI-enabled marketing content. And I think you'll begin to see this show up as early as Q3 and Q4. A place to start seeing some of that show up will be brand Dr. Pepper. We're about to embark on our eighth season of Fansville and this year, not only is the work great. I saw the work just a couple of weeks ago, really excited about the new season of Fansville. But you're going to also see it materialize in a more personalized digitally-enabled consumer engagement. You'll also see it on the coffee side. You'll see us the way we're leveraging the new digital approaches and marketing to identify and to target higher-value households both existing Keurig users and new high-value households to really drive that lifetime value and get the most out of new Keurig household placement. So I'm optimistic overall, Dara, on what we're going to see from marketing as we take this next step. And I think what you should expect is higher ROIs and more impactful spend. Operator: And your last question will come from Filippo Falorni with Citi. Filippo Falorni: Tim, I wanted to get your perspective just on the protein beverage space. You talked in the past as an area of opportunity. Maybe give us context in terms of how you're planning to play in the category and also given in the context of the Dial brand, tuck-in acquisition, how that fits into your strategy? Timothy Cofer: Absolutely. So 2 parts, first around wellness and protein and then around [indiscernible]. One of the great things about beverage is the way consumer preferences are ever-changing. And -- by the way, I'll do a plug here. We issued our state of beverages report back in June last month, and it really underscored this health and wellness mega trend and how it's impacting consumer behavior and beverages. And I think it's the single most significant consumer trend impacting beverages. And consumers are really looking to beverages to provide a wide array of health and wellness benefits. And it ranges from your question on protein to fiber and gut health, hydration, 0 sugar, energy and alertness. So we're all over this, as you would expect, as consumer-obsessed brand builders. And I think what you've seen from us is we've done a good job responding to these health and wellness trends broadly in beverages. We will continue to evaluate those places which are more white spaces. And I believe protein is one of those. No doubt consumers are looking for more functional attributes and the beverages and protein is part of that trend. And we think that KDP can and will participate in that over time. As we have done in other spaces, we will evaluate that through a buy builder partner lens, right? Is this something we can extend to organically from our own shop here in KDP, potentially leveraging our own brands. Is this something we want to partner with someone else is this something we want to do an acquisition, full ownership or minority. Nothing to announce today, but you can bet that we're looking at all these health among the spaces, including protein. I think overall, feel good about our track record there, including how we've been creative and capital efficient in how we go about that. On your second question on [indiscernible]. [indiscernible] acquisition really was an opportunistic tuck-in. And it allowed us to penetrate an attractive category of $4 billion drink mix and liquid water enhancer category and do it with a relatively modest financial outlay. This is a business that's had a double-digit growth CAGR for the last many years. Previously, we were a partner in minority investor in [indiscernible] and we thought now is the right time to go ahead and do the full acquisition. We like this team. We like the capabilities. We like the R&D here. By the way, back to the health and wellness point, 60% of that portfolio, 60 is functional around ingredients and great claims around hydration, energy, immunity, et cetera. So we took advantage of this opportunity. We can leverage [indiscernible] know-how and extend additional KDP brands. We think it's a nice small tuck-in transaction. It's unlikely to move the needle on enterprise trends, but we're excited to welcome our new friends from [indiscernible], a talented team there and to partner closely to further expand our beverage industry leadership. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jane Gelfand for any closing remarks. Jane Gelfand: Thank you, Michael, and thank you, everyone, for joining us this morning. We appreciate your interest and your support. Please reach out to the Investor Relations team with any questions, and we wish you a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper's Earnings Call for the First Quarter of 2025. [Operator Instructions]. This conference call is being recorded, and there will be a question-and-answer session at the end of the call. [Operator Instructions]. I would now like to introduce Keurig Dr Pepper's Senior Vice President of Finance, Jane Gelfand. Ms. Gelfand, please go ahead. Jane Gelfand: Thank you, and hello, everyone. Earlier this morning, we issued two separate press releases detailing first quarter results and announcing the appointment of new independent directors to our Board of Directors. We will discuss these topics during this conference call and in the accompanying slide presentation that can be tracked in real time on the live webcast. Before we get started, I'd like to remind you that our remarks will include forward-looking statements, which reflect KDP's judgment, assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting KDP's business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to our earnings release and the risk factors discussed in our most recent Form 10-K and 10-Q, which will be filed with the SEC later today. Consistent with previous quarters, we will be discussing our Q1 performance on a non-GAAP adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. Definitions and reconciliations toward the most directly comparable GAAP metrics are included in our earnings material. Here with us today to discuss our results are Keurig Dr Pepper’s Chief Executive Officer, Tim Cofer; and Chief Financial Officer and President, International, Sudhanshu Priyadarshi. I'll now turn it over to Tim. Tim Cofer: Thanks, Jane, and good morning, everyone. Our first quarter results were strong. Net sales advanced more than 6% and EPS increased more than 10%. We believe KDP is well-positioned in today's fluid macro environment. The operating and regulatory backdrop demands a combination of organizational ballast and agility as a scaled beverage player. That is also the industry challenger. KDP is fortunate to have both. Q1 served as a good demonstration. Our resilience was evident in the strong top and bottom-line results. While each of our segments faced different conditions in Q1, we executed well to deliver strong and steady enterprise-level performance. During the quarter, we also moved quickly to assess and react to trade policy changes. Looking out to the balance of the year, our outlook now incorporates our best estimate of tariff-related pressures and mitigations based on the policies in place today. As a result, we continue to expect that 2025 will be another solid year of growth, and we are reaffirming our full year guidance. Let's now unpack the quarter's highlights and segment performance beyond the strong financial outcomes in Q1. There were several noteworthy achievements in the quarter also worth highlighting. These include market share gains across iconic liquid refreshment beverage brands like Dr Pepper and Canada Dry, as well as newer brands like Electrolit and C4. Accelerating price realization across each of our segments, reflecting actions to effectively manage inflation in 2025, a smooth start to the integration of Ghost Energy. We are hitting the ground running in establishing a true energy platform with a 6.5% market share position already, and momentum building. Strong operating discipline, particularly in overhead cost management and smart capital allocation, including the monetization of our very successful multi-year Vita Coco investment. Vita Coco has been a valued partner for the past 15 years, and we recently extended our distribution partnership to capture the significant growth opportunity ahead. At the segment level, U.S. Refreshment Beverages continued to outperform on the back of very strong CSD trends. U.S. Coffee experienced a softer start, as the category began to work through commodity-driven inflationary challenges, and international proved resilient against a dynamic macro backdrop. I'll now dive deeper into each of our segments. Let's start with U.S. Refreshment Beverages, which was the clear standout in the first quarter. Net sales grew 11%, driven by strength in our core CSD portfolio, as well as the initial contribution of our GHOST acquisition. Our CSDs outperformed in a healthy category. As consumer-obsessed brand builders, we delivered this result through a combination of impactful innovation, strong commercial execution, and full funnel marketing. Dr Pepper had another great quarter with sizable market share gains, including a meaningful contribution from our highly incremental Dr Pepper Blackberry launch in February. The new product, which pairs the iconic Dr Pepper flavor with the rich sweetness of Blackberry, has captured nearly a point of CSD share and is performing on par with our most successful innovations from recent years. The Dr Pepper franchise continues to gain distribution breadth and depth, thanks to innovation and zero format expansion, which remains a multi-year growth opportunity for this powerhouse brand. We also delivered healthy net sales growth in Canada Dry and 7UP due to attractive returns on recently stepped-up innovation, marketing support and product refreshment, including our early 2025 launch of 7UP Tropical. More exciting activity for these and other CSD brands like A&W is forthcoming. Our energy portfolio was another area of strength in the quarter. Entering year three of our partnership, C4 maintained its momentum, driven by DSD execution to expand the brand's distribution points and grow display penetration. Our integration of GHOST kicked off well, as did the distribution transition in late Q1. As we assume full influence over the brand all the way to the shelf, we are beginning to execute against GHOST's significant growth opportunities. We are doing the same with emerging brands like female-forward Bloom Sparkling Energy, which quickly scaled to a half a share point in the category during Q1, and the recently launched mainstream-focused Black Rifle energy line. Now, that our thoughtfully constructed energy portfolio is in place, we are confident in our right to win, and our team is eager to seize the opportunity. In sports hydration, another exciting emerging category for KDP. Our work with Electrolit is entering year two on a strong growth trajectory. In Q1, the brand enjoyed significant and accelerating share gains, which should sustain as we pursue distribution white space and new packaging and product forms. Alongside our partner Group OPIZZA, we are committed to building electrolyte into a national and mainstream player, which will be supported by a state-of-the-art manufacturing facility currently under construction in Texas. Overall, we're very pleased with our U.S. refreshment beverages performance. Our portfolio has momentum. We are executing at a high level, and we have strong commercial plans for the rest of 2025. In U.S., coffee Q1 was a challenging quarter with a 3.7% net sales decline and profit pressure. Though the single serve categories transition in 2025 from volume-led to pricing-led growth requires some patients to navigate, our dual priorities are steadfast. First, mitigating record green coffee inflation, and second, fortifying our long-term growth model by addressing evolving consumer needs. During the first quarter, we took actions in support of both of these priorities. I'll begin with mitigating green coffee inflation. Given the magnitude of the pressure that we and the industry are facing, we implemented a price increase across our owned and licensed brands to start the year. These pricing actions appeared on shelf earlier than many peers, resulting in short-term volume and mix trade-offs in Q1. As already announced, industry pricing layers in over the coming months, we expect to see more typical price gaps among key single serve brands and for the net impact of our actions to become more favorable looking out into the back half. We will continue to evaluate all available levers to offset inflation over the course of the year. These include potential additional pricing, more productivity savings, and a sharper focus on the highest returning products, channels, and households. This brings me to our second priority, fortifying our long-term growth model. We are going after premium cold and next-generation opportunities to drive Keurig’s future growth with Q1 progress across each dimension. We've been building a tier of premium and super-premium coffees anchored by brands like Lavazza, La Calombe, Philz and others. These additions resonate with higher value consumers and drive positive mix, and we've proven we can strongly accelerate these brands' growth when part of our portfolio, as an example, Lavazza, K-Cup pods, saw over 30% growth in Q1 retail sales, demonstrating significantly enhanced momentum, just a couple of quarters after we assumed the brand license last year. Another major focus area is capturing more cold occasions through a variety of total coffee formats. In Q1, we introduced new flavors to expand on 2024's successful Refreshers platform. These products are proving highly incremental at key retailers. Our La Calombe ready-to-drink coffees also continued to scale nicely in the quarter, supporting the brand's transformation into a formidable challenger in this multibillion-dollar beverage space. Our future coffee vision is also steadily progressing with behind-the-scenes work on the Keurig Alta system and plastic-free, aluminum free K-Rounds pods. Over the last few months, we advanced in home consumer testing of the new system, generating valuable insights that we will apply as we expand the trial to even more households, as well as plan for future commercialization. These examples illustrate how we are balancing our U.S. Coffee activities this year between inflation mitigation and long-term growth initiatives. Though segment performance is likely to remain subdued in 2025, we are laying the groundwork for stronger and more multifaceted growth in the years ahead. Moving to international, Q1 sales grew in the mid-single-digits. We're pleased with KDP's relative trends across our primary countries and will continue to lean in to bolster our momentum as the year progresses. In Q1, we saw strong growth in liquid refreshment beverages, driven by Penafiel and our CSD portfolio, in particular Dr Pepper and Crush. Inflation-related pricing also started to flow through late in the quarter and supported top-line gains across the international portfolio. We expect segment growth to accelerate over the balance of 2025, reflecting increased price realization and the activation of exciting commercial plans, highlighting our key international brands, many of which enjoy strong local identities. To wrap up, our dawn-to-dusk beverage portfolio is delivering strong enterprise results, while continuing to evolve towards faster-growing spaces. Simultaneously, we are capably managing through changing economic conditions and mitigating associated risks. As we move through the year, we will remain flexible and proactive, as we work towards delivering on our 2025 financial commitments and advancing our long-term strategic priorities. I'll now turn the call to Sudhanshu and will return at the end with some closing thoughts. Sudhanshu Priyadarshi: Thanks, Tim. And good morning, everyone. We had a strong start to 2025. Our business has momentum, we are executing well, and we are operating with discipline and agility. Together, these factors give us confidence in our ability to continue to deliver solid results over the balance of the year. First quarter net sales grew 6.4% in constant currency. Our top line was driven by strong double-digit gains in U.S. refreshing beverages and healthy trends in international, which more than offset a challenging quarter for U.S. coffee. On a consolidated basis, the group was supported by multiple net sales drivers. Net price realization increased 2.8%, sequentially strengthening across each of our segments. This primarily reflected actions taken in response to inflation as well as some targeted trade spend refinements. Volume mix advanced 3.6% in the quarter which included solid base business growth, particularly in liquid refreshment beverages. The addition of cost to the KDP portfolio also contributed 2.9 percentage points to the top-line. Gross margin contracted 170 basis points versus the prior year. We expected this pressure given a difficult comparison and escalating inflation. Pricing and productivity should build in the coming quarters, and our labs become easier, which will help us better manage expected headwinds. SG&A leveraged 90 basis points. Disciplined expense management is an ongoing focus, but is taking on even greater importance in today's less certain economic enrollment. We are constructively cushioning our processes streamlining where it makes sense and arriving at more efficient ways of working. These efforts will continue to bear fruit over the coming quarters driving operating leverage as we grow. In total, operating income increased 3.9%. This translated to 10.5% EPS growth which was enhanced by below-the-line leverage, including a realized gain on the sale of our minority stake in Vita Coco. This transaction is testament to the merits of our flexible capital allocation approach, which I will discuss in more detail shortly. Moving to the segments. U.S. refreshment beverages posted another set of impressive quarterly results. Net sales growth accelerated to 11%. Volume mix was the primary driver, increasing 8%, including a 4.8 percentage point contribution from GHOST. Base business momentum was also strong, driven by CSDs and key partnerships. Net price realization contributed 3 points to segment net sales, primarily reflecting CSD pricing. Segment operating income grew 8.7%, as net sales momentum and productivity savings more than offset inflation. This growth also came, despite a sizable net headwind from lapping a larger C4 performance incentive in the year-ago period. In The U.S. Coffee segment, net sales declined 3.7% in the first quarter. As expected, net price realization inflected positively contributing 1.5 points of growth, as pricing actions on our owned and licensed brands began to flow through. However, this was more than offset by a 5.2% decline in volume mix. Part of the pressure reflected industry pricing layering in at different rates across the single subcategory, which contributed to short term volume and mix impacts. We also saw some retailers more closely managing trade levels as price increased. Segment operating income declined 12.5%. In the first quarter, net price realization and productivity proved insufficient to fully cover green coffee inflation and lower volume mix. We expect both revenue and operating income pressure to ease in the back half, as the balance between pricing, productivity and inflation improves and as mix effects normalize. In international, net sales grew 5.4% with growth across regions and categories. Growth was led by favorable net price realization of 4.1%. Volume mix was also up 1.3%, driven by particular strength in liquid refreshment beverages in both Canada and Mexico. Segment operating income declined 4.6%. Similar to last quarter, this reflected the phasing of DSD investments in Mexico, as well as an imbalance between pricing, productivity and inflation. Both factors were primarily a function of timing. For the full year, our International segment should remain a strong top and bottom line growth contributor. Moving to cash flow and capital allocation. We generated $102 million in free cash flow in the first quarter. Notably, this result included the known impact from a one-time $225 million GHOST distribution transition payment. So, on an underlying basis, our performance was even stronger. Our business model remains highly cash generative and we continue to expect a healthy free cash flow year in 2025. Our dynamic capital allocation strategy was on display during the first quarter, as we monetized our multi-year equity stake in Vita Coco. This was a clear demonstration of the mutual value that our partnership model creates. Since we began working with Vita Coco, we have helped to establish the brand as the clear leader in the vibrant coconut water category. The partnership has also generated attractive financial returns for KDP, including the realized gain in the first quarter from the sale of our minority investment in the company. Shifting now to our 2025 guidance. Our constant currency outlook is unchanged. We expect mid-single-digit net sales growth with a bias towards the high end of the range and high single-digit earnings per share growth. Based on current rates, we now anticipate that FX will represent approximately a 1 percentage point top and bottom line headwind for the full year. Our below-the-line assumptions remain the same as our prior guidance. Specifically, we expect interest expense in a $680 million to $700 million range, an effective tax rate of approximately 22% to 23% and approximately $1.37 billion diluted weighted average shares outstanding. Based on what we know today, anticipated tariff impacts in 2025, appear manageable relative to our guidance. While we are not immune to the effects of these tariffs, multiple counterbalances should keep us on track to deliver the year. These include a series of mitigation steps that we are pursuing, flexibility from first quarter over delivery and other in-year opportunities. Having said that, we recognize that some external elements, like future trade policy and potential consumer response are outside of our control. As a result, we will need to remain agile as we seek to deliver responsible and sustainable outcomes for KDP and for our consumers. In closing, we are pleased with the business momentum and a strong execution that powered our first quarter results. With our singular focus on beverages, scaled North American operations, and challenge our mindset. KDP is well-suited to navigate today's very dynamic economic landscape while delivering consistently. With that, I will turn the call back to Tim for closing remarks. Tim Cofer: Thank you, Sudhanshu. This morning, we also highlighted the continued evolution of KDP's Board of Directors to help steward our next stage of growth. First, following a rigorous and extensive recruitment process, we appointed two new independent directors, Mike Vandeven, and Lawson Whiting. These highly qualified, seasoned executives will bring valuable and complementary perspectives to our board. Second, Bob Gamgort's role is transitioning from Executive Chairman to non-executive Chairman of the Board, another natural next step in our governance. Having joined KDP more than 18 months ago and assuming the CEO role a year ago, I can say with confidence that KDP has entered an exciting new chapter in our time as a public company. Our Board is refreshed and energized, as is our executive leadership team. Together, we look forward to executing on the compelling growth and value creation agenda ahead. With that, we're now happy to take your questions. Operator: We will now begin the question-and-answer session. [Operator Instructions]. At this time, we'll pause momentarily to assemble our roster. The first question comes from Dara Mohsenian with Morgan Stanley. Please go ahead. Dara Mohsenian: Hey, good morning. So, first, just a clarification on the fiscal '25 guidance. There's obviously a lot of moving pieces. Just can you discuss high-level, your level of confidence in maintaining the local FX guidance in 2025? How much flex do you think you have to manage through a difficult environment that's caused most of your peers to have the lower guidance? Sudhanshu, the comments on tariffs were helpful. Can you give us a bit more detail on your exposure there and the potential offsets in the guidance? And then, just separately, we've seen very healthy level of organic sales growth in U.S. Refreshment in the last couple of quarters, driven by strong pricing as well as market share gains for your portfolio. Can you just discuss the sustainability of those drivers going forward, particularly in the context of a weaker consumer environment? A, on pricing, what are you seeing competitively, the willingness of retailers and consumers to stomach the additional pricing? And then B, just level of confidence that the market share gains will continue, particularly on the CSD side? Thanks. Sudhanshu Priyadarshi: Good morning, Dara. So, let me talk to you about the, I'm assuming you meant EPS guidance. So, our philosophy is to issue a balanced guidance that includes both risk and opportunities. But based on what we see today, we continue to expect high single-digit constant currency EPS growth. The primary drivers in that guidance, we're assuming good profit flow through from top line momentum in U.S. Refreshment Beverages and international, plus it's also including GHOST accretion as distribution is building and a strong productivity and disciplined expense management, which will support continued healthy brand investments level. As you know, there are incremental pressure points that has emerged even since February. Current tariffs now represent an additional headwind versus initial plan, slower than expected start in U.S. Coffee with improvement expected in second half. We believe we have identified these appropriate steps to offset these impacts. And now, we just have to execute. This include pushing hard on cost savings, evaluating additional pricing and mix management and pursuing alternate sourcing. Our Q1 EPS upsides also provides us some flexibility to absorb headwinds over balance of year. But as you said, it remains a fluid in movement, future trade policy and consumer health or watch points. These drive a wider range of outcome that is not always predictable. Having said that, we feel good about our ability to influence the factors within our control in 2025, which is why we have reaffirmed our outlook today. Tim Cofer : Yes. And Dara, I'll take the question on U.S. refreshment beverage. And as I said in my commentary, I mean, no doubt, we're pleased with the performance that we saw in the category. And it starts with, obviously, CSDs. And CSDs, the category itself continues to be very healthy. I think there is strong consumer value and appeal in that category overall, and continued price and mix opportunity for us. Within a healthy category, KDP is outperforming. I mentioned Dr Pepper, which remains very strong. We're very happy with the Blackberry launch, continued expansion of the zero platform and distribution gains. Canada Dry gained share in the quarter, 7UP is back to share growth, given a brand refresh and launch of Tropical. So CSDs are really firing on all cylinders for us. Second, in energy, we had a strong quarter of energy. I think our portfolio of energy brands is starting to show. C4 has maintained momentum as it enters year 3, the partnership, we expect continued growth there. GHOST, it was a good start on GHOST in Q1. The distributions transitioned over to us, and you saw a good growth there. And Bloom is scaling very nicely, very quickly in this female forward subsegment. I go to sports hydration, Electrolit, very pleased, growing strong double digits. We expect robust growth on the year for Electrolit. We've just lapped our initial introduction of Electrolit into the portfolio. and believe that with our DSD execution, we can really magnify that growth opportunity, scale it nationwide, bring it into mainstream aisle bring some innovation to market. Overall, I think as you look at US RV, a great quarter, robust innovation, marketing, strong DSD activation, and we continue to be bullish on the year. As you spoke specifically at the tail end of your question on pricing in US RV, we see our growth largely driven by base business volume and mix gains and obviously goes contribution. Pricing will be a contributor this year. It's primarily CSDs. We announced our, what you call, typo CSD price increase that took effect at the beginning of the year, that's filtering through the P&L. And I think, as I said earlier, it's clear from the overall category resilience that consumers continue to see great value in the CSD category relative to LRBs. Now that tariffs are in the picture, it does introduce another dimension that we'll need to think through. CSDs, like our other categories, are at least in part reliant on some aspects of a global supply chain. And so, as that develops, we'll consider all potential mitigations which could include additional pricing actions late in the year to protect our long-term ability to invest and keep this business as healthy as we've seen it in Q1. Operator: The next question comes from Lauren Lieberman with Barclays. Please go ahead. Lauren Lieberman : Great. I wanted to talk a little bit about coffee and elasticity. I know, Tim, you mentioned in your prepared remarks some dynamics around timing of when the various players in the category put through pricing. But you have spoken in the past about, needing to manage affordability broadly. But if we're thinking about a kind of potentially constrained or already seeing a constrained consumer environment, where you stand on some of that messaging to really promote the idea of at home coffee being an affordable solution, et cetera, et cetera? And just kind of how you're thinking about elasticity, as the industry kind of gets more coordinated, if you will, on pricing for the green coffee inflation? Thanks. Tim Cofer : Absolutely, Lauren. So, no doubt in this inflationary environment that we find ourselves here in '25. As I said, we've got two main priorities on the coffee business this year. The first is mitigating that green coffee inflation, including now tariff-related impacts. And the second is making sure we are playing the long game and we're advancing long-term initiatives, specifically for us. That means cold, that means premium and next generation propositions. We implemented a pod price increase in January on our owned and licensed portfolio. And as we look at the Q1 marketplace dynamics and the data that you see, we did, I think its clear competitor pricing layered in at different rates across brands and channels. And so far at a category level, the elasticity is certainly manageable and not particularly surprising. But the slower-than-expected pacing across competitive dynamics did weigh on our volume and mix performance in Q1. And I would say that the price gaps weren't normal or consistent with historical norms. So, we were under some pressure, therefore in Q1, and quite honestly, I'd expect those pressure points will persist likely into Q2, but we do expect it to ease looking into the second half. And we're already seeing evidence that competitive pricing is starting to accelerate across the category, especially if you look at the last few weeks of data. So, in the guidance that Sudhanshu and I provided, we've calibrated for that reality, and we can stay patient as this plays out. As you go into the back half, we will consider additional inflation mitigation steps in response to both green coffee and tariffs. Additional pricing could be one of the levers, but there are others as well, productivity mix and a broader cost base. As you think about the other part of your question, talking about affordability, no doubt, particularly in this macro environment, consumer affordability is critical, and really demonstrating value to consumers is important in this inflationary environment. And we've talked in the past, Lauren, that at-home coffee, given its multi-serve nature, is more exposed on a total dollar outlay. And so, to address this, we are focusing in two areas. One is making sure we've got the right price pack options. And I remind you and others that last year we actually did a price pack adjustment that I think will serve us well in this environment to hit a lower total dollar outlay per pack. So, think 12 to 10 or at club, 100 to 80 count. And the other to your question is emphasizing the relative value of our proposition relative to at-home coffee. And we think that that can play well. And even on the premium end, you can have that incredible cup of Lavazza, La Calombe, Kicking Horse, Philz Coffee, all the quality, all the value, all the convenience at a fraction of the coffee shop alternative price point. So, that is certainly something we will leverage in this inflationary environment. Operator: The next question comes from Nik Modi with RBC Capital Markets. Please go ahead. Nik Modi : Thanks, good morning, everyone. Just two quick ones for me. Just, Tim, I'd love your perspective on activity amongst Hispanic Latino consumers here in the U.S. I mean, obviously, it's a lot of immigration news and a lot of suppression, I think, of activity, but it's been pretty volatile. We're hearing in April, for instance, very high Hispanic populated areas and brands leveraged to those areas are actually doing much better. So, I would just love your thoughts on kind of what you're seeing in the market and kind of how you think this will play forward. And then just one question on Snap, given all these state-level initiatives, what exactly is the industry's response or can the industry's response be from a legal perspective just given that there's a lot of arguments to be made against actually banning soda from Snap, for instance, juice drinks, some of them have more sugar than CSDs just as an example. So, I just would love your thoughts on that. Tim Cofer : Yes, Nik. So, we'll start with Hispanic. As you well know, the Hispanic consumer is the second largest demographic group here in the U.S. and accounts for a meaningful percentage of our business and broader CPG purchases. And we have many great brands that appeal to Hispanic consumers. But I would say our exposure to this group is in line with our peers and the overall category dynamic. Over the last couple of months, our data certainly is aligned with yours in terms of seeing softening trends among Hispanic consumers relative to the broader population. And when you dig into that, you see that manifesting both in terms of fewer trips and spend per trip. Having said all that, I would say that the slowdown year-to-date that we're seeing in the Hispanic consumer purchase dynamic is not yet sufficient to move the needle on our enterprise trends. And I think you see that overall in the total enterprise results that we printed here for Q1. So, the way I'd characterize it is a watch point I think it's contributing to the overall dampened consumer sentiment you're seeing in the U.S., we are seeing some modest changes in consumer behavior and overall signs you see that external and macro factors are starting to have an impact. in terms of consumer sentiment. But it's not yet sufficient to move the needle. And I think on sales trends in our core categories show that we remain resilient. Then to your second question on Snap, I'd start with a couple of facts for you and others on the call. And that is, when you look at the grocery bill receipts of SNAP recipients and non-SNAP households, they're actually strikingly consistent, and you see beverages playing an equally permanent role in both set households. Second thing I'd say is SNAP recipients fund part of their grocery bill through Snap subsidies and part of their grocery bill with their own money. And I think all this tends to suggest that should there be change in Snap, you could see a shift of kind of sort of funds from left pocket to right pocket. But I'm not sure -- and we would not expect a significant change to our categories. You ask about our position as an industry, and we certainly stand with our industry colleagues to advocate for consumers' freedom of choice and giving SNAP recipients, treating them with the same dignity as anyone else to give them the choice to buy the food and beverage brands that they'd like. And of course, providing transparency on our ingredients. And I think as a beverage industry, we've actually done a great deal. You might say more than anyone else to reduce total caloric load in the U.S., calories from beverages are actually down 40%, since 2000, and 60% of the beverage portfolio in the industry and here at KDP are lower no calories and zero sugar. So, we've done a lot here. We will continue to work with the administration and our industry colleagues to advocate for consumers. And the last thing I'd say is, to the extent there is any exposure here, KDP exposure would be similar to our peers. Operator: The next question comes from Chris Carey with Wells Fargo Securities. Please go ahead. Chris Carey: Hi, good morning, everyone. Tim Cofer: Yes. Chris Carey: I wanted to ask about free cash flow. So, obviously, it was a noisy quarter with GHOST, but we're getting to this point where free cash flow is going to be less impacted by the payables program. Obviously, we've got this hit in Q1. You've kind of talked about capital allocation in the quarter, or as a general concept today. Can you maybe just help us frame how you would view, maybe with a bit more specificity your free cash flow development as we go through this year and really into 2026, and perhaps comment on how we should be thinking about free cash flow conversion. I'm conscious that free cash flow has been a major debate on the company, but the payables program paying it down was a meaningful part of that. And so, just trying to understand the path to a more tangible free cash flow inflection and what you would intend to do with that cash, as it starts coming through in a more meaningful way? Thanks. Tim Cofer: Good morning, Chris. As you know, cash generation is a hallmark of KDP. As you said, we deliberately took a step back over the last couple of years. And now, we are on a clear path of returning to the structured conversion level. You can see our free cash flow profile is accelerating, and we made significant progress in 2024. And we plan to have a further improvement in 2025. Quarterly cash flow can be lumpy. We talked about Q1, but we had a good start in Q1. And it was up year-over-year, even with the high one-time gross distribution termination fee. In the long run, we are on track to restore business to the long-term target conversion level over the next couple of years. Our goal remains, which I've said before, to return to the conversion level that are commensurate with our largest peers. It will take us couple of years, but you will see 2025 more half, second half weighted, but it should be better than 2024, especially after you take into account the $225 million distribution payment. Your question on capital allocation. We are highly focused on deploying this cash, as we generate, the cash we generate in a smart, disciplined and dynamic way. Our long-term capital allocation priorities are unchanged. They include internal investments, partnership M&A, steady dividend growth and opportunistic share repo, and we strive to keep our leverage below 2.5 times. In the current environment, deleveraging is the priority, but we'll continue to consider opportunities to invest in growing -- grow the business while staying disciplined on our capital returns. Operator: The next question comes from Peter Grom with UBS. Please go ahead. Peter Grom : I wanted to ask about GHOST. The performance for the brand was very strong, but I think the expectation was that the contribution would be the smallest in the first quarter and then build from here. Is that still the right expectation as we think about the model moving forward? And then just second, a lot of discussion on moderating category growth across many of your categories. But energy drinks seems have gone the other direction year-to-date. So just a little bit curious what you think is driving the improvement and whether you would anticipate growth to kind of continue to accelerate, particularly as the industry starts to cycle easy or easier comparisons in the summer here? Thanks. Tim Cofer : Yes, Peter. So, let's address both parts of your questions, and I might even take it in reverse order. But it's been a fast start out of the gate in Q1 for us on our energy platform broadly. And it's exciting to see already our platform of brands winning and showing up as anticipated in terms of very complementary and incremental to one another. At a category level, to the second part of your question, energy, as you said, is 1 of the fastest-growing categories within liquid refreshment beverage. You saw a little bit of softness kind of last summer, Q3, et cetera. You saw it start to pick up in and year-to-date retail sales are in the high single digits. And like you, we look at scanner data every week, and I think you've seen robust growth the last 7 weeks, 8 weeks in a row double digit. So, feeling good about the category, feeling good about the fact that it serves that universal need feeling good even as we go into the back half and we lapped some of the softness that you saw in 204, those are good comps at a category level. Then talking KDP specifically, our portfolio has great momentum. And I mentioned, and I'll cover the other three and then get into GHOST. But C4, we're now entering year 3 of the partnership, big strong player in the performance subsegment and performing very well. Bloom Energy off to a red-hot start strongly resonating with women still a young brand already captured more than 0.5 point. And Black Rifle Energy just beginning to hit shelves. And then you get to GHOST. And you see us growing double digits at a retail level. I'm very happy with our progress year-to-date. And I'd highlight a few points. Number 1 is we've got a great working relationship with the GHOST team. We're aligned on our vision and their vision. We've got strong coordination. We've got complementary cultures. It's working kind of at the people and team level. Second, we're well into transitioning to distribution and setting in motion our joint commercial plans. The process is going smoothly so far. It's on schedule. The handovers are going well. And now that we've got greater control over the brand, all the way to that point of buying, I think you're seeing those marketplace trends accelerating. Obviously, our focus on maximizing distribution, TDPs, total points of distribution, cooler space, displays, et cetera. And third, and I think most importantly, we are on track to deliver on our plan and our expectations for 2025 and the long-term. And yes, to your question, we do believe we will continue to build momentum in the balance of the year. Operator: The next question comes from Brian Spillane with Bank of America. Please go ahead. Peter Galbo: Hey, good morning. It's Pete Galbo. Can you hear me? Tim Cofer: Hey, Pete. We hear you. Peter Galbo: Hey, guys. How are you? Thanks for taking the question. Appreciate it. Just maybe one clarification and then one kind of broader question. But Sudhanshu, maybe you can just help us a bit more, I think it was about $0.04 of upside on the quarter relative to consensus. Obviously, you're not changing the guide and you've outlined that related to tariff and maybe the consumer environment. But maybe you can just help us a little bit with the phasing and how you're thinking about the build of EPS over the rest of the year from a cadence perspective? Sudhanshu Priyadarshi: So, Pete, the beat in Q1 was some was driven by Vita Coco sale. We sold Vita Coco stake with a very successful stake, and we had a gain of close to like $0.015 if you think about it. So, obviously, this giving us flexibility in balance of year to manage all the consumer headwind and tariff. We guide for the year and we're reaffirming the guide that it will be MST sales to the buyers towards the higher end of sales and the EPS mid-single-digit. Obviously, Q1 was a double-digit growth, but you saw the below-the-line helped. So, that's what I would say. I don't want to guide by quarter, but you can think about full year will be adjusted EPS, and Q1 is giving us flexibility to manage through all the headwinds, whether it's trade, tariff or consumer. And IR can help you more towards modeling, if you have more questions. Operator: The next question comes from Kaumil Gajrawala with Jefferies. Please go ahead. Kaumil Gajrawala: Hey, guys. Good morning. It's bring your kid to work day at Jefferies. So, I'm going to have my son, Cameron, ask a question. Longwood top for Blackberry is already 1% market share and was only lost in February. How big of a contributor will it be for the year? You guys get that? Tim Cofer: Wow, fantastic. I think it's my first ever question from a young person, and I appreciate it, Cameron. And I hope Cameron is a big fan of Dr Pepper Blackberry. Indeed, to his question, we're really, we're pleased with brand Dr Pepper and the results in Q1. This is, as you know, the number two CST brand by volume now for two straight years and it's our, we are on track for our eighth consecutive year of market share growth. We think that we've got continued runway for growth through our strategy of bringing great flavors like Dr Pepper Blackberry into the portfolio. We think we can grow through closing distribution gaps, and we think we can also grow through the Zero platform, which continues to grow at a double-digit rate. Specifically, to Cameron's question on Dr Pepper Blackberry, it's on par already with some of the strongest innovations over the last few years. We launched this one new this year across formats varieties, which means not only bottles and cans, but also in fountain and in frozen. And we're just 8 weeks into the launch, and we've achieved nearly 1 point of market share. You'll see us supporting. If you haven't seen our advertising and marketing, it's great. It's up there, full funnel marketing activation across all the different digital, social and linear channels. And I think you'll see continued strength of Dr Pepper year to go. Thanks, Cameron. Operator: The next question comes from, and the last question today comes from Filippo Falorni with Citi. Please go ahead. Filippo Falorni: Good morning, everyone. I was wondering if you can provide a little bit more color on kind of the cadence of coffee going forward. I know you mentioned there were puts and takes in Q1 and you're expecting some sequential improvement, but maybe some direction on the improvement there? And then specifically on the tariff side, still in coffee, can you remind us, like the implication both on the brewers and the raw material impact, how you're -- you should impact the P&L and how you're planning to mitigate it? Thank you. Sudhanshu Priyadarshi: I'm assuming you meant -- I'm giving you answer more of the OI operating income. So, we had a soft Q1 OI and both revenue and why, and we anticipated a muted start of the year, but it was worse than what we expected in quarter 1, and Tim gave the reasons. It was mainly driven by timing of industry pricing phasing into market was slower than what we anticipated. We continue to think that 2025 will have sales and OI pressure in U.S. coffee relative to our initial planning strength, we have tempered our segment outlook to reflect two factors: first, what we saw in Q1, we will continue. It will be Q2 to walk through some of this volume mix headwind. And then the second of your question on incremental impact of tariff that is currently in place. It applies to green coffee and it's also applies to brewer. We already announced a grower price increase in the market. So, we're trying to manage for profit dollar for the year. But we feel that whatever coffee does this year, it will continue to be subdued. We feel good about our full year guidance of sales and HSST enterprise level. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management. Jane Gelfand: Thanks so much, Drew, and thank you, everyone, for joining us on a busy morning. The IR team is here all day to answer any follow-ups you may have, and we appreciate the interest. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen and thank you for standing by. Welcome to Keurig Dr Pepper’s Earnings Call for the Fourth Quarter and Full-Year of 2024. This conference call is being recorded and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper’s, Senior Vice President, Finance, Jane Gelfand. Ms. Gelfand, please go ahead. Jane Gelfand: Thank you and hello, everyone. Earlier this morning, we issued a press release detailing our fourth quarter and full-year results, which we will discuss during this conference call and in the accompanying slide presentation that can be tracked in real time on the live webcast. Before we get started, I'd like to remind you that our remarks will include forward-looking statements, which reflect KDP's judgment, assumptions, and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting KDP's business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to our earnings release and the risk factors discussed in our most recent Form 10-K, which will be filed with the SEC later today. Consistent with previous quarters, we will be discussing our Q4 and full-year performance on a non-GAAP adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. Definitions and reconciliations toward the most directly comparable GAAP metrics are included in our earnings material. Here with us today to discuss our results are Keurig Dr Pepper’s Chief Executive Officer, Tim Cofer and Chief Financial Officer and President, International, Sudhanshu Priyadarshi. I'll now turn it over to Tim. Tim Cofer: Thanks, Jane, and good morning, everyone. 2024 was a pivotal year for KDP. In a demanding operating environment, we delivered attractive performance consistent with our long-term algorithm and full-year guidance. We unveiled our refresh strategy, which we activated as the year progressed to set the stage for KDP's next phase of growth. And we took bold action to extend our portfolio into attractive white spaces and strengthen our commercial capabilities. In short, we struck a thoughtful balance between achieving our annual commitments and setting up KDP for consistent, sustainable success. 2025 is shaping up as another dynamic year for the CPG industry, and we will remain agile in our execution, while targeting a similarly balanced set of outcomes, delivering on algorithm, financial results, and simultaneously advancing strategic priorities to fortify our long-term growth model. Let me start with a quick review of our key 2024 accomplishments, which spanned each of our five strategic pillars. Beginning with consumer-obsessed brand building, a successful innovation slate and engaging marketing campaigns drove attractive growth across many of our iconic brands. To provide just a few examples, Dr Pepper Creamy Coconut was our largest limited time offering ever and generated significant buzz. We capitalized on the dirty soda cultural phenomenon powered by social media, which helped drive our eighth consecutive year of market share growth for Dr Pepper. Canada Dry's first brand extension in years, Fruit Splash Cherry, was the number one innovation in the CSD category. The Mott's fall marketing campaign, highlighting its fresh, minimally processed apples, fueled full-year share gains in juice and strong back half momentum in sauces. And in coffee, our owned and licensed brands accounted for over 50% of the pod category innovation, spearheaded by our distinctive, the original donut shop refreshers line, which was the number one new product in the category and doubled our initial plan. We shaped our now and next portfolio seamlessly transitioning Electrolit and La Colombe to our DSD network and onboarding several new coffee partners, including leading brands such as Black Rifle in the U.S. and Canadian Icon Kicking Horse. GHOST is yet another example of our portfolio strategy in action. Through this acquisition, which closed at year-end, we added a successful emerging brand in the high-growth energy category that will benefit from inclusion in our advantaged distribution system. In total, our actions accelerated KDP's portfolio evolution to structurally faster growing segments within the beverage industry. We amplified our route to market advantage and further extended the reach and power of the KDP, DSD system across multiple geographies and sites. Most notable in 2024 was the territory acquisition to extend our manufacturing and distribution presence into Arizona. The transaction provided direct exposure to a growing market and added high quality scale to our supply chain and logistics networks. We also executed well across our existing footprint, translating to healthy marketplace trends for our base business and strong performance for our partner brands. Our Fuel for Growth focus permeated the organization, driving productivity savings at the high-end of our target and generating SG&A overhead leverage, particularly in the second-half of the year. And finally, we strengthened our free cash flow generation, which funded dynamic capital allocation activities. These included $1.1 billion of share buybacks, our fourth consecutive annual dividend increase, and over $1 billion of strategic investments that will enhance our ability to deliver consistent, profitable growth in the future. Our strategy and the five pillars underpinning it represent our North Star. In 2025, we will set a high bar for operational excellence, while further advancing each of these pillars as we become an ever stronger and more advantaged beverage company. To summarize our full-year 2024 financial performance, we delivered results consistent with our long-term algorithm, with constant currency net sales growing approximately 4% and EPS growing 8%. Strong productivity and overhead savings drove P&L leverage and funded higher marketing investment. Free cash flow generation and conversion also improved considerably relative to prior year in keeping with our expectations. The strong performance during the year was led by our U.S. refreshment beverages and international segments, which each demonstrated standout momentum and together represent over 70% of revenue. In U.S. coffee, we made progress and strengthened our business resiliency as the industry heads into an inflation-driven pricing cycle. Moving to Q4. At the enterprise level, we finished the year with momentum. During the quarter, KDP delivered a meaningful top line acceleration and solid bottom line growth. Constant currency net sales increased more than 6%, led by U.S. refreshment beverages, which delivered an impressive double-digit sales gain. Notably, the net revenue trend across each of our three segments accelerated relative to the third quarter. Volume mix was the primary top line driver with year-over-year growth in each business. Price was also a positive contributor with gains in U.S. refreshment beverages and international more than offsetting temporary price pressure in U.S. coffee. Our top line growth, productivity savings and overhead discipline mitigated escalating inflation, enabling increased investment behind our brands and solid EPS growth. Focusing on Q4 segment results, U.S. refreshment beverages net sales grew a very strong 10%, led by a volume mix increase in the high-single-digits. Our teams executed exceptionally well to deliver this growth, which reflected base business momentum, traction from new partnerships, and route to market additions. Carbonated soft drink momentum was particularly strong in Q4. The category remains healthy, and we benefited from compelling innovation and brand activity, as well as offerings that appealed to value conscious consumers. Our CSD brands continued to win in the marketplace with market share gains in the quarter. Full flavor Dr Pepper is now the number two CSD in the category. And the Dr Pepper brand is the undisputed leader in the vibrant CSD flavor segment. Dr Pepper was also the CSD category's largest share gainer during Q4, reflecting its consumer appeal, unique positioning, and the benefits of our commercial activities. For example, the seventh season of our Fansville college football marketing campaign was our most successful yet. We also saw continued traction from Dr Pepper's zero sugar portfolio, which will remain a strong growth factor going forward. Canada Dry was another top CSD performer, supported by our Fruit Splash Cherry innovation. And 7UP grew market share as consumers responded to our Shirley Temple Holiday LTO and refreshed brand design. In 2025, we expect robust CSD growth to continue, supported by engaging full funnel marketing activations and a promising CSD innovation lineup designed to extend our flavor leadership. This includes Dr Pepper Blackberry, which combines Dr Pepper's original 23 flavors with the rich sweetness of blackberry. 7UP Tropical, which blends the crisp taste of 7UP with mango and peach flavors. And exciting seasonal activations across other iconic brands, including an indulgent and nostalgic A&W Ice Cream Sunday beverage and new flavors from our Crush and Sunkist brands. Notably, Dr Pepper Blackberry marks the first time we are simultaneously introducing an innovation across bottles and cans, fountain and frozen to maximize availability across various formats that our consumers enjoy. Beyond CSDs, the next largest driver of our Q4 growth was Electrolit, which is enjoying accelerating trends after converting to the KDP, DSD system. Electrolit is one of the fastest growing brands in the sports hydration category, and we see significant runway for future expansion. In 2025, we will focus on strengthening Electrolit’s distribution, including further transitioning the brand from Hispanic specialty to the mainstream sports hydration aisle. We will also leverage our DSD muscle to build Electrolit’s presence in multi-pack and zero sugar offerings where the brand meaningfully under indexes versus the category leaders. Also during Q4, we made significant progress advancing our energy strategy. We drove strong growth for C4, gaining share within the attractive performance energy space and achieving an additional equity milestone in the process. We also began to transition Black Rifle Energy and Bloom to our DSD distribution network and closed on the GHOST acquisition. With a formidable, distinctive, and complementary energy portfolio now in place, we are enhancing our operating structure and adding dedicated resources to ensure KDP’s success in this important high-growth category. Just three years ago, our share in energy would have been close to zero. Today, it is over 6%. In 2025, we expect well over $1 billion in retail sales from our energy brands and have set our sights on achieving a double-digit share position in the coming years. Overall, we're pleased with the performance of our U.S. refreshment beverages segment. Our exceptional Q4 results capped a strong 2024, and we have exciting plans in place to support sustained momentum in 2025. In U.S. Coffee, Q4 net sales decreased 2% with a modest volume mix gain, including pod volume growth, more than offset by a temporary net price decline. We are encouraged by the improving state of the category and traction from our own portfolio efforts. Let me elaborate. First, year-over-year trends in the at-home coffee category improved on a value basis, when compared to Q3, and the exit rate was healthy, with December representing the strongest month of the quarter. Second, in Q4, we continued to emphasize affordability, drive premiumization, and advance at-home cold coffee offerings, all initiatives that we believe will have multi-year relevance in the category. Consumer acceptance of our price-packed down counts remained strong. Our premium product tier continued to grow through our expanded commercial relationship with Lavazza. And we captured incremental consumers and occasions through cold offerings like K-Cup Refreshers and our new K-Brew and Chill Brewer. Third, we made progress expanding our participation in coffee formats and channels where we have historically been underrepresented. Our ready-to-drink coffee partnership with La Colombe performed very well with retail sales growth meaningfully accelerating in Q4. Momentum in away-from-home coffee also improved in the quarter and we see significant opportunity into 2025 as in-office work ramps and we further push into channels like hospitality and food service. The combination of these factors put U.S. Coffee on firmer footing exiting 2024, positioning it to be more resilient in 2025. We expect category conditions to be quite different this year, given the inflationary pressure from coffee commodity costs. Accordingly, we are managing the business with two primary objectives. First, to preserve profit dollars and our ability to reinvest despite escalating green coffee costs. In response to this inflation, we announced pricing in Q4 that began to take effect in January and saw many competitors take similar steps. However, the commodity price has continued to move even higher since then, and we are evaluating all available options to offset the incremental pressure. These levers include driving greater productivity, optimizing mix, and may also require further pricing actions with some elasticity offset. Our second objective is to continue to steward the single-served category through marketing, innovation, and activation in brewers and pods, while expanding our presence across total coffee occasions and solutions. We are planning to introduce compelling new products in various formats this year, and behind the scenes, we are advancing work on more disruptive launches like Keurig Alta and K-Rounds plastic and aluminum free pods for the years to come. Turning now to International, we delivered another quarter of healthy top line growth with constant currency net sales increasing at a high-single-digit rate. Momentum was broad-based across the portfolio. In international coffee our top line was driven by market share gains for brewers and pods. In cold beverages, our performance was led by Mexico LRBs, which grew nicely despite some signs of a macroeconomic slowdown. These results were propelled by Penafiel line extensions, the expansion of power brands like Dr Pepper within Mexico, and route to market investments across traditional and modern trade. During the quarter, we signed a Canadian licensing deal for Nestea, the leading ice tea brand in the country, furthering our international partnership strategy. The partnership will pick up later in 2025, and through this iconic brand addition to the portfolio, we expect to establish a leading position in an important LRB category, while benefiting from enhanced scale across our total Canadian operations. All in, our international segment continues to perform well. We are prioritizing this business for reinvestment, underpinning our confidence it can remain an outsized growth driver going forward. In closing, I'm pleased with our performance during 2024. We delivered strong results in a challenging environment, while simultaneously positioning the business for the long-term. This outcome was a direct output of the talent, dedication, and hard work of our 29,000 colleagues across KDP. On behalf of my executive leadership team, I'd like to thank them for their efforts and impact. Our challenger mindset is well-suited for the current environment, and we expect to continue to see strong results in 2025 from empowering our teams to play offense and take calculated risks. I'll now turn it over to Sudhanshu and we'll return with some closing thoughts about the year ahead. Sudhanshu Priyadarshi: Thanks, Tim, and good morning, everyone. We are pleased with our results for the year. We've demonstrated excellent execution across the organization. We delivered 3.9% net sales growth, drove robust productivity to expand gross margin, and leveraged SG&A to tight expense management. As a result, we grew operating income 9% and EPS 7.8%. We also meaningfully strengthened our cash flow generation. And as Tim outlined, made notable strategic progress to lay the groundwork for our success in 2025 and beyond. Our fourth quarter closed the year on a strong note. Net sales grew 6.2% in constant currency, showcasing an acceleration relative to the first three quarters and led by U.S. refreshments beverages and international. Enterprise volume mix grew 5.3%, reflecting healthy base business trends and an ongoing contribution from new partnerships. Net price realization was also a positive contributor, increasing 0.9%. Gross margin contracted 120 basis points versus the prior year. We generated significant productivity savings in the quarter and also benefited from positive price realization. However, this was more than offset by building inflationary pressures and the impact of lapping a tough year ago comparison. SG&A leveraged 20 basis points, despite an increase in marketing investment reflecting and enhanced overhead efficiency mindset across the organization. All in, operating income grew 3.4% and including a tailwind from lower shares outstanding, EPS advanced 5.5%. Moving to the segments, U.S. restructuring beverages net sales grew an impressive 10.3%, accelerating from a mid-single-digit growth rate in the third quarter. Volume mix was the primary driver, increasing 7.5%, led by base business momentum, particularly in CSDs. We further benefited from an incremental contribution from Electrolit where our partnership is progressing well and growth is accelerating. The quarter also included the modest benefit of an extra shipping day due to calendar shifts. Pricing grew 2.8% in the quarter, primarily reflecting favorable price realization in our CSD portfolio. Segment operating income increased 8.6%, driven by the very strong net sales growth and robust productivity savings. We delivered this result, while reinvesting even as we absorbed a net headwind from lapping a larger C4 performance incentive in the year ago period. In U.S. Coffee, net sales declined 2.4%. Volume mix grew 0.7% in the quarter, driven by a 1.1% increase in pod shipments. Our strategic initiatives showed traction with the underlying themes of affordability, hold, and premium to remain in place on a multi-year basis. Brewer shipments declined 4% in the quarter below point of sales consumption, due to seasonality. On a full-year basis, which smooths out the seasonality related noise, brewer shipments increased 7.3%. Segment pricing declined 3.1% in the fourth quarter. We had expected some lingering pressure this quarter, but nonetheless encouraged by the improving trend. We anticipate category pricing will strengthen further in 2025 based on actions taken in response to green coffee inflation, including our January price increase. Fourth quarter segment operating income declined 5.7% with productivity savings more than offset by the net price decline and green coffee inflation. Moving to international, net sales grew 8.5% in constant currency. The strong result was led by volume mix, which increased 6.5%, reflecting positive momentum across regions. Net price realization was also a growth driver, contributing 2%. Inclusive of unfavorable FX, reported net sales increased 0.8%. Segment operating income declined 8.6%. This reflected two primary factors. First, a strong reinvestment in the quarter, including DSD expansion activities in Mexico and higher marketing across the segment. Second, escalating green coffee costs in the fourth quarter with related pricing actions in Canada, due to take effect in the middle of the first quarter. Importantly, we see these as temporary dynamics and expect our international segment to remain a strong top and bottom line growth driver in 2025 as a whole. Moving to the balance sheet and cash flow, we generated a strong free cash flow of almost $700 million during the fourth quarter. This brought full-year free cash flow to $1.7 billion, a significant step up versus prior year, and we expect further progress in 2025. Cash generation is the hallmark of KDP, and we remain on track to restore our business to healthy structural conversion levels over the next couple of years. As Tim discussed, during 2024, we deployed the cash flow we generated in a variety of value enhancing ways, including over $1 billion of strategic investments to acquire a 60% ownership in GHOST and expand our DSD footprint into Arizona. $1.1 billion worth of share buybacks, and a 7% increase in our quarterly dividend, marking our fourth consecutive year with a dividend raise. We ended 2024 with management leverage of 3.3 times, which reflected the GHOST transaction. This was above our long-term target of less than 2.5 times, and more of our focus in 2025 will be on deleveraging. However, we feel comfortable that our accelerating free cash flow profile can support a disciplined, multi-pronged capital allocation strategy that also includes investments and steady dividend growth. Moving now to our 2025 guidance. On a constant currency basis, we expect mid-single-digit net sales growth and high single-digit earnings per share growth in line with our long-term algorithm. Based on current rates, we anticipate that FX will represent an additional 1 percentage to 2 percentage point headwind. Our outlook assumes good momentum in our U.S. refreshment beverages and international segments and an incremental contribution from the GHOST acquisition. The plan also recognized that U.S. Coffee is likely to remain more subdued in a dynamic commodity environment, even with higher pricing. We expect strong productivity and overhead discipline to generate fuel for growth and to support healthy operating income gains in the coming year. Below the line, we forecast interest expense in a $680 million to $700 million range, an effective tax rate of approximately 22% to 23%, and approximately $1.37 billion diluted weighted average shares outstanding. There are a couple of factors worth considering when it comes to the quarterly phasing in 2025 were: one, Q1 will reflect the impact of a later Easter and one fewer shipping day, compared with prior year. Plus, the balance between inflation, pricing, and productivity generation is slated to improve over the course of the year. As a result, we anticipate a stronger top line and bottom line momentum in Q2 through Q4, particularly as the contribution from GHOST builds following the transition to our distribution network. In closing, we are pleased with our 2024 performance and the good finish in the fourth quarter. We drove healthy marketplace trends across our base business, secured additional scale in attractive white spaces, strengthened our advantage route to market system, and embedded a greater efficiency focus throughout the organization. And we did this all while delivering on our plans. We are confident 2025 will be another year of progress for KDP. We expect to showcase our operating agility in a dynamic environment, our relative insulation for currency volatility, and most importantly, our building momentum in the industry. With that, I will turn the call back to Tim for closing remarks. Tim Cofer: Thanks, Sudhanshu. We achieved a great deal in 2024 and we're committed to delivering another strong performance in 2025. As we look to the year ahead, we are cognizant of the demanding operating backdrop and will act with agility to navigate uneven consumer sentiment, higher inflation, and a shifting regulatory landscape. We have momentum across much of the portfolio with an exciting slate of marketing, innovation, and sales activation plans. We are moving with speed to unlock significant productivity savings and, where appropriate, implement pricing in response to inflation and to ensure continued investment in the business. And we are hitting the ground running with GHOST, which we will activate in a big way as we transition distribution over the coming months. These factors support our confidence in another on-algorithm year, during which we will continue to distinguish ourselves as an advantaged player in the exciting beverage industry for the long-term. Thank you for your time, and we're now happy to take your questions. Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Chris Carey with Wells Fargo. Please go ahead. Chris Carey: Hi, good morning, everyone. Tim Cofer: Good morning. Chris Carey: So I wanted to just maybe talk through the building blocks for 2025 beginning with the commentary on Q1, you've got the leap year and you've also got the Easter dynamic, so revenue and profit well and you also have green coffee. So revenue and profit do build. But I think there's also a dynamic where we're looking at year-to-date consumption trends, which are very strong, particularly in your U.S. refreshment business. So are you seeing anything different versus what we're seeing, or are we really just talking about some calendar timing dynamics and green coffee inflation as we build through the year? And just connected when you think about the overall delivery, from a top line standpoint, from volume mix versus price, and from a bottom line standpoint, do you have any thoughts on kind of where you would be thinking you're trending within the range, given we're so early in the year. So just any thoughts on that underlying momentum you see in the business entering the year and just some thoughts on relative ranges and drivers for top line and bottom line? Thanks so much. Sudhanshu Priyadarshi: Thanks, Chris. So first of all, we are pleased with our on-algo performance in ‘24 and you saw the exit run rate in Q4 and we feel we are well set up to deliver our algo MSD top line and HST EPS yet again in 2025. Let me walk you through the sales and EPS driver as we see them today. This year will be a year with a lot of macro things moving, but what we see today, there are some differences in how we think on sales and how we think on EPS. So when it comes to the revenue growth, it's fair to say that we see a path towards the upper end of our MSD net sales growth range. And the key drivers are continued momentum in the U.S. RB and international. This is underpinned by strong innovation, commercial plans, and some modest net pricing. As I said before, a subdued trend in U.S. Coffee in a dynamic commodity environment, even with higher pricing, and we think this is an appropriate planning stance, and the incremental contribution from GHOST, which we begin to consolidate in Q1 at a smaller contribution, but it will ramp as distribution builds primarily starting in Q2. Now let me come back to EPS. So we expect net sales growth and moderating -- a modest operating margin leverage that will translate into HST, and constant currency EPS growth. We should have a good profit flow through from volume mixed momentum, both in U.S. RB and international. Now we also feel that GHOST will be modestly accretive this year, a bit better than we originally expected, due to earlier distribution. But on the flip side, the inflation outlook is certainly more challenging than we thought even three months ago based on the direction of green coffee. We will look to offset this through pricing, strong productivity, mix, and overhead discipline. So as we think right now all in, MSD and HSD percentages are the right range to target in constant currency. I will also remind you in the reported term, we expect an additional 1 to 2 point FX headwind. But, as I said, this is a challenging environment, and this outlook requires discipline and agility in the face of record coffee inflation and macro uncertainty. When it comes to quarter one and phasing, Q1 we do have a less shipping day, a fewer shipping day and also later Easter, and only a partial benefit from coffee pricing and a smaller gross contribution as distribution transition occurs. So as I said during the call, we expect growth to accelerate over the balance of year as the calendar normalizes, gross distribution ramps and pricing builds. EPS to Q1, EPS growth will be limited by net sales phasing, a lag of pricing to inflation, a tough lap from C4 earned equity in prior year period and a full quarter of financing costs for GHOST with limited contribution from distribution. We also expect EPS to accelerate over the balance of year, reflecting a better expected balance between pricing inflation, the GHOST distribution wrap, and the phasing of productivity and savings realization. Operator: The next question comes from Peter Grom with UBS. Please go ahead. Peter Grom: Thanks, Operator. Good morning, everyone. Hope you're doing well. So, Tim, I was hoping to get some perspective on coffee just as you look back to 2024. It's been a category that's been more difficult to call. I think the improvement has taken a bit longer than many anticipated. So I guess just as you look back, you feel like you have a better understanding on maybe why category growth remained more subdued? And then just as you think about the stronger exit rate, what do you think drove that? And I know you're expecting more subdued growth in ‘25, but I guess my question is, do you feel like you have better visibility on category growth where we sit today versus maybe where we've been over the last year? Thanks. Tim Cofer: Absolutely, Peter. So, you know, I think stepping back first, coffee remains an attractive category long-term. We remain committed and bullish on long-term coffee prospects. I remind you and others that it is a ubiquitous category. It maintains wide and passionate consumer appeal, it's the most consumed beverage outside of water. I think we believe even in an inflationary environment, there's ongoing opportunity for premiumization. We think there's an opportunity for us to have an even wider diversity of formats and channel penetration to distinct different, to attract and capitalize on different needs states. And I think in this inflationary environment that we've transitioned into, there's an opportunity for us to further showcase the value of at-home coffee relative to away from home. And that includes obviously our single served leadership position, but also our ready to drink offering with the new partnership with La Colombe. So to your question, back in ‘24, it was a year of relatively benign inflation. And it didn't start to ramp until the very end of the year. So our focus and much of the category was on volume stabilization. And I'll tell you, overall, we were pleased and we felt like we were successful. Volume mix in the year grew about 1% in ’24. You saw a pod volume turn positive in Q4. Obviously, now as we go into ‘25, we're in a completely different environment with record green coffee costs. We are shifting our focus. We must protect our ability to invest for the long-term. We understand that with the pricing moves that we and others have made, there will be some volume elasticity trade-off. We're willing to accept that because overall, we think we need to play the long game here. And so, as I said in my prepared remarks, as we go into ‘25, it's really two primary objectives. One, preserving those profit dollars in light of that inflation through a combination of the pricing action we've taken, mix, productivity, et cetera, and continuing to invest in the future, which we do think remains bright for coffee across our innovation and activation plans, pods, brewers, and really stepping back and making sure we're expanding in the full coffee portfolio beyond single serve position where we've got strong leadership. Having said all that, I'll remind you what both Sudhanshu and I said in the prepared remarks. We're planning for U.S. Coffee segment performance to remain subdued. And even with that, we feel confident in our overall KDP enterprise outlook of MSD on the top and EPS HSD. Operator: The next question comes from Steve Powers with Deutsche Bank. Please go ahead. Steve Powers: Thanks very much. Good morning, everybody. Tim Cofer: Hey, Steve. Steve Powers: Tim -- hey, so I was hoping you could maybe building on what you outlined in your prepared marks around KDPs, ambitions and energy, maybe just a little bit more color on how you're viewing that market in 2025? Obviously for you guys, GHOST is a big part of your plans for the year, plus activity around C4 and Black Rifle and Bloom. And we've seen a lot of activity articulated from other players as well, whether it's Red Bull or Monster or the news last week regarding Celsius and Elani News. So maybe just a little bit of perspective on how you're seeing consumer demand taking shape within the category? And then how your portfolio is positioned to take advantage of white space opportunities within that fairly busy and changing competitive landscape? Thank you. Tim Cofer: Yes, Steve, we're bullish on energy, no doubt about it. We all know it's one of the fastest growing categories within LRB, close to a double-digit mark over the last three years. I think there remains lots of opportunity to continue to offer differentiated brands that hit unique demand spaces and unique targets. We also like the profitability of the energy category, because it really helps to fund high-quality long-term brand building. The need is there, ever present, ever more so in terms of a universal need for alertness. And I think you're seeing a growing category, sophistication in energy, meaning that, yes, there's continued upside in household penetration, but channel development, there's still upside, segmentation, price pack architecture, and again, unique positioning. So one of the things you mentioned in your question is we've seen some category consolidation, including some news last week, including our own exciting acquisition of GHOST that we closed on December 31 of last year. I think that speaks to the attractiveness of energy. And quite honestly, these last few moves make us feel optimistic that it will help fuel healthy, high quality competition that should benefit the consumer and really expand the overall pie within energy. We feel good that we've constructed now a portfolio that has a right to win in energy. I remind you what I said in the prepared remarks three years ago, KDP's share in energy was basically zero. Sitting here today, it's over 6%, well over $1 billion in retail sales. And as I've said, we've got a double-digit share goal in the years ahead. When you look at this portfolio we've assembled, it's a series of complementary brands that can really target distinct consumer cohorts and demand spaces. C4, our large anchor brand today in the performance space, in fitness, strong offerings in high stimulation segment with the ultimate line. Our Black Rifle partnership, mainstream, veteran founded, unapologetically American. The new Bloom distribution deal that we have, a female forward brand with a very strong following, tremendous momentum just getting started and then GHOST a Lifestyle brand a younger gen zillennial target really exciting flavor range a liter and zero sugar skews. We you know as we get deeper and deeper with GHOST we feel great about this deal I think it's an attractive asset. It's fast growing brand there's opportunities for KDP to add the value that you've seen us add in other partnership deals. Quite honestly, just yesterday, I was with the founders here in our Texas headquarter office. Dan and Ryan, we've got big plans and we're taking the distribution here in just a couple of weeks here in early March. As Sudhanshu said, you'll see us ramp from there. But I think that gives us an opportunity to significantly impact the brand's trajectory. And we're bullish on what we can do under KDP's ownership for GHOST and for our entire portfolio of energy. Operator: The next question comes from Andrea Teixiera with JPMorgan. Please go ahead. Andrea Teixiera: Thank you. Good morning. So my question is first, what is embedded in for the pods volume recovery? I mean, obviously the price mix impact is probably going to hopefully inflect in an actual quarters with pricing already announced and potentially as you said additional pricing that you're studying? And how has elasticity -- have elasticity been, one of your competitors have talked about elasticity coming in a little bit better-than-expected? And a follow-up on energy, to get to the double-digit share, basically you're thinking, are you thinking two parts of the same question, one organic or M&A or combo of growth, as you want to come from [fixed] (ph) to double-digits? And have you been able to secure some of the distribution gains, as you called out with GHOST coming up in March, as well as the SC4? What are you looking in terms of velocity as you expect to reach that double-digit aspiration? Thank you. Tim Cofer: Thanks, Andrea. Starting with your coffee question, as single serve coffee category leader, it's critical that we protect our ability to continue to fund high quality reinvestment, including and even especially in these times of inflation. And so we implemented a pod price increase in January, we announced that in the fourth quarter. Many of our competitors, but not yet all, have taken similar action. And anytime we take pricing, we plan for a level of elasticity. Obviously, volume is going to be weaker. It's a little early to get a clean read on elasticity at this point in the year and part of that is because the industry and competitive pricing is layering in right now at different rates at different times and different channels. I would tell you on the whole the consumer response to-date has not been especially surprising, you know, largely in line with our expectations. Seed price, you know, has moved higher, and it's been up and down, you know, as you -- we track it daily, obviously. And so, you know, we're looking at any and all options to offset any sort of incremental pressure beyond that first move that includes productivity, incremental productivity mix, you know expense discipline. It may require another pricing move. We'll assess that each and every day. And you know, as we make our decisions, we'll continue to monitor consumer response and really focus on that first priority that I mentioned, which is preserving profit as the number one priority and our ability to continue to invest over time. So I think that largely handles the coffee question. And then the other was back on GHOST. As I mentioned earlier in Steve's question we feel great about the GHOST acquisition as I've gotten deeper into it with the team I think it's a very attractive asset and there's significant opportunity for KDP to add value. Distribution is obviously chief among them, but it goes beyond that. I think there's supply chain opportunities for us, R&D, insights, et cetera. The distribution handover is going to take place here into KDP, DSD starting in March. And so we have the opportunity, similar to what we've done with other partner brands you've seen in the past, to build ACV, build average items carried, build the quality of the display, secondary location, coolers, et cetera. And obviously we're working hand-in-hand with our customers, and I think our customers are excited about what we will bring to the party on GHOST. And consistent with what I said to Steve's question, we're bringing this full portfolio of distinctive and complimentary brands that I think can really reinforce one another, help drive our energy sales, and also have a benefit back to total KDP DSD in terms of drop size, store frequency, and DSD economics. Operator: The next question comes from Kaumil Gajrawala with Jefferies. Please go ahead. Kaumil Gajrawala: Hey guys, Good morning. Over the years, no one's been better than you guys at finding partnerships and alignments. I guess tons of conversations about energy, but the new, at least big, hot thing seems to be around modern soda. There's been some transactions in the place, Coke's launching one of their own. Curious how you plan to play there and what sort of structures you'd consider? Thanks. Tim Cofer: Absolutely. You know, I'll step all the way back to our vision. Our vision is to provide consumers with a beverage for every need, anytime, anywhere. And I think, as you referenced in your question, KDP's done a very good job of shaping our portfolio as, you know, a key pillar of our strategy. And we've made great progress in the last few years. And certainly energy is the one we're talking about a lot today, but as you say, the addition of Electrolit in sports hydration, La Colombe and ready to drink coffee, and many other partners across still, Vita Coco, Evian, and Water, et cetera. You will see us continue to do that. You'll see us continue to transition our portfolio to areas where the puck is going and where consumers have strong interest. And that includes appealing to health conscious consumers. You know, we've seen that in our own portfolio. 60% of our portfolio today is, you know, what we call positive hydration, no or low calorie, or the addition of nutrients, a serving of fruit, no sugar added, et cetera. Where we see those durable, high potential white spaces, including the area that you mentioned in your question, you can be sure we're evaluating any and all entry avenues to participate in that growth pocket. That might be organic, that might be through partnerships. but as you've seen us do, we will skate to that and we will continue to future-proof our portfolio to have the most growth-accretive position in LRBs. Operator: The last question today comes from Filippo Falorni with Citi. Please go ahead. Filippo Falorni: Hi. Good morning, everyone. I wanted to ask about the puts and takes for gross margins in 2025? Obviously, we talked a lot about green coffee inflation. Can you talk a little bit about your hedging, how much visibility you have there? And then also in terms of other inflation, particularly in aluminum for the refreshment beverage business. And then overall, it sounded like you have a lot of productivity. Should we think the margin expansion is more below the gross margin line or do you still expect a potential for gross margin to be consistent or maybe expanding in 2025? Thank you. Sudhanshu Priyadarshi: So this is Sudhanshu. So first, our ‘25 outlook implies a modest operating margin expansion. And let me give you a few key drivers. First is operating leverage from healthy volume mix growth, positive pricing and active mix management across each of our segments. And yes, we do expect another strong year of continuous productivity at the top end of our range 3% to 4%. We had a very good year in 2024. And then ongoing overhead discipline. So as of now, we feel very good about our plans and obviously we will remain agile in managing across various P&L levels to deliver on our commitment, while continue to invest in the long run. Your question about aluminum, so as you know, our general approach, you know, we head six to nine months, but aluminum is an exception since we do not purchase it directly. Instead, like much of the industry, we source, finish, scan, and list from U.S.-based suppliers. We lock in pricing through supplier contracts and often take longer coverage that for direct commodity purchases. So -- but the hedging only delays, it doesn't permanently offset where we are. All of these things, we have factor in our outlook and we feel good about MSD and HSD EPS. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jane Gelfand for any closing remarks. Jane Gelfand: Thank you, Betsy, and thank you, everyone, for participating. We appreciate your attention and your support, and Investor Relations will be available all day to answer any follow-ups. Thanks again and have a great day. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen and thank you for standing by. Welcome to Keurig Dr Pepper’s Earnings Call for the Third Quarter of 2024. This conference call is being recorded. [Operator Instructions] I would now like to introduce Keurig Dr Pepper’s Head of Investor Relations, Jane Gelfand. Ms. Gelfand, you may please begin. Jane Gelfand: Thank you and hello everyone. Earlier this morning, we issued two separate press releases announcing third quarter results and our pending transaction with GHOST. We will discuss both topics during this conference call and in the accompanying slide presentation, which can be tracked in real time on the live webcast. Before we get started, I’d like to remind you that our remarks will include forward-looking statements, which reflect KDP’s judgment, assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting KDP’s business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to our earnings release and the risk factors discussed in our most recent Forms 10-K and 10-Q filed with the SEC. Consistent with previous quarters, we will be discussing our Q3 performance on a non-GAAP adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings materials. Here with us today to discuss our results are Keurig Dr Pepper’s Chief Executive Officer, Tim Cofer; and Chief Financial Officer and President, International, Sudhanshu Priyadarshi. I’ll now turn it over to Tim. Tim Cofer: Thanks, Jane and good morning, everyone. Our solid 2024 year-to-date performance demonstrates KDP’s resiliency and flexibility. This morning, we reaffirmed our full year outlook despite an uneven operating environment. And we are targeting a strong finish to the year in Q4. Simultaneously, we are making good progress against our long-term strategy, laying the groundwork for multiyear success. Now, before covering our quarterly results, I want to highlight the just announced GHOST deal as yet another example of how we are enhancing our portfolio while exercising capital discipline. We have reached an agreement to purchase a majority stake in GHOST this year to be followed by the acquisition of the remainder of the business in the first half of ‘28. This transaction strengthens our position in the attractive energy drink category and accelerates our portfolio evolution towards consumer preferred and growth accretive spaces. GHOST is young, versatile and founder-led, with approximately $0.5 billion portfolio anchored by its leading energy drink while also spanning supplements and an emerging presence in other LRB categories. The brand more than quadrupled in size over the last 3 years and remains one of the fastest-growing in the energy category, thanks to its unique brand identity, distinctive flavors and packaging, cross-occasion appeal and strong consumer engagement, including on-premise. GHOST will complement KDP’s existing energy portfolio and substantially enhance our presence in the category. We see significant potential to further scale GHOST in collaboration with its founders, Dan Lorenzo and Ryan Hughes, who will continue to lead the brand as part of KDP’s U.S. refreshment beverages unit. I’ve been very impressed with Dan and Ryan and their tremendous success to-date. More importantly, I share their vision for strong growth in the years to come. Together, we plan to take GHOST to new heights as we build out KDP’s platform-based approach to the energy category. Now at $23 billion in size, energy remains one of the fastest-growing scaled categories in beverages and enjoys multiple structural growth characteristics. These beverages satisfy a near universal consumer need for energy and alertness, which is increasingly relevant in a world with significant demands on our time and attention. They appeal to consumers across all ages and demographics, including over-indexing to GenZennials. There is significant headroom for household penetration to grow versus other leading beverage categories. And the category is still in the development stage of price pack architecture and channel diversity. All of these elements translate to a large total addressable market that we believe the category will grow into and on which KDP is well positioned to capitalize. As energy drink consumption becomes more prevalent, the category is evolving to serve distinct consumer need states and occasions. This landscape lends itself nicely to a portfolio approach, which we have successfully employed in premium water to become the number two share player. We’re now using a similar playbook in energy, having accelerated our push into the category over the last 24 months with C4, GHOST and Black Rifle Energy. In addition to today’s Ghost announcement, we just signed a distribution agreement with Nutrabolt for Bloom ready-to-drink energy. Bloom is a highly promising emerging and distinctive beverage brand with a female-oriented SKU. Together, each of these brands can work in complementary ways to address consumer needs while driving greater scale in the category and across our DSD infrastructure. Beyond its strategic merits, the GHOST transaction is another good example of how we approach efficient capital deployment. Through an elegant deal structure, we are capturing the growth opportunity and paving the way for compelling financial returns while retaining manageable balance sheet leverage and aligning long-term incentives. Our chosen structure retains GHOST leadership team, reinforcing a unique element of KDP’s white space expansion strategy, our founder network. We work to keep visionary entrepreneurs at the helm of the brands they created while adding substantial scale and resources from KDP. In energy drinks, we’ve seen the value of this arrangement firsthand through our close relationship with Nutrabolt’s innovative leader, Doss Cunningham. With alignment and support from energy leaders like Doss, Dan and Ryan of GHOST and others, we are building a formidable energy platform that will drive win-win outcomes for all involved. Let’s now move to our third quarter results. Constant currency net sales grew 3.1%. We made solid progress on volume/mix with 3.5% growth in Q3. As anticipated, U.S. refreshment beverages momentum strengthened considerably U.S. coffee volume mix grew nicely and international trends remained healthy. Total KDP net price was a source of modest pressure in Q3. We expect sequential improvement in Q4 and a further step-up into 2025 as recently announced pricing actions across meaningful parts of our portfolio including CSDs and single-serve coffee take effect early next year. Our focus on productivity and cost discipline continued to ratchet up in Q3. These elements help to support gross and operating margin expansion. As a result, consolidated operating income grew in the high single digits, and EPS grew 6%, consistent with our plan. We are focused on near-term delivery while also truly orienting our business towards the long term. Our strategy provides a roadmap for achieving strong and consistent results over a multiyear time frame, and we aim to incrementally advance our strategic pillars each and every quarter. Let me discuss our latest progress. I’ll start with consumer-obsessed brand building. Our consumer-centric scorecards include awareness, household penetration, loyalty and other classic brand-led metrics. And yet, how we ultimately measure success comes down to market share growth. In Q3, we gained share across each of our major product verticals, liquid refreshment beverages, K-Cup pods and brewers, and in each of our major markets, the United States, Mexico and Canada. We achieved this performance through a combination of exciting innovation and brand activity as well as strong commercial delivery. While our Q3 top line also reflected the impact of the softer consumer environment on certain category growth rates, our market share results are a good indicator that we are effectively stewarding our brands and controlling the controllables. Our second pillar, reshaping our now and next portfolio has been a major 2024 priority, primarily through our new Electrolit and La Colombe partnerships. Both brands continued to transition to our DSD network during the third quarter with a growing financial contribution. We are now able to more directly influence their marketplace performance and accordingly, our trends are accelerating with significant opportunity still ahead. Our just announced transaction with GHOST furthers our commitment to evolving towards high-growth areas. We will continuously shape our portfolio in the future, which will likely entail both brand additions and targeted pruning. Moving now to route to market. During the third quarter, we closed on and integrated our recently acquired assets in Arizona. The transition of coverage to our network went smoothly and was achieved in record time. We have now shifted our focus to ensuring the Arizona operations run as efficiently as possible and leverage the network benefits of being part of KDP. We also continue to opportunistically expand our distribution presence in other regions, including the recent tack-on of incremental territories in Tennessee. Our company-owned DSD network in Mexico is another focus area, given the vital competitive advantage it provides in a market with a sizable traditional trade. During the third quarter, we invested in expanding the systems coverage, selling routes and cooler penetration, all of which contributed to our strong relative trends. Turning now to our productivity and overhead disciplined work to generate fuel for growth. This is a priority in all environments, but it’s particularly critical in the current moment. As such, we delivered strong savings during the third quarter with healthy productivity and the reemergence of SG&A overhead leverage for the first time in many quarters. We are now on track to exceed our cost savings goals for the year while also carrying a healthy pipeline of productivity and efficiency projects forward into 2025. Finally, our cash generation has strengthened, as expected in 2024, and we are dynamically allocating this cash flow to support multiple parallel priorities. Our capital deployment this year has thus far included capital expenditures to support our growth and productivity initiatives, a sizable share buyback near our stock’s 52-week low, a 7% dividend increase announced in Q3, which marked our fourth consecutive annual raise, and now our pending acquisition of a 60% interest in GHOST. In other words, we are staying disciplined, being opportunistic when compelling options become available and managing across our capital allocation objectives, including our commitment to a resilient balance sheet. Let me now share some observations on our third quarter segment performance, starting with U.S. refreshment beverages. We saw a nice sequential acceleration in revenue growth, which increased at a mid-single-digit rate in the quarter. Our volume/mix momentum built as we completed the distribution transition and significantly ramped display activity for Electrolit. We also delivered solid base business trends across our core brands. The consumer environment remains dynamic, which is having varying impacts across our portfolio. For instance, the carbonated soft drinks category is outperforming our expectations. CSDs have accessible price points and are supported by sophisticated revenue growth management capabilities, which make them well positioned to provide options for value-seeking consumers. At the same time, we are also winning in the category with a strong innovation and commercial programming slate that is driving healthy share trends. Our CSD performance was led by brand Dr Pepper, thanks in part to a very successful summertime LTO with creamy coconut as well as the continued build-out of our zero sugar line. We expect the brand’s momentum and share gains to sustain, supported by a recent launch of the seventh season of our incredibly popular Fansville college football marketing campaign. Elsewhere in CSDs, Canada Dry Fruit Splash, the brand’s most significant launch in years remains highly incremental to the franchise and is demonstrating the potential of this great brand. We’re also stepping up support behind our iconic 7UP with a first-in-a-decade brand design refresh that debuted in Q3 and a limited time offering surely temple flavor that is just now rolling out and has been a hit on social media. Meanwhile, some still beverage categories remain under pressure, which we see as a reflection of the current consumer softness. This is particularly true for categories with a greater exposure to convenience stores and with higher average price per ounce products like ready-to-drink teas. In these categories, we must continue engaging consumers with compelling brand activity, while also appropriately emphasizing value at key price points. In other still beverages, we’re seeing stronger trends. One example is our billion-dollar warehouse delivered MOTs brand, which has been an investment priority during 2024. During Q3, our back-to-school campaign, which highlighted fresh, minimally processed apples as a point of differentiation for MOTs, performed well, supporting top line growth and share gains for the brand. In total, we’re pleased with the performance of the U.S. refreshment beverages segment in Q3, with notable progress made in scaling the Electrolit partnership and supporting our core portfolio. In U.S. coffee, we experienced a soft overall quarter. Market share momentum drove solid volume mix, but pricing realization was challenged due to persistent category promotions, which weighed on segment revenue and profitability. We’re not satisfied with this outcome and are actively working to improve these trends even in the context of escalating inflation. At the same time, we’re planning prudently regarding U.S. coffee’s role in our near-term overall enterprise performance. The reality is that at-home coffee category consumption remains muted. However, within that, single-serve is outperforming, and within that, our brands are as well. But because the category’s absolute growth rate is below the long-term trend, we are choosing to be judicious, and we’re focusing on the elements within our control. Let me dive deeper into three such areas that, together, should result in improving revenue trends for the coffee segment over time. First, we have good pod market share momentum. Our three-pronged strategy focused on affordability, premiumization and cold coffee translated into further meaningful owned and licensed share momentum in the quarter. We saw strength across both Green Mountain and the original doughnut shop, including particular traction and incrementality from our new line of refreshers – which we are building into a distinct single-serve platform. At the same time, we are attracting new brands into the Keurig ecosystem, including the recent addition of Black Rifle K-Cup pods, which began to scale in our network during Q3. Taken together, our favorable owned and licensed market share trends and new partnerships position us for a stronger set of financial outcomes as the category recovers. Second, brewer trends continue to move in the right direction. In Q3, we drove strong double-digit growth in brewer shipments. While quarterly trends are inherently lumpy, the coffee maker category has returned to more stable footing and Keurig and Keurig-compatible brewers are gaining significant share. This speaks to our ongoing appeal among coffee-consuming households and should be supportive of future pod consumption. Looking out to the important holiday season, we’re well positioned with excellent retailer and consumer feedback for Kay Brew and Chill in the early days of our launch and good momentum behind our entry-priced models. Third, while not yet evident in category trends or our results, we are encouraged by recent category pricing in response to escalating inflation. The competitive environment in the third quarter was notably promotional as in the first half, and we do not expect any immediate easing in Q4. However, industry pricing should build over the coming quarters given recently announced competitor price increases as well as our early 2025 single-serve increase. Even with an anticipated elasticity impact and some related volume trade-off, we’d expect this to result in a healthier overall revenue trend. All in, though the path ahead will likely come with some quarter-to-quarter variability, we continue to see traction across our U.S. coffee segment. As long as the at-home coffee category remains soft, we will continue to plan with restraint, all while positioning Keurig and our assortment of brands to win longer-term. In other words, we are playing the long-game by driving high-quality innovation and marketing and attracting new brands into the Keurig ecosystem. Turning now to international. We delivered another quarter of good performance, with constant currency net sales growth nearing the high single digits. We drove gains across multiple regions and categories. In Mexico, market share grew in almost every category in which we operate, reflecting productive brand-building activity and DSD investments bearing fruit. We often talk about the success of our powerhouse, Penafiel brand. Which maintained its trajectory in Q3, but Squirt’s performance was also notable. The brand recently achieved a significant milestone becoming the number two flavored CSD in Mexico, and it is a great example of another iconic KDP brand with local traction and momentum. Our cold beverages performance in Canada was also robust, led by growth in Canada Dry and Dr Pepper as well as continued strength in our low- and no-alcohol portfolio. In international coffee, as in the U.S., our three-pronged strategy helped to drive market share gains across both brewers and pods. Overall, we feel great about our international momentum and with ongoing investment, expect this segment to remain an outsized growth driver for KDP. In closing, we’re pleased with our team’s strong execution in what remains a dynamic operating environment. We are on track and focused on closing out the year strong while pushing ahead on key strategic initiatives and setting the stage for healthy, consistent financial performance beyond 2024. And with that, I’ll turn the call to Sudhanshu. Sudhanshu Priyadarshi: Thanks, Tim, and good morning, everyone. We delivered a solid quarter with operational discipline driving strong OI growth and accelerating cash generation. We are on track to a strong finish to 2024 while also making important strategic progress like today’s announced transaction with GHOST. The actions we are taking to support base momentum and enhance our portfolio help reinforce visibility to consistent performance in the years ahead. Third quarter net sales grew 3.1% in constant currency. U.S. refresh and beverages top line accelerated, U.S. Coffee posted a soft quarter and international growth remained healthy. I will discuss each segment in more detail shortly. On a consolidated basis, volume/mix was the primary sales driver, a strengthening to a 3.5% gain. We grew share across our portfolio and also benefited from a building contribution from new partnerships. Net price realization declined 0.4%. Pricing was positive across most of the business with pressure confined to U.S. coffee. We expect consolidated pricing to turn positive once again in quarter four. Gross margin expanded 20 basis points versus prior year. This reflected good productivity delivery and a performance incentive from C4, which contributed approximately 50 basis points of expansion. SG&A also leveraged 80 basis points as the lean overhead discipline we are embedding across the organization is beginning to more meaningfully benefit results. This will remain a focus area going forward. All in, operating margins expanded 110 basis points and operating income grew 7.5%. Inclusive of a net headwind below the line, EPS grew a solid 6%, consistent with our plan. Moving to the segments. U.S. refreshment Beverages net sales grew 5.3%, accelerating from a low single-digit rate in quarter two. Volume/mix led the way, up 4%, including a growing contribution from Electrolit as volume fully transition to our DSD network. Our base business trends also strengthened, led by our CSD portfolio. Pricing contributed 1.3% to the top line, reflecting favorable price realization in CSDs and targeted value investments in parts of the still beverages portfolio. We expect segment net sales growth to improve further in quarter four, reflecting a healthy partnership contribution and base business trend. Segment operating income grew 6.8%, with 40 basis points of margin expansion. The improvement was driven by our net sales momentum, productivity and the C4 performance incentive. This was partially offset by cost inflation across key inputs. In U.S. coffee, net revenue and operating income declined 3.6% and 7.2%, respectively. Obviously, we are not pleased with these results, but this performance deserves greater context. Despite a still muted coffee category, we drove improving volume/mix in the third quarter with 2.7% growth. This was comprised of flattish pods and 14% growth in brewer shipments. We enjoyed good market share momentum across both product lines, thanks to strong innovation and retail execution. This market share trend should sustain in quarter four as we continue to benefit from our 3 strategic focus areas of affordability, premiumization and cold coffee. Third quarter pricing was soft, declining 6.3%. We lapped a challenging year ago pricing competition, and like in the first half, continued to respond to industry promotions, which remained at odds with coffee commodity moves. We do not expect the competitive picture to moderate immediately, but our comparisons get easier starting in quarter four. In addition, we just announced a price increase due to take effect early in the next year. As is typical, there will likely be an elasticity impact as industry pricing is implemented. As Tim said, we will manage the business for overall revenue dollars, which we expect to reflect the combination of good market share and more favorable pricing. Shifting to the segment operating income decrease in quarter three. We generated a strong productivity savings, but these were more than offset by the net price decline. Though Q4 operating income is likely to once again be pressured given the return of commodity cost inflation, our team is focused on 2 major levers to improve the trend into next year. Price increases and modulating promotions will be one significant driver, and productivity, network optimization and broader cost controls will be the other important enabler. Our discipline across both is getting stronger, and we are revving our productivity engines, which gives us optimism looking out to 2025. International constant currency net sales grew 6.5% or 0.4% on a reported basis. Top line growth was balanced, with volume/mix increasing 3.1% and net price realization adding another 3.4%. Our growth was strong in absolute terms, and also came against a tough year ago comparison. During quarter three, our local execution was exceptional, driving market share gains in our major categories and markets. International top line growth should accelerate in quarter four as our market share outperformance sustains and comparisons begin to ease. Beyond this year, we have exciting plans to continue to capture the significant long-term growth opportunity we see for this segment. International segment operating income advanced meaningfully in the quarter, growing 16.6% in constant currency. The strong bottom line result was driven by net pricing and productivity. This more than offset continued inflationary pressures and help fund incremental marketing. Moving to the balance sheet, cash flow and capital allocation. In the third quarter, we generated more than $500 million in free cash flow. Consistent with our expectations, free cash flow dollars and conversion are improving. We remain on track for a meaningful step-up in full year cash flow compared to prior year. The accelerating cash flow profile is supporting our ability to advance multiple capital allocation priorities. GHOST will enhance our presence in an attractive white space category. By utilizing a thoughtful restructure, we are setting up to deliver compelling multi-year financial returns. We are doing so while aligning incentives and ensuring our balance sheet remains resilient post the transaction. In quarter three, we also announced a 7% dividend increase, marking KDP’s fourth consecutive year of dividend growth and underscoring our commitment to direct shareholder returns. Turning now to our 2024 guidance. On a constant currency basis, we continue to expect mid-single-digit net sales and high single-digit EPS growth. Our full year 2024 outlook also embeds the following below-the-line assumptions: Interest expense in a range of $615 million to $625 million, an effective tax rate in a 22% to 23% range, and approximately $1.37 billion diluted weighted average shares outstanding. When it comes to quarter four, we are focused on delivering a strong top line result, driven by solid base momentum, including improved net price realization and a continued healthy contribution from recent partnerships. Though revenue growth is expected to accelerate and our productivity bias will remain strong, our margin progress is likely to pause this quarter. This is because inflation is slated to become a bigger factor in quarter four, while the benefits of just announced pricing do not kick in until early 2025. We also expect a modest FX translation headwind to both top and bottom line. In closing, we are pleased with our overall performance in quarter three. In an uneven operating environment, we are focused on executing our plans over the balance of the year, emphasizing Q4 delivery, advancing our strategic pillars and actively planning for another year of consistent performance in 2025. I will now pass on to Tim to wrap with some brief remarks about next year. Tim Cofer: Thanks, Sudhanshu. Before we move to Q&A, I want to leave you with a few closing thoughts. First and foremost, we are laser-focused on finishing 2024 on a strong note. At the same time, similar to many of you, our internal attention is increasingly shifting to 2025. While it’s premature to provide an exact outlook, I can share a few preliminary thoughts. As we build our 2025 plan, we see considerable opportunity and also some risk. On the one hand, the operating environment remains subdued, with no immediate signs of relief for stretched consumers. Pockets of escalating inflationary pressure are necessitating industry pricing, but because consumer health is varied, the elasticity impact is uncertain. On the other hand, our strategic progress in 2024 will provide long-tailed benefits in 2025. We have strong innovation and commercial plans across our brands, the benefit of continued portfolio evolution and expanded route-to-market capabilities and greater productivity and cost discipline taking hold across the company. We will also have added top line flexibility from GHOST, which will enable us to plan judiciously in the case of coffee, and to push ahead on other portfolio optimization opportunities, all while delivering consistently. Put another way, as we see it today, the various puts and takes into 2025 appear fairly balanced. Together, we expect them to support another year of performance within our long-term algorithm. We’ll continue to monitor the environment and refine our assumptions and will share official 2025 guidance during our next earnings cycle. Thank you for the time, and we’re now happy to take your questions. Operator: [Operator Instructions] The first question today comes from Kaumil Gajrawala with Jefferies. Please go ahead. Kaumil Gajrawala: Hi guys. Good morning. Congrats. Can we maybe talk more about how the portfolio works together in energy? And maybe specifically C4 and GHOST, but also with Black Rifle and some of the other things that you have been doing, just how is the whole meant to work, or is there any concern of the blurring of lines between some of these categories? Tim Cofer: Yes. Good morning Kaumil. I could certainly speak to that. As you look at energy, we continue to believe energy is one of the most attractive categories within total LRB, large, consistently fastest growing over the last many years. I think what we are starting to see is as that category matures, it’s evolving to serve distinct consumer need states and occasions, and we believe that, that landscape lends itself well to a portfolio approach. And that’s what we are pursuing with today’s announcement is a collection of brands that work in complementary ways to address different consumer needs and different occasions while obviously generating scale that will benefit our DSD system. So, if you think about it, step back just 2 years ago, KDP basically had very little, if any, presence in the energy category. As a result of today’s announcement, primarily around GHOST, but also around Bloom, we now have a portfolio of four to five material brands in the category that will allow us to establish a multifaceted energy platform. Very quickly on each one to your question, as you look at C4, Doss Cunningham has done a great job of establishing a strong performance-based positioning with products that really provide functional efficacy, targeted largely at gym and fitness occasions and everyday energy. It’s also, from a consumer standpoint tends to be more male and skewing a little bit millennial. Then you get to GHOST. GHOST has a more lifestyle positioning, bold flavor forward products, popular with gamers, social settings and increasingly a business that lends itself to on-prem, on-premise, including occasions like music festivals. Also a slightly more balanced male, female split, a little bit more Gen Z and a real growing authority in zero sugar. In fact, recent data would suggest 6 of the top 30 SKUs in zero sugar are from GHOST. Then you get to Black Rifle, a recently announced partnership with Black Rifle. This brand will serve consumers seeking more mainstream energy products as well as those looking for coffee energy hybrids and obviously, the chance to leverage that strong coffee brand with that target. And then finally, the other news of today Bloom, clearly more female-oriented, early days, but highly promising. And as you heard, we just signed on to distribute that business nationwide after really a very successful launch at Target this summer. So, we feel great about this portfolio approach. It’s a big step forward for KDP. The energy category is more sophisticated, and we think this approach will serve us well in the years to come. Operator: The next question comes from Brett Cooper with Consumer Edge Research. Please go ahead. Brett Cooper: Good morning. Another question for you on the GHOST transaction, the brand has been able to get to about a 3% share in the beer distribution network, there is some stuff there. So, can you talk about what KDP brings to the table that can step change that, maybe offering past examples? And then on the other side of that, can you speak to and maybe quantify the scale benefit it brings to your business in the C-store channel, and the impact that can have on the total portfolio over the long-term? Again, any tangible examples would be helpful. Thanks. Tim Cofer: Yes, absolutely. I think the best example of what KDP can bring to GHOST and why this today’s announcement and acquisition, I think has tremendous logic and benefit is really what we have done in the last couple of years with Doss, Nutrabolt and C4. In less than 2 years, we have effectively doubled the business on C4 together. We have increased market share by more than a point. We have essentially doubled TDPs, total distribution points, in particular, in C-stores and UDS, which as you well know, is critical for energy. With the power of KDP DSD, we have almost tripled display activity, and we have by orders of magnitude, increased cold drink assets. So, I think when you are looking for specifics, there is a number of specifics there. We know energy now well, and I think we have a proven playbook that we have executed with C4 that we believe we can replicate with GHOST. Beyond that, I think there is other elements that we bring to this partnership that can be powerful and a real win-win. Obviously, things like R&D capabilities, innovation capabilities, marketing strength, our commercial teams, our GM skill sets, connections and top to tops, obviously, with our customers in building out the doors, price pack architecture. And then over time, I think a lot of synergies as well from the procurement side, certainly manufacturing long-term, there is quite a few cost synergies that we can think about. So, overall, I feel good about our model, the strong momentum that we have with Dawson C4 and our ability to replicate this once again with GHOST. And I think the last part of your question, no doubt this will help drive the total KDP DSD flywheel. When you look at what we have done here over the last few years, say the last 3 years, we have gone at C-store in particular, from about a 7 share to approaching a 10 share across total LRB. C-store is obviously critical for the Energy segment. And with the addition of GHOST, that will probably add close to 20% additional scale in small format to KDP’s footprint. And obviously, that drives the entire DSD flywheel and economics. Operator: The next question comes from Dara Mohsenian with Morgan Stanley. Please go ahead. Dara Mohsenian: Hey. Good morning. Tim, you spent a lot of time on your plans in the Coffee segment. And obviously, there is a lot occurring from an industry standpoint here. Just wanted to get your perspective, it does sound like you have taken a step back in terms of what you assume from an industry perspective in coffee. How durable do you think that is as you look out? And then given some of the company initiatives you mentioned that are paying off in terms of your market share picking up, brewers picking up, do you think that you can offset some of those industry headwinds? Are you looking at a pace of organic sales growth that’s similar to long-term trend as you look out over the next year or 2 year s? And how do you think about that? And then second, just on profitability. Once pricing goes into place, do you think you can start to expand year-over-year margins again in the Coffee segment, or with some of the cost pressures and industry top line headwinds, that’s more uncertain? Just how you think about those things going forward would be helpful. Tim Cofer: Okay. Thanks Dara. Yes, I will start on that, and I will kick it over to Sudhanshu to speak to the last part of your question on margin for next year. Dara, I will start. I said it before, I am going to say it again. We are bullish on coffee’s long-term prospects. I think the structural tailwinds are intact. We are bullish on this category, ubiquitous, right, regular consumption. The most consumed beverage aside from water on the planet, addressing a critical need for energy and alertness. So, we are bullish long-term. No doubt, at-home coffee category performance has been sluggish, and it is taking longer to recover than we have planned and anticipated. Having said that, what we are doing is focusing on what we can control. And I think the encouraging signs are, within at-home coffee, which overall is sluggish, the single-serve category continues to outperform. And within the single-serve category, our brands continue to outperform. So, for us, and you said it in your question, we are planning prudently when it comes to the category recovery. That’s inclusive of Q4 in terms of year to go and our – affirmation of our guide on the year, so we are planning prudently in Q4. And as we look ahead to ‘25, you heard me give some preliminary commentary on ‘25. We are planning prudently, but we are continuing to execute, I think a strategy that we believe is working and I have talked before, I won’t drain it, affordability, premiumization, cold coffee, those three vectors, we think are working. We have plans against it. We are encouraged by our results. Evidence of that are market share gains you are seeing in both pods and brewers and an improving trend in ‘24 versus ‘23. The new dynamic now is the green coffee increase in cost. And to your question, what that means for us is we intend to manage the business for overall revenue dollars in the near-term, as you would expect, in an inflationary environment. So, as I shared in my prepared remarks, we have announced the pricing that will go into effect in early ‘25. Obviously, there will be an elasticity impact as is usually the case. But this should translate to a healthier top line trend as well as continued good market share as we go into 2025. And then maybe, Sudhanshu, do you want to margin. Sudhanshu Priyadarshi: Thanks Tim. Hey Dara. So, as you know, we indicated consistently that our plan for U.S. coffee margin in ‘24 was skewed to a first half that are mainly driven by the timing of green coffee cost impacting our P&L because we had six months to nine months. And as you have seen, this cadence has generally played out consistently with our expectation of our first half margin expanded nicely, and then margins started to come under pressure versus last year in quarter three, which we expect will continue in quarter four. Now if you look at 2025, we expect coffee inflation to continue to ramp. We will look to offset with pricing that is going into market early in the year, as just Tim said. And we will – also will have heightened focus on productivity and other expense discipline. As it is typical inflationary environment, our plan is to manage for operating profit growth and not the margin percentages. However, as inflation normalizes, we continue to see opportunity to rebuild segment margin on a multiyear basis and our focus on delivering that outcome. Operator: The next question comes from Chris Carey with Wells Fargo Securities. Please go ahead. Chris Carey: Hi. Good morning. I have one quick follow-up on Dara’s question just around coffee. Do you have any shipment timing impacts from storms in the quarter, cost came in a bit below consumption, and I would just love your thoughts on that. Obviously, less material over the long-term, but perhaps if there is any caveats there, I would be curious. And then really, Tim, you have been going through portfolio. You have some comments on portfolio optimization. Over time, clearly, you have been adding some faster growth assets, but the business has not done a whole lot of pruning. So, how does this all come together as you look out over the next 1 year to 2 years and you think about the type of portfolio that you are really trying to create and some of the avenues that adding some of this volume, scale and energy and Electrolit allow you to do on maybe some of the areas that are not growing quite efficiently or quickly? Thanks. Tim Cofer: Yes, Chris. Thank you. On the first one, here is what I would say. Look, the hurricanes came right at the end of the quarter, literally in the last few days, and it didn’t help, alright. We saw an impact. We actually had a significant facility as well in – right in the hurricanes path that got wiped out temporarily. And we are putting it back together. So, it didn’t help. We are not going to give you a number, but that certainly didn’t help our quarter and close in Q3, particularly on the coffee side. To your other question on portfolio optimization, I would say, look, any good company continuously shapes their portfolio, and that means adding good on top end and cleaning house as appropriate. And when you do that well and consistently, you drive a more efficient total network from procurement, raw materials through the manufacturing, supply chain, distribution operations. And I think part of our approach here is really assessing our existing portfolio holistically and now deciding which categories and brands do we really want to emphasize. And within the categories and brands, which SKUs. And when you do that that does open the door to network optimization and really DSD optimization. Now, when you do that, it also can come with a net sales trade-off. But the long-term, and I have seen it many times in my career, is a faster-growing portfolio operating at higher service levels and operating at a more attractive cost structure. If you think about KDP, you know we are still a relatively young company. And if you think about the last 5 years to 6 years, first things first, it was around integrating these two companies, doing a great job on synergy capture, then we hit that whole COVID pandemic. And so we are now at a point, especially when you add a great new brand like GHOST where we can take the opportunity to refocus on portfolio optimization. And so you are going to hear us talk more about it. I referenced it in today’s remarks. And I think it’s particularly true on U.S. refreshment beverage. So, we are actively working. We are scoping and sizing the potential as we speak. We will share more details over time. But no doubt, when you add a high-growth focused asset like GHOST in an attractive category like energy, that – and I said it in my remarks, that gives us some top line flexibility going into ‘25 to make some tough choices on portfolio optimization that over the long-term, I think will really yield fruit both on the top line growth and on the margin. Operator: The next question comes from Robert Ottenstein with Evercore. Please go ahead. Robert Ottenstein: You kind of – two things, first of all, congratulations on both GHOST and Bloom, they are terrific brands. You kind of win at this a little bit, but obviously, there is a bit of a concern. You can hear from investors and else on the call about whether you are kind of doing too much at the same time and whether the system can handle it all, and not just in terms of energy, but you got Electrolit, there is a lot going on, you talked about pruning things. But maybe if you could talk a little bit about your infrastructure capabilities, what you have in terms of warehouses, logistics, IT systems and the investments that you have done over the last number of years to be able to handle increased complexity. And then just more of an execution issue, any comments on plans to transition from the Anheuser-Busch distribution system to yours for GHOST and kind of roughly how long you expect that to take? Thanks. Tim Cofer: Thanks Robert. I think a little bit to your preface. We spoke about this a little bit, but let me try to unpack it a little bit more. In short, I think we are well prepared and well positioned to take on the new growth vector with GHOST. I think evidence of that is what you have seen us do the last couple of years. C4, I gave a lot of stats earlier to one of the earlier questions on our success with C4. Electrolit has been a very smooth and successful transition this year. We have an incredible relationship with Electrolit management and the family at Grupo PiSA. I was actually there a few months ago talking about the transition. And I think they and we are very pleased with that handover and that transition. You are seeing the good early results, and you will see more next year. We have had a very successful sell-in into 2025 resets on Electrolit. I think the KDP DSD system is showing its resilience. In fact I met with our DSD leadership team the last couple of days here in Frisco headquarters, and they are feeling very bullish about what we are doing on C4 and Electrolit. And I know their – I told them for all the right reasons, obviously, didn’t share the news of this morning. Until this morning, I told him to call in and listen and I know they are listening right now. They are really excited about seeing the flywheel of KDP accelerate, particularly in C-stores. So, from an infrastructure standpoint, from an investment standpoint, to your point, in our branches, in our DCs and our warehouses, you have seen that investment take hold. You have seen us also get acquisitive around territories, which is I think another proof point of our confidence in DSD. We will look at what you see in Arizona, I mentioned a new smaller territory in Tennessee we just took, and then there is some broader bigger news that may follow in ‘25 that’s out in the public domain. So, we have got really a strong commercial skill set with our partners. I think that’s why we are a preferred partner in the industry. And we feel good overall about our ability to digest these. At the end of your question, you referenced AVI, yes. And no doubt, AVI is GHOST current distribution partner. Our expectation is we will begin to transition the distribution in mid-2025. This is consistent with the six-month termination notice that’s required. After that, we will resume – assume responsibility for all the distribution and work within KDP DSD and, in some select cases, partner distributors to ensure that GHOST is available everywhere. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jane Gelfand for any closing remarks. Jane Gelfand: Thank you, Betsy and thank you everyone for participating. We are going to try to keep you on time given multiple competing earnings. We do appreciate your support and IR will be available all day to answer any follow-up questions you may have. Thank you again and have a great day. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr. Pepper’s Second Quarter 2024 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] This conference is being recorded and there will be a question and answer session at the end of the call. I would now like to introduce the Keurig Dr Pepper's Vice President of Investor Relations, Jane Gelfand. Ms. Gelfand, please go ahead. Jane Gelfand: Thank you and hello, everyone. Earlier this morning, we issued a press release detailing our second quarter results, which we will discuss during this conference call. A slide presentation will accompany our remarks and can be viewed in real time on the live webcast. Before we get started, I'd like to remind you that our remarks will include forward-looking statements, which reflect KDP's judgment, assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting KDP's business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to our earnings release and the risk factors discussed in our most recent Forms 10-K and 10-Q filed with the SEC. Consistent with previous quarters, we will be discussing our Q2 performance on a non-GAAP adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings materials. Here with us today to discuss our results are Keurig Dr. Peppers Chief Executive Officer Tim Cofer; and Chief Financial Officer and President, International, Sudhanshu Priyadarshi. I'll now turn it over to Tim. Tim Cofer: Thanks, Jane, and good morning, everyone. It's been eight months since I joined this great, young and dynamic company. I continue to be impressed with the caliber of the organization, the quality of our execution and the challenger mindset our people embody each and every day. Together, we delivered healthy second quarter performance while making important progress to advance our strategic agenda. With our first half now in the books, we're on track to deliver full year results consistent with our on algorithm outlook. The operating environment remains uneven with resilient demand from higher income consumers and value seeking behavior among low and middle income consumers. We are highly attuned to these dynamics and despite them, we still expect a top-line acceleration over the balance of the year. Thanks to several elements largely within our control including new partnership growth and traction from innovation. At the same time, our first half weighted EPS delivery outs taped the way for on planned performance as we also seed our multi-year growth agenda. In Q2, constant currency net sales growth sequentially improved to 3.4% and reflected a re-weighting of our top-line drivers with pricing moderating and volume mix accelerating to positive territory. We entered 2024 anticipating net price realization for KDP and the industry would normalize from the unusually high levels over the past few years and it has. It's encouraging to now see a more balanced top-line growth profile begin to emerge. At the same time, we remain focused on generating leverage throughout our P&L to fund reinvestments and drive earnings growth. In Q2, continuous productivity savings and cost discipline drove strong operating margin expansion helping to translate our top-line momentum to a solid bottom-line results with 7% EPS growth versus prior year. As we execute against evolved strategic framework, we registered a number of wins in Q2. Let me highlight a few that will continue to payoff throughout the year along with focus areas for the long-term. As you know, one of our key strategies is consumer obsessed brand building. Our innovation ramped significantly in the second quarter and as expected these new products are seeing good marketplace Traction. In U.S refreshment beverages, Dr Pepper Creamy Coconut is now our most successful limited time offering. Canada Dry Fruit Splash is also proving highly incremental to the brand. Together, these innovations are driving improved share trends across the CSD portfolio. Outside of CSDs, we're pleased with the initial response to our WonderWater restage, which is re-engaging consumers in its early days. In US Coffee, our new refreshers from The Original Donut Shop are on track to be the largest Keurig platform launch of the last several years. These coffee shop inspired cold beverages are bringing new occasions and younger consumers into the single-serve K-Cup category and are supporting market share gains for our owned and licensed portfolio. Outside the US, our Peñafiel Aced and Twist products are extending the powerful Peñafiel brand into new white space segments and contributing to market share gains for our Mexico portfolio. In total, these Innovations will continue to develop over the coming months with additional news and activation upcoming across the portfolio including in Powerhouse brands like Motts and Green Mountain. We also made progress with new partnerships as we focus on shaping our now and next beverage portfolio. With Electrolit and La Colombe now part of that portfolio, our excitement about each brand's future and the win-win collaboration models behind them continues to build. As anticipated, revenue contributions from these brands increased during the second quarter and should further scale over the balance of the year. The transition of Electrolit volume to our DSD network is ongoing with the handover expected to be complete in the back half. As we take on this distribution, we're beginning to unlock the brand’s untapped potential with outsized market share gains in KDP served regions and channels. This performance underscores our go to market capabilities and spotlights the growth opportunity for Electrolit within the Sports Hydration category. Similarly, we continue to cultivate our La Colombe partnership across both K-Cup pods and shelf-stable Ready-To-Drink coffee. Focusing on the latter, the La Colombe’s reformulated Draft Lattes are truly differentiated in this category and showed strong promise. As we speak, our DSD organization is focused on expanding this unique product’s availability and display to drive initial consumer trials contributing to strengthening marketplace trends. In May, we also announced a planned transaction with Kalil Bottling Company, another concrete step to amplify a route-to-market advantage, which is a key component of our strategic agenda. With one of only three nationwide direct store delivery systems for LRBs, we understand innately the competitive advantage of controlling last mile distribution in our industry. This particular transaction will grant us full control of our brands’ distribution in Arizona, a strategic and fast-growing state and with it the ability to optimize and extract even more leverage from our local DSD assets. We are moving quickly towards completing the acquisition of Kalil’s production, sales and distribution operations in Q3 and we are honored that the Kalil family has entrusted us to carry on the legacy of their multi-generational business. Perhaps less externally visible in any single quarter is the significant work we're doing to dial-up our productivity and fuel for growth engine. With consumer health mixed, pockets of inflation returning like in the case of green coffee and currency volatility increasing, we are reinforcing our attention on driving productivity, network optimization and structural cost discipline. These focus areas are essential to securing additional near-term flexibility and room for reinvestment and they are enablers of consistent delivery over the long term. We had an active agenda to support each element in 2024 and are laying the groundwork for meaningful further actions that will benefit us well beyond this year. Also woven throughout our strategic agenda is a commitment to corporate responsibility and being a force for positive change. I am proud of how our people corporate this focus into every day activities and decision-making, while also pursuing a set of ambitious multi-year targets. We highlighted this important work once again in our 2023 corporate responsibility report published just last month. I encourage you to give it a read to track our progress and to witness how we live up to our Drink Well, Do Good progress. Now, let's turn to our Q2 segment top-line performance. Sudhanshu will then discuss segment performance in more detail including the strong margin expansion we delivered across the board. Starting with US Refreshment Beverages, revenue grew at a low-single-digit rate in the quarter. Our performance was led by CSDs which remain an outperformer in the liquid refreshment beverage space by offering compelling everyday value and variety. Within the CSD category ,and as expected, our relative market share trend improved as Q2 progressed and as our 2024 innovations slate and brand activations layered into the market resonating with consumers. Brand Dr Pepper maintained its long-term track record of market share growth. On the back of this year's dirty soda inspired Creamy Coconut LTO and the marketing excellence behind our new “it's a Pepper thing” campaign. Our ability to steadily grow Dr Pepper by staying on top of trends and continually tapping into the cultural zeitgeist is a defining characteristic of the brand. It’s on track for its eighth consecutive year of market share outperformance and yet there is still substantial untapped opportunity to further expand its preferred status. Beyond CSDs, we also delivered another strong quarter of growth for C4 Energy. Despite the energy category’s recent moderation, it remains a highly attractive space with consistently faster volume growth in all major beverage categories including on a year-to-date basis. With C4, we also have a uniquely positioned brand that is gaining share with meaningful growth runway still available for us to realize. In some parts of these still beverages portfolio, we continue to see a more pronounced macro impact leading to softer category growth rates. As a result we're taking steps to ensure our brand’s value propositions are clearly resonating. This includes targeted channel-specific promotions, price pack work like smaller bottles and multi packs and a focus on value-oriented channels like Club and Dollar. Simultaneously, we are investing to drive demand through innovation and brand activations such as this year's rollout of reformulated Bai WonderWater and the Summer Olympics Gymnastics tie-in for core hydration Moving to US Coffee, we made further progress against key priorities during the quarter. While overall at-home coffee category trends remained subdued our relative performance is strengthening with pod shipments improving to flat year-over-year in Q2. This outcome reflected market share gains across our owned and licensed brands including initial traction across our three focus areas, affordability, premiumization, and cold coffee. Together, these initiatives reflects a barbell strategy intended to highlight value for those consumers who are feeling stretched and provide premium options for those with more spending power. When it comes to affordability, during Q2, we began rolling out smaller pack sizes intended to optimize the cost per package of K-Cup pods. Because of its multi-serve nature, coffee is one of the highest dollar ringed food and beverage categories and these price pack adjustments enable us to hit more attractive every day and promoted price points across grocery and club channels. At the same time, we launched digital campaign that emphasized the affordability of consuming coffee at home instead of at coffee shops which we see as particularly resonant messaging in the current environment. Our Q2 affordability strategy also extended to brewers where we drove sizable Keurig share gains led by entry price machines and supported by some targeted value investments. Shifting to premiumization, the combination of brewer innovation in an increasingly well-developed set of super premium pods is strengthening Keurig’s system credibility with coffee connoisseurs and tapping into more affluent consumers. This includes our work with Lavazza, now a licensed brand within our portfolio as of Q2. With greater commercial influence, we have already secured expanded distribution for the brand and are just getting started on the activation agenda. Moving to cold coffee, we are actively pursuing the significant number of ice occasions currently occurring away from home. Cold Coffee represents less than 20% of at-home occasions, while at certain coffee shops, cold beverages account for upwards of 70%. One way we are pursuing this white space is through K-Cup innovation with significant activity during Q2, including refreshers cold brewed pods. These items performed well in the quarter with wider distribution and support slated for the back half. We're excited to further address the cold opportunity through brewers including the upcoming launch of our new K- Brew + Chill brewer in Q3, as well as through the continued expansion of La Colombe Ready-To-Drink coffee. All in, we're encouraged by the progress we are seeing from our multiple coffee initiatives which is visible in improving market share for both K-Cup pods and brewers. Even so, and as with many food and beverage categories today, demand trends across the larger at-home coffee category are soft. In single-serve, a promotional environment that is at odds with significant green coffee inflation also persists. This softer demand backdrop supports why we constructed our 2024 outlook assuming a muted revenue growth contribution from U.S Coffee, which remains an appropriate planning stance. Turning now to International, impressive segment performance continued in the second quarter with double-digit constant currency growth on the top and bottom-lines and broad-based momentum across the portfolio. In cold beverages, strong in-market execution in both Mexico and Canada powered our results. Compelling Peñafiel the outline extensions momentum behind Clamato and Canada Dry and ITP share gains in the low and no alcohol category led the growth. Our Canadian Coffee results were also robust in the quarter driven by our owned and licensed brands and supported by nuanced portfolio management. With exceptional strength in the International business in Q2, we also seized the opportunity to reinvest in our brands and capabilities to see the future growth adding to our confidence in sustained segment momentum. In closing, we are pleased with our overall second quarter performance and remain on track to our full year outlook. At the same time, we are activating our strategic agenda. Our consumer-centric approach to brand building is resonating in markets. Successful portfolio expansion into higher growth categories like energy, sports hydration and ready-to-drink coffee continues. And multiple initiatives to strengthen and already potent route to market are underway including our pending transaction with Kalil Bottling. We also remain highly focused on furthering our enterprise-wide efficiency and cost agenda which will underpin our visibility for the balance of the year and our ability to invest in the future. And throughout our capital discipline is unwavering and with a strong balance sheet and improving free cash flow, our ability to strategically deploy our cash is robust. With that I’ll turn the call to Sudhanshu. Sudhanshu Priyadarshi: Thanks, Tim, and good morning, everyone. Our solid Q2 financial performance speaks to KDP’s strength of execution. Net sales growth sequentially accelerated with margin expansion powering double-digit operating income growth and high-single-digit EPS growth. Free cash flow conversion also strengthened. We are pleased with our progress year-to-date and have visibility to our full year outlook. Our constant currency net revenue grew 3.4% in the quarter. Performance was led by strong double-digit growth in our International segment and healthy trends in US refreshment beverages balanced against continued muted performance in US Coffee. Consolidated volume mix grew 1.8% year-over-year inflecting back to growth as new partnerships failed and our innovations gained traction in the marketplace. We saw broad based volume mix progress across the business with positive growth in each segment. 1.6 points of pricing also added to consolidated net sales growth. This reflected a more normalized level of net price realization in US refreshment beverages relative to recent quarters and ongoing gains in International. This was partially reduced by the impact of previously discussed price gap adjustments in US Coffee. Gross margin expanded strongly, up 130 basis points versus prior year driven by the favorable net impact of productivity pricing and inflation. [Indiscernible] grew at a slower rate than net sales, resulting in approximately 30 basis points of leverage in the quarter. All in, total company operating income grew strongly up 11% versus prior year. Even with some offsets from below the line items, EPS growth was a healthy 7% in Q2. Moving to the segments. US refreshment beverages net sales grew 3.3% in the quarter led by 2.9 percentage points from net price realization. The pricing contributions reflected increases in CSDs taken in early 2024 slightly offset by targeted value investments across other parts of the portfolio. As expected, segment volume mix returned to growth in Q2 increasing 0.4%. This performance reflected a ramping benefit from the successful transition of Electrolit volume to our DSD network, as well as our Q2 weighted innovation calendar. Our new products are resonating in the marketplace as evidenced by improving share trends for brands like Dr Pepper and Canada Dry. We expect the building benefits from partnerships and innovation over the balance of the year to yield accelerated volume `mix growth in the back half. Segment operating income grew 11.9% in the quarter and margins expanded 230 basis points primarily reflecting tailwinds from net pricing and productivity. We continue to expect healthy operating income growth in US refreshment beverages for the full year to notch at the same magnitude as we saw during the first half. In US Coffee, net sales declined 2.1% with volume mix growth of 0.8% offset by the 2.9% net pricing declines. We have made sequential progress in driving improved take up trends over the past few quarters and we were pleased to pod shipments stabilize in Q2 with 0.2% growth. As Tim described, owned and licensed share gains were a major driver with tractions across our strategic initiatives. Our market share momentum should sustain into the back half. At the same time, we’ve built our full year balance assuming only muted at-home coffee category trends which is what we have experienced year-to-date. We are expecting similar category dynamics for the balance of the year. Brewer shipments increased 2.1% in Q2, with the rolling 12 months trend improving to 1.4% growth. Our innovation in commercial strategies are driving meaningful share gains particularly for our value brewers we expect this share momentum to persist in second half. Segment net pricing decreased 2.9%. Similar to last quarter, this reflected investments to appropriately managed price gaps in a competitive single-serve environment. US Coffee operating income grew modestly versus prior year and margins expanded 70 basis points with productivity savings and cost discipline effectively neutralizing the profit impacts of price investments. As expected, our year-over-year margin trend is moderating as we calibrate our growth drivers to achieve greater balance between our top and bottom-line delivery. This will likely pay out to an even greater degree in the back half as we lapse more difficult competitions and combat inflation, though we still expect segment margin expansion on a full year basis. International net sales grew 15.5% on a reported basis points and 14.7% in constant currency. Segment growth was comprised of very strong 10.4% volume mix growth and up 4.3% increase in price. Our performance reflected growth across markets and categories, including Canada Coffee and Latin American LRBs driven by excellent execution. Segment operating income advanced significantly increasing 30.2% in constant currency terms. Growth was driven by net sales gain and net productivity, which more than offset a significant increase in marketing. We will continue to make high quality investments as we execute our strategy to capture the outsized growth opportunity in our International business. Moving to the balance sheet and cash flows. In Q2, we generated $543 million in free cash flow reflecting a combination of difficult seasonality, capital discipline and a more modest impact from our supplier financing program reductions. For the first half in total, free cash flow grew roughly 50% versus prior year and conversion improved. We expect back half free cash flow conversion to improve further relative to the first half. The accelerate in free cash flow profile supports an unchanged capital allocation agenda. Our priorities remains organic and inorganic investments to further our growth, continuing to strengthen our balance sheet and returning cash to shareholders through a steadily growing dividend and via opportunistic share buybacks. We dynamically manage these options in the short-term with a balanced approach over the long term. For example, following our significant share repurchase activity in Q1 we had more modest free cash outlays in the second quarter resulting in a slight reduction in management leverage during the period. We remain committed to our long-term leverage target of 2 to 2.5 times though by comfortable following a non-linear path. Moving now to our 2024 guidance. On a constant currency basis, we continue to expect mid-single-digit net sales and high-single-digit EPS growth in 2024, both consistent with our long-term financial algorithm. Our plans to invest, and net sales acceleration over the back half of the year which is based largely on factors within our control like partnerships and innovation. Even so, we are cognizant of mixed consumer involvements and are focused on strong execution to secure full year delivery. Even as revenue growth accelerates, we do expect back half EPS growth to moderate sequentially. That is, the strong first half EPS profile provides us with sufficient flexibility to manage through accelerating inflation, product headwinds, and ongoing investments in the back half of the year while delivering on full year expectations. From a phasing perspective, we expect roughly similar rates of EPS growth in quarter three and quarter four. Our full year 2024 outlook embeds the following unchanged below the line assumptions. Interest expense in a $625 million and $645 million range and effective tax rate of approximately 22% to 23% and approximately $1.37 billion diluted weighted average shares outstanding In closing, we are quite pleased with our second quarter results and feel good about our ability to deliver the year, while also advancing clear strategic initiatives with multi-year payback windows. With that, I will now turn the call back to Tim to close. Tim Cofer: Thanks, Sudhanshu. Now halfway through the year, 2024 is progressing well and according to plan. We knew that our top-line momentum would build quarter-over-quarter and it has improving market share trends and strengths of execution should support further net revenue acceleration in the back half. We also knew that margin and EPS gains would be tilted towards the first half and we delivered. With 9% EPS growth in the first six months of the year, we have good visibility to delivering on algorithm performance in 2024 while solidifying our focus on the strategic initiatives that will fuel consistent growth over multiple years. Before moving to Q&A, I'd like to take a moment to recognize our greatest source of competitive advantage, our talented people. I am thankful to our 28,000 colleagues for the hard work and dedication reflected in our Q2 results and in the strategic agenda we are simultaneously activating that will benefit us in the future. Thank you for your time and we're now happy to take your questions. Operator: [Operator Instructions] The first question comes from Bryan Spillane with Bank of America. Please go ahead. Bryan Spillane: Hi, thanks operator. Good morning, everyone. Tim, I wanted to just pick up on maybe some of the comments you made about and some of the things that have changed like inflation the dollar strengthening a bit. Just can you give us a perspective on what the operating conditions or what the segment or category dynamics are today versus maybe where they were at the start of the year when you set your plan? The guidance isn't changing, but I guess it feels like the categories have a little bit and I know one major theme that we've seen across earnings season is just demand in the US across a lot of categories not as strong as expected and we've got some companies rolling back on price. So just want to kind of want to get your perspective of is it accurate that maybe the categories maybe not as strong as you all thought at the start? What have that patience you've made and maybe if I can slip into that in CSDs US in particular, if needed the - that the consumers’ ability to maybe absorb or take on more and more price increases. I know there's a lot there, but thanks. Tim Cofer : Yeah. Thanks, Brian. I'd say - I'd start by saying we are pleased with our execution and our results in Q2 despite an uneven I think was a word I used earlier uneven or mixed consumer environment. And I think when you ask about how the categories are evolving, obviously, it starts with the consumer. And we continue to see, I mentioned this in our last quarterly call, we continue to see a bifurcation across income levels. So we're seeing the high income consumer continuing to be resilient in their purchases and their demand and we're seeing a low and middle income consumer that's under pressure and seeking value. And that manifests in many ways as it relates to the beverage industry. Consumers are being more selective around when they're buying, where they're buying, we are seeing a little bit more of the purchase in key categories around holiday periods, waiting to stock up for that Memorial Day or July 4th period for example. We're also seeing the shifting in spending to more value-oriented channels like club like a dollar and value. And I would say over the course of Q2, these dynamics became a bit more pronounced. But the way we look at it given our broad portfolio across liquids refreshment beverage is this drop creates both opportunities and challenges. And I think on opportunities I now connect it to the end of your question, I’d start with CSDs. CSDs right now are highly resilient and it's clear that CSDs continue to offer value to consumers. This category is outperforming even our expectations that when we created the plan for the year. We're seeing the robust category both on value and dollars and on volume and within that of course we're seeing a strong performance from KDP brands led by brand Dr Pepper which grew share again in Q2. I also think on the coffee side, while we are seeing a more muted total coffee contribution, it's a great opportunity to bolster at-home coffee consumption through value-oriented tactics. I talk about affordability as one of our three key tactics. Thanks to opening price point brewers, value messaging versus coffee shops which we put out there in Q2 and so on. There are challenges as well in certain parts of our portfolio and the one that I speak to is still beverages. I think still beverages and some of the other categories perhaps even energy that skew themselves towards C-Store, towards single bottle or can purchase, those were seeing a little bit more pressure. So that's how we're seeing it. The great news is when you look at the entire basket of our portfolio, I would say it is on plan and that's why that gives us the confidence that and the strength of our ramp in the back half around partners give us the confidence to continue to confirm MSD on the top-line. Bryan Spillane: Thanks, Tim. Appreciate it. Operator: The next question comes from Peter Grom with UBS. Please go ahead. Peter Grom: Thanks operator and good morning, everyone. Hope you're doing well. So, I was hoping to get some color on the organic sales guidance for the back half of the year which implies a pretty decent acceleration. You both touch on this acceleration being driven by areas where you have controls of partnered brands and innovation. So maybe can you just speak to how we should anticipate this contribution building and then just on the underlying business obviously a lot of moving pieces. Can you just touched on a lot of those as to Bryan's question, but you do you need any improvement in core trends and orders to hit this target or can this current environment hold and you would still see this acceleration? Tim Cofer : Yeah, thanks, Peter. Yeah, I tell you we have good line of sight to sequentially stronger top-line growth in the back half in Q3 and Q4. And the good news for us is it reflects factors largely within our control. I would say it is not predicated on a need for a significant change in terms of consumer health or macro. The single greatest driver of that top-line acceleration does lie with these partnerships that are continuing to scale. Lead among them is Electrolit. Electrolit will continue to ramp in Q3 and Q4. We’re very pleased with the distribution hand over that we've had so far and that is continuing to ramp on a geographic and an account level and will be a meaningful incremental contributor in Q3 and Q4. Shifting to the coffee side of the house, I’d point out Black Rifle. Black Rifle is a new brand that we signed on I think I mentioned it at the tail end of last call and that will continue to ramp into Q3 and Q4. La Colombe is another that will contribute more to the top -line in the back half. So, partnerships is a big part of it. On the base business side, I mentioned some of our innovation, we're really pleased with what we seen on for example Creamy Coconut, Canada dry Fruit Splash, the Bai WonderWater restage and then we have more to come that actually will begin to hit in Q3, think core hydration Olympics sponsorship with US Gymnastics. We've got a big program for Mott’s at back-to-school, I'd say one of our biggest in years and I stand to hesitate to tell you about another season of Fansville. I’ve seen that the team’s work on Dr Pepper Fansville and I am telling you if you're a College Football and Dr Pepper fan, you're going to be excited about what. And I remind you we've got an extended season of College Football this year. So, we feel good about it. The last one I talk about is International. International right now strong double-digit growth in Q2 and we expect international to continue to be a meaningful contributor. So, it is not an easy operating environment. It is mixed and uneven. But we're confident about our plans and really focused on strong execution to deliver on our outlook. Peter Grom: Thanks and maybe just one quick follow-up. You mentioned green coffee prices starting to move higher. How should we think about this dynamic impacting your pricing strategy in coffee? And maybe what you'd expect from the category more broadly as we move forward here? Sudhanshu Priyadarshi : Well, Peter, this is Sudhanshu. Good morning. You are right, the green coffee green coffee price is higher and we've talked about before that it will factor in our guidance. We hedge for six to nine months. So we are factoring as part of the guidance. So our top-line and bottom-line guidance includes that. Your question about pricing as a category, there is two words, we always focus on high quality activity to drive category growth. Tim mentioned in the call. Right now we are seeing the promotional dynamics that play in the category which is as odds with where the green coffee prices are. But we have continued to accept to appropriately position ourselves versus the competition. But as I said before, we are monitoring the situation. It's part of our guidance we have factored in. But yeah, it does create a headwind in H2. But our intent is to continue to responsibly manage our price gaps. But we must protect our ability to fund high quality investment on behalf of these categories and our brands. Operator: The next question comes from Lauren Lieberman with Barclays. Please go ahead. Lauren Lieberman: Great. Thanks. Good morning. Just coming back to coffee again, I mean, it seems like great timing that you had a a plan already in place and underway to address affordability is what given what we're seeing call it accelerate in the consumer environment. But I was curious, I guess, given the mentions on the promotional environment, and Investments already made to-date, where do you stand on price gaps? So are you feeling good about where you are? Is there incremental investment needed in price gaps to narrow them or in promotions specifically? And then, on the more structural sort of invest - strategic elements here where you can - how fully rolled out on those smaller packages more affordable price points or is that something that also keeps building as we move through Q3? Tim Cofer: Yeah. Thanks, Lauren. As mentioned, when we think about driving our coffee business, we're really focused in three areas, affordability, premiumization, and cold coffee. And I think those first two do reflect this barbell strategy as we've called it and the bifurcation we're seeing in across the consumer landscape. Your question primarily was in that affordability area and indeed pricing and absolute price and price gap is one element of that. I would say specifically to your question and how we're feeling on price gaps, we feel good. We feel good. The move that was made late last year did put us more at historic price gap levels. I do think as Sudhanshu said and as we said in the prepared remarks, with green coffee going up right now, it is a little bit at odds with the current promotional dynamic that's going on. We're going to closely monitor that and obviously take a measured and nuanced approach. But our affordability strategy is much more than that. And one of them is the down counts so that was part of your question as well specifically on two of our key sizes 12 count at Food channel, we downsized to 10 counts. That is done in terms of from a production standpoint. So you'll continue to see a little bit of that 12 count still out in the marketplace. But it's rolling through as we speak, some retail some channels are already fully in 10 others are still working through 12. We've seen a good response from that Lauren, in terms of volume response as we would expect and obviously that allows us to hit an everyday price point and a promoted price point that is more in line with what consumers are looking for especially at that low and mid income level. I’ll remind you that as you look at total food and beverage, 40 is actually a top five dollar per unit outlay because of its multi-serve nature. And these down counts 12 to 10 and then I’ll reference the other big one in the club channel it was a 100 count and that's down to an 80 count and that also allows us to hit key price points. So you've got the pack down counts. You’ve got the value messaging, I think In the last quarter Lauren, I remember you asked me a question on that and indeed we went live with that feeling good about that. I think that is very resonant and compelling messaging positioning our coffee single-serve at-home, the quality, the variety in a broader frame of coffee shop and away from home. And the last thing I’d point to on affordability is entry price brewers. We're seeing that we're growing the Keurig system within the total coffee maker category and part of that is entry price brewers. So that's the affordability. I will stop there, but I remind you and others that there's also a great premium strategy as well, as well as a big push into cold coffee. Operator: The next question comes from Dara Mohsenian with Morgan Stanley. Please go ahead. Dara Mohsenian : Good morning. So, I just want to get a bit more granular on the take-home coffee category. Obviously, there’s been a slow down in the last year and a half, which seems to be improving. But more recently now we've seen a pronounced slowdown at the same time in their strength. So the broader energy, let's say caffeine complex seems to be a bit under pressure. So, A. would just love your perspective on that what's driving that? Is it more short-term macros? Is it the lot of middle-end consumer pressure you mentioned or other longer-term factors? And just B, is there opportunity in coffee to source greater share from energy here as you think about share of stomach. And then also maybe you can just touch on any shifts you're seeing in away-from-home coffee to at-home coffee and in brewing versus ground coffee and at-home just as you move through Q2 and here so far in Q3? Thanks. Tim Cofer : Thanks, Dara. No doubt, at-home coffee volumes remain muted in Q2 and I'd say at a similar level to what we saw in Q1. I would also say it's not all that different from many food and beverage categories today. Importantly, within at-home coffee, the single-serve category outperformed as it has the last many years and did as well. We're feeling good about the progress we've made across a number of initiatives, the ones I mentioned to Lauren, affordability, premiumization, and cold coffee. But I think we have a - an appropriate outlook for the balance of the year in terms of expectations and our guidance contemplates that muted revenue contribution from coffee. In tougher macroeconomic times, we have seen shifts in consumption from away-from-home channels, to at-home channels. And that does tend to benefit our business on the coffee side, as well as on the liquid refreshment beverages side. Obviously, more of our business is in at-home business than away-from-home. So I think in general, if as we see that trend and certainly based on some of the actions we're taking around price promotion, around down counts, around value marketing in the broader frame, I think that conserve as well. You also referenced energy and let me give you a few comments on that. Energy in my view is a highly attractive space. It is over time, over these last many years consistently faster volume growth than really any other major beverage category. That is also the case on a year-to-date basis. On a year-to-date basis from volume standpoint, energy remains the fastest growing as it did in ‘23 and in ’22. Now within that, we have seen a slowdown of late and the volumes have moderated. I do think that is related to the broader macro and some of the pressure we're seeing of consumers, particularly in low and mid income energy obviously skews to C-Store. It skews to single bottle purchase and that’s where you're seeing a little bit more pressure in certain channels like gas and convenience. But for me, that doesn't change what I characterize as a constructive view on the energy category. Energy. addresses a clear set of needs for consumers. It occupies clear demand spaces. I think there's a lot of interesting nuances and opportunities within energy to build out sub-segments and you're seeing that today in terms of challenger brands that are coming in relative to the big large historic incumbents. And I look, tell you Dara that you that there's significant helpful penetration gains still for the energy category as it relates other beverage categories, think CSDs. Last thing I’ll tell you on energy is, we continue to be excited about our position with C4. C4 has strong momentum. I think in the quarter, our C4 business on a retail sales basis grew about 30% and at only 3% market share we believe we have meaningful runway for growth. Operator: The next question comes from Chris Carey with Wells Fargo Securities. Please go ahead. Chris Carey: Hey, good morning, everyone. So, I wanted to just follow up on some of the back half commentary, which has been well covered. But in the U.S. Coffee business we’ve seen this stabilization. There is a sequential improvement and a pause specifically, I know you're talking about muted performance for the full year. But is there any reason to believe that going to the back half of the year this stabilization to your mind would not sustain and maybe even continue to improve as you fold in partners? And similarly, is there any reason to your mind that the pricing that we've seen which did down a little bit should be materially improve into the back half? So it’s a bit of opposite questions between the two and if I could sneak this as given we are at the end of the call, but the half in US refreshment improvement, is there a way that you'd frame the contribution from the distribution partnership ramp relative to innovation, is it mostly distribution and innovation is the kicker? So you know thanks for those two on coffee and US refreshment in the back half. Tim Cofer : Yes. Hi, Chris. So, let's start coffee back half and then we'll go to ref bev. As you said we're encouraged by the slow and steady progress we're seeing. in K-Cup volume trends and I will point out that we've now had four consecutive quarters of sequential improvement in K-Cup volume. And we were pleased to see our K-Cup shipments stabilized in the second quarter flat - I think up 20, 20 basis points. So this slow and steady improvement trend is clearly there. There's always going to be potential for quarter-to-quarter lumpiness, but I would expect that the H2 second half pod shipment trend will improve versus H1 in particularly in Q4. And indeed, that improvement has been underpinned by the progress we're making in our owned and licensed business, the market share progress we are seeing I referenced some successful innovation, the work we're doing again in the three areas around affordability, premiumization, cold coffee. And a big push into cold coffee the back half. That’s pods, that’s refreshers, that’s also our new Brew + Chill brewer and that'll be the first brewer that actually brews out a cold cup of coffee. So feeling good about the progress in coffee in the back half. As it relates to refreshment beverages, I'm pleased with both the base business and the new partners. And they will both play a meaningful role in the back half. The ramp, as I said earlier will be more around what we see from partner contribution, Electrolit, La Colombe, C4, et cetera. And I think we’ve said earlier then on a full year basis we expect those new partnerships to add about 200 basis points to total company net sales and I would tell you we continue to feel good about that number. Operator: The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead. Bonnie Herzog : Alright. Thank you. Good morning everyone. I am I have a question on your International business. It's clear you've been making a significant push. So curious to hear what you believe, are the key drivers that are going to allow you to continue to win internationally? And second, how will you evaluate whether it's best to enter new markets or organically or possibly through acquisitions? And then finally what percentage of your sales, do you think your International business could ultimately represent? Thank you. Sudhanshu Priyadarshi: Bonnie, good morning. So, you're right, we have - International is doing well. We said that this will be a growth driver for our business for overall KDP and we are very pleased with the momentum in our International segment. This performance basically reflects combination of growing categories as per their share gains. So it’s geographic and category-wise expansion and we are seeing low and no alcohol in Canada and Mexico. And we are also seeing line extensions in Mexico. We are investing in route to market and in cooler in Mexico and we are seeing the execution there. And also the local team they understand the market consumer. You are seeing the on and licensed pod momentum in Canada and we continue to have confidence that this growth actually give contribution from International will continue. Regarding your question on the future markets, plus we have a lot of work to do in our bases in basically in Mexico and Canada. And we have significant opportunity to drive outsized growth, but we do look at both inorganic and organic strategy to unlock this potential. We have the similar model in those markets what we have in US, buy, build and partner model. And we will look at into some international markets to see whether we can make some inorganic entry, but mainly focused right now is driving what we are driving in Mexico and Canada. And while I don't have a number to give that what will be the mix of it, but the math you could see last five years, International has grown close to double-digit CAGR and we expect similar type of growth coming to the business. Operator: Our last question today will come [Indiscernible] with Citi. Please go ahead. Unidentified Analyst : Hey, good morning, everyone. So, Tim I wanted to go back to US Coffee and the second half outlook. Obviously, good to see the volume improvement in pods and the total segment but obviously pricing came in more sequentially. So should we expect this level of promotional activity to remain consistent in the second half? Would you think about maybe reducing a bit the promotional intensity? And do you need that level of promotional activity to get further volume improvement in the second half? Just to get some context that will be will be helpful. Thank you. Tim Cofer : Thanks [Indiscernible] As the pioneer here in the single-serve and the category’s steward, we're most focused on high quality activity should drive sustainable single-serve category growth. And that’s of course for us, but for all our participants and all of our partners in the Keurig ecosystem. And that includes our work on innovation, in consumer marketing, value messaging, both on brewers and on pods. That said, right now there are some promotional dynamics at play in the category and in response to that, at the end of the year and early this year we did take some steps to appropriately position ourselves versus competition. I think inherent in your question is this tensions leave all that. The building backdrop around green coffee prices is a bit at odds with some of the promotional activity and I would say over long term it does not appear to be sustainable. So from our standpoint, of course we're doing the right thing around striking that balance around protecting our positions and making sure that we also have the margin structure we need to continue to drive the entire ecosystem. Obviously, part of that is the way that we manage commodities and our hedging position which I think we’ve shared in the past, that’s usually six to nine months out. And so that means the higher green coffee could begin to impact our P&L progressively over the course of H2, second half. So, we're going to continue to closely monitor that situation. Our intent here is to responsibly manage our price gaps while also protecting our ability to fund high quality reinvestment to drive the single-serve category. Operator: This concludes our question and answer session. I would like to turn the conference back over to Jane Gelfand for any closing remarks. Jane Gelfand : Thank you, Drew and thank you, everyone for participating this morning. We appreciate your support. Investor Relations is available all day to answer any follow-up questions you may have. Appreciate it and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good day, and welcome to the Keurig Dr Pepper First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to introduce the company's Vice President of Investor Relations and Strategic Initiatives, Jane Gelfand. Please go ahead. Jane Gelfand: Thank you, and hello, everyone. Earlier this morning, we issued a press release detailing our first quarter results, which we will discuss during this conference call. We have also added a slide presentation to our earnings material. The slides accompany our prepared remarks and can be tracked in real time on the live webcast. They will be archived on our IR website afterwards. Before we get started, I'd like to remind you that our remarks will include forward-looking statements, which reflect KDP's judgment, assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting KDP's business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to our earnings release and the risk factors discussed in our most recent Forms 10-K and 10-Q filed with the SEC. Consistent with previous quarters, we will be discussing our Q1 performance on a non-GAAP adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings materials. Here with us today to discuss our results are Keurig Dr Pepper's Chairman and CEO, Bob Gamgort; Incoming CEO and Chief Operating Officer; Tim Cofer; and Chief Financial Officer and President, International, Sudhanshu Priyadarshi. I'll now turn it over to Bob. Robert Gamgort: Thanks, Jane, and good morning, everyone. It has been a busy and exciting start to the year at KDP. First quarter performance was strong, with solid consolidated sales growth and double-digit EPS growth. Momentum in our U.S. refreshment beverages and international segments remained healthy, and U.S. Coffee results showed meaningful sequential recovery. We invested in marketing and capabilities across the business while also delivering attractive broad -- the strong start to the year enhances our visibility to an unchanged on algorithm 2024 growth outlook. In Q1, we also advanced several strategic initiatives that position the company for multiyear success and demonstrate our confidence in the value creation opportunity ahead. First, we unveiled a revolutionary future vision for the Keurig brewing system that has been years in the making. When launched, our new proprietary K-Rounds plastic and aluminum-free pods and Keurig Alta brewers will enable consumers to brew a wide variety of hot and cold Barista-style beverages from a single machine using a pod that can be easily and sustainably disposed. This system has the potential to redefine how consumers brew coffee for decades to come, and we're excited to begin beta testing later this year. At the same time, we are committed to growing our preeminent existing K-Cup system, including through a strong slate of innovation in 2024. Second, in Q1, we also took advantage of a highly-compelling and dislocated stock valuation by executing a $1.1 billion buyback of 38 million KDP shares. This was our largest quarterly share purchase -- repurchase in our history, and we have progressively increased our buyback activity over the past several years. And with another $1.8 billion remaining on our authorization, we intend to stay opportunistic, when we see attractive value in our shares. Third, we introduced our Evolved enterprise strategy, which we unveiled at an Investor Day hosted last month. This strategic framework combines many of the philosophies and practices that KDP has developed for the last 5 years with new elements intended to drive strong and self-reinforcing growth in our next chapter as a public company. Many elements of this strategy were already evident in our first quarter results. Finally, this morning, we announced that Tim has been appointed KDP's CEO and will join our Board effective tomorrow, marking the culmination of a robust transition process that began when he joined us in November. I have worked closely with Tim over the past several months and have seen firsthand how our company is benefiting from his deep and diversified CPG experience, strategic vision and personification of our challenger culture. I look forward to continuing to partner with Tim and the broader leadership team in my ongoing capacity as KDP's Executive Chairman and could not be more confident in their stewardship of the company's next chapter. With that, I will turn the call over to Tim. Timothy Cofer: Thanks, Bob. And good morning, everyone. Let me start by once again expressing my appreciation to Bob and our Board of Directors for the honor and privilege of leading this dynamic company into the future. I'm energized to partner with our 28,000 colleagues across the globe to build on KDP's strong track record and to guide our next chapter of growth and value creation. I see a tremendous amount of upside ahead. At our recent Investor Day, I shared the many elements behind my conviction and discussed how we intend to unlock this future opportunity. If you've not yet had the chance, I would encourage you to watch the replay of that event. Now as Bob mentioned, we recently introduced an Evolved strategy, which is anchored by 5 strategic pillars. These are effectively a road map to guide each of our employees' actions every day, and it includes directives to champion consumer-obsessed brand building, shape our now and next beverage portfolio, amplify our route-to-market advantage, generate fuel for growth and dynamically allocate capital. This strategic framework will guide our company over the next few years and is designed to deliver a sustainable cycle of growth. Each element of this strategy featured in the first quarter, which represented a strong start to the year. Net sales growth accelerated sequentially with continued momentum in U.S. refreshment beverages and international and meaningful progress in U.S. Coffee. Gross margin expanded significantly, driven primarily by robust net productivity, which funded reinvestment to support our future growth and drove strong earnings growth in the quarter. And we flexed our capital allocation priorities toward direct shareholder returns, taking advantage of a unique opportunity to efficiently repurchase a large number of shares at an attractive valuation. Overall, our first quarter performance demonstrates the health of our business and provides enhanced visibility to our unchanged full year outlook for mid-single-digit net sales and high single-digit EPS growth. Taking a closer look at the intersection of strategy and Q1 results, we were encouraged by the quarter-over-quarter acceleration in net sales growth to nearly 3%. Though top line momentum remained pricing-led, volume mix improved to nearly flat, following declines during 2023. Consumer-led innovation leveraging our comprehensive demand space framework was an important contributor to this improvement. Here are 2 quick examples. In U.S. refreshment beverages, we launched Canada Dry Fruit Splash, a flavor extension of our second largest CSD brand. The innovation is performing well during the early launch phase, proving incremental to the Canada Drive franchise and driving market share gains. In international, we introduced Schweppes mocktails as the first can mocktail product in Mexico, securing distribution with several large customers and generating very strong initial consumer acceptance. The launch is already exceeding our plan, and we have yet to turn on the advertising. Innovation activity ramps across our portfolio in Q2, and we're excited to build on our initial momentum as we move through 2024. Our top line growth during the first quarter also reflected the continued successful execution of our partner strategy. Electrolit sales and distribution commenced in the quarter, and La Colombe ready-to-drink beverages are now ramping through the system with smooth distributor handovers and early traction. C4 Energy also continues to grow strongly, and we achieved further key performance milestones in Q1. DSD execution is a key enabler to this success and we continue to invest to drive greater efficiency throughout the system. Improving first quarter trends in U.S. Coffee owned and licensed brands illustrate our commercial and route-to-market effectiveness. Our owned and licensed market share began a recovery, which steadily strengthened throughout the quarter. Distribution growth, increased display activity, price gap management and increased marketing, all contributed and this better trajectory has sustained quarter-to-date with more high-quality activation to come later this year. Total KDP gross margin expanded 350 basis points in the first quarter, and gross profit dollars grew approximately 10%. This strong performance reflected an enterprise-wide focus on productivity, which yielded meaningful benefits during the quarter and more than offset persistent inflation as well as the benefit from an additional C4 performance incentive. Our gross profit progress provided important fuel for growth funding reinvestment, including a double-digit increase in marketing also contributed to the very strong bottom line results in Q1. Specifically, operating income grew an impressive 17.5% year-over-year and earnings per share advanced 12% ahead of our ingoing expectations. With top line momentum expected to build from here, I'll now spend a few minutes discussing each of our segment's Q1 net sales performance and why we have confidence in the balance of the year. Let's start with U.S. refreshment beverages. Revenue momentum remained healthy with mid-single-digit net sales growth in the quarter. Our performance was led by solid growth in CSDs and our expansion in energy and sports hydration, partially offset by softer trends in certain still beverage categories. As anticipated, segment growth moderated from Q4 as we lapped year-ago pricing measures and due to innovation timing, which phases later in '24 when compared to 2023. In Q1, we anniversaried the launch of Dr Pepper Strawberries and Cream, which was a standout success and went on to become the #1 CSD category innovation of 2023. Looking ahead, we expect an exciting 2024 innovation and brand activation slate to drive a larger sales contribution in future periods. Our Dr Pepper Creamy Coconut limited time offering is launching as we speak, just in time for the summer season, and it capitalizes on the popular dirty soda social media trend. The complete restage of by Bai WonderWater is just beginning to roll out, and our core hydration partnership with U.S. Gymnastics will be activated during the summer Olympics. We expect these collective activities will have a larger impact in the back half. In addition, our partnership with C4 should continue to enjoy good momentum, and our sales and distribution of Electrolit will build over the course of the year. While the magnitude of overall U.S. refreshment beverage pricing should moderate going forward as we increasingly anniversary year ago activity, some modest incremental pricing across CSDs was announced earlier this year and will contribute to growth. We also continue to optimize price pack architecture to fit consumer needs across the portfolio and various channels. Moving now to U.S. Coffee. As expected, net sales strengthened considerably relative to the fourth quarter and decreased at a more modest low single-digit rate in Q1. Notably, volume mix was basically flat, improving from a high single-digit decline last year. There were a number of green shoots in the quarter for U.S. Coffee. Let me outline 5 key elements that bolster our confidence in continued top line recovery in this segment. First, our pod shipment trends improved sequentially. Though at-home coffee category consumption growth remains muted, the trend modestly recovered relative to Q4. More importantly, Keurig's own volume momentum accelerated throughout the quarter. Second, our owned and licensed brand market share momentum is building, which is a mix accretive trend. In Q1, we grew owned and licensed total distribution points at a double-digit rate. We increased display activity and supported our brands with higher marketing. In addition, we made tactical adjustments to appropriately align our promotion strategy. This is already having an impact and will allow greater innovation, marketing and activation to shine through in the balance of the year. Owned and licensed share momentum progressively strengthened throughout the quarter, and we expect the trend to continue supported in part by upcoming price pack architecture changes to strengthen the value proposition. Third, within the coffee maker category, Keurig and Keurig compatible brewers also continued to gain share in Q1, extending a multiyear track record of outperformance. An exciting innovation like K-Brew + Chill, which has not yet launched and will hit retailer shelves later this year should further support our performance. Fourth, as our volume in U.S. Coffee improves, so does our ability to manufacture at a more attractive cost profile. We generated strong productivity during the first quarter, which drove healthy segment margin expansion and funded reinvestment. We're also beginning to optimize our manufacturing footprint to favor high-efficiency locations like Spartanburg, where capacity is ramping and unlocking further network optionality, which should also generate fuel for growth. And finally, fifth, the Keurig partnership proposition remains very strong as evidenced by multiple recent brand additions to our ecosystem. Lavazza will transition from a partner to a licensed brand during the second quarter. Also in Q1, we reached agreements to welcome Brooklyn Roasting Company; Shark Tank favorite, Kahawa 1893 Coffee; and Canadian super premium brand, Kicking Horse to our roster. And just this morning, we are announcing the addition of Black Rifle Coffee as a new partner. Black Rifle Coffee's success in the coffee industry is already well established, and their decision to evolve to a Keurig system partner speaks to the full value proposition of our stewardship of the single-serve category. Our La Colombe ready-to-drink coffee partnership is yet another proof point and is just now beginning to scale. In total, these exciting partnerships will begin to contribute to U.S. coffee segment volume growth later in 2024. Moving on to international, which is becoming an increasingly significant part of our business and is a core part of our strategic agenda. The segment's strong sales performance continued into the first quarter with high single-digit growth on a constant currency basis and broad-based strength across categories and markets. Our cold beverages portfolio performed particularly well in Latin America, reflecting continued strong DSD execution. Performance was led by our powerhouse Peñafiel brand, which continues to enjoy strong base momentum even as we extend the brand into new adjacencies. For instance, we recently launched Peñafiel soft seltzers, which offers sparkling mineral water with a refreshing touch of flavor, no calories, no sugar and with 100% natural flavors. We also further grew our segment presence in the low and no alcohol alternatives category, with continued share gains for Atypique in Canada and strong retail and consumer reception for our launch of Schweppes mocktails in Mexico. In our Canadian coffee business, market share grew for Keurig brewers and for our owned and licensed pod portfolio led by the Van Houtte brand. As in the U.S., we continue to strengthen our international route to market. And earlier this month, we announced a multiyear partnership with the Toronto Blue Jays for pour rights at their ballpark. We're excited to expand Canada Dry, Dr Pepper, Clamato, Crush and Atypique within the on-premise channel and will continue to seek out opportunities to thoughtfully build the distribution of our brands outside the U.S. In short, we're pleased with the promising start to the year. We demonstrated sequential top line progress in the quarter and delivered broad-based growth in adjusted operating income and margins across our segments. We did this while simultaneously funding high quality reinvestment in our brands and capabilities. Sudhanshu will speak more about our margin progress and our intention to continue balancing growth and reinvestment in the coming quarters. We're confident this approach will reinforce our 2024 outlook for on algorithm, top and bottom line growth, which remains unchanged while also powering a virtuous cycle growth over a multiyear time frame. And with that, I'll turn the call over to Sudhanshu. Sudhanshu Priyadarshi: Thanks, Tim. And good morning, everyone. Our Q1 results were strong, demonstrating sequentially improving net sales growth, continued meaningful gross margin expansion and incremental investments in marketing and capabilities. With EPS ahead of our plan, we intend to use Q1 upside as additional pool for reinvestment to support revenue growth over the balance of year and as buffer against pockets of reemerging commodity inflation. First quarter net revenue grew 2.8% in constant currency. Healthy momentum continued in our U.S. refreshment beverages, and International segments and we are encouraged by the sequential top line recovery in U.S. Coffee. On a consolidated basis, we realized positive net pricing, up 3.1% year-over-year. This was driven by favorable pricing in our U.S. refreshment beverages and international portfolios, balanced against previously flagged targeted price investments in U.S. Coffee. Importantly, consolidated volume mix improved to nearly flat year-over-year, showing a modest 0.3% decline in the quarter. Gross margin expanded significantly up 350 basis points, driven by the favorable combined impact of productivity, pricing and normalizing inflation. Gross margins also reflected a performance incentive related to strong commercial execution of our C4 partnership. This benefit contributed slightly over 100 basis points to the gross margin in the quarter and now offers us extra flexibility to drive future reinvestment. SG&A deleveraged 50 basis points in Q1 due in part to a double-digit increase in marketing. All in, total company operating income grew very strongly up 17.5% year-over-year with EPS increasing 12%. Moving to the segments. U.S. Refreshment Beverages net sales grew 4.3%, led by 5.6 percentage points of pricing. Elasticities remain manageable across most categories and volume mix declined 1.3%, including an initial contribution from our electrolyte partnership. As expected, our relative market share and net sales performance reflected a later innovation cadence relative to 2023, particularly in CSDs. These calendar differences will normalize as new products get introduced and our innovation gains traction. In other words, segment net sales drivers should rebalance further towards volume mix as market share performance improves and as the magnitude of pricing contribution moderates considerably from here. Segment operating income grew an impressive 22.4% in the quarter and margins expanded 440 basis points. Tailwinds included pricing, strong productivity, and the C4 performance incentive, I mentioned earlier. This combination of factors helps fund higher marketing in the quarter. All in, we have good line of sight to continued operating income gains in U.S. Refreshment Beverages over the balance of the year though not at the same magnitude as we experienced over the last couple of quarters. U.S. Coffee top line trends significantly recovered relative to Q4 as expected, while net sales declined 2.1% volume mix was close to flat down a modest 0.3% year-over-year. Pod shipments continued their multi-quarter improvement trajectory and decreased 1.1%. This progress was driven by a steady recovery in volume and market share momentum across our owned and licensed portfolio during the quarter. With multiple elements underpinning this trend, including greater distribution and display and a more appropriately aligned promotional strategy, we expect innovation and activation to begin having an even greater impact in the balance of the year. Brewer shipments increased 26% in Q1 due to a combination of improving trends in the coffee maker category, continued Keurig market share gains and timing benefits. On a rolling 12-month basis, which smooths out some of the inherent quarterly brewer volatility, shipments are still down just under 2%, representing an improving trend versus the double-digit decline we experienced in 2023. Segment net pricing decreased 1.8%, primarily due to previously discussed promotional adjustments across our owned and licensed portfolio. This is in response to competitive activity that began in Q3 last year and continues today. These recalibrations more than offset the continued benefit of pricing we are realizing through partner contracts while improving segment mix. U.S. Coffee operating income advanced 1.4% and margins expanded 110 basis points versus the prior year driven by productivity savings and easing cost pressures, partially offset by higher marketing spend. As expected, the rate of segment margin expansion moderated versus the back half of 2023 as we are managing towards a more balanced top and bottom line outcome in this segment in 2024. We are pleased with the progress we made during quarter 1. International segment net sales grew 11.8%. On a constant currency basis, sales increased 7% with very solid volume mix growth of 4.8% and pricing up 2.2% year-over-year. Our performance included growth across market and categories with particular strength in Latin American LRBs. Segment operating income advanced very strongly, up 25% in constant currency terms. Volume mix growth, pricing and productivity netted favorably against inflation and higher marketing. We also continued to invest in route-to-market capabilities including the on-premise expansion in Canada that Tim mentioned and by strengthening our DSD network in Mexico. Given its outside growth potential, investing in our international business is a significant priority and should support an increased top and bottom line contribution from the segment in 2024 and over time. Moving to the balance sheet and cash flow. Our Q1 free cash flow represented a use of $73 million. Cash generation is seasonally lower during the first quarter, and the year-over-year difference in free cash flow versus Q1 2023 was largely a function of a front-loaded cadence to our CapEx investment this year. In absolute terms, free cash flow also remained weighed down by roughly $400 million of reductions in supplier financing arrangements. We expect the impact of the carryover effects of these changes to moderate over the coming quarters and for free cash flow to accelerate with full year conversion projected considerably ahead of 2023 levels. This will support our capital allocation agenda. Our priorities include making organic and inorganic investments to further our growth, continuing to strengthen our balance sheet and returning cash to shareholders through a steadily growing dividend, and via opportunistic share buybacks. We will remain dynamic in managing across these priorities at any point in time with a balanced approach over the long term. For example, in Q1, we repurchased 38 million shares for a total of $1.1 billion, taking advantage of an attractive valuation and the liquidity event presented by JAB secondary offering. Though our management leverage ratio increased modestly as a result, we remain committed to our long-term target of 2 to 2.5x. Moving now to our 2024 guidance. On a constant currency basis, we continue to expect mid-single-digit net sales and high single-digit EPS growth in 2024, both consistent with our long-term financial algorithm. Our plans continue to embed strong top line momentum in our U.S. Refreshment Beverages and International segments with a relatively muted growth contribution from U.S. Coffee. We expect productivity savings to help offset a more normal level of inflation. There are, however, pockets of reemerging commodity inflation, for instance, in the green coffee price. We will need to monitor and manage these, particularly in the back half. Throughout the balance of the year, we also plan to continue to deploy investment dollars behind brands and capabilities to support our top line growth. The incremental flexibility afforded to us by our Q1 outperformance should enable us to balance these concentrations. As a result, we continue to anticipate healthy operating profit growth and full year operating margin expansion on a consolidated basis. Consistent with our original guide, we expect some of this operating momentum to be offset by a net headwind from below-the-line items, constraining operating profit flow-through to EPS. Our '24 outlook embeds the following below-the-line assumptions, which now reflect share repurchase and financing activity from Q1. Interest expense in a $625 million to $645 million range for the full year and effective tax rate of approximately 22% to 23% and approximately 1.37 billion diluted weighted average shares outstanding. In closing, we are pleased with the stronger-than-anticipated start to the year, which bolsters our confidence in our ability to deliver on our full year guidance while fueling a virtuous cycle for the long term. With that, I will now turn the call back to Tim to close. Timothy Cofer: Thanks, Sudhanshu. Before we move to Q&A, I want to thank our KDP colleagues for embodying our company's challenger mindset every day. In Q1, we collectively put the business on an accelerating path in a dynamic macro environment. Strong execution was visible across our results and in every country end market in which we compete. We intend to keep building momentum as the year progresses. Bob, Sudhanshu, the broader executive team, and I, feel the team's energy and enthusiasm for KDP's Evolved strategy, which was particularly evident at this month's annual summit of the company's top leaders. Together, we're excited to activate this strategy to unlock considerable future value for our shareholders. Thanks for the time, and we're now happy to take your questions. Operator: [Operator Instructions] The first question today comes from Bryan Spillane with Bank of America. Bryan Spillane: Tim, congratulations on the new role. And Bob, hopefully, it sticks this time, right? I don't want you to come back. Robert Gamgort: I'm confident it will, Bryan. Bryan Spillane: So Sudhanshu, I just wanted to pick up on the comment you made about inflation and understand green coffee cost. If you could also give us a perspective on aluminum, just there's given the headlines about the sanctions and just the potential increases in aluminum cost, how we should be thinking about that? And Tim, maybe just on the coffee point, if we're going to see green coffee inflation, but we've also been discounting to get price points in line with where consumers see value, how do we just think about managing margins in coffee if we do see a sustained increase in green coffee costs? Sudhanshu Priyadarshi: Let me take the first inflation question, and then Tim will take over -- take the next question. So our inflation, we continue to expect some inflation in 2024 overall, but at a more moderate level than in recent year. We talked about green coffee. We're also seeing inflation in aluminum, but as you know, we manage it within our guidance, within our range of outcomes, and we have factored all of these inflation and commodity. We also had some stuff for 6 to 9 months in our guidance. So our overall guidance for the year, which is mid-single-digit top line and high single-digit EPS factors in all of these scenarios. Timothy Cofer: Yes, Brian, I'll take the second part of your question. I mean stepping back on coffee, obviously, as the pioneers of single-serve, coffee here in the U.S. and the steward of the category with almost 80% share of manufactured pods, our primary focus is on growing the entire ecosystem. And that's quite honestly more important than maximizing market share of any given brand. We aren't particularly interested in competing on price. But at the same time and to your point, we did make some decisions of late to protect, particularly our owned and licensed brand portfolio when we felt that our competitive positioning was impacted based on some competitive movement that we saw in the back half of last year. So we did make the decision to adjust the pricing really a couple of points around price gaps. Having said that, Brian, I would say when you look at our first quarter results, yes, there were some tactical promotional adjustments. But we also grew our owned and licensed distribution points actually at a double-digit rate. We increased display activity. We also brand support, brought some innovation. And I think all of these factors contributed to important strengthening of our business on owned and licensed. And I expect going forward, other activity around the innovation agenda, you've heard us talk about, both on pods and brewers, accelerated marketing and activation will help us drive continued strength in or, I would say, improving sequential strength in coffee for the balance of the year. Operator: The next question is from Lauren Lieberman with Barclays. Lauren Lieberman: I wanted to talk a little bit about marketing in coffee because one of the things that I've been thinking about recently is that the messaging that you've shared with The Street, the messaging on affordability, some of the advertising you've shared, all feels very spot on. And yet, perhaps over the last 12 months, you haven't had the reach to consumers or the impact to consumers that you might have hoped on some -- communication of some of messages. And so as we're thinking about affordability still being very much a concern and I would think a selling point of single-serve Keurig Coffee and also the launch of iced -- sorry, the chill machine. I want to hear a little bit more about maybe how you're targeting or approaching marketing differently, key channels to reach the consumer and what you might be doing to kind of turn up the volume or do things a bit differently than you did in 2023 to get better reach with those messages. Timothy Cofer: Absolutely. So we are seeing and we saw it this quarter an increase in our total marketing investment on coffee. And I think as we've realigned back to the question that Brian asked making sure that from a price point standpoint, we feel good about our owned and licensed brand. It's an opportunity now for our marketing and innovation to work even harder. I think there's -- we're employing what we characterize as a bit of a barbell strategy, reflecting both the opportunity to reinforce value on our pod business as well as drive on the premium side. When you look at the consumer broadly, you do see at the higher income levels a really robust participation in the Keurig ecosystem and actually growing sales. Where we see a little bit more pressure, of late, is on the lower and mid income. And to that end, you will see new marketing coming starting in the second quarter. That is more sharply focused on a value message, particularly against a broader frame of away-from-home coffee. While at-home coffee represents 3/4 of the volume, away-from-home coffee is the larger dollar ring. And we think in today's economic environment and given the quality and variety that we're providing, a sharper value-based message will be one that's well received and you will see that activated as of Q2 this year. So that's yet to come. Another one is around our iced and cold platform and indeed launching the refreshers that we've done, which is obviously a big part of away-from-home coffee shop experience as well as new iced pods and the new Brew + Chill brewer that will be launching in the fall, that will also be incremental and new marketing against that platform, which I think is a big source of growth opportunity for us. And then, finally, on the premium and super premium, we've really rounded out our roster. I made reference to a number of new partners into the Keurig ecosystem at the premium and super premium level, you will see marketing against that. And I'd be remiss if I didn't mention as well from a total coffee consumption standpoint, the big opportunity around ready-to-drink and single serve with our La Colombe partnership, and you'll see marketing against that. So I think we've got a stacked series of new news, both in terms of innovation and marketing messaging. Most of that is yet to come as we go through the year. Operator: The next question comes from Chris Carey with Wells Fargo. Christopher Carey: So 2 quick questions. First on the coffee business. So adding Black Rifle, very interesting development. Can you just talk about how that partnership came to be and whether this makes you more confident on your ability to continue to see sequential improvement in your coffee volumes into the back half of the year and perhaps into 2025, just given the momentum around that business? And then if I could, just on the cold side, Sudhanshu mentioned some of the innovation timing dynamics of the underlying cold business. Would you expect those to start looking better as innovation comes to market? And can you just remind us on timing of the innovation suite specifically with Creamy Coconut. Timothy Cofer: Sure. So first on Black Rifle, as I mentioned in my prepared remarks, we are excited to welcome Black Rifle into the Keurig ecosystem. I think Black Rifle's coffee success, I'm sure you know what, Chris, is already well established in the coffee industry. And I think their decision to evolve to a Keurig system partner really reinforces our full value proposition and our stewardship as the single-serve category leader. So pleased with that development. Bigger picture, and I referenced it in the prepared remarks, we partner with a broad range of coffee brands nationwide and we're about offering consumers choice and variety and a great high-quality cup of coffee and really providing consumers the diversity of their preferences and Black Rifle coffee is the newest addition, but it's one of many and one that we feel good joining our system. As it relates to cold and refreshment beverage, indeed, we have a slightly different phasing of the major innovation on our refreshment beverage this year versus last year. We mentioned this in our February call. But when you look at our relative market share here in Q1, we're under a little bit of pressure right now. We expected that. It reflects that later innovation cadence. And the one I draw your attention to was really a blockbuster for us last year, and that was Dr Pepper Strawberries and Cream. It launched early in the first quarter of last year. It enjoyed a very strong start. And in fact, it became the #1 CSD category innovation in the industry in 2023. This year, we're seeing a slightly later phasing of that. So as we speak, we're launching Dr Pepper Creamy Coconut. You can find it in your local store. It's a great product. We're also rolling out a complete restage of our Bai still portfolio under the banner of Bai WonderWater in partnership with Sydney Sweeney. We're launching, I would say, reinvigorating our core water business hydration business with U.S. gymnastics partnership. So we've got a lot of activity that really is starting now in Q2 and will ramp into the back half of the year. On top of that, I would mention what you know as well, which is continued strong C4 contribution and a continuing distribution ramp of our Electrolit partnership. Therefore, you see more of the firepower hitting in the back half of '24 versus '23. Operator: The next question comes from Peter Grom with UBS. Peter Grom: So maybe building on the partner brands, I was hoping to get some color on C4. Maybe first, I would just love to get your perspective on kind of what you're seeing from the category more broadly. Trends have moderated quite a bit across the board. So just any thoughts on what you think could be driving that. And then just on C4 specifically, continued strong growth, some share gains here. You have visibility on where you're sourcing these share gains from? Do you think it's coming from kind of the legacy brands like a Monster or Redbull? Or do you really think it's coming at the expense of maybe some of the other performance energy drink brands? Timothy Cofer: Yes. Yes, absolutely. Well, we continue to be really pleased with our partnership with C4. I think I shared at Investor Day as of that moment with since KDP took the distribution partnership with C4, and we made that minority investment stake. TDPs are up close to 60%. Sales are up 65%, and we continue to see growth potential for C4. C4 has got some exciting innovation this year around flavor extensions and around sizing and packaging configurations as well. Indeed, the Energy segment broadly, as you have mentioned, Peter, has seen some softening versus what was a multiyear run. I think Energy remains very much a resilient category and one that particularly among Gen-Xennials will continue to play a huge role in daily beverage choice. As it relates to sourcing, we see sourcing broadly. I'm not going to get into specifics around any given competitors, but I think it's both sourcing from other large players in energy as well as broader liquid refreshment beverage, particularly among youth as they make various choices on their caffeine carrier. Operator: The next question comes from Steve Powers with Deutsche Bank. Stephen Robert Powers: Congrats, Tim and Bob as well, from me. Tim, I wanted to play back what you said just a couple of minutes ago on the cadence of sequential improvement in underlying refreshment beverage performance. It sounds like with the innovation you're launching now in CSDs and then the Bai relaunch, et cetera, it sounds like we should see sequential improvement in market share this quarter as we're looking at consumption data, but the full financial impact is going to be more skewed to the second half. I just want to make sure I got that right. Timothy Cofer: That's correct. Stephen Robert Powers: Okay. Great. And then if I could take a longer-term perspective with respect to the Alta brewer system. As you pursue that, I was just curious as to the engagement you expect from some of your partners. And as you beta test and scale, do you expect to do that with a relatively full brand assortment? Or is that more of a longer-term endeavor? Roger Johnson: Yes, Steve, it's Bob. On the Alta system, obviously, we're excited about its potential to continue to drive growth in the total single-serve category. And as Tim, I think, nicely said earlier, that is our top priority. We previewed the system with all of our partners, and they've been involved every step in the way. And our decision on how we roll out the system, which brands are in initially and how we continue to execute that over time, we're still very much in the early stages of that, but it's an active conversation with the partners. Operator: The next question comes from Robert Ottenstein with Evercore. Robert Ottenstein: Two kind of follow-ups. First, on the pod business, could you remind us or maybe update us just in terms of what the business mix looks like between owned, licensed partner, private label, so we just kind of level set where we are on that. And related to that is there any change in strategy in terms of how you're looking at those categories and your emphasis? Or is it just pretty much as it has been? And then second question, great to see all the share buybacks. Does the commitment to the share buybacks, is it purely opportunistic? Or does it, in any way, reflect even a slight philosophical change from where you were 3 or 4 years ago, let's say in terms of use of excess cash flow, maybe a slight pivot towards share buybacks versus inorganic growth. Timothy Cofer: Yes. I'll take that first question on pods, and then I'll defer it to Sudhanshu on the second part of your question. I mean broadly, and you see this in the syndicated data when you look at the full estate around pods, you're looking at roughly I'll do round numbers here, Rob. 50% is our partners, 25% owned and licensed, 25% -- well, 20% private label. So that's the broad makeup of the mix. And our strategy hasn't changed. As I said at the beginning, we are stewards of the entire category. Our responsibility is to grow the category and grow the entire ecosystem. Obviously, owned and licensed brand give us an additional mix benefit and one that we keep an eye on and want to be sure that they continue to stay robust. I made some comments both in the prepared remarks and in earlier Q&A on what we've done to not only protect that franchise, but also to grow it. And I think we've got a great innovation slate and a series of marketing initiatives here to go to keep our owned and licensed business robust, but very much view ourselves as stewards of the entire category. And then I'll pass to Sudhanshu. Sudhanshu Priyadarshi: Yes. So regarding the share buyback, as you know, we had $4 billion worth of authorization, and it is opportunistic for us. Our #1 priority in capital allocation and investment in our own business, organic and inorganic growth. Number two is maintaining the strong balance sheet, our long-term leverage target of 2x to 2.5x. But we keep it very dynamic in terms of how we manage quarter after quarter, year after year. So you saw us, we saw opportunistic pricing with JAB secondary sales, and we purchased 38 million shares in 2024. 2023, we purchased close to 22 million shares. And 2022, we purchased 11 million shares. We still have $1.8 billion remaining on our share repurchase, but we will continue to be opportunistic when we see value in our stock price, we will go and buyback shares. Operator: The next question comes from Andrea Teixeira with JPMorgan. Andrea Teixeira: So my question is on consumption. First on coffee, can you comment on the exit rate of pod consumption? And how should we think about the cadence of innovation, you had a lot of, in this call, in terms of that cadence in particular. And also Alta, I understand this is beta testing, but when we should expect that to conclude and to start commercializing. And for cold refreshments on the Creamy Coconut Dr Pepper, how can we pretty much eclipse with the Strawberry Cream lap and how we should be thinking about that? And if I can squeeze the marketing commentary that you had about the A&P investments, how we should be thinking in the cadence of the quarters. Timothy Cofer: Andrea, thanks. Let me make sure I can get through all these. I think first on pod shipments and consumption, as referenced, we saw sequential improvement in our pod shipment trend during Q1, and that was underpinned by better trends at POS. So we've seen both a modest improvement in the at-home coffee category broadly. And then as mentioned, a real acceleration in KDP specific volume driven by the recovering share trends, particularly on owned and licensed. So feel good overall that minus 1%, near flat pod shipment performance in Q1 is obviously significantly above what we saw in Q4 and the back half of last year. In terms of consumption versus shipments, we're comfortable overall with the pod inventory levels and didn't see any unusual changes. So it's really consumption-driven and continuing. While not perfectly linear, I would say, we expect a gradual recovery in pod volumes and consumptions through the balance of the year underpinned by the initiatives that we've talked about already on this call. You then asked about Alta. We're doing a beta test in the fall with limited consumer really to get the learning around what's working, how we can optimize, et cetera. At this point, there isn't already a predetermined path. Obviously, we have various scenarios and plans. But we're going to take the time to learn from that and then scale it up afterwards based on those learnings. So more specificity to come following the beta test that starts this fall. Then as it relates to CSD innovation, indeed, as I said earlier, we're lapping in Q1 just a blockbuster #1 innovation in the entire CSD category last year. So that's what you're seeing in some of the share pressure. Year to go, I think we've got a stacked innovation plan, including with the Dr Pepper Creamy Coconut and many of the others. Canada Dried Fruit Splash is already doing well. And we're only at, I would say, less than half ACV. So that's yet to ramp fully, including in some of the biggest markets. So you will see that phase more to the back half. And then what was it? Was that it? Good. Thank you, Andrea. And obviously, happy to follow up with you further, the IR team, or me on more questions. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jane Gelfand for any closing remarks. Jane Gelfand: Thank you, Betsy. And thank you, everyone, for participating this morning. As Tim said, we are available all day to answer any follow-up questions and look forward to continued engagement. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper's Earnings Call for the Fourth Quarter of 2023. [Operator Instructions] This conference call is being recorded. [Operator Instructions] I would now like to introduce the company's Vice President of Investor Relations and Strategic Initiatives, Jane Gelfand. Ms. Gelfand, you may begin. Jane Gelfand: Thank you, and hello, everyone. We appreciate your attention, recognizing that many of you are also attending an industry conference. Earlier this morning, we issued a press release detailing our fourth quarter and full year results, which we will discuss during this conference call. Before we get started, I'd like to remind you that our remarks will include forward-looking statements which reflect KDP's judgments, assumptions and analysis only as of today. Our actual results may differ materially from current expectations based on a number of factors affecting KDP's business. Except as required by law, we do not undertake any obligation to update any forward-looking statements discussed today. For more information, please refer to our earnings release and the risk factors discussed in our most recent Form 10-K, which will be filed with the SEC later this morning. We will also discuss non-GAAP measures of our performance. Definitions and reconciliations to the most directly comparable GAAP metrics are included in our earnings release. We will also speak about the concept of underlying performance, which removes the impact of nonoperational items in the current and prior years. These items include gains on asset sale leaseback transactions, reimbursement of litigation expenses related to the successful resolution of our body armor lawsuit, a business interruption insurance recovery and the change in accounting policy for stock compensation. Here with us today to discuss our results are KDP Chairman and CEO, Bob Gamgort; Chief Operating Officer; Tim Cofer; and Chief Financial Officer and President, International, Sudanshu Priyadarshi. I'll now turn it over to Bob. Robert Gamgort: Thanks, Jane, and good morning, everyone. 2023 was a year of significant progress for KDP as we grew share across the majority of our business, entered multiple high-growth white spaces, such as ready-to-drink coffee and sport hydration through highly capital-efficient partnerships, began to rebuild margins while simultaneously driving high-quality reinvestment, returned more than $1.8 billion to shareholders, including a 7.5% dividend increase in the opportunistic repurchase of 22 million shares and delivered our financial outlook, while significantly improving the composition of our earnings and strengthening our balance sheet. . Full year constant currency net sales grew nearly 5% and EPS advanced 6%. On an underlying basis, our EPS growth was even stronger and in the double digits as we largely eliminated the contribution from nonoperational gains that benefited the prior year. Pricing actions and a near doubling of year-over-year productivity savings, more than offset continued inflationary pressure, supporting earnings growth even as we funded a double-digit increase in marketing. Our 2023 performance demonstrated the resilience inherent in our broad portfolio with continued momentum in U.S. refreshment beverages and international offsetting short-term pressures in U.S. coffee. We also initiated a thoughtful succession process that balances continuity and new perspectives across the company's most senior leaders. Tim and our refreshed executive team have merged seamlessly are building momentum and add to my confidence in KDP's future success. Our hard work in 2023 sharpened our strategic road map and bolstered our capabilities and financial profile providing a platform for growth and value creation in 2024 and over the long term. Moving now to our fourth quarter results. A primary focus for us last year have been rebuilding our margin structure. We made impressive gains in Q4, driving the strongest quarterly gross margin expansion in our history and the fastest rate of operating margin improvement in multiple years. This improvement was broad-based across each of our segments and enabled us to deliver EPS above the outlook we shared last quarter despite the impact of some transitory top line headwinds. Q4 constant currency net sales grew 1.1%, with net price realization more than offsetting a volume/mix decline. This result is not representative of our ongoing momentum and was, in part, weighed down by short-term factors in our U.S. coffee business that we do not expect to persist. We have good visibility to mid-single-digit consolidated net sales growth in 2024, which Sudhanshu will address in a few minutes. Q4 gross margin expanded 450 basis points, translating to gross profit dollar growth of 10% and helping to fund increased investments. Operating income increased at a high single-digit rate and EPS grew in the double digits. Notably, normalizing for nonoperational items in 2022, our Q4 underlying EPS growth rate was in the high teens. We continue to enjoy strong momentum in U.S. refreshment beverages. Net sales grew at a high single-digit rate in Q4, led by still very healthy net price realization and manageable elasticities with volume mix declining only modestly in the period, redouble focus on productivity and cost discipline along with strong C4 energy partnership execution, translated this topline to double-digit operating income growth. Q4 segment margins expanded meaningfully even as marketing continued to grow. As we observed back in October, though consumers remain largely resilient, value is a key shopping consideration. Many consumers are making trade-off decisions to manage stretch household budgets. As a result, value-oriented channels, such as club stores continue to outperform and consumers are inclined to shop more during deal periods such as holiday weeks. Our U.S. refreshment beverages business model is well suited to a dynamic macro environment. The breadth of the beverage occasions we serve and the depth of our distribution allow us to spot changing consumer trends with speed. We then flex our plans to deliver on the key tenets of our growth strategy, driving category growth, market share gains and white space expansion regardless of the operating environment. Fourth quarter was no exception with dollar sales growth and share gains across 85% of our U.S. refreshment beverages business. CSDs grew nicely, led by Dr. Pepper, which was the largest market share gainer among the top 10 category brands for both the quarter and the year. During Q4, we once again activated our Fansville marketing campaign, the fuel awareness and drive demand. And despite Dr Pepper's existing scale, we grew incremental display and ACV for key varieties and pack sizes. Dr. Pepper, strawberries and cream also remained highly resonant, finishing 2023 as the #1 innovation launch in the CSD category. In other parts of our portfolio, we leverage revenue growth management to ensure we are offering consumers continued compelling value across all channels and formats. For instance, in Q4, we deployed more multipacks and tailored promotional and merchandising strategies by channel for core hydration and Avion. As a result, our premium water portfolio grew retail dollars and notched market share gains, overcoming some consumer trade down to mainstream water. Our pursuit of white space opportunities continued in Q4, wrapping up a very active year. We exited the first year of our sales and distribution partnership for C4 Energy with momentum. C4 commands less than a 3% share in energy today with meaningful upside ahead, and we have strong commercial plans to add significant further scale in 2024. We also just started shipping electrically through the KDP system, which will build our exposure to the fast-growing sports hydration category and multicultural consumers. A full innovation slate adds to our 2024 excitement. These include the launch of Dr. Pepper Creamy Coconut, just in time for the summer season. Canada Dry Fruit/CSD, Apple Mini bottles, the restage of Buy Wonder Water, 4 hydration partnering with Teen USA Symnastics and the national U.S. rollout of Penafiel, our powerhouse mineral water brand from Mexico. We intend to leverage continued U.S. refreshment beverages top line growth to drive a balance of reinvestment and bottom line delivery in 2024. Over the past year, our commercial and supply chain teams have grown increasingly integrated, yielding significant efficiencies. As a result, our productivity savings run rate step changed in 2023, and we began 2024 with healthy carryover savings and a robust pipeline of additional projects to support P&L flow-through. In U.S. coffee, we continue to control the controllables in the context of a still sluggish at-home coffee category. Our Q4 pod shipment trends improved relative to Q3, and we delivered another quarter of strong segment margin recovery and underlying operating income growth. We also ended this year having added approximately 2 million new households to the Keurig ecosystem in line with our target. That said, net sales declined 10% year-over-year as some short-term dynamics weighed on Q4 segment performance. As Sudhanshu will describe in detail, a combination of transient factors accounted for roughly half of the top line decline, and we expect these to dissipate in 2024. Bigger picture, volume consumption in the at-home coffee category declined about 3% in 2023 in IRi tracked channels gradually recovering from a mid-single-digit decline in 2022. Q4 category trends were largely consistent with the full year. In both the quarter and the year, single-serve coffee continued to grow as a percent of total at-home coffee servings. And Keuring compatible brewers also gained meaningful share. 2023, 4 out of 10 brewers sold were Keuring compatible. And in Q4, that ratio approached 50%. These are clear indications of our ecosystem's ongoing appeal to coffee drinking households. While at-home coffee category consumption is taking longer than we anticipated to return to growth to the back half of '23 was clearly stronger than the first, and we expect the gradual recovery to continue. Our 2024 U.S. coffee strategy incorporates a balance between long-term growth initiatives and short-term actions that address current macro realities. We will continue with high-quality brand and ecosystem building activities to drive incremental household penetration, increased pod usage among existing and new households and accelerate growth in ready-to-drink coffee. At the same time, we will emphasize affordability through revenue growth management initiatives such as engineering brewers to hit important entry price points. and highlighting the relative value of consuming coffee-at-home versus in coffee shops. For higher income consumers, we continue to build out super premium solutions. These actions should support a broader at-home coffee recovery and ultimately help return the single-serve category to its long-term growth trend. Even so, we are building our 2024 financial plans around more prudent category growth assumptions. With more than 50 million coffee drinking households in the U.S. yet to convert to single-serve, there is significant runway to steadily grow penetration. We have an ambitious vision of Keuring future, some of which we will begin to share publicly starting this spring. At the annual Houseware Show in a few weeks, we will preview an exciting pipeline of disruptive innovation of Keuring brewers, and we will be making a public announcement about these innovation plans shortly before that event. Our 2024 pod program is equally robust. Innovation will span cold and hot occasions and a spectrum of brews and flavors. Along with incremental promotional and marketing support, these new products will directly bolster our owned and licensed brands. Products like refreshers will benefit our indulgent donut shop brand, while our high-profile collaboration with Kevin Costner will elevate Green Mountain. This is Costner's first brand campaign in 30 years and will feature the co-creation of a unique set of blends and integrated marketing events to highlight our shared passion for coffee quality and sustainability. We remain focused on building out the super premium tier of pods, which reinforces Keurig's reputation for quality and supports premiumization in the category. Our latest activities began in Q4 with the introduction of lock alone licensed pods and continue in early 2024 with the conversion of Lavazza to a licensed relationship, which will unlock more growth and efficiencies for the brand. Our ready-to-drink coffee efforts are also gaining momentum. In Q4, we commenced our sales and distribution partnership for lock-on ready-to-drink coffee now with renovated products and packaging. Wrapping up on U.S. coffee, while we are not satisfied with our 2023 performance, we are taking steps to support a stronger 2024. We are acting as a category leader to revive long-term category growth, thinking expansively and disruptively with the vision, capabilities and willingness to invest in the future growth opportunities for ourselves and on behalf of our partners. In other words, we are being open-minded and ambitious and positioning KDP to benefit from an at-home coffee category rebound, while also planning 2024 in a measured way. Moving now to our International segment. Revenue grew at a double-digit rate on a reported basis and high single-digit rate in constant currency with continued balance between pricing and volume mix. As with our other segments, operating income grew faster than net sales, resulting in significant margin expansion. Our performance reflected healthy growth across country markets. Our results were led by strong trends across our cold beverages portfolio, primarily driven by Penafiel and Clamato in Latin America, Canada Dry and Dr. Pepper CSDs in Canada, and our continued expansion of our ready-to-drink alcohol and alcohol alternatives products. In our international coffee business, we delivered strong household penetration growth in 2023 and this will remain a 2024 priority. For that aim, we recently inked an agreement to make sure the official coffee maker of the NFL in Canada, capitalizing on the sports growing popularity. Our international momentum is supported by broad-based capability investments, including in areas such as distribution and consumer insights. As in the U.S., our DSD system in Latin America represents a competitive advantage. During 2023, we bolstered our reach by expanding our routes and building out more dedicated coolers at retail and plan to do so again in 2024. Meanwhile, our innovation pipeline marries local expertise and enterprise-wide insights. For instance, the launch of Schweppes mocktails in LatAm will build on our experience in ready-to-drink low and no alcohol products in Canada. While the upcoming introductions of Dr. Pepper Dark Berry in Mexico, an expansion of 0 CSDs in Canada, leverage successful playbooks out of the U.S. Since merger, we have grown our international business at a strong double-digit CAGR from slightly over $1 billion in annual sales to almost $2 billion. We continue to see outsized growth potential in this segment, and it will remain a meaningful contributor to KDP's total results in 2024 and beyond. Wrapping up, 2023 represented another year of delivering on our commitments while also advancing key strategic priorities. The operating environment is as ever demanding but our all-weather business model and energized teams are up to the challenge. Our focus remains on sustainably and thoughtfully extending our leadership position in the beverage industry while consistently delivering strong and predictable financial outcomes, including a return to our long-term algorithm in 2024. On March 19, we will be hosting a webcasted investor event to dive deeper into our strategy and the multiple value creation opportunities we see across the business. We hope many of you will join or tune in. I will now turn the call briefly over to Tim, after which Sudhanshu will walk us through the detailed financial results and outlook. Timothy Cofer: Thanks, Bob, and good morning, everyone. After joining KDP in November, I've spent the past 3 months fully immersing myself in the business as Chief Operating Officer, and in preparation for the CEO succession later this spring. My onboarding has exposed me to nearly every aspect of KDP, and most importantly, to its people. At the top of that list, Bob, Sudhanshu, our Board of Directors and the broader executive leadership team, with whom I've already forged strong and collaborative partnerships. I've spent time in multiple KDP locations from our headquarters in Dallas and Boston to the front lines of DSD retail as well as our cold and coffee manufacturing plants. I've met with many of our customers and partners and above all, listen to the valuable feedback from our employees. I also had an active hand in developing the 2024 plan that we're sharing with you today, and I echo Bob's confidence in KDP's ability to continue to deliver and create value for our shareholders. The investor event in a few weeks will be my first opportunity to share a more comprehensive view of my observations on the beverage industry, KDP as a market leader and our strategy to extend that leadership in the years ahead. I look forward to kicking off a deeper discussion at that time. For now, let me just say that I'm equally impressed by KDP's current strength as I am excited about the company's future potential. We are a leader in a very attractive industry. We steward many iconic brands that consumers love. Our commercial and distribution capabilities are differentiated. We are a preferred partner and have demonstrated an ability to evolve our portfolio in a way that broadens growth exposure and accomplishes it with capital responsibility. Finally, one of our greatest strengths is that we act with a challenger mindset. This is an important cultural element that attracted me to KDP and one which we plan to build upon going forward. Although Keurig Dr. Pepper is still a young company, our track record of strong and consistent financial delivery over a historically dynamic past 5 years is testament to our resilience and potential. I'm honored to build on such a formidable foundation and look forward to partnering with the Board and my colleagues to drive the next chapter of KDP's success. We have strong alignment and our commitment to deliver value to all stakeholders, including our shareholders. We're fortunate to have many long-term investors who have supported KDP since the merger, and we look forward to delivering for all of you in the years ahead. And with that, I'll turn it over to Sudhanshu. Sudhanshu Priyadarshi: Thanks, Tim, and good morning, everyone. I will focus my remarks this morning primarily on our quarter 4 results and the 2024 outlook. Our Q4 performance demonstrated strong execution in a dynamic operating environment. We further rebuilt our margin structure, invested to seed future growth opportunities and delivered a strong EPS growth that was slightly ahead of our outlook. . Fourth quarter net revenue advanced 1.7%, with 1.1% constant currency growth. Net price realization increased 4.8%, which was partially offset by a 3.7% decline in volume mix. We enjoyed strong momentum across approximately 70% of our business namely in U.S. refreshment beverages and international, but our top line growth was pressured by temporary headwinds in U.S. coffee. Gross margin expanded a record 450 basis points year-over-year, driven by a favorable net impact of pricing, productivity savings and moderating inflation. We also earned performance incentives relative to our strong commercial execution of the C4 partnership, which contributed approximately 100 basis points to gross margin. SG&A deleveraged 170 basis points, in part reflecting a double-digit increase in marketing. Total company operating income grew 6.5%, which, along with modest below-the-line leverage drove 10% EPS growth. Excluding the year-over-year reduction in nonoperational gains, EPS would have grown in the high teens. In 2023, we essentially eliminated nonoperational benefits. We now move into 2024, looking to build on this solid earnings base. Moving to the segments. U.S. Refreshment Beverages grew net sales 6.8%, led by 7.5 percentage points of pricing. Volume/mix declined a modest 0.7% with manageable elasticities, broad market share gains and a healthy growth contribution from C4 Energy. As Bob discussed, in 2024, we will build on our commercial momentum with a robust slate of innovation though our cadence of launches differ slightly from last year. For instance, our Dr Pepper Creamy coconut rollout will begin in quarter 2 and gain steam into the summer as opposed to the very successful launch of strawberries increased in quarter 1, 2023. While the calendar difference is made temporarily weigh on our market share comparison early in 2024, we remain confident in another great year for U.S. substation Beverages relative market performance. Segment operating income grew 20.2% in the quarter and margins expanded 360 basis points. This growth reflected the net sales momentum, a favorable impact of productivity net of inflation and the C4 performance incentives partially offset by higher marketing. In U.S. coffee, we made good progress across multiple dimensions. Share gains for the single subsegment, and for Keuring continued. We executed a successful holiday approval program to end the year with 40 million Keuring households and the segment margins came in at the highest level in 10 quarters. These markers survive, we do not view the headline 9.9% net-well decline in quarter 4 as overly indicative. With pricing, a positive contributor, just shy of 1%, segment sales were pulled down by a 10.7% decrease in volume mix. Let me deconstruct drivers to give you a sense of why we see roughly half of the decline as transient. Brewer revenue decreased 21%, primarily due to a 14% decline in brewer shipments and reflecting a return of normal seasonal shipment patterns against a steadier point of sales trends. Looking at the back half in total is more telling with brewer shipments in line with point-of-sale purchases. As context, full year approval shipments in 2023 were 13% higher than pre-pandemic shipments in 2019, representing a 3% CAGR. Pod revenue declined 7% in the period, even with the continued impact from previously discussed private label exits, pod shipment trends sequentially improved as expected, down 3% in quarter 4 versus 8% last quarter. Pod revenue in the period was also unfavorably impacted by mix, given a lower percentage of sales from on in-licensed brand relative to last year. The temporary headwinds in quarter 4 included the brewer decline, private label exits and a modest impact of lapping an extra week last year. Though quarter 1 will continue to reflect still sluggish category dynamics, we do expect these discrete factors to be less impactful beginning next quarter. Moving to segment operating profit and margins. Although quarter 4 operating income dollars declined 2.8% year-over-year, this was entirely due to the impact of lapping more than $50 million in nonoperational benefits. On an underlying basis, our operating income grew in the double digits. U.S. coffee operating margin expanded 260 basis points relative to the prior year. Drivers of this expansion included an improving relationship between pricing and inflation, continuous productivity benefits and overall cost discipline. In 2024, reinvestment will be an important priority in the segment and will source from these margin tailwinds. International segment net sales grew 11.5% in the fourth quarter. On a constant currency basis, sales increased 6.5%, with pricing up 3.6% and volume mix growing 2.9%. We continue to deliver strong results across markets, despite tough year-over-year comparisons in Mexico from lapping the World Cup last year. Segment operating income increased a very strong 25.6% on a reported basis and 19.8% in constant currency terms, thanks to pricing, operating leverage and productivity mating favorably against iteration. As President of our International segment, I see a tremendous multiyear top and bottom line growth opportunities across this business, including in 2024. Moving to balance sheet and cash flow. Our ongoing cash generation remains strong. However, we chose to deploy a significant component of our 2023 cash flow to strategically reduce our supplier financing program, a decision that optically weighed on our free cash flow even as it to strengthen our balance sheet. Put another way, our free cash flow for the year measured just north of $900 million, but included a $1.6 million use of cash from accounts payable, primarily due to our discretionary decision around the supplier financing program. Our business remains highly cash generative and on an ongoing basis, we continue to expect conversion commensurate with other leading beverage players. However, we will be below this long-term level in 2024 due to a continued a bit more modest impact from reducing supplier financing. How we intend to allocate our capital remains very much intact. Our priorities include making organic and inorganic investments to support our growth further strengthening our balance sheet, consistent with our long-term net leverage target of 2 to 2.5x and returning cash to shareholders through a steadily growing dividend and opportunistic share buybacks. In any given year, we may over-index to 1 or more of our priorities based on short-term opportunities, but over time, we will take a balanced approach. For example, direct shareholder returns were a focus area during 2023, representing a cash deployment of over $1.8 billion. We saw value in our stock and repurchased 22 million shares during the year, including more than 8 million shares in quarter 4, with over $2.9 billion remaining on our buyback authorization, we will continue to be opportunistic. We also raised our dividend 7.5% during 2023, marking our third consecutive annual increase. Moving now to our 2024 guidance. We expect to deliver mid-single-digit constant currency net sales growth and high single-digit EPS growth in 2024, consistent with our long-term algorithm. Based on our current FX outlook, we expect reported results to also incorporate roughly 50 basis points, top and bottom line currency headwind in 2024. Our plans reflect continued strong momentum in our U.S. Refreshment Beverages and international segments, while contemplating a relatively muted contribution from U.S. coffee. New strategic partnerships will contribute approximately 200 basis points to overall top line growth which will also benefit from the combination of carryover pricing and selected new price actions consistent with a more normalized inflationary environment. We are projecting another year of robust productivity savings to help offset this more normal level of inflation. Even with planned reinvestments in our brand and capabilities, we expect healthy operating profit growth, reflecting net sales growth and full year operating margin expansion. However, we also anticipate some below-the-line headwinds primarily in interest expense. This will constrain some of the operating profit flow through to EPS, though we retain good visibility to bottom line growth within our high single-digit target range in 2024. Our full year outlook includes the following below-the-line assumptions. Interest expense in a $560 million to $580 million range, an effective tax rate of approximately 22% and approximately $1.4 billion diluted weighted average shares outstanding. From a phasing perspective, we expect our top and bottom line momentum to build throughout the year. This quarterly EPS flow is typical for us and accounts for our innovation and investment calendar as well as building contributions from electrolyte and lacalome in the back half. Reflecting these dynamics and a slower start to the year in U.S. coffee, we forecast first quarter net sales and EPS growth in the low single digits. In closing, 2023 was a significant year for KDP. We grew share across most of our portfolio, increased gross margin through efficient pricing and record productivity, invested in key growth factors, improved the composition of our earnings profile and to strengthen our balance sheet. We expanded into attractive bite spaces through capital-efficient strategic partnerships and return a meaningful amount of cash to shareholders. Our 2023 performance was the product of hard work and strong execution across our whole organization, which enabled us to achieve a good set of operating and financial outcomes that were in line with our original projections. Our results also underscore our proven ability to deliver consistently and predictively in a dynamic operating environment. We have strong confidence that we will do so again in 2024. With that, I will now turn the call back to Bob to close. Robert Gamgort: Thanks, Sudhanshu. Five years out from having played a key part in creating KDP, my excitement about its future continues to build. Our performance track record speaks for itself. In the 5 years since merger, net sales have grown at a 6% CAGR and EPS at an 11% CAGR. We have generated almost $11 billion in cumulative free cash with roughly half redeployed to bolster the business through transformational capital investments and disciplined M&A and partnership deals, which further enhance KDP's growth profile. . We returned the other half to shareholders, enhancing our TSR delivery. We are looking forward to seeing many of you in mid-March and to sharing more about our go-forward strategic road map. KDP's priorities are very clear. They reinforce our role as a disruptive and dynamic force within the beverage industry and lend visibility to continued delivery against our attractive long-term growth algorithm. My confidence is made all the stronger, given the refreshed management team now in place with Tim's vision and energy already taking root and propelling KDP into its next chapter. Thank you for dialing in during a busy day of cagny, we are now happy to take your questions. Operator: [Operator Instructions] The first question today comes from Peter Grom with UBS. Peter Grom: So Bob, you mentioned that you're building your '24 operating assumptions based on category growth expectations that are more prudent. Can you maybe just unpack that a bit more? And I would be particularly curious on what your expectations are for the U.S. coffee business sounds like 1Q is still going to be sluggish, but it does also seem that you need the category growth to improve in order to kind of hit your organic sales outlook. So just any thoughts on specifically when you think that inflection will happen would be helpful? Robert Gamgort: Sure. All 3 of us on the call today have been very involved in the development of the 2024 plan. I think as we said right upfront, there's no expectations in the plan of any significant change in the macro environment. And we talked about our expectations around coffee being quite muted as we think about 2024. We focused our energies really on what we have in our control which we've talked about a number of times. I think given that Tim will be taking over in Q2 and he's been very much involved with the team in developing AOP, it may be helpful for you guys to hear from Tim about why we have conviction on the outlook that we provided today. Timothy Cofer: Yes. Thanks, Bob. Peter. As Bob said, I think we do have good visibility into the mid-single-digit net sales growth, '24 outlook that we've shared with you today, and it really reflects 3 primary elements, and I'll start with Refreshment Beverages. We had a strong '23 and expect to continue positive momentum into '24. I think it will be characterized by a more normalized pricing environment that includes both some carryover and select targeted new actions. That will drive a more balanced price and vol mix equation. . We've got a strong innovation lineup again, and Bob referenced some of those initiatives earlier in the prepared remarks, all supported by strong digital marketing and in-store activation, and we will benefit from our recent expansion into higher growth of white spaces, including electrolyte in sports hydration, which is fully incremental, and the continued scaling of our C4 platform and energy space in partnership. Second, we think we have continued significant runway in international. And we've demonstrated a double-digit CAGR since the merger. As Bob mentioned earlier, it's a much bigger part of the mix. We've nearly doubled the business since merger at almost $2 billion. And we expect that solid momentum to continue in '24. And that brings us to coffee. The 21st elements really give us time for U.S. coffee to recover on the top line. And so the overall mid-single-digit sales guidance reflects relatively muted contribution expectations from U.S. coffee we expect coffee vol/mix recovery. We expect sequential improvement throughout the year. We've got some good programming and good new ideas, partnerships, La Colombe, Luvata conversions on the premium side, new marketing campaigns on Green Mountain and Original Donut Shop, some strong innovation, including refresher and extension in our ICE platforms, all the while in this economic environment, reinforcing our quality, a variety and importantly, our strong value proposition relative to coffee shop alternatives. Operator: The next question is from Chris Carey with Wells Fargo. Chris Carey: Just following up on coffee. Can you maybe just help frame the visibility that you have on operating profit and operating profit margins and the vision if the top line remains muted as you expect, that would assume that's in line with your expectations, but it has been quite a volatile experience over the last several years. So what if things get worse, do you have enough buffer to be able to invest behind maintaining the sequential improvement even if still muted in 2024, while maintaining your your profit expectations for the year, so any context there would be helpful? Robert Gamgort: Yes. Chris, let me just give you just a bigger picture context on the top line, and then I'll ask Sudhanshu to talk to you about the margins. and it's all under that umbrella of controlling the controllables. We have good visibility on the margins. If you look at the very long-term trends on at-home coffee and single-serve in particular, you talked about is volatility. It was a situation where the category went straight up during COVID due to time spent at home and then it moved down from that peak. So it's been slow moving. We talked about it quarter-to-quarter. It actually hasn't been that volatile. It's just been slower in recovery than any of us expected. Just to reiterate a couple of comments about the category. We're not happy with the the pace of the rebound, but it is sequentially getting better. It is interesting that we're seeing this trend globally in nearly every developed market, any other trend that seems to consistently hold up is that the single-serve segment outperforms all other forms of coffee. And so we're seeing this gradual improvement, the untracked channels perform better than the track channels. And given that the pace of that, while sequential has been gradual, that's why our planning expectations going forward, we think are quite reasonable and prudent. Now that's an area we don't fully control, we influence it through our innovation and marketing. We do have a lot of visibility and control of the margins. So Sudhanshu, you want to talk about that side of the equation? . Sudhanshu Priyadarshi: Thanks, Bob. And Chris, as you saw this in second half, that gives you a proof point of how we have rebuilt margin first half, we were at 30% operating income margin, in Q3, we did 33%, in Q4, we did 36%. And we said that it took us multiple years to come down from the peak margin, it will take us multiple years to get the margin to pull back. But at the same time, in 2023, we took structural action to support our prior U.S. coffee margin. We talked about renegotiating partners contract. We made progress on Spartenburg. And in 2024, we expect for the full year, coffee margin progress on an annual basis, but I wouldn't rely on second half margin as an ongoing margin for coffee. And we also need to factor in the balancing between 2 priorities. One is supporting category and top line recovery, but we feel good about coffee margin expansion for 2024. . Operator: The next question comes from Brett Cooper with Consumer Edge Research. Brett Cooper: A question for you on LRB brand partnerships. I was hoping you could stick to the evolution of your capability to onboard brands. I don't know, maybe using recent additions versus those that you started earlier any tangible evidence you have with respect to those benefits you get on your own brands to bring those on? And then just the environment for partnership additions that we sit in today? Robert Gamgort: Sure. So we've got good experience now. in onboarding a number of brands. And I'm not going to recite all of the ones that we've had over the past 4 or 5 years. But the most recent additions, which have happened or in process of being onboarded right now, of course, C4 La Colombe ready-to-drink coffee and Electrolit. As we've developed -- as we've brought brands on board, we've learned quite a bit about how to exit them out of their current distribution system quickly and efficiently, and then how to onboard them both into our national account planning process all the way down through our inventory planning and merchandising and delivery at a store-by-store level. So we've developed a playbook that we use. It's the same team who has onboarded all of these brands. And when we are in a position where we have an agreement with a partner, we bring all the commercial teams together. We spent a couple of days and we have this down to really a science. The tangible evidence of that, I would point to C4 where you could see there was not only 0 slippage in terms of its performance during an onboarding, which is a fear in most situations where you're transitioning from one distribution system to another, we picked up immediately and improved the performance as soon as it came into our system. And you can see that in terms of increased availability, both breadth and depth of availability. You can see it in the merchandising quality, and you can also see it in the display and promotional activity. And obviously, those are all the leading indicators, the lagging indicator that's critically important is the share gain. So we have the same bullishness as we're bringing La Colombe up to speed right now. And as I mentioned in my prepared remarks, Electrolit just started shipping through our system is going incredibly well right now. So I think we've got a great example -- many good examples of how we get better and better at that. In terms of what does the environment look like. The track record we have now of every brand partner brand that has come into our system that has seen a marked improvement in performance and growth and even brands that have been in our system for a very long period of time, our longest partner brand is Vita Coco and the fact that they continue to grow as well. has created a great sense of attraction for other brands who are outside of the system to try to get in. That puts us in a position to be very thoughtful and disciplined about where we want to do this. and also to be able to construct deals that are truly win-win over the long term. And we think the hallmark of this is that from an investment and growth perspective is that we're able to leverage the strength of the business improvement that we can offer partners to construct deals that are highly attractive to us, very capital efficient, give us exposure to higher growth segments and the proof in terms of the benefits to the partner or in the results that I just talked about. Operator: The next question comes from Dara Mohsenian with Morgan Stanley. Dara Mohsenian: So Bob, I just wanted to return to top line in the at-home coffee category in the single-serve segment. You obviously covered 2024, but just can you take more of a look backwards at 2023 and some of the recovery being weaker than expected? Is it just the COVID drop-off you referenced earlier or are there other factors that drove some of that softness? And then just turning to the long term. So any perspective on if anything structurally changed here in the single-serve party segment? How you think about the growth opportunity post-2024? Robert Gamgort: We've felt a lot of time studying the coffee segment since the COVID peak and then the anticipated recovery since then. I think Chris mentioned before that there was some volatility in the top line. I was thinking about this question, the volatility was really driven by our expectations of a rebound and are not happening. If you look at the actual trends underneath it, they've been pretty steady, unfortunately, on the upside, much slower than we had originally anticipated. I always start with the total at-home coffee category because single-serve mirrors that, except it just performs better than total at-home coffee. So there's nothing fundamental about single-serve. It's really in the context of total coffee. This is an interesting category. And similar to many I have worked on in my career. It's a universal product. It's a very high frequency consumption pattern. And in situations like that, you can see that minor changes in consumer behavior can really move the needle. And again, we're not talking about volume changes of plus 10%, minus 10%, we're talking a much smaller ranges within there. But given the size of that business to us, it has an impact on us. Mobility was clearly a factor that's not debatable. But if it was all mobility, we would have seen a faster rebound than that. And so as we go through this process of understanding it and our peers do the same globally and you can listen to their insights from their calls as well, you can see that there's really no single issue. It's a lot of little things that have contributed to it. And I think the best news in that is that as all of us in the coffee industry have done the deep-dive diagnostics to understand, is there something structurally that's changed? Is there a significant consumer behavior or perceptual change? I'm happy to tell the answer is no, that the equity and beliefs around coffee and the attractiveness of coffee even to the younger generation is as good as it's ever been. So for us, we keep doing what we're doing, which is driving the category through innovation and marketing. And as I mentioned, again, in my prepared remarks, we're going to be debuting some real breakthrough innovation in the near future. We look forward to being able to do that. And we're also making sure that we are targeting affordability in the short term. We know that there's quite a bifurcation in U.S. households. The higher income households are increasing their consumption of premium products. And so it's important for us to have premium brewers and a super premium coffee line because we want to be attractive and competitive with that segment. But we also know that the mid- and lower income consumers have become more value seeking. And therefore, we're very much focused on ensuring that we always have an entry-level price point brewer or 2 out there. We focus on the cost per cup and talking about that more overtly in comparison to the price benefit we offer versus away from home coffee and, of course, being more selective in targeting promotions and price pack architecture. So we're happy to see the improvement we wish in the category, which the pace was faster. We've taken very prudent a very prudent approach to our assumptions for 2024 to let that happen naturally and be able to deliver good results as it does. Operator: The next question comes from Andrea Teixeira with JPMorgan. Andrea Teixeira: So I appreciate the explanation on perhaps volume in the shift that you mentioned, Rob, but can you comment more about the price mix for the coffee parts? How much of that was from what you just said, you want to focus on affordability? And -- or is that effect of life that you have been seeing more of a structural shift from on to partner brands? And related to that, what should investors expect in terms of the cadence of the pod recovery or perhaps becoming as bad as we progress through the year? Robert Gamgort: Yes, I'll answer the last part first, in terms of the cadence, you're seeing it happen, right? You see the sequential improvement on there. We don't have anything that would indicate that the continuation of that is anything but a good assumption. I think when you take a look at mix, mix, just remind you, mix gets very noisy when we analyze it quarter-by-quarter. There are a couple of factors in mix. On the brewer side, we had a mix scenario where we sold more of entry-level lower-priced brewers. We're indifferent from a household penetration perspective, but it does have an impact on the revenue side as you -- we say a 0 impact on the profit side of the business. . If you take a look at it within Pod, you do see that the owned and licensed pods were lower as a percent of total sales during the quarter and that the 1 licensed products have a higher revenue contribution. In our last earnings call, we talked about that the category had gotten a bit more promotional. It's not a surprise when the category consumption is soft. You can expect to see individual players promote more to try to gain a share advantage. Remember, we are really focused on category growth because we have about 80% of the category. So that's not a big of a focus for us. But when the price gaps become so far out of line, we have to address them on our owned and licensed portfolio. And we said that we were going to do that in the fourth quarter, which is what we've done, and it just takes time for that to catch up. But our expectation is that the promotional and marketing activity and the innovation activity that we put in place on owned at license will bear fruit for us in 2024. Operator: Our last question today comes from Filippo Falorni with Citi. Filippo Falorni: Just wanted to go back to assumptions for category growth, but on the U.S. refreshment beverage side. Clearly, we've seen normalization in pricing and volumes have been a little bit weaker to start the year. Maybe can you give us a sense of what you're assuming for refreshment beverages for your core business, excluding the partnerships? Robert Gamgort: Sure. When we take a look at 2024, we're coming off of a couple of years of incredibly strong category growth that was driven by unprecedented levels of pricing and really healthy elasticities in the face of that pricing that's not a good expectation for the long term. So when we think about 2024, we think it reverting back towards the long-term patterns that we've seen for LRB in the individual segments. And that means more balance between price and volume mix. . Two specific things to call out when you think about our business with regard to 2024 and why we have confidence in our guide, and Tim went through that in great detail. But with regard to U.S. refresh and beverages, I would call out that partnerships are an important part of our growth engine. And you can expect those are -- contributed about 200 basis points towards growth as we think about 2024. And then the only other comment I would make is the phasing of the growth in U.S. refreshment beverage is slightly more second half focused, and that's driven by 2 things. The timing of Dr. Pepper innovation is a bit later this year. And you know that Dr. Pepper innovation has a material impact on our growth for our LRB. And then the other part, too, is the ramp-up of Electrolit, which is happening right now, and we'll pick up steam as we move throughout the year. but that's already a very substantial business that will be coming fully into our system. And as we've been able to do with C4 and other partner brands, we expect to be able to work with them to step up the performance to an even higher level, and so as that builds, that will have a much more significant impact on our growth rate in the second half of the year. But as I said, on a category basis, I think you should start thinking towards the longer-term trends that we saw pre-COVID and pre the inflationary time period to be a good guide for how we think about the category. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks. Jane Gelfand: Thank you, Betsy, and thanks, everyone. We appreciate your time and attention this morning. And as always, the Investor Relations team is here to answer any follow-up questions you may have. Have a great day. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper's Earnings Call for the Third Quarter Of 2023. This conference call is being recorded. [Operator Instructions]. I would now like to introduce Keurig Dr Pepper's Vice President of Investor Relations and Strategic Initiatives, Jane Gelfand. Ms. Gelfand, please go ahead. Jane Gelfand: Thank you, and hello, everyone. Earlier this morning, we issued two press releases, the first, detailing our third quarter 2023 results and the second, announcing our sales and distribution partnership with Grupo PiSA for Electrolit. During today's call and consistent with previous quarters, we will be discussing our Q3 performance on an adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. The company believes that the adjusted basis while not in accordance with GAAP, provides investors with meaningful comparisons and appropriate insight into our business and operating performance trends. Details of the excluded items are provided in the reconciliation tables included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company's control, we do not reconcile our guidance. We'll also speak about the concept of underlying performance, which removes the impact of nonoperational items in the current and prior years. These items include gains on asset sale-leaseback transactions, reimbursement of litigation expenses related to the successful resolution of our BodyArmor lawsuit, a business interruption insurance recovery, and a change in accounting policy for stock compensation. Finally, our discussion this morning may include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that can cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. Here with us today to discuss our results our KDP Chairman and CEO, Bob Gamgort; and our Chief Financial Officer, Sudhanshu Priyadarshi. I'll now turn it over to Bob. Robert Gamgort : Thanks, Jane, and good morning, everyone. We are pleased with our Q3 results. KDP's diversified beverage portfolio and strong execution continue to support consistent delivery of our company goals and commitments, even as the operating environment around us remains dynamic. In Q3, healthy organic sales growth and significant gross margin progress fueled reinvestment and bottom-line growth, reinforcing the ability to our full year outlook, which remains unchanged. Third quarter constant currency net sales grew 4.1%. As expected, net price realization moderated from the first half but remain the primary top-line growth driver, while volume mix strengthened sequentially. Our performance reflected continued share gains in U.S. Refreshment Beverages, gradual recovery in U.S. coffee segment results, and strong momentum in our International business. Gross profit margin expanded significantly, up 100 basis points year-over-year and the largest improvement in four years, reflecting an improved balance between ongoing inflation, pricing and productivity. Gross profit growth enabled us to continue reinvesting in the business, including increased marketing for the third consecutive quarter, while simultaneously driving bottom line growth which was slightly above the expectations we shared with you back in July. As we move through Q4 and plan for next year, we expect our revenue growth drivers to continue to normalize as pricing moderates relative to recent history and volume mix continues to improve. To be clear, pricing is expected to remain a key part of the top-line equation, especially considering that inflation is likely to persist, albeit at more moderate levels than over the last couple of years. Simultaneously, our focus will be on supporting volume mix by balancing margin flexibility between reinvestment and future top-line growth and earnings flow-through. Let me take a step back and frame how we assess consumer health, our portfolio, and our strategy in the macro environment. The consumer remains healthy with demand resilient and category elasticity is manageable. Even so, consumers are closely calibrating where and how they shop? For instance, growth in club and other value-oriented channels has accelerated while the convenience of e-commerce and pickup and delivery services continues to resonate well after any pandemic-related uplift would have normalized. Consumers remain responsive to high-quality innovation and activation, but price and package architecture is another increasingly important dimension, including smaller pack sizes that hit key price points and multipacks that offer value and convenience. On the margin, we also see some migration of lower to middle-income households towards at-home meal and beverage occasions, which should benefit our more essential categories like CSDs and coffee. The business is well positioned against this backdrop, thanks to a compelling all-weather growth model. The ability to seamlessly meet the consumer across all beverage need states and to service those occasions across all channels is at the heart of why we formed this modern beverage company. Since then, we've made even more progress as we significantly grew the portfolio reach and strengthen our internal capabilities. Looking forward, our distribution prowess across retail is broad-based with very strong in-market execution yet we also enjoy a scaled online business, particularly on the coffee side. Our robust 2024 innovation pipeline has been well received by the trade and spans product, format, and packaging news. It captures a combination of value and premium price points as well as low and no calorie and indulgent beverages. We also continue to price nimbly across the entirety of our portfolio, including by leveraging our strong mix management capabilities. In short, the consumer is resilient but choiceful and KDP is positioned to drive attractive top-line growth through a combination of volume, mix, and price levers. Our successful growth model rests on our exclusive focus on North American beverages and a winning strategy. It begins with KDP's powerful twin distribution assets, our multichannel cold beverage distribution system, including DSD, and an installed base of nearly 40 million active households using the Keurig system. This is an unparalleled combination in the industry, which enhanced by strong R&D and commercial backbone, enables us to grow our categories, and gain share across our base business, and further build out our portfolio through high-value M&A and partnerships with counterparties who increasingly seek us out. When we fill in category white spaces, such as through our announcement today of the partnership with Electrolit, fuels a virtuous cycle of growth, investment, and growing returns on that investment. As the new brand scale and our portfolio expands, our capabilities get stronger. Drop sizes get bigger, our merchandising gets more impactful, we service each store and household more frequently and our commercial and consumer relationships tighten. This enables further investment in growth that begins to cycle anew. We have proven this model over multiple years. In U.S. Refreshment Beverages, we have consistently outperformed our categories, growing dollar share in at least 75% of our business in all but two quarters since the beginning of 2019. We also entered multiple strategic white spaces within the past 12 months such as ready-to-drink coffee, energy, and after today's announcement, sports hydration, all were achieved in a very capital-efficient manner. The growth path ahead is increasingly evident with both owned and partner brands. The latter, where our relationships are strategic and long-term, growth and mix are positive, and our economics are attractive. Coffee, the single-serve segment has continued to steadily gain share of at-home coffee, cementing Keurig's leadership position with this important category. At the same time, we are expanding our total coffee strategy to encompass iced, ready-to-drink, and other forms of coffee within and beyond the K-Cup format. And in Canada and Mexico, we have leveraged similar strategies across our Refreshment Beverages and coffee business as well as deeply experienced local teams to build a combined business approaching $2 billion in revenue, with a mid-20s operating margin. As a result, our International segment has become a scaled contributor to the overall portfolio with significant growth runway ahead. I'll now briefly discuss how this strategy played out in Q3, with Sudhanshu to follow with greater detail and guidance. In U.S. Refreshment Beverages, 82% of our business outpaced category growth in the quarter. CSD business is healthy. Dr Pepper building on the momentum of strawberries and cream earlier in the year, with a successful sixth season of the iconic Fansville marketing campaign. Other brands such as Canada Dry and Squirt also saw strong gains. And Polar's momentum continued in sparkling water, where it now commands the number two volume share position. CORE and Evian remains strong drivers in premium waters with CORE, in particular, seeing great traction from our partnership with U.S. gymnastics. That said, work to do elsewhere in the still portfolio including with buy, is undergoing a significant restage and reformulation next year. Importantly, our partnership with Nutrabolt on C4 is proceeding very well. In Q3, C4's market share and earned display accelerated while velocities remain strong across those regions where KDP has taken control of the brand throughout the market. Even as the C4 rollout continues in its first year, we have significant room for future growth in energy, where KDP's market share is only 3%, and C4 has tremendous potential. With the Electrolit announcement today, we are extending our portfolio into the large and important sport hydration category, another quickly growing mix accretive white space for KDP. Electrolit is a brand that has established a strong regional foothold, thanks to its unique product attributes, scientific heritage, and extremely loyal customer base. The brand is the market leader in sports hydration in Mexico, and that popularity extends to the U.S. where Electrolit enjoys broad multicultural appeal but over-indexes with Hispanic consumers. Though it has good scale today in the U.S. and already generates more than $400 million in retail sales, representing more than a tenfold increase over the past five years, Electrolit has significant upside potential. We are excited to partner with Grupo PiSA, Electrolit's parent company, to meaningfully expand the brand's distribution breadth and depth in the U.S. and across all channels while also leveraging KDP's commercial expertise to further enhance the brand's position at retail. With C4, Lock alone, and Electrolit having entered our portfolio over the last 12 months, we have meaningfully increased the growth potential for each of these brands while extending a positive halo on the rest of our business. For example, our total volume in chain convenience stores will increase by approximately 50% after incorporating these brands, providing scale and efficiency benefits across the entirety of our portfolio. This is the virtuous cycle that I described just a few minutes ago and which will continue to fuel KDP's success. Turning now to U.S. coffee, where our back half is focused on driving segment margin improvement in the context of gradually improving at-home coffee category volumes. With visible progress on both fronts, let's address each in turn. I'll start with the segment margin improvement. We have a greater ability to control in the short term than we do with category trends. Q3, we began to deliver against our objective with a strong inflection in segment margins and operating income, which meaningfully improved both sequentially and year-over-year. Importantly, we expect the margin improvements to continue. We previously said that delayed pricing would flow through our partner brands, and it has. We have now strengthened the pricing protocols across these long-term partnerships and do not expect any significant lag between inflation and pricing to recur in the future. Plus, commodity cost headwinds are now moderating and productivity is building across the segment, enhancing our visibility to continuing to grow the bottom line even with ongoing reinvestment. Moving to category performance. At-home coffee category volume growth accelerated relative to Q2 but the pace of recovery is admittedly gradual. From Q2 to Q3, volume trends across the broader category strengthened by about 100 basis points in measured channels though volumes are still modestly lower year-over-year. Single-serve continues to gain share of at-home coffee with our proprietary data, which is more comprehensive spanning both measured and untracked channels, indicating that Q3 Keurig's compatible pod consumption volume was approximately flat versus a year ago, proving from down approximately 3% in Q2. These green shoots are encouraging, and we will continue to nurture them as the single-serve market share leader. During the quarter, we saw our competitors begin to lean more aggressively into price promotions in the single-serve category, resulting in some share shifts across the various brands in the ecosystem. As a reminder, because we manufacture nearly 80% of all Keurig compatible pods in the U.S., we tend to participate even share changes occur between our branded and private label partner brands and our owned and licensed brands. Nevertheless, we must responsibly manage our owned and licensed brands price gaps within the category and intend to stay nimble to the changing operating conditions around us. Importantly, as we choose to surgically respond to the recent price activity, we expect segment margins to accelerate in Q4. We also do not expect the competitive pricing activity to meaningfully accelerate at-home coffee category buying, which we know are far more responsive to high-quality activities that influence consumer choice and lean into emerging trends. As the single-serve leader, KDP will continue to drive category growth as we always have through innovation, renovation, and white space expansion that build penetration with new households and increased usage among our existing consumers. With 90 million U.S. households drinking coffee at home, of which fewer than 40 million are actively using Keurig brewers, there is a significant multiyear opportunity ahead. In 2024, we will continue to pursue that growth through new consumables like cold brew, expanded ice varieties, and refreshers. New brands like La Colombe, which, by the way, begins to ship in ready-to-drink and K-Cup format starting in Q4, significantly new innovation in brewers, all supported by strong marketing and brand activation activity, including exciting new collaborations across our owned and licensed brands. Moving on to our International performance in Q3, which remained impressive with revenue growth once again, in double digits and continued segment margin expansion. Both our Coffee and Refreshment Beverages businesses performed well. Canada, the ready-to-drink alcohol and no alcohol segment is growing, and we are contributing to that growth. ATP gained significant share as velocity and distribution built and a blast from the past, vodka-based Tahiti Treat RTD generated exceptional consumer demand. In Mexico, our powerhouse Pena CL and Squirt brands, both grew at a double-digit rate, leveraging our strong go-to-market and DSD capabilities behind which we continue best. In Mexico, like in the U.S., we have significant growth potential ahead across both our core portfolio and through partnerships as we leverage these unique distribution assets. KDP's strong balance sheet and cash generation profile are powerful enablers of our broader growth strategy with today's Electrolit announcement yet another example of how we can grow our portfolio and market reach in a highly capital-efficient manner. As a result, our financial policy approach can be flexible and dynamic. This year, we are deploying some of our cash flow to strategically reduce our supplier financing program. Simultaneously, we announced a 7.5% increase in our annual dividend furthering our track record of regularly growing dividend income for our shareholders. With over $3 billion remaining on our share buyback authorization and having already repurchased 24 million shares of KDP stock over the last two years, we have substantial flexibility to opportunistically lean in when we see compelling value in the business we know best. Wrapping up, our third quarter results represented another period of consistent delivery against our commitments. Our top-line growth was strong and resilient and we reinvested in our brands and differentiated capabilities. We also achieved important proof points in our margin recovery journey this quarter as visible in our consolidated gross margin progress, and in U.S. Coffee segment results. Our Q3 results provide enhanced visibility to our unchanged 2023 outlook for constant currency net sales growth of 5% to 6% and adjusted EPS growth of 6% to 7%. We expect to close out 2023 having significantly improved our composition of earnings profile, lending further support to our aspiration to be on algorithm in 2024. I'll now turn it over to Sudhanshu. Sudhanshu Priyadarshi : Thanks, Bob, and good morning, everyone. Our consolidated third quarter results were solid. Top-line growth was resilient, and supported future momentum by reinvesting in the business and we delivered modest EPS upside relative to the expectations we shared with you last quarter. Revenue advanced 5.1% to $3.8 billion with healthy constant currency sales growth of 4.1%. Pricing remained the primary growth driver, contributing 5.5 points as expected by the moderation from the second quarter as prior year pricing actions were lapped. Volume mix strengthened sequentially, posting a modest 1.4% decline year-over-year. Gross profit margin inflected positively in the quarter and expanded a strong 100 basis points year-over-year as pricing and efficiency gains begin to offset input cost inflation. Total SG&A deleveraged 130 basis points year-over-year, reflecting our focus to reinvest in our brands and capabilities while combating sustained inflation. SG&A saw another quarter of double-digit increases in marketing spending, while transportation, warehousing and other corporate costs such as labor remains headwinds. Adjusted operating income grew 3.1%, which, combined with below-the-line leverage, resulted in mid-single-digit EPS growth to $0.48, slightly ahead of the guidance we shared last quarter. We achieved this result without the benefit of any nonoperational gains in the quarter as we continue to make progress on reinforcing our earnings base looking out to next year. Moving to the segments. U.S. Refreshment Beverages grew net sales 5.9%, led by 7.1 percentage points of pricing. The price contribution moderated quarter-over-quarter as anticipated as we begin to anniversary some of the last year's pricing activity. Volume mix declined 1.2%, reflecting outperformance versus our categories across the vast majority of our portfolio and the growth contribution from C4 Energy. As Bob said, we expect price to remain a continued driver of the top-line growth algorithm in quarter four and into next year, even as growth rebalances across volume, mix, and pricing contributions. Consumer is resilient, category elasticities are manageable and inflation to moderating remains a headwind. Segment operating income grew 6.1% in the quarter and segment margins were approximately flat year-over-year. This performance reflected the favorable impact of pricing and productivity, net of inflation, offset by increased investment in marketing. In U.S. Coffee, net sales decreased 3.2%, improving versus the second quarter trough as expected. Pricing sequentially strengthened and contributed 3.1 percentage points of growth. Some of this reflected pricing that lagged realized inflation across our partner portfolio and is now flowing through after a delay. In future cycles, we expect the pricing pass-through necessary to offset inflation to be more seamless. Volume mix declined 6.3% year-over-year in quarter three. Brewers grew 8% as we moved past destocking in the first half and shift in for the important holiday period. For the back half, as a whole, we expect brewer shipments to track point-of-sale strength, which remains softer in today's macro environment and are still declining in the mid to high single digits compared to last year. Importantly, Keurig brewers continue to gain share within the coffee maker category and we still expect to finish the year having grown penetration to approximately 40 million households in the Keurig ecosystem as compared to approximately 38 million at the end of 2022. All shipments declined 8%, similar to last quarter. However, by our measure, category consumption volume in single serve were flat year-over-year across all channels, a sequential improvement relative to quarter two. As we previewed would happen last quarter, shipments lagged category consumption in the period due primarily to two factors: First, the competition against a year ago channel inventory build; and second, the volume impact from our decision to exit certain low-margin private label contracts. We anticipate a smaller combined impact from these factors in quarter four and expect all shipments to sequentially strengthen relative to quarter three. Office segment operating income grew 5.7% and operating margins expanded strongly. At near 33%, segment operating margins increased 280 basis points versus the prior year and also compared very favorably relative to 30.4% in the first half. The significant infection was driven by pricing, productivity, and moderating inflation, and we expect it to sustain. As Bob mentioned, the part of the expected revenue recovery is slightly altered relative to our original plan due to some prudent price arrangement in a competitive environment. Nevertheless, margin trends are expected to accelerate further in quarter four. Fundamental progress is expected to drive continued solid operating income growth year-over-year even as we lap a difficult comparison given nonoperational benefits partially contributed to U.S. Coffee operating income last year. International segment sales increased 20.8% in the third quarter against a double-digit growth tempera in the year-ago period. Constant currency sales growth was very strong at 12.9%, with volume mix increasing 9% and pricing up 3.9%. Our top-line momentum are broad-based across Mexico and Canada. Segment operating income grew very strongly at 39.4% on a reported basis and 31.7% in constant currency terms, thanks to operating leverage and efficiency gains netting favorably against inflation. And anticipated, our free cash flow conversion strengthened sequentially in the third quarter to $459 million, reflecting the combination of profit growth and moderating working capital users and consistent with our expectation for free cash flow conversion to strengthen in the second half. Our capital allocation approach remains unchanged. Our priorities include organic and inorganic investments to support our growth, further strengthening our balance sheet, consistent with our long-term net leverage ratio target of 2 times to 2.5 times, and returning cash to shareholders through our dividend and opportunistic share buybacks. We dynamically adjust between these priorities on an ongoing basis. In quarter three, we closed on the highly strategic La Colombe partnerships first introduced in July, which included a $300 million equity investment. Today, we announced another important partnership with Grupo PiSA to sell, distribute and merchandise Electrolit in the U.S. This is a meaningful step forward into sports hydration for KDP and establishes another mix accretive growth platform, even as it comes with minimal capital commitments. As Bob pointed out, with entries into energy, RTD coffee, and sports hydration over the past 12 months, we have penetrated three large and important white spaces for a relatively modest capital outlay of less than $1.3 billion. We also have the ability and desire to continue to return cash to our shareholders. In September, we announced a 7.5% increase, marking our third consecutive year of growing our dividend and representing a cumulative 43% increase over that time. Our CRE purchases will remain opportunistic and we have demonstrated a willingness step in when our share price becomes dislocated from the long-term value we expect to create. The approximately $3.2 billion remaining on our share repurchase authorization, we will continue to assess the market for such opportunities. Moving now to guidance. We are reaffirming our consolidated outlook for 2023 and continue to target constant currency net sales growth of 5% to 6% and adjusted EPS growth of 6% to 7%. Our EPS outlook assumes minimal benefits from nonoperational items in 2023, implying double-digit EPS growth on an underlying basis. Our guidance for below-the-line items is consistent with last quarter. For the year, we continue to expect interest expense in a $470 million to $475 million range, effective tax rate of 22% and approximately $1.41 billion diluted weighted average shares outstanding. We expect a strong end to the year in quarter four with similar top-line dynamics in quarter three and even a stronger gross margin expansion. At the same time, we will be lapping approximately $67 million of nonoperational gains in last year's fourth quarter, primarily concentrated in the U.S. Coffee segment, which creates a challenging comparison. Blending these factors together, we expect Q4 adjusted EPS of approximately $0.54 or 8% year-over-year growth. On an underlying basis, this represents strong double-digit EPS growth. With that, I will now turn the call back to Bob for closing comments. Robert Gamgort : Thanks, Sudhanshu. I'd like to close by saying how excited we all are that Tim Cofer has joined KDP as Chief Operating Officer on November 6. From there, we are looking forward to a smooth CEO transition between Tim and me in Q2 next year in continuity as I serve as KDP's Executive Chairman thereafter. Upon joining KDP, Tim's immediate focus will be immersing himself in the business. He will also partner with Sudhanshu, the full executive leadership team, and me to drive our annual operating planning process for 2024. A lot of robust work is underway, and we expect to provide you with a detailed outlook when we report our Q4 results. For now, let me just say that our entire organization is focused on delivering a strong finish to 2023. We expect that Tim will join Sudhanshu and me in this forum in February and I know you will enjoy meeting him after that. I'll now turn the call back to the operator for questions. Operator: [Operator Instructions]. Our first question will come from Andrea Teixeira with JPMorgan. You may now go ahead. Drew Levine : Hi, good morning. This is Drew Levine on for Andrea. Thank you for taking my question. So, I just wanted to ask on U.S. Coffee. If you could talk more specifically to the trends during the quarter, both in tracked and untracked channels, if the recovery is sort of playing out sequentially as you expected, and what we could think about the exit rate for September and October being? And then secondarily, I think the expectation was for pod volumes to perhaps see moderating declines in the quarter. They were pretty flat. So, anything changed incrementally during the quarter from a pod shipment perspective? Thank you. Robert Gamgort : Sure, Drew. Thanks for the question. On our last call, we talked about drivers of improved coffee performance going forward. One was margin improvement and the other one was rebound in the total at-home coffee category. And so that goes beyond single-serve to all forms of coffee consumed at home. Obviously, as you saw in the results, we've received the -- or we've experienced the inflection that we expected in the margin side, and that's largely under our control and big driver of our performance. The category is experiencing sequential improvement. But admittedly, it is gradual. When we take a look at consumption of single-serve and we use our proprietary data, which looks at tracked and untracked channels and remember, the track channels represent roughly 60% of total consumption, we're seeing that the volumes are flat, which is an improvement sequentially, but a bit slower than we expected. And so that's really the core of any shipment shortfall versus expectations is really driven by the category. I would remind you, within that, the single-serve and KDP continues to grow share within that category. The theme that we've talked about before about controlling the controllables margin share performance all are really quite good. The challenge is really this total at-home coffee category, which is moving in the right direction, albeit at a slower pace. My last comment on that is what we're experiencing on at-home coffee in the U.S. is not unique to the U.S. It's a trend that we're seeing in most developed markets as well. Operator: Our next question will come from Dara Mohsenian with Morgan Stanley. Your may now go ahead. Dara Mohsenian : So, just to follow up, do you expect the category will continue to recover going forward sequentially from here? Can we get back to growth going forward? And maybe can you detail what's driven the acceleration in untracked channels and how sustainable that is going forward? And then just second, if you could take a bit of a lookout to 2024, you mentioned on algo for the total company. Does that apply to the coffee business in terms of a more normalized organic sales growth and profit growth pace as you look out to 2024? Thanks. Robert Gamgort : Sure. I think that when you take a look at the shipment -- or the trajectory of the coffee category, I think it speaks for itself. We talked a lot about mobility as a big driver, and we certainly weren't the only ones that were looking at that. So, mobility is no longer a factor. It's gone back to a more normalized environment. And so, I think that the trajectory that we're seeing right now on improved coffee consumption will continue. The drivers of that, I think it's -- there are multiple contributors to the slower but steady improvement in the category, including really a change in work routines, where you're looking at more hybrid work. The afternoon occasion, for example, changes on that. On the margins, we could see some impact from pricing and inflation and also some of the trends in cold coffee, which also indexes to out-of-home. But there's nothing structural going on right now. And you can imagine, we spent a lot of time digging into the fundamental consumer drivers of coffee. The tailwinds are incredibly strong. the movement towards improving growth looks to be right in front of us here. But we're being honest in saying that the total at-home coffee category has been more gradual than we originally expected, although we don't -- like I said, we don't see anything structural. With regard to the untracked channels, why is that stronger? It's really driven by club and e-commerce. E-commerce, which was growing prior to the pandemic, accelerated significantly during the pandemic, and it really has shown no signs of pulling back from that. And we talked before about the importance of e-commerce in our total business, but you can imagine when you look at individual segments, that single-serve coffee is really an ideal segment for e-commerce. It's lightweight, high value, long shelf life, not fragile to ship. So, you can really have a quite a good business on e-commerce. In addition to that, remember, we've been increasing our own subscription business and services to the consumer. And as we put more smart brewers out there, and allows for smart consumption-based reordering, I think that e-commerce will continue to grow. And I think club is an overall consumer shift towards that channel. It represents a good value. I also think that some of the changing away from home coffee trends, meaning office coffee trends have also benefit the club channel as well as people in small and midsized offices are picking up their supplies there as well as in e-commerce. And then with regard to 2024, I mean, we've given you our macro outlook. We're not going to break it down by individual segments. The one thing I would say that I believe is important is this gradual or more gradual rebound in coffee is something that we've been able to factor in our thought process as we think about our total company algorithm. And obviously, it's something that we've digested and built it into our expectations. Operator: Our next question will come from Bryan Spillane with Bank of America. You may now go ahead. Bryan Spillane: Maybe Bob, maybe to just pick up on that last point, and maybe a little bit higher level, just thinking about the consumer. As we've gone through this earnings season, it's -- there just seems like economizing behavior in a lot of different forms has kind of Bob more as we've moved through the back half of this year and Hershey talked a little bit about it this morning as well. And so, can you give perspective on two things. One, just how you're thinking or how KDP is thinking about the consumer next year, stronger, weaker, and how maybe you're adjusting your plans across all businesses for that? And then the second, just because it's been so topical, just kind of how you -- how KDP is digesting all of the sort of information about GLP-1? And is that something you're beginning to factor into your longer-term plans? Robert Gamgort : Yes. Thank you, Brian. Thanks for those questions. Our -- we plan our business on a range of outcomes. We've said that before. We've been very watchful of the consumer and concerned about trade-down behaviors as a result of financial pressures. As we said, the consumer today remains incredibly resilient but we're thoughtful about how that might shift into the future. We look across our entire portfolio, we have the ability to shift across formats, mix, channels, price pack architecture on both the refreshment beverage side and the cold beverage side -- I mean, on the coffee side, to be able to react to any of those changes. But as of right now, we haven't really seen that. There is a potential cascade that happens where you could talk about within traditional retail where consumer looks to lower-priced items and shops in more value-oriented channels. There's another piece as well, which is a cascade from away from home to in-home. And some of the surveys that I've looked at recently is if you are pinched -- these are consumer surveys, if you're pinched, what do you give up first? And what the consumer gives up first is dining out of home and travel. And so, I think that what happens is that moves those occasions in home where we benefit from them. And if you could take a look at the broad portfolio across all formats, but also specifically within coffee, we've been working really hard to provide similar options to produce specialty coffee, cold coffee, coffee any form that they get out of home in home. And so, I actually think that's a benefit for the category going forward. So, the conclusion is nothing as we sit here today. Very possible in the future and certainly in our range of planning, but lots of flexibility for us to deal with it and potentially some upside on certain segments, including coffee. With regard to GLP-1, we've had the opportunity to look at every trend possible from a consumer perspective for opportunities and risk. We've spent a lot of time digging into the most robust data that's available, and I would caution everybody that the data that is actually available is really limited at this point. What we would want to see as an industry, before you go with any conclusions, is you'd want to see known GLP-1 users and be able to match their behavioral data over time. Self-reported data, survey data, trying to figure out who might be a GLP-1 consumer is really dangerous. The data that we're able to get into, which is quite limited on actual GLP users and their known consumption for us is neutral, may even be different than that by meaning more positive, but let me just say neutral right now. And here are the facts, and I think it actually makes sense with just playing good sense, which is there's no evidence that people drink less in terms of beverages. So, unless you believe the consumption of tap water is going up, there's no indication of that, and somebody in the beverage industry is picking up those sales. Are mix shift possible? Absolutely, but we haven't seen anything significant in the data that we have in front of us within the world of beverage. And I would remind you that we have a very, very broad portfolio. And in fact, more than 60% of our products as in our corporate responsibility portfolio are classified as positive nutrition. So, it's very similar to the conversation on recession. Consumers don't drink less if they change their mix in terms of which formats and types of beverages they consume. We have one of those occasions. And also, we have the ability to innovate should we choose to. We've had some questions on coffee. Specifically, all the data that we can see right now, there's no impact on coffee consumption as a result of that. So, when we step back, we are surprised by the reaction. And quite honestly, we're surprised that the conversation is about food and beverage. We don't participate in the food industry, but I can tell you in the beverage industry, I really think that there's little to be concerned about here. Having said that, we're going to continue to study. We'll get more robust data. We'll be able to see what I said before, which is known GLP-1 users and their actual consumption patterns over time. And I think the picture will become much clearer, but that's our conclusion today. Operator: Our next question will come from Robert Ottenstein with Evercore. Your may now go ahead. Robert Ottenstein : Thank you, very much. Two questions. First, congratulations on the deal with Electrolit. When I was at NAX [ph], a month or so ago, it was all the rage. A lot of talk about it. Can you just -- you mentioned that it was accretive to your mix. Can you talk about what that means? Because I would have thought this is just a distributor margin that you're getting. So maybe talk to us about the impact on your business? And then the second question is -- and this is kind of outdated. If you go back before Keurig and you talked to the old management team about the smaller pack sizes, Dr. Pepper was lagging, and there was a little bit of pushback saying that going into this different variety of pack sizes and can sizes would add unneeded complexity. And I know a hell of a lot has changed since then. I'm just wondering where you are in terms of your manufacturing and canning capabilities today in terms of meeting that greater variety of pack sizes? Robert Gamgort : Yes. So, Robert, I'm glad that you saw Electrolit at NAX and the excitement about. This is a business that we've been tracking for some time, and we've been really impressed with their strong growth. The fact that their consumer target is multicultural. And it's a perfect example as we've discussed with C4, with La Colombe, with Polar, where we can take a brand that is very strong and has a clear consumer base and opportunity and help them grow through expanded distribution, proof merchandising, and access to our RGM capabilities, category management capabilities, and more. And so, this one, I think, is another one of these win-win structures. When we think about Electrolit coming into our business and its implications on 2024, clearly, it's a contributor to revenue growth. Similar to what we talked about with C4, in its first year of incorporation, we don't think about it as much of a driver of profit growth. But when you get into its second year, it will be able to contribute profitability and we'll provide framing around that at that time. And that's because we make significant investments in the first year to get the brand on board. And also, as we discussed earlier, this gives us a wonderful opportunity to put more investment in our -- market system to be able to improve coverage with the fact that we now have larger job sizes and increased frequency. And as we said a number of times, that benefits all brands within our system. The fact that we put in the prepared remarks about the 50% growth in large outlet C-stores for us is a very significant consideration here in terms of our ability to cover our convenience stores for our entire portfolio. So, this is yet another great example of how we're able to build our capabilities. Your point about smaller pack sizes, yes, the other world has changed quite a bit. we have substantial distribution, and we have good manufacturing flexibility on small pack sizes. We see them as an incremental driver of growth. They happen to also be margin accretive. They're very much in line with consumer trends where if someone wants to treat themselves and a portion of our portfolio is in the treat need state that we give them an opportunity to do so in a smaller pack size. And that's been the case in other CP industries. And as we think about our manufacturing base going forward, flexibility in formats and pack sizes is a critical capability that we continue to invest in to give us the optionality of price pack architecture moving forward. Operator: Our next question comes from Bonnie Herzog with Goldman Sachs. You may now go ahead. Bonnie Herzog : Bob, I was hoping you could give us some more color on the exiting of certain private label contracts in terms of maybe how big these customers are and if there's an expectation for more to come. And then you called out a tough comparison on your pod volumes in the quarter, given the trade inventory builds in the year-ago period. So just trying to understand how big of an impact do you think that was? And could you just confirm, I thought you said that you're already starting to see pod volumes improve in Q4? Thanks. Robert Gamgort : Yes. So, on the first one on the exit of some private label partners, that really began in Q2. I mean, the best way for you to size it is you can take a look at the track data for the most part and just see KDP manufactured share and it's going to show you we're unlicensed versus licensed private level is. And I don't think that that's -- it's not -- it's definitely not a driver of profitability. And it's a minor contributor to revenue, but it's the right thing to do over the long term. We offer significant value to our partners. And we're also the driver and the player who invest in brewer innovation, brewer launches, which is the catalyst for the entire industry. And from time to time, in these negotiations, we find partners on the other side who don't want to pay for the value added. And we -- there's a point in which we don't drop price because we know that we add that value. And I would also point out that in almost every circumstance, both partners have come back to us over the long term because they miss with they have from KDP. So, you'll see it in the tracked channels, and I don't think it's a big deal. Second part of the question was about the -- you asked a bit about inventory, and that's really a question about the gap between shipments and consumption. The best way to characterize that is that if we tell you that the category rebound is going in the right direction, but not at the pace that any of us expected, when I say any of us, anybody who operates in the coffee industry and develop markets globally, then there's always going to be a disconnect between shipments and consumption. And there may be some shipments ahead of consumption based on those expectations. That happened. That's normalizing. Expect that gap to narrow further in Q4. So, to me, that's a lagging indicator. It's a contributor to the shipment piece, which is worthy for a conversation in this quarter. But over the long term, the pieces to really watch our, how's the at-home coffee category performing because that really drives everything. How is our share being total single-serve and total KDP share of at-home coffee, that continues to expand? And then the last part of it is our margin against that volume, which also is very high and improving. The combination of those three really does create value. But again, it's created some short-term disruption as we get out of this got of this -- still the after-effects of the rebound from the pandemic piece. Operator: Our final question will come from Chris Carey with Wells Fargo Securities. You may now go ahead. Chris Carey : I know you're not going to specify what drove the margin improvement in the quarter specifically. But can you maybe frame the relative contribution of pricing, of productivity, of easing commodity inflation, maybe it was even a benefit? And also, you've been quite adamant that the mix impact of your own portfolio underperforming is not as great as what is sometimes debated. And so, I wonder how that impacted the quarter as well, and you're clearly looking for an acceleration in margins in Q4. And I think really what I'm trying to do is get some confidence that while pod volumes could be volatile within your portfolio, they could be volatile. But as you go into next year, here's why we're going to continue to have visibility on margins even if shipments or otherwise are a bit different than maybe what we would expect one quarter or two quarters out, right? So really trying to help frame the Q3 margins and to kind of get some help on the go forward. Robert Gamgort : Yes. Let me talk about the margin inflection that we've seen in the quarter, and we talked about prior to that. And then I'll ask Sudhanshu to take a look at where we are on -- from a segment OI perspective and a forward outlook on that. We had a number of conversations in the past, as you'll recall, about the gap between pricing to partners and private label versus the inflation that was -- that we were experiencing that had never been contemplated in the years in which we had the prior years in which we had signed those agreements. And remember, that's very different than pricing that you see at retail, just to be clear because I know when I say pricing, people immediately go to retail pricing. What I'm talking about is the contractual pricing that we have with partners and private label, who then in turn set their own retail pricing as a result of that. And so, we said that there was a lag, but it would flow through. It's flowing through. We have great visibility to it going forward, to answer your question, because it's contractual. And I think the other point to make, and it's an emphasis of the prepared remarks, is that we've now adjusted all of those agreements going forward, and we don't expect a substantial lag to -- between pricing and inflation to occur in the future. So, lessons learned from the past, a bit of pain that we had to incur over the past couple of years, but that's all catching up right now, and you're seeing that flowing through. In addition to that partner and private label pricing flowing through, we're also seeing some moderation in inflation, and we're experiencing an increase in productivity. As we said a couple of times, when we were in a supply chain disruption mode, and we were trying to get every case out the door, productivity takes a backseat. We're in really good shape on our supply chain from a capacity standpoint. And we have the ability now to focus on productivity and dial that up. So, it's a combination of partner private label pricing, productivity, and moderating inflation that is contributing to the margin inflection you're seeing now and also our confidence and visibility into the future. But Sudhanshu, why don't to take up a minute and talk more about that last piece? Sudhanshu Priyadarshi: Thanks, Bob. Chris, if you think through -- think about Q4 and beyond, in Q4, we are expecting a sequential improvement in pod shipment as category is gradually recovering. We also plan to have margin expansion in quarter four higher than quarter three. We talked about that before. And we will also see a solid operating income growth in quarter four, even stronger underlying. As you all know, we had a lot of nonoperating benefit in coffee. So, you will have a stronger underlying growth because we're planning minimal nonoperating thing. As you think through 2024, our plan is to continue to gradually rebuild margin in the coffee category started with quarter three. You saw we went from 30% roughly in the first half to 33%. Q4 will expand further, and you will see this gradual buildup or rebuild up our margin in 2024. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jane Gelfand for any closing remarks. Jane Gelfand: Thanks, Anthony, and thank you, everyone. We appreciate your time and attention this morning. And as always, the Investor Relations team is available to answer any follow-up questions you may have. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper's Earnings Call for the Second Quarter of 2023. This conference call is being recorded, and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper's Vice President of Investor Relations and Strategic Initiatives, Jane Gelfand. Ms. Gelfand, please go ahead. Jane Gelfand: Thank you, and hello, everyone. Earlier this morning, we issued a press release detailing our second quarter results. Consistent with previous quarters, we will be discussing our performance on an adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability and the use of constant currency growth rates are not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation tables included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company's control, we do not reconcile our guidance. We will also speak about the concept of underlying performance, which removes the impact of non-operational items in the current and prior years. These items include gains on asset sale leaseback transactions, reimbursement of litigation expenses related to the successful resolution of our BODYARMOR lawsuit, a business interruption insurance recovery and a change in accounting policy for stock compensation. Finally, our discussion this morning may include forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. Here with us today to discuss our results are KDP Chairman and CEO, Bob Gamgort; Chief Financial Officer, Sudhanshu Priyadarshi; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. I'll now turn it over to Bob. Robert Gamgort: Thanks, Jane, and good morning, everyone. KDP’s second quarter once again demonstrated our portfolio’s resilience and ability to consistently deliver on our total company commitments. Our solid performance was driven by strength in U.S. refreshment beverages, encouraging developments in U.S. coffee and continued momentum in international. Consolidated Q2 results were healthy with strong revenue momentum and sequentially accelerating operating income and EPS growth. Net sales advanced more than 6% supported by net price realization, modest category elasticities and good share performance across much of our portfolio. For the first time since Q3 2021, reported gross margins expanded as an improving balance between pricing, inflation and productivity began to emerge. Gross profit dollar growth funded marketing increases across all segments, and help to offset continued cost pressures in transportation, warehousing, and labor. As we forecasted, we're in the early stages of a margin recovery that we expect become more visible in the back half. Looking ahead to the balance of the year, we are raising our 2023 net sales growth outlook to 5% to 6%, while our full year EPS Outlook is optically unchanged, it in fact represents greater than originally anticipated underlying rule with an enhanced composition to our earnings profile. As Sudhanshu will discuss in more detail, we now expect minimal non-operational items in 2023 setting KDP up for strong and sustainable earnings base from which to grow in 2024 and beyond. U.S. refreshment beverage’s performance in Q2 was outstanding double-digit revenue growth and strong operating margin expansion. Similar to last quarter, category growth and our own momentum remained pricing-le. Limited volume elasticities across the portfolio. Though demand is resilient, we are mindful of the various pressures facing our consumers, and are proactively meeting our needs to product, and package innovation along with strong in-market execution. These elements come together, we see market share gains. Q2 these were most notable across our CSDs sparkling water, coconut water and juice portfolios. Even as price realization begins to moderate in the back half, we remain confident in our ability to drive attractive organic growth by creating value among three key dimensions. First, by driving growth in core brands through marketing and brand renovation. Second by filling portfolio white spaces via innovation and external partnerships; and third, by enhancing the effectiveness of our omni-channel selling and distribution system. We delivered on each of these dimensions in Q2. Focusing first on our core brands. For the second consecutive quarter, Dr. Pepper was the largest share gainer in the CSD category, bolstered by the success of Strawberries & Cream, and the continued strong momentum of Dr. Pepper Zero Sugar, which was once again maybe top two food and beverage product in IRI Circana’s New Product Pacesetter Innovation Ranking. Keurig also continue to outperform driven by its multicultural appeal and unsweetened sparkling waters, our partnership with Polar have now boosted the brand to the #2 volume share position nationally. We also brought significant excitement or choose categories were mocked in a wine puncher driving innovation and gaining share. When it comes to the partnerships our C4 distribution transition is proceeding well. 2023 is a year of transition and investment and though it is still early days in our distribution rollout we are driving gains across multiple metrics and remain confident in the growth potential of C4. KDP distributed geographies, total points of distribution increased nearly 60% versus prior year and waited weeks on display across large format food outlets are up nearly 50% relative to the beginning of 2023. These gains translated into continued velocity and share momentum for C4, and accelerated the brand's already strong revenue growth even further. Clearly, our partnership approach continues to create win-win outcomes, making this model increasingly attractive to other high potential companies including La Colombe, which I'll speak more about shortly. The effectiveness of our selling and distribution engine underpins our success across all the examples I cited. One would acknowledge the hard work our teams have done to drive improvement across the system where it shows signs of strain during the pandemic. Customer service levels have now significantly improved relative to where we were during the COVID period, and in some cases exceed pre-pandemic comparisons. But our work here is never complete. These strides are leading to even tighter in-store and on-shelf execution as our market share momentum demonstrates. Turning now to US Coffee, we're exiting Q2, we saw several encouraging developments that are expected to benefit segment performance over the coming quarters. On our last earnings call I identified three key tenets underpinning our expectations in this segment. First, an at-home coffee category momentum would begin to recover in the back half, as mobility comparison ease. Second that we would add approximately two million new households to Keurig’s ecosystem in 2023, aided by BrewID & Pod innovation and the addition of new brands. And third, that segment operating margins would improve meaningfully in the back half supported by a better balance between pricing, inflation and productivity. We had even more visibility to these elements playing out today with Q2 marking an expected trough in both top-line growth and margins. Let's address each point in turn. First, as anticipated, at home coffee category momentum began to improve toward the end of the second quarter. This continue to do so in July. Lot of time our consumers are spending at home this year versus last is continuing to normalize. Since we believe time spent at home is the single largest variable driving at home coffee consumption, it follows that volume trends are recovering too. We are observing this across broader at-home coffee within which single-serve continues to gain share. Category recovery is very clear when looking at publicly syndicated data. In Q1, Keurig compatible Pod volumes good proxy for the total single-serve category declined nearly 4% across measured channels. Q2 these declines moderated to less than 2% with improvement particularly notable towards the end of the quarter. For the last four weeks, category volumes are flat to up slightly. Notably, category and KDP volume performance has been even stronger in non-track channels such as e-commerce and Unmeasured Club. Category trend is a positive leading indicator for our business and we would expect sequential improvement in net sales growth in the back half. That said, we are prepared for our volume growth to lag the single-serve category in the shorter term, as we focus on optimizing profitability. Pricing across all sub- segments of our K-Cup K- portfolio Is now more fully flowing through our financials including from our partner breadth consistent with our previous expectation that pricing would catch up to inflation, but a delay We also exited some of our lowest margin private-label contracts. Both of these elements are now filtering through our results and the syndicated data. Longer-term, our growth in U.S. coffee will remain underpinned by driving incremental household penetration for the Keurig system and increasing revenues from our existing 38 million active households, which brings me to the second tenet of our coffee outlook, driving incremental household penetration. In Q2, we furthered this growth strategy by elevating our presence in cold coffee, which is an important trend among younger consumers. This spring, we nationally expanded the K-Iced Brewer platform, especially formulated Ice K-Cup pods. Strong marketing and activation activities across all media and digital channels, including a special limited edition Rolling Stone’s K-Iced brewer that sold out in less than 24 hours. These Innovations are off to a very strong start with the K-Iced Brewer family performing extremely well and our ice pods proving highly incremental to our base business. Just last week, we announced a strategic partnership with La Colombe, super premium and award-winning coffee brand with wide appeal and untapped potential. Partnership which includes an equity investment, a sales and distribution agreement for RTD Coffee and a K-Cup pod licensing agreement is a compelling example of our ability to add value to a single partner across both hot and cold beverages, which KDP is uniquely positioned to deliver. Our collaboration with La Colombe will encompass several exciting strategic avenues. We will leverage our sales and distribution capabilities to scale La Colombe across major retail classes of trade. Along with the Pete's brand, we're creating a ready to drink coffee platform, which will enable us to better serve the needs of our consumers and retail customers in this important category. We will also work closely with La Colombe to formulate and introduce the brand into the Keurig ecosystem in a K-Cup format. Here too, we are building a super premium platform as La Colombe joined several recently added brands like Intelligentsia, BLK & Bold, and Philz. Additionally, La Colombe is a vertically integrated model and specialized manufacturing knowledge are other differentiated elements that could enhance our collaboration over time. In short, this partnership has strong value creation potential that when unlocked will benefit both KDP and LA Colombe to our joint ownership model. Now moving to the third element, driving our coffee outlook. We continue to expect segment margins for the U.S. coffee segment to meaningfully improve both sequentially and year-over-year in Q3 and Q4. Multiple factors led the segment margin contraction over the last few years and several elements including sequential favorability in pricing, commodity costs and productivity are now starting to come together to facilitate a margin rebuild. Pricing to offset cumulative inflation across our K-Cup portfolio including for partner and private-label brands will now more fully flow through starting in Q3. Commodity cost pressures including in green coffee and packaging are also projected to ease. Efficiency benefits should ramp up throughout the year as we have redoubled our productivity efforts following a period focus on mitigating supply chain disruptions. We will work to further enhance these elements going forward with the expected back half margin inflection and important marker for future profit growth. Our International segment continues to perform well, even as it begins to lapse double-digit growth in the year ago period. In Q2, Canadian volume momentum was fueled by non-alcoholic and low alcohol beverages where we have multiple brands like Atypique and Labatt's is gaining share. This is an exciting set of emerging categories where we plan to leverage our learnings across markets. Execution also remains strong in our Canadian coffee business where KDP manufactured Pod’s grew consumption dollars in gained market share during the period. In Mexico, our DSD network continues to strengthen, which is supporting broad based share momentum across our LRB portfolio and the ongoing rollout of our partnership with Red Bull. Across the portfolio, Pen UCL and its aide extensions into flavored sparkling waters, as well as our CSD brands continue to perform very well. Wrapping up, our consolidated Q2 results are yet another illustration of our modern beverage company working to deliver strong, consistent and predictable company performance. We continue to develop our business for the long term to investments in innovation, partnerships and capabilities, while demonstrating our ability to work through shorter-term normalization in coffee. We also continue to deploy our cash to create value for shareholders. It’s all this via the equity investment in La Colombe and through the opportunistic repurchase of KDP’s shares, which continued through Q2 as our share price remain dislocated. We are raising our 2023 outlook for constant currency net sales growth, do 5% to 6% and reaffirming our guidance for adjusted EPS growth of 6% to 7% with an improving composition of our earnings profile. We now expect only minimal non-operational benefits within the frameworks of this guidance implying double-digit adjusted EPS growth on an underlying basis. I'll now turn it over to Sudhanshu to discuss Q2 results and our balance of year outlook in greater detail. Sudhanshu Priyadarshi : Thanks, Bob, and good morning, everyone. We are pleased with our concentrated quarter two results which represented another quarter of strong sales growth with reported gross margin expansion both sequentially and year-over-year and significant reinvestment in marketing. Reported sales advanced 6.6%, to $3.8 billion with 6.1% organic growth, reflecting strong pricing and a modest decline in volume mix. Consolidated top-line momentum, was driven by U.S. refreshment beverages and international segments, partially offset by a trough quarter in U.S. coffee which we anticipated. Reported gross margin expanded slightly year-over-year to 54.8% as we made progress in offsetting ongoing inflection. This is an important change in trend past in the nearly two years. Even with continued cost pressures across transportation, warehousing and labor, we reinvested significantly in marketing, with increases across each segment. As a result, total SG&A as a percentage of sales deleveraged 40 basis points year-over-year. Adjusted operating income grew 4.4%, and additional below the line leverage helped drive adjusted EPS of $0.42, 7.7% above prior year. We continued to deploy our cash in accordance with our evolved capital allocation priorities. Over the past four quarters, we have opportunistically repurchased nearly 22 million KDP shares, including 7 million shares in quarter two in recognition of a significant long-term opportunity in our stock. Combined with our quarterly dividend, we have returned approximately $1.9 billion of cash to shareholders over this timeframe. In addition, since the merger, we have evolved our ownership structure to that of the modern beverage company we are today, increasing KDP’s public float from 13% in 2018 to 73% today. This includes the exit of Mondelēz which earlier this month completed its final sale of the long-term strategic equity stake it took as part of the KGM Tech private in 2016. During the quarter, we continued to persistently invest in promising partnership and M&A opportunities, namely the $300 million investment we made in La Colombe announced last week. KDP’s successful track record in the scaling beverage brands and strengthening our leadership positions across our key categories make us a sought-after partner for high potential companies and brand owners. We remain discerning and disciplined at all such opportunities seeking out only those that has compelling the strategic merit create win-win outcomes for both parties and provide significant value creation potential. Turning now to segment performance. U.S. refreshment beverages sales grew an impressive 11.8%, led by 12 percentage points from pricing with virtually no volume mix impact. This resilient volume mix performance continue to reflect the strength of our portfolio, ongoing market share gains, manageable. category elasticities in the face of significant pricing and the contribution from C4 energy. Segment operating income increased 18.1% and segment margins expanded 150 basis points as pricing and productivity benefits more than offset commodity, manufacturing and labor inflation and an increase in marketing investments. In US coffee, sales declined by 0.7%, with positive pricing more than offset by anticipated volume expression which I will further explain now. Focusing first on the consumable parts business, as Bob indicated, we are encouraged by the improving consumption volume trends in the single subcategory exiting the first half. We see this category trend as the leading indicator for the direction of our business. Further, in quarter two, our reported Pod shipment declines had yet to reflect any improvement due to three primary factors. First, a category volume recovery began later in the period and therefore had a limited impact on quarterly results. Second , we lapped a period last year when we were replenishing retailer and partner inventories after supplying to disruptions creating a difficult shipment compression; and third, our conjunction and shipment volume were impacted by our decision to exit some low value private-label contracts. We expect some lingering impact to our shipment volume from factors two entry as we move into quarter three. Even so revenue trends are projected to sequentially strengthen driven by positive pricing and moderating volume declines. On a trailing 12 month basis, brewer shipments declined 11% year-over-year. For perspective, our brewer volume is still 18% higher than the comparable 12-month period ending quarter two 2019, which represents a clean pre-pandemic compression. The point here is that, despite all the volatility of the last several years, the surging demand during the height of COVID and the later stages of normalization we are working through, demand for Keurig ecosystem is greater today than it was four years ago among both consumers and retail partners. Our Q2 brewer shipment declined 10.9%, a sequential improvement relative to quarter one and were impacted by the same factors we discussed last quarter. With improved softer discretionary demand for smaller appliances, including brewers which saw mid-single-digit consumption declines and additional, albeit moderating pressures from trade inventory rebalancing. After two quarters of inventory adjustments, we believe these are that largely behind us looking out to the back half. Importantly, Keurig branded brewers gained share of all of coffee makers sold in quarter two, which recently launched KI brewers seen good traction in the market. We will further support these new brewers and highly incremental ice bars in the back half as we continue to expand our cold coffee platform and offerings. US coffee operating income contracted 14.6% at 30.1% segment margins were similar to quarter one level, but 310 basis points lower year-over-year. Versus the prior year, this performance reflected a continued unfavorable relationship between pricing and inflation, as well a significant investment in higher marketing in part to support our ice innovation launches. Looking to the back half of the year in U.S. coffee, we forecast a gradual recovery in revenue growth, coupled with significantly improved margins. This combination underpins our outlook or a strong rebound in segment, operating income with positive growth in quarter three to be followed by very attractive gains in quarter four. Our international segment performance in quarter two remains strong even as we lapped tougher years ago completions. Net sales increased 10.9% on a reported basis with constant currency growth up 7%. Net price realization contributed 6.1% and volume mix was up 0.9% year-over-year. Segment operating income grew 11.5% on a reported basis and 7.7% in constant currency, reflecting the benefit of the growth in net sales and increase productivity, partially offset by inflationary pressures and a significant increase in marketing investment. Turning briefly to cash flow. Free cash flow totaled almost $300 million in the second quarter. As we enter the seasonally more cash generative back half, we would expect our absolute levels of free cash flow as well as free cash conversion to meaningfully improve from here. This brings me to our consolidated outlook for 2023, which we updated in our press release this morning. Our outlook for constant currency net sales growth is now higher at 5% to 6% and we continue to expect adjusted EPS to grow 6% to 7%. While our EPS outlook is unchanged on the surface, expected profile of our earnings is now further improved relative to our guidance earlier this year. Specifically, you’ll recall that 2022 benefited from several non-operational items and at the start of this year we expected to reduce the use of these items by approximately 50% in 2023. I am pleased to share that our EPS forecast now includes only minimal such benefits. As a result, on an underlying basis, I our EPS growth is now projected to be in the double-digits versus our prior expectations for a high-single-digit gain. This very strong underlying performance demonstrates the earnings power inherent in KDP’s model. It is also effectively and increase to our 2023 growth outlook and will preclude any further upside to EPS expectations for this year while setting us up for a strong and sustainable base from which KDP can grow earnings in 2024. Our full year guidance includes the following expectations for below the line items. Interest expense in a $470 million to $475 million range; equity method earnings from Nutrabolt of approximately $40 million to $45 million; an effective tax rate of 22% for the year and approximately $1.4 1 billion diluted, which is average shares outstanding. We have covered a lot of ground today. So I would just finish by remarking on the projected cadence of earnings for the balance of the year. Given the evolution of pricing, inflation and productivity, along with the timing of planned reinvestments over the back half, we expect only modest EPS growth in quarter three, followed by very strong results in quarter four. With the good first half in the books and the enhanced visibility to the balance of the year, we are confident in our robust finish to 2023. With that, I will now turn the call back to Bob for closing comments. Robert Gamgort Thanks, Sudhanshu. If you haven't done so already, I encourage all of you to read our 2020 corporate responsibility report, which was published last month. Highlighted within its pages is the significant work KDP is doing to further our sustainability agenda. We're very proud of our progress across multiple focus areas including in renewable energy, water stewardship, and diversity and inclusion. To close, Q2 was a very good quarter for KDP across multiple dimensions. Performance in U.S. refreshment beverages was once again exceptional and international posted another great quarter. US coffee is approaching an important inflection with improved visibility to a significant margin recovery, which we expect to lead to strong operating income growth as we close out this transitional year for the segment. On a consolidated basis our efforts to offset inflation are increasingly evident in gross margin stability, and marketing reinvestment across all segments. And as we discussed today, full year guidance implies double-digit underlying EPS growth with an even stronger top-line outlook. These are all key elements to set us up for ongoing momentum in the back half and ultimately into next year. I will now turn the call over to the operator for questions. Operator: [Operator Instructions] Our first question will come from Chris Carey with Wells Fargo Securities. You may now go ahead. Chris Carey: Hi, good morning, everyone. Robert Gamgort: Hi, Chris. Chris Carey : So, clearly, tall results on a total company level, but at the same time so much of the day to be has been around coffee. And I think there's been a bit of a misunderstanding that the underlying assumption of the category has actually been improving through the year. And I think, what I hear today is that that improvement has continued to accelerate through the quarter and into the quarter-to-date. And so, I just have a couple specific questions around that. So first, you why do you think that underlying improvement has been occurring? And really I'm trying to get to the context of sustainability. It is as simple as the away-from-home channel was recovering in the front half of the year, that's normalized. Now, the at home channel has normalized, as well. And secondly, it sounds like you expect to remain below consumption in coffee into the second half of the year. Is that a Pod and Brewer comment? And just given the tough comps and you're making some changes to the portfolio, would you expect that dynamic to carry into 2024? Or this predominantly in Q3, is this Q4 and then you've normalized from there? So, thanks for any perspective on just underlying durability of this improvement. We've seen in the at-home coffee channel and also this dynamic of shifting to consumption and when you think you can start to close that gap over the next two to four quarters? Thanks so much. Robert Gamgort : Okay, Chris. Let me start it at a very high level with the total category, because I think that is most important. We've clearly weathered a storm over the past year or so that's impacted our category and our profitability within the negative impacts were on at home coffee. We saw this category decline in all forms globally. And to answer your question, we have seen that as primarily driven by mobility changes. This is the post-COVID recovery mobility impact. That's largely played out. I think, by the end of the third quarter for sure that will be played out. We also had some issues in terms of supply chain recovery coming out of COVID where it was a service at all cost mindset and we were also not focused on productivity and of course inflation. And that was combined with the lag in our pricing realization. And that's when you add that all up, that's quite a list of challenges in our coffee business over the past year. If you look at what the setup is right now, it’s much more constructive. We're seeing a rebound in category and that's largely driven by normalized mobility. To your specific question about away-from-home versus at home, wait from that hasn’t change that much, right. If you look at office occupancy, it's pretty stable. It's improving very, very gradually. Over time, if that improves, then we'll get the benefit of from that on our way from home coffee business. But that's not something that we're banking on. It's really been an at-home coffee consumption story driven by changes in mobility. So we're seeing is rebound in category. As we talked about in our prepared remarks, we're seeing that pricing that we talked about that was lagged now flowing through the P&L and of course we're seeing a moderation in inflation and the combination of that is very constructive going forward. And one thing I would point out is that single-serve coffee has had and continues to gain share of all forms of coffee over this time period In terms of our shipments below consumption, the best way to look at us over the long term, I am not going to talk about 2024 specifically, but our shipments share approximate category consumption over time. Our focus is on category growth. We have about an 80% share of all Pods that go through the system. Mix can change over time, but again we're focused on category. And I think you ought to just think about category rebound as being consistent with how we think about our long-term shift and trends. But in the short term, we're looking at against a period a year ago, we were still rebuilding shipments from supply chain disruptions, so that's part of it. We've also talked about exiting some of the lowest margin private-label contracts and then we’ve taken some additional pricing on our owned and licensed. We think these are really the right decisions to prioritize margin recovery in a recovering category, and that's what causes a little bit of a separation between consumption and shipments in the short-term. But there's no reason to think that's the case over the long term and really I would point you to category consumption as the long-term indicator. Operator: Our next question will come from Bryan Spillane with Bank of America. You may now go ahead. Bryan Spillane : Thank you. Thanks operator. Good morning, everyone one. So, just two quick ones for me. Sudhanshu, just the flip of non-operational gains now not contributing as much, that's obviously good news. Is that a change in just the way you're going to treat them, one, backing them out versus including have things changed. So, some of these financial moves like, sale-leaseback just not as attractive anymore? And then the second one for you Bob is, just 2 million household penetration or new households - is 2 million new households in coffee brewers still a possibility this year? Or might that be little bit below that just given the current environment? Sudhanshu Priyadarshi : So, Bob, let me take the first one. So Brian, no, as we have said beginning of the year, KDP is focused on delivering best-in -class CPG activity performance. This also includes our enhancing of composition of our earning profile. Last year we had a lot of non-operating item when we started the year with targeted 50% reduction, but as you can see from our first half performance, our underlying business performance is great. We are also seeing the margin recovery in coffee in second half. So we have enhanced visibility. So we believe that now we will have a minimal non-operating and we will deliver a better underlying operating performance this year. This will also help us in 2024 because we will not have this roughly 50% of headwind from last year. It was roughly, I think it's more than $150 million, $160 million dollar. We had a half of that was this year. We don't expect that to do that and that will help us in 2024 and beyond. So there is no change. It's just our strong operating performance that we planned all along. Robert Gamgort : Brian, on the two million households yes, still our target for 2023 as we talked about a number of times, brewer sales are really a great predictor of household penetration. So, the two million is still where we're trending. The one thing I would point out is, as you know, we are heavily fourth quarter loaded. Holiday season, gifting we've done well in difficult environments that – in a difficult economic environments around that gifting because people go for more functional gifts during that time period. Our innovation pipeline, the promotions, the retailer support that we're getting for the fourth quarter, all was terrific, but got a lot of game left to be played in the fourth quarter. But as we sit here today, we are targeting two million. Operator: Our next question will come from Dara Mohsenian with Morgan Stanley. You may now go ahead. Dara Mohsenian: Hey, good morning. Robert Gamgort : Hey, Dara. Dara Mohsenian: So, on the coffee side, you were very clear and comprehensive in your remarks on the second half improvement and what drives the improvement versus the first half. But in theory, it's a pretty big dichotomy. So, I guess it just be helpful to hear how much visibility you think you have at this point in coffee, particularly relative to some of the first half disappointment, maybe rank order some of the factors you mentioned in terms of driving that sequential improvement? But also just longer-term, broader context for the volatility we're seeing this year and what you think it sort of means for future growth prospects, as we look out longer term? And then be, I'm sure coffee will get a lot of the air time as usual. But we probably be remised if we didn't touch on the US refreshment and international strength in the first half of the year. How sustainable do you think are the factors there that have driven the strength as you think about go forward trends from here? Thanks. Robert Gamgort : Okay. I'll take both of these. I think it's always helpful and I feel like I'd remind everybody that's on many of our calls, but I do think it's helpful step back and look at the coffee category over the longer term that gives you the best context. It is always short term volatility, particularly in the COVID and post-COVID world. But if you go back and it's in our press release if you go back and you take a look at pre-COVID, 2019 to our latest period, the CAGR on Pods is mid-single-digits, CAGR on brewers, about mid-single-digits. And so there is a lot of bumpiness and it's been tough for all of you to navigate through the pluses and minuses over the past couple years. But that context is always helpful and it always serves us really well to look at the longer term trends, which is this is a growing category driven by zoomers converting from brewing by the Pot to brewing by the cup. We are the drivers of that. Our partners benefit from that. Our retailers benefit from that, so does Keurig, because we participate in 80% of those transactions. So, that's the most important thing for everyone to always takeaway when you look at any quarterly results on the business. In terms of the back half of the year and visibility, it’s a really good question. The area that's been most challenging for us over the past couple years is predicting consumer mobility. And it's not a concept we even thought about prior to COVID. So be able to match up consumer mobility against in-home coffee consumption we had to learn a lot there. And then also being able to predict it is really a difficult thing to do given the economists are having a tough time doing that. But I think that noise is largely behind us, which is the most important takeaway from this conversation and we should see a normalization in category growth, as behavior from consumer perspective also normalizes. The one area where we have had and still have the most visibility to is our margin. And I know that's been another area where there was pressure on the business that we explained as we look forward and we understand coffee pricing in advance, we understand our pricing. And we also knew that the agreements that we had with our partners and our private-label partners, as well is that we have the ability to recover inflation, but it had a lag effect to it. And there's only so much that you can talk about before you want to see the proof. And you're seeing the proof of that now flow through and we have great visibility to that in the back half of the year. So, put it on the table, our assumptions for the back half of the years continued slow and gradual recovery of the category in total. We have and continue to gain share of total at home coffee and single-serve. And then an improving margin and that's driven by pricing flowing through the P&L, moderation, and inflation and our ability to focus on productivity now, that our supply chain is in really good shape across the board. Our customer service on coffee has been fantastic. So, let me talk a little bit about refreshment beverages and it's a, it is a fantastic story that I'm glad you raised, because we certainly don't take it for granted nor should anyone else. What's been working for us is three factors. We've been gaining share in a growing category and I don't mean to make light of it because it's really each one of these is an important double-click, but it's driven by marketing, innovation, and really importantly outstanding retail execution. So, gaining share in growing category is always a positive thing. Our pricing and productivity have been catching up to inflation. There was – we were chasing inflation for a long period of time. We were able to narrow that Gap. And I think importantly, consumer resilience has allowed the category to withstand all the pricing that was required to offset that inflation. Now, last point is an area that we continue to watch very carefully. And we're seeing a general elasticity hold up nicely. But we're seeing some greater elasticities in some of the segments within LRB that we will watch and adjust to. But, if I were to summarize the cold beverage business, growing margin, and share, and growing category, certainly a formula for success. We plan to continue to do everything I just said, plus add new partnerships as we've done with C4 most recently and then more recently La Colombe. Operator: Our next question is from Andrea Teixeira with JPMorgan. You may now go ahead. Andrea Teixeira : Thank you. Good morning. I have a couple of questions to the Sudhanshu’s point on site EPS and then a question to Bob on the Pod. First on the EPS growth outlook for Q3, what would be the underlying growth ex non-operational items for the quarter because we understand there were no operational items in Q3 last year? And the question for Bob on the Pods would be the shipment inflection. Should we expect shipments to converge to consumption in Q4? Or kind of like the embedding what the outlook that you gave for the fourth quarter? Or could you bridge the impact for the private-label exits, which is one of the factors that was a headwind in the quarter and also in the second half? And sorry for the two-parted question. But on this on - the on the price and improved mix as you exit this, this third-party manufacturing, should we not – so with the private-label should we expect pricing to lap in Q3? Or use - expect to still have some benefit on pricing for pods into the second half of the year? Thank you. Sudhanshu Priyadarshi : So, let me take the first one. First, I would urge you to think about back half in total with the cadence between Q3 and Q4 EPS, just the matter of phasing. Our second half growth is expected to be largely Q4 loaded reflecting the expected flow of investment spend and the cadence of pricing and productivity relative to inflation. In forecasting quarter three EPS, last year, we have no non-operating items in Q3. We had in Q4, which we expect that to be minimal. But the reason we is modestly higher year-over-year. There are three key components. One is U.S. refreshment beverages. We are lapping the year ago pricing and we are forecasting heavier investments. U.S. coffee positive OI growth as margin begin to inflect in quarter three and then more to come in quarter four. So those are the two main reasons mostly driven by our decision to invest more importantly. But I said, let's look at the second half and you will see that we have a strong EPS growth. Robert Gamgort : Yes, let me reiterate what I said before, which is over the long-term consumption to people shipments. There's no reasonably will be different. As is often the case you see some separation between the two on a quarter-to-quarter basis, clearly, there is factor we had supply chain issues in which we were under shipping and we were overshipping to catch up on that. What's happening right now in the back half of the year is exactly we said is we're seeing our consumption base is, slow and gradual recovery in the in the total at-home coffee category. Single-serve continues to gain share of at-home coffee occasions which is important. And then there's two things that are - couple things I should say that are unique to us as that is causing our shipments to be slightly in high consumption. One is how we're lapping some of the year ago timing of shipments due to recovery. We talked about all the license pricing and we also talked about some private-label contracts that we exited all in the direction of making sure that we're rebuilding margin. And that'll play out. So, we had talked previously, about for the year coffee being about up 1% in revenue, and 3% or 4% in OI. And if I look at the way things were playing out and it's hard to forecast it differently, we've got great visibility to margins. So we expect that to strongly inflect in the second half. And that's going to lead to accelerated OI growth. I'll talk about that in a moment. I think the revenue number may come in somewhat below that on a reported basis. I don't think it's that big of a deal. But the other thing to think about though on the OI growth projection and even if that comes in slightly below that on a reported basis for Sudhanshu’s comments the without any non-operational impacts, the adjusted segment on an underlying basis is even stronger than we talked about before. So, you add it all up and you say the back half of the year there may be some puts and takes here, but the underlying strength of the business is really, really improving. And anything that's off any of these projections is really driven by some intentional strategies we put in place. And then the last thing I would talk about our coffee margin is, there are four drivers of that margin which is pricing, inflation, and productivity and mix. And clearly, we're seeing the pricing flow through. You ask about the second half versus first half. We had virtually no pricing coming through from partners and private-label in the first half. That's just starting to flow through in the back half of the year and that will ramp up. And yeah, there's some trade-offs in mix and some of the other parts on here, but we have good visibility to improving margin going forward. Operator: Our next question will come from the Lauren Lieberman with Barclays. You may now go ahead. Lauren Lieberman : Great. Thanks. Good morning. I was hoping we could maybe take a step back and do something a bit educational on coffee. So, you in the Nielsen data, I know you guys are more into toward IRI, but in the Nielsen data you can see that owned and licensed brands within pods has been losing share and I think that's garnered quite a bit of attention from the investment community. So, I was hoping you could talk about, I know that you’ve said historically you manage the margin profile of owned and licensed to be comparable to that of partner. But I was curious if you could talk about why we should or shouldn't worry about that from a dollar profit contribution over time and how you manage sort of the - let's call it, the potential conflict of interest with partners versus what's owned in terms. market share and so on and you know, how you manage that relationship? Also, just Bob, you'd mentioned pricing on owned and licensed and I just wanted to be clear if that was new pricing that's recently gone in the market or if that's still to come? And then finally, I know that inventory destocking for Pods at retail had been a potential watch point that hasn't come up. So I'm assuming it's a non-issue, but I just wanted to check in on that front, as well. Thanks. Robert Gamgort : Sure. Yes. Thanks for the opportunity for me to talk about the way - the way the system works. So, again, I go back to the very beginning and say that what we manage as an ecosystem that involves our brands, our partner brands and private-label brands, our retailer brands. And it's really important that retailers are considered to be a partner in this whole ecosystem, as well because, conversion of brewing by the cup are popped by the cup benefits all of the interested stakeholders in this. Our objective is really focused and hasn’t changed, which is we want to have a growing system. We want to category to continue to expand. We want the dynamics of that category to be constructive for everybody. Part of that is managing our own brands which we manage very separately from our partners. So there is no conflict of ventures. We manage those as a separate group within our organization that has no visibility into what our partners or private-label are doing and it allows us just to maintain focus on the category. For us, we see the opportunity for more pricing within our brands, within the category. If you take a look at our price gaps versus other forms of coffee, even though there's been pricing in the single-serve segment, the price gaps versus all forms of at-home coffee right now are the narrowest they have ever been. And in fact, we do believe they are at a point where it's actually not doing anything to drive category growth. Partners and that includes some of our retail partners and their private-label brands. Look, sometimes they have short-term objectives that are more share-driven. So, we see some of that promotional competition and that shift share between one brand to another, but it really does nothing for the category which is our focus. And so that's why when I take a look at our pricing, it comes back from being more restrained in the promotional environment, which allows us to protect margin. And again, if you go back to the highest level, the rational decision for us to make is to improve our margins in a growing category. And then, you did point out something about if owned in license brands are losing some share it might have some negative in mix impact. Fair enough that mix is as great as some people think it is as we said before. But I would then also point out that we're looking at pricing inflation and productivity. And the reason that people should believe that we're not concerned about that that difference of share is the visibility that we're giving you two improve in margin going forward. If it were a heavy negative impact on our business, we wouldn't be able to do that. So we understand all these weavers of pricing inflation part to be mix. And sometimes you have to trade out one for the other. We can do that for the long-term health of the system and the growth of the category, which is what we are focused on. And then your last point is about destocking of pods. It’s not something that we've seen at retail and nor do we expect to see anything of that nature. Operator: Our last question will come from Steve Powers with Deutsche Bank. You may now go ahead. Steve Powers: Yes. Hey, good morning. Thank you. Robert Gamgort : Hey Steve. Steve Powers: I wanted to ask on the free cash flow conversion. Sudhanshu, you talked about the improvements to come which is great. I guess there a way to frame where you think you'll land on convergence for the year? And as we think ahead, is there any reason that a return to 100% free cash flow conversion or thereabouts is too ambitious for ‘24 and beyond? And I guess, within that, if there's any – is there any changes that you're thinking about or that you’ve implemented more structurally with regards to supply chain financing that’d be useful to know. Thank you. Sudhanshu Priyadarshi : So, it's a great question. As you know KDP had been a highly cash-generative since merger and we expect to continue to generate significant free cash flow going forward. In our first half, our cash flow generation was lower primarily due to two factors versus last year. One was the lapping on some discrete items and also our proactive choice to selectively reduce a portion of our supplier financing program in a less attractive rate environment. The free cash flow conversion will be significantly higher in the second half versus second quarter and also first half, though it’s for the year, it will improve somewhat below 100% for the full year, but as you know, we look beyond 2023, we continue to target industry-leading levels of free cash flow conversion. So there's not too many changes. We are still generating a lot of cash. It’s a second half business. You will see it. But we are making some proactive choices with supply chain financing. That was very attractive in low-rate environment, but now it's not that attractive. Steve Powers: And last point, are you through those changes? Or do you anticipate there may be still changes to come given where rates are and where they may go? Sudhanshu Priyadarshi : No, so, we look at more of a – as the overall capital allocation policy as we came in, in the summer and we have our growth is. Our goal is to - low leverage, but we generate a lot of cash. So be make those decisions case-by-case. So I wouldn't say that supply chain financing will - the number will become zero, but yes, we're looking at case-by-case it’s a gradual and we are looking at the benefit of - its also has a benefit on operating income. So it's – first, in the in the beginning, you feel the most pain is the working capital has a short-term pain, but in the long run, it’s beneficial and we make the right economic decision. So it's case-by-case supply chain financing is proactive choice. We are making the decision based on where we see is better economic benefit. But it's a gradual and it will not happen everything this year, like we will not reduce everything to this year. It will continue for next couple of years. It will be a gradual reduction. Operator: This concludes our question and answer session. I would like to turn the conference back over to Jane Gelfand for closing remarks. Jane Gelfand: Thanks, Anthony, and thank you, everyone. We appreciate your time and attention on what we know is a busy morning. And the investor relations team is available should you have any follow-up questions Have a great day. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr Pepper's Earnings Call for the First Quarter of 2023. This conference call is being recorded, and there will be a question-and-answer session at the end of the call. I would now like to introduce the company's Vice President of Investor Relations and Strategic Initiatives, Jane Gelfand. Ms. Gelfand, please go ahead. Jane Gelfand: Thank you, and hello, everyone. Earlier this morning, we issued a press release detailing our first quarter results. Consistent with previous quarters, we will be discussing our performance on an adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability and the use of constant currency growth rates are not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation table included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company's control, we do not reconcile our guidance. Beginning this quarter, we will discuss our performance in accordance with our recently redefined business segments, which were described in the 8-K filed last Thursday, April 20. This new segment structure is more consistent with how we evaluate the business internally and provides more visibility to our segment performance in the U.S., which is our largest market. We will also speak about the concept of underlying performance, which removes the impact of nonoperational items in the current and prior years. These items include gains on asset sale leaseback transactions, reimbursement of litigation expenses related to the successful resolution of our BODYARMOR lawsuit, a business interruption insurance recovery and a change in accounting policy for stock compensation. And finally, our discussion this morning may include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. Here with us today to discuss our results are KDP Chairman and CEO, Bob Gamgort; our Chief Financial Officer, Sudhanshu Priyadarshi; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. I'll now turn it over to Bob. Robert Gamgort: Thanks, Jane, and good morning, everyone. We started 2023 with good momentum. Our overall Q1 performance came in largely as expected and demonstrated the resilience of the modern beverage company we have built. We continue to manage well against a dynamic macro environment with the diversification benefits of KDP's model evident in our results. This morning, we reaffirmed our 2023 outlook, and we are confident in our ability to continue to deliver on our commitments as a company. For the quarter, consolidated net sales advanced a strong 9% versus the prior year, and adjusted EPS grew 3%. Consumer demand remained healthy driven by successful renovation and innovation, increased investment in marketing and modest elasticities across much of our portfolio. A narrowing gap between inflation and pricing coupled with increased productivity and favorable mix contributed to good flow-through to gross profit, though we continue to work through significant ongoing inflation in transportation, warehousing and labor costs. We expect the balance between these operating income drivers to turn more favorable in the back half of the year. In U.S. refreshment beverages, which represents nearly 60% of KDP consolidated revenue, our strong performance in Q1 demonstrated the depth of our capabilities across multiple dimensions including brand renovation, marketing, distribution and in-market execution as well as our partnership philosophy and successful track record. As discussed previously, we create value in U.S. refreshment beverages in 3 ways: by driving growth in core brands through marketing and brand renovation, by filling portfolio white spaces via innovation and external partnerships and by enhancing the effectiveness of our omnichannel selling and distribution system, including our company-owned direct store delivery system. The multiplier effect of all 3 of these elements working in unison was evident in Q1. We gained share in categories representing almost 90% of retail sales. With strong momentum in core brands, particularly Dr. Pepper, Crush and Mott's. On the back of the very successful launch of Dr Pepper Strawberries & Cream, brand Dr Pepper recorded the largest market share gain in the CSD category this quarter. In fact, the brand has become the #1 flavored CSD in syndicated data over the past 13 weeks. For perspective, Strawberries & Cream reached 70% ACV distribution within 5 weeks of launch, quickly gained a full share point in the CSD category and continues to experience strong momentum. Driving the early success of Strawberries & Cream is KDP's direct store delivery engine and robust consumer insights and marketing support. In Q1, we also began to activate our strategic partnership with Nutrabolt, transitioning C4 energy distribution to our network. Our execution thus far has been smooth and is progressing in line with our plans. As we begin to invest behind the brand, we are securing incremental distribution points and display as well as upgrading placements. Though it is still very early days, our partnership with Nutrabolt is strong and collaborative. We are excited by its potential and look forward to unlocking more value for both KDP and Nutrabolt in the quarters and years ahead. In-market execution underpins the gains we are making across our U.S. refreshment beverages portfolio. The results speak for themselves, but they are even more notable given we and the industry at large, continue to work through significant inflation. We have supplemented 2022 carryover pricing with some additional pricing actions to start the year, as we protect our profitability and our ability to reinvest for the long term. The limited elasticities this business has experienced so far are a telling reminder of the resilience of the category in general and the KDP portfolio in particular. Our brands remain important and affordable components of our consumers' everyday lives. Still, as recessionary risks persist, we continue to closely monitor consumer health and sentiment. Turning now to U.S. Coffee, which represents roughly 30% of our consolidated revenue. This segment experienced a slower start to the year. The performance in pods.which as you know, is our primary focus and profit driver was as expected, with brewers softer than expected. Pod segment's performance in the first half of the year will be difficult to analyze for longer-term trends. Let me take a step back and explain what we are seeing in the category and in our own business. Growth rates in the at-home coffee category, including the single-serve segment are being temporarily impacted by changes in mobility relative to the prior year. In Q1, the category lapped the surge of the Omicron variant and lingering pandemic precautions in the year ago period are expected to continue to affect comparisons through the first half. At the same time, the category is digesting significant cumulative pricing to offset inflation. Importantly, single-serve continues to gain volume share in the at-home coffee category in the U.S. underpinning the strength and resilience of the segment and our long-term growth strategy. We also see the environment for small appliances being impacted by the combination of lower consumer discretionary spending and a challenged specialty retailer environment. Sudhanshu will cover the detailed quarterly performance drivers, but let me say upfront, we expect the second half to reveal a more normalized picture of the health of the single-serve category and our ongoing momentum. We are still planning to add approximately 2 million new households to the Keurig ecosystem in 2023, and we also continue to expect the back half to show strong improvement in segment operating margins. Short-term noise aside, the category -- the coffee category is vast and growing in the U.S. and globally. Moving out the volatility of the pandemic period, we are projecting double-digit volume growth for our at-home pods in the U.S. from 2019 to 2023, which translates to mid-single-digit compound annual growth rate. This is consistent with our previous discussions that eliminating the significant noise over the past 3 years revealed consistent and healthy long-term trends for at-home single-serve coffee. As the leader in U.S. single serve, our overarching growth strategy is to continue converting consumers from brewing coffee by the pot to brewing it by the pod, which we pursue through 2 primary means. First, by driving household penetration for the Keurig system. U.S. single-serve adoption remains significantly below that in more developed single-serve markets in Western Europe and even Canada. And we expect household growth to continue for many years to come as we target adding approximately 2 million new households annually. Second, by increasing revenue and profit growth from our existing 38 million U.S. Keurig households. Ongoing brewer innovation to address new and changing consumer needs, and a focus on expanding brand and variety of offerings within the Keurig ecosystem underpin our coffee growth strategy. We have news on both fronts in 2023. When it comes to meeting consumer needs, after an initial successful launch with a single customer last year, in 2023, we are expanding our K-Iced brewer platform as well as dedicated iced pods specifically designed for cold beverages. Both coffee beverages are growing quickly at coffee shops and over-indexed to younger consumers. Given our ability to deliver a high-quality cold coffee experience at home for a fraction of the price, we see ice coffee as a growth opportunity for the Keurig ecosystem in 2023 and beyond. We also continue to add new and exciting brands to the Keurig ecosystem. Today, we are pleased to announce that Philz Coffee, a super premium brand based in San Francisco, will be available on K-Cup pods beginning this fall. Through the new partnership with Philz as well as the additions of Intelligentsia and BLK & Bold announced last year, we are building a new super premium segment for K-Cup pods. Our International segment which represents just above 10% of our consolidated revenue, encompasses both our Canadian coffee and beverages business as well as our LRB businesses in Mexico and Puerto Rico. Our growth strategy for international, leverages enterprise-wide insights and capabilities to grow household penetration in coffee and to drive share gains in LRBs through brand innovation and renovation, white space expansion and strengthening our routes to market. We tailor our approach to local taste and market structures while exporting best practices and ideas across the whole of North America. In Q1, we were pleased to see broad-based momentum across our brands and categories, including in mineral waters, CSDs and single-serve coffee. Our partnership with Red Bull in Mexico continues to build. And we also remained focused on expanding within the low or no alcohol category, including through our acquisition of Atypique in Canada. Both opportunities leverage our existing portfolio and distribution assets, including our DSD system in Mexico and our alcohol portfolio and expertise in Canada. Wrapping up, we expect the operating environment to remain fluid, and we see KDP as well positioned to continue to deliver strong consolidated performance in 2023. We are reaffirming our 2023 outlook for constant currency net sales growth of 5% and adjusted EPS growth of 6% to 7%. On an underlying basis, this implies adjusted EPS growth that is closer to 9% at the top end of our long-term algorithm. In addition, KDP has a track record of strong free cash flow generation, and we expect to continue to unlock the potential for incremental shareholder returns through strategic capital allocation. We have evolved our capital allocation approach to better fit our development stage as a company and to respond to a higher interest rate environment. We are prioritizing internal investments, partnerships and M&A, balanced against returning cash to shareholders through our dividend and opportunistic share repurchases, which we undertook this quarter and last quarter. A recent upgrade by Moody's to a stronger investment-grade credit rating recognizes that the inherent portfolio balance of our modern beverage company, along with our capital allocation philosophy and free cash flow profile, all aspects that Sudhanshu will talk more about next. Sudhanshu Priyadarshi: Thanks, Bob, and good morning, everyone. In kicking off 2023, we made the decision to realign our segment reporting to more closely reflect how we plan, run and evaluate these businesses internally. The new U.S. coffee segment will also enhance comparability relative to how we speak about our long-term goals, including our 2 million annual U.S. household penetration target. There is also the added benefit of giving you a more refined picture of our operations in the United States, which is by far our largest market. We believe the size, scale and margin profile of each U.S. segment becomes more visible externally, making it easier for you to track and analyze. U.S. refreshment beverages is an $8 billion-plus revenue business with a 28% adjusted operating margin. The U.S. coffee business is $4.3 billion in revenue, also very large with an adjusted operating margin above 32%. Obviously, both are high-quality CPG businesses with tremendous scale in the U.S. market. At the same time, our fast-growing international segment at approximately $1.7 billion of revenue and a 24% adjusted operating margin is already meaningful and quite profitable. We are pleased that KDP's portfolio delivered over all Q1 results, which were consistent with our going-in expectations even as performance among the segments was varied. Q1 sales advanced 9% driven by a strong in-market execution, particularly in U.S. refreshment beverages. Gross profit dollars grew at a similar rate, and we increased marketing investments versus prior year. At $0.34, our adjusted diluted EPS grew 3% versus Q1 last year. Without a $0.05 headwind from the significant reduction in nonoperational items year-over-year, underlying EPS growth in the quarter was in the high-teens. As discussed on our last earnings call, we are committed to a step function decrease in the use of nonoperational items this year. And as this occurs, the earning powers of the business will become even more visible. Our actions also continued to reflect our revised capital allocation priorities. In Q1, we saw and took advantage of a value opportunity in KDP shares and bought back 6.6 million shares during the quarter. Combined with the share repurchases we undertook in late 2022, we have now returned more than $500 million to shareholders via opportunistic buybacks over the past 2 quarters. Our high-quality portfolio, consistent results, well-capitalized balance sheet and flexible capital allocation approach are being increasingly recognized. As Bob mentioned, Moody's upgraded our credit rating earlier this month, which is especially notable in a weaker macro environment. We believe our strong balance sheet and North American focus represents a safe haven in the current tumultuous financial market. Let's now take a closer look at consolidated Q1 results. Consistent with the last couple of quarters, our top line growth was driven by pricing taken to offset inflation and a modest volume/mix decline. Net sales grew 8.9% to $3.4 billion with pricing up approximately 10%. Gross margins were stable at 52.7% and primarily reflected the combined benefits of pricing, productivity gains and positive mix balanced against considerable input cost inflation. Total SG&A as a percentage of sales deleveraged by about 100 bps versus prior year, reflecting continued elevated transportation, warehousing and labor costs. Despite these cost headwinds, we increased marketing investment to support our brand momentum. We also lapped an SG&A benefit of $28 million from a stock comp accounting chain in the prior year period. Q1 adjusted operating income was $699 million, about 4.5% below a year ago, but representing almost 9% growth on an underlying basis. Adjusted net income grew about 1%, aided by flat interest expense, equity method earnings and a lower tax rate versus the prior year. Lower diluted shares outstanding helped drive additional leverage in the EPS growth rate. Turning now to segment performance. U.S. refreshment beverages sales grew 12.7%, led by 12.5 percentage points from favorable net price realization. The benefit of pricing was sequentially lower relative to Q4 as we begin to anniversary price increases we took in early 2022 and have not yet captured the full benefit of pricing actions announced earlier this year. Volume mix was slightly positive in the quarter reflecting very limited elasticity impact as well as the contribution from C4 Energy. This volume mix result speaks to resilient consumer demand, modest elasticities in our categories and a successful slate of renovations and innovations. Segment operating income increased 11.6% as we effectively translated top line momentum to bottom line results despite inflation in packaging, manufacturing and labor costs. Our U.S. coffee segment represents a single-serve ecosystem in which our brewers create a platform for high-quality coffee experiences through our high-margin consumable K-Cup pods. Simply put, we are in the business of selling pods, not brewers. That said, we recognize that the quarter volatility in brewers can sometimes distort the picture. To help you further contextualize brewer trends, we are introducing 2 additional disclosures, trailing 12 months brewers sold and associated growth rates. You saw both of these in our press release this morning. Going forward, while we will continue to disclose quarterly brewer sales and shipments in our 10-Q, we will focus our remarks in this forum as well as in the press release on trailing 12 months strength, which we believe to smooth the inherent quarterly volatility of appliances relative to consumables. Let's now get into the results. In U.S. Coffee, Q1 revenue declined 1.3%, with pricing up 5.3%, but volume mix down 6.6%. The involvement for small appliances was more dynamic than we expected, reflecting the combination of softer discretionary spending and a challenged specialty retailer landscape. These factors primarily impacted brewer shipments, which declined 29% in the quarter. For perspective, Q1 is our seasonally smallest quarter of the year, accounting for less than 20% of brewer shipments. On a trailing 12-month basis, brewer shipments totaled $10.2 million, reflecting a 9.8% decline year-over-year, but a strong growth of 25.6% relative to the pre-pandemic period ending Q1 2019. Our goal of adding an incremental 2 million households in the U.S. in 2023 remains intact. U.S. pod revenues grew 2.9% and pod volumes declined modestly, down 1.9% in quarter 1. This was influenced by consumer mobility that was meaningfully different versus the same time last year when the Omicron surge led to more time spent at home. There are other factors at play in the category such as some elasticity in response to pricing and mix shifts to a more normalized level of premium versus private label exposure. However, we continue to believe that mobility is the largest driver of at-home coffee category softness over the past few quarters. It follows that pod trends should improve in H2 as mobility differences relative to last year begin to dissipate. We continue to expect U.S. coffee volumes in quarter 2 to remain under pressure against the year ago period when we successfully executed our coffee recovery program and rebuilt partner and retail inventories after supply disruptions. Inflation remains a headwind in U.S. Coffee, where segment operating margin contracted 130 basis points in the quarter and segment operating income declined 5.3%. We expect an improvement in the relationship between inflation, pricing and productivity in the back half which provides good visibility to a strong margin recovery in the segment, leading to a year-over-year improvement in gross margin in 2023. In particular, we are refocusing on productivity in 2023 after much of 2022 was focused on prioritizing customer service. I want to revert for a minute to Q1 performance as it would have been reported for the former Coffee Systems segment. Constant currency revenue for Coffee Systems grew 1% in quarter 1 with faster growth in Canada relative to the U.S. Following the segment realignment and reflecting softer-than-expected brewer volume, we now expect U.S. Coffee revenue to grow approximately 1% in 2023 with segment operating income growth of 3% to 4%. This incorporates plans for ongoing marketing reinvestment and the expected back half margin expansion. Our consolidated outlook for KDP in 2023, which I will address in more detail shortly, remains unchanged. Our International segment performance in Q1 was strong and well balanced. Net sales increased 16.7% with net price realization contributing 9 points of growth and volume mix up 7.7% year-over-year. Growth was broad-based and led by LRBs and single sub-pods. The combination of net price realization and productivity gains helped to offset inflationary headwinds and together led to a strong segment operating income growth of 18%. Turning briefly to cash flow. Free cash flow in Q1 was $16 million. This declined relative to last year, reflecting the lapping of certain discrete benefits in Q1 2022, such as the BODYARMOR litigation settlement gain as well as a use of net working capital this quarter. For the full year, we expect the rate of free cash flow conversion to approach our long-term target. This brings us to our consolidated outlook. With Q1 results largely as expected, we continue to expect constant currency net sales to increase 5% in 2023 and adjusted EPS to grow 6% to 7%. We continue to project currency translation to be a 50 basis point headwind to both top and bottom lines. As Bob said, underlying EPS growth is expected to be closer to 9% at the top end of our high single-digit long-term algorithm. This basis removes the noise from year-over-year differences in nonoperational items, which we still expect to roughly half relative to 2022 levels. Despite the recent news headlines about CPI and PPI easing, we continue to see significant cost inflation. Headwinds across realized raw material costs transportation and labor are sticky and persistent, and we still expect mid-single-digit inflation in 2023. We are highly focused on offsetting these pressures through a combination of pricing, revenue growth management and productivity initiatives, and we expect the gap versus inflation to reverse as the year progresses. Our full year guidance for below-the-line items remains unchanged. We expect interest expense in a $465 million to $470 million range, which still includes $45 million related to the Nutrabolt investment. Equity method earnings from Nutrabolt of approximately $40 million to $45 million, an effective tax rate of 22% for the year and approximately 1.42 billion diluted weighted average shares outstanding. As it relates to quarter 2, EPS is expected to grow in the low- to mid-single-digit range. We still expect to have a gap between inflation and pricing and productivity in the quarter with a more beneficial relationship expected to materialize in the back half. Marketing is also expected to increase in quarter 2, reflecting incremental investments across both LRBs and coffee particularly behind the Iced platform in U.S. Coffee that Bob highlighted earlier. To wrap up, our overall Q1 performance tracked largely in line with our expectations, and we remain confident in our ability to navigate the balance of 2023, which promises to remain dynamic. Our recast segments better eliminate the scale of our businesses with distinct and clearly defined growth pillars in place for each segment. Our brand portfolio, renovation and innovation activity and in-market execution remains very strong. We are working diligently to offset inflation and to drive margin improvement later in the year while reinvesting in our brands. And finally, our capital allocation priorities are clear as we look to deploy our strong cash flow against the highest ROI opportunities. I will now turn the call back to Bob for closing comments. Robert Gamgort: Thanks, Sudhanshu. Before moving to Q&A, I want to take a moment to thank Maria who is retiring in July after a distinguished 40-plus-year career. She will remain with KDP as an adviser through year-end. I know that most of you hold Maria in the highest regard, just as we do at KDP where she has been a valued member of the executive leadership team for the last 5 years. Maria and I have worked together for over a decade, spanning 2 companies and countless deals, including an IPO. She has built a very strong corporate affairs team for KDP, and we are pleased that she will stay on as an adviser to support the transition to her successor upon hire. We will all miss working with Maria, and wish her the very best in this next and well-earned chapter. I'll now turn the call over to the operator for questions. Operator: [Operator Instructions]. Our first question comes from Andrea Teixeira from JPMorgan. Andrea Teixeira: So I wanted to go back. Bob, you spoke about like the brewer shipments. And then I understand the volatility that allowed you to change the reporting ways and merging the 2. I was just wondering, embedded in your commentary as well, you spoke about second quarter still being challenging and all the mobility aspects of the category. So if you can talk about a little bit of what are you seeing as we exit the quarter and as you lap the Omicron or [indiscernible] pandemic benefits for the in-house or at-home consumption? And then at the same time, I understand you don't disclose what is out-of-home, but there is some out-of-home component of the pod, so how should we be thinking about that as well as pantry destocking or retail destocking? Robert Gamgort: Yes. Okay, Andrea. Thanks for your questions. It's really 3 components, particularly on brewers now I'll talk about mobility-related pods and then I'll add in the last point about what is the away-from-home business impact on our pods business. So first of all, in brewers, let me -- I always need to go back and say what we said essentially every quarter is, we don't see brewer sales as a good predictor of household penetration, and our primary focus is driving household penetration. And just so we're clear, we said that in quarters where brewers were plus 60% or plus 35%, we felt the same way. There is an inherent volatility in selling small appliances that is fundamentally different than selling consumables. And that's why looking at out on a quarter-by-quarter basis makes that metric even less helpful. And if you look at this quarter in particular, you're seeing a lot of disruption in retail. I'm thinking about one of our original retailers for the Keurig business actually went bankrupt. So there's movement in inventory, there's movement across retail channels on the brewer side, so it's particularly volatile. Having said that, we don't believe it impacts household penetration. Just for perspective, we sell about 10 million brewers per year, and we add 2 million households. So there's a significant difference there that is representative of upgrades or replacement. And that's the piece that I think people always forget. The reason that we're talking about brewers on a rolling 12-month basis -- trailing 12-month basis because that at least take some of the noise out of it and gives an accurate picture. But of course, we didn't change the metric. We're just talking about that, and we're still reporting the quarterly metric as well. So we'll give you both. With regard to mobility, that has been the single biggest driver of at-home coffee consumption. And as we've talked about on the last call and still true today, we're seeing the exact same trend globally. As it stands right now, mobility, the run rate, if you want to think about it that way, on mobility is pretty steady. And what's happening now is we begin to lap year-ago numbers that also are more normal that will happen in the back half of the year. And we've been saying that for a while. Everything seems to be on track for that. And other people around the globe who are in the coffee business are seeing the same kind of trends and saying the same thing. So I think there's a common view of what's happened with the consumer. The biggest driver of consumption of coffee at home is time spent at home. It's that simple. And so that's what we're seeing happening right now. And with regard to away from home, when you see the total pod number, as you point out, it's a combination of at-home and away-from-home. And a lot of people do that calculation for attachment rate and they divide the total pod number divided by the number of brewers, that embeds the away-from-home number, which is really nothing to do with an attachment rate. That at-home business, which was down almost gone in the early days of COVID, has rebounded, but we think it is lower -- it is clearly lower than pre-COVID. And we think that's the way it's going to stay for a while. So I don't think there's good news to come on that away from home. I also don't think there's bad news to come. I think it's pretty stable right now, but it has been a significant drag on the business over the past couple of years. But it is on a -- if you were to calculate that and its impact on the attachment rate I described, it would give the impression that attachment rate is down just simply because away-from-home in total was smaller than it once was. Operator: The next question comes from Bryan Spillane from Bank of America. Bryan Spillane: Maria, congratulations. It's been a pleasure working with you. You'll definitely be missed. Maria Sceppaguercio: That's so nice, Bryan. Look forward to seeing you soon. Bryan Spillane: Okay. I guess you stayed for more than just a cup of coffee. Robert Gamgort: We'll wait for that. Bryan Spillane: You teed it up. So actually, my question is for Sudhanshu and just around your comments around cash flow. The tables -- working capital was a pretty negative swing in the first quarter. And I think it's -- if you can clarify for this, that this is partly just reducing the size of your factoring program? So a, if you can confirm that? And then the second is just how you get to approaching, I guess, 100% free cash flow conversion because you're starting from a pretty big hole in the first quarter? So I guess if you can kind of clarify how close you think you get to the long-term target? And again, just kind of how that evolves over the course of the year, given the impact on cash from operations in the first quarter? Sudhanshu Priyadarshi: Bryan, it's a great question. So you see Q1 operating cash flow is down versus a year ago, but last year, we had a lot of one-off items. So it's lower, mainly driven by those things, but also there is some timing of supply chain financing, we call it factoring. And this program was great in the beginning when interest rate was low, but we have a lot of options of our cash. You saw our leverage target is 2x to 2.5x. So we make the right optimal financial decision, whether it's interest rate, factoring also takes care of some interest rate is impact our P&L. So we're making a lot of those decisions. Those are dynamic. But when I sit today, I still expect that we should be pretty close to our long-term target of cash conversion. I don't see an issue here right now, but we will be making these like dynamic trade-off decisions every month, every quarter, and we will update you more if we see something different. Operator: The next question comes from Lauren Lieberman from Barclays. Lauren Lieberman: Very much appreciate the conversation I'm trying to effectively almost smooth out the conversation on brewer sales in particular and also on pods across multiple quarters. But I was wondering why the comparison is being made to trailing 12 months ending the March quarter of '19 because that's basically comparing to 2018?. I wouldn't think that with the pandemic starting as it did that there was any big real acceleration in shipments. There may have been takeaway at retail, but shipments wouldn't have changed very much in those last weeks of March 2020. So why compare it to effectively 2018 rather than to 2019? Sudhanshu Priyadarshi: Lauren, this is Sudhanshu. The reason we did it to give you a more clear picture. In Q1 2020, you'll see the China started having locked down and then we saw the late March, there was some retail. So it was more to give you the visibility, but we -- that's the reason we did it. It's more because Q1 2020 had more noise. So we just wanted to have a pre-COVID number. But we'll continue to give you a trailing 12 months decline. As you can see, this time, we declined 9.8%. So you will always have these metrics, but that's the reason because Q1 2020 had some noise, so we just wanted to be more clean. Robert Gamgort: Yes. And just to build on that one, but one of the points is if you take a look at how we're expecting sales for brewers to play out in 2023, it's going to be up nicely versus 2019 or you could pick a date prior to 2019, all of which were years in which we added 2 million or more households. So one of the points we're trying to make on this is there were a number of upgrades and replacements that were accelerated during the pandemic cycle. You'd people spending more time at home, people were spending money on their home and also there was government subsidies as well. But if you're -- if in the end, we sell brewers as part of household penetration -- actually, the household penetration is what drives brewer sales primarily. And if you go back and you check '19, '18, '17, the 2023 numbers no matter how you look at it, are going to be up nicely versus that. And we added 2 million households in all of those years. And that's the point we're trying to make. Operator: The next question comes from Chris Carey from Wells Fargo. Christopher Carey: Can you just comment on the coffee margin in the quarter, just given the volume decline I actually think it came in a little bit better? What are some of the drivers? What are you seeing from commodity inflation? What are you seeing from transportation? What are you seeing from volume deleverage in the quarter? And then also, what are you seeing from a productivity standpoint? This is a key kind of debate for investors. And again, I just want to understand some of the components that came in, in Q1 and maybe helping build confidence on what you expect for the full year, including the back half recovery? Sudhanshu Priyadarshi: So Chris, there are 3 things that impacted in Q1. One was there's a narrowed gap between pricing and inflation. There was mix between pod and also the brewer sales. If you see brewer declined 29%, so it helps the margin and productivity benefit was there too, but that will ramp up more towards the second half. So if you look at our U.S. Coffee guidance, we said roughly 1% top line growth and 3% to 4% profit growth. So you're seeing those leverage will come more. It will be more second half but we believe that the margin improvement driven by relationship improving between inflation and pricing, productivity and mix will help us deliver the full year number. So Q1, all those things impacted, but you will see this benefit move in the second half. Operator: The next question comes from Steve Powers from Deutsche Bank. Steve Powers: Great. So on the resegmentation, I think I definitely appreciate the simplicity of it. And I think over time, it will become shorthand for all of us. And I think the incremental disclosures you spoke to on or have been speaking to on Coffee Systems pods versus brewers will help. I guess as I'm thinking about it, my question is really on the restructuring of beverages side because the historical -- I mean just the economic differences, both revenue mix implications and margin mix implications of the former beverage concentrates versus packaged beverages business. I think there's a big spread there. So as you're talking about that business going forward, we're thinking about forecasting that business going forward. How should we think about that? What information may be in the Qs and Ks going forward that will help us kind of tease out those potential mix implications? Is really, I'm just trying to think through that. And also on refreshment beverages because I don't know if you're going to give this or not, but just the neutral contribution to growth in the quarter and expected over the year just so we can frame sort of the underlying versus the all-in revenue growth? Sudhanshu Priyadarshi: So Steve, this is Sudhanshu. The reason we did this resegmentation, we didn't do it since we merged. When we merged, we were running the business the same way. But internally, this is our second chapter of KDP growth and we run the business, U.S. refreshment beverages, U.S. Coffee and International, so that's the region we're required to report results to you the way we run the business. We also feel that U.S. Coffee will give -- people will get a lot more visibility because we talk about 2 million households, people look at IRI and channel data. So it will help more clarification and people can relate to what internal numbers and external numbers are. Regarding refreshment beverages, you have the 3-year -- the 3-year margin and sales. So you can see from there that we will continue to disclose the key drivers of that performance. But that's the way we run the business. It's U.S.-focused. We're also taking noise from ForEx, we're taking noise from -- before it was Canada and U.S. combined. So a lot of those things will help you simplify it, and we will aid you if you have any questions on building your model. Nutrabolt this quarter was minimum is help us. But for the year, as we say, depending on the interest rate we pay, interest cost and also the equity pickup we will take, it's marginal. It will see more improvement or accretion to our EPS in 2024. Operator: The next question comes from Brett Cooper from Consumer Edge Research. Brett Cooper: Congrats to Maria as well. A question for you on distribution system. There's been a lot of change in the marketplace. And I think you're in a unique position given that your nondistributed volume goes through Coke, close to Pepsi route to market. And given that perspective, I was hoping you could offer your thoughts on the potential for distribution relationships and partnerships as a means to enhance scale capabilities and economics and then obviously, ultimately, brand performance in the years to come? Robert Gamgort: Yes. Brett, just to clarify for everyone, the -- a portion of our Dr Pepper volume goes through Coke and Pepsi as well as our own trucks and then some other brands like Schweppes and Crush. Outside of those brands, everything goes through our distribution system, and we cover about 75% of the U.S. population. And then the rest of that is covered by a network of independent operators, most of whom we've had long-term relationships with. And so we have always stated that we want to be a catalyst for consolidation on the distribution side of the business. We think it is what retailers are going to want over time. We believe it's highly cost efficient. We also think from an environmental impact, taking miles off the road is a smart thing to do. Our way of doing that has been to consolidate overlapping territories where our company-owned routes match up against independent operators. And we've done about 25 transactions over the past couple of years to make that happen. We think that consolidation will continue over time. We think that there is all the macro drivers that we just talked about and we stand ready and are driving our role as a catalyst to continue to make that happen. So, a lot more to come there. Operator: Our next question comes from Kevin Grundy from Jefferies. Kevin Grundy: Great. I want to send my congratulations to Maria as well. I want to come back to Nutrabolt, and the C4 brand, Bob, you said it pretty bullish, both near term and long term. A few questions related to that. Just 1 maybe comment on how quickly you think you can ramp that brand from a distribution perspective? Some color on the spring, shelf space resets and where you think that brand is possibly gaining share? And then Sudhanshu, to follow up on Steve's question, I think there would be some interest in the revenue contribution. I think the guidance for equity earnings is helpful, but the revenue contribution on the distribution agreement that would have gone through the PB segment, is that something you want to provide with respect both to the quarter and to the full year in terms of what's embedded in your outlook? Robert Gamgort: Early days on C4. We're in the mode of transitioning from their current distribution system into ours. I can tell you that that's gone very smoothly so far. And if you look at the syndicated data, you can see that the points of distribution are on the rise, which is really what our initial objective is. And it's more than just the quantitative increase in distribution. It's also the qualitative increase in terms of quality of placements, distribution -- I mean, on merchandising and placements. So all of that is very much going on track. And the good news is you'll be able to track our progress on both the distribution gain and you'll be able to monitor velocities through syndicated data. So you'll be able to track our progress. You want to talk about the growth contribution? Sudhanshu Priyadarshi: Yes, Kevin. So the C4 contributed to volume in U.S. refreshment beverages in Q1 and which we expect to continue for the full year. But the similar to other distribution partnership, we are not quantifying the top line contribution. As Bob said, we will call this out as a driver and you can track our performance in the scanner data. It is a very small -- if you look at our $8 billion U.S. refreshment beverages, it's a very small. But we'll call that as a driver for you. And then once it becomes big enough to really meaningfully impact our revenue and profit, we will start thinking on how do we disclose it. Operator: Our next question comes from Bonnie Herzog from Goldman Sachs. Bonnie Herzog: I just had a couple of questions on your U.S. Coffee segment. Bob, I understand your point about brewer volumes versus household penetration. But I guess I'm trying to understand your expectations for brewer volume this year, especially that's a pretty big driver of your top line as well as impacts on margins since they're just slightly profitable. So how should we think about brewer volumes for the year, especially given how elevated your inventory levels still are? I mean is it fair to assume your volumes will likely now be down more than you originally thought? And then, I guess, if so, is that also a key driver of why you're expecting margin expansion in the second half? Any color there would be appreciated. Robert Gamgort: Sure. Sure. On our last call, we set the expectation for 2023 that brewers would be down modestly. When you take a look at it on a trailing 12-month basis, you see those kind of trends that we described here, down 9.8%. This quarter, as we said in the prepared remarks, was softer than expected. And I don't take a look at any one of these quarters and project it as a long-term trend. And there's a lot of volatility in this quarter compared to a normal quarter, which is -- which has volatility. And part of that, as we talked about is retail disruption with regard to some of the specialty retailers being really challenging and one of them going bankrupt. Having said that, other retailers will pick up the consumer slack and the consumer demand. And we will certainly be there in all those retailers. We have distribution everywhere. And a lot of this is moving online where we are very, very strong. And so as I said before, just like in quarters, we're plus 60%. We said don't project this quarter out anywhere that's the inherent volatility. I'm saying the same thing about this quarter. With regard to brewers, I mean inventory, it's not an issue from our standpoint. We managed that very, very well. So it's not a negative. And with regard to second half margins, expected reduction of brewers is not a driver of our margin assumption in the back half of the year, that's not built into any of our assumptions. Operator: The next question comes from Peter Grom from UBS. Peter Grom: Maria, congrats as well. Maybe just two questions on coffee, maybe 1 just housekeeping. Bob, you mentioned Bed Bath & Beyond, how impactful is that to the business? I'm assuming it's embedded in the outlook, but just wanted to understand if there's something we need to think through as we model the growth from here? And then I guess I just wanted to follow up on Chris' earlier question around operating margin in coffee, but more from a long-term recovery perspective. I understand you expect improvement in the back half of the year. But how would you frame the long-term opportunity? And maybe more specifically, how quickly can you get back to operating margin in kind of the mid- to high 30% range? Robert Gamgort: Yes. I mean the disruption from any particular retailer is not a major factor over the long term. The consumer demand remains. They just shift their demand to other retailers. And I said before, we have great relationships and great availability across the board, including e-commerce. We always try to work with retailers even when they're challenged. And so in a given quarter, it caused some disruption based on shipments versus a year ago, et cetera. But like I said, it has no impact on household penetration nor does it have any impact on the long-term outlook that we have or even the annual outlook that we have. With regard to margins, Sudhanshu gave you the reasons why margin was on the right trajectory. If you continue to look forward, I'll give you a couple of factors. One is the narrowing of pricing versus inflation as we talked about on our contracts with our partners. We have long-term contracts. We said a number of times that there is a lag in being able to secure the pricing versus inflation. So as time goes forward, we're able to do that. And the other part that we talked about is productivity. Productivity, a year ago when we were in a supply chain rebuild mode, was a very, very low focus for us back there's no focus. We were just trying to get supply out there to rebuild inventories. Now that we're way ahead of the game from a manufacturing standpoint, it allows us to focus on productivity. And then, of course, we talked about big structural productivity projects like Spartanburg, and we said that we view that -- it's been a delay, which has been challenging in the past 12 months and currently. But as you look forward to think of that one as deferred productivity still to come. So again, this is all about the narrowing of our cost structure, which is inflation minus productivity versus pricing and they continue to get more favorable as we move forward. Operator: Our last question comes from Rob Ottenstein from Evercore. Robert Ottenstein: First, just a point of clarification, then my real question. The clarification is, I just want to make sure I heard it right, that the pod sales in the second quarter will be affected by Omicron last year? And please remind me on the guidance on that. And then the main question is, wondering if you could give us an update on your digital initiatives and e-commerce? Robert Gamgort: Sure. Just to clarify on the pod conversation. The primary driver of pod volume is the mobility. And it's -- as I said before, time spent at home is the biggest driver of coffee consumed that no big surprise there, but it's a very direct relationship there. The run rate that we're seeing on mobility is relatively stable over the past couple of months, and we continue to expect that going forward. It's the lap versus year ago that becomes more neutral/favorable as you get to the second half of the year. And that's why we're saying in the second half of the year for all forms of adult coffee would look better on a volume perspective. The unique element in your comparison to Q2, in addition to the mobility comparison, is we were rebuilding inventory after the late -- it was Q4, Q1 supply chain issue. And so we outshipped ourselves in the second quarter of last year. And we were really clear when that happened and that was the rebuild of inventory. So that's why when we talk about Q2 being more challenged on a comparison basis, it's the combination of still the rebound in the mobility versus a year ago with this unique situation in Q2, which is the inventory build. With regard to digital, we don't have a lot of time to talk about that right now. I mean I think it's a conversation for another day. We have initiatives across the board in terms of the way that we plan and run the business as well as the way that we identify and optimize our consumer marketing. With regard to direct-to-consumer, we are -- we've talked before that we believe we are one of, if not the leader, in -- certainly in the food and beverage world in terms of direct consumer sales. And the technology that we continue to build on the Keurig side of the business, which is the connected brewers with the ability to understand consumption on a real-time basis, translating that into a smart auto reorder program is very exciting as we continue to move forward and build the number of households that have a smart brewer. So a lot more conversation on that point to come. I can't really do it justice in this period of time, but appreciate the question. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Jane Gelfand for any closing remarks. Jane Gelfand: Thank you, Jason, and thank you, everyone, for joining us on a busy morning. The IR team is available to answer any questions you may have. So please do reach out. Thank you again. Operator: Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Keurig Dr Pepper’s Earnings Call for the Fourth Quarter and Full-Year of 2022. This conference call is being recorded and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper’s Chief Corporate Affairs Officer, Maria Sceppaguercio. Ms. Sceppaguercio, please go ahead. Maria Sceppaguercio: Thank you. And hello everyone. Earlier this morning we issued a press release for the fourth quarter. Consistent with previous quarters, we’ll be discussing our performance on an adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability and the use of constant currency growth rates are not in accordance with GAAP. We believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation tables included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company’s control, we do not reconcile our guidance. Today, we will also speak to the concept of underlying performance, which removes the impact of previously disclosed non-operational items. In ’22, these items included gains on asset sale leasebacks, reimbursement of litigation expenses related to BodyArmor, a business interruption insurance recovery and a change in accounting policy for stock compensation. Here with us today to discuss our results are KDP Chairman and CEO, Bob Gamgort, and our Chief Financial Officer, Sudhanshu Priyadarshi. Also with us this morning is the IR team, including Jane Gelfand, who we are excited to welcome this week as our new Vice President of Investor Relations and Strategic Initiatives. I'm confident that many of you know Jane from her time on the street, as well as her most recent role at Wayfair, where she led a number of finance functions including Investor Relations and Treasury. Jane is replacing Steve Alexander, who after more than 16 successful years in finance, commercial and IR with KDP and predecessor companies has decided to take some time off for family and travel. We are pleased that Steve has agreed to stay on to April to support the transition. And finally, our discussion this morning may include forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. With that, I'll hand it over to Bob. Robert Gamgort: Thanks, Maria, and good morning, everyone. In 2022, we continue to advance our vision of a modern beverage company by expanding our portfolio to reach more beverage consumers, needs and occasions and by enhancing our unique selling and after-market capabilities to make our brands available at every point of sale. Our full-year financial results were in line with or above our guidance with revenue growing by 11% and adjusted diluted EPS expanding by 5%. Since our Q3 earnings call, we had the opportunity to engage with many of you twice. First, at our early December in- person event, where you met the KDP Management Team and Board of Directors, and again, on our mid -December fireside chat, during which we discussed our investment in Nutrabolt, including the distribution agreement for C4 and answer questions regarding recent trends in the categories in which we compete. Those conversations provided us with a good sense of what's top of mind with our investors, which we will build upon during today's call. I'll start by providing perspective on the macro and category environments we faced in 2022, discuss how we created shareholder value over the past year and offer thoughts on how we see 2023 shaping up both in terms of the macro environment and our strategy to continue winning. Sudhanshu will follow me with specifics on our Q4 and full-year 2022 results, provide more detailed guidance on key metrics for 2023, and discuss the evolution of our capital allocation policy. While it seems like a long time ago, we started 2022 with the lingering effects of supply chain disruption, primarily driven by a final COVID wave that reduced labor availability in late 2021 and early 2022. We felt that impact most acutely in our coffee business where strong 2021 consumer demand had depleted our inventories and in our still beverage portfolio where we faced a range of supply shortages. We implemented supply recovery programs that yielded strong customer service improvements with replenished inventory levels. By Q2, our concerns around COVID and supply chain disruptions were quickly supplanted by industry inflation in ingredients and materials, labor, and transportation. That was outpacing significant pricing. Velocity held up well in the categories in which we compete, which enabled strong revenue growth, driven by both the higher pricing and increased volume, but came at lower margins. Store perspective, we faced total cost inflation in 2022 of 16% far above our expectations going into the year. And we implemented pricing actions across our portfolio that averaged in the low double-digits. Pricing realization was strong and accelerated throughout the year. Yet it consistently lagged the timing of the escalating inflationary impact on our P&L. As we approach the end of the year and enter 2023, we became more focused on the potential impact a recession on our consumers, despite seeing minimal evidence of changing behavior to-date. We are monitoring consumer behavior closely and are taking proactive steps to ensure our brand strength continues into 2023 and beyond. Of course, the wide range of challenges of 2022 is a continuation of the rolling set of obstacles we have navigated since the onset of COVID in 2020. In this context, we have discussed the benefits of our all-weather business model. This is more than a punchy sound bite; it reflects our ability to manage our broad portfolio in unique routes to market to deliver strong and consistent shareholder returns in an unpredictable and changing environment as we did in 2022 and every year since forming KDP in 2018. In addition to delivering our ambitious financial commitments over the past five years, we've also been immersed in an integration and transformation process that created a modern beverage company that today can consistently deliver attractive, high quality, dependable returns with a well-capitalized balance sheet. Toward that end, we have evolved our capital allocation policy to reflect that of a more mature KDP and to be contemporary with a changing macro environment marked by rising interest rates. During the integration and transformation stage, we had a strong focus on rapid deleveraging. Using all available levers available to us, while still investing in building our capabilities and brands. We took advantage of compelling opportunities to monetize non-strategic assets through sale leaseback transactions, which enabled us to simultaneously invest, delever and drive strong returns for our shareholders. As we shift from integration and transformation to activation, we are planning for a step change reduction in the use of non-operational benefits starting this year. That means our underlying operational growth will exceed our adjusted growth in 2023. Of course, our guidance will continue to be for adjusted metrics and we will report results on the same basis we've always done. But we will also highlight operational performance from time-to-time to provide you with a better sense of the underlying strength of our business. Strong cash flow remains a hallmark of KDP. As we discussed in December, we plan to deploy our cash to improve our long-term targeted leverage ratio to 2.5 times or below. While still funding strategic growth projects, and attractive return of cash to shareholders. With the learnings from 2022 in mind, I'll shift to a discussion of our 2023 outlook. Starting with the most pressing industry topic from last year, inflation. Our plan assumes the rate of inflation will moderate to the mid-single-digit range, that translates to a cumulative inflation rate of approximately 30% over the past three years clearly unprecedented in our lifetime. Regarding the inflation outlook for 2023, recent spot price declines of key inputs might lead some to believe this could be industry deflation. The reality is we don't buy on a spot basis and the underlying commodity cost doesn't reflect the total delivered cost to us. Such is certainly the case in coffee where seed prices dropped in late 2022. However, the differential, which includes everything in our fully landed coffee costs, such as broker fees, sea freight and premium coffee up charges was up meaningfully. Labor is another area in which we're continuing to see persistent inflation. To offset the continued impact of inflation, we have upped our game in productivity, reduced our discretionary costs and increased pricing. The realization of 2022 pricing actions will continue to flow into our P&L during 2023. And in some areas, where continued inflation impacts are not yet fully covered by pricing. We've implemented additional revenue growth management actions to address key margin gaps. The combination of moderating inflation and continued pricing realization means that we expect year-over-year improvement in gross margin in 2023, but not yet returning to 2019 levels. With higher gross margins in view for 2023, the conversation shift the demand. A key focus point for us in 2023 is the financial health of American consumers and its impact on price elasticity for the categories in which we compete. Therefore, we believe it's prudent to expect that lower, but still positive of year-over-year pricing realization combined with modest elasticities will yield KDP net revenue growth of approximately 5% in 2023. It's also important to be proactive in ensuring the continued strength of our brands by increasing our investment in growth in 2023. As we are all aware, industry marketing budgets were reduced during COVID and many haven’t yet been fully restored. While we have learned to be significantly more efficient with our brand spending, 2023 is the right time to increase our absolute investment behind key segments and brands, as well as the support a strong lineup of innovation. The improvement in our gross margin combined with 5% revenue growth will enable us to deliver year-over-year improvement in operating income growth. Even with our increased brand investments and the headwind of comping significant non-operational benefits in 2022. Taking all of the macro and company specific factors discussed this morning into account, we expect adjusted EPS for 2023 to grow by 6% to 7%. Removing the impact of previously disclosed non-operational items from 2022 implies adjusted EPS growth that is toward the high end of our long-term algorithm. Our expectation for continued strong value creation in 2023 is rooted in the success of our unique and flexible business strategy over the past five years. In cold beverage, our focus is on driving growth. First in core brands through marketing, brand renovation and continued strong end market execution. In 2022, we continue to build upon or hold the significant share gains we achieved over the past few years in total liquid refreshment beverages and key segments such as CSDs and premium water. Second, by filling white space in our portfolio through innovation and partnerships such as our strategic relationship with Nutrabolt for C4 Energy and our Red Bull agreement in Mexico, as well as our expansion into new platforms such as non0alcohol beer with our investment in athletic brewing and better for you drinks in foodservice through our partnership with Tractor Beverage. Third, by enhancing the effectiveness of our omnichannel selling and distribution system, including e-commerce, where we are one of the food and beverage leaders, and our company owned direct store distribution system. Over the past several years, we have built a stronger direct to market -- direct route to market capability through investment in capabilities and tools and acquiring key DSD distributor territories, all of which have driven consistently strong market share performance across our brands and segments. In coffee systems, we are focused on growth. First, by driving household penetration growth for the Keurig system every year. Given the large number of remaining addressable households, we have line of sight to continued household growth well into the future. As we enter 2023, we have built the U.S. installed base of 38 million households, which along with our installed base in Canada consumed more than 13 billion cups of coffee manufactured by KDP annually. Second, by expanding the roster of coffee partners in the Keurig system. 2022, we welcomed back community coffee and added new brands such as BLK & Bold, the first black-owned nationally distributed coffee brand and Intelligentsia, one of specialty coffee's most pioneering and innovative brands. Third, by creating new platforms to drive incremental revenue and profit growth from existing Keurig households such as connected brewers and new beverage formats and occasions. In 2022, we expanded our lineup of connected brewers with the introduction of K -Café Smart, which has received outstanding consumer and professional reviews, expanded the Keurig app, which works with both connected and non-connected brewers to help consumers make barista quality specialty coffee beverages at home and expanded availability of our Keurig’s Slim + ICED brewer and expanded our brew over iced pods. In 2023, iced will be a significant focus area procuring with expanded K-Ice machines and pods supported by dedicated marketing and focused retailer support. And finally, KDP's extraordinary free cash flow enables the potential for incremental shareholder returns through strategic capital allocation including M&A and partnerships, opportunistic share repurchases and growing our dividend within our stated payout ratio of 45% of free cash flow. With that as important context, I'll hand it over to Sudhanshu to discuss 2022 results and our 2023 outlook in more depth. Sudhanshu Priyadarshi: Thanks, Bob, and good morning, everyone. I joined the company three months ago, because I believed KDP represented a unique investment and value creating opportunity and my conviction has grown significantly as I’ve targeted to understand the business better. This conviction will be reflected in my perspective on our 2022 results, the important learnings as we look back on the year and the implications for 2023. Starting with coffee systems, before jumping into specific numbers, I'd like to share my perspective on the coffee category. Coffee is an attractive long-term growth category. KDP operates primarily in the at home coffee segment in the U.S. and Canada where we are the industry leader. The at home segment comprises the vast majority of all coffee drinking occasions and single serve is the clear winner, consistently growing share of at home occasions. There has been significant noise between 2019 and 2022 in both the at home and away from home coffee categories, primarily due to shifting consumer mobility and we acknowledge that it has been a challenge for investors to separate the signal from that noise. After significant at home coffee volume growth in 2020 and 2021, due to increased consumer time spent at home, we began to see a deceleration in 2022. This occurred globally in all forms of at home coffee, which is quite unprecedented. There are several factors at play causing this concurrent decline. We believe the primary contributors are a reduction in time spent at home for consumers, which we know correlates with coffee consumption as the elasticity impact of significant pricing actions taken in 2022. Specific to the U.S. consistent with the global trends, volume for the total at home coffee category decreased 6% in IRI with all major forms declining, including bags, cans and single serve. However, single serve coffee outperformed, enabling it to gain share of total at home coffee consumption. KDP's owned and licensed brands demonstrated selective strength in 2022, despite having among the highest price increases in the single sub-segment. With the fourth quarter, representing its highest share position since before COVID. Driving its strength by the strong innovation that originated with consumers and reinstated promotions in the second half as parts supply was restored. We saw a similar trend at play in coffee brewers in the U.S., where smaller plants volume were challenged in 2022 comping against growth in 2020 and 2021 that was primarily fueled by time at home, as well as in part by stimulus checks. Although not immune from this dynamic, curate compatible brewers also gain a share of all coffee makers in 2022. Moving to the financials. For the year, the segment grew net sales 6.2% with pricing up 7% and volume mix down 0.8%. Product revenue also advanced 6.2%, reflecting the benefit of pricing and a 1.4% increase in volume. Brewer volume declined 5.2% in 2022 comping the double-digit growth we have experienced each year since the onset of COVID. As you know, our goal is not brewer sales, but rather household penetration and we added more than 2 million new households to the Keurig system in 2022 modestly above our long-term annual target. Innovation is a key driver of household penetration and we are pleased with the performance of our 2022 brewer innovation slate and excited about what's coming in 2023. While top line growth in profit systems was solid, the challenge in 2022 was operating income which declined 7.5% as inflation exceeded, net realized pricing compressing margins. We expect an improvement in the relationship between inflation and pricing going forward, leading to a year-over-year improvement in gross margin in 2023. But specifically, our 2023 outlook projects KDP coffee systems to deliver 3% to 4% net sales growth and 5% to 7% operating income growth. Removing the impact of non-operational items in 2022, this implies higher coffee systems operating income growth in 2023. We expect a strong recovery in margins, reflecting the strength of KDP's owned and licensed brands and a favorable relationship between pricing and inflation, particularly in the second half of the year, which will be significantly stronger than the first half. While the Keurig system is unique, its scale of $5 billion in net sales and OI margins above 30% are consistent with a best-in -class CPG business. While we continue to manage the business to drive household growth and extract incremental value from our existing installed base, I think it makes sense to access coffee systems using the same conventional metrics as you would any other CPG business. That translates into net sales and operating income performance, the outlook for which we are sharing with you today for the year ahead. Our 2023 outlook reflects the following factors that we believe are most relevant to consider. First, while mobility has recovered significantly from 2020 lows, it still remains below pre-COVID levels and we expect its continued recovery in 2023 to represent a headwind for at home coffee consumption especially in the past half. Second, the industry's pricing actions taken in 2022 will have a carryover benefit in the first half of 2023, which will have a modest negative impact on volumes. As discussed, total at home coffee volumes declined during 2022 and these category trends have continued in early 2023, although single serve importantly continues to outperform. Third, we see a rapidly evolving retail environment for small appliances with challenges in key mass and department and as specifically retailers impacting the availability of our brewers. We are targeting alternative channels such as e-commerce to pick up the slack. However, we believe, is reasonable to expect a modest decline in curate brewer shipments year-over-year in 2023. These factors, which will have an influence on 2023 results, in no way alter our bullish long-term outlook for the coffee category or our expected outperformance for the single serve format. Turning now to our cold beverage business, which performed very well in 2022 and enters 2023 with strong momentum. Beverage Concentrate had an exceptional year in 2022. Net sales grew 16.4% with net pricing up 14.7% and volume mix up 1.7%. Dr Pepper brand drove the performance largely reflecting the expansion of Dr Pepper Zero Sugar and a strong in-market support. Dr Pepper zero sugar retail dollars in volumes each grew in the strong double-digits during 2022, outpacing the Zero Sugar segment, reflecting net price realization, strong velocity growth and incremental distribution gains. Beverage Concentrates adjusted operating income grew 16.9%. This reflected the favorable relationship between pricing and inflation as the shared benefit of bottler pricing actions was only minimally offset by inflation given the margin structure of the business. During the year, we also benefited from the opening of our Newbridge Ireland concentrate facility, which represented a dual source of concentrate manufacturing for KDP. The new facility had a smooth and successful start-up in 2022. Looking ahead to 2023, we continue to be excited about the beverage concentrates business particularly given our strong innovation offerings, including the first quarter launch of Dr Pepper Strawberries and Cream. We expect the segment to post operating income growth in 2023 that moderates versus a strong 17% growth achieved in 2022. This reflects our expectation for a reduced benefit of pricing in response to the expected lower level of year-over-year inflation. Continuing with packaged beverages for the year, we grew net sales 12.4%, with pricing up a strong 12.1% and volume mix up 0.3%. Elasticities for the business remain modest due to the strength of our brand portfolio. This strength is most evident in our in-market performance where we gained share in categories, representing 92% of our U.S. retail sales pace, leading to expansion of our total LRB share. We are pleased with our strong ongoing in-market execution, which has enabled us to maintain the cumulative share gains achieved in CSDs, since 2019 and continue to strengthen our number two share position in premium water driven by significant growth of core hydration, polar and Vita Coco. Our partnership with Polar is a great example of our win-win partnership approach as Polar is now the number two national sparkling water brand in the grocery channel and is gaining ground in all other channels. In the juice category, Mott's continued to be a standout, driving double-digit growth in both pricing and volume for the year and gaining an impressive 3.6 share points in a category in which its primary competitor is private label. Adjusted operating income for packaged beverages grew 1.2% in 2022, as our strong net sales growth and productivity were largely offset by inflation, as well as a negative year-over-year non-operational competition. Similar to Coffee Systems, adjusted operating margin for packaged beverages compressed for the year due to the timing disconnect between inflation and pricing despite our ability to realize more pricing in core beverages than in coffee systems. Importantly, packaged beverages exited the year with strong underlying momentum. Turning to 2023. We expect a strong net sales growth for packaged beverages that moderate versus the 12% growth in 2022 as the impact from carryover and select new pricing actions is expected to be less significant than the pricing benefit realized in 2022. Net sales will also benefit from our recently announced distribution partnership for C4 energy drinks. The integration is well underway and tracking our plans. Packaged beverages has a strong innovation lineup planned for the year beginning with an active first quarter. In CSDs, the highlight will be the Q1 launch of Dr Pepper Strawberries and Cream, which has garnered a strong consumer response, achieving a 1% share of CSDs in the very early stages of the launch. In addition, we just launched CORE Hydration+, a nutrient enhanced water that offers distinct functional benefits and we are launching a new variety for our highly incremental Snapple elements line in March. We plan to increase marketing investments to support the core business and this new innovation. Packaged Beverages operating income is expected to be strong in 2023 with margin expanding, due to a better relationship between pricing and inflation and we expect the segment's underlying performance to be even stronger, driven by gross margin expansion, partially offset by marketing investments. Ending with Latin America beverages. Latin America Beverages had another outstanding year, delivering a strong and balanced net sales growth of 23% with both net pricing and volume mix up significantly. Our performance was led by Peñafiel, which delivered a strong double-digit sales growth and continued to gain share. Clamato was also a standout with double-digit sales growth and a significant increase in market share. Adjusted operating income for the segment grew 18.5% in 2022, reflecting the strong top line growth and productivity that more than offset inflation and a significant increase in marketing investment. In 2023, we expect continued momentum in Latin America Beverages, reflecting strong commercial plans to drive incremental distribution continued a strong in-market performance and our distribution partnership with Red Bull Mexico. Turning briefly to the consolidated results for the fourth quarter which are addressed in detail in our press release. Consolidated net sales grew more than 12%, reflecting higher net pricing and a modest volume/mix decline. Growth was balanced across our portfolio, with all four segments expanding net sales at a double-digit rate in the quarter. Adjusted gross profit advanced almost 11% and gross margin contracted 80 basis points, but improved sequentially on a year-over-year basis. Adjusted operating income grew 13.2% and adjusted operating margin expanded 20 basis points. Adjusted EPS in the quarter grew 11% versus the fourth quarter of 2021 to $0.50. Turning to our 2022 full-year results. Total company net sales grew 11% with growth in both net price and volume mix, reflecting the strength of our portfolio. Adjusted gross profit grew almost 8% and gross margin contracted 170 basis points, due to the timing of pricing and productivity lagging double-digit inflation. Adjusted operating income grew 4%, reflecting a double-digit growth in net sales and a year-over-year benefit from company's strategic asset investment program largely offset by the contraction in gross margin and significant inflation in transportation and warehousing costs. As a result, adjusted operating margin contracted 180 basis points. Adjusted EPS grew 5% to $1.68 for the year, consistent with the guidance. Turning now to our balance sheet, cash flow generation and evolve capital allocation policy. Free cash flow conversion was exceptionally in 2022 at 111%, well ahead of our long-term target of approximately 100%. Operating cash flow totaled $2.8 billion for the year and free cash flow grew to $2.7 billion. Our strong cash flow generation is a powerful value creation tool. As Bob discussed, we evolved our capital education policy to reflect changes in the macro environment. With the interest rate increases over the past year, our hurdle rate for deploying cash has increased, and it is appealing to maintain strong liquidity and ample dry powder. As discussed during our December fireside chat, we believe it makes sense to continue to reduce our leverage over time and had established a long-term management leverage target of 2 times to 2.5 times, which compared to 2.8 times at the end of 2022. From a capital allocation perspective, in addition to internal organic growth investments, our top priority is value-enhancing M&A and strategic partnerships, along with opportunistic share repurchases to return value to shareholders and manage share creep, as well as growing our dividend within our 45% stated payout ratio target. Our focus in 2023 will be the integration and expansion of our 2022 partnerships and investments, so we currently do not expect M&A to represent a significant use of cash in the near-term. Our capital allocation action in 2022 already began to demonstrate our updated priorities. During the course of the year, we invested almost $1 billion in attractive new growth platforms, namely our 30% equity stake in Nutrabolt, the acquisition of AT peak and equity investments in athletic brewing and tractor beverages. We also continued to strengthen our DSD network with a number of territory deals to further increase our scale and effectiveness. At the same time, we returned $1.5 billion to shareholders through our quarterly dividend, which we increased by 6.7% in September, and the opportunistic repurchased of 10.6 million shares. I will close with our outlook for 2023. We expect 2023 constant currency net sales growth of 5% and adjusted EPS growth of 6% to 7%. The later representing a year-over-year growth improvement versus 2022. Foreign currency translation is expected to approximate 0.5-point headwind to both net sales and adjusted EPS growth. Removing the impact of non-operational items, this implies significantly higher adjusted EPS growth. Included in our guidance are the following assumptions: interest expense in the range of $465 million to $470 million, reflecting the rising interest rate environment and including approximately $45 million related to financing the Nutrabolt transaction. Regarding Nutrabolt, we expect some net sales benefit from our distribution agreement for C4 as previously discussed, 2023 is expected to be a transition and investment year for the partnership, and therefore, we are not expecting any material impact on earnings this year. However, we do expect equity method income from our 30% stake in Nutrabolt to approximate $40 million to $45 million, which offsets the Nutrabolt-related interest expense. This equity method income will flow through non-operating other expense and income. The effective tax rate is estimated at approximately 22%. Diluted weighted average shares outstanding are expected to be approximately $1.42 billion. From a timing standpoint, we expect EPS for the first quarter to be roughly even with a year ago, reflecting our belief that Q1 will have the highest rate of inflation, the largest marketing increase and the smallest productivity benefit of the year. Q1 will also be comping significant non-operational benefits in the year ago period. We expect EPS growth to strengthen in the balance of the year as inflation moderates and productivity benefits ramp. I will now turn it over to Bob for closing comments. Robert Gamgort: We formed KDP in 2018 as a pure-play beverage company focused on the North American market. In the U.S. alone, there are 1.2 trillion beverage consumption occasions in play every year. Beyond population growth, that number doesn't change much, nor do the fundamental consumer needs for beverages. What has and will continue to change is which beverage formats consumers choose to satisfy their needs and where consumers purchase their beverages. Compared to 2017, we served an additional 6 billion beverage occasions in 2022 through portfolio innovation, renovation and new partnerships. By executing our concept of a modern beverage company, which reflects our holistic view of all beverage opportunities, we've been able to better satisfy consumer needs, leading to our accelerated growth rate. We remain excited about the significant growth opportunities ahead. In 2023 and beyond, we'll continue to leverage our business model to capture even more of the trillion-plus beverage occasions each year in North America. I'll now turn the call over to the operator for questions. Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Chris Carey at Wells Fargo Securities. Please go ahead. Chris Carey: Hi, good morning. Robert Gamgort: Hey, Chris. Chris Carey: So I just want to clarify one thing than a fundamental question. So clearly, the non-operating adjustments have been a sticking point with investors. I gather from your comments on this earnings call that you're well aware of these dynamics and are making some changes going forward with specifically the guidance range, reflecting potentially the clean base. And so I just -- I kind of wanted to be crystal clear about this. The use of these non-operating contributor. And I appreciate there's an investment offset, but these will be kind of a thing of the past. And we can look at somewhat clean results going forward. Obviously, it was going to be dynamics every quarter, but these sorts of programs will be sort of sunsetted. Is that what I'm hearing? Then I have a fundamental question. Robert Gamgort: Yes. Thanks, Chris. As we mentioned in the prepared remarks, we've been in really an integration and transformation today, since the integration period or since the merger in 2018. That is complete, and we've moved from the integration phase to an activation phase. And so that causes us to think about how we build a company that is contemporary, as I said, with the current environment and also one that is reflective of a more mature KDP that can deliver consistent returns that are reliable by investors over time. So that's why it made sense to use some of these non-operational benefits in the past when we're in a mode of transforming, integrating. We're also delevering and investing heavily in the business. But as we look forward on here, we're making a significant step change in the use of non-operational benefits in 2023 actually beginning in 2023. And we're committed to continue moving in that direction in the future. So I think the most important thing from an investor perspective is that the $1.78 in EPS, which reflects the midpoint of our 2023 guidance is a good, reliable number that could be the focus of valuation. Chris Carey: Okay. Very clear. Just on the expectation for gross margin expansion. I guess, I'm trying to frame that in the context of -- you gave an outlook for inflation and also, you're saying that you're going to be investing into marketing. So something like a mid-single-digit inflation. Is that sort of a COGS and SG&A is the right way to think about that inflation overall and then there'll be marketing on top of that? So that's quite a bit of increase. So I'm just trying to frame the gross margin expansion to need to offset that. So any context there would be helpful. Thanks. Sudhanshu Priyadarshi: Hi, Chris, this is Sudhanshu Priyadarshi. Yes, you're right, we expect a substantial improvement in our gross margin, but it will not go back to 2019 level. But we said before, we would like to invest in marketing. So we will be reinvesting in marketing. So you will not see the flow through from gross margin to OI all the way. You will see some flow-through, but we expect that we should start investing money in our brands, and we talked during our December fire-side chat. So that's our plan. So yes, you're right, gross margins will improve. But we will reinvest in marketing, so you won't see the -- all of them flowing through to OI. Operator: Thank you. And our next question today comes from Bryan Spillane with BoA. Please go ahead. Bryan Spillane: Thanks, operator. Good morning, everyone. Robert Gamgort: Good morning, Bryan. Bryan Spillane: Bob, I guess, hey, so my question was just around Coffee Systems, and I appreciate the perspective you gave on kind of the perspective for ‘23. But can you give us a little bit of -- we're getting a lot of questions about holiday sell-through, both in terms of some of the retail disruption, but just whether consumers are making other choices about small appliances at the holidays? And maybe if you could talk a little bit about in the outlook for this year, how much of the brewer decline do you think has just been -- there's been a bit of a pull forward in the last couple of years. How much of it do you think is disruption at retail? Or how much do you think is just a function of consumers being sensitive about how they're spending their discretionary dollars. Robert Gamgort: Yes. Good question. Let me start with something I said a number of times in the past, especially when we've had quarters where the brewer sales were up significantly, and that is -- we're not in the business of selling brewers. We're in the business of driving household penetration. And while there is a correlation between brewer sales and household penetration, there's not this direct causation that we've talked about a number of times in the past. And what I mean by that is there are three reasons consumers buy brewers. It's a new household. It's a replacement of an existing brewer or it's an upgrade. And so there's a number of factors that you can see brewers sales down, and it has no impact on household penetration, because it means that somebody has delayed an upgrade, for example. So two things to point out in 2022 versus 2021, obviously, in Q4 is we were delivering 3 million new households in 2020 and 2021. So obviously, in 2022 with 2 million households, you would expect to sell fewer brewers. The other part is we have seen a challenged retail environment, and we referred to that in our script, particularly in specialty channels in some mass customers as well. And while we're working with them to continue to drive growth of the whole category and our brewers specifically. We also think it's smart to continue to look for other opportunities to pick up that consumer demand elsewhere, where the consumer demand is moving. A lot of that, as you know, is moving towards e-commerce. Having said all of that, I think your question on consumers making other choices. The reality of it is KDP brewers or cured brewers picked up share of all coffee makers and of small appliances. So it's not a decision to buy something in place as it, but there's clearly been some pressure on small appliances in general. And some of that is the rebound effect post COVID, but some of it is also due to some retail pressure that we described in the prepared remarks. Operator: Thank you. And our next question today comes from Kevin Grundy with Jefferies. Please go ahead. Kevin Grundy: Great. Thanks, good morning, everyone. Bob, just to follow-up on Bryan's question, but very succinctly, as you kind of pull this together, look at household penetration, your confidence in the business, is this -- your Coffee Systems business is the expectation that this grows mid-single-digits longer term. I think that's really important, because it's a key debate for the stock. And then just my follow-up unrelatedly, just on the advertising and marketing increase. Bob, maybe just a little bit more color there on the magnitude of the increased key areas of spend, I think that would be helpful for folks as well. Thank you very much. Robert Gamgort: Sure. As we've talked about our long-term target for household penetration is 2 million households per year. We actually delivered slightly more than that in 2022. We did deliver significantly more than that in the previous two years. All our indications this year is the $2 million is still the right number to assume for household penetration going forward. And your question about mid-single-digits going forward, absolutely where we are. That's what we talked about in the December fireside chat. We gave you the context of the long-term trends. And also, we looked at the first half of the COVID period and then the COVID recovery period. And how there's been some shift between there. But 2 million households and mid-single-digits is still we have in view. Sudhanshu Priyadarshi: Bob, I can take the -- I can take the marketing question. So as we've said, our marketing spending will increase in 2023, but our learnings and marketing returns will decide which brand and how much we spend. So we don't have a top term marketing target, we will watch our brand formal and elasticity during the year, and then we'll make the decision of which brands we invest in. Operator: Thank you. And our next question today comes from Lauren Lieberman with Barclays. Please go ahead. Lauren Lieberman: Great, thanks and good morning. So we want to -- I know we want to look forward and you've talked about plans on non-operating items for next year. But I did want to talk about the gross margin performance in the fourth quarter. Because my understanding had been that the expectation was for gross margin expansion and that kind of went the other way and then we had another sale leaseback gain. So I think it's important for people just to understand what went on with gross margins this quarter when that kind of changed versus an expectation for the things to be improving already. Thanks. Sudhanshu Priyadarshi: So Lauren, this is Sudhanshu. So for Q4 specifically, we saw the pricing -- it continued to build, but still lag inflation, especially in the coffee segment. So that's the other issue. But our full-year inflation for last year was 16% that was higher-than-expected. And as Bob mentioned, during our script. So we've seen that relationship improving, but we did not see that in coffee what we were expecting in Q4. So -- but you're seeing that in relationship between pricing and inflation is improving. And that's the reason we are committed that in 2023, our gross margin will expand. Lauren Lieberman: Okay. And is that going to be a beginning in Q1 do you think? Or is it later in the year that, that starts to kick in? Sudhanshu Priyadarshi: It will be later in the year. As we said, we don't buy on part. So it takes six to nine months to see the price included, but you will see that in the second half. And I talked about that in my prepared remarks. So you will see that in the second half, you will see the improvement in gross margin more as we will see the benefit of commodity deflation -- not deflation, but moderating inflation on commodity. Robert Gamgort: Yes. And look, we have good visibility, obviously, for the early part of the year and what commodity pricing is in the first quarter for -- from a coffee perspective, is where we see the highest inflation and then it improves from there. Operator: Thank you. And our next question today comes from Brett Cooper at Consumer Edge Research. Please go ahead. Brett Cooper: Thanks. Good morning. You've talked about the underutilization of your bottling system. I was hoping to get a sense of how much of a step adding in brands like NutraBolt is to raising that utilization to your desired levels? Or is there more that needs to be done to get to where you want to be? Thanks. Robert Gamgort: Yes. I think what we've talked about in the past is that we have a tremendous asset in our direct store -- company-owned direct store distribution system with significant opportunity to run more high-quality volume through that system. When we do that, you get to then you get the cost benefit, right, because you're leveraging that fixed cost against a higher base. And the second part of it is you improve your effectiveness, because what that allows are higher drop sizes and more frequent store visit. So the area where we've had the biggest opportunity was in C-stores. We're incredibly strong in large outlets, but our C-store business has been one where we have the most opportunity that's heavily driven by the fact that we had a gap in energy. And as you know, energy on a dollar basis is the largest segment within C-stores. So C4 is a significant step in that direction. And it allows us to really increase our scale in the C-store area, which has the benefits I described earlier. And we feel like we're just getting started on that. That business has a tremendous trajectory for growth. And as we talked about before, we feel like we're not done yet in that space or some of the other areas where we have white space in our portfolio. So much more to come there, much more opportunity in front of us. Operator: Thank you. And our next question today comes from Bonnie Herzog with Goldman Sachs. Please go ahead. Bonnie Herzog: Thank you. Good morning. I had a question on your pod volumes, which were a bit weaker than, I guess, expected in the quarter and did decelerate on a three-year stack basis for the full-year. So I guess I wanted to better understand how you're thinking about this? And then your attach rates which are also declining. And I know you touched on this, but just more color there would be helpful. Just here -- I'd love to hear more about the changes you've seen in consumer behavior, sort of, within the home and then ultimately, why you have the confidence that essentially attach rates might actually improve or accelerate this year? Thank you. Robert Gamgort: Yes. Bonnie, what I think is most interesting is if we just take a step back and say, let's look at at-home coffee in total. So we're a leader within at-home coffee, but we participate in this bigger category. I think what's most noteworthy in 2022, is there was a volume decline in all forms of at-home coffee globally, and single-serve actually grew its share of coffee consumption in the U.S. So from our perspective, on a relative basis, single-serve continues to outperform within at-home coffee. But at-home coffee volume decline was about 6% for the year. That's pretty notable. Our biggest -- our belief is that the biggest driver of that is consumer mobility. If you look at the first part of COVID, as we talked about in December, you would see acceleration in attach rates. If you looked at it in the recovery period from COVID, you see a deceleration in attach rates. And what happened, especially in the second half of 2022 is that there was this global slowdown in volume of coffee that's driven, we believe, primarily by mobility, but on a secondary basis, it'd be driven by some elasticity, because there was significant pricing in there. Why do we have confidence in this is because the Keurig System continues to outperform year in and year out within at-home coffee. None of us believe that at-home coffee is a long-term problem. In fact, it has significant tailwinds. This is just an adjustment as people are spending less time at home, more time out of home. We know that the number one driver of at-home coffee consumption is time spent at home. And it's as straightforward as that, and we expect to see the recovery in the category of at-home coffee to occur as mobility improves throughout the year. Bonnie Herzog: Thank you. Operator: Thank you. And ladies and gentlemen, our final question today comes from Filippo Falorni from Citi. Please go ahead. Filippo Falorni: Hey, good morning, guys. On the pricing front, can you talk about how much of your pricing plan for 2023 is carryover pricing from 2022? And how much is new pricing? And then in terms of the new pricing where it's concentrated is it mainly on the beverage side or on the cost side? Are you planning for price increases there as well? Thank you. Robert Gamgort: Yes. The great majority of the pricing that shows up in our 2023 P&L is carryover from 2022, and I'll remind you that we took extensive price actions in 2022, and they did not flow through to the P&L all the way through in ‘22. So that's happening. We did take some additional pricing actions in the early part of ‘23 on our packaged beverage business to close some of the remaining margin gaps. So that will flow through as we move into the remainder of 2023, but that's all that we have planned right now. Operator: Thank you. Ladies and gentlemen, this concludes today's question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks. Maria Sceppaguercio: Hi, everyone. This is Maria. We are around today to take your questions. We'd love to connect with you afterwards if you have any. Feel free to call as usual. Have a good day. Operator: Thank you, ma'am. This concludes today's conference call. And we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Keurig Dr Pepper’s Earnings Call for the Third Quarter of 2022. This conference call is being recorded and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper’s Vice President of Investor Relations, Mr. Steve Alexander. Mr. Alexander, please go ahead. Steve Alexander: Thank you. And hello everyone! Thanks for joining us. Earlier this morning we issued our press release for the third quarter of 2022. If you need a copy you can get one on our website in the Investors Section. Consistent with previous quarters, today we’ll be discussing our performance on an adjusted basis which excludes items affecting comparability and presents growth rate on a constant currency basis. The company believes the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability is not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation tables included in our press release and our 10-Q, which would fall later today. Due to the inability to predict the amount and timing of certain impacts outside of the company’s control, we do not reconcile our guidance. Here with us today to discuss our results are KDP CEO, Ozan Dokmecioglu, our Interim CFO George Lagoudakis. Also joining us for Q&A, our KDP Executive Chairman Bob Gamgort. And our Chief Corporate Affairs Officer Maria Sceppaguercio. And finally, our discussion this morning may include forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risk and uncertainties that could cause actual results to differ materially and the company undertakes no obligation to update these statements based on subsequent events. A detailed discussion of these risks and uncertainties is contained in the company’s filings with the SEC. And with that, I’ll hand it over to Ozan. Ozan Dokmecioglu: Thanks, Steve, and good morning, everyone. Giving that this is my first earnings call as CEO, I would like to start today’s discussion with my thoughts on the KDP operating model, and a strategic approach that makes us unique in the CPG space. Our focus continues to be on managing our business for a range of potential macro outcomes, and leveraging the all weather business model we have created to drive success. Regardless of the environment, we may face. Our results this quarter, and the consistency of our performance since merger are a testament to the strength of this model, which has continued to perform well in the highly volatile macro environment our industry has faced since the onset of COVID. And, most recently, our portfolio has performed well with significant levels of inflation, and pricing, along with a challenge consumer landscape, demonstrating its recession resistance. With elasticity impacts remaining modest, and our market share positions remaining strong. Our business model starts with an attractive and competitive organic total shareholder return algorithm, which is driven by a flexible and scalable strategy. In cold beverages our strategy is focused on driving growth. In core brands, through marketing, brand renovation and in market execution by filling whitespace in our portfolio through innovation, and partnerships, such as our Polar Seltzer partnership, and the recently announced Red Bull selling and distribution agreement in Mexico, which we will touch on a bit later. And by enhancing the breadth, depth and effectiveness of our omni-channel selling and distribution system, including our company owned direct store distribution system. The investments we have made in selling and distribution over the past several years have built a stronger go to market capability that has driven consistently strong market share performance across all the brands and beverage segments. In coffee systems, we are focused on driving household penetration growth for the Keurig system at the rate of approximately 2 million new households every year. Given the number of remaining addressable new households for the Keurig system, which we estimate at more than 50 million. We have line of sight to household growth well beyond the next 10 years and consumer mobility continued to increase. KDPs, LRB dollar consumption increased more than 11% in the quarter. Growing LRB share in both the quarter and year-to-date periods, reflecting the benefit of pricing that was only modestly offset by volume, which remained quite resilient, with elasticities below the category in both periods. We continue to benefit from healthy categories as strong portfolio of leading brands, and very effective in market execution. The strong performance in the quarter was broad based and led by share gains in premium waters and seltzers, teas, apple juice and fruit drinks. In carbonated soft drinks our performance also continued to be strong, with dollar consumption up 12% in both the quarter and year-to-date periods with our share up year-to-date. We are pleased that we continue to expand on the impressive share gains we generated over the past couple of years. Within carbonated soft drinks our zero sugar innovation continues to perform well. With modulus elasticity impacts, and stronger velocities, then the overall zero sugar and diet category. In premium water, core hydration group dollar consumption 35% in the corner, driving almost two full points of share growth. Snapple led by the success of our Snapple brand refresh, and Snapple elements drove dollar consumption growth of 15% and share growth of almost one full point in the quarter. And in seltzers our partnership with Polar that continues to drive growth for the brand with ACV increasing six points and share gains of two points. Moving to coffee. Before discussing category dynamics, let me quickly share some context on our business and the performance improvements that are now beginning to materialize. You will recall that the combination of consistently strong consumer demand and supply constraints led to a port shortage starting in late 2021. Consequently, we fall back on our demand investment, as did most of our partners and lounge, the coffee supply chain recovery program to increase port output and rebuild finished goods inventories for all parties in the Keurig ecosystem. We completed the program last quarter and have now restored inventories across the ecosystem which enables us along with our partners and customers to resume investments in demand generating programs to drive category growth. As a result, the single server port category continues to recover from supply constraints. We store our consumption up 6% in the quarter, advancing to 7% in September, and off to a good start in quarter 4. There has been considerable noise in the broader at home coffee category numbers well beyond single serve coffee that is worth discussing further. A combination of increased consumer mobility, retail price actions, and the reduction in advertising and promotion spent the latter related to the single service supply challenges negatively impacted at home coffee category demand over the summer. Our analysis suggests that consumer mobility had the outsized impact with mobility returning to more normal patterns once the school year started, we are seeing sequential improvement in at home coffee demand. Importantly, single serve coffee outperformed all other forms of at home coffee during quarter 3. Further away from home coffee category while still down significantly versus pre-COVID levels continues to improve with further runway as returned to office behavior builds. Looking specifically to KDP coffee performance, KDP manufacture port consumption was up 4% on dollar basis in the third quarter, with owned and licensed brand consumption growing by 5%. As the McCafé donut shop and Green Mountain brands posted the strong growth. Performance is ranked during the quarter with year-over-year dollar and volume share advancing sequentially in September versus July and August and continuing to improve into the fourth quarter. KDP continues to maintain its strong leadership position in the category with market share for KDP manufacture ports at approximately 82%. Moving forward, we expect mix to shift for KDP manufactured ports from private label to branded as community coffee comes on board beginning late this year. Turning to brewers. Today, we are confirming that we are on track to add 2 million new households into the Keurig system in 2022, which is consistent with our long term algorithm. As discussed many times, we expect the elevated rate of 3 million new households that we attracted in 2020 and 2021 to normalize post-COVID and that’s exactly what’s happening in 2022. Of course, we don’t need to sell as many brewers to support 2 million new households as we did to support 3 million, which explains the 15% decline in brewer shipments in the third quarter. Remember, we are in the household penetration business, not to brewer sales business as the last the break even on brewer sales and generate nearly all of our profits from attracting new consumers into the Keurig ecosystem. Taking a longer term perspective further brewer sales were a healthy 16% above 2019 and on a year-to-date basis brewer shipments are up more than 30% versus the first three quarters of 2019. In addition, single serve brewers continue to hold the number one position in the at home brewers segment and KDP continues to grow share driven by strong innovation across all consumer price points. Finally, our Latin America beverages segment continued to pass exceptionally strong results in the third quarter. Net sales advancing 29% and operating income was up 14%. The latter on top of all the 8% growth in the fourth quarter of last year. Leading this strong performance in the quarter were Peñafiel, Clamato, Mott’s and Squirt. Earlier this month, we announced a strategic partnership to sell and distribute Red Bull in Mexico starting in quarter four. The majority of the revenue we generate in our Latin America beverage segment is from Mexico. And we are excited to enter into this win-win partnership with Red Bull which will strengthen our position in the energy category, improve our go-to market scale and drive efficiencies over time. And now, I will hand it over to George to cover our third quarter performance in a bit more detail. George Lagoudakis: Thanks, Ozan and good morning everyone. I will start with a brief review of our third quarter business and financial highlights and then provide the details on our segment results. As usual, we will be discussing our performance on an adjusted basis. Total company net sales increased 11.8% to $3.6 billion with growth across all segments led by continued exceptional performance of our cold beverage business. Higher net price realization of 12.1% was only slightly offset by a volume mix decline of 0.3%. Adjusted gross profit grew 8.6% in the quarter, reflecting our significant price that is beginning to approach the level of inflation we experienced in Q3 also benefit the performance boosts productivity. As previously discussed we include our highest quarterly year-over-year increase in green coffee costs this year pressuring our gross margin, which declined versus year ago to 54.8%. Adjusted operating income increased 2% in the quarter, as the increase in gross profit was partially offset by increased outbound transportation, warehouse and labor costs, as well as higher marketing investment to support our back half plans. As a result, adjusted operating margin declined 250 basis points to 26.1%. Adjusted net income increased 4.3% in the quarter, primarily reflecting the operating income growth and lower interest expense. Adjusted diluted EPS increased 4.5% in the quarter to $0.46. Free cash flow remains strong at $686 million driving our free cash flow conversion ratio to 105% in the quarter. Turning now to our segment performance in the quarter. Packaged beverage net sales grew 15.6% driven by higher net price realization and volume mix that was driven with a year ago. This impressive volume mix performance reflects this strength of our brands, coupled with effective marketing and strong in market execution. As a result, we continue to hold down multiyear set gain in CSDs. And we gain additional sharing other categories, including premium and flavored water, Seltzer, tea, juice and fruit drinks. In an increasingly challenging economic backdrop our packaging mix capability across our portfolio enable consumers to easily pursue options that fit their budgets. Many were not allowed fastest growing CSV packets by volume in the quarter. Our continue in market effectiveness was supported by highly effective marketing investment during the quarter including the season five launch of the highly successful Dr Pepper Fansville episodic drink. In recognition of which continued brand strength Dr Peppers were recognized by Canada as one of the top 20 most valuable global food and beverage brands. Turning to Snapple. This important brand was a standout in Q3 registering the strongest seller performance in the tech category, led by Snapple elements launched earlier this year, with a matching packaging and bought new favorite elements has driven strong and repeat rates and it’s proving highly incremental to the brand. Adjusted operating income for the packet beverage segment increased 7.9% after accounting for double digit increase in marketing investment, as pricing and productivity more than offset higher inflation in the period. Turning to beverage concentrates which parses strong and balanced growth in the quarter. Net sales advanced 17.3% with favorable net price realization and higher volume mix. The strong net sales performance was fueled by Dr Pepper Canada Dry and Press. Adjusted operating income for the segment increase 21% driven by the strong mid sales growth and lower marketing expense due to time. Coffee system net sales grew 5.2% in the quarter driven by our recent pricing actions and higher quote segments. Volume mix declined the quarter as a 3.5% growth in shipments was more than offset by a decline in brewer shipments. As Ozan mentioned, brewer shipments were down 15% versus last year, but 16% above the pre-COVID period. Adjusted operating income for the quarter decrease 15.7% primarily due to broad based inflation, which included the highest year-over-year green coffee costs this year. Higher price realization and productivity continue to lag inflation, but we expect an improved relationship in Q4 as the year-over-year inflation rate moderate significantly from Q3, and the contribution from previous pricing actions becomes fully realized in the coffee P&L. And finally Latin America beverage net sales advanced an impressive 28.8% balance between higher net price realization and increased volume mix. The strong net sales performance in the quarter was led by Peñafiel, Clamato, Mott’s and Squirt. Adjusted operating income increase 13.5% reflecting the strong growth in net sales and productivity, partially offset by inflation, and a significant increase in marketing investment which increase at a faster rate than the sales growth. I would like to spend a moment discussing our expectations for the balance of the year. Our strong executions gives us confidence in our route loop, and we are reaffirming our guidance for full year net sales growth in the low double digit range and adjusted diluted EPS growth in the middle single digit range. Supporting this guidance, we expect the following assumptions. Adjusted interest expense is expected to approximately $425 million. Adjusted effective tax rate is expected at the higher end of our guidance rates of 22% to 22.5%. Diluted weighted sale outstanding are estimated to be approximately 1.43 billion. With that. Let me hand it back to Ozan for some closing remarks. Ozan Dokmecioglu: Thanks, George. Before moving to question and answer, let me spend a moment on recent organizational announcements. On Monday, we announced the appointment of our new CFO, Sudhanshu Priyadarshi who will be joining us on November 14. Sudhanshu is a seasoned global finance, strategy and operations executive with significant goal about experience including in the beverage and retail industries. He will be a strategic partner to our team as we deliver against our commitments, scale our business for growth, and continue to successfully navigate the complex macro environment. We look forward to introducing him to you soon. Earlier this month, we announced a strategic realignment of our supply chain organization to accelerate enterprise wide productivity and speed of decision making. In doing so, we leveraged our strong supply chain bench promoting three experienced supply chain Leaders. With Roger Johnson becoming our new Chief Supply Chain Officer. It all builds on our strong supply chain foundation, and we believe positions as well as we head into 2023. In closing, we believe that our attractive organic growth coupled with our significant inorganic value creation opportunity will enable us to continue to drive strong total shareholder return results over time. We are excited about the talent and structure we are building to continue to execute against our opportunities with excellence. I will now hand it back to the operator for your questions. Operator: We will now begin the question and answer session. [Operator Instructions] And our first question here will come from Bryan Spillane with Bank of America. Please go ahead. Bryan Spillane: So Ozan we got a lot of questions this morning about brewer shipments being down in the quarter, as much as they were. I know, you talked a little bit about this dynamic even earlier at the Barclays conference back in September. But I guess can you help put this into a little bit more context? How this tracked relative to what your expectations were? Maybe about your also just how you’ve planned for holiday this year against this backdrop where there’s certainly going to be less discretionary spending. And maybe within that, just how you’re addressing maybe the value equation of the Keurig system against the backdrop of consumers tightening their belts. Ozan Dokmecioglu: Sure, thank you very much, Bryan. First of all, let me address the your first question on the brewers and the decline. As we have discussed, we remain on track to add 2 million new households into the Keurig system in 2022 which is consistent with our long term trend as we have been talking, and as expected, lower than the elevated rate of 3 million that we experienced in 2020 and 2021, during the period of increase at home COVID behavior. Therefore, it is very logical that we would need to sell fewer brewers in 2022 to support the additional 2 million incremental households, versus the 3 million that we have generated in 2020 again, and in 2021. As we have said many times in the past, shipments and consumption are not comparable over a short period of time, such as one or two quarters. And again, we are not in the number of brewer sales business, as we communicated many times, we don’t generate or make money on the brewers sales. And there were years I’m sure you will remember that we sold much less than what we are targeting this year, for example, and still generated 2 million incremental houses. So what matters is the composition of the annual says that goes to the replacement cycles and several other factors that are at the end generates the incremental household. So that’s very important to note. Now, the second part of your question, in terms of our plans, and how we see the ecosystem and so forth. As we also communicated before, we still see 50 million incremental households that to be recruited into our Keurig ecosystem. That means if you take a long term horizon, minimum 10 years and plus plenty of growth is waiting us around the corner. And that’s what we have been executing against. And then we look to the near end as you ask, the holiday programs, and so forth, as we always do. We have very effective trade and the consumer programs, including and coupled with our innovation, that we have been putting in the marketplace with regards to our brewers in a very successful manner that is ready to have another good Q4 holiday season as well as continued into 2023. Therefore we see absolutely no problem. And there is no any reason for us to deviate from our long term target of creating 2 million incremental households on a year in year out basis. And that’s what we are going to do. Operator: Our next question will come from Lauren Lieberman with Barclays. Please go ahead. Lauren Lieberman: Good morning. I’m just I’m going to ask my real question, but just a kind of put a fine point on your responses now is on to Bryan’s question. Just want to be clear that your expectations for 4Q brewer shipments, and what’s embedded in your guidance is very much in line with this expectation for slower, for the deceleration household penetration because I think, again, it’s the plan versus market reality, I think that people are asking about. So that’s just to that validate that approach. My second and kind of real question was just to talk a little bit about private label performance in ports I mean you spoke a bit about it also in your prepared remarks, but we have started to get some questions there on thing, a little bit of a perk up in private label. So if you could talk about, I guess, participation in private label, how this has an impact or doesn’t in terms of the margin business. And if you expect that private label performance to change at all, going forward, when you’re kind of you’ve two dynamics. One is reinstating, marketing you and your partners on branded coffee, but on the other hand, continue to increase inflation to the consumer. And so perhaps more impetus to trade down. Thanks. Ozan Dokmecioglu: Thank you, Lauren. And so I will break your question, I believe into four parts. And the first part, the answer for your first part of the question. Yes, absolutely. And our guidance, not only on our planning stance basis, but in reality as well, that includes to deliver 2 million incremental households for 2022. And we are quite certain on our numbers. As you know, we have the tracking mechanism. And that’s where we are at this point in time. When we step back and look at it with regards to the slowing down the consumption. Obviously, there are quite a bit of noise that we need to do a double click and provide the context. A combination of the increase in mobility especially in the summer months, following the post-COVID environment, along with retail pricing actions, combined with the less investment into advertisement and promotion as well as consumer activities, which the latter one complete the lead due to supply chain port supply issues that we have encountered. And then we got out of it fully at the end of quarter two. So all these combinations, and our analysis also suggests that the mobility increase was the outpaced one, an outsize one that impacted negatively the consumption in terms of the port consumption. However, with the investments coming back, and this life going back to more normal, like the school season kicking in, and also people are starting to go back to more to the offices, we started to see improvement in the consumption. For example, when you look to the market data, in September versus July and August, you will see an improvement. And we are also off to a good start into quarter four, which is October. Therefore, we have reflected all these into our plans for the remainder of the year. And we are quite certain that our growth in the single serve, we’ll continue both from a top line and the bottom line perspective. And as we said in our prepared remarks as well, quarter three had the highest absorption rate in terms of the green coffee beans, which created quite a bit of pressure in our P&L in Q3. The good news is that is behind us. Therefore the inflation rate that we are going to see in quarter four is going to be significantly less versus the first three quarters that we have seen due to the spike of our base last year. Therefore, several factors that will enable us to deliver a very good corner in coffee in quarter four. So that’s the important part. And the last part of your question with regards to the private label. When we actually look to the entirety of our portfolio, we will see that our private label exposure is limited. Especially when you look to the carbonated soft drinks, we have very limited competition coming from the private label. When you look to the fruit juices that is through there’s a healthy amount of competition in the private label yet, as the data, I’m sure that you have looked at it, we continue to increase market share in that category, which we have been really doing well on the basis of our innovation and market execution in the strong brands of portfolio that we have. And on the coffee private label, please remember that we are still the largest producer, and the manufacturers of the single serve K-cup pods for the private label sector as well. So if the private label increases share or there’s a trade down going on, we will still contribute and participate to the economics of that, given that we are still producing a vast majority of the private label K-cup pods. That’s why we believe that our ecosystem is really intact, again, goes back to our old weather business model between the cold beverage and the coffee. And we expect to have a very strong Q4 across the enterprise. Bob would you like to add anything? Bob Gamgort: Yes. Good morning. I think it’s, as we said over the past four years is always helpful to look at the Keurig system not on a quarter-by-quarter basis but over the long term. There are a lot of fluctuations up and down. But every time you step back and look at the performance of the ecosystem over six months, nine months, or a multiyear basis, the trends become really clear. So let’s go back to that. We’ve always had 2 million households for years our target is those unsaid that gives us more than 10 years line of sight to more than 10 years of very attractive growth as we convert more than 50 million households more than 50% of U.S. population actually. What we saw during COVID are a couple of things that changed. The household penetration went from 2 million to 3 million, we always said it was going to revert back to 2 million. We saw an increase in attachment rate. We said it was going to normalize which it has. We also I would remind you saw a spike in premium coffee brands at the expense of private label and our point of view was that would normalize over time. We’re relatively indifferent to that given that we participate against all of those. The biggest concern that investors had when we talked to them was not that any of what I just said was going to happen, but rather there was some sort of pull forward so that the 3 million would translate into less than 2 million going forward. Whereas we sit here today here’s the good news we’re on our long term trend of 2 million which what we said. Attachment rate is back to normal levels and healthy and the balance between private label and premium and mainstream is back to where it was before and we participate in all of those. The only noise in this period, as Ozan talked about is when you go from 3 million to 2 million, you don’t need to sell as many brewers to support that. But as we said, we’re not in the brewer business, we’re in the household penetration business, and 2 million households is exactly where we want to be. And it sets this up for a very, very good future in this ecosystem. Operator: Our next question will come from Nik Modi with RBC Capital Markets. Please go ahead. Nik Modi: Ozan and maybe even Bob I’d love to hear your thoughts on the deal environment in terms of valuations, any things that you guys have been looking at that seem attractive, obviously, not getting into the details, but given your commentary historically about, [indiscernible] and balance sheet and the desire to do more deals, I just would love some context on that. And then just a quick follow up on the coffee side, some of the work we’ve done, which suggests, there’s been a fair degree of increasing interaction between pods away from home coffee, like cafes, Starbucks, and packaged bottled coffee, that you can buy at retail. And I was just curious if you had any thoughts on that. Have you looked into that at all? Thanks. Bob Gamgort: I’ll start with the M&A environment. Ozan you can pick the second part of that question up. As we monitor the M&A environment. And we continue to see what we described previously, as the relatively easy funding situation for high growth companies starting to change and that continues to do so new investment for them is becoming more challenge. If you look at the public valuations as a marker for the few companies in this space that match that high growth criteria, you can see the change in investor sentiment reflected there pretty aggressively. So we continue to see an opportunity for us to be a catalyst. Our goal is always create win-win partnerships, we’re not out there trying to buy something at a low price, we’re really trying to step in, and be able to solve a number of challenges for these high growth businesses, by creating a partnership that works for everybody and take a look at what’s happened just in the recent past with Polar, and beverage AT peak. And now in this call, we’re talking about Red Bull in Mexico. If you think about it every call, we talked about a new piece of news where we’re layering in more strategic businesses or segments into our business. And as that continues to build, it makes us a stronger company going forward. I would also add to that list all of the independent distributor acquisitions that we’ve made over the past couple of years that significantly strengthens our distribution system. So we’re going to continue to do so. I would say that as we continue to engage in these discussions, and we have numerous discussions right now, we’re very clear in our strategic priorities. We’re really confident in our ability to assess the value to KDP and KDP shareholders. And we’re incredibly flexible in our approach to have on how to make these partnerships work. If you look at the track record of our success in creating value and growth for the partners I just described, as well as the continued growth that we have on our long term partners like Evian and Vita Coco and McCafe that is very attractive to emerging beverage companies. And so it allows us to have a seat at the table in a number of these conversations. And we’re very optimistic and we will continue to play out in the way that I described. We’re talking about the interaction, medium coffee. Ozan Dokmecioglu: Absolutely. And actually, I like to double click on that, because it’s very important point. And Nick, that you mentioned, let me start with at home consumption. So at the onset due to the lock downs, and so forth, we have seen a significant increase in our attachment rate with regards to the single source of consumption at home, both in USA and Canada. And over time, if the mobility increasing and as we were expecting and in line with our plans, which is a kind of post COVID scenario, that the attachment rate started to come down. And please bear in mind, before we call it times, our attachment rate has been very, very stable for a long time. Therefore COVID was the only exception that made a spike and then came down more or less to the previous COVID levels as we speak right now. Therefore, that’s an important point to note. At the same time when COVID hit obviously hour away from home office business, which is how we defined for the most part not all but for the most part, also of significant declines. Albeit right now we are seeing improvements but it’s still significantly lower. Again the office coffee business at we have versus the pre-COVID levels. Therefore, we see this as an opportunity, both in quarter four and beyond that along the office habits build back that we will see our fair share in that segment at the same time. So there are quite a bit of interactions between the two. And also, as you said, right now, again, with the mobility increased, especially in some LVC, that the coffee shop products being consumed more as one would expect, with some moderation at the at home consumption. Therefore, as you said, there are quite a bit of intersection points, that when you step back and look at our portfolio, the good news is we are playing in terms of the overall Keurig ecosystem that we manage which is very important, and goes back again, another very strong leg to our all weather business model that we have successfully put together. Thank you. Operator: Our next question will come from Chris Carey with Wells Fargo Securities. Please go ahead. Chris Carey: Can you just confirm maybe the key drivers of the profit delivery in coffee this quarter, between the green coffee inflation you’re seeing versus other inflation, like other commodities or supply chain inefficiencies? I’m just trying to frame the coffee operating profit performance in the context of pricing which is building and mix which is more favorable for pods in the quarter which should be mixed accretive. And then just connected to that I wonder if you could just maybe frame how you see these coffee margins over the longer term horizon like if this is a structural reset, because maybe the cost of doing business is higher, or this is just about commodity inflation. And you should be catching up to these inflationary headwinds over time and I apologize, this is just a kind of confirmation on the model. But the extra week in Q4 that’s going to land in coffee, would you expect to grow above the impact of the extra week. So I apologize for all that. But thanks for the context. Ozan Dokmecioglu: No problem. Thank you very much. So I will break up your question into three components. So first of all the major drivers and how are we looking to the profitability of coffee in quarter three. The major determinant and the driver of coffee P&L in Q3 was the absorption rate of the coffee beans, green beans which is obviously our raw material that we use in terms of the negativity that it calls in our P&L. Why? Because when you looked over base last year, you will see, and we alluded to this during our quarter two call as well. Last year, we had several hedges that came off in Q3 which means that our inflationary step up was significantly higher in Q3 with regards to the coffee beans versus the other quarters. The good news that’s behind us. That’s one of the reasons why we have solid plans and we expect to see significant profit improvements in quarter four as well. At the same time, our pricing continues to build up and we believe that in quarter four, we will be in a position that our pricing will fully catching up to the inflationary factors. As you said, the inflation was broad based. It’s not only coffee beans, but across the other materials and the ingredients that we have been using. But our algorithm clearly suggests that Q4 will be a very good inflection point not only for coffee, but for the cold beverage business that we also have and is basically mirrored in coffee P&L we expect to mirror more or less what has happened in the cold beverages as we have been expecting and communicating which was the pricing quarter in quarter out was getting closer to the inflation and at one point that pricing would be fully sufficient to overcome not only the absolutely the impact of the inflation but the margin percent wise as well. And that’s what has happened in our for example when you look to beverage concentrates and the packaged beverages segments that we have announced and we expect that positive trend to continue into quarter four. So coffee is a little behind like a quarter but that’s what’s going to happen exactly. And we should not also forget that obviously we are continuing to build the productivity programs and Q4 as has always been the case would be the highest delivery quarter for us at the same time. Therefore, we see Q3 coffee inflationary trends in relation to the pricing in the negative operating income delivery at transitory quarter for us and we expect a very strong quarter for the reasons that I have just articulated. Absolutely, we do not expect any structural issue or reset with regards to the coffee margins going forward. And as I say, we will we see a very strong actual the improvement in quarter four. There is no any reason and, and as we discussed before, obviously, coffee margins is one of the highest in our overall CPG industry as well at the same time. Therefore, we were very pleased, and we are very pleased, and there is no instructional change that we are forecasting for any reason. The last part of your question with regards to the 54th week, extra week in coffee, as we said before, it is true that we have few days, not even a week because of the holiday season and most of the retailers being shut. And the consumption in that, sorry, the sell out in that week, which is the last, very last week of December is the slowest. And it’s almost minimal, not is almost but it is very, very small number that wouldn’t change our profile with regards to the quarter four. It will have a little impact to the growth rates as well. That’s why we have not quantified that number that we spoke before and communicated giving the very minimal impact on our numbers. Operator: Our next question will come from Bonnie Herzog with Goldman Sachs. Please go ahead. Bonnie Herzog: I wanted to circle back to brewers with a question, hoping you could touch on your inventories, which are quite high up 60% this year. So wondering how much of this might have to do with retailer inventory levels of brewers being elevated and then therefore retailers aren’t ordering or buying as many brewers? Is that is something that’s going on? How big of a risk do you believe this is in the next quarter or two for you? And then a quick clarification of your mid single digit EPS guidance for this year. Last quarter you mentioned you expected your second half EPS to be up high single digits driven largely by Q4. So just wanted to verify that high single digits in 2H is still expected or is maybe mid single digit growth more realistic. And that would I guess, result in your full year EPS growth possibly coming in at the low end of mid single digits? So just clarification on that two please. Thanks. Ozan Dokmecioglu: Sure. Thank you, Bonnie. So let me start with the brewers. We need to get the context right in terms of the brewer POS as well as the sellouts. As I explained due to the supply chain issues that we started two encounters late 2021 and impacted a good chunk of the first half of this year as well there were little investments in the category, including the brewers, because simply we didn’t have including our partners, including our retail partners to sell enough. Therefore, that definitely curtailed the demand. So that this is a fact. Now, at the same time giving all the supply chain issues that the whole appliance will has faced in the last two years, we have been continuing to execute and co-manufacturing and bringing to the USA in order to keep our pipelines intact. When you step back and look at the small appliances at the retailers that you will see some longer inventory levels that they are facing. But please make sure that when you do the double click in that number, and you see that the single serve the brewers small appliances, in fact is doing way better than the overall. Small appliances retain number. Therefore, the headlines that we are seeing if we don’t do that double click real is quite a bit of misleading we do not see that kind of inventory long term being carried by the retailers. That’s number one. Second, it is also true that we have a little bit more than, more inventory than the previous years. It just because of two facts first we wanted to be ready for the holiday season that we are facing. And we are also increasing significantly investments behind the ecosystem along with our partners, along with the customer, retailer customers as well. Therefore, right now we are seeing a very good traction that we started in quarter four therefore we are not worried at all with regards to the inventory levels that we have. And always there are ups and downs that we have faced in the last seven years at Keurig business. Therefore the overall system and the brewers including the consumption in relation to the investments is one big circle. And we are pretty mature and intact on that one. Bob Gamgort: Let me add, I think, Bonnie your question. And Bryan also hinting at potential concerns about the environment in Q4. Let me make a couple of points on the holiday season this year. One of things that we’ve seen is that whenever there’s a challenging economic time, gifting tends to shift from the indulgent or frivolous to functional. And there’s no better functional gift than a Keurig Brewer. We have a wide range of price points from entry level all the way up the premium, we have an incredibly wide range of retail distribution, from e-commerce to all channels of brick and mortar distribution. And we’re already seeing a number of retailers very early, are already pushing Keurig as one of their premium or prime promotions going into the holiday season. And we continue to expect to see more of that. So I know there’s some concerns, as you guys have articulated about inventory levels and purchase power and small appliances. But as Ozan pointed out, if you double click on this, you see that single serve brewers and Keurig, in particular are doing incredibly well. And we expect them to have a strong holiday season. But again, all consistent with driving 2 million households, a penetration, which is what all of this is about. Ozan Dokmecioglu: Exactly. Thanks Bob. And also the second part of your question with regards to the EPS. Yes, quarter four is expected to be the strongest quarter of the year, as we expect to deliver margin improvement and accelerate EPS growth. There are several drivers to that which the full benefits of price realization. And as we announced publicly, we have taken another round of price increase behind our carbonated soft drinks portfolio are the quarter four that we will continue to deliver further top line and contribute to our profitability and also lapping spike in inflation this quarter. If you would remember, last year in quarter four in 2021, we had a big inflation step up which means that we are lapping less increase this year compared to the first three quarters of this year. So that will drive further profitability and the full realization of productivity this year that will accumulated in quarter four, and again, led by supply chain issues that we ran into, especially behind our coffee business. Last year we had several onetime unexpected costs including the customer penalties that we stated publicly as well, that will not happen this year. Therefore, lots of reasons why quarter four will be another strong quarter from the top line as well as especially bottom line perspective and we also expect to deliver a positive margin improvement which would be in a good inflection point for this quarter. Thank you. Operator: Our next question will come from Brett Cooper with Consumer Edge Research. Please go ahead. Brett Cooper: Just one quick question I wanted to double click on the supply chain organization change. And I was hoping you can help us understand the rationale for the change whether that change is a leading edge change for the enterprise and then just, I guess help me understand how that nets higher productivity. Thanks. Ozan Dokmecioglu: Absolutely. I mean, we always look for opportunities across our business, either how we operate, the ways of working, that we also align our organization accordingly. As you know, approximately two years ago, we moved a little bit from the functional to more business unit lead organization structure, and these data moves are in support of that move, taking it to the next level, nothing new is around the edges. And now that we have any issues or we have encountered in our supply chain or any unresolved issues that we are trying to tackle. To the contrary, as we have been talking at many different platforms that our supply chain organization as well as its supply chain fundamentals improved drastically across two businesses that we have in the cold beverages, especially in coffee. Therefore, this organizational change is making our supply chain to get even closer to the businesses that we do expect to see faster decision making with at the right time with the right players around, which will eventually impact our productivity programs as well. And a little bit more info on how this change may impact our productivity programs a bit, the first six to nine months because of the supply chain issues that we have faced, especially in coffee but not limited to coffee. In some brands, important brands like Snapple, as we communicated publicly before and by and a little bit in the CSS that we ran into some supply chain issues. In fact, the focus whether we liked it or not that went towards getting collecting all those issues that we have faced, because that’s what we should have been doing. And this, putting those problems behind us. And with the new organization that we made, the small changes now will enable us to focus on much more productivity delivery, either in quarter four or next year as well. So this is the sum up of the impacts that we expect from the latest supply chain changes. Thank you very much. Operator: And our last question today will come from Andrea Teixeira with JP Morgan. Please go ahead. Andrea Teixeira: Thank you. Good morning. So I also want to have a clarification on the coffee side. I’m sorry for going back to that and then Bob on M&A. First, can you comment a little bit on the sell out for the brewers from a replacement standpoint, which I understand is still bigger than the new households, of course, the razor blade model, we would like more households, but I don’t want to underestimate what’s happening on the future to single serve. And then Bob on the Red Bull distribution agreement in Mexico first, congratulations on that. And should we see more of these in isolation, but or perhaps testing the waters for potentially expanded agreement including the U.S. and if not, given your firepower M&A how we should be thinking about opportunities in energy. Thank you. Ozan Dokmecioglu: Absolutely. Thanks Andrea. Let me start with the coffee and the brewer part. First of all, we are very pleased and more importantly, the brewer sales exactly in line with what we were expecting. So that’s very important to note. So when we look to the composition of our total sales, as you know, we never broke that apart in terms of so many brews that we sell goes to the replacement and other factors as well. But you are absolutely right replacements have been and will play a much larger role in terms of the percent of our sales in our brewer units. That is a fact. But what is also important as we have been saying the incremental household that we will be driving that has too many levels to that. For example, when we which we did improve the, our brewer qualities, obviously, the life expectancy of the brewers extended, which means that is the replacement cycle got longer which means that we require less brewers to sell. But that still enables us to deliver the 2 million incremental households that we have been delivering very successfully. I’ll bet 3 million both in 2020 and 2021 with no pull forward as well, from 2022, or even beyond the years. Therefore, replacement brewers has been and will be our realities. And we will continue to improve our brewer qualities and expect them to further extend the lifecycle. And also, we have increased and continue to increase our innovation cycle in the brewers , which would enable us to tap to the new consumption occasions and with the new format as well that will further give us the incremental top line as well as the bottom line. Therefore, we are quite pleased with the overall brewer performance that we have put together and feeding our ecosystem. Bob on the Snapple? Bob Gamgort: Yes , I’ll refer back to our investor day a little over a year ago where we talked about the role of M&A and partnerships. And we said that we had a number of criteria. One is we want to add on to our existing portfolio and leverage the infrastructure we have in place, particularly our DSD system. We were really interested in new platforms, particularly in energy and alcohol, where we saw good whitespace opportunities. And we also talked about we’ve got these incredibly strong businesses in Canada and Mexico that we really don’t talk much about. And we saw opportunities there. So quick, simply, when I look at the new arrangement with Red Bull and Mexico we think about that hits on energy. And it hits on continued expansion in Mexico, [indiscernible] was expansion within Canada. So we’re beginning to add into these opportunity areas that we identified about a year ago in a more aggressive way. And all I will say on the Red Bull Mexico piece is our goal is to do what we do with all of our partnership, which is demonstrate incredibly strong value added for our partners, drive growth for them. And that always leads to more opportunities in the future. And I would expect that that would be the same in the case of this one. Before I think I’m turning it back over to Ozan before I do that I have to in my new role here, I have to say we didn’t get a single question on our cold beverage business today. And I want to give a shout out to our cold beverage team who delivered another incredible quarter of revenue growth, market share performance, record profitability, and they continue to hit it out of the park and they kind of feel left out on some of these calls. So I will acknowledge their strong performance as it shows up in our EPS in our overall financial delivery to KDP. So Ozan back over to you. Ozan Dokmecioglu: Yes, thank you very much. Thank you very much to all of you as well, Steve. Steve Alexander: Yes, this is Steve with our team around all day if you have any questions and we thank you all for your time participating on the call today. Thanks and have a great day. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.

Company Representatives: Bob Gamgort - Chairman, Chief Executive Officer Ozan Dokmecioglu - Chief Financial Officer, President of International Maria Sceppaguercio - Chief Corporate Affairs Officer Chethan Mallela - Senior Director of IR Steve Alexander - Vice President of Investor Relations Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Keurig Dr Pepper’s Earnings Call for the Second Quarter of 2022. All participants will be in listen-only mode. [Operator Instructions]. This conference call is being recorded and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper's Vice President of Investor Relations, Mr. Steve Alexander. Mr. Alexander, please go ahead. Steve Alexander: Thank you! And hello everyone! Thanks for joining us. Let me start this morning by introducing our new Senior Director of IR, Chethan Mallela who joined us in May. Many of you may know Chethan from his six years working on the sales side with Andrew Lazar of Barclays, followed by IR roles over the past few years at American Eagle Outfitters and Peloton. He is a great addition to our team and we believe you will enjoy working with him. Earlier this morning we issued our press release for the second quarter of 2022. If you need a copy you can get one on our website in the Investors Section. Consistent with previous quarters, today we'll be discussing our performance on an adjusted basis, excluding items affecting comparability. Beginning last quarter, you may recall that we began excluding the impact of foreign currency translation from our adjusted results. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability is not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation tables included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company's control, we do not reconcile our guidance. Here with us today to discuss our results are KDP Chairman and CEO, Bob Gamgort; and Ozan Dokmecioglu, our Current CFO and President of International, who is transitioning to the CEO effective tomorrow, at which time Bob will become Executive Chairman. Also with us is our Chief Corporate Affairs Officer, Maria Sceppaguercio. And finally, our discussion this morning may include forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risk and uncertainties that could cause actual results to differ materially and the company undertakes no obligation to update these statements based on subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. And with that, I'll hand it over to Bob. Bob Gamgort: Thanks Steve and good morning, everyone! The second quarter was one of significant progress for a company in a macro environment that continues to be challenging on many fronts. Broad based inflation continues to impact industry margin as pricing continues to increase, but it's not yet caught up to inflation. The good news is our brand strength has held up well in the face of new pricing, with modest elasticity impacts across our portfolio during the quarter. With concerns having shifted to the potential for a recession, it's worth spending a moment on how our categories have performed during previous recessionary periods. During the last significant economic downturn in 2008, 2009, our lead segment, particularly carbonated soft drinks and coffee were among the CPG categories that held up best. These categories are true staples, with regular consumption behaviors and few direct substitutes, and they have the benefit from the trade down effect from out-of-home consumption to in-home consumption that frequently occurs during recession. As we've done successfully in the past, we will continue to manage KDP against a range of potential macro outcome and believe that the all-weather business model we’ve created positions us well as we continue to operate in a challenging environment with significant uncertainty. Since the formation of KDP, we have delivered great returns for our shareholders, with a four year total shareholder return in excess of 100%. Well above broad market indices and nearly all food and beverage peers. More notable is that these returns were delivered during our transition from a closely held company to a widely held one. With the public market absorbing approximately 675 million new shares into the fall, equivalent to $25 billion in market cap. With our inclusion last month in the S&P 500, along with our existing position in the NASDAQ 100, we continue to broaden our appeal. Let me take a few minutes to remind you how the KDP business model creates value, and then let Ozan apply that framework to our Q2 results. KDP is underpinned by an attractive and competitive organic total shareholder return algorithm, driven by a flexible and scalable strategy. Coffee Systems; our strategy is focused on attracting about 2 million new household every year into the Keurig System. While also driving revenue and profit growth among our 36 million existing Keurig households to new platforms such as connected brewers and new beverage formats and occasion. Given the size of the remaining addressable new households for the Keurig system, which we estimate at more than 50 million, we have line of sight to household growth well beyond the next 10 years. In cold beverages, our strategies focus on driving growth in core brands through marketing and brand renovation, filling white space in our portfolio through internal innovation and external partnership, and enhancing the effectiveness of our omni-channel selling and distribution system, including our company owned direct store distribution system. The investments we have made in selling and distribution have built a stronger go-to-market capability that has a multiplier effect on our brand investment as evidenced by our consistent share growth. In addition to our core algorithm, KDP’s extraordinary free cash flow enables the potential for incremental shareholder return through strategic capital allocation. I will elaborate on this later in the call. Ozan, over to you. Ozan Dokmecioglu: Good morning everyone! Bob provided an overview of our successful growth strategy, and I want to spend a moment to highlight our quarter two results in the context of our overall strategy. On a total company basis, net sales advanced 13.5%. With net sales up more than 10% and volume mix up more than 3%, with all four segments posting strong growth. KDP adjusted gross profit increased 10%, while adjusted gross margin declined 180 basis points, reflecting the timing gap that remains between pricing and inflation. During the quarter we experienced cost of goods sold inflation across all inputs, including ingredient, packaging and manufacturing labor. In addition, we also experienced a much higher rate of inflation in transportation and warehousing. At the time of robust consumer demand and SG&A inflation was also significantly higher. Taken together, our total inflation for the quarter exceeded 17%, which was more than two percentage points higher than the 15% we experienced in quarter one. As a result, adjusted operating income declined slightly, a significantly higher cost to serve offset the 10% increase in adjusted gross profit in the quarter. All-in, adjusted net income increased approximately 3%, reflecting a lower adjusted tax rate and lower interest expense. Adjusted diluted earnings per share also increased 3% to $0.39, and we closed out the first half of this year very much as expected. Free cash flow for the quarter at $600 million continued to be strong, driving a free cash flow conversion ratio of 108%. Let's shift to a discussion of segment performance starting with Coffee System. I'm happy to report that our Coffee Supply recovery plan has been completed ahead of schedule, with part manufacturing output restored to levels that will provide full service to our partners and retailors. While that success came at a cost, as we discussed last quarter, it sets us up for a strong second half of the year. For the quarter, Coffee Systems net sales were up 9%, driven by both higher pricing and increased volume mix, reflecting strong sequential improvement in sales. For the quarter pod sales grew 10%, led by both higher pricing and higher volume mix, while brewer sales grew almost 6%, led by higher pricing that was partially offset by lower volume due to the 29% volume growth comparison in quarter two last year. Marketing investment in quarter was up slightly. Single-serve coffee category pricing was up nearly 9% during the quarter based on IRi as coffee brands and retailers mitigate the impact of inflation, particularly in coffee with new price actions. We have noted a few industry reports direct linking category volume deceleration in IRi with pricing actions and attempting to draw conclusions on elasticity. In addition to our typical caviar that syndicated data reflects only about 50% of total pod sales, let me also caution you that there is significant noise in the category numbers in quarter two. Due to the impact of supply chain issues, including out of stocks and significantly reduced category, promotional and marketing support. There are also some timing impacts from consumer mobility with regard to out-of-home coffee consumption during the quarter. As we move into the second house, we continue to expect a strong dollar consumption growth in the category with some ongoing volume pressure related to increased consumer mobility compared to the prior year. This is consistent with our prior expectations that at-home attachment rates would eventually return to pre-COVID levels and we are continuing to see this occur. At the same time, we are seeing improvement in office-coffee, which we expect to gradually improve over time. In this dynamic environment we continue to track the relationship between single-served coffee pricing and other forms of coffee, including out-of-home coffee. Despite the increase in single-serve pricing, the gaps between core months have remained consistent as all-forms of coffee have increased in price. Let me shift to some highlights of coffee system growth drivers. In quarter three, we will nationally launch our new K-Cafe smart brewer, which in one machine, the representation of the cumulative enhancements we have made to curate brewers over the past five years. The K-Cafe smart is enabled by our connected Brewer ID Technology that recognizes the pod and adjusts the brew for a perfect Cup. It also features multi-screen technology, which enables a wider range of temperature and strength, including our best ever Brew Over Ice coffee delivery yet. This new brewer also incorporates a new multi speed product to enable consumers to create capuchins, lattes and other specialty coffees, guided by an interactive recipe experience, located in the Keurig App. Taken together, the K-Café Smart enables consumers to create a coffee shop experience in home, at a fraction of the cost, and with greater appeal to younger households. With our continued smart technology development, we remain on track to reach 1 million connected households in the next few years, which continues to unlock new platforms such as SMART Auto-Delivery for pods. The enhancement to Keurig System Quality and innovation continue to be recognized by key industry players and we are pleased to announce the addition of two new Super Premium Coffee brands into the system with Intelligentsia and BLK & Bold joining our roster of Keurig partners. In addition to enabling Keurig system to reach premium consumers, with price points of around $1 per pod, the participation of these events provides a strong endorsement for the quality of the coffee delivered by our new brewers. Last quarter we shared that Community Coffee will also be joining the system as a partner brand. The production of K-Cup pod or Community began this month and our license pods will be available on keurig.com and at retail nationwide later this year. In addition to adding new brands, we have had great success in driving growth in existing brands. McCafé which you will recall joined the Keurig System as a licensed brand a few years ago was the fastest growing brand in Single-Served Coffee this past quarter. Shifting to cold beverages, we again grew or held market share across the vast majority of our portfolio. In carbonated soft drinks, we grew dollar consumption by 11% in the quarter and are holding on slightly expanding the substantial share gain we achieved over the past two-plus years. This past July 4 holiday represented the 23rd consecutive holiday period in which KDP grew carbonated soft drinks market share. We are doing this by leveraging the strength and differentiation of our portfolio, successful innovations such as Dr Pepper and Cream Soda which was recently ranked by IRi as the Number 1 food and beverage Pacesetter for 2021, as well as exceptional in market execution and effective marketing. CORE Hydration and Snapple are two examples of strength in our non-carbonated portfolio. Both of which has been held, backed by supply chain disruptions last year. CORE is the fastest growing brand in the Premium Unflavored Water Category this year with dollar consumption dropped off for the 1% in quarter two. Snapple is benefiting from investment in the Snapple Brand Refresh launched last year, which continues to attract younger consumers and build momentum for the brand, driving dollar market share growth year-to-date. We have also had great success in driving growth for our partner brands with Polar Seltzer becoming the fastest growing and a suite in sparkling water brand in the category, advancing market share two full share points to 10.3% in the quarter and continuing to grow. In addition, Vita Coco grew over 16% in the quarter, advancing Household penetration by 9% and dollar share by more than 4 points to 54%. Within cold beverages, packaged beverages net sales were up 13%, driven by both higher pricing and increased volume mix, with elasticity impact remaining modest. Increased marketing investment and strong in-market execution supported continued market share growth in the quarter. For Beverage Concentrates, net sales were up 23%, reflecting higher pricing, including the benefit of favorable timing related to trade accruals and higher volume mix. Finally, for Latin America Beverages net sales were up an impressive 27%, balanced between higher net pricing and increased volume mix, supported by a significant increase in marketing investment. Elasticity for the segment remained modest. Latin America beverages has been a consistent with strong performance, led by a portfolio with strong brands such as Peñafiel, Clamato, Squirt and Mott's. On a two year basis net sales in the quarter increased more than 50%. During the quarter we announced an agreement to acquire the global rights to the non-alcohol, ready-to-drink cocktail brand Atypique, which is a highly unique offering in the emerging and fast growing non-alcohol coffee segment in Canada. This new platform complements our strong and successful ready-to-drink alcohol portfolio in Canada and provides KDP with incremental growth opportunities in an exciting new category. We completed our minority investment in Tractor Beverage and signed an exclusive sales agreement to expand innovation in food service channel, leveraging the strength of our fountain foodservice sales team. As we announced last quarter, Tractor offers the first and only certified organic, non-GMO beverage solutions specifically tailored to food service operators. While these are great examples of the small but strategic investments, let me turn it over to Bob to provide some commentary on the broader capital allocation and M&A opportunity for the KDP, which will be one of his key focus areas as Executive Chairman. Bob Gamgort : We have built a business that has been pressure tested by macro volatility and prices, and has emerged stronger and nimbler than ever. In the past four years we had distinguished ourselves as strong operators, with the great majority of our team members solely focused on running the business with excellence. Value of that approach is reflected in our industry leading TSR since merger, and our attractive forward-looking organic algorithm. We also know we have an opportunity to enhance organic shareholder returns through the strategic deployment of our discretionary free cash flow. We have a proven capability to build new brands and create exceptional value for KDP and our partners by adding new brands into our growth machine. Look no further than the examples discussed during today's call such as CORE, Polar, Vita Coco and McCafé. Therefore it’s logical for us to consider M&A as our leading opportunity in capital allocation. We employ a disciplined and rigorous process in our deal evaluation, which balances risk versus reward and understands the true underlying value of any new business to us. We also consider a range of structures to enable us to expand our brand portfolio with M&A being one, but not the only past the filling white space. It's no secret that historically when our disciplined approach has faced lofty valuation expectations from sellers, the outcome has been fewer acquisitions and more strategic partnership for KDP. We are good with that as we know that no deal for an alternative partnership structure is far better than an overpriced acquisition. The environment for high growth companies has shifted in recent months and we are encouraged with the conversations that we're having with several potential partners. We believe that our proven success in creating value for our partners, combined with a more challenging investor environment for these entrepreneurs has begun to narrow the bid ask spread. Time will tell if that improves action ability. All potential M&A investments compete against the asset this team knows best, which is the value of our own equities. As noted in our press release, we repurchased approximately 2.5 million shares during the quarter at an average price of $34.51 per share. We see opportunistic share buybacks and investment in our internal growth projects as attractive uses of our capital. Finally, we believe the size of our discretionary cash flow, which is expected to be $5 billion over the next 3 years, distinguishes us as a unique investment opportunity. Ozan will now provide some commentary on our outlook for the balance of the year before we moved to Q&A. Ozan Dokmecioglu : As indicated in our press release, we are including our guidance for full year constant currency net sales growth to the low double digit range, while reaffirming adjusted diluted earnings per share growth in the mid-single digit range. We continue to expect adjusted earnings per share growth in the second half to reach the high single digit range, driven by strong performance in the fourth quarter, leading to meet single digit growth for the year. Supporting this guidance, we continue to expect the following unchanged assumptions. Adjusted interest expense is expected to approximate $430 million. Adjusted effective tax rate is expected in the 22% to 22.5% range and diluted weighted shares outstanding are estimated to be approximately 1.43 billion, assuming no additional share buybacks. Finally, given the current environment, I want to share some detailed perspective on our expectations for the second half. At this point in the year we are lastly covered on input costs and have good line of sight to price realization. Quarter four is expected to be the strongest of the year in terms of earnings per share delivery, while quarter three is expected to look much like quarter two. The primary driver of the phasing of our second half results is the timing relationship between pricing and inflation. You will recall that inflation in quarter one was 15%, which advanced to more than 17% in quarter two. We expect inflation to be even higher in quarter three, largely driven by our Green Coffee positions. Because we are getting the benefit of more pricing in our quarter three P&L, we expect to offset this incremental inflation to deliver EPS growth for the quarter. In quarter four we expect the rate of inflation versus the prior year to be roughly half the rate of quarter three. As a reminder, we will be lapping the significant spike in inflation we experience in quarter four last year and we realize the full benefits of pricing already taken, which will enable us to offset inflation and deliver margin improvement in the fourth quarter. Finally, I want to acknowledge that tomorrow I will assume the CEO role of KDP. I'm honored to take on the leadership of this great company, including our 27,000 dedicated employees and I greatly appreciate the endorsement and support of Bob, our Board of Directors and our Executive Leadership Team. Looking ahead, I couldn't be more excited about the growth potential I see for KDP in this new chapter. We have the opportunity to leverage all the progress we've made since the merger to further strength our brands, enhance our go-to-market capabilities, build our world class team. Doing this will enabled us flawlessly to executive our strategic plan, while standing ready to proactively capitalize on new opportunities that come our way and face whatever macro challenges arise, just as we did in our last chapter. The KDP team has distinguished itself as flexible, nimble and fast and it is these key attributes that will again differentiate us moving forward. I will now hand it back to the operator for your questions. Operator: [Operator Instructions] The first question comes from Bryan Spillane with Bank of America. Please go ahead. Bryan Spillane: Thanks operator. Good morning, everyone. A - Bob Gamgort: Good morning, Bryan. A - Maria Sceppaguercio: Good morning, Bryan. Bryan Spillane: Two questions for me. One, Ozan as we’re kind of looking into the back half of the year and just thinking about pricing and inflation, are there plans for further price increases [Technical Difficulty] or cold beverages in the back half of the year or have you pretty much [Technical Difficulty] put in all the price that you need to cover inflation, then I have a follow up. A - Ozan Dokmecioglu: Yeah, good morning and thanks Bryan for the question. I mean, first of all it is also important to note that – because as you know pricing obviously goes hand-in-hand with inflation and what's going on in the macroeconomic environment. So we are largely covered on the input cost side and also we have a good line of sight into the price realization for the remainder of the year, so it's a very clear for us. So at the same time, as we have announced several times, there is starting throughout 2021 as well as early this year, as well as early quarter too. We have taken several pricing actions across our portfolio, both in the Coffee Systems, as well as the Cold Beverages. So those pricing activities went through and as you know, we don't necessarily talk with regards to future action plans in terms of the detailed pricing action plans, but as we have done previously, depending on how the macroeconomic situation is going to trend, along with the inflation, we are ready to take further action plans as well as activate several other levers that we have been managing our business. As you know, we don’t necessarily just focus or fixate on one lever. We have multiple levers in our business starting with the volume, combined with the mix management and obviously productivity delivery in relation to the pricing and our business investment. So we have several levers available for us in order to pool and continue to weather the storm as we have been doing the last four years. Therefore if the macroeconomic situation changes along with the expectations that we have, we will take the necessary measures in order to put further pricing. Bryan Spillane: Thanks Ozan. And then Bob, just a question for you. Just to pick up on the comments you made about the M&A environment, and you know I guess my question is, when you're thinking about or looking at high growth companies you know a year ago or two years ago, you know there’s a lot of focus on revenue model, revenue multiples, TAMs and like profit and cash flow were sort of taking a backseat I think in terms of a lot of the valuation discussions that were being had. So has that changed also? Like if you're looking at high growth companies, is there may be more of a consideration now in terms of profitability and cash flow than maybe where those seller's expectations were and how they were trying to value the businesses before. Bob Gamgort: Yeah. I mean Bryan from our respective we've always focused on profiting cash and what we looked at in any potential partnership where there’s an acquisition or a seed investment is what's the long term growth of that business, and then in our business model, what kind of profit and cash could we generate off of that once we put it in place and have the synergies and access to the resources of those companies. For us, the valuation has always been based on long term profit and cash. Having said that, we were in theory competing against people who were just looking at revenue multiples, and you know as recent as a year ago we had conversations with potential sellers who are talking about valuations they were getting from stats or the fact that they could go out to the IPO market. Those are very different valuation models in what we're looking at. So as we said, we remain disciplined, we always have – we'd rather have an alternative partnership structure as we’ve done with Polar and Vita Coco and McCafé. We're up for acquisitions and we've done some of those which have performed well in our business, but we’re not going to overpay and we've never been caught up in valuing anything on a multiple sales. Bryan Spillane: Alright, thanks Bob! Thanks Ozan! A - Bob Gamgort: Okay, thank you. Operator: The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead. Bonnie Herzog : Thank you. Good morning, everyone. Bob Gamgort: Good morning! Bonnie Herzog : I have a question on your coffee business. I guess I'd be curious to hear you know some more color on the consumer and whether you're seeing any signs of down trading within the home actually that could affect your pod attach rates going forward. You know during the quarter I think your pod attach rate decelerated a bit. So wondering you know how big of a risk you see for lower coffee pod consumption in an economic slowdown with you know thinking about the possibility that consumers start brewing ground coffee in their homes, even if they do owned you know one of your brewers, or you know Bob thinking about your comments. Do you expect you know something like that to be more than offset by incremental consumers switching back to consuming coffee in their home. That’s it for me. Thanks. A - Bob Gamgort: Yeah, so the first part is household penetration is the biggest driver of growth in our coffee system more than attachment rate. So as we’ve talked about, we had 3 million households per year for the past two years. We saw that as above our long term trend of 2 million households and so our expectation you know continues to be that 2 million is the right growth rate for us on household penetration. Attachment rate has been remarkably consistent over the long term. The only difference is during COVID we saw an increase in attachment rate that has been working down gradually from that peak to pre-COVID levels, and there's a little bit of noise even in this quarter of a bigger re-opening where people are going out of homes, and that's actually been – as strong as our business has been, that's actually been a negative factor that's been weighing against our strong growth that we've had and that's just about – in our opinion that’s just about done. We're almost back to fully open. Interestingly the one area that hasn’t reopened fully are offices, and so still in front of us is the opportunity to recapture even more growth in our office coffee business. With regard to tradeoffs, we have studied this a number of different ways and I referenced in our prepared remarks that we went back and looked at the last recession across all CPG categories. Coffee and CSDs are among the most resilient if not the most resilient in all of CPG for the reasons that I talked about, and we don't see any tradeoff in between coffee, forms of coffee within the home. You see over the quarter, a slight increase in private label pods, and some reduction in premium pods. If you recall during COVID the reverse is true. So it's almost a reversion back to the long term trends, and even if that does happen, remember, we make the great majority of private label pods, so this is a business that’s well protected against all forms within single-serve and honestly, we do not see tradeoffs between other forms of coffee. And if there is a real recessionary impact, we know that people go from out-of-home consumption to in-home consumption, which would be a net positive for us. Bonnie Herzog : Alright, it makes sense. Thank you so much. A - Bob Gamgort: Okay, thanks Bonnie. Operator: The next question comes from Kevin Grundy with Jeffries. Please go ahead. Kevin Grundy: Great! Thanks. Good morning everyone. A - Bob Gamgort: Good morning, Kevin. Kevin Grundy: You must have touched on SG&A – good morning Bob. SG&A came in a bit higher. I think there was some mention of higher marketing spending in PB [ph], I think to a lesser extent in coffee, so sort of a near term dynamic to that. Maybe talk about what you're coping with in that line item SG&A and then within that investment levels. And then Ozan and for both of you, Bob as well, what's the right level for advertising and marketing. I mean you guys reduced as did many others within the industry during COVID. At one point it was 6% as a percent of sales. We’re still kind of stacking in the low 4% area. Maybe just comment on what the right level is longer term and when you expect to get back to that? Thank you. A - Ozan Dokmecioglu: Yeah, thanks Kevin. So I will start with the first part of your question. When you look to our SG&A line, in fact there are quite a bit of pluses or minuses, and it's a line that a lot of cost elements actually get together and we consolidate. So let me try to expand a little bit, provide for or shedding a little bit further light. First of all, we have the transportation and warehousing expenses that are included in that line, which obviously has been one of the most volatile and inflationary spending line item for us, and TNW, Transportation and Warehouse represents almost the biggest increase factor in the SG&A line that you are looking at. And the second big bucket that we have in that SG&A line is as you said, advertisement and promotion, and we had some good levels of increase in our investments behind our brands, so that also included in that line. And also the whole labor across our company with the exception of manufacturing or production related, which is core elements of cost of goods sold. That leaves us with all the frontline employees we have, including our DSD, including our merchandizing, including our white collar, and as you know labor especially on the frontline has been one of the most pressurized line items throughout the year starting last year, so that increase is also included. And the remainder of all the overheads, whatever left that are included in that line that tended having any inflationary factor. And as you see, there are so many pluses or minuses in that line, but I think these are the four factors that do explain the majority of the increase in that line. Bob, onto you. Bob Gamgort: Yeah, talking about the marketing piece, you know COVID forced a wide number changes in the way we do business and obviously I’m not going to recap all of those. Some of those experiences were good learnings that we want to continue in the future, some of them are saying, okay, we want to go back to the way things were. So I think it's really reset the level of marketing spend that’s required. We were all forced to work with lower marketing spend. It caused us to be much more sensitive about return on investment and dial up our understanding in terms of a precision marketing perspective, and I think the best evidence that we were able to do that successfully is the strength of our brand portfolio. I mean that's really where the proof is in the end. So for us it became much more a focus on which brands we want to support in the portfolio at critical levels, what tactics do we want to use, and then how do we use all of the data that’s now available, to be able to target more precisely and course correct and it's worked pretty well. As we say all that, if you think about the strat plan that we took you through in Investor Day, our long term plan is to continue and increase marketing over time. The reason is because we have more ideas for growth than we're supporting right now and that's a great position to be in, and so I think as we continue to whether all of the pluses and minuses of inflation and recession and the volatility over the – you know the past three years is nothing like any of us experienced over our careers, we will increase our marketing spend overtime. But as we sit here today, the strength of our brands really speaks to our ability to navigate this environment. Kevin Grundy: Very good. Thank you both. A - Bob Gamgort: Okay. Operator: The next question comes from Lauren Lieberman with Barclays. Please go ahead. Lauren Lieberman: Great! Thanks! Good morning, everyone. A - Bob Gamgort: Good morning. Q - Lauren Lieberman: I wanted to talk a bit about brewer sales and you called out the brewer volumes were down 4% versus that, I think it was 29% comparison, so you know to some extent very much as expected, but of course retailers have been signalling you know challenges with small household appliances, discretionary items of the sort. So just wanted to get your perspective on brewer sales for the balance of the year, knowing again you've got some pretty big comparisons. What you're seeing if anything from retailers in terms of push back on inventory and you know about – I know you referenced again the traditional run rate of 2 million households per year, but does that still feel feasible? Is it an on average rate over time. Is that really a feasible addition in this economic environment, thanks – for this year in particular. A - Bob Gamgort: Yeah, let me start with the last part, because that is the most important part, which is household penetration, and it feels like every year we get asked questions about why this is the year we can't do 2 million households. And so I would say there's no indication, whether it's COVID, COVID recovery, recession, inflationary environment that our ability to add 2 million households per year is very steady, its strong and we have a ton of confidence in that, and that leads us to more than 10 years of household penetration growth at the size of the available market, so that area I think we're in good shape on. The second point I would make and we say this even when we have incredibly strong brewer sales quarters. The correlation between brewer sales and household penetration is loose. There's some correlation over time; it's not what you might think, and clearly on a quarter-to- quarter basis there's zero correlation. And we did point out just last year, we added 3 million new households to the system and we sold more than 11 million brewers. That tells you that the majority of brewers sold are replacements or upgrades and we certainly have been giving people reason to upgrade with the addition of new features and benefits and new design. So with that in context, when we said 3 million household a year ago, 2 million this year, 11 million brewers a year ago, year-to-date our brewer sales are down approximately 5%, and we’re up on a two year basis or at the same time period in the 30% to 40% range. You know we're taking pricing on brewers, but we see inflation there like everything else. Would I expect some elasticity effect? Definitely! But I see it not impacting household penetration. I see it as impacting some of the upgrade cycles, which we’re perfectly fine with. As you know we don't really make money on brewers. It's really in service and household penetration and coffee consumption, so all of our core assumptions are very much intact. Q - Lauren Lieberman: Fantastic! Thank you! And then just the one question though on retail inventory levels, pushback from retailers and get to just topical, would love to hear your perspective on that. A - Bob Gamgort: Yeah, it is definitely an issue, and as you know the shift in consumer behavior caught many of them by surprise and so they are overstocked with goods that have long lead times that are not selling, but we're in a category that sells incredibly well. As I said, we're talking about 5% volume change off of 11 million units. This is still a very good growth and profit opportunity. Again, most of the brewers – most of the retailers that sell brewers also sell pods and they know that every time they convert household over from drip coffee maker to single-serve, the great majority of those future pod purchases go to the retailer who sold the brewers, and is a significant trade up in profitability for them. So this is not the area they are looking to cut back on the inventory right now. This is one – still one of the best growth and profit drivers in their entire store, but this is not where they are focusing. Q - Lauren Lieberman: Okay, fantastic! Thanks so much! A - Bob Gamgort: Sure. Operator: The next question comes from Chris Carey with Wells Fargo Securities. Please go ahead. Chris Carey : Hi! Good morning. A - Bob Gamgort: Good morning. Chris Carey : My question is specifically on coffee pricing. So just looking at pricing in the coffee segment in the quarter, it does look like partner and private label pricing remains pretty minimal to KDP even though we can see these partner and private label operators raising pricing much more substantially and track channels. Can you maybe just give any commentary on when you think the overall pricing within the coffee segment will be more consistent with the pricing that we're seeing in the overall category, which is quite a bit higher? Then I just have a quick follow up. Ozan Dokmecioglu: Sure, thanks for the question Chris. Probably it would be verified focus on our own, let’s say owned and licensed products in terms of the pricing and how much we are seeing through the realization. As I was articulating a couple of minutes ago, we have taken a few pricing actions across our portfolios and in coffee, which is owned and licensed brands that we control obviously the pricing and the full – for the economics of it, including our brewers as Bob just that. So we have taken a few pricing actions last year which was in 2021 and early this year in quarter one and towards the end of quarter two as well. And when you look to the numbers that we have announced for example on the quarter, you would see that almost 6% of the price realization that we have successfully achieved across our coffee portfolio. And when you look to the either IRi or recent data you will see several action plans that the other industry players decided to take place. And when you look to the private label part, which is also important, but as Bod said, let’s make sure that we remind ourselves that we still produce for the most part of the private label category, that we also contribute to the economic benefits off that at the same time. Private label initially was a little slow to take the pricing actions, but when you look to the latest data, it is – that path also has gone up. Therefore, overall we are very happy with the resiliency of our owned and licensed brands that have shown and how the consumption is moving across the portfolio with regards to the pricing actions. And as we have seen, there are – besides the single-sever, the other segments or the sub-segments of coffee have also taken the pricing in line with more or less what's going on, especially with regards to the coffee bean prices. Bob Gamgort: Let me just add one things to it, just as a reminder of a concept that we discussed in the past which I will admit is a bit complex, and that is the fact that our pricing realization on our P&L understates that gap between what you're seeing at retail and what we're seeing, in large part – not the only reason, but in large part because we're not responsible for the Green Coffee purchases of our partners. So the biggest inflationary impact within coffee right now is the Green Coffee impact. Our partners take that on their P&L. We are just doing the conversion for them and so what happens is, it understate what feels like our pricing realization relative to the market, because a big part of the cost structure does not flow through our P&L. Chris Carey : That’s very helpful. Then just a quick follow-up on coffee as well. The expectation last quarter was for pod shipments to remain below consumption. It does feel like high volumes came in out of expectations this quarter. Did you catch up quicker than you had thought? Are you in a better position going into the back half than you were thinking at the end of last quarter, and is there any over shipment dynamics that we should be keeping in mind as we go into the back half as well. So thanks for just contextualizing the supply chain and the pipeline as well. Bob Gamgort: Yeah, it’s means the good news is, as we said in our markets is that our coffee recovery was accelerated. We made an investment to do so. It cost us on the P&L to do so, but we're in a position as we exited Q2, where we have good inventories, full service to our partners and our retailors, and what that enabled us to do is to catch up in the second quarter on some of that missed opportunity in the first quarter, and so we said that we were going to be below consumption in the first half, and then above consumption in the second half. We’ve largely caught up in the second quarter as a result of that. So going forward our consumption and shipments should be largely balanced. Chris Carey : Okay thanks a lot. Operator: The next question comes from Brett Cooper with Consumer Edge Research. Please go ahead. Brett Cooper: Thanks, just two questions from me. On coffee, can you update us on South Carolina, how much capacity that opens up to you and how that fits into your ability to bring new customers? And then second question Bob, you company M&A is just focused primarily on portfolio expansion relative to prior comments, which were large. Just wanted to check in on how [Audio Gap] relative to just an example? Thanks. Ozan Dokmecioglu: So, thanks for the question Brett. So let me take the first part with regards to the South Carolina coffee plant that we have been building. As we said previously, Spartanburg is now planned for 2023 and as a reminder, as we also spoke before, we begun in fact production of the cake-up on our first line in June 2021. But let’s make sure that this is a large facility that will take multi-year startups due to the several lines that we are putting. And as we discussed before, there was some slow ramping up due to 100% related to coffee – COVID, excuse me, issues that primarily our line manufacturer that ran into in Europe that we have agreed to buy. Therefore, lowest times are being catching up as we speak right now, when we are still in schedule to put the lines, some of the lines into service, starting 2023 onwards, which was in-line with our expectations. Bob Gamgort: Yeah, I think on the M&A question, your point is correct, and that the conversation that we just had was primarily on portfolio white space, but I would say that our total landscape that we’re looking out across the whole M&A opportunity is portfolio white space, new platforms, geographic expansion and new capability that’s very consistent with what we talked about Investor Day, still is the case. And you know my examples of our two most recent small, but very strategic add-ons into peak is both filling in white space, it’s also Canada and we've got these great Canadian Mexican businesses that we can add to through M&A. And then Tractor is a great example as well, because again it’s a while space yeah, but it really leverages new capabilities and new strength in our fountain foodservice business. We’ve got the capabilities that we can built with scale. So we look across that entire landscape and are finding that you know as I said in my remarks are in quite a few I think very productive conversations. Operator: Was there a follow-up Mr. Cooper? Brett Cooper : No. Thank you. Bob Gamgort: Alright, thanks Brett. Ozan Dokmecioglu: Thank you. Operator: The next question comes from Andrea Teixeira with JP Morgan. Please go ahead. Andrea Teixeira: Thank you. Good morning. I have a question and two follow-ups please. First for Bob, how are the pod rates of growth away from home versus home phasing. And then, can you speak about the volume mix, but now more focused on the Packaged Beverage business. Are you seeing any signs of a more cautious consumer on the premium water side, and as you exit the quarter any signs of increased velocity. And I understand you don't break down volume mix, but in this environment perhaps mix is running faster than volumes in this scenario and in any signs of reversal ahead of us. And the one for Ozan, just so I'll put it out there, on the phasing of margins that you provided, the mass of the guidance implies that obviously both gross margin and EBITDA margin will likely down in Q3 year-over-year, but perhaps you know to make the math work for the guidance you mean flat in Q4. Just want to make sure that we got it right. Thank you. Bob Gamgort: Yeah, let me start with the cold beverage, right, in terms of any trade down or any change in behavior, we are not seeing anything right now. I mean theoretically as we move into recession you would see small outlets, convenient channels being more pressured, gas prices always do that and you know you’d see more sensitivity around packs and sizes. But if there's any change its very, very small right now. So nothing that we would be able to report that’s concrete based on the data. It's all things that may happen in the future. With regard to coffee, we don't specifically break out our away from home business as the side, but it's been a heavy drag on our business since the beginning of COVID. In fact we gave some to you back. We gave some very specific numbers about how much it was down and how much of a drag that put on our total growth. The recovery on that has been incremental quarter-by-quarter, but we’re still well below pre-COVID levels on your away-from-home business, so that represents a future upside to us. And the mobility that I was talking about before is really people consuming In-Home versus consuming out-of-home, in other words like a coffee shop, and that’s still recovering back to the COVID levels, but it's all built into our expectations and all of our guidance reflects everything I just talked about there. Andrea Teixeira: You want to talk about the margin piece? Ozan Dokmecioglu: Yes exactly. So it's important to reiterate what I just said a few minutes ago, that we are on the input cost size, we are largely covered for the remainder of the year, which we do also have a good line of sight with regards to the price realization, so these are three important points. And when we step back and look at it, because you asked the question on the margins, this is important in relation, the inflation and the pricing and the whole productivity equation. In quarter one, inflation came in at 15%. As we just spoke, quarter two inflation came in at 17% and we also expect quarter three to be the, to be a little higher than in quarter two. So we are getting a more pricing benefit in Q3 due to the actions that we have successfully implemented, that would be – that would help us to offset these further inflation headwinds that we are expecting to happen in our business. At the same time, we also expect quarter four inflation to be more or less half rate versus what we have seen in Q3 versus last year. Why? Because last year in quarter four, in 2021 we have seen a significant spike across the board in most of our input costs that drove a big inflationary number, so we are lapping against that one. So that’s very important to figure that out as well. So what does this leave us? This leaves us that we will realize the full benefits of pricing that we have already taken, which will enable us to offset the inflation and the deliver the margin growth in quarter four. That would be our expectations in order to sum up by second half, as well as they split it in quarter three and the quarter four. Andrea Teixeira: Super helpful. Just one classification, the rate or the index that Bob had said away-from-home, is that still about 80% of what it was back just prior to COVID? Bob Gamgort: We haven’t talked about that specifically, so. Andrea Teixeira: Okay, that’s fare. Thank you, I’ll pass it on. Operator: The next question comes from Steve Powers with Deutsche Bank. Please go ahead. Steve Powers: Hey! Thanks, good morning. Two questions from me. The first one, the first one of Beverage Concentrates, maybe a little bit of clarification. I was hoping you could parse out more of the underlying run rate in realized pricing versus the trade of accrual impacts this quarter. You know a clarification if that trade accrual impacted something that we should expect will reverse or if it's discreet this quarter. Ozan Dokmecioglu: No, hi Steve! Let me take the Beverage Concentrates unit specific trade accrual question. First of all, it would be helpful to talk about that. The trade accruals are basically part of our normal daily lives. Some quarter is plus, some quarter is negative. And obviously we do our best in order to estimate as close as possible, but as you know, because of all these ever changing macroeconomic situations, really making it difficult to get almost 100% procession, first of all that’s the reason of the trade accrual. And the trade accrual timing also accounted, let’s say for more than or around half of the price realization that we have experienced in quarter two and as we have seen in our numbers. Do we expect this to trade, to come back as a negative in the other quarters? No, absolutely that's not the expectation or that’s not the reality of what's going to happen. Steve Powers: Okay, perfect! That's helpful. And then I guess, I think Bob or Ozan either one, just to build on Lauren’s question on household penetration, I think you addressed 2022 comprehensively. As you said you get asked every year, so just looking ahead to the extent that consumer confidence and discretionary spending continues to come under pressure. I guess I'm just curious how the playbook changes on household acquisitions in a truer recessionary environment? Whether that comes in terms of just a more precise value messaging, a different emphasis on the assortment of brewers you might bring to market or however you think about that playbook in a recession to the extent that it is different. Bob Gamgort: Yes, excellent question. You see that our capabilities here, we have a wide range of price points on brewers and we have a wide range of price points on pods and we cover the entry level price point all the way up to now Super Premium as we talked about on the call, dollar per pod coffee all the way down to entry level price points which is around $0.30 per cup. And the same applied to brewers, where we have brewers that are now around $50 right, they used to be below $50, but due to inflation around $50, all the way up to about $200 to $250. So we are able to take that range and have the right mix by retailer and target consumers with the appropriate price points. The other point is that, if you think about these new brewers that we are introducing, that are much more capable of producing specialty coffee and actually iced coffee, we're able to deliver messages that you have a valued message to them. Because the price comparison between cups and ground is one things, but the price comparison between cups and out-of-home coffee is dramatic; it's 5x to 10x, the cost to go out-of-home. So the more that we’re able to allow consumers to replicate the coffee shop experience in-home, it actually allows us a dial up that’s away from home to in-home value messaging in our communications is very compelling. So we have a number of options within our tool kit and it's exactly the way we’re thinking about it, the way that you laid it out. Steve Powers: Yeah, okay, thank you very much, that helps. I appreciate it. Bob Gamgort: Okay. Operator: The last question today will come from Robert Ottenstein with Evercore. Please go ahead. Robert Ottenstein: Great! Thank you very much. Just wondering if you can give us an update on the CFO search and maybe remind us you know what you're looking for in terms of experience and skill set. And then there's also been some other management changes, maybe just kind of give us a sense of you know what the team looks like today? The kind of changes that you've made and how you see the organization from a senior management perspective going forward? Thank you. Ozan Dokmecioglu: Yeah, good morning, Robert. So let me take the CFO part and a couple of follow-up to your questions on that line. First of all, we are aware, we wanted to be with regards to the CFO search, and as we said before, we are looking forward to recruit a world class CFO that not only will manage the today’s complexity and the size of our business for the – but for also the future that we are building, the modern beverage company. So that’s important and it’s going well. At the same time, I am also happy to say and we are fortunate to have a deep bench of talent and have a very skilled and experience executive. In fact George is sitting next to me today on this call, and George Lagoudakis as we have announced publicly stepping in on as Interim CFO. So that’s very important to note. So there in no any gap and we carry the experience, as well as the necessary knowledge to perform the duties without creating any gap. With regards to the other positions that we may be looking for, as well as the internal promotions that took place, at this point in time lets be clear on one thing; we do not have any open position. We have people on the jobs that we will be either looking for external or the promotions that took place on an internal basis, and there will be a healthy handle where when we have the external candidates in place. So it's not a situation that someone left the positions open and we are looking to recruit externally. So that's important to make sure that the continuity is 100% there. Robert Ottenstein: And then just in terms of the CFO, I mean there’s CFO's who are more financially oriented and other ones that are more operationally oriented. Any thoughts along those lines? Ozan Dokmecioglu: I mean it is – absolutely, I agree with you. It is important to focus on the CFO and the necessary credentials and the knowledge and the experience, but there's also another factor that we should not forget, which would be the overall financing team that supports the CFO. When we step back and look at it to the several, the several finance leadership team executives that we have KDP today, all those roles being occupied and serviced by the really world class expertise. Therefore we do have a very strong finance team below the CFO, which definitely helpful to perform the CFO activities, and we are not necessarily looking for to grab or find one specific expertise. What matters for us is to be able to operate on a cross functional basis across our company, and most importantly contribute to the growth agenda of our company that we are very excited given all the opportunities that lie ahead of us. Robert Ottenstein: Terrific! Thank you very much. Ozan Dokmecioglu: You’re welcome. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to the company for any closing remarks. Bob Gamgort : Thank you, operator, and thank you everyone for joining this morning. If you do have any questions or follow ups, Chethan and I are around all day. Please reach out; we’ll be happy to talk to you and answer any questions. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Good morning, ladies and gentlemen and thank you for standing by. Welcome to the Keurig Dr Pepper’s Earnings Call for the First Quarter of 2022. This conference call is being recorded. [Operator Instructions] I would like to introduce Keurig Dr Pepper's; Vice President of Investor Relations, Mr. Steve Alexander. Mr. Alexander please go ahead. Steve Alexander: Thank you and hello everyone. Thanks for joining us. Earlier this morning, we issued our press release for the first quarter of 2022. If you need a copy, you can get one on our website in the Investors section. Consistent with previous quarters, today we'll be discussing our performance on an adjusted basis, excluding items affecting comparability. Beginning with this quarter we will also exclude the impact of foreign currency translation from our adjusted results. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability is not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation tables included in our press release and our 10-Q which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company's control, we do not reconcile our guidance. Here with us today to discuss our first quarter 2022 results are; KDP Chairman and CEO, Bob Gamgort; our CFO, Ozan Dokmecioglu; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. And finally, our discussion this morning may include forward-looking statements which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially and the company undertakes no obligation to update these statements based on subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. And with that I'll hand it over to Bob. Bob Gamgort: Thanks Steve and good morning, everyone. Our Q1 results reflect different stories of challenges faced and progress achieved across our portfolio. One common thread however is, the continued strong consumer demand for our brands as demonstrated by consumption growth and share expansion. In Coffee Systems the story is one of accelerated supply recovery to enable us to fuel the continued strong growth of the Keurig System, following our addition of six million new households in the past two years. As discussed previously the December-January Omicron wave caused widespread labor outages that resulted in supply shortfalls in coffee pods, at a time when consumer demand was at a record high. As the first quarter progressed, we accelerated our efforts to rebuild pod manufacturing capacity, increase finished goods inventories and improve service levels. Our first coffee pricing actions intended to mitigate inflation in Latin America Beverages. Even though we’re still in the peak portion of the inflation curve the timing of pricing is lagging inflation which leads the pressure on margin. Looking forward we believe there will be an inflection point in which high current costs begin to lap elevated year ago costs, leading to lower year-over-year inflation comparison. At the same time pricing actions will have caught up which we expect will lead to margin recovery. As we look forward, we believe our cold beverage portfolio will continue to perform well throughout the balance of the year and we are confident that our coffee production output and inventory levels will have fully recovered by the end of Q2. Therefore, we have increased our 2022 full year guidance for net sales from mid-single digits to high single digits, while maintaining our EPS guidance at mid-single-digit growth. Looking at Q1 earnings and EPS, Ozan will discuss the key drivers of results in the quarter. But the biggest headlines are the relationship between inflation and pricing and the investments we've made in the business, particularly in coffee. Taken together we delivered modest net earnings growth and adjusted EPS in-line with a year ago. During the quarter inflation which was significant across the board particularly for inputs such as coffee, resins, aluminum and sweeteners, as well as transportation and labor approached 15% which is higher than we expected entering the year. Within our segments, Packaged Beverages again reported another standout quarter with net sales advancing 13% on volume growth of 5% and pricing up 8%. In-market performance also remained very strong with market share growth registered in almost 90% of our cold beverage portfolio led by continued strength of CSDs, along with seltzers, coconut waters, teas, apple juice and fruit drinks. Performance of Snapple and Core continued to improve from the material availability issues faced in 2021 with both brands posting improved market share results in the quarter and upcoming innovation and marketing plans for this summer expected to accelerate this progress. Bai continues to recover from supply issues last year, posting consumption growth for the past four consecutive quarters. Margins for Packaged Beverages were impacted by escalating inflation which outpaced the timing of pricing, as well as ongoing transportation and labor challenges. We expect new pricing actions already announced to the trade to be in market, late in the second quarter. In Coffee Systems, we undershipped consumption with negative KDP net sales for the quarter, comparing to 3.6% K-Cup pod consumption growth as measured by IRI. You'll recall from our fourth quarter discussion that record consumer demand for K-Cup pods was challenged by production shortfalls, as Omicron-related labor availability issues combined with the delayed start-up of our new Spartanburg manufacturing facility pressured our capacity. We prioritized our service recovery during the quarter to partners and customers at the expense of our owned and licensed brands to rebuild our internal inventory levels. While that was the right decision from a Keurig ecosystem perspective, it came at a significant cost to KDP in terms of both revenue and profit. We made significant progress during the quarter in restoring our coffee supply chain with K-Cup pod production, finished goods inventory and customer service all improving by double-digits. We now expect a full inventory recovery by the end of Q2, enabling Coffee Systems to return to normal service levels in the second half of this year. Supporting this recovery is new manufacturing equipment we expect to come online as the year progresses, which will ensure supply to meet strong consumer demand in the second half of this year and in 2023. As we continue to work on coffee recovery and rebuild our finished goods inventory in the second quarter, we expect pod shipments to remain below consumption. That trend is expected to reverse in the second half of the year with shipments outpacing consumption, as improved internal inventory positions will enable us to refill customer and partner inventories and return to driving our owned and licensed brands through marketing and promotion programs. This will result in a much improved top and bottom line performance for Coffee Systems in the second half of this year. Pricing in coffee has also increased to mitigate the impact of inflation. Single-serve coffee category pricing increased 5.4% in the quarter, as pricing actions continued to flow through at retail. KDP-manufactured brands pricing advanced 6.7% in the quarter. Given the escalating inflationary pressures, we recently announced another round of pricing that will be in market late in the second quarter. While navigating through the well-discussed macro challenges over the past two years, we have also maintained our focus on driving long-term sustainable growth through innovation, renovation and partnerships across the full KDP portfolio. Although these topics have received less airtime in our recent conversations, I'd like to take a few minutes to do so now starting in Coffee Systems. You'll recall that in 2021, we debuted a new platform for Keurig with the launch of the K-Supreme Plus SMART connected brewer. This is the first of many new connected brewers to come including the K-Cafe smart later this year. Consumer response to our connected brewer continues to be positive and we believe that we will have more than one million connected households in the next few years. In 2021, we also launched our popular Brew Over Ice feature on one of our smallest footprint brewers, our K-Slim + ICED coffeemaker, which debuted as a Target and keurig.com exclusive. More than half of K-Slim + ICED purchasers were households completely new to the Keurig system. We will be expanding retail availability of this model late this summer. Next week, we are launching the new K-Cafe Essentials model, our first brewer less than $100 that offers coffee lattes and cappuccinos through a built-in milk frother. This brewer has scored an average 4.8 out of five stars in our consumer and influencer review programs and we look forward to its debut as a Walmart exclusive. In terms of coffee innovation, in January, we launched a Snickers-flavored K-Cup pod under The Original Donut Shop brand as an expansion of our flavored platform. This new product is already a top-selling variety where distributed with a national rollout planned for later this year. Lastly we are pleased to announce the Community Coffee the largest family-owned retail coffee brand in the US will be returning as a Keurig partner brand at the end of this year. The relaunch of our partnership after a five year hiatus is a testament to the quality, innovation, service and consumer insights the Keurig ecosystem can provide to coffee brands. We look forward to working together with Community -- the Community team to help accelerate their brand growth. Shifting to cold beverages. We're excited to announce that we have agreed to make a minority equity investment in Tractor Beverage to expand innovation in the fountain and foodservice channels. Available nationally in Chipotle restaurants since 2020, Tractor offers the first and only certified organic non-GMO beverage solution, specifically tailored to foodservice operators. To enable Tractor to achieve widespread distribution across multiple food service channels, we have also agreed to enter into an exclusive sales agreement with Tractor that leverages the strength of our fountain foodservice sales team. KDP cold beverage innovation and renovation continues to be robust and we have recently launched Snapple zero sugar; and Snapple Elements, a new line of teas and juice drinks inspired by the elements fire, rain and air. Snapple Elements line is made from all-natural ingredients with no artificial flavors or sweeteners and less sugar than traditional Snapple beverages. Snapple zero sugar is a rebranding of Diet Snapple, similar to what we've done with several key CSD brands, resulting in increased velocity. During the quarter, we launched two new CSDs, Simple 7UP, a new 7UP line with clean simple ingredients and reduced sugar; as well as Sunkist mango orange to expand our fast-growing Sunkist brand lineup. Finally, returning this summer as a limited-time offer is a fan favorite Dr Pepper Dark Berry, including zero sugar variety. The launch will feature promotional packaging tied to this summer's release of Jurassic World Dominion. I'll now turn it over to Ozan to take you through more highlights of the quarter. Ozan Dokmecioglu: Thanks, Bob and good morning everyone. I will start with a brief review of our first quarter business and financial highlights and then turn to our outlook for 2022. As usual, we will be discussing our performance on an adjusted basis. And as Steve mentioned, beginning this quarter, our adjusted results now exclude the impact of foreign currency translation. As mentioned earlier, our top line was again quite strong for the quarter, as Packaged Beverages advanced a significant 13%, along with very strong growth for Beverage Concentrates and Latin America Beverages. As expected, Coffee Systems net sales declined in the quarter, as the segment prioritized shipments to branded and private label partners and to rebuilding inventory, which improved sequentially in the quarter. All in, net sales advanced 6.1% to $3.1 billion, with net price realization up 6.3% and volume mix down slightly. Excluding Coffee Systems, net sales advanced 12.8% and volume mix was up 4.6%. On a two-year basis, net sales for the first quarter increased 17.5% versus 2020 with all four segments growing. Adjusted gross profit was up 1% in the quarter, benefiting from the impacts of the significant pricing actions we put in place and productivity savings. Escalating inflationary pressures, combined with ongoing supply chain disruption and labor constraints were significant offsets, as the timing of pricing continues to lag inflation. As a result, adjusted gross margin declined 280 basis points versus year ago to 52.7%. Adjusted operating income declined 1.2% in the quarter, reflecting the significant impact of inflation, including the ongoing impacts of macro supply chain and labor challenges, partially offset by our strategic asset investment and other benefits that enabled continued investment in the business. Adjusted operating margin declined 170 basis points to 23.8%. On a two-year, basis adjusted operating income increased 6.7% versus 2020. Despite the inflationary pressures, we maintained our investment in brand marketing. In fact, while we reduced the spending in Coffee Systems due to supply limitations, we increased marketing spending in our cold beverage brands by 7%. During the quarter, we also made significant investments to accelerate coffee recovery and get us back to normalized inventory positions and service levels to realize our full growth potential in the second half of 2022. Those investments were focused on additional labor, warehousing and transportation capacity. As Bob mentioned, we prioritized partner and customer brands over our owned and licensed brands for the long-term benefit of the ecosystem, but with a short-term profit and revenue hit to us in the quarter. These incremental investments were paid for in part by a $38 million benefit in the quarter from our strategic asset investment program, along with a $28 million benefit in non-cash stock compensation expense and a $28 million benefit in legal fees. Adjusted net income in the quarter increased approximately 1%, primarily reflecting lower interest expense, partially offset by a higher adjusted tax rate. Adjusted diluted earnings per share was $0.33 in the quarter, essentially even with year ago. Free cash flow for the quarter at $632 million continued to be strong, driving a free cash flow conversion ratio of over 133%. During the quarter, further strengthening our cash position, we received a $350 million settlement from the successful resolution of our litigation against BodyArmor, which was used to reduce financial obligations. At the end of the quarter, unrestricted cash on hand totaled $592 million. As announced earlier this month, we completed a $3 billion strategic refinancing given the current interest rate environment. Since the time of the merger nearly four years ago, we have generated significant cash flow and rapidly delevered. This strategic refinancing further strengthens our balance sheet and liquidity profile with extended maturities and more favorable rates that will lower our interest expense. Turning now to our segment performance in the quarter. Packaged Beverages again delivered double-digit net sales growth with the first quarter up more than 13% driven by favorable net price realization and higher volume mix, the latter reflecting continued market share expansion and strong in-market execution across the portfolio. On a two-year basis net sales increased an impressive 21% versus 2020. Adjusted operating income increased 16.9% reflecting the strong net sales growth and productivity combined with the strategic asset investment program benefit of $38 million. These benefits were significantly offset by the unfavorable impacts of escalating inflation and macro supply chain disruption and labor constraints that drove higher-than-anticipated costs to serve the continued strong consumer demand we experienced. Beverages Concentrates also posted double-digit net sales growth approximating 10% in the quarter led by favorable net price realization and higher volume mix. The volume mix performance was driven by higher fountain foodservice volume due to improving, but still recovering consumer mobility in restaurant and hospitality channels. On a two-year basis, net sales advanced almost 17% in this segment. Adjusted operating income increased 3.3% in the quarter driven by the strong net sales growth meaningfully offset by the impacts of escalating inflation and a significant increase in marketing investment. Latin America Beverages also posted double-digit growth in net sales approximating 18%, essentially, balanced between higher net price realization and increased volume mix. On a two year basis Latin America net sales increased an impressive 26% versus 2020. Adjusted operating income increased 13% reflecting the strong growth in net sales, partially offset by broad-based inflation and a significant increase in marketing investment. And finally, Coffee Systems net sales in the quarter declined 4.3%. This reflects the impact of rebuilding our internal inventory positions combined with prioritizing shipments to branded and private label partners for which we receive lower revenue recognition per pod than we do with our owned and licensed brands. In addition, Coffee Systems faced a significant comparison to the first quarter last year where net sales increased 17%. On a two year basis, Coffee Systems net sales increased 12% versus 2020. We achieved higher Coffee Systems net price realization of 3.2% in the quarter, which was driven by pricing actions taken primarily on our owned and licensed pods in late 2021 and the first quarter of 2022 combined with sequentially lower retailer fines incurred in the first quarter. Lower volume mix in the quarter of 7.5% reflected comparison to the strong 19.5% growth in the year ago period and the impact of our coffee recovery program. Consequently, pod and brewer shipment volume declined 5.2% versus a year ago comping the strong growth of 14% and 61%, respectively in the year ago period. Adjusted operating income decreased 24% in the quarter. While this performance reflected the higher net price realization we achieved it continued to lag inflation and the cost of our recovery plan. This plan which will continue through the second quarter accelerated customer service recovery to partners and retail customers quickly. However, it added significant costs during the quarter. I would like to spend a moment discussing our expectations as the year unfolds in the context of the first quarter. We expected the first quarter to be our most challenging period this year due to the timing dynamic between inflation and pricing and in comparison to quarter one last year before inflation spiked, coupled with our need to invest heavily in coffee supply. With the first quarter now behind us we continue to believe it will prove to be the toughest this year. During the quarter, we delivered strong brand growth, implemented new pricing actions, and delivered significant improvements in coffee production, customer service levels, and inventory. As we look ahead, we expect continued strong revenue growth, driven by innovation, renovation, partnerships and are pleased that we will be in the position to invest in marketing to restore full demand to our coffee business in the second half as inventories are rebuilt. As discussed this morning, accelerating coffee recovery and investing in our cold beverage marketing came at a cost in quarter one. However, we have the flexibility to leverage our strategic asset investment program and other one-time benefits to cover these investments. This puts us in position for accelerated revenue growth in second half, including unconstrained growth in coffee. Looking ahead inflation still looms as the greatest challenge and has proven difficult to forecast even for the experts. We continue to lock in coverage on all items where possible have implemented additional pricing and are ready to add more pricing if required. We have and will continue to protect our marketing investment as we believe brand strength and stability to lessen pricing elasticity is a key competitive advantage for KDP. As discussed on the last call, we also see the strategic asset investment program as an ongoing effective tool to drive marketing investment in an environment marked by significant cost pressures. Our confidence in our topline led us to increase our guidance for full year net sales growth to the high single-digit range while reaffirming our full year guidance for adjusted diluted earnings per share growth in the mid-single-digit range. Supporting this guidance we continue to expect the following unchanged assumptions. Adjusted interest expense is expected to approximate $430 million including the benefit of our recent strategic refinancing, which was planned early this year. Adjusted effective tax rate is expected in the range of 22% to 22.5%. Diluted weighted shares outstanding are estimated to be approximately 1.43 billion. Finally, while we don't provide quarterly guidance, given the current environment, I want to share that we expect the second quarter to show modest sequential adjusted earnings per share improvement versus the first quarter with more meaningful improvement in the second half. Specifically, we continue to expect adjusted earnings per share to strengthen during the year reaching the high single-digit range in the second half which would put us on our long-term algorithm for the period translating to mid-single-digit growth for the full year. With that, let me hand it back to Bob for some closing remarks. Bob Gamgort: Before moving to Q&A I want to recognize Steve Alexander for his recent promotion to Vice President of Investor Relations. Many of you on this call have had the opportunity to work with Steve during his 15 years with KDP and Dr Pepper Snapple and have benefited from his strong understanding of the beverage industry. And finally, earlier this month, we announced that I will be transitioning my CEO role to Ozan at the end of July and I will remain Executive Chairman for the following two years. This transition was designed to ensure continuity of leadership and strategic direction for KDP as well as to enable dedicated focus on the new and very significant inorganic value-creation opportunity we have in front of us. I have tremendous confidence in Ozan based on working side by side with him over the past six years and I'm excited about the opportunity to continue to partner with him, the KDP executive team, and the KDP Board of Directors over the next few years. With that, I'll turn it back to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Bryan Spillane with Bank of America. Your line is open. Bryan Spillane: Hi, thanks operator. Good morning everyone and congratulations to Bob to you to Ozan and Steve on all your new roles. Bob Gamgort: Thanks Bryan. Ozan Dokmecioglu: Thank you. Bryan Spillane: So the I guess my question -- I have a couple of questions just around Coffee Systems. One is just -- you talked about new capacity coming online. So just want to make sure we're clear about when that will be. And at what point in the year do you think that service levels will be optimized, right? Are we still six months out a year out? Just at what point do we think service levels will be normal? Ozan Dokmecioglu: Again, good morning, Bryan. Thanks for the question. Let me start with your first question with regards to the coffee capacity and the production availability. As we announced during -- starting actually mid of last year, we were expecting some slowdown ramping up our state-of-the-art manufacturing facility in the K-Cups in Spartanburg slowing down. But during our last call, we also announced that Spartanburg will be turned on primarily in 2023. So that was our stance. In the meantime, we've also gone through a significant consumption demand coming from our consumers. And as we always do starting last year onward, we actually acquired new production lines utilizing the existing technology that we have. And we are commissioning them as part of our ramp-up plans. Therefore, two-third of that capacity already went in and one-third is also going to coming online in the upcoming quarters. Therefore, we feel good where we are with regards to managing our overall coffee production capacity. And also just to add you also asked the question when we will be feeling good in terms of restoring the capacity that we will be requiring and needing. And as we spoke to during our prepared remarks, we have seen sequential monthly improvements of restoring our production capacity. That includes inventory. That includes our service levels to our partners, to our retailers as well as our owned and licensed. And we expect actually to fully restore our capacity including all those spaces sometime in quarter two. Therefore, we feel very good where we are and it took a few quarters to go back to the levels that we were requiring for. Bryan Spillane: Thanks, Ozan. And just one follow-up just staying with coffee and pricing. We've fielded a lot of questions about consumers potentially trading down and demand elasticity. But maybe Bob could you talk a little bit about how you see pods as a relative value to coffee away from home? And is that really maybe the more sort of tangible comp especially since, coffee away from home the prices and the inflation there has been pretty meaningful. So just trying to understand if we should when we're looking at elasticities and cross-elasticities is it really away from home more so than people maybe trading up and down within the coffee aisle? Bob Gamgort: Yes. Well I'll start Bryan with in-home, which we think is very relevant and we can talk a little bit about away from home. But we put in this strategic pricing investment over a number of years and we've had a lot of investor questions about this as well. So if you go back to 2016, before we implemented it, the cost per cup which is the relevant measure of K-Cup pods versus bag coffee for example was a $0.30 per cup premium. We lowered that to $0.20 per cup during the -- during that investment and we saw tremendous consumer response. Now we're moving up in price, but the game as you point out is really a relative game. And if you look at now the difference today between K-Cup pods and bags it's still $0.20. So we're maintaining that $0.20 differential while we're taking our pricing up which we think is the most relevant comparison. With regard to away from home, it's hard to come back with an exact number to be able to measure that against but we know that we're talking about an average price per pod or price per cup of $0.50 for K-Cup versus $0.30 for bag coffee. You're talking about a multiple of that somewhere between five and 10x depending on what you buy out at retail and that gap continues to get wider and wider. And so we see as people get concerned about pricing clearly, there's a trade-off from away from home to in-home which benefits the entire category. But our price gaps versus other forms of roast and ground coffee have stayed the same at that lower level that we guided to in 2018 2019. Bryan Spillane: Great. Thank you. Bob Gamgort: Okay. Operator: And your next question comes from the line of Bonnie Herzog with Goldman Sachs. Your line is open. Bonnie Herzog: Hi. Thank you and congratulations from me as well for everyone. I have a few questions this morning on your guidance. I guess, first on the top line your updated guide implies top line growth in the high single-digit range for the remaining quarters this year plus some. So I guess what gives you guys the confidence that your top line can accelerate? Especially since -- I'm thinking about your Q1 results, which were driven entirely by price realization, so I guess I'm asking about this in the context of the increasing pressures on consumers and kind of a little bit of what you just touched on as it relates to elasticities. And then on the bottom line, I guess, I'm trying to understand how you're factoring in some of the one-time items such as benefits from the gain on litigation settlement that you called out and continued sales leasebacks. I guess it seems like these did help to drive your slight EPS beat in the quarter. So how should we think about these items for the rest of the year? And how many points of growth do you expect from one-time items in your EPS guide? Thank you. Bob Gamgort: Okay. I'll start with the top line and then I'll ask Ozan to pick up the second part of your question there. With regard to the top line, you have to pull apart the quarterly results by coffee and all other. And the all other businesses outside of coffee, so that's LAB, BC and Packaged Beverages, were up -- all up double digits. And they were up in terms of pricing, but also volume. In fact volume was up fairly substantially across those. So our confidence is not that it's just all pricing driven, as we're seeing really strong growth in both. And our expectation is that that continues. We talked about more pricing being implemented. Of course, we've built our model around elasticities and the kind of elasticities we've seen and we expect going forward. So that's where we get the confidence on the cold side. The coffee side of the business, which was a significant drag on growth in the quarter, we know, will recover substantially in the second half of the year, for a couple of reasons. One is, we made substantial investment in the first quarter to accelerate our coffee recovery. And part of those one-time benefits you talked about, were used to fund those investments and Ozan will talk about that in a minute. But that puts us -- that acceleration puts us in great shape, because as Ozan just said, we believe our customer service levels will be back to normal by the end of the second quarter, which means that we can have unconstrained sales in the second half of the year. We've been pulling back on shipments. We've also been pulling back on promotion and advertising in the first quarter. So we can go back to unconstrained demand for coffee in the second half of the year. And then the other point on coffee is, we're undershipping consumption for the first half of the year. That flips around in the second half of the year. And we have the opportunity with the increased internal inventories to restock customers, partners and then again be able to turn on the promotion and marketing. So the combination of all of those leads us to the confidence that the second half of the year will be in that high single-digit range that we guided. Ozan, do you want to talk about the investment we made off of some of those discrete benefits? Ozan Dokmecioglu: Absolutely, absolutely. And thanks for your best wishes as well, Bonnie. So let me start with the strategic asset investment program which we also define as one-time benefits that we have incurred. First of all, as you would remember, we have been implementing these initiatives since 2019. So there is no new news or no new initiative or implementation with regards to that. So over time, we have leveraged, as I was saying, the strategic asset investment program to cover investment and the significant inflationary and macro challenges. So this is important to understand the sources and the use cases. Then we also have occasional benefits that we can utilize in exceptional times, like, this that allow us to continue to protect investment in the growth of our business, which is super important to us, so we can continue to innovate and support our brands, which is one of the reasons why our elasticities have held up to this point very nicely. Going forward, as opportunities arise, we expect to use the strategic asset investment program as an effective tool or the single factor to drive marketing and other investments when required. Exact timing of these transactions is not predictable, because we take an overall holistic perspective and on an annual basis. So that's the important part. And I'd like to take the opportunity to expand for a little -- for five seconds on the other two one-times that you have mentioned, which one of them was the stock comp benefit. Now that we have almost four years of history as a public company, we have transited to estimating our restricted stock for futures raised, as opposed to actual events, which is in line with industry practice. So both practices are 100% in line with the US GAAP, as well as how our peer group is treating this type of expenses. And on the legal fees, over the past few years, we recognize as ongoing expense costs related to our litigation against BODYARMOR. And with the settlement agreement in our favor, we simply recognize the return of our legal fees to ongoing results and that will be it. Thank you. Bonnie Herzog: All right. Thank you. Operator: And your next question comes from the line of Lauren Lieberman with Barclays. Your line is open. Lauren Lieberman: Great. Thanks. Thanks so much. So I was curious to talk a little bit about the go-forward in terms of the announced management changes. I mean, Bob, as you move into an Executive Chairman role, I'd love to hear a little bit about how you'll be spending your time. I know it was in the release you talked about M&A, but just where your focus areas will be. We've talked about the big kind of checkbook that you, as a company, will have at your discretion. So curious about how you'll be focusing those efforts a little bit more. And then Ozan, I mean, you and Bob have been partners since the start. But curious also as you're thinking about the path forward, things that you think you can add where you can add value in a different way than you already have been in your current position. Thanks. Bob Gamgort: Sure. Bonnie [ph], for me, first, there's really three areas of focus as we go forward. One is continuing to lead the Board, as we've evolved the Board overtime from being closely held to widely held and that also will continue to evolve somewhat over time. And so that's an important part of my role. Second part of it is working with Ozan on the executive team to make sure that the transition is seamless, and that we continue the great momentum that we have on the organic delivery of our business and I have a ton of confidence in that. And then the third part is, to give some time and space for me to work on the inorganic opportunities in particular M&A. Wouldn't be a surprise to anyone that the last 2.5 years or so have been very intensely operationally focused, very much managing it seems like everybody in the industry from one crisis to the next. And while that's critically important and is the right priority it doesn't leave a lot of time to think about and work on the strategic aspects of the business that require a significant amount of time, investment, patience even relationship building to be able to do that properly. And so, I'm certainly looking forward to being able to have more space against that, while always being available to Ozan and the team to jump in and help as needed over the next couple of years. Ozan Dokmecioglu: Yeah. Also thanks to you as well Lauren. So, I'm sure you all know that, we have a robust strategic plan as we have all taken you through back during our Investor Day October 1st last year. And obviously I have been one of the important architects of that plan along with Bob, along with the executive leadership team as well as our Board and I'm 100% behind that strategic stance. And when you do a double click you would see that, we have great growth opportunities in Coffee Systems, doubling our business overtime by recruiting new households as well as tapping to our innovation both in the brewers as well as the coffee beverages side. And we still have some white spaces that we can fill in. When we look to the cold beverages again, we have great growth trajectory in front of us so be it via distribution making it -- making our distribution more effective more impactful as well as efficient. As Bob was saying, we have quite a bit of still white spaces in select brand groups that will get us to new consumption occasions. That includes perhaps some geographical dimensions. And Bob was also saying M&A. Therefore as you see, it's a full package in terms of the growth trajectory that we have in front of us which makes us obviously very excited and motivated. And our job is to continue to execute very successfully against this strategic planning stance and deliver the business goals that we put on us. Lauren Lieberman: Okay. Thanks so much. Operator: Your next question comes from the line of Kevin Grundy with Jefferies. Your line is open. Kevin Grundy: Great. Thanks. Good morning everyone and I wanted to extend my congratulations as well. First I think just housekeeping maybe on Ozan's replacement at the CFO position. Maybe just are you looking internally for that? Are you looking externally for that? I suspect it is both. Maybe just comment on sort of what attributes you're looking for that candidate maybe timing. But the broader question I have is really around investment levels. I think this is to kind of pick up a little bit on what Bonnie was getting at before excuse me just how you're balancing that with EPS growth. Because Bob, you've been really clear about your commitment to how seriously you take the EPS growth targets and the delivery has been very, very good since the merger in what's been a really volatile environment. But with the onetime items now providing some help the question is really around balance. And number one like, what's in the outlook for brand support now? And what's your willingness to sort of commit to those brand levels, or is there some element that you're possibly willing to pull back if needed to hit the EPS growth target? So just the question is really around balance what's in the guidance and your willingness to pull back if needed to deliver against the EPS growth target. Thanks for all that. I know there's a lot there. Bob Gamgort: All right. Ozan, why don't you start off? And I'll pick up the second part. Ozan Dokmecioglu: Yeah, absolutely, and again, thank you very much as well Kevin. So, on the CFO search as we announced publicly the decision was to go outside and recruit a world-class CFO. And for the fact that -- in order to deal with the complexity of our company, but also and more importantly to bring a CFO that will be able to navigate through the future growth plus the existing complexity of our company. And that's what we are looking for. And the search has already started. And we believe that we will manage the time lines that we have communicated previously in terms of being able to recruit. Bob Gamgort: Yeah. On your second question, I think the simple answer is we take all of our commitments seriously. And we put commitments out there in a balanced manner. So think about what we delivered over the first three years as a public company. We delivered a 15% EPS CAGR, while we accelerated growth so we beat our growth targets. At the same time we were more competitive in the marketplace as evidenced by all the share gains that we had across the board as well as accelerated household penetration on the Keurig system and we put in place a foundation that's now scalable as we move into the future. So all of those were delivered. As you could imagine, when we put that commitment out there in 2018 the world looked very different than it has over the past three years, yet we've been able to balance across all of those without optimizing one metric at the expense of the other. We were able to deliver balanced performance and that's exactly the way we look at it going forward. So one thing, I would point out is that early back in October 1, we saw a lot of challenges in the macro environment in 2022. And therefore, we said that, we would be on mid-single-digit EPS growth in 2022. We're pleased that, we did that given what has materialized since then. And now we're in this mode of balancing investment and growth. And you can see we've taken our growth expectations up. It's not just pricing driven it's volume and pricing. And we make investments in brands. As we mentioned, on our Q1 call our cold business investment in marketing was up during the quarter. Even though it was incredibly challenging quarter we spent more. And the one-timers you're talking about I would suggest we not focus on any one quarter. You have to look at those type of – I put those mostly in the category of normal business especially when you look at it over time. And we're just incredibly transparent about those. And any time they hit in one quarter we tend to over focus on those. And then we don't talk about them as a group when they're not or it's an unfavorable comparison versus a year ago. We never get any questions about those. So just look at it over the period of a year. The fact that, we have some of these items to double down on investments in our brands, as well as in accelerating our coffee recovery, allows us to have the confidence in the balanced delivery that we committed to. Kevin Grundy: Very good. Thank you, both. Good luck. Bob Gamgort: Okay. All right. Thank you. Operator: And your next question comes from the line of Chris Carey with Wells Fargo Securities. Your line is open. Chris Carey: Hi. Good morning. Bob Gamgort: Good morning, Chris. Ozan Dokmecioglu: Good morning. Chris Carey: I just wanted to follow-up quickly on the M&A commentary Bob with your new role and then I'll ask a question on coffee. Just around M&A and priorities clearly the Tractor investment is on the smaller side, but potentially interesting over a long time period. Historically, you talked about reticence for large-scale M&A. So would we expect these types of deals to be more on your radar, or are you open to larger deals, if the category or geography fits? So kind of following up on the prior line of thinking there and then just on the coffee side of the business, I think you said that, your owned portfolio pricing was in the 6% range which is ahead of what you did in the quarter with coffee. Were there any service charges that impacted you in the quarter? And can you just expand on the partner brand pricing and when you would expect total Coffee Systems pricing to better approximate what you're doing from an owned perspective? Really, what I'm trying to get at there is just if you're pricing and whether the rest of the category is following and you're not expanding price gaps too much. Thank you so much. Bob Gamgort: Sure. First thing is, our reticence I think is the word you used on large deals was not on large deals. Our reticence is on overpaying for large deals. And so it's not about the size. It's about the multiple. And I think that, we're in an environment now where we're seeing all kinds of valuations shift. And people – our investors are more in favor of paying for cash flow and earnings than just multiple of sales with no earnings potential in them. So that may represent some interesting opportunities. But what I would point out is that, the way we think about inorganic is across the range of partnerships like we just announced with Community, which is a huge win for Community, and a huge win for us to be working together again. And we don't need to own that business by any means to have the benefits of that. And likewise by partnering with us they win as well. We can make seed investments as we announced today on Tractor Beverage, which is small today but we will certainly accelerate it. And it's in a unique channel in fountain foodservice, which is one that we are incredibly strong, but yet haven't done a deal like this in that channel before. And then we're also looking at mid- and larger-scale M&A as well. And so we have – I would say, we have a consistent dialogue with a large number of potential partners. I can't get into the details of that, but the fact that we are in this position when we talk about businesses like Community and Tractor is good evidence that of how we think about being proactive and creative in our partnerships. With regard to coffee pricing, again, the category is up 5% or a little over 5% and we were up a little bit more than that. Again, I wouldn't overreact to any one move in the quarter. Sometimes that's mix. Actually if you break it apart further the area that has moved late is private label within pods. So premium brands have actually moved substantially. The mainstream brands where we're a heavy participant in with our owned and licensed have all moved about the same level. There was a late move in private label. But they can't avoid the price of coffee and now you're seeing pricing coming up on that. So we're not seeing any distortion in the gaps between private label mainstream and premium and pods sticking for any time period. Chris Carey : Thanks, Bob. Operator: Your next question comes from the line of Andrea Teixeira with JPMorgan. Your line is open. Andrea Teixeira: Hi. Good morning, everyone and I will echo all the congrats and best wishes to Bob, Ozan and Steve. So, I wanted to just break down a bit on the new guidance. And for -- isn't that conservative still given that volumes will likely recover from here on the under-shipment comments in hot beverages in perhaps call it low-single at this point? And then, your price/mix should accelerate from the 6% that you posted so far. Isn't there potentially like an upside for that, or we should be thinking in the high single and with the visibility that you have now in terms of costs you're not ready to -- it's too early in the year to call a little bit better EPS given that -- given the puts and takes ahead of you? Appreciate that. Ozan Dokmecioglu: Yeah. First of all, good morning, and thank you very much Andrea. With regards to your top -- and you also touched to the bottom line as well. So let me try to break it up. You are right we feel very bullish with regards to our top line as Bob explained the reasons. And on the basis of that, we have increased our guidance from mid to high-single-digit top line growth expectations, and there are so many proof points with regards to that. And coffee will be one of the important determinants of, especially second half kicking in after we reinstate and put all the supply chain disruptions that we have had. So -- and we are also planning to take a second round of pricing in most of our portfolio by early summer, which would be more or less in line with the peer group and the market players that we have all announced to the trade. Of course, there will be some different timing with regards to the implementation, but we feel very good with regards to our price expectations and what do all those mean and translate to our top line growth. Having said that, there's a reason why everyone is taking pricing which is the inflation factor that came in and continuing to come in higher than everyone's expectation. For example, when we step back and look and just to remind our previous communications 2021 approximately inflation came in as we announced around 7%. And we also said during our Q4 2021 call, which was like a couple of months ago, that we expect 2022 inflation to trend around low-teens. But in reality in Q1 we have faced approximately 15% inflationary pressure, which was higher than what we were expecting. And I'm sure you have heard what all other industry players have been saying, which is essentially in line with what I'm articulating right now. Therefore, true we are taking pricing. True at the same time our volumes continue to increase, coupled with our very strong in-market execution and you can see the proof point in our market share, which is around 80% of our LRB that we have either maintained or continued to gain market share. Therefore, really strong performance and delivery all around. But inflation is not stopping and we are still seeing a lag in relation of the pricing and the inflation. As you know, no one can take an anticipated inflation and pricing accordingly which on a pure math basis this means margins will continue to be under pressure as well as there will be a lag. But we also believe that towards quarter three and probably more in quarter four of this year, there will be we expect on the basis of our assumptions again an inflection point in terms of the pricing catching up to cost. And that's where the margin expansion actually will kick in from a pure math and algorithm perspective. Therefore, we believe that we have a good robust algorithm that we put out there. Inflation is real. Inflation is -- has been higher than what we were expecting. And it's nothing to do with our coverage whether we can cover or not, because there are some input cost elements that we cannot cover, no one can cover, for example, rPET, for example polypropylene that we use with regards to the material of the K-Cup pods and some parts of the transportation and labor. So you see, it's not like one or two. Therefore this is continuous levers that we pull in order to run our business as well as deliver against our algorithm. And of course, if we do see some opportunity to do better as you all know we are not going to hold back. But we think we have a good algorithm right now a balanced one that keeps us to continue to invest behind our brands and business. Andrea Teixeira: Thank you, Ozan. That’s fair. Operator: And your last question comes from the line of Brett Cooper with Consumer Edge. Your line is open. Brett Cooper: Thank you. Good morning and congratulations to all. I had two questions if you don't mind. You've spoken about building the infrastructure to be a bigger company. I was hoping you can expand on the most important pillars that you've built or have in place that allows for that leverage. And then the second one is, you have a scaled e-commerce business in coffee, both direct to consumer and third party. So just from the outside we can't always see what's going on. I was hoping you can provide us an update on the progress you've made in preparing for the move in your cold beverage business to e-commerce and/or evolving the customer relationship to a more digital one. Thanks. Bob Gamgort: Sure. A couple of things, Brett. First of all, on the scalability piece that you talk about, I think there are three big areas in which we've set up a business at scale. I think one is just management structure. So, we've got a management team that has the bandwidth to take on more than they have today. And our focus on North America, I think gives us a bit of an advantage here. Having managed global businesses in my past to be able to focus in one region where you have common consumers, common customers, yet a significant amount of white space for expansion is an advantage for management to be able to continue to take on more without being distracted. I think the second area where we've made significant investment in is in our distribution capabilities. And we talk about a wide range of them. But if you think about today, we announced an expansion in our fountain foodservice business. We talked about on a number of calls, Dr Pepper is the most available CSD in fountain foodservice. So we've got a really strong team but they've had a relatively small set of brands and businesses to sell. Now we're equipping them with a new brand in partnership with Tractor, where they're able to get into new territory with GMO-free organic and some really unique products to be able to expand. So it expands their toolkit. There's a good example of a great foundation that we can now scale. DSD is a very important area for us. We've made significant investment over the past three years, increased tools and capabilities. But also we've expanded our DSD breadth and depth by acquiring close to 25 independent distributors to be able to boost our system. And obviously anything that you can scale within DSD improves both your effectiveness as well as your efficiency. And then as you touched on e-comm is a really interesting area. When we put the two companies together and we showed how we were bringing the best of both to share across the business, one of the conversation was about e-comm. But in 2018 e-comm and beverage didn't seem like a big idea. Certainly it was a very significant idea during COVID. And it's one that on the cold side of the business has to build over – will build over time but it has to be through click and collect and regional delivery. Shipping liquids by UPS and FedEx is not a great business model over the long term. But we see that area rapidly evolving and we're in a really good position. Part of enabling us to do exactly that required us to go back and redefine and renegotiate a number of our distribution agreements that were not contemplated in an environment of e-comm and we've been very successful in doing that over the past now four years to set ourselves up so that we have a win-win with our distribution partners, our independent partners and yet we're able to drive e-comm to the benefit of the consumer as well as us and our partners. With regard to our coffee business, you're 100% right, we have a scaled business in e-comm. We've been very agnostic in terms of where our brands are sold on e-comm. So we're very supportive of Amazon, of walmart.com on any type of retailer.com. We share our information with them. We try to make them better. So it's not that we're in competition with them at all. In fact we know the consumers want to go online but they want to buy it from their preferred retailer. And so we enable that by doing what I just said. With regard to keurig.com we have focused it on auto reorder or reorder, and that's its primary reason for being. And also it's a good place to find SKUs that are small that are favorites of a small group of consumers who can't find them at normal retailers. We'll sell everything on there. Obviously, that's been a challenge during the supply recovery phase. We will get back to that again. And so that's a big part of it. And as you think about the one comment I made in my remarks about connected brewers and the fact that we believe that we'll have 1 million connected brewers in the next few years, that really adds additional power to an auto reorder business because you go from replenishing based on shipments to replenishment based on consumption and that is a whole different level of convenience for the consumer. And so that's why we're really bullish on that business over the long term as well. Brett Cooper: Great. Thanks. Bob Gamgort: Okay. Thank you. Operator: Thank you. And I'll hand the call back to Steve Alexander for any closing remarks. Steve Alexander: Great. Thank you, operator. Thanks everyone for joining us today. Maria and I are around all day. If you have any questions please feel free to reach out. We'll get back to you. Thank you so much. Operator: Thank you. And that concludes today's conference. You may now disconnect.

Operator: Good morning ladies and gentlemen. And thank you for standing by. Welcome to the Keurig Dr Pepper’s Earnings Call for the Fourth Quarter and Full Year 2021. This conference call is being recorded and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper's Senior Director of Investor Relations, Mr. Steve Alexander. Mr. Alexander, please go ahead. Steve Alexander: Thank you, and hello, everyone. Thanks for joining us. Earlier this morning, we issued our press release for the fourth quarter of 2021. If you need a copy, you can get one on our website in the Investors section. Consistent with previous quarters, today, we will be discussing our performance on an adjusted basis, excluding items affecting comparability. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability is not in accordance with GAAP, we believe that the adjusted basis provides a meaningful comparison and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation tables included in our press release in our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of company's control, we do not reconcile our guidance. Here with us today to discuss our fourth quarter 2021 results are KDP’s Chairman and CEO, Bob Gamgort; our CFO, Ozan Dokmecioglu; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. And finally, our discussion this morning may include forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based on subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. And with that, I'll hand it over to Bob. Bob Gamgort: Thanks, Steve. And good morning, everyone. As you recall, this past quarter represents the completion of our three-year merger plan and the beginning of the next chapter of our transformation and growth, as we detailed for you during our Investor Day in October. With the merger plan now in the record books, I am pleased to report that we met or exceeded all of our key commitments, and we have demonstrated the power of our new company with a significantly faster growing business than at the time of the merger. The volatile macro environment we have faced since the merger has tested the industry and our business. It has also provided the opportunity for KDP to demonstrate the strength and resilience of our business model and our ability to withstand unforeseen events and deliver on our long-term commitments. In terms of a few specifics, our top-line strength over the past three years is a standout, growing approximately 5% on a compound annual basis over the period, almost double the merger target of 2% to 3% growth. More importantly, our sales growth accelerated significantly over the three years, with 2021 net sales advancing nearly 8.5%. Our strength since merger extends well beyond our financial commitments, as we delivered high-quality, in-market performance, including broad based market share growth across our portfolio, and meaningful expansion of new households using the Keurig system. Importantly, we maintain top line growth each year since the onset of COVID. As we've been able to pivot the growth certain segments of our business faster to offset those that were and, in some cases, continue to be negatively impacted. Market share expansion in cold beverages was driven by exceptional strength in CSDs, which have grown 1.5 share point since 2019. In coffee, the Keurig ecosystem continues to expand with eight million new U.S. households added to the system since 2018. Since 2019, we've driven growth in KDP consolidated net sales of nearly 14% and an adjusted EPS of 31%. These results were fueled by strong execution, successful innovation and high impact marketing. On a three-year basis, key financial metrics including adjusted EPS, management leverage ratio and synergy capture were delivered well within our merger target range, with adjusted EPS up more than 15% on a compound annual basis over the post-merger period. We delivered this performance while building a solid foundation for the future, including the advancement of our corporate responsibility agenda, achieving the goals set before the merger and expanding into new areas such as diversity and inclusion, positive hydration, and regenerative agriculture. All of this is underpinned by a talented team and a culture that rewards bold thinking, speed and a mindset of ownership and accountability. Investors who have been with us since the merger have been rewarded by a total shareholder return of 109% which is more than 2x the Consumer Staples sector index and two times the return of the S&P 500 Index. Important to the delivery of these strong results is how we manage KDP. Our playbook includes a range of strategies and tactics that enable us to navigate through volatile conditions in the short term, to stay true to our long-term vision. A good example is our strategic asset investment program, which we initially launched in 2019 and have used each year since, including in Q4 of 2021 to maintain or increase marketing investment in our brand portfolio. Ozan will discuss more in his remarks. Let's talk about the current environment we're facing. At this point in the earning season, you are fully up to speed on the range of issues negatively impacting the CPG industry. Supply chain disruption driven by labor shortages, lack of material availability and broad transportation issues have reduced industry customer service levels and pressured gross margins. In addition, unprecedented levels of inflation across nearly all components of cost of goods and cost to serve necessitated multiple pricing actions across the industry, most of which lagged inflation in terms of timing in the market. These challenges intensified in the fourth quarter with the onset of Omicron, causing significantly higher absenteeism across manufacturing and commercial frontline workforces. It has been reported that 6% of the U.S. workforce was absent at the start of the new year, due to being infected with COVID or caring for someone who had been infected. As significant as that number is, it actually understates the real impact on supply chains. We, for example, experienced absenteeism at key plants in the double digits, which magnified an already challenged labor situation, causing the workforce to drop below critical threshold levels. We're certainly not alone. Our suppliers have inputs, transportation services, and plant equipment are also experiencing these challenges, which has a compounding effect on our operations. Of course, we don't get paid to report the news but rather to deliver our commitments regardless of the macro situation. That's exactly what we've done. By implementing an unprecedented set of actions to increase labor availability and prioritize our portfolio to ensure availability of the fastest turning highest profit items. A tangible example of the challenges we faced and the solutions we've implemented is in Coffee Systems. Record consumer demand for K-Cup pods bumped up against lower manufacturing output and delayed new capacity availability. Both, directly related to COVID. This caused us to tap into our finished goods inventory in Q4, falling below safety stock levels, which impacted service to our partners and retailers. We have successfully rebuilt production output since the height of Omicron absenteeism, but we are now servicing the continued high consumer demand while working to rebuild inventory, which is a process that we’ll continue well into the next quarter. Ozan will talk more about the impact of the supply challenges in his comments. While we're seeing light at the end of the supply chain tunnel, as the wave of Omicron runs its course, inflationary pressure continues to be persistent. To address continued inflation, we implemented several pricing actions over the past six months and announced more pricing in early 2022. To date, our elasticities have held up nicely. Most of the challenges discussed today were reflected in the 2022 outlook we provided at our October Investor Day. At that time, we expected the impact of supply chain disruption and escalating inflation to be significant headwinds for the year, resulting in our projection for net sales and EPS growth to be in the mid-single digit range for the full year. Nearly five months since Investor Day, we continue to believe this guidance for the full year is realistic. Yet it's important to highlight the expected pacing of results throughout the year. Specifically, we expect Q1 to represent our most challenging comparison to last year, as we managed through the peak levels of supply chain disruption and significant ongoing inflationary pressures. EPS performance is projected to improve starting in Q2 reaching high single digit growth in the second half of 2022 which would put us back on our long-term algorithm. Let me take a few minutes to shift back to 2021 to highlight our full year results. Our top line performance continued to accelerate, with full year net sales growth of more than 8% and all four business segments up strongly. Our Packaged Beverages segment was a standout, posting double digit net sales growth for the year, fueled by an impressive 17% increase in the fourth quarter. Our Beverage Concentrates and Latin America Beverages segments also delivered strong double digit net sales growth in 2021. While our coffee business posted net sales growth of 6% due to an almost 6% increase in pod shipments, and a double digit increase in brewer shipments. In 2021, we added nearly three million new U.S. households to the Keurig system, on top of approximately three million new households added in 2020, which means total U.S. Keurig households are now approaching 36 million. Adjusted EPS for the year advanced more than 15% which translated to 31% EPS growth on a two-year basis as previously mentioned. Strong in-market performance for our brands underpins the delivery of our financials. Our LBR portfolio grew market share across nearly 75% of the portfolio in 2021 and almost 80% when looking at results on a two-year basis. Most notable with continued strength and CSDs, which drew consumption by 26% and market share by 1.5 share points since 2019. In fact, KDP took over the number two share position and CSDs in the grocery channel in 2021. The drivers of our CSD performance are widespread and sustainable. While nearly all of our CSD brands continued to perform well, Dr Pepper was again one of the fastest growing major CSD brands in the U.S. last year, and it was the single fastest growing since 2019. When Fortune recently unveiled its Halo 100 ranking for how well brands serve their consumers, Dr Pepper was the only beverage brand in the top 100 and the only FMCG brand in the top 20. Sunkist took over leadership of the fruit CST segment in 2021, fueled by innovation. Since 2019 Sunkist has grown dollar consumption by 35%. With the success of our zero-sugar innovation in 2021, we gained over three share points in zero-sugar CSDs, capturing a third of the zero-sugar category. And later this year we will be launching Snapple Zero Sugar. Looking at other key segments of our cold beverage portfolio, our CORE, Snapple and Bai brands, whose growth was capped in 2021 by supply chain disruptions demonstrated positive in-market performance as product availability improved in Q3 and Q4. Retail consumption was up double digits for both Core and Bai in the quarter, while Snapple was up 5% in the quarter, and ended with double digit growth in December. The Snapple Refresh, which was designed to bring younger consumers into the franchise with new graphics and sustainable packaging is proving to be successful. Our premium water stream continues to be enhanced by strong partnerships. The success of Polar seltzer demonstrates the power of the KDP distribution network, as we continue to expand availability outside the northeast region, achieving a 4.3% share for our first year in the market for which KDP is responsible for the brand. Vita Coco, a long-term KDP partner in which we also made an equity investment in 2021 had an exceptional year, growing dollar consumption 33% and market share by almost seven full percentage points to nearly 51% of the coconut water segment. Switching to coffee where retail dollar consumption of single-serve pods manufactured by KDP in tracked channels grew 2.7% for the year, with higher growth achieved in untracked channels due to continued strength in e-commerce and club and a limited return to offices. Growth would have been even higher if not for the Q4 supply chain disruptions which lead to reduce promotions and increase out of stocks. KDP manufactured share remains strong, increasing to 83.2% for the year. As mentioned previously, Keurig household penetration continued to be exceptional, adding eight million new households to the Keurig system since 2018. Further demonstrating the power of the Keurig system, for the first time ever, unit market share of Keurig compatible brewers surpassed traditional drip coffee makers in the fourth quarter. In 2021, we debuted a new platform for Keurig, with the launch of the K-Supreme SMART connected brewer, which is the first of many new connected brewers to come. The consumer reception has been very strong. And we have line of sight to having more than a million connected households in the next few years. Finally, although we don't give our Latin America Beverage segment much airtime on these calls, I'd like to point out that our team delivered 14% revenue growth and 19% operating income growth, behind particular strength in Penafiel and Clamato. In addition to being a strong contributor to total company results, LAB represents an attractive expansion opportunity for KDP. Before I turn it over to Ozan to talk about our 2021 results and our 2022 outlook in more detail, I'd like to reflect on our long-term outlook as discussed at our Investor Day. The completion of our merger period provides an opportunity to reflect on our accomplishments over the past three years, as well as our potential over the next three years. While we will always manage our business through the challenges of the day, we measure ourselves on long-term value creation, and therefore keep our focus on delivering in the present and investing for the future. As we look to the future one of the most attractive aspects of the KDP investment story is our unique potential to drive outsized returns through a combination of an attractive organic growth algorithm, coupled with the opportunity for significant inorganic value creation. You recall from our Investor Day our outlook was to generate approximately $4 billion of discretionary free cash flow between 2022 and 2024. Since Investor Day, we have received proceeds from our BodyArmor investment, as well as funds from the settlement of our litigation against BodyArmor. Combined, this resulted in cash proceeds approaching $1 billion, increasing our discretionary free cash flow outlook over the three-year period to $5 billion. This cash flow is being prioritized to the highest ROI use of our capital, which we continue to believe is strategic M&A, where we have a differentiated and demonstrated management expertise and track record. Discretionary cash of $5 billion translates into more than $20 billion of M&A capacity, assuming the same reasonable expectations we discussed in October. Coming out of Investor Day, we saw a few headlines suggesting that we were looking for a singular large acquisition. Let me assure you that we remain intentional and disciplined in our allocation of capital and that the significance of our more than $20 billion in M&A firepower represents total capacity for M&A, not a singular or targeted deal size. In the absence of value-generating M&A, we will use our new share buyback authorization to opportunistically repurchase shares. Our effective deployment of free cash flow over the previous three years is a good example of how we think about shareholder value creation through deployment of capital. During that time period, debt repayment was our top priority and a strong generator of shareholder value. However, also during that time, we acquired the CORE, Big Red and Limitless brands, made an equity investment in Vita Coco and several startup businesses, brought 22 independent distributor territories into KDP to strengthen our company-owned DSD system and invested in expanded production capacity and high-return plant and warehouse automation projects. At the same time, we also passed on numerous M&A opportunities, including BodyArmor, one we believe it was more prudent to be on the sidelines or a seller rather than a buyer. With our balance sheet and strong position and exceptional free cash flow in front of us, we're excited about our ability to continue to generate strong inorganic returns on top of our attractive organic TSR algorithm. Let me hand it over to Ozan. Ozan Dokmecioglu: Thanks, Bob, and good morning, everyone. I will start with a review of our performance for the fourth quarter and full year 2021, which our press release discusses in significant detail, and then turning to our 2022 guidance. All of this discussion will be on an adjusted basis. Constant currency net sales in the fourth quarter increased 8.5% to $3.49 billion, fueled by higher volume mix of 4.4% and favorable net price realization of 4.1%. This performance was driven by 17% growth in Packaged Beverages as well as very strong growth in Beverage Concentrates and Latin America Beverages. On a two-year basis, net sales for the fourth quarter increased 15.7% versus 2019. Adjusted gross profit increased 47% in the quarter to $1.83 billion. Adjusted gross margin declined 210 basis points versus year ago to 53.8% of net sales. This performance reflected the impact of the significant pricing actions we put in place as well as delivery from our robust productivity program and merger synergies. Offsetting these drivers was the impact of both wide scale, accelerating inflation and supply chain challenges, many of which compounded with the onset of Omicron in the fourth quarter, which is also a seasonally high demand period for us. Adjusted operating income in the quarter grew 6.1% to $910 million driven by the increase in adjusted gross profit and the benefits of productivity and merger synergies that favorably impacted SG&A, as well as $70 million gain in the quarter from our strategic asset investment program. I will talk more about this program in a few moments. Partially offsetting these positive drivers were broad-based inflation in outbound logistics and labor as well as higher marketing investments. On a constant currency basis, adjusted operating income increased 5.9% versus year ago. And on a three-year basis, adjusted operating income increased 11.9% versus 2019. Adjusted operating margin declined 70 basis points to 26.8% of net sales in the quarter, primarily due to the lag between the timing of inflation and pricing. Adjusted net income in the quarter advanced 15.5% to $640 million versus year ago, primarily driven by the growth in adjusted operating income, lower interest expense and lower adjusted tax rate. Adjusted diluted earnings per share in the quarter grew 15.5% to $0.45 compared to $0.39 in the year ago period. Before turning to 2021 full year results, I would like to spend a moment discussing the inflationary pressures and supply chain disruption we have referenced this morning. During the fourth quarter, inflation accelerated considerably. It increased across nearly all key inputs, leading to a double-digit inflation rate across cost of goods sold and SG&A combined, which is significantly higher than we experienced in the third quarter. As we look to 2022, we expect this level of inflation to continue for much of the year, with some moderation expected in the fourth quarter. As Bob explained earlier, similar to others in the industry, we have faced a number of supply chain challenges. However, in quarter four, it was our Coffee Systems business in which short-term profitability was most pressured by the convergence of demand and supply events. Consistently, strong consumer demand for K-Cup pods exceeded our manufacturing output, which was limited due to labor shortages and absenteeism driven by Omicron and a delay of our Spartanburg facility ramp-up, also due to the impact of COVID on our European equipment supplier. As a result, we missed pod revenue opportunities, incurred incremental logistics costs as we expedited the available supply to partners, incurred substantial customer fines when our customer service levels missed targets. It is important to highlight that embedded in our Coffee Systems pricing results are the customer fines related to service levels, which are included on the P&L as a deduction to pricing, which masked the positive net price realization the Coffee Systems achieved in the quarter. As Bob also mentioned, we have taken action to maximize production within our existing network to improve customer sales levels and to meet the continued strong consumer demand. Working closely with our partners, we have been able to simplify variety and implement minimum order sizes. We have also used the supply challenges as an opportunity to rationalize certain SKUs in our owned and licensed brand portfolio. And we have shed some lower-profit partner business. Collectively, these actions are already enabling us to improve production output and rebuild inventory. Our KDP manufactured and to a lesser degree, own aid licensed share that you will see in syndicated data will be negatively impacted by these actions. However, they will have little to no impact on our profitability. Finally, we continue to work with our equipment supplier on ramping up Spartanburg, but we have derisked our plant by increasing capacity at existing facilities and assuming no additional pod capacity coming from Spartanburg until 2023. The actions we have taken to increase production in all other sites will enable us to supply the immediate demand until that time. Let me turn now to our full year results for 2021. Constant currency net sales grew 8.4% to $12.68 billion, driven by higher volume mix of 5.7% and favorable net price realization of 2.7%. More importantly, net sales growth was strong and balanced across each of our business segments. On a two-year basis, KDP net sales advanced 13.9% versus 2019. Adjusted gross profit growth of 7.9% to $7.04 billion equated to a gross margin of 55.5% for the full year, a 70 basis points decline versus last year. This performance reflects a series of pricing actions implemented late in the year, combined with productivity and merger synergies. Offsetting these positives was a significant broad-based inflation and supply chain disruption previously discussed which accelerated in the fourth quarter. Adjusted operating income grew 7.2% to $3.42 billion and adjusted operating margin declined 50 basis points. Given the industry challenges in 2021, finishing the year with operating margin down only 50 basis points speaks to the underlying strength of our business and the benefits that come with a strong top line growth. In addition to the gross margin performance, also benefiting operating income were strong productivity and merger synergies as well as the year-over-year benefit of our strategic asset investment program. This program, which we started in 2019, creates value from certain assets to enable the investment in strategic assets to drive accelerated growth. Earlier, I mentioned the impact of this program in the fourth quarter results. However, most relevant is the much smaller full year impact of only $28 million, which is significantly below the increase in marketing investment we made in 2021. We plan to continue to use this program in 2022 and beyond. Adjusted net income for the year advanced 14.7% versus a year ago to $2.28 billion, primarily reflecting the growth in adjusted operating income as well as lower interest expense and a lower adjusted tax rate. For the year, adjusted diluted EPS grew 14.3% to $1.60 compared to $1.40 in the year ago period. On a two-year basis adjusted diluted earnings per share was up 31.2% versus 2019. Free cash flow for the full year continued to be strong at almost $2.6 billion, representing a free cash flow conversion ratio of approximately 113%. This strong free cash flow combined with the cash proceeds of $576 million from the sale of our equity interest in BodyArmor, enabled us to reduce our outstanding bank debt by over $1.7 billion and structural payables by $11 million. We also ended the year with $567 million of unrestricted cash on hand. Due to our growth in earnings and reduction in bank debt, we improved our management leverage ratio to 2.9 times at the end of 2021, which delivers on our merger commitment to achieve a management leverage ratio at or below 3 times. As Bob discussed earlier, in addition to the $576 million received from the sale of our BodyArmor equity interest, we also resolved our litigation against BodyArmor in January, which resulted in additional proceeds of $350 million, driving the combined amount of these items to almost $1 billion in cash proceeds. With these additional proceeds, we now expect to have approximately $5 billion of discretionary cash over the next three years to drive inorganic value creation. Let me now move to our guidance for 2022. Earlier today, we affirmed our 2022 full year guidance for both net sales and adjusted diluted earnings per share growth in the mid-single-digit range. Supporting this guidance, we expect the following: Adjusted interest expense is expected to approximate $430 million. Adjusted effective tax rate is expected in the range of 22% to 22.5%. Diluted weighted shares outstanding are estimated to be approximately 1.43 billion. Finally, while we do not provide quarterly guidance, given the current environment, I want to share our perspective on how we expect 2022 to unfold over the course of the year. From a timing standpoint, we expect the peak of the supply chain challenges to occur in quarter one, with our results improving through the remaining three quarters. Inflation is expected to pressure margins for much of the year, with some moderation late in 2022. Specifically, supply chain disruption worsened in the second half of last year and is expected to moderate as we lap it in the second half of 2022. Inflation spiked in the second half of last year, particularly in the fourth quarter and as such is expected to moderate as we lap it in the latter part of 2022. Total KDP revenue growth is expected to improve sequentially throughout 2022. From a segment standpoint, it's worth noting that Coffee Systems is expected to start the year slowly as we rebuild inventory to meet strong consumer demand and improved service levels while we're comping net sales growth of 17.4% in quarter one 2021. Included in our guidance is the 53rd week in Coffee Systems which will occur in the fourth quarter of the year. The net of all of these points is that we expect our adjusted earnings per share performance to strength during the year, reaching the high single-digit range in the second half, which is in line with our long-term algorithm. With that, let me hand it back to the operator for questions. Operator: [Operator Instructions] Your first question comes from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: All right. Thank you. Good morning. I had a couple of questions on your guidance. First, you guys ended 2021 with stronger-than-expected top line, and it really does seem like underlying consumer demand for both your Packaged Beverages and coffee business is strong, yet you did, again, maintain your outlook for this year. So I guess I'm just trying to understand how conservative this might be. And how are you guys thinking about the affordability for your brewers, given the pressures on the consumer, especially the low-income consumer this year? Just trying to understand what's factored into your guidance in terms or on brewers in terms of volume growth and potential down-trading risk? And then just one final quick clarification on your EBIT growth this year. Do you guys expect it to be up mid-single digits as well? Again, I'm just trying to understand that in the context of maybe something below the line driving your mid-single-digit EPS growth outlook for the year? Thanks. Bob Gamgort: Okay, Bonnie. Good morning and thank you for those questions. Ozan, do you want to talk about the guidance? There were two of them related to guidance, and then I'll come back on the brewer question. Ozan Dokmecioglu: Yes, certainly, Bob. So good morning, Bonnie. So let me start with your last question with regards to the EBIT growth expectations for next year. As we have guided everyone back on October 1 during our Investor Day, our expectation from the top line standpoint of the year [ph] was mid-single digit as well as earnings per share as mid-single digit as well. As you know, we don't guide specifically on either operating income or earnings before interest and taxes. However, as you said we always push and find opportunities to improve below the operating income or the EBIT line, specifically in our interest expense line as well as the taxes. And as you know, over time due to our debt payment capacity along with the improved working capital, I believe we managed to do a pretty good job of lowering our interest expense and that will continue into 2022 as well. At the same time, we always look for further tax effective rate efficiencies, and that will be another good year that we expect as we also guided a little bit lower tax rate expectation in 2022. Therefore, I think this sums up with regards to our guidance and expectations on the profit. Then with that, Bob, you'd like to take the affordability for your brewers? Bob Gamgort: Yes. Let me talk about the first one, which is about the top line pacing with regard to 2022. You're right the revenue growth has been incredibly strong. If you decompose that growth, we're getting about half of that from volume and mix, which compared to a lot of sectors, is very robust and the remainder of that is coming from pricing. So, I think that's where it gets challenging to forecast, what's going to happen in the balance of the year. We have a great feel for what volume and mix looks like. We're thoughtful about elasticity because we're all entering into uncharted territory here in terms of the price increases collectively that are happening across the industry. And we build it more off of that than we build it off of anticipated pricing going forward. And that's why we thought it's prudent to build a business model that delivers mid-single-digit EPS off of mid-single-digit top line growth. The area we'll have to be thoughtful about and as you look at companies going forward is if top line numbers are exceeded because of additional pricing due to additional inflation, that doesn't mean that any of its ever going to show up in our earnings or EPS. But that's all hypothetical and to come. I think the fact that we build our business model primarily off of volume growth and known pricing is how we got to that guidance. A lot could change between now and this time a year from now based on inflation and pricing trends. With regard to brewer affordability, it's an excellent question because our Number 1 driver of the Keurig system is continued household penetration growth. We've added 8 million households in the past three years, back-to-back years of 3 million households, which is nicely above what we think is our long-term trend. I'll remind everyone that there were concerns. We delivered that 3 million that we had pulled forward from the following year, where we actually had another record year off of demand. We understand very well the critical price points, the threshold price points for consumers at different levels, entry-level, upgrade level. And we also know where there is more sensitivity around pricing and so we've been very strategic in the pricing that we've implemented in our brewers. We've been able to design brewers to value so that we hit an approximately $50 price point and certainly below that on promotion. We know that $100 is the next price point. And then we also know that we have a significant number of brewers that have very low-price elasticity because we offer so much value to them. So even though you'll see pricing move across brewers in aggregate, we will also protect those critical price points and understand that we can lean in more on certain brewers in certain channels where there's less elasticity than others. And we will never be distracted from our overall mandate of driving household penetration. Bonnie Herzog: Okay. That's really helpful. And just if I may just clarify because I know, Bob or Ozan, you mentioned in terms of the brewer volume, that will be quite pressured in Q1 as you work to, I think you mentioned rebuild inventory levels. So, I'm just kind of putting that context of the full year, especially on top of, like you mentioned two really good strong years in terms of brewer volume. I mean, again, just trying to think about what's factored into your guidance. Do you expect total year brewer volume to be up? Or is it more conservative on the brewer side in terms of being flattish for instance? Bob Gamgort: Yes. I'm glad to be able to clarify that. First of all, the pressure that we're talking about in the rebuilding inventory is all on the pod side. Bonnie Herzog: Okay. Bob Gamgort: What's quite remarkable is given all of the global supply chain challenges for a product line that is made overseas and shipped on the ocean and the fact that all of our brewers contain chips in them; our team has been pretty amazing in being able to find alternative materials, chips, et cetera to be able to continue supply brewers. So, brewer supply has not been an issue at all. What we're working towards though as we look at a forecast for the long-term, not just for 2022, but as we think about the long-term for Keurig, we think about 2 million new households per year is what we describe as our long-term trend. And then you – there's always a significantly higher number of brewers sold, but a lot of those are due to replacements or upgrades. While they show up in our revenue line, they don't really have a material impact on our profitability. That's why we don't focus on brewer sales, nor do we forecast them for you. What's most important are the brewers that are in place to be able to drive new household penetration, and we're fine on that. With regard to pods, we've had incredible demand on pods now. The demand has been increasing every year. We saw it also remained very strong through COVID, although the composition of that growth shifted from away from to at-home, a little bit of that's going back. The issue is that we've been building demand for pods based on that increased installed household base for the Keurig brewers. And as the fourth quarter hit with – and then later with Omicron into January, we could not supply the current demand. That caused us to draw down our finished goods inventory down to below safety stock levels. And now we're rebuilding that production. Our production is up significantly versus where it was in early January, for example. But now we're serving two masters, we have to solve – we have to continue to serve strong current demand. And at the same time, we have to take some of that production and use it to restock inventory to improve our efficiency. And that's the process that's going to take another quarter or so. But we've seen the bottom of that, and that was really driven by the absenteeism issue that hit in early January, late Q4. And we're improving that now. So, it's all pod-related with regard to inventory, nothing with brewers at this point. Bonnie Herzog: Okay. Perfect. Very helpful. Thank you. Bob Gamgort: Okay, Bonnie. Operator: Your next question is from Chris Carey with Wells Fargo Securities. Chris Carey: Hi. Good morning. Bob Gamgort: Hi, Chris. Chris Carey: So just following up on coffee. Typically, when pods outperform, that's a margin tailwind. Obviously, there were other drivers this quarter. And I wonder if you can maybe just review what you see as maybe structural or a bit more lasting to the margin rate this quarter and areas that you would expect to improve from here on a sequential margin rate. Said another way, is this high-20s level of margin base from which to go forward? Or should they sequentially improve with your supply chain? And then just connected to that, on pricing, so in coffee, clearly getting your own business pricing. Can you just maybe frame the impact of the strategic pricing versus these charges that you incurred and your updated thoughts on pricing of the business going forward? Thank you, guys. Bob Gamgort: Yes, sure. Those are great questions. Let me start with, do I think anything is structural and long-lasting? Simple answer is no. What we're experiencing right now is a supply challenge not a demand challenge. And the supply challenge that we're dealing with is solvable, it's already being solved and it's short-lived. The demand remains incredibly strong based on the fact that we're continuing to drive great household penetration. If you think about the convergence of events that happened in Q4 and carried over into Q1, it's happened to a number of people in the broader CP industry. It really hit us because our demand was so incredibly strong at the same time that it caused a lot of pressure. We just had serious issues in being able to maintain the production due to absenteeism, quite honestly. As I said in my prepared remarks, 6% was the national absenteeism rate in the beginning of January; we had plants that were in regions that were harder hit where the number was a multiple of that. That gets – you get to a point where your production, you drop below a threshold level for your production, and that's exactly what happened to us. And then there's a series of knock-on effects that happened. All of them are short-lived. But if I give you a sense of it, we missed sales as a result of that. We expedite orders to try to prevent out-of-stocks and service our partners; we prioritized our partners over us in some cases. We are now paying a lot of overtime for people who are showing up. So, all of these things start to build up to cause serious short-term pressure on the business, all of which is being unwound as we speak and none of which is structural in nature. But it has a significant impact, as we said, because we have to rebuild inventory. What compounded this a bit further is we were expecting in late 2021 a ramp-up in new production from our new plant in Spartanburg. And quite frankly, our equipment supplier missed their deadlines. Again, if you think about it, it is a European-driven manufacturing, and they were ahead of us on COVID in general and Omicron, so they started feeling the pressure at the time that we started seeing the demand really ramp up. So that wasn't available to us at the same time. Again, that's solved. We talked about in our script that we've now built our production outside of Spartanburg to be able to handle that demand. We are now giving our supplier full rein of that plant to be able to optimize production without trying to also serve current demand. And we also have a contingency plan should they continue to miss any milestones. We have a backup plan, so we won't let it go any further than 2022. And when Spartanburg is up to full capacity, not only does that represent a growth opportunity that represents productivity that's yet to be realized. So not only is that not a structural issue going forward that's a structural opportunity in front of us. The last point is pricing. Because in an inflationary environment, we know that pricing is critically important. I'll go all the way back to the statements we made more than four years ago when we put the two companies together and we said that with regard to Coffee Systems, we said the strategic pricing investment, which was intentional to get the price point pods down to the appropriate threshold levels, would moderate over time once we hit those thresholds. So, if you think about what's happened since then, 2018 our net pricing in Coffee Systems down about 4%; 2019, down 3%; 2020 down about 2%; 2021 down less than 1%. In Q4, we had positive pricing that was masked by customer service lines. It's one of the knock-on effects of the production issues I talked about. And as we said in our prepared remarks, in 2022, we're putting in more pricing. So, you will see positive pricing in Coffee Systems going forward based on the pricing that we've already put in place. So, we've moved beyond now the strategic price investment into positive pricing, and all of that is yet still in front of us. Again, the most important thing is there are a few, if any CPG businesses that have line of sight to growing their volume in the mid-single-digit range year-after-year by converting people from one behavior to another, which is brewing by the pot to bring by the cup. Not only is that intact, it's been delivered and we still have 55 million potential households remaining to be converted even after we converted eight million in the past three years. Chris Carey: Thanks Bob. Bob Gamgort: Okay, Chris, thank you. Operator: Your next question is from Kevin Grundy with Jefferies. Kevin Grundy: Hey good morning, everyone. Bob Gamgort: Yes, good morning. Kevin Grundy: First, a housekeeping question for Ozan. Just on the tax rate, which has been trending lower here. Just comment, I guess, your expectation longer term and if there's any – number one, is that sustainable? Number two, is there going to be any difference between the booked tax rate and your cash tax rate? And then Ozan, maybe just spend a moment on commodity cost inflation, which has clearly gotten worse since you initially provided the mid-single-digit EPS growth guidance. Just spend a moment, please, on key exposures, what you're expecting. And then as we think about gross margin, how much you expect to offset with pricing and productivity. Thanks. Ozan Dokmecioglu: Absolutely. Kevin, so with regards to the tax rate, we have initiated and successfully implemented several strategies around lowering our effective tax rate. And when you look to our financials since the onset of putting the two companies together the last three years, I believe we have been quite successful of managing our tax rate. And as I have just explained in our prepared remarks, we expect our tax rate for 2022 to be around 22%, maybe 22.5%. So, that's our ingoing assumptions on the basis of the implementations that we are expecting to deliver the results for us. So, that's number one. And on a normalized basis, probably 2022 levels will more or less sustain, maybe a little bit lower, but not much. So, that's our expectation with regards to overall effective tax rates for 2022 and beyond. So, let's talk a little bit about the inflation in the commodities and our exposures, right? So, as you all know, inflation accelerated throughout 2021, with the fourth quarter in 2021 increasing double digits. It's significantly higher than what we anticipated, and we also expect to continue through much of 2022, with some moderation in the fourth quarter. So as Bob also alluded a little bit ago, we expect quarter one to be the most challenging comparison to last year, when I say quarter one, I mean 2022, as we manage through peak levels of supply chain disruption and significant ongoing inflation. But when you look right now through our overall commodity exposures, we think it will cover six to nine months. Therefore, we feel that we are well covered for 2022, but we continue to layer in some further coverage, albeit at significantly higher rates than last year at this time. And some costs, like transportation, some packaging materials like polypropylene, which is the material for K-Cup, for example, that we can't hedge them because there is no any structured market that we can hedge. Therefore, we believe that we struck a good balance right now with regards to our coverages, the impact of the overall commodity inflation, along with other input costs in 2022 versus 2021. We also, for example, in coffee, had longer positions in 2020 as well as 2021. But our low-cost positions are now fully utilized, which making green coffee, for example, one of the largest percent changes year-over-year in our basket of input costs of KDP. But all these assumptions that we have built in our guidance and in our numbers that we have just reported. Therefore, we believe that we have a good balance right now of dealing and managing the overall inflation, which is arising as a result of all input costs, transportation, along with labor in relation to the guidance that we put along with the margin structure quarter in, quarter out. Kevin Grundy: Okay. Thanks for the color. I’m sure there’s number of other questions. I’ll pass it on. Ozan Dokmecioglu: Thanks. Bob Gamgort: Thanks. Operator: Your next question is from Brett Cooper with Consumer Edge. Brett Cooper: Good morning. A question on how you look at the portfolio in its entirety in making business and price decision. I guess the specific question is that with the cold beverage business performing well, how much flexibility does that give you in potentially taking with less pricing coffee in order to manage pod pricing to the levels that you target with your prior strategic actions? And then just a follow-up from that. Would love any thoughts on the impact of pod pricing moving back above those target levels given the pricing action. Thanks. Bob Gamgort: Okay. Yes, Brett, thank you. The benefit of the portfolio that we have is a bit of diversification in terms of different consumer trends, different competitive dynamics, et cetera. And so, if you go all the way back to the commitments we put out there in 2018 and the fact that we've been able to deliver them despite all of these challenges that we're with COVID, now inflation, supply chain disruption, et cetera, that's the benefit of having the portfolio that we have, that we're able to leverage one part of the portfolio to be able to offset challenges in the others. And then you've seen it reversed in certain situations, where coffee was over-delivering to help one side of the business and now the cold business in some cases in Q4 was able to do that. That's great from an investor perspective. With regard to how we take pricing though, we don't think about it that way. We look at pricing at the consumer level segment-by-segment. We understand price elasticities, competitive dynamics. And in an inflationary environment like the one that we're in right now, we're going to push pricing as hard as we possibly can based on our best assessment of the impact on that individual business. And that does put us in a position where we say because we can take pricing in one area, we'll take less pricing in the other. We take the maximum amount of pricing that we can in each individual business until we get to the point where we think it adversely impacts demand to a level in which it's not a great business decision. But the diversification of the portfolio, though, allows us to step back and we deliver consolidated results and have the confidence that we are able to deliver against the guidance that we put forward despite all the uncertainty and volatility that we face. Can we take the next question please? Operator: Your next question comes from Lauren Lieberman with Barclays. Lauren Lieberman: Thanks. Good morning. This is probably a good lead into the last conversation. But I feel like there was, Bob, in your comments over the last few minutes is really sort of passion discussion of the visibility that you think you have to sustain volume growth as you have been keeping the transition in cost and driving consumer behavior. But I was curious how you think about the structural potential of the Keurig businesses. I'm guessing this is where the bulk of the M&A is expected to reside. You've already made all these moves, of course, on route to market So, can you talk a little bit about sort of the structural potential and how you think about volume perhaps versus price mix in those businesses as well? I'd just be curious to kind of hear your same kind of multiyear view on that side of the business. Thanks. Bob Gamgort: Yes, great question. Our cold business has performed exceptionally well since the merger. It's been driven by the formula that we discussed a number of times, which is building share and volume growth on core brands through renovation and marketing. Countless examples of that, and I won't repeat them because we mentioned most of them in our prepared remarks. Innovating into white space and also doing partnerships and acquisitions to fill in territory that we are covered with our current portfolio and then investing in and improving our route to market to ensure that the delivery, the merchandising, the servicing on the cold side of the business improves every single year. And it's the combination of those three that's delivering the very strong results. What I just described has a significant amount of runway in front of it. You mentioned we've done a lot of work on the route-to-market side, bringing in independent territories into our system. We've also invested heavily to improve the delivery and effectiveness of our system where we already cover. There's still plenty of runway left on both of those. White space, we still have significant amount of open territory in our portfolio to be able to fill in to leverage that distribution system as well as the marketing strength that we have. And we still have tremendous line of sight to the innovation and renovation on our existing brand portfolio. As we talked about three years ago, a lot of conversations, will allow Dr. Pepper has been successful. You can't possibly grow that any further. What else are you going to do? And then I would point out that Dr. Pepper was the fastest-growing major CSD in the past two years driven by marketing innovation. And we feel like we still have plenty more to go on that. So, it's that combination of existing brands, white space and distribution system effectiveness that gives us line of sight to significant growth still in front of us. Lauren Lieberman: Thank you so much. Bob Gamgort: Okay, thanks Lauren. Operator: Your next question comes from Andrea Teixeira with JPMorgan. Andrea Teixeira: Thank you. Good morning. I wanted to double click on your comments about M&A. Bob, should we interpret that the Board is mostly looking for bolt-on M&A compared to bigger transactions? And if so, what are the white spaces at this point? Would energy and coffee shops be out of question in this scenario. And related to that, on your use of capital, you mentioned buybacks. Normally, you don't embed that in guidance. So, I just wanted to clarify that on 2022. And lastly, on pricing, I think, what is included in your mid-single digits, and correct me if I'm wrong, you are assuming what is in the market already. And with the labor and other costs where sitting since your Analyst Day, would you contemplate additional pricing at this point? Thank you. Bob Gamgort: Okay. Yes, on the M&A side, what we've talked about is our capacity for M&A. So, we say it's north of $20 billion based on the $5 billion of discretionary free cash flow and some of the assumptions that we put forward in the Investor Day. The clarification we were making today is there were a number of headlines that came out of that where people said we were looking for a $20 billion acquisition. And what we're saying is that we've got significant capacity to continue to do acquisitions of a variety of sizes and our four areas are filling in the white space as we just talked about, continuing to build our distribution capabilities, which we also talked about; adding new capabilities which as we get further along we could explain some of that; and then obviously, we always have the opportunity for some geographic expansion. We operate in North America today, heavily in the U.S., with nice positions in Canada and Mexico. We talked about today Latin American beverages, for example, just continuing to deliver fantastic results that are accretive to total KDP. That's an area where we could see some opportunity for additional investment. So, we have a wide range of targets, all of which are strategic. They range in sizes, but we wanted to clarify that we're looking at a $20 billion plus as capacity, not as a target. Ozan is going to talk about buybacks in a second. With regard to pricing the pricing that we have in the plan is not just what we've already put in place, but also pricing that we've already announced that's happening in the early part of 2022. With regard to the rest of the year we always say we need to be flexible based on inflation, productivity, pricing and marketing investment. And we don't talk about any one lever in the future at the expense of others. We look at all four in combination, and that's how we will continue to manage through 2022. And Ozan, do you want to – I think this will be our last question. Do you want to end this on the buyback conversation? Ozan Dokmecioglu: Yes, absolutely, Bob. And hello Andrea. So, a couple of quick points on our buybacks. I just want to remind ourselves that our Board has authorized us a four-year program up to $4 billion of buyback, which started January of this year through end of December 2025. And we also expressed before that our program is an opportunistic one. It's not formulaic by any mean. It would just depend on the market conditions and will be at the discretion of the management to decide on a buyback or not. And I believe, Andrea, as you said, in line with our Investor Day announcement, and we are also repeating now, we did not build any plus or minus that may come as a result of our buyback decision into our guidance for 2022. It is also fair to say, as Bob explained just now, that our priority to use our capital as well as cash would be in M&A. For some reason, in absence of that, that we may decide to do some buybacks, again on an opportunistic basis. So that will be my couple of quick remarks on the buyback. Thank you. Andrea Teixeira: Thank you, both. Bob Gamgort: Thanks. Operator: I'll now turn it back over to management for closing remarks. Steve Alexander: Thanks, everyone, for joining us this morning. The IR team, Maria and myself will be around all day. If you have questions, please reach out to us, we would love to talk to you. Thank you very much and have a good day. Operator: Thank you. This concludes today's conference. You may now disconnect.

Operator: Good morning, ladies and gentlemen. And thank you for standing by. Welcome to Keurig Dr Pepper's Earnings Call for Third Quarter of 2021. This conference call is being recorded, and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper's Senior Director of Investor Relations, Mr. Steve Alexander. Mr. Alexander, please go ahead. Steve Alexander: Thank you. And hello, everyone. Thanks for joining us. Earlier this morning, we issued our press release for the third quarter of 2021. If you need a copy, you can get one on our website in the Investors section. Consistent with previous quarters, today, we will be discussing our performance on an adjusted basis excluding items affecting comparability. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability is not in accordance with GAAP, we believe that the adjusted basis provides a meaningful comparison and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation tables included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company's control, we do not reconcile our guidance. Here with me today to discuss our third quarter 2021 results are KDP's Chairman and CEO, Bob Gamgort; our CFO, Ozan Dokmecioglu; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. And finally, our discussion this morning may include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based on subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. With that, I'll hand it over to Bob. Robert Gamgort : Thanks, Steve. And good morning, everyone. As we approach the completion of our three-year, post-merger period, we're looking forward to our next chapter of transformation and growth. We're entering that phase from a position of strength, with topline momentum fueled by new tools and capabilities, robust innovation, and the right team and culture to enable continued success. Importantly, we're also nearing our targeted leverage ratio, which enables us to shift the use of our industry-leading cash generation from debt reduction to a new set of options for increased value creation. We have successfully navigated the macro dislocation that has occurred over the past 20 months and expect to be able to do the same in the face of the new challenges that are causing incremental disruption across the economy. The escalation in input cost inflation coupled with labor shortages and supply chain disruptions, including constraints in transportation, impacted us in the quarter and will likely persist for some time. As part of the offset, we have increased price and utilized a wide range of RGM initiatives across our portfolio, along with stepped up productivity, alternate sourcing and supplier strategies, and other cost mitigation activities. Given the strength of our brands, driven by increased investment in innovation in marketing, we have been successful in limiting the elasticity impact of the pricing to date. Our third quarter results provide a good example of KDP's ability to manage through challenges and deliver strong and balanced results. We posted another quarter of high-single-digit constant currency net sales growth, with all four business segments reporting strong increases. We also delivered double-digit adjusted diluted EPS growth, while increasing marketing investment in the quarter. As discussed last quarter, we believe it's helpful to highlight our results on a two-year basis because we are layering strong current year performance on top of strong year-ago performance, which we believe sets KDP apart from most companies. On this basis, constant currency net sales advanced 13% versus the third quarter of 2019 and adjusted diluted EPS was up 38%. On a year-to-date basis, results were similarly strong compared to 2019. KDP's in-market performance for the third quarter was as strong as our financial performance. We continue to grow share in carbonated soft drinks, reflecting core brand growth, and successful innovation and renovation, most notably our new zero sugar variety. Sunkist continued to post strong double-digit consumption growth behind its new flavor lineup and is now the number one fruit flavored CSD brand in the category. Other CSDs posting strong growth in the quarter were Canada Dry, A&W, and Squirt. The Dr Pepper brand also continued to perform exceptionally well, consistently gaining market share on the strength of double-digit consumption growth. This growth has accelerated with the recent launch of this year's Fansville campaign, which celebrates the passion consumers have for college football and Dr Pepper. In-market performance of our key non-carb beverage brands such as Snapple, Bai, and Core continued to be impacted by supply chain challenges that capped growth. The supply chain situation is already showing signs of improvement with Snapple's latest four-week consumption well above its 13-week trend, and Bai growing consumption by nearly 15% in the most recent periods behind the success of Bai Boost. On a two-year stack basis, in-market performance of our cold beverages was very strong, with nearly 75% of the portfolio's retail sales base expanding market share. We continue to drive our newest brand partnerships and deepen existing ones. In the case of Polar, we expanded availability outside of the Northeast region, achieving a 3.7% share and 60% ACV distribution in markets for which KDP is responsible for the brand. We also invested in Vita Coco's recent IPO. And as part of that transaction, extended our distribution agreement with them. In coffee, our K-Cup pod shipments advanced 6% in the quarter and are up almost 7% year-to-date. This reflects continued strong at-home performance and a modest improvement versus year ago in away-from-home coffee, although the latter continues to be down significantly versus pre-COVID levels. Market share of KDP manufactured pods and track channels was 83%, up almost a full point versus year ago. As we discussed during our recent Investor Day, we expect to add at least 2 million new Keurig households in 2021, continuing our long-term growth trajectory and clearly showing no pullback following our accelerated level of 3 million new Keurig households added in 2020. We will provide a final 2021 household penetration number when we report our Q4 earnings. Brewer shipments grew 2.2% in the quarter, successfully comping a 34% increase in the third quarter of last year. On a year-to-date basis, brewer sales were up 22% versus year ago. And compared to the third quarter of 2019, brewer sales were up 44%. Driving this impressive growth is effective marketing and our comprehensive quality and innovation strategy that is widening choice, functionality, and price points of our brewer portfolio. The most recent example is our new MultiStream Technology, which delivers a richer, more balanced, and flavorful cup of coffee. Our newest brewer is the Keurig Supreme Plus SMART, initially launched on keurig.com in July and now rolling out to retailers in time for the holidays. In addition to incorporating MultiStream Technology, this Internet-connected brewer also features our new BrewID technology, which recognizes the specific K cup pod in use and automatically customizes brew settings. The brewer SMART technology also enhances our successful auto delivery business by utilizing SKU level pod consumption data to automatically replenish consumers via shipments direct to home. Both our auto delivery and broader ecommerce business continued to expand in the quarter on top of the exceptionally strong growth experienced last year. We also continue to innovate in pod sustainability and have begun the introduction of Easy Peel lids to our recyclable K-cup pods in order to make the recycling process simpler for consumers. In addition to the good progress we've made in coffee pod sustainability, the accomplishments in our companywide ESG efforts continue to be recognized. Recently, we received the Reuters Responsible Business Award for the social and human capital category, recognizing our 20-year journey of putting farmers first by improving 1 million lives in our coffee supply. A top 10% ranking among 350 food and agriculture companies by the World Benchmarking Alliance, a United Nations affiliated organization that focuses on improving private sector performance against the UN Sustainable Development Goals. A number two ranking out of 50 of the largest CPGs and retailers in North America by the nonprofit, As You Sow, in their assessment of plastic usage and packaging sustainability progress, and LEED Gold certification for our new Frisco headquarters. Before turning it over to Ozan, I want to highlight the increase in our outlook for 2021 net sales growth to 7% to 8% as communicated in our press release this morning. We continue to expect adjusted diluted EPS growth in the range of 13% to 15% as pricing, productivity, and revenue growth are being leveraged to offset significant and accelerating industry inflation, as Ozan will now discuss in his comments. Ozan Dokmecioglu : Thanks, Bob. And good morning, everyone. Continuing on an adjusted basis, I will briefly review our performance for the third quarter, which was another strong one for us. I will then turn to our outlook for the balance of 2021. Constant currency net sales increased 6.8%, fueled by higher volume mix of 3.2% and favorable net price realization of 3.6%. Importantly, all four business segments posted growth, driven by successful innovation and strong marketing, along with continued solid in-market execution. For the first nine months of 2021, constant currency net sales grew 8.4% versus year ago. And on a two-year basis advanced 13.3% versus the same period in 2019. Adjusted gross margin in the quarter advanced 50 basis points versus a year ago to 56.4% of net sales, reflecting higher pricing and productivity, partially offset by significant and accelerating inflation in cost of goods sold. Adjusted operating income in the quarter grew 6.5% versus year ago to $931 million, driven by the strong and balanced net sales growth in the gross margin expansion as well as productivity and merger synergies in SG&A. These positive drivers were partially offset by significant inflation in transportation and logistics and significantly higher marketing investment. On a constant currency basis, adjusted operating income increased 5.7% versus a year ago. Adjusted operating margin declined 30 basis points, reflecting our decision to reinvest in marketing to drive brand strength. Excluding the increase in marketing, adjusted operating margin was up versus year ago. For the first nine months of 2021, adjusted operating income increased 7.6% versus year ago. And on a two-year basis, adjusted operating income was up 21% versus the first nine months of 2019. Adjusted net income in the quarter advanced 13.3% versus year ago to $631 million, primarily driven by the growth in adjusted operating income and lower interest expense., largely reflecting lower interest rates stemming from the strategic financing completed in the first quarter of 2021, lower outstanding indebtedness, and realized gains on interest rate swap contracts. Also benefiting the growth in adjusted net income was a lower adjusted tax rate. Adjusted diluted EPS in the quarter grew 12.8% to $0.44 compared to $0.39 in the year ago period. For the first nine months of 2021, adjusted diluted EPS advanced 13.9% versus year ago. And on a two-year basis, adjusted diluted EPS was up 32% versus the first nine months of 2019. Let me take a moment to discuss the inflationary pressures and supply chain challenges we have referenced this morning that are impacting the broader economy and our industry. We are experiencing significantly higher inflation this year than we expected at the start of the year, which we were managing with pricing, productivity and accelerated growth. For perspective, we expect all-in inflation this year, which includes inflation in cost of goods sold, transportation, warehousing and logistics, and SG&A, to be up approximately 6% versus year ago. This inflation has accelerated in the second half of 2021. Our updated guidance for 2021 incorporates all of these considerations, and we are confident that we have the tools and management disciplines in place to deliver our guidance for both revenue and earnings growth. Let me now turn to our segment performance in the third quarter. Coffee Systems constant currency net sales increased 4.6%, driven by higher volume mix of 5.7%, partially offset by lower net price realization of 1.1% which continued to moderate as expected. The value mix performance reflected pod shipment volume growth of 6.3% and brewer volume growth of 2.2%. The pod volume growth reflected continued strong momentum in our at-home pods and improved performance in our away from home business, although returning to offices continues to be slow and this business remains well below pre pandemic levels. The 2.2% increase in brewer shipments, which is on top of the 34% increase in brewer shipments in the third quarter last year, was fueled by continued strong consumer purchases stemming from successful brewer innovation and a double digit increase in marketing. During the quarter, we took pricing in our brewer portfolio, and more recently, took pricing on our owned and licensed coffee brands, given the escalation in coffee commodity pricing. As a reminder, most of our partner contracts require the partner to be responsible for coffee beans. Therefore, the increased commodity costs and any pricing they chose to take for these brands does not follow through the KDP profit and loss. Adjusted operating income for Coffee Systems increased 1.1% to $377 million, driven by the net sales growth and continued productivity and merger synergies, partially offset by inflation and a double-digit increase in marketing investment in the quarter. This marketing investment supported the launch of our new Keurig Supreme Plus SMART brewer, featuring our new BrewID technology platform. The campaign was executed nationally via digital, social and earned media and was amplified by experiential activations. On a constant currency basis, adjusted operating income increased 0.5% in the quarter. Adjusted operating margin in the quarter was 32.6% compared to 34% in the year-ago period, largely reflecting the significant increase in inflation and marketing investment. Packaged Beverages constant currency net sales grew 6.8% in the quarter, with volume mix growth of 1.5% and higher net price realization of 5.3%, reflecting continued growth in both our company-owned CSD operations and warehouse direct business. The majority of our liquid refreshment beverage portfolio contributed to this growth, with CSDs, notably Dr Pepper, Canada Dry and Sunkist particularly strong, along with Polar, Vita Coco and Motts driving growth. Adjusted operating income for Packaged Beverages increased 2.6% in the third quarter to $312 million, driven by strong net sales growth, productivity and merger synergies, partially offset by inflation, particularly in transportation, as well as marketing investment and increased operating costs to meet continued strong consumer demand. On a constant currency basis, adjusted operating income increased 2.3% versus year ago. Adjusted operating margin for packaged beverages was 20.2% in the quarter compared to adjusted operating margin of 21% in the year-ago period, largely reflecting the impact of inflation and higher marketing investment. Beverage Concentrates constant currency net sales increased 10.8%, reflecting favorable net price realization of 11.4%, resulting from higher pricing and lower trade expense, slightly offset by lower volume mix of 0.6%. The growth in net sales also reflected a continued recovery in the fountain foodservice business due to increased consumer mobility in the restaurant and hospitality channels, with brand Dr Pepper driving the growth. Offsetting this growth was the decline in bottle can concentrate shipment volume. Adjusted operating income for Beverage Concentrates increased 9.1% to $289 million, driven by Lynette [ph] sales growth, partially offset by a strong double-digit increase in marketing investment. This increase reflected investment behind Dr Pepper zero sugar and the Dr Pepper college football campaign. On a constant currency basis, adjusted operating income advanced 8.7%. Adjusted operating margin in the quarter totaled 73.7% compared to 75.3% in the year-ago period, reflecting the impact of significantly higher marketing investment. Excluding the increase in marketing, adjusted operating margin was up versus a year ago. And finally, Latin America Beverages constant currency net sales grew 14.5%, reflecting strong volume mix growth of 10.5% and favorable net price realization of 4%. Liquid refreshment beverage in-market execution in Mexico continued to be strong across all channels, which drove significant net sales growth for key brands, namely Peñafiel and Clamato. Adjusted operating income increased 48% to $37 million. And on a constant currency basis, adjusted operating income increased 36%. This strong operating income performance reflected the net sales growth and productivity, partially offset by significantly higher marketing investment and inflation. Adjusted operating margin in the quarter advanced 350 basis points to 23.7% despite the meaningful increase in marketing investment. Free cash flow in the quarter continued to be strong at $676 million, driving year-to-date free cash flow to $1.6 billion. This strong free cash flow performance for the quarter and year-to-date periods represented free cash flow conversion ratios of approximately 107% and 100% respectively. During the quarter, we reduced our outstanding bank debt by $325 million and structured payables by $2 million. We also ended the third quarter with $200 million of unrestricted cash on hand. Due to our growth in earnings and reduction in bank debt, we improved our management leverage ratio to 3.2 times at the end of the third quarter of 2021. Since the merger close in July 2018, we have reduced our management leverage ratio by 2.8 times and continue to expect to achieve a management leverage ratio at or below 3 times at year end. Let me now move to our outlook for full-year 2021. For the third time this year, we increase our guidance for constant currency net sales growth to reflect the significant momentum in the business. And we now expect growth in the range of 7% to 8%. This compares with our original 2021 guidance for constant currency net sales growth of 3% to 4% and our most recent guidance of 6% to 7%. We continue to expect adjusted diluted earnings per share growth in the range of 13% to 15%. And we expect to continue to invest significantly in marketing to maintain our top line momentum. Supporting this guidance, we expect the following. Adjusted interest expense is now expected in the range of $495 million to $500 million, reflecting the realized gains on interest rate swap contracts that benefited the third quarter. Adjusted effective tax rate is expected in the range of 23.5% to 24%. Diluted weighted shares outstanding are estimated to be approximately 1.43 billion. And finally, our management leverage ratio is expected to be at or below 3 times at year end. With that, let me hand it back to Bob for some closing remarks. Robert Gamgort: Closing out 2021 completes the three-year commitment established in January of 2018 at the announcement of the merger. Clearly, a lot has transpired since then, and throughout this time, the KDP team has remained focused, flexible and resilient. With one quarter left to go, we are confident that we will significantly over deliver our net sales commitment and achieve our 15% to 17% adjusted EPS commitment. I will now turn back to the operator for your questions. Operator: [Operator Instructions]. Your first question comes from Bonnie Herzog with Goldman Sachs. Bonnie Herzog: I wanted to ask about your topline, which continues to be much stronger than expected, and it's impressive that you guys have taken up your sales growth guidance yet again. So, given this how does this potentially change your thinking regarding your preliminary outlook for 2022? Does it give you any more confidence in your ability to deliver on a mid-single-digit top line growth or possibly above this? And if so, do you think your initial outlook for mid-single-digit EPS growth next year could ultimately prove conservative given that lever? Just wanted to get your thoughts on that. Robert Gamgort: We're very happy with revenue growth that we've seen. If you recall, when we put the company together, we talked about revenue – three-year revenue guidance of 2% to 3%, and we've far exceeded that. It's driven in a really healthy way through a combination of growth across the entire business, core business growth, and innovation, and it's fueled by great marketing as well and our execution at retail. So, the drivers behind it are sustainable. The contributions from our brands and the innovation pipeline is very strong. Again, as we sit here in – during the Investor Day in October and we're looking out over the future, we think that mid-single digits is the right target. Remember that everybody is getting some revenue growth off of the pricing that we're putting in place right now. So, it's hard to look down the road and forecast what pricing will be over the next three to five years. So, we base it more on what the underlying volume growth is in a normalized pricing environment, and are comfortable that mid-single digits is the right commitment for us to make over the long term. Obviously, the trends that we're seeing right now are stronger than that. Operator: Your next question comes from the line of Chris Carey with Wells Fargo Securities. Chris Carey: The pricing in the Packaged Beverage business, I think, was the highest in over a decade unless I'm mistaken. Clearly it makes sense. Elasticities are not what they historically have been. They're not in any category right now. Can you just talk about maybe how this pricing evolves over the next year or six quarters? I think KDP was a little bit slower to ramp pricing as aggressive as some of your other domestic peers. When does revenue growth management become a bigger dynamic here? When do you think volumes could potentially be impacted by pricing? I imagine the pricing model will be more pricing driven ahead. Again, the concept of higher pricing makes sense, but it's historically high, of course, and just want some more perspective on how this evolves over time and where the RGM piece comes in relative to list price and just how you're thinking about how this evolves over the next year or so. Robert Gamgort: The questions that you're asking are on the minds of everybody in the industry. The fortunate thing is that we operate in a wonderful industry, beverages, and I'm including coffee in that as well, that is incredibly rational. So, the objective is margin protection. And what we've all faced is an unprecedented level of inflation, certainly unprecedented in all of our working careers for the North American market level of inflation. There are three ways to offset that – pricing. And I would include RGM in pricing, and I'll talk more about that. Pricing, productivity, and then there's another lever, which is reinvestment back in the business. And so, we can pull those levers in different magnitudes based on the level of inflation and what we believe the impact will be on the overall business. What we're seeing right now is that there's been a significant amount of pricing across the industry. The data that I have doesn't suggest that we were slower than anyone else. I think we were right in line. Different parts of our business realized the pricing faster than others. So, for example, our BC business has an immediate impact. When you take pricing, it hits the P&L. There's a delayed response in some of our other businesses, as it has to reach retail, and you have to protect some of the promotions in place. So that’s may be what you're thinking about there, but certainly there's been extensive pricing. The impact of elasticities has been better than historical, and in part it's because of the way we've taken pricing and also the strength of the brands. And we've been able to find a way uniquely within I think the industry to continue to have positive gross margin in the quarter, for example, which gives us the opportunity to reinvest back in our business, which makes pricing even more possible because you continue to invest in your brand strength. So, I would suggest that that's the framework we approach 2022, and any prediction I would make in the future about elasticities, where do I think inflation is going to be, how do I think pricing will respond to that, not productive because it's impossible for anybody, including the Fed, to predict what's happening going forward. What I would say is that we manage this in a very dynamic manner. When there is more inflation, the industry has put on more pricing. And we have the other levers that I talked about in terms of productivity and reinvestment to pull to protect margin. And that's why we're confident in the guidance that we put out in October 1 in an environment as volatile as this. We still have the ability to manage our way through that. Operator: And your next question comes from Bryan Spillane with Bank of America. Peter Galbo: It's Pete Galbo on for Bryan. I guess just on Bev Con, obviously, there's a natural gap between shipment volumes and bottler case volume, but I think bottler case volumes were maybe a little bit lighter than we had expected and there wasn't a ton of detail around what happened there in the press release. So, just anything there would be helpful. And I think, Ozan, just there were some comments, particularly on the bottling can part of the Bev Con business, just how are your franchisees managing inflation? How is it impacting their ability to serve – having to do anything kind of to accommodate them for their rising costs? Robert Gamgort: Let me let me kick it off, Ozan, and then I'll turn it over to you. The timing between shipments – our shipments and bottler case volumes is always quarter to quarter some disconnect. They equalize over time. There's nothing notable there. And the best way to look at the underlying health of our business, and it's more of a leading indicator, is to look at the consumption numbers, the offtake numbers from IRI and Nielsen because that's the leading indicator of consumer demand that will pull our brand through, whether it comes through our system or through another entity's system, it's still our brand and that's reflected in those numbers. And you can see that they're exceptionally strong, particularly on Dr Pepper, which is the largest brand that flows through multiple systems. So, everything is very positive there. There's nothing to note. Ozan, you want to talk a little bit about the inflationary impact on our partners and how they offset that. Ozan Dokmecioglu: Of course. Particularly on the bevcon, as you were saying, Bob, bevcon comes in two pieces. One is the bottlers and the distributors that we work as well as our fountain foodservice business. And specific answer to the question, Pete, on the mechanism of our bottlers and distributors pricing, most of our bottlers and distributors are on incident pricing, which, as you know, is a quite a bit sophisticated algorithm that starts from the shelf prices, then goes to the bottlers and distributors and reflects to us. Therefore, this is a best-in-class in terms of pricing adjustments that take place in the marketplace. And that also includes the sophisticated revenue growth management strategies that we deploy on a consistent basis. Therefore, as Bob also alluded a couple of minutes ago, the whole sector took some forms and shapes of pricing actions, either shelf price improvements or using a sophisticated revenue growth management strategies. And as a result of that, there's a net flow through to our bevcon business. And given the nature of the bevcon that we ship and sell and transfer the concentrate, the increase in the pricing in that segment reflects in our numbers right away. Right away meaning a little earlier than the packaged beverages, for example, that takes a little bit gap between the price improvements, we turn into the finished product, ship it and sell it across the board. So, that will be our algorithm that make us to realize very good margin improvement from the pricing in bevcon. Operator: And your next question comes from the line of Andrea Teixeira with J.P. Morgan. Andrea Teixeira: Just want to kind of like go back to the supply chain points that I think you kind of managed really well. Can you kind of give us an idea of how, at this point, the packaging side will be able to manage and how it positions you into 2022? And, Bob, I wanted to go back to also to – just to clarify your point about protecting profitability. I know it's early to say, and obviously, when you gave the 2022 preliminary outlook, it kind of implies the margins are probably going to be on a gross margin basis. I don't know, but that you're going to have a similar algorithm or protect profitability. Is that still going to be more of financial deleverage and below the line or you may be able to protect your gross margin? Robert Gamgort: I'm going to tackle the first one on supply chain and then, Ozan, you want to talk a bit about 2022 and margins after I finish that. With regard to supply chain piece, like everyone, this has just been a rolling pattern of challenges. So, last time we talked to you, we were having some issues with regard to packaging availability, particularly in the area of Snapple and glass, which required us to move faster to our PET conversion, and starting up the plant much faster than we expected. That is largely behind us. And as I said, you're seeing improvements in those businesses. And so, at the moment, that is less of the issue. Our bigger challenges, and I think consistent with the industry, is actually transportation right now. Customer pickups, as well as shipments that we make that are not through our own fleet are increasingly challenged where pickups don't happen as scheduled and transportation is unreliable, as well as incredibly costly. And then again, like everybody, we're facing some rolling labor issues as well that are not adequate from time to time to be able to service the demand. So, our supply chain team has done incredibly well in navigating through all of these. As you know, we have new supply chain leadership. And Tony, who has joined us, made an immediate impact on that. And so, we're seeing a lot of improvements. But it continues to be incredibly volatile. Ozan, you want to talk about the margin side? Ozan Dokmecioglu: Actually, I like to expand a little bit because, obviously, the whole inflation and the pricing algorithm is so interrelated to each other. As we shared with you, and I'm sure you are seeing this every day, like everyone else, we are experiencing a significant increase in inflation, particularly in packaging materials, labor, lately coffee beans, Corning glass, and so forth, which is a broad base of our input costs, combined with transportation. And the latest one, we are seeing pressure on the labor shortage as well as the availability. As we also shared with you a little while ago, we expect overall inflation rate for 2021 to impact us negatively around 6%. And also, inflation has accelerated through 2021, with the second half being higher than the first half. So, what does this mean? This means that we are entering into 2022 at a higher second half run rate. So, we expect that at least the first couple of quarters of 2022 to face tougher comps than the second half of 2021. Having said that, during our Investor Day, October 1, we also shared with you that our long term outlook is for continued adjusted operating margin growth fueled by primarily three things – productivity, mix and overhead leverage – while we continue to invest in our brands to continue to drive our strong growth. Therefore, at this point in time, our 2022 outlook is our best estimate based on a range of assumptions, which is very important to articulate and this is how we have been managing the enterprise for a while, which is a balance between the inflation, pricing, productivity and business investments. Obviously, the more we know, we will update you and the timing of that update would be during our February 2022 call that will announce our quarter four and the full-year results. But in summary, we believe in the strength of our plan and the algorithm that we put in front of you that will deliver over time. Andrea Teixeira: And your next question comes from Kevin Grundy with Jefferies. Kevin Grundy: Congratulations on another strong result. I wanted to kind of zoom out a little bit. I have a more strategic question for you this morning just as it pertains to your distribution assets and the potential to move into alcohol following PepsiCo's announcement with Hard Mtn Dew. As you know, the legacy Dr Pepper company has long viewed its bottling assets as strategic. I think there's been some questions over the years about potentially taking a look at doing something more strategic, spinning them off, refranchising, etc. But it was collectively something the board thought never made a lot of sense. You mentioned the Vita Coco investment there. That's been a long term relationships. It's part of the allied strategy. The Polar deal that you guys entered into made a lot of sense as well. So my question is this. I'm sure the PepsiCo announcement is in no way lost on you. I just wanted you to comment this morning on the potential for Keurig Dr Pepper to move into the alcohol space, to take a look at your own distribution assets. Is that something that you're entertaining? Is that something that you think makes a lot of sense? Robert Gamgort: I think we lost the end of it. But let me give you a point of view on this space here. On alcohol, in particular, is an area that we look at, it's very similar to the way we look at beverages in total. So as we said, when we put the other coffee with cold beverages, that we thought there was an opportunity to look at beverages holistically. It's the same with alcohol. Now, the complexity of distribution is one that has been pointed out by many including us. And I think that what you referenced with regard to Pepsi is very interesting in how they're being creative around that. What you're seeing is really the intersection of two opportunities. One is portfolio expansion to new territories, as well as consolidation in the distribution assets to make sure that they are at scale and therefore more efficient. And so, we look at both of those opportunities. And the one that you point out is there is some overlap. So, it's an area that we continue to study. As we had pointed out on the Investor Day, we participate in alcohol in a variety of ways that I think was surprising that people. We talked about the business we have in Canada, where the distribution environment is very different. The fact that we do licensing in the alcohol space, and we think that our brands can play in alcohol nicely, the fact that we're the number one mixer company which has us participating in alcohol consumption occasions at a much higher rate. And we put all of that knowledge and objective together to think about that. So I think, in short, there's a lot of complexity to do this in the US. It's interesting to see how others are looking at it. We look at beverages holistically, and so it's certainly on our radar screen. It'll be something in the broadest sense that we'll be talking about in the future. Operator: And your next question comes from the line of Brett Cooper with Consumer Edge Research. Brett Cooper: Bob, the leadership team that you brought in comes more from outside of non-alcoholic beverages versus what we typically see in the space. So I was just hoping three years into the deal, you can talk about where you see the state of your route to market business, your observations on what the accepted view of operations was versus how you as a team are seeing it, and then how you look at managing evolutions in the industry, whether those are the ecommerce, the rising penetration of electric vehicles altering convenience store purchases and/or the rise in non-ready-to-drink beverages? Robert Gamgort: First of all, I'll start with the team. We're really proud and pleased with the team that we have in place right now. We continue to build capabilities. If you look at where we have drawn team members, especially at the most senior levels, and you see it at the EL, executive team level. But I would also say, at the level of direct reports to the executive team, it's very similar. Wide range of packaged goods experience with a focus on beverages. We like to pull people from all elements of beverages. So we have non-alcohol as well as alcohol experience. We have a number of people who in that individual have experience in both. We also have people who have a number of experiences both within North America as well as international experience. And we think that this combination of skills, experiences, backgrounds and style make us much stronger as a team. And we will continue to add talented team as well as promote and upgrade talent from within as we've done. So, it is a critical part for our ongoing success to make sure that we've got the management team who can really lead the business of the future. So let's talk about some of the future-looking comments or questions that you ask right there. Again, we go back to our original thesis for putting the two companies together is that beverages historically had been managed in silos. And we thought if we took a look at it from a consumer perspective that we would be better off and it's exactly what we've seen, is that consumers don't think about beverages in formats, the silos. They think about needs and occasions and they use multiple beverage formats, brands, products, etc., to satisfy those needs. So, by taking a consumer first, need-based approach, it has really informed our innovation pipeline, both in the cold and hot side to great success, as you see, it's driven our marketing programs. And it helps us think about partnerships going forward, whether that's a partnership like Polar that was our most recent one, in which we have a long term franchise agreement with them, but not ownership. Or partnerships where we have seen investment or ultimately acquire the business as we've done with others. When you think about our distribution assets, which is another area that you point to, we put the company together in 2018, and talked about seven different ways that we went to market. We ranged from direct store delivery, to wholesale direct, to franchise – our fountain foodservice which is our on-premise business. But the other one that we talked about at that time was ecommerce, and there was very little appreciation for ecommerce, particularly in beverage in 2018. And that's changed dramatically. We have seen the percentage of our ecommerce business grow. We've talked to you before. That's north of 10%. It's higher on our coffee business. It grows significantly faster than our average business. And we are in position to be the market leader, the category leader in this space, driven by the historical strength of Keurig. And now with Keurig, where there's always been a substantial ecommerce business, the fact that we are selling brewers that are smart brewers that can recognize the pod, that can trigger an order direct to consumer based on actual SKU level consumption, suggests that we are thinking way ahead in terms of what the next steps are in terms of distribution routes, as well as efficiency. My last point is it ties back to the question that Kevin asked, in addition to portfolio whitespace and finding new points of distribution, we think our CSD asset is a competitive advantage. But we also believe in consolidation and distribution in the industry. And we'll look for ways to continue to consolidate distribution and drive more efficiency and effectiveness through that really important asset to us. So, I think I've covered all of your forward-looking points. If there's anything else on there or anything I missed, let me know. Operator: Your next question comes from the line of Lauren Lieberman with Barclays. Lauren Lieberman: I was wondering if you could just talk a little bit about Polar. I know it's still relatively early, but had been expanding distribution. And I was just curious if you could talk about some of the uptake you're seeing and what you're doing also to build awareness of that brand because it's one thing to put it on the shelf, another for people outside of the Northeast to pick it up off that shelf. Robert Gamgort: As you know, Polar continues to be responsible for the brand in their territories. And we've expanded outside of the Northeast for them. Right now, we're at 60% ACV distribution in the territories for which we're responsible. We're happy with that. It continues to grow. We've achieved now just under a four share of that category, which is a sizable and growing category. And we're happy with the trajectory that we're on. I was out just recently doing retail in a number of markets across the country, and I was really pleased with the level of distribution and display activity that we're getting. And in stores in which we haven't gotten it fully slotted onto the shelf yet because of timing, I saw a lot of off-shelf display pressure, which will continue to grow the brand. The Polar team is responsible for marketing the brand. And it's something that we work with in conjunction – work with them on. And I agree with you that, as this distribution base continues to build, and we have great push activity behind it, needs to be supported with an increasing amount of consumer poll activity. And that's something that we're continue to work with them on. But I think that the foundation is in place to be able to activate that. And overall, we're just really pleased with how that business is trending. Operator: Your next question comes from Sean King with UBS. Sean King: First off, I'm glad to see you're starting to move pricing higher on the pod side for the owned and licensed brands. But first off, do you expect or are you seeing the partner brands following on price at retail? And then second, over time, can you get pricing on the partner brand manufacturing contracts, given the higher costs you're seeing? Robert Gamgort: Let me talk a little bit about just pricing in total on pods and then, Ozan, why don't you pick up on the partner agreements and potential pricing there. I think pricing is always an interesting conversation in the context of K cup pods because we have intentionally been lowering the price, although I know for analysts and investors that was always something of concern. We always point out that that was an intentional strategy that has continued to drive household penetration. And we knew that the price was too high. And we're able to back up those price investments with strong levels of productivity because, as the price came down, we were able to expand margin. That's certainly the proof point that it was intentional. We had that well under control. We are seeing an increase in the underlying price of coffee. And while that is a lesser component of a finished K cup pod than somebody who's selling roast and ground coffee, it still is of a magnitude where we know that pricing is appropriate and required. So we pass it on immediately in the form of pricing in our owned and licensed brands. And we do think that's the right thing to do, given the inflation. But it's a little more complex in the partner situation as well as private label. And I think, Ozan, why don't you talk that through because it's a good opportunity to remind everyone how our contracts work and what they're likely to see inside and outside of the KDP P&L. Ozan Dokmecioglu: And as we say, use the genetic code on partners, and obviously, we include the branded partners we have as well as private label. It's one group for us. And as we shared with you, not the specifics, but in general terms, our partner contracts are for long-term duration. So, they are not for the short term. And the contracts obviously specify all the details in terms of the working relationship. So, when we do the double click, we also see that, as KDP, we are not responsible to source the coffee beans for the most of our partner group. So, what does this mean? This means that any fluctuation, plus or minus, in the coffee bean procurement, responsibility of the profit and loss management lie with the partner group. That also obviously includes the pricing on the shelves that we have zero saying and it's their business and their job to decide how they manage their pricing. And in some instances that we are responsible in terms of the coffee bean supply, we use our broad hedging strategies and techniques by considering all these puts and takes and protect ourselves at all times. So, this is our overall working relationship from the core manufacturing side of our business and how we set the algorithm between the partner groups as well as the branded ones as well as the private label. Operator: Your next question comes from the line of Laurent Grandet with Guggenheim. Laurent Grandet: Actually, the question I've got is very much the same as Sean. I'd like to re-dig more a bit about these. So I understand about the coffee bean and all these, but what about the pod manufacturing. You said in your prepared remarks that the manufacturing went up for your pods? So, are you able to pass through some of that increased cost of manufacturing the pods? I'm not talking about the coffee here, but more the pod by itself to either your product level or [indiscernible] or Nestle, Starbucks? Robert Gamgort: Ozan, you want to pick that up. Ozan Dokmecioglu: First of all, we are not at a position to disclose all the detailed relationship between us and our partners. I'm sure you will appreciate. But if I want to make, let's say, overall general statement on that one, we always look to several pieces as a kind of basket between – from the manufacturing perspective, that includes some of the input cost. As you said and as I said that we are not responsible for the most part from the coffee beans. But there are some other elements, as you say, but that's why we have our overall productivity programs. That's why we always look for further efficiencies in our business in order, first of all, to help us to improve our margins as we have been doing as well as to weather these type of non-persistent or persistent inflationary environments. Therefore, it wouldn't be right just to look to one piece element and try to make sense out of it, but rather we need to look holistically and that's how we were managing not only coffee, but all segments of our business on the basis of the relationship with pricing, the inflation, productivity as well as the business investments. And as we have also spoke, we also improved our pricing on the owned and licensed that will be impacting our numbers. And you will see in the data as well starting quarter four onwards. And as we also said that we are very pleased both on the coffee beverages as well as cold beverages that the sector is very rational and very responsible to manage the inflation and the pricing relationship. Therefore, we are very pleased, Laurent, with our algorithm and our working relationship with our partners in all pieces of the elements. Robert Gamgort: I think just to build on that, as I said before, just to reemphasize, our objective is margin protection. Our levers to pull are a combination of pricing, productivity and reinvestment. And we have different mechanisms in different contracts to be able to protect margin against that, using that entire basket. And in the case of coffee, which has been the most inflationary item within the manufacturing and delivery of a K cup pod – as we said, we're not responsible for it for most of our partners. And in the case of our own brands, we immediately took pricing, which by the way, as you can see, didn't really show up at all in Q3 based on the timing of the pricing and the lag on that. So, that's the actual pricing that we put in place, and we've seen across the industry as more to come. Operator: Your next question comes from the line of Dara Mohsenian with Morgan Stanley. Dara Mohsenian: Just a follow up on that. Look, obviously, the guidance for 2022 is below your long-term algorithm because of the cost pressures. So clearly, there's some ability not to fully price away those commodity costs. Theoretically, with the conversations we've been having today, heritage DPS is in good shape to do that. You talked about some pricing on your owned and licensed brands. So just to be very clear, I assume the gap for 2022 is that the cost pressures you're seeing on the manufacturing side for your partner brands, understanding you're not responsible for the coffee grounds themselves, but you're not fully getting the pricing to offset that. So, A, is that the case just to be explicit about it? Seems clear, but just to be explicit. And, B, is that more just a lack of ability to sort of respond short term and you can make up for that in future years as you think about it? Or is it more just the contracts are set the way they are in terms of pricing and the way the relationships work, it's more of sort of a standard pricing over time as opposed to responsiveness to commodity costs. Just to clear that up? Robert Gamgort: First of all, I think you're connecting things that aren't connected right now. So you're looking at our 2022 guidance, which was our initial guidance that we were in a position to – I think really felt obligated to provide some guidance in October, four to five months in advance of when we normally would. And as we've shown, since the very beginning, we pick our guidance and our commitments really seriously. We're pretty much the only company that held on to guidance during COVID. So when we put a number out there, we treat it as a commitment and an obligation. And so, when we're sitting there in October, operating an incredibly volatile environment that nobody can predict, we feel that it was important to set expectations for 2022 that was friendly to investors, so that they could plan appropriately. So, connecting coffee contracts and our ability to price or not, which I think we just explained in great detail over the last two questions to our guidance for 2022, I think is not appropriate. Having said all that, I'm going to say what we said a couple times today. Inflation is one input cost. We are managing around a range of inflation. One of the pieces that I think is not well understood is as soon as we talk about inflation, immediately, I see reports jump to commodities and hedging. Let's be clear, the inflation that the industry is seeing right now is way beyond commodities. It's packaging, it's labor, transportation. Some, if not most of those, cannot be hedged and are impossible to forecast. So, everybody is getting exposed to a high level of inflation. We're exiting 2021 at the highest run rate of the year. Nobody can fully predict how that's going to flow through in 2022. But if you're entering the year at the highest level of the previous year, that would cause you to say, okay, there's going to be increasing pressure and we're going to have to offset that through a range of pricing, productivity and reinvestment. Last point I would make as you think about 2022 is we're really clear. Our marketing is up in 2021 versus 2020. We intend for our marketing to be up in 2022 as well. The industry took down marketing in 2020 versus 2019 reluctantly, but the whole industry did it. Our objective is to build it back because we think investment in our brands behind innovation is the most important thing, and it's fueling the top line. So there's an assumption in 2022 that we're going to reinvest. And you can figure that into the estimates as well. So, that's our outlook for 2022. It's early. We're going to provide a lot more information when we're in our normal position of doing so in early February. We take our commitment seriously. And we're really pleased with the growth of our business and believe that the right thing for us over the long term is to continue to invest in growth and not cut marketing spend to be able to offset any margin pressures. Dara Mohsenian: Can I just follow-up with one question? If you see manufacturing costs continue to move up on the partner side in coffee, do you think you can get incremental pricing over time? How do you think about just that piece of it? I understand there are a lot of moving pieces and you're still delivering solid growth for next year. But I'm just trying to understand that one piece of it. Obviously, we're seeing a lot of responsiveness to the costs on the heritage DPS side, right, a very strong pricing this quarter. So I'm just trying to understand that one piece of it. Robert Gamgort: There are a variety mechanisms for us to recover inflation on the pod side of the business. Pricing is one of them. Productivity is another. My black point on this one is – I said this for the past three years that the focus on pricing on coffee, while it makes sense from a traditional CPG perspective, makes no sense in the coffee pod business when the company is intentionally trying to lower prices. And even in an inflationary environment, we're trying to keep prices down. We're only passing on the coffee costs because they are excessively high. With regards to the rest of our business, we have a significant amount of productivity and mechanisms to take more pricing if we choose going forward. But remember, our overarching strategy is to try to keep prices down even in the face in the face of inflation and protect our margins through a combination of productivity and pricing. In this business, we have leaned on productivity because it's available to us much more than pricing because it's the right thing to do for the ecosystem of Keurig. Recognize that concept is very different concept than traditional CPG. I would also say it's the beauty of the Keurig system because it truly is an ecosystem. That's an overused phrase, but it's true in the case of Keurig. And that's what makes this thing work over the long term. You can't focus on one metric because if you do you have you run the risk of damaging the long term growth of the system. And you could see that, if anything, we're accelerating the growth of the system, which really drives everything. Operator: And your final question comes from the line of Robert Ottenstein with Evercore. Robert Ottenstein: And just want to follow-up on a couple of questions. We've covered a lot of ground. So just one, as you look at the growth opportunities in the M&A, how does international expansion rank in terms of priority? Is that something that you see as natural, particularly maybe in Mexico, or particularly in areas where you have the brand in the US, but maybe not overseas? Or you can use your expertise in other areas? So that's the first question. And then second, as you look at these commodities, there's a traditional hedging playbook, right, that you guys have traditionally used, but you've got prices now at unprecedented levels with a steepness in the curves like aluminum that I don't think any of us have ever seen. Does that change your strategy in terms of the duration of the hedges? Robert Gamgort: Let me hit the first one and then, Ozan, you want to talk about hedging and duration of our positions and how we think about that. Yeah, on the international side, with regard to M&A specifically, as we talked about in our Investor Day, we're really excited about being able to use our high levels of discretionary free cash flow to look beyond debt reduction as we're just about to reach our long-term leverage targets. And we talked about the capacity to do $20 billion worth of M&A. There are four areas that we talked about in that portfolio, whitespace distribution and consolidation within distribution, adding capabilities to our business. And then we also talked about market expansion or international. So, it's one of the top priorities. I don't want to rank them because it's going to be dependent upon not just our needs and our opportunities, but what is available and what kind of partners are on the other side. We've got really nice business in Mexico. We hadn't talked about it very much. And we were proud to share with you the business that we built in Mexico at Investor Day. Similarly, in Canada, we have a nice business there that we have really driven nicely. And we believe that both of those markets are – we've got a position there with management, infrastructure capabilities that are scalable. And so, we see opportunities in those two markets. And then I really don't want to talk beyond that because our objective is to make sure that we leverage the investments that we already have in place and scale them before we look at completely open territory, although that's not off the table, and see a lot of exciting opportunities across all of North America, not just in the US. Ozan, you want to talk about the hedging in our commodity position. Ozan Dokmecioglu: Absolutely. And I like to expand a little bit on this because this is a very important topic and is ever changing, especially times of COVID proved how vigilant and flexible and adaptive we need to be. First of all, when we look to the sources of the inflation, you will see that that's across the board. That includes, as you were saying, Bob, the main commodities that we buy that we have several sophisticated hedging strategies and techniques that we apply. But that is not all. There are other elements of the cost of goods sold that are being increased as part of the general inflation. That includes transportation, warehousing, which is hard to being able to hedge, for example, and even some parts of our portfolio in the packaging like polypropylene which is the main material that we use in the K cups. The traditional hedging techniques do not work there. But having said that, what is important for us that we manage this again in a very basket driven basis by looking to several scenarios and assumptions. And of course, we do change our hedging strategies and policies on the basis of the expectations as well as taking very different blends of positions again, depending on which segment of our business. But beyond that, we are also very active to protect ourselves because inflation comes obviously as an increased price, but the availability is also important. Therefore, we have been very active of trying to find alternative suppliers. And beyond that alternative suppliers, also diversifying geographically the sources of the input to fulfill our business requirements. Therefore, when we say hedging, it summarizes quite a bit, but it's not all there are several legs to how we manage the overall cost of goods sold base of our company. That includes the supplier relationship. That includes the diversification. That includes the geographical diversification at the same time. Therefore, it's a very vigilant part of our business that we are all over and spending a huge amount of time to get it right. And what matters at the end of the day that we manage this complex situation on the basis of the various assumptions and still continue to successfully deliver against our financial commitments. As we have been doing a little bit more than three years, I think the model that we have adopted has proven to be successful, and we will continue to act as such. Operator: I would now like to hand the conference over to management for closing remarks. Robert Gamgort: Thank you very much for joining us today. Our teams are out all day. So if you have any questions, feel free to reach out to us. We're here. Operator: This does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Keurig Dr Pepper's Earnings Conference call for the Second Quarter of 2021. This conference call is being recorded, and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper's Vice President of Investor Relations, Mr. Tyson Seely. Mr. Seely, please go ahead. Tyson Seely: Thank you, and hello, everyone. Thanks for joining us. Earlier this morning, we issued our press release for the second quarter of 2021. If you need a copy, you can get one on our website at keurigdrpepper.com in the Investors section. Consistent with previous quarters, today, we will be discussing our performance on an adjusted basis excluding items affecting comparability. The Company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. With the exclusion of items affecting comparability is not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons in an appropriate basis for discussion of our performance. Details of the excluded items are included in the reconciliation tables included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the Company's control, we do not reconcile our guidance. Here with me to discuss our second quarter 2021 results are KDP Chairman and CEO, and Bob Gamgort; our CFO, Ozan Dokmecioglu; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. And finally, our discussion this morning may include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the Company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the Company's filings with the SEC. With that, I'll hand it over to Bob. Bob Gamgort: Thanks, Tyson, and good morning, everyone. Since we spoke last quarter, consumer mobility across North America has continued to increase, with improving trends in travel, grocery and retail and recreation translating into changes in growth trends in beverage category segments and retail channels. Just as we experienced in 2020, the COVID recovery period in 2021 is creating significant volatility in demand, which has required us to remain nimble and flexible in managing our business. One area in which mobility remains challenged is offices, which continues to be a headwind for us in coffee. While we've experienced some improvement year-to-date and expect more over the balance of the year, we project the recovery of office mobility to lag other areas of the economy. Mix management was key to our success in 2020 as we were able to drive growth in on-trend segments and channels to offset those that were structurally challenged by COVID. While managing demand mix continues to be critical this year, we also face the added challenges of input cost and labor inflation, transportation constraints, labor shortages and supply chain disruptions, making 2021 arguably more difficult in many respects than 2020. We expect another 6 to 12 months of macro volatility before a more predictable operating environment emerges. Key to stabilization will be a return to both school and the office environment, the course of the COVID virus and its variants, the impact of reduced or eliminated government subsidies, the catch-up of global supply chains to meet unprecedented demand and an improvement in the labor market. Despite all the challenges, we remain confident in our ability to deliver our EPS guidance for 2021 while increasing our revenue growth target to 6% to 7% for the full year. Our updated financial outlook offsets the challenges I mentioned a moment ago with new pricing actions announced across most of our categories, along with continued productivity and efficiency efforts and the improving performance in our higher-margin beverage concentrates and fountain food services businesses that both benefit from increased mobility. It's important to note that we still intend to reinvest any earnings upside into growth investments. At the midpoint of our 2021 guidance range we will have achieved the three-year financial algorithm that we communicated at the time of our merger, delivering annual adjusted diluted EPS within our target range of 15% to 17%, revenue growth well above our target range of 2% to 3% and our leverage ratio at or below 3x by the end of this year. We will share our outlook for the business and update our long-term algorithm for total shareholder return at our upcoming investor event in September. Details regarding the virtual event will be shared next week. Turning to second quarter results we announced this morning. We posted another strong quarter, highlighted by double-digit growth in adjusted diluted EPS and high single-digit growth in constant currency net sales. These results were broad-based and balanced across the Company with growth driven by both core business and innovation. Because we're one of the few companies layering strong current year performance on top of strong year ago performance, it's also helpful to highlight our results on a two-year basis. Comparing the first half of 2021 with the same time period in 2019 shows constant currency net sales growth of 13.5%, adjusted operating income growth of 19.5% and adjusted diluted EPS growth of just under 30%. We expanded our market share of total liquid refreshment beverages over the previous two years, driven in part by our 1.4 share point increase in carbonated soft drinks. Total K-Cup pod shipments increased nearly 15% over the same time, and brewer sales are up nearly 50%. Looking specifically at the second quarter, more than 70% of our cold beverage retail sales base expanded market share, reflecting continued growth of CSDs driven by core brand strength and innovation, the most recent being our new Zero Sugar lineup which is performing exceptionally well. Growth in key non-carb beverage brands such as Snapple, Core, Bai and Evian was good for the quarter but could have been even stronger had it not been for supply disruptions, which I will discuss in a few moments. In coffee, our K-Cup pod shipments were essentially flat in the quarter successfully lapping the very strong year ago period that was driven by peak at-home consumption. Comparing K-Cup pod shipment volume to 2019 removes some of the significant noise and timing for that business. For the quarter, K-Cup pods grew nearly 10% on a two-year basis, demonstrating the underlying long-term growth trends in our coffee business. Keurig brewer sales in the quarter increased by nearly 30% compared to a year ago, some of which was influenced by government stimulus and the timing of Amazon Prime Day. Finally, with regard to coffee systems innovation, we were excited to announce earlier this week the launch of the K-Supreme Plus Smart Brewer, marking our first launch of a connected brewer for the broader consumer market. We look forward to talking more about the new Brew ID technology and the growth platforms it creates for us at our upcoming Investor Day event. Shifting from demand to supply, nearly all CPG companies have discussed supply disruptions in 2021, and we're certainly not immune to these challenges. We continue to be effective d in supplying K-Cup pods and CSDs, and we've been able to overcome chip shortages and ocean transportation limitations to supply the high levels of demand for our Keurig brewers. However, our non-carb beverage portfolio has been negatively impacted by supply disruptions, especially Snapple and Core, which is evident in the latest Scanner numbers. I'll use Snapple as one example of the type of challenges that we and most other CPG companies are facing in the current environment. As we discussed on previous earnings calls, we started rolling out our refreshed Snapple bottle on the West Coast in November of 2020. That new package substitutes post-consumer recycled plastic or rPET for glass and non-recycled plastic. And it also contemporizes the Snapple brand look and feel. The consumer reception has been very strong, with Snapple growing share for the first six months of the year as we increased recruitment of younger consumers, exactly what we intended to do with the refresh. However, an unexpected shortfall in committed glass bottles from our supplier required us to transition our new rPET packaging faster, which pressured material availability from our supplier of rPET and stretch the startup curve of our new production lines. We're navigating through this challenge and other disruptions that have become the new normal in 2021 to maintain our guidance. However, we do expect some sales and share pressure on key non-carb beverage brands throughout the third quarter. Our learnings on how to successfully manage our business through the volatility of COVID continue to serve us well as we build an increasingly resilient organization. Before I turn it over to Ozan to discuss our segment performance in detail, I'd like to mention the great progress we continue to make in the area of ESG, which we know is important to an increasing number of investors. We recently issued our annual corporate responsibility report that highlights our performance against our previous ESG goals, increases our ambition through new ESG goals and expands our impact in new areas such as diversity and inclusion and health and wellness. If you haven't done so already, I encourage you to read the CR report, which is available on the KDP corporate website. Ozan, over to you. Ozan Dokmecioglu: Thanks, Bob, and good morning, everyone. Continuing on an adjusted basis, I will briefly review our performance for the second quarter, which was very strong and our press release discusses in significant detail. I will then turn to our outlook for 2021. Constant currency net sales increased 8.1%, fueled by higher volume mix of 6.1% and favorable net price realization of 2%, with all four of our business segments posting growth driven by elevated consumption and strong in-market execution. For the first six months of 2021, constant currency net sales grew 9.4% versus a year ago and 13.4% versus the first six months of 2019. Adjusted operating income in the second quarter totaled $839 million, an increase of 8.3% compared to $775 million in the year ago period, driven by this strong net sales growth across our portfolio, productivity and merger synergies. These growth drivers were partially offset by significantly higher marketing investment in the quarter, inflation in logistics, manufacturing and input costs and higher operating expenses associated with increased consumer demand. For the first six months of 2021, adjusted operating income increased 8.3% versus year ago and 19.4% as compared to the first six months of 2019. On a constant currency basis, adjusted operating income for the second quarter increased 6.8% versus year ago. Adjusted operating margin in the second quarter was 26.7% compared to 27.1% in the prior year, significantly impacted by the reinvestment in marketing in the quarter, inflation and unfavorable margin mix due to the higher brewer sales. Adjusted net income advanced 14.7% in the quarter to $538 million compared to $469 million in a year ago period driven by growth in adjusted operating income and lower interest expense, largely driven by lower interest rates stemming from the strategic refinancing we completed in the first quarter of 2021. Debt repayments and the lower adjusted tax rate in the quarter. Adjusted diluted EPS grew 15.2% to $0.38 per diluted share compared to $0.33 per diluted share in the year ago period. For the first six months of 2021, adjusted diluted EPS advanced approximately 14.5% versus a year ago and more than 29% versus the first six months of 2019. Let me pause for a moment to discuss the inflationary pressures and supply chain challenges we have referenced this morning. Price expectations continue to rise for aluminum, glass, corn products and polypropylene, which is a material use in our K-Cup pods. And like most other CPG companies, we have also experienced an increase in transportation and logistics costs as well as supply chain challenges related to supplier constraints, labor shortages and material and packaging availability. Despite these challenges, we have confidence in our ability to successfully navigate them. I will elaborate on this. For 2021, we are in a position of strength as our sales growth momentum will help to offset inflation. As discussed previously, we rely on a combination of productivity, cost controls, pricing and various other revenue growth management strategies, pulling the right levers at the right time to protect the long-term health of our business. In terms of price, we have already announced increases in both our core beverage and owned and licensed coffee portfolios. Along with the other levers I just mentioned, this approach enables us to mitigate rising input costs and address supply chain challenges while reinvesting in the business and protecting bottom line profit. As we did in 2020, we will remain nimble in response to changing market conditions to ensure our continued success focusing on flexibility, speed and delivery to manage our product and SKU performance at a granular level. Our updated guidance for 2021 incorporates all of these considerations, and we are confident that we have the tools and management disciplines to deliver strong growth in both revenue and earnings despite the dynamic inflation and logistics challenges. Let me now turn to our segment performance in the second quarter. Coffee Systems constant currency net sales increased 3.9% driven by higher volume mix of 3.5% and favorable net price realization of 0.4%. The volume mix performance reflected pod volume growth of 0.2% and brewer volume growth of 29%. The pod growth reflected successfully, lapping peak shipments in the year ago period related to consumer stock-up behavior in the early days of the pandemic and an improved performance in the away-from-home business. Even though the return to offices continues to be slow, and this business remains well below pre-pandemic levels, the 29% increase in brewer shipments in the quarter was fueled by continued strong consumer purchases stemming from successful brewer innovation and, to a lesser extent, favorable timing of time day during the second quarter of 2021 versus the third quarter of 2020. The favorable net price realization in the quarter was largely driven by brewers and the continued moderation of pod pricing declines, consistent with our strategic pod pricing initiative launched several years ago. Looking to the back half of the year, we expect pod shipments growth to continue in the mid-single-digit range, while brewer shipments are expected to be about even with a year ago given the 30% brewer growth we achieved in the second half last year, which benefited from the government stimulus during COVID sheltering. At the time, we heard some concern that the elevated brewer growth and incremental households we were adding in 2020 represented a pull forward from '21. Given the continued strength of brewers, which are now expected to be up approximately 10% for the year on top of the 21% last year, performance would suggest that the pull forward did not occur and that our momentum continues. Adjusted operating income for Coffee Systems totaled $371 million, an increase of 2.2% compared to $363 million in the prior year. This increase was driven by continued productivity and merger synergies partially offset by inflation in manufacturing, input costs and logistics. On a constant currency basis, adjusted operating income increased 1.1% in the quarter. Adjusted operating margin in the quarter was 33.7% compared to 34.8% in the year-ago period, largely driven by the negative margin mix associated with the very strong brewer sales. Packaged Beverages constant currency net sales grew 7.3% in the second quarter driven by strong volume mix growth of 6.2% and higher net pricing of 1.1%. This performance reflected growth in both our company-owned DSD operations and warehouse direct business. The majority of our LRB portfolio contributed to this growth, with CSDs, including Canada Dry, Dr Pepper and Sunkist, along with premium water leading the way. Adjusted operating income for Packaged Beverages in the second quarter totaled $286 million, an increase of 6.3%, compared to $269 million in the year ago period. This was driven by the strong net sales growth as well as productivity and merger synergies. These growth drivers were partially offset by inflation in logistics, manufacturing and input costs, a significant increase in marketing investment and higher operating costs to meet continued strong consumer demand. On a constant currency basis, adjusted operating income increased 5.9% versus a year ago. Adjusted operating margin for Packaged Beverages was 19.1% in the quarter compared to adjusted operating margin of 19.3% in the year-ago period, largely reflecting our significant reinvestment in marketing. Beverage Concentrates constant currency net sales increased 20.7% due to favorable net pricing of 10.4% and higher volume mix of 10.3%. The net pricing was driven by our annual price increase and a favorable comparison to prior year on our annual true-up of customer incentive accruals as well as strong revenue growth management. The volume mix performance was largely driven by improving trends in the fountain foodservice business, reflecting higher levels of consumer mobility in the restaurant and hospitality channels compared to the year ago period as well as the benefit of significant marketing investment driving growth in the quarter. Dr Pepper and Crush led the growth, partially offset by declines in Canada Dry. Adjusted operating income for Beverage Concentrates increased 15.3% to $256 million compared to $222 million in the year ago period, driven by net sales growth, which was partially offset by the significantly higher marketing investment. On a constant currency basis, adjusted operating income advanced 14.4%. Adjusted operating margin in the quarter was 68.3% compared to 71.8% in the year ago period, primarily reflecting the higher marketing investments. And finally, Latin America Beverages constant currency net sales grew 20.8%, reflecting strong volume mix of 16.6% and favorable net pricing of 4.2%. The liquid refreshment beverage in market execution in Mexico continued to be strong and resulting in the overall liquid refreshment beverage share expansion and continued robust retail consumption, which drove significant net sales growth for key brands, namely Penafiel and Clamato. Adjusted operating income increased 61% and to $37 million compared to $23 million in the year-ago period. On a constant currency basis, adjusted operating income increased 44%, reflecting the strong net sales growth and productivity. These growth drivers were partially offset by significantly higher marketing investments in the quarter and inflation in logistics, manufacturing and input costs. Adjusted operating margin in the quarter advanced 310 basis points to 22.3%. Free cash flow in the quarter continued to be strong at $492 million, which translated into a year-to-date free cash flow conversion ratio of nearly 95%. In addition to our ongoing deleveraging and investing in the business to drive top line momentum, we're also increasing our return to shareholders. Specifically, during the quarter, the KBP Board authorized the previously announced 25% increase in our quarterly dividend rate, which was paid earlier this month. Despite this healthy increase, our payout as a percentage of free cash flow remains below 50%, pointing to the exceptional strength of our cash flow generation and the future optionality it provides. During the quarter, we reduced our outstanding bank debt by $427 million and structural payables by $4 million. We also ended the second quarter with $167 million of unrestricted cash on hand. Due to growth in earnings and our reduction in bank debt, we improved our management leverage ratio to 3.4x at the end of the second quarter of 2021. Since the merger closed in July 2018, we have reduced our management leverage ratio by 2.6x. Let me now move to our outlook for 2021. For the full year 2021, we now expect net sales growth to be in the range of 6% to 7%. This compares with our original guidance for the year of 3% to 4% and our most recent guidance of 4% to 6%. We continue to expect adjusted diluted EPS growth of 13% to 15% for the year and plan to reinvest any over-delivery back into the business to support continued momentum. Supporting this guidance, we continue to expect merger synergies of approximately $200 million for a three-year total of approximately $600 million, in line with our merger targets; adjusted interest expense in the range of $505 million to $515 million; an adjusted effective tax rate in the range of 23.5% to 24%; diluted weighted shares outstanding of approximately 1.43 billion. And finally, our management leverage ratio is expected to be at or below 3x by the end of this year. With that, let me hand it back to Bob for some closing remarks. Bob Gamgort: Thanks, Ozan. Before handing it over to questions, I want to highlight that earlier this month, we celebrated the three-year anniversary of the Keurig Dr Pepper merger. Transaction that was based on our vision to create a North America-focused beverage company that approach the consumer and customer beverage experience in a more contemporary way. In the three years since we've accomplished a great deal and we are on track to achieve all of the financial commitments we made back in January 2018. We will continue to demonstrate what we believe it takes to be a modern beverage company, and we look forward to sharing more details with you in September. I will now turn it back to the operator for your questions. Operator: [Operator Instructions] Your first question comes from Bonnie Herzog with Goldman Sachs. Your line is open. You may ask question. Bonnie Herzog: Thank you. Good morning everyone. I guess I was hoping for a little more color on your Packaged Bev volume in the quarter, which was definitely strong especially considering you were lapping a tough comp from the pantry loading last year. Could you guys give us a sense of how maybe the growth progressed through the quarter and your expectations for this business in the second half? And I'm also curious how much of the strength was driven by the rollout of your new zero line and how incremental that has been on your portfolio? And maybe any early reads on the rollout from retailers in terms of securing incremental space? Thank you. Bob Gamgort: Sure. Good morning, Bonnie. The growth in Packaged Beverages for this quarter was pretty well balanced across all items. CSD had particular strength, and I'll talk about Zero Sugar in a minute. The one area that we did flag is that in our non-carb portfolio, we started seeing some weakness as we got into the month of June in particular. And it is 100% driven by some supply issues with real issue on Snapple and Core. Both those brands were growing very, very well up into the supply disruptions. If you look at the IRi data, you see where we actually start to drop off during a little bit in May but really in the month of June on those two. So, that was the flow of the volume over the quarter as well as what the composition was. And as we talked about in the prepared remarks, we've increased our guidance on the year. Obviously, it's driven a lot by our Packaged Beverage business, and so all of the supply issues that we talked about are taken into consideration in that guidance. So, we're navigating our way through it. Real bright spot within the quarter continues to be CSDs. We refreshed or we converted our diet flavor brands over to Zero Sugar. If you look at an even comparison of those two, in other words, take out Dr Pepper Zero Sugar, which is an incremental item, if you just look at like-for-like on the conversion, our sales were up 16% as a result of the conversion from diet to zero sugar. And then the Dr Pepper Zero Sugar variety has been incredibly strong. Year-to-date consumption, if you look at an IRi is about $100 million. Our early read is about 70% of that is incremental, and we've been able to get that in distribution in 85% ACV. So, great execution across the board in that conversion and the addition of Dr Pepper Zero Sugar, yet one more thing that's driving our CSD portfolio, and that gave us strength combined with everything else I just talked about in the Packaged Beverage segment. Bonnie Herzog: Okay. So as I think about the second half, you expect some of this momentum to continue. Would that be fair, Bob? Bob Gamgort: Yes, that's fair. And you can take a look at, I think, a very high level of info that we gave today, which is updating guidance for the balance of the year. So, it allows you to see a first half, second half calculation. And then we were very specific about within that, what we're expecting in terms of coffee brewer sales as well as pod sales. So, you start -- we're narrowing it down for you to give you what a Packaged Beverage business should look like. Operator: And your next question comes from Kevin Grundy with Jefferies. Your line is open. Kevin Grundy: Good morning everyone and congratulations on the quarter. Bob, just picking up on your prior remarks but maybe bringing it up to a total portfolio level. So, the 6% to 7% upwardly revised guidance is fantastic. This has been stair stepped up from 4% to 6% previously and then 3% to 4% initially. So, just maybe sort of again picking up on the last line of question, but bringing it more broadly to both the coffee and total LRB side of the portfolio, how has the view evolved over the past six months for you guys thinking about the portfolio? And the growth outlook, what specifically has come in better? What gives you confidence for the balance of the year? And then longer term and maybe you want to get into this more at the upcoming Analyst Day, what do you want to communicate to the Street in terms of what you think the sustainable growth rate is for this business longer term? Bob Gamgort: Sure and good morning. The last part we will cover in some depth at the Investor Day, which is coming up, so I'll wait for that event to talk about beyond 2021. With regard to 2021, we're seeing strength across the board. So in the decomposition of the year-to-date numbers that you've seen, you've seen strength in every single segment, and you've seen some mix benefits. So for example, fountain foodservice and beverage concentrates, which are among our most profitable items, were negatively impacted in the year ago period. We're getting a good rebound on that. We're seeing continued strength in at-home coffee. Certainly not at the peak of consumption in home that we did a year ago, but we've been talking about that expectation since Q2 of last year. And then brewer sales continued to be exceptional. We're projecting for the rest of the year that those will be flat. But as Ozan said earlier, it certainly takes aside the concerns that many had that the incremental households we gained in 2020 and the extra brewer sales were a pull forward. That's certainly not the case. So quite simply, we're seeing strength across the entire business. That's given us the confidence to take our revenue expectations up. And then anything in a first half, second half or quarterly comparison is really driven by the volatility of a year ago. And that's why I think it's really important to look at two-year numbers to take the noise out. And it's easy for all of us to get enamored with one quarter performance. We've always taken a long-term view. And you're seeing a lot of rebound from other companies, but the reality of it is if you compare our numbers to 2019, our revenue was up almost 14%. Operating income is 20%, as I said before. Earnings per share is up about 30%. I think that's the real way to evaluate performance. Operator: And your next question comes from Bryan Spillane with Bank of America. Your line is open. Bryan Spillane: Good morning everyone. So Bob, maybe just to step back a little bit further, and I guess I wanted to get your perspective on two things. One is just given all of the supply chain, I guess, challenges or constraints, and this is -- we're hearing this across a lot of companies, just how you're thinking about the balance of reinvestment or like stimulating demand while it's just becoming more challenging to produce things. And then maybe if you can also comment on just this whole environment with inflation and labor force being tight and just -- have you seen this before? How does it change the way you think about just kind of how you're running the business day-to-day over the next year or so? I'm just trying to get a sense of just do things have to change because this just environment is so dynamic. Bob Gamgort: Yes. I think we've seen a lot -- a number of things in the past two years that we've never seen before in our career. Certainly, the shutdown of COVID and all of the related issues around keeping employee safe and running our operations under real constrained conditions was unique. I think this rebound, as I said in my remarks, in some respects, it's actually more challenging than that because we're getting a lot of mixed signals. There's reopenings in certain areas, and then there's problems in others. We've all dealt with inflation. We've seen it in commodities and input costs. We've never seen this level of labor inflation, which is not necessarily a bad thing because there are consumers as well, so it gives them more purchasing power. But the labor shortages are something that none of us have seen in our career. And I have no idea how much of it is tied to government stimulus and concern about going back to work, how much is tied to the fact that kids need to be in school in the fall to free up the labor force who are watching the children. We're going to know a lot more when September October rolls around, but I'd say this is very much unprecedented in all of our careers. The way that we're managing through it goes back to how we started in March of 2020 when we had to make some dramatic changes due to COVID. We stay very flexible. We're looking at the short term as well as the long-term, but emphasis on not committing to anything for too long because we know it's going to change. Your comments about supply chain disruptions, I'm calling it the new normal, now hopefully, it's not normal. It's the reality we're dealing with. And we just flex when we have capacity in one area. We lean in more on demand generation when we have constraints in others. Certainly, we're not going to promote or spend incremental dollars promoting an area that we have supply constraints on. So the game is really going to be won or lost by speed by speed and flexibility. That's something that we were able to do last year. And we're certainly doing it to even a greater degree this year. And I think that will continue until this all settles out. Bryan Spillane: Okay. And then just -- and maybe not even specific to KDP, but just would your expectation be that like it just doesn't stop at the end of the calendar year? Meaning this -- some of these sort of factors could continue for a while? Or should the baseline expectation be that within the next six months or so, this should start to settle out? Bob Gamgort: It's really hard to forecast. And I said in 2020, I want to get out of the forecasting game and get into the reaction game, and I think that served us well. As I listened to the Fed, and they don't know, if inflation is short term or long-term, and you can hear the President talking about supply issues, and they don't have a good handle on what's going on here. So, I'm not going to be a better forecaster than they. I do -- if you really push us, I think we'll see this start to settle out in 2022. But again, it's going to be driven by the course of the virus and the variants. It's going to be driven by things like government stimulus. Those seem to be the two biggest factors in everything that we've just talked about. Operator: Your next question comes from Lauren Lieberman with Barclays. Your line is open. Lauren Lieberman: I wanted to talk a little bit about marketing spending because in 2020, where we all know that you pulled back on marketing spend quite a bit particularly in the CSD business and yet posted these tremendous market share gains, not just the sales growth. And so as you bring marketing back into the fold, I guess, one kind of short-term question, would you say, at this point you're kind of back to 2019 levels of spend on your -- the CSD -- the cold businesses, I should say, excuse me, number one? And number two, as you think holistically knowing the plan is to reinvest any revenue upside into the business, but have you discovered better ROI on your spend that you think is sustainable rather than just was a function of the environment last year? And if so, what are maybe some of the key changes or areas where you're getting greater efficiencies? Bob Gamgort: Good morning. Yes, we have certainly been more efficient in our marketing, and that's a continuation of a trend that's been in place for a while now. The nature of marketing has moved from being more broad targeting to more precise targeting. We have a significant number of tools and metrics available to us today that weren't available even a couple of years ago. And so the efficiency of our spend continues to increase, and that got pushed to an extreme during COVID, in which we were able to continue to generate demand, as you point out, with significantly lower levels of spend. I think part of that was efficiency and a big part of that was a unique situation a year ago. And if everybody pulls back at the same time, really, its execution, in-store availability, the right promotions that were driving a lot of demand, and we did that very well. But our intention is to continue to ramp our spending back up. You see a big jump in our numbers this quarter versus a year ago. I think everybody experienced that. We, along with pretty much everyone in the industry, is not fully back to 2019 levels of spending, but we're ramping our way up. And I think we're doing it for two reasons. One is there are a lot of cost pressures on all of us right now and a lot of volatility. So it's prudent to be able to keep some in reserve as you're increasing your spend to say let's ramp it up versus go all at once because we need some offsets to volatility going forward in addition to productivity, efficiency and the pricing that we've put in place. And that's what I just said is true for everybody in the industry right now. I think the second part is it gives us an opportunity to really test efficiency. If you ramp it up, you can see where your next dollars being spent and it's a good return on investment. And that gives you the confidence to add the incremental dollars beyond that back. So our track is to continue to increase over time. We'll talk more about what the long-term projection of that is when we get together in September, but that's how it's playing out right now in 2021. Lauren Lieberman: Okay. That's great. And as you also just think about continuing to reinvest in the business this year with any further upside you may see, what would you say are key areas, right? Because there's an element of we're getting greater efficiency in marketing. We don't need to go too quickly both because of the supply commentary that you talked about with Bryan and the industry kind of standard. What are other areas? I mean is it as you've kind of continued to change your route to market? What are the kinds of activities that you might be investing in there where some of this profit or sales-driven upside might go? Bob Gamgort: Sure. When we get together in September, we're going to talk about the investments that we've made in the areas of R&D and product development. That's both on the hot side as well as the cold side of the business, and we'll give you some real examples of that. You point out route to market, which is critically important in beverages and something that we think is very unique. So the investments that we've made in our DSD system, which has been a big driver of growth, we've talked about it in bits and pieces over the earnings call. But when we get together, we'll be able to do a more holistic view of what we've done over the past three years and where that's going. And that's a big source of investment for us. E-commerce is another area. It's hard for you all to see the sales that we're generating in e-commerce because it doesn't show up in IRi right now. But when you see, the disconnect, sometimes between our shipment numbers and the IRi numbers, with the shipment numbers being stronger, and that happens over time, you know that we're getting some significant growth out of e-commerce. And that's a big investment area. And then just purely from a brand perspective, we would -- as we add more money, we would add to the number of -- add to our portfolio the number of brands we advertise. So right now, we focus our advertising on our largest brands. But we've got some midsized brands in there that are deserving of advertising as well, and that would be the next area that we would fund once we get to what we think is threshold on the large brands. So, there's a lot of opportunities for investment. We're very selective and test our way through it. But again, these are some of the themes that we look forward to sharing with you in September. Operator: And your next question comes from Andrea Teixeira with JPMorgan. Your line is open. Andrea Teixeira: Good morning. So, I wanted to discuss a little bit more, Bob, if you can, on the pod attachment rate. So I think you guys said last April that it is too elevated. Your comments so far on the call have been very positive against the historical levels but a bit of peak, right? So -- and I wanted to kind of also get a little bit of -- because I believe you, Ozan, spoke to pricing during the quarter or planned pricing. So with the benefit of a few months since your last comment, can you update us what you're seeing as the office reopened and the at-home could moderate? Obviously, as you're seeing probably less than 1:1 trade-offs with away from home more than offsetting the at-home kind of moderation at this point. And on the beans, on the coffee beans and the green coffee, I think it's not that much of an impact for you, but can you kind of explain to us how protected or hedged you are and what are you embedding in your guidance? Thank you. Bob Gamgort: Okay. Yes. Let me just go with pod growth first and just remind everybody the formula for our pod volume. It's a combination of household penetration. In growth in household penetration, the number of new households that we're adding to our existing base times the attachment rate, which is the current usage per machine. This quarter a year ago, we saw a peak level of attachment rate as people were really in lockdown mode. And as we talked about it at that time, we saw that as temporary and that over time, that would revert back to the long-term average. Over the very long term, attachment rate is very steady, and that's why we've suggested prior to COVID that you could use pod volume growth as a good proxy for household penetration growth. Very simply, our household penetration was very strong last year. We were up about 9%. We added 3 million households. We've told you before that we expected 2 million additional households this year and that attachment rate would go back to the long-term average. It's exactly what's happened. The attachment rate that we're seeing right now is very much in line with what we've seen over the long term, and household penetration continues to grow. And that's what you're seeing in the pod volume growth. So, so far, everything has gone as expected. When we look at mobility, we're seeing a significant increase in people going out of the home into restaurants and hospitality. Certainly, people going and getting coffee out-of-home in coffee shops has gone up significantly. In fact, we saw a bit of a spike at one point in the early part of reopening. I think people felt liberated to go back out and wanted to enjoy a coffee on the go. The one area that has been lagging and continues to lag is office. So even with the strong numbers that we have in our coffee business, we're still getting a fairly significant headwind out of the away-from-home business, which for us is concentrated in offices. And very similar to the question Bryan asked, it's hard for us to predict what's going to happen there. And we see an improvement versus a year ago. You couldn't get much lower than the numbers we saw a year ago and away from home, but nowhere near back to normal, nowhere near to 2019. So that provides long-term or longer-term upside for us. And as we said before, that's a higher-margin business, so it will be accretive to both top line as well as mix. But we think that will be a slow recovery, and that assumption is embedded in the numbers we gave you. With regard to pricing, like everyone who has a coffee business who has reported so far, we've talked about the significant increase in coffee pricing. We are hedged like everyone else, but hedging, it just delays the pricing. It doesn't make it go away. And so our best practices have always been is that when we see an increase in pricing that we believe will be sustained that you take pricing now, because it takes time for it to flow through the system, and you know that you're eventually going to be paying that price when you add new coverage into your portfolio. With regard to us, you're right, coffee is a lower percentage of our cost structure compared to if we were just a traditional roast and ground player. But when you have a significant increase like we're experiencing right now, it certainly does impact us to the level that we want to take pricing. And then the last point, I'll add because I think you're asking about the different forms of pricing, we have big piece of our business are brands that we own or license. We're responsible for everything on those, so we've taken pricing on that because we pay for the coffee that's in that. And then the remainder of our business is either partner or private label. In most of those situations, the partner is responsible for the price of coffee. We're responsible for everything else. So it's really up to them to decide what they want to do from a pricing standpoint with regard to coffee. That's not something we get involved in. So I think I've covered everything you asked about with regard to coffee. Andrea Teixeira: That's super helpful. But the like if I can just ask on that, what are you seeing in terms of like any rebounds to your private label or the ones that you represent, as you said, the brand that you have passed through, how is that reacting? Bob Gamgort: It hasn't really. If you take a look at the IRi numbers, you haven't seen much pricing actually reach the shelf right now. So more to come that will be something we could talk about on the next quarter call about what that impact is. But typically, we don't see much in the way of trade down. But if we do, I would just remind everybody that we have -- we manufacture pods that are generating 83% of category sales. So wherever the consumer goes in terms of brand choice and wherever they go from an outlet in terms of where they buy it, we got it covered. And so we're fairly neutral in those perspectives, and we just give the consumer choice and let them decide what they want to buy. Operator: And your next question comes from Steve Powers with Deutsche Bank. Your line is open. Steve Powers: Hey, guys. Good morning. Thank you. Bob, just to round out that conversation on coffee, so what I took from just the cadence of what you described is that you're implementing pricing down than pricing builds over the back half. And then presumably the delayed inflation to the extent it manifests would be a '22 phenomenon. You'd have the pricing in place when you get there. Is that the way to think about it? Bob Gamgort: Yes, that's a good way to think about it. And the pricing and the costs never match up exactly, and that's why we always create some margin for us to smooth that out, but that's a reasonable assumption. Steve Powers: Great. And I guess -- and maybe just a little dovetail into some of the themes you talked about in September, but I just -- maybe just an update on the build-outs that you've had going on at Spartanburg and Allentown and in Ireland and just where those are, any unexpected development, positive or not so positive? And then just, any way to think about the impact of that on -- the benefits of that on the business as we go forward beyond '21? Bob Gamgort: Absolutely. Yes, I think it's a good time to talk about that. Ozan, would you like to jump in and update Steve and everyone on those projects? Ozan Dokmecioglu: Absolutely. Absolutely. Steve, with regards to Allentown, we began our production of cold average cases earlier this year. And as we speak, we are proceeding to ramp up to reach full utilization levels, and it will continue through this year as well as 2021. Also as a side note, the combined cold beverage and coffee warehouse that we put together in Allentown is also fully operational. With regards to Spartanburg, we began to produce some of our K-Cups as being the first line back in June, which is very recent. And we'll continue to ramp up over the course of approximately 18 to 24 months and the reason being is due to the sheer size of the huge volume and the planned capacity that we have been implementing. And the lines will be coming up and running in a sequential, let's say, order. With regards to the investment in the project in our Ireland facility, the concentrate beverage plant, that we have been building, is almost complete. And we are expecting to put into service and ramp up from there on sometime in quarter four this year. Therefore, after the COVID related some delays, as we have communicated in three major of our investments, we are back on track. We have been getting the lines up and running in line with our new time lines right now. And we are very happy with the progress that we have been seeing. Operator: And your next question comes from Sean King with UBS. Your line is open. Sean King: Good morning. In the prepared remarks, you mentioned the macro volatility lasting for the next 6 to 12 months before sort of seeing normalized consumer behavior. Is it safe to say that this could impact, I guess, the pending outlook for '22? Or am I trying to jump ahead a little bit too far here? Bob Gamgort: Yes, it's a little jumping ahead a little bit. I mean clearly, we think about this and going into '22, but I wouldn't have any read-through in terms of trying to predict what that means for us in 2022. I think we've done a really good job of recognizing the challenges and being able to mitigate them pretty substantially if you take a look at what's happened last year and what's going on this year. And look, I can't forecast that. I can tell you that we all hope that things start to return to more normal in 2022. Sean King: Right. Great. One more, if I could just sneak in. Just on the substantial brewer growth that you've been seeing, is there any way you can kind of break that down between brewer replacement, new brewers versus trading up? And I know a lot of that has to do with your household penetration comments, but any color you can provide around there would be great. Bob Gamgort: Yes, it's really hard to do that in the moment. We're always able to do that in hindsight, and we do quite a bit of analysis of understanding how much of these are brewer upgrades versus straight-up replacements versus completely new households or even a secondary placement in an existing household. So, that's something that we dig in answer we're able to see in hindsight. For perspective, a year ago, we added 3 million net new households, and we sold 11 million brewers. So that gives you an idea of how much household penetration growth we were able to drive, which was substantial, almost 10%. But at the same time, we continue to offer better brewers with new features that are encouraging people to upgrade. And although an upgrade is not something that we profit from in the moment because we don't make money on the brewers, as you know, it really is a serious recommitment for those households to stay with the Keurig system for the long haul because the model is dependent upon not just bringing in new households, but also keeping our current households, which we do at a very high rate. And so right now, it's hard to know the breakout we are offering really attractive brewers that offer new benefits. We just launched this week the K-Supreme Plus Smart Brewer. If you go online and look at some of the reviews both on our website from consumers as well as from the media, it's getting terrific reviews. And I just think this will be yet another reason for people to upgrade. So something we'll share with you when we have it, but it's a very, very bullish indicator in terms of the health of the business from both the current households as well as new households. Operator: And your last question comes from Chris Carey with Wells Fargo Securities. Your line is open. Chris Carey: Just following up on the line of question around pricing. I guess I'm conscious that you're seeing like polypropylene inflation in one of the categories where you have a stated strategy to actually lower pricing. Obviously, you have the new plants coming online. You're announcing pricing in the back half. But I guess, can you just comment maybe on like holistically how you think about offsetting inflation? And certainly, one could argue an area like packaged beverages probably has a bit more maybe like structural pricing power in North America right now than does pods. And so maybe just comment on that. I guess it's -- you're seeing positive pricing in coffee systems this quarter for the first time. I realize that's mix driven. But I just wonder if we're on the verge of seeing that stabilize and potentially rebound with inflation, if you're comfortable with that concept. So anything just around conceptually how you're thinking about offsetting inflation with pricing on a sort of a total portfolio basis would be helpful? Bob Gamgort: Yes. So I think our entire portfolio has good pricing power, which is one of the reasons why I think beverages, is a great category. We are aggressive in productivity and efficiency as our first line of defense. We implement all kinds of purchasing strategies, hedging, as I said before, being one that delays the inevitability of inflation. It gives you some short-term pricing certainty but doesn't eliminate it. And then of course, pricing, when it can't be covered by the others, is the ultimate answer. And you're seeing pricing now not just in the beverage industry but across the board. I have absolutely no concern with pricing in coffee. As we talked about three years ago when we talked about it publicly, but it's been in progress now for five years, we wanted to lower the price of coffee pods in the U.S. because we knew they were too high. And when we compare them to steady-state rates around the world, they were way out of comparison to those five years ago. The price has been reduced significantly. And the data that we put in our Investor Day deck in 2018 is very relevant in terms of what the right price point is for consumers. And it shows that, to a degree, the industry has actually overshot that and its pricing it below the levels that consumers thought would be a good value. They're doing it for a variety of reasons, and I've talked about it before. There are retailers who know that K-Cups are a real attraction to consumers, and so they'll price them very low just to bring people in. Putting a little bit of pricing in to recover inflation is not a concern at all given where we stand across the industry in pricing. And I think price stabilization is something that we've talked about happening for a long term. It's already happening as we speak, and I still think it's an incredible value to consumers. Chris Carey: Thanks so much. And I appreciate it's the end of the call, I'll keep this quick. But just on the road to zero, is there a way to think about how long this launch could go before getting fully penetrated? You're running two to three shares, but obviously, other offerings from competitors have had kind of like years of runway. Just how you're thinking about the time horizon from which this can continue to benefit the portfolio? So thanks so much for that. Bob Gamgort: Yes. We've been successful in driving growth in our CSD portfolio now for years. We've done that through a combination of very solid marketing and good market execution on our core brands and by bringing news and refreshment to them. And it's hard to put a timetable around what is any one line extension or refresh do for the brand. So we have a constant stream of them. Think about what Dr Pepper and Cream has done for the Dr Pepper brand, and that's still growing right now. I think zero sugar both on Dr Pepper and across our flavors is a similar platform. And we have additional innovation and renovation ideas to come that we'll be layering on top of that in the future. And that's really the game is that you don't launch something and assume that that's the answer forever, that is part of the news that you're delivering. And that's how we think about this as well. So thanks for that question. Operator: All right, there are no further questions at this time. I'll hand the call back to the Company. Tyson Seely: Thank you. This is Tyson, everyone. Thank you for the time. I know we're slightly over, and you all have very busy days today. Please reach out to myself or Steve or the IR team for any follow-ups. We look forward to talking to you. Have a good day. Operator: Thank you, ladies and gentlemen, for joining us today. That concludes today's conference. Thank you all for joining. You may now disconnect.

Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Keurig Dr Pepper's Earnings Call for the First Quarter of 2021. This conference call is being recorded, and there will be a question-and-answer session at the end of the call. I would now like to introduce Keurig Dr Pepper's Vice President of Investor Relations, Mr. Tyson Seely. Mr. Seely, please go ahead. Tyson Seely: Thank you, and hello, everyone. Thanks for joining us. Earlier this morning, we issued our press release for the first quarter of 2021. If you need a copy you can get on our website keurigdrpepper.com in the Investor section. Consistent with previous quarters, today, we will be discussing our performance on an adjusted basis, excluding items affecting comparability. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability is not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are included in the reconciliation tables, included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company's control, we do not reconcile our guidance. Here with me virtually today to discuss our first quarter 2021 results are KDP Chairman and CEO, Bob Gamgort; our CFO, Ozan Dokmecioglu; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. And finally, our discussion this morning may include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. With that, I'll hand it over to Bob. Robert Gamgort: Thanks, Tyson. And good morning, everyone. I hope you and your families are well. As we enter spring cautious optimism as in the year, vaccine rates are approaching 50% of the US adult population and growing across North America. Higher levels of consumer mobility are evident in retail, restaurants and entertainment. And there is an increasing belief that the worst of the pandemic is behind us. If the last year has taught us anything, however, it is that our role is not to predict the future but rather to be nimble, responsive and prepare for whatever we may face in the future. This same mindset enabled Keurig Dr Pepper to deliver meaningful outperformance in 2020 and a strong start to 2021. While some companies have been devastated by the impacts of the crisis, others have experienced a windfall from it. We on the other hand have succeeded despite the pandemic, by driving the parts of our business that are performing well to overcome the declines we've experienced in areas structurally challenged by COVID. While that may sound easy and concept, it is very difficult to execute in the real world. And I would like to thank our 27,000 team members across KDP, who continue to step up to meet the challenge. In the first quarter of 2021, we delivered strong performance across the board, highlighted by double-digit growth in both net sales and adjusted diluted EPS. We also reaffirmed our outlook for another strong year of double-digit adjusted diluted EPS growth. Despite the specter of rising inflation, in part by increasing our net sales growth expectations from 3% to 4% to 4% to 6%. This sets us up for a solid 2021 and positions us to achieve our ambitious three-year merger targets ending this year. Let me now provide key highlights of the first quarter. Our net sales grew by 11%, with all four business segments posting growth, driving this performance with continued strong in-market execution across the business. In cold beverages, we continue to perform well, with more than 80% of our cold beverage retail sales space expanding market share during the quarter. We believe a helpful way to assess both our results and those of the broader industry, given the unique volatility of 2020 is on a two-year stack basis. Over this time period, nearly 90% of our cold retail sales space grew market share and our consumption was up nearly 17%. LRBD performance continues to reflect KDPs broad-based strength and CSD, premium unflavored water, Snapple teas and fruit drinks and others. During the quarter we launched new zero sugar varieties across our CSD portfolio, which has helped to solidify our number two CSD manufacturer status in key retail accounts. We're also seeing KDP brands take over leadership position. The latest being Sunkist becoming the number one fruit flavored CSD brand, fueled by the zero sugar introduction and flavor-line extension. In the past few months, we launched innovation behind Bai with Bai Boost, made with clean ingredients, including plant-based energy from tea extract, Bai Boost has been well received by retailers and consumers in early days. Finally on cold beverages, our new brand partnership and the growing sparkling water segment with Polar is performing well. National ACB has grown to 55% with more distribution to come, as shelf resets are completed across the country. Our coffee business posted an exceptionally strong quarter, with net sales advancing 17% on a constant currency basis, due to a 14% increase in pod volume growth and a 61% increase in brewer volume. The latter primarily being driven by a roughly 40% increase in consumer sales, and some benefits of shipment timing between the quarters. Approximately half of the 14% increase in pod volume was due to strong consumption in the quarter, with the remainder driven by differences in pod shipment timing relative to the unusual year ago period. The fact that pod volume growth in track channels registered at just above 3% for the quarter, demonstrate the trend that we've been discussing for some time, take a pause are experiencing significantly higher levels of growth in untracked channels, particularly e-commerce. Sticking deeper into untracked channels highlights further the growing importance of e-commerce. Strength in at-home pods has been tempered by continued weakness in the away-from-home channel, as the return to offices continued to be slow. We do expect improvement over the course of 2021, especially after Labor Day when we anticipate the rates of office re-openings to accelerate. On a two-year stack basis, dollar consumption of positive track channels was up 11% with two-year shipments up more than 20%. For total KDP we delivered very strong bottom line results in the quarter, with adjusted diluted EPS growth of nearly 14%, despite lapping the sale leaseback gains in the first quarter of the year. We also continue to generate high levels of free cash flow, enabling us to pay down debt and improve our management leverage ratios of 3.5 times at the end of the quarter. Since the merger, we have reduced our leverage ratio by 2.5 turns while also investing meaningfully across the business. Let me now hand it over to Ozan to walk you through the financial results for the quarter and provide further details on our outlook for 2021. Ozan Dokmecioglu: Thanks, Bob. And good morning, everyone. Continuing on an adjusted basis, I will briefly review our performance for the first quarter, which was very strong, and our press release discusses in significant detail. I will then turn into our outlook for the full year 2021. Constant currency net sales increased nearly 11%, fueled by higher volume mix of 10.3% and favorable net price realization of 0.5% with all four of our business segments posting growth. Adjusted operating income in the first quarter totaled $741 million, an increase of 8.3% compared to $684 million in the year ago period, driven by the very strong net sales growth, continued productivity and merger synergies and lower marketing spending in relation to the pre-COVID spending levels in the year ago period. These drivers were partially offset by higher operating expenses associated with increased consumer demand, inflation in logistics and input costs and an unfavorable comparison to a $2 million [ph] gain in the prior year on the sale leaseback of four facilities. For perspective, this gain negatively impacted the year-over-year adjusted operating income growth rate by more than seven full percentage points. Adjusted operating margin in the first quarter was 25.5%, a decline of 70 basis points versus year ago, which included the 160 basis points headwind from the gain on sale leaseback transactions. Adjusted net income advanced 15.4% in the quarter to $471 million compared to $408 million in the year ago period, driven by growth in adjusted operating income, and the lower adjusted effective tax rate. Adjusted diluted earnings per share grew 13.8% to $0.33 per diluted share, compared to $0.29 per diluted share the year ago period, which included the $0.02 gain from the year ago sale leaseback transactions. Let me take a moment to discuss the inflationary pressures we have referenced this morning. Like most other CPG companies, we have increased our outlook for inflation over the past month. Price expectations continue to rise for aluminum, glass, corn inputs, and polypropylene, which is the material used in K-Cup pods. Most recently, we have experienced a spike in transportation and logistics costs, which is especially acute when we have been required to purchase sport capacity to satisfy the strong demand for our products. Some of these input costs, for example, transportation, and polypropylene cannot be hatched. To manage inflation, we rely on a combination of productivity, cost control, pricing and incremental volume growth, pulling the right levers at the right time to protect the long term health of our business, while offsetting rising input costs. For 2021, we are in a position of strength, as we are able to utilize our sales growth momentum to mitigate inflation. However, if inflation were to accelerate, we may need to utilize other options, just like we did in 2020. We will remain nimble and flexible to react to changing market conditions to ensure our continued success. Finally, we get a number of questions on the benefit of hedging and forward buying with regards to mitigating inflation. First, while we use these practices wisely, their role is primarily to provide plenty of certainty for a period of time and to insulate against short term volatility in input costs, they can postpone, but not offset inflation. Coffee is a great example. We are seeing green coffee prices on the rise right now. But we are covered for a period of time, which lets us see how the market settles before we need to react. Like every other input cost, with green coffee inflation were to be persistent, then we would consider all of our available options to offset its impact on our profit and loss. The good news today is our strong guidance for 2021 incorporates all of these considerations. As we are confident that we have the tools and management discipline to deliver a strong growth in both revenue and earnings, despite the inflation outlook that has been widely discussed this earnings season. Let me now turn into our segment performance in the first quarter. Coffee systems constant currency net sales increased 16.9%, driven by higher volume mix of 19.5%, partially offset by lower net price realization of 2.6%. The volume mix performance reflected pod shipment volume growth of 13.7%, driven by double-digit at-home shipments, partially offset by continued softness in the away-from-home coffee businesses. The 61% increase in brew shipments in the quarter was fueled by strong consumer consumption and the benefits of shipment timing. Adjusted operating income for coffee systems totaled $389 million, an increase of 12.1%, compared to $347 million in the prior year. The increase was driven by the strong net sales growth, as well as continued productivity and merger synergies. These growth drivers were partially offset by inflation in logistics and inputs costs and the unfavorable comparison to the sale leaseback gain in the year ago quarter that impacted the segment by $16 million. The year-over-year adjusted operating income growth rate would have been 5 percentage points higher in the quarter, absent this year ago gain. Adjusted operating margin in the quarter was 34.1% compared to 35.7% in the year ago period, a decline of 160 basis points, including a 170 basis points headwind from the asset sale leaseback gain in the first quarter of 2020. Also impacting the comparison was unfavorable margin mix, due to the exception on the strong brewer growth in the current quarter, and the breakeven margin structure of brewers, offsetting these impacts were continued strong productivity and merger synergies. Packaged Beverages constant currency net sales grew 7.2% in the first quarter, driven by strong volume mix growth of 6.8% and higher net pricing of 0.4%. This performance reflected growth in both our company-owned DSD operations, and warehouse direct businesses. Driving this growth were Dr Pepper, A&W, Canada Dry, Sunkist, 7UP and Squirt in CSDs, along with Snapple and Clamato, partially offset by a decline in Bai. Adjusted operating income for packaged beverages in the first quarter totaled $197 million, a decrease of 3% compared to $203 million in the year ago period. That included the sale and leaseback gain of $26 million for the segment. The year-over-year adjusted operating income growth rate would have been 14 percentage points higher in the quarter, absent this year ago gain. Inflation in logistics and input costs and higher operating costs to meet strong consumer demand were also headwinds in the quarter, as were continued channel and format mix challenges, as we are comping to a largely non-COVID period last year. Partially offsetting these drivers were the strong net sales, continued productivity and merger synergies and lower discretionary expenses. Adjusted operating margin for the segment was 15.1% in the quarter compared adjusted operating margin of 16.7% in the year ago period, a decline of 160 basis points, including the 220 basis point headwind from the year-ago sale-leaseback gain. Beverage concentrates constant currency net sales increased 6.5% due to favorable net pricing of 7.2%, partially offset by lower volume mix of 0.7%. This performance continued to be affected by the unfavorable impact of COVID-19 on fountain foodservice business, albeit, improved since the beginning of 2021. Adjusted operating income for beverage concentrates increased 21.3% to $239 million compared to $197 million in the year ago period, driven by net sales growth and lower marketing spending. Adjusted operating margin in the quarter advanced 850 basis points to 72.9%, primarily reflecting the favorable net price realization. And finally, Latin America beverages constant currency net sales grew 7.7%, reflecting strong net pricing of 10.3%, partially offset by lower volume mix of 2.6%, as consumer mobility in Mexico continued to be impacted by COVID-19. However, this has improved from the beginning of 2021. Liquid refreshment beverage in market execution in Mexico continue to be strong, driving market share growth for key brands, namely Peñafiel, Squirt and Clamato. Adjusted operating income decreased 15% to $23 million, compared to $27 million in the year ago period. On a constant currency basis, adjusted operating income decreased 14.8%, reflecting the impact of foreign currency transaction expense and inflation in logistics, partially offset by the strong growth in constant currency net sales, continued productivity and lower discretionary spending. Adjusted operating margin in the quarter decreased 470 basis points to 18.4%, primarily reflecting the unfavorable impact of foreign currency transactions expense. Switching back to total KDP. Free cash flow in the quarter was again exceptionally strong at $458 million, which translated into a free cash flow conversion ratio of nearly 100%. As previously announced, we completed a $2.2 billion strategic refinancing in March of this year. Since the time of the merger, nearly three years ago, we have generated significant cash flow and have rapidly delevered. This strategically financing further enhances our liquidity profile and strengths our balance sheet. To that end, our strong free cash flow performance in the quarter enabled us to reduce outstanding bank debt by $25 million and structured payables by $5 million. And we paid $95 million for the early retirement of that, in conjunction with previously mentioned March strategic refinancing. We also ended the first quarter with $335 million of unrestricted cash on hand. Due to growth in earnings, our reduction in bank debt and increased cash on hand, we improved our management leverage ratio to 3.5 times at the end of the first quarter of 2021. Since the merger closed in July 2018, we have reduced our management leverage ratio by 2.5 times. Let me move to our updated outlook for 2021. For the full year 2021, we now expect constant currency net sales in the range of 4% to 6% compared to our initial guidance of 3% to 4% at the beginning of this year, which reflects the strong demand for our brands across all segments. We also reaffirmed our EPS guidance range of 13% to 15% growth for the year, in part driven by the benefit of higher net sales outlook in offsetting higher inflation. As indicated in our release this morning, we plan to invest any earnings outside above our guidance range back in the business to drive future growth. For perspective, on a two year stack basis, assuming the midpoint of our guidance range, adjusted diluted earnings per share growth will approach to 30%. Supporting our guidance, we continue to expect merger synergies of approximately $200 million for the three year total of approximately $600 million, in line with our merger targets. Adjusted interest expense in the range of $505 million to $515 million and adjusted effective tax rate in the range of 23.5% to 24%. As you have seen in our results this morning, our effective tax rate was below this guidance range at 22.1% in quarter one, due to one-time discrete favorable items, including employee stock vesting, which we anticipated, which is lastly, a first quarter event. Our dividend rate will increase 25%, beginning with our regular quarterly dividend to be announced in the second quarter subject to official board declaration, as previously disclosed, diluted weighted shares outstanding of approximately of 1.43 billion. Finally, we continue to expect our management leverage ratio to be at or below three times by the end of this year. While we do not provide quarterly guidance, giving the company is on to an unusually volatile quarter two 2020, let me provide some additional perspective on the second quarter. Giving the inflation allocations we discussed and their significant year-over-year increase in marketing spending, we expect to deliver double-digit adjusted diluted EPS growth for the quarter, although, it will be below the full year guidance range of 13% to 15%. Transportation will continue to be a headwind in the second quarter. With respect to marketing, we continue to restore investment behind our brands this year, especially to support our strong sale of innovation, which is comping a year ago period in which everyone in the industry reduced marketing expenses, due to the uncertain consumer demand environment under COVID. We hope this provides some helpful clarity on the phasing of our business results this year. With that, let me hand it back to Bob. Robert Gamgort: Thanks, Ozan. Before moving to Q&A, I would like to provide a brief update on corporate governance. As you are aware, we transitioned from a controlled company to a widely-held one in 2020. Since that time, we've enhanced our board structure, increasing its independence and diversity, and establishing the role of lead independent director. I want to highlight - or announced it yesterday that we welcome Lubomira Rochet, as a new Director to our Board. Since November, we've added four new directors, each of whom brings a unique experiences and fresh perspective to the Board. Finally, many of you have asked questions about our post-2021 outlook. We plan to hold an Investor Day shortly after we report our Q2 earnings, during which we look forward to sharing insights on our long-term strategy and financial expectation. Details for the conference will be provided in the near future. I will now hand back to the operator. Operator: [Operator Instructions] Your first question comes from the line of Bonnie Herzog with Goldman Sachs. Your lines open. Bonnie Herzog: All right, thank you. Good morning. Robert Gamgort: Hi, Bonnie. Bonnie Herzog: Hi. I wanted to ask you guys about you know, the brewer sales in the quarter, I was hoping just to get a little bit more color on, you know, the much better than expected sales that you guys reported and how impactful some of the innovation that you've put in the marketplace has been? And then in looking forward, how should we think about your brewer’s sale to the balance of the year, especially in the context of some of the tougher comps that you're going to be facing? And then separately, thinking about attach rates on a go forward basis, you know, especially given some of the brewer volume growth that you've seen. I guess to me, it seems like if you're attach rate hold, this really could be a meaningful driver behind pod volumes in the coming quarters and years. And if you could just touch on that or is that the right way to think about it? Thanks. Robert Gamgort: Yeah, okay. Sounds great. Let me start with attach first. During the pandemic, we saw an increase in attachment rate, especially in the early days. And that was very different than the long term trend we had experienced, we said the attachment rates were very stable. Our expectation that we communicated at that time at that time is that, as consumer mobility normalized, we would see attachment rates normalize back to their long-term levels. And that's exactly what we're seeing right now. So I think attachment rate, on hand have come down from their piece in Q2 a year ago, no surprise there. But the reverse side of it is, our attachment rates holding up versus their long-term trend, even as we add new households, absolutely. And I think - it's as simple as when we're able to convert a home from brewing coffee by the pots to brewing it by the cup, it settles in at a consumption race. And unless there's some substantial change in their behavior, stays very solid over time, which is ultimately good news. As we talked about a number of times, so it's worth, but it is worth repeating. Household penetration growth is what drives our pod growth over the long-term. And brewer sales over a longer period of time has some correlation. But especially in the short term, there's not causality. So you can't automatically look at trump brewer sales and say, that's going to mean that we've got a even higher rate of household penetration. And let me give you a little more depth on that, because it's such a critical point. In 2020, as you know, we added 3 million new households to the Keurig system. And that was about a million households above our normal run rate of 2 million. And there were a lot of questions about is this a pull-forward from the future? When we look at 2021? We said absolutely not. And that's exactly what's playing out right now. To get those 3 million households, we sold 11 million brewers. So that tells you that we had a record year, not only in terms of new household, but a record year in seeing existing households, which are now 33 million strong in the US, replace or upgrade their brewers. And while replacements and upgrades don't lead to household penetration growth, they're really important because they represent a strong recommitment to the Keurig system. So let's talk about 2021. When we talk about - when we put our initial thoughts about 2021, we said that we believe that we'll return to our long-term trend of adding 2 million new households per year, and we weren't concerned about any pull-forward. We had a really strong quarter in brewer sales in Q1, and by the way, 40% of that 60% growth was driven by consumption. So there's some shipment timing in there. But it's really consumer sales driving the majority of that, as happy as we are with that it is far too early in the year for us to conclude that that translates to household penetration growth above 2 million. Why is that? Because we've got a ton of innovation in the market right now. And you're also seeing two rounds of government stimulus in the past few months, that have people feeling very liquid. And so a number of people are using it to still invest in their homes, and they're upgrading their brewers. And we've given them innovation to do so. So as we sit here today, we're still talking about 2 million new households, which is a tremendous growth. And as we always do, we'll update our household penetration growth at the end of the year. And the start that we see on brewers to give us confidence, if nothing else to give us confidence that the 2 million number is very doable. Operator: Your next question comes from the line of Bryan Spillane with Bank of America. Your lines open. Bryan Spillane: Hey. Good morning, everyone. Robert Gamgort: Morning. Bryan Spillane: Just two quick ones for me. First one just Ozan on the inflation outlook for the year and relative to the comments on hedging. Just wanted to clarify, is your inflation outlook, you know, is it hedged. So meaning is there a potential for more? I don't know volatility, I guess in the COGS inflation over the balance of the year, or are we you know, is the outlook pretty well locked in? Ozan Dokmecioglu: Sure. Good morning, Bryan. And like you have heard, likes of many of our peer group of companies, we have increased our outlook for inflation over the past month. And when you looked at the major reasons of the inflation, you would see that primarily around the packaging likes of aluminium, glass, as well as polypropylene, the material that we use in the K-Cup pods, that includes corn inputs that translates for us as the high fructose syrup. \And then, in the past one month, we were expecting already an inflationary environment in the transportation and the overall logistics, but we have seen an uptick in those. And we also service our increased volume using at times off the spot rate, which makes it a little bit higher inflationary environment. And right now, we believe that we have included a healthy amount of inflation expectations, in our view to go period. And some of the input costs, especially transportation, which is translates for us as freight, as well as polypropylene are not really hedge above in terms of there not regulated market, so we can perform some of the hedging activities that we have then. And - but nevertheless, Bryan, we feel very good with our expectations and how much inflation we have increased in our outlook and build for the rest of the year. And for the commodities and the other input costs, there are other measurable items, as we always use widely hedging techniques to protect and bring price stability and then forecast transparency for the year to go, they are all intact. But please make no mistake, that hedging or forward purchasing provides high certainty for a period of time. And in a persistent inflation is just postponing, is not really mitigating the inflation as such. But in short, we feel very good with our expectations for the rest of the year. And we believe we de-risked our P&L as much as we could. Operator: Your next question comes from the line of Lauren Lieberman with Barclays. Your line is open. Lauren Lieberman: Great, thanks. Good morning. I want to talk a little bit about marketing plans for this year, as you mentioned in the prepared remarks industry - the cold drinks industry, everyone reduced spending significantly in 2020. And then you guys had tremendous results regardless. So I just want to talk about how your marketing plans for ‘21 possibly have changed with inflation being so much worse, you know, than initially anticipated. I'm sure marketing is up year-over-year, but just how much, anything that you can offer, how that may have shifted. And then also the mix of that spend, you know, again, given the very strong returns on the relatively low level of spend in 2020. How is that informing your thought process on what actually needs to be spent to support this business? Thanks. Robert Gamgort: Sure. Good morning, Lauren. Thanks for the question. Marketing plans, well, let me talk about marketing spending first. As you point out, everybody in industry dropped their spending in 2020. It was a combination of covering mix issues. But also in the early days of the pandemic, the marketing wasn't very efficient. As we got through the years, as you also point out, not only did we restore some of the spend, but we also learned to be incredibly efficient with that spend, nothing like being under pressure to innovate on how we're able to reach consumers in a more efficient way. And a lot of that learning carries over into 2021, where we build in that expected efficiency, plus we have plans to invest more in marketing. To be really - directly to your question, we have not changed our commitment to the increase in marketing that we have planned in 2021, despite the fact that we're seeing higher inflation, so we haven't touched marketing to offset inflation at all, in 2021. Our expectation is increased marketing spend, restore as much of that as we possibly can, although we won't get all the way back to where we were in 2019, for sure, that will take a couple of years to get there. We are also looking for opportunities to invest more in our marketing spend. So as we talked about a number of times, that we think 13% to 15% growth in an environment like we're in right now, especially when you look at a two year stack of 30% EPS at the midpoint is fantastic return. And anything above that, we would then use opportunistically to invest back in the business to continue to drive long-term growth, getting the balance right between delivering best-in-class EPS, plus best-in-class growth and market share expansion is what we're doing here. And we will reinvest any opportunity that we get. We spend an increasingly - increasingly we're spending more and more on digital, that's not a surprise, everyone's doing that. We have much more science behind our marketing. And our team continues to build their expertise in doing so and that leads to more efficiency. So absolute spending investment is no longer as it relevant, as it once was because we're dialing up the productivity and efficiency of that spend every year and so we're able to squeeze more out of every dollar in terms of the consumer impacting, as you point out, you know, even though our marketing was down in 2020, we gained share on 90% of our core portfolio, and we added 3 million new households security. So clearly, we knew what we were doing on that spending. And then my last point is, what are we going to spend the money on this year, we've got an incredible lineup of innovation, on the LRB side, well, first on CSD, zero sugar is our big news. You're already seeing advertising right now on Dr Pepper zero sugar. We're running NASCAR for the first time this weekend, in many, many years with Dr Pepper behind zero sugar and Bubba Wallace. We're introducing Bai Boost, which will support with advertising. And then on the Keurig side, we've got a number of innovations, Green Mountain Brew Over Ice. We're continuing the One Step Lattes and cappuccinos on Donut Shop, both of whom have done really well. And then, of course, substantial spending beyond the Keurig business to drive household penetration. So not only do we restore the spending, do we know how to spend it, but we're really focused that spending on innovation, which we know drives really efficient marketing. So thanks for that question. Operator: Your next question comes from the line of Andrea Teixeira with JPMorgan. Your line is open. Andrea Teixeira: Thank you. Good morning. So I wanted to go back to the comments about Q2 coming in below the guide for EPS, despite obviously being the easiest comp for you. I understand the transportation cost pressures and reinvestment. But can you talk about the top line outlook? And if it's coming above the - what do you have the now that you raised? Thank you. Robert Gamgort: Yeah. Ozan, will likely talk about the EPS side, the earning side of it and the pluses or minuses? Andrea, thanks for the question. We did something that we usually don't, which gave guidance on a quarter because of the volatility. So we're certainly doing in the earning side, but we do not plan to give guidance for quarter-by-quarter on the revenue side. But Ozan, do you want to talk about the earnings visibility that we have and why we decided to give some extra color on Q2? Ozan Dokmecioglu: Absolutely. Good morning. So when we look to our overall expectation and the construct of the quarter two, we still see a very healthy quarter, as you have said a good top line increase expectation. And when we look to the inflationary pressures that are coming along, we expect a healthy amount of inflation to realize in our quarter two [ph] P&L. And we should not also forget that when you comp versus the last year in quarter two, we have seen some declines, especially in the transportation and the logistics area, for example, which was purely driven by the demand and supply, which was coming from the marketplace as part of the pandemic environment. So we are going to lap lows periods that on a like for like basis is up taking the overall freight costs, as well as logistics expectation for us. But the good news is we have a good handle on those things, and we have built in our forecast and the plans and not only for quarter two, but beyond, including the second half of the year. At the same time, last year, in quarter two, as part of the overall industry giving there wasn't much return in a pandemic environment, we reduced more, so from our marketing spending, especially behind the advertisement and promotion. And as Bob was articulating a couple of minutes ago, we started to reinstate some of the advertisement and promotion investments behind our brands and also support a slate of the innovation that we have and putting in the marketplace. Therefore this is also technically creating a negative comparison, increase in the advertisement and promotion versus last year. But it's all good expand that goes behind our branch and investment and of our business. And as we always do, we are very careful in terms of delivering on our productivities, merger synergies, as well as other cost controls that we have been doing very successfully since the actual emergent date, but we took it to the different levels starting with the pandemic environment. Therefore, when we put all the puts and takes, we do we still expect a very healthy growth in terms of the either the top line, mid part, as well as the bottom line of our P&L. Operator: Your next question comes from the line of Chris Carey with Wells Fargo Securities. Your line is open. Chris Carey: Hi, good morning. So I know we're still not in a you know completely normal operating environment with COVID. You know, but I guess with the strength that you're seeing in coffee, what looks like a pretty rational environment in the North American beverage environment, especially on the pricing front and you're still gaining share. I wonder if you have some, you know incremental thoughts as we get into this year, just about the steady state organic sales growth of this portfolio because it continues to show an ability to grow better than a low single digit top line algorithm, which to category exposure might suggest that the packaged beverage unit specifically has been coming in significantly better. And I just wonder if there's more opportunity here, then what again, that that low single digit category growth rate might imply? So thanks for any thoughts around that. Robert Gamgort: Sure. Good morning. Thanks for your question. The - this environment is anything but steady state, as we sit here right now. And as we said upfront, it appears to be returning to more of a business as new normal, whatever that's going to be when it settles basis. But way too early in this year, for us to even think about steady state. We have our entire organization remaining on their toes. We're looking for changes in the environment, none of us went into this year expecting the level of inflation that we're seeing right now, for example, and we don't know if it's temporary, or if it's sustained. So I don't know what steady state looks like. And when we get towards the end of the year, we'll probably have a better view on that. I mean, your question is, what's the longer term growth outlook for this portfolio and whatever that environment is? I won't steal any thunder from our Investor Day, which we'll be doing right after our Q2 earnings, because that will be the topic. What does the KDP outlook look like both from a strategy and a financial algorithm post-2021. At that point in time, we'll have more data on what the marketplace looks like. And that'll be a very robust part of that conversation. Operator: Your next question comes from the line of Steve Powers with Deutsche Bank. Your lines open. Steve Powers: Hey, thanks. And good morning, everybody. Two questions, if I could, I guess, maybe Ozan for you just to round the 2Q key versus balance of the year question. I think, you know, I appreciate the color you gave to Andrea’s question. But if you could just hit maybe for us a little bit more specificity on what you expect to get better in the back half versus 2Q, whether it's the cost environment, or the cost savings momentum, pricing benefits, or otherwise. Just looking for a bit more clarity on where the back half acceleration has to be sourced from relative to what you said about 2Q? And then Bob, what I really wanted to ask about was just the relative strength of packaged beverages on the top line, not just this quarter. But what we've seen over the past several, there's been tailwind in that business, but you've, I think, pretty consistently exceeded expectations. And I'm curious, if there are things you can, you know, you know, hammer home for us in terms of where you attribute or what you attribute outperformance to. Part of that, I think, is that your market shares are stronger in future consumption channels where consumers have been biased to shop this past year. To the extent that's true, I guess maybe you could talk about that. But I'm also curious if you feel you see opportunities to leverage the strength you've had in those channels into future gains and immediate consumption channels when traffic builds as we go forward? Thank you. Robert Gamgort: Ozan, do you want to start with the first one? Ozan Dokmecioglu: Yes. Yes, Bob. Good morning, Steve. Thanks for the question. So in order to bring a little bit more color, let me try to break up a little bit more. And then - and we go from there. So as I said, we do believe that we have a good planning stance, not only for Q2, but for the remainder of the year. So - but let's make sure that we all agree on one thing is still we are not 100% out of the woods in terms of the pandemic environment. We still don't know exactly how all these things going to play out and how the macroeconomic situation going to react, and most importantly, how the mobility is going to be impacted. As we said in numerous number of times, we did not get any windfall from the pandemic environment. This was a ruthless prioritization in terms of managing the mix, along with the innovation and the categories that we operate. Therefore, we also said that we have seen some pressure in our - for example, in the coffee side, away from home business, that primarily serves the offices, as well as the hospitality sector. On the cold beverage side, the most negatively impacted part of our business was the fountain foodservice, as we discussed, again in numerous number of occasions. The good news with those, starting quarter two onwards, we are going to lap those negative numbers that we have seen in 2020. And with the increasing of the mobility, we do expect those two parts of our business to start to perform better than 2020. And albeit, we already started to see month in month out since January onwards. So we don't know and we don't have a real crystal ball in terms of how the mobility is going to be impacted and what would be the puts and takes on our business. Having said that, we also have a good understanding and some expectations in terms of how our top nine we look like in relation to the crisis stability that we believe now we have in our overall cost of goods sold portfolio, that goes back to the inflationary comments, and I have just made, which a good chunk of our portfolio that is hedgeable and we are taking all the necessary measures to assure up the rest of the year. And for the other input costs, like soft polypropylene and trade that there are not regulated markets that we can hedge, that we believe we put the incremental inflationary environment that would be applicable for our business for the rest of the year. And as we also discussed, we have several levels actually in case the inflammation goes further to put into the service, likes of productivities, cost controls, pricing whenever it is appropriate, as well as our increased volume profile to support the bottom line. Therefore, we are very fortunate in terms of having several resources in order to fight back even further inflation that may happen, given that we don't know exactly what we don't know at this point in time. And therefore, when we step back and look at it, we will also continue to ramp up our remainder productivity problems, as well as merger synergies more in the second half of this year. So when we add up all these puts and takes, we believe that we have quite a bit of healthy profit and loss profile to deliver our EPS commitment of 13% to 15%, with the associated top line. Therefore, the good news is that we have built in all these, again, puts and takes into the remainder of 2021 and came up with the full year profile that we have been talking. Bob? A - Robert Gamgort Yeah. Let me - I'm going to add one thing to that, Steve, before I get to your second question. To bring together your question and Andrea's question, you know, sometimes we get into the details, which are important, we lose the big picture. So let me just step back before I move on and say the big picture on it. The second quarter, we said is going to be below our 13% to 15% annual guidance, but still double digit. So we're talking very strong performance in second quarter. The biggest driver of that fact, in Q2, if you want to look at why is Q2 below the balance of the year is this reinvestment in marketing in 2021 compared to a quarter a year ago, we're marketing across our business and the entire industry was - had a dramatic pullback, I view that as a position of strength, not as a cost. But obviously it shows up on the earning side for one quarter. So all of that detail is really important. But let's not lose the big picture of what I just said. I think this is actually a very, very strong position. With regard to our results of our packaged beverage business, it's two things, its brand strength and its outstanding execution of retail with regard to the brand strength. We have you know talked about our share gain on Dr Pepper, Canada Dry for years, which continues to say and I won't build - drill down deeper into those because we talked about those all the time, but we're getting broader share strength across our portfolio. So I mentioned one today this deserves a little bit of a call out which is Sunkist, which has now moved to the number one fruit flavored CSD share position. We never talked about Sunkist, but we've had innovation, renovation and marketing behind that brand. And you see that it respond, and I could keep going throughout our CSD portfolio to talk about that. Beyond CSDs, we've had fantastic results on brands like CORE, Snapple, we're in the middle of a Snapple reinvention right now, which is a completely new look to it, new bottle 100%, post consumer recycled, et cetera, et cetera. So I won't go through this laundry list. But there is real brand strength and it's not accidental. It's driven by innovation, renovation and really strong marketing and that will continue. With regards to execution, it's more than just we're getting the blocking and tackling right. We have added really strong leadership to that side of the business. We've upgraded the data and technology that helps aid our decision making. We have real strength in things like - on areas like revenue growth management, which allows us to be very precise in our promotion program. And then finally, we've made 14 investments, some are substantial, like the Honickman partnerships. Some are very small, but we made 14 transactions in our route to market to take some independent businesses and move them over to our businesses in which our thesis is that when we can consolidate the supply and distribution, we're able to execute better market, and that's showing up and that's not going to slow down. So it's really the combination of those, your point about C store versus others is really not a major factor here. If you want to look at our relative C store performance, I can make it really simple for you. The single biggest reason why we are not as large as some of our competitors is because we don't have a meaningful position in energy or sports, but particularly energy. And energy is a big category in C stores. But it's nothing beyond that. Operator: Your next question comes from the line of Kevin Grundy with Jefferies. Your line is open. Kevin Grundy: Great. Thanks. Good morning, everyone. Thanks for taking the question. Bon, a question for you on Polar and the company's sparkling water strategy more broadly. So you spent a little bit of time, you mentioned distribution opportunity for the brand. It also seemed like it contributed to the strong package beverage result in the quarter building on Steve's question a moment ago. So a few questions, please. What is the ACV opportunity? I think you mentioned it's 55%. What is the ambition? Where do you think that can go? And where are those shelf space gains going to come from, as you as you expand? Have you been pleased with the existing velocity, as you've expanded here at existing retailers? And then Bob maybe just more broadly on the company's sparkling water strategy, just more broadly, given the attractiveness of it, and it continues to be one of high growth categories in the beverage space a lot there? Thank you. Robert Gamgort: Yeah. Okay. Yeah, thanks for question. We have - really if you look at our previous position as sparkling water with relatively limited, we had some regional positions in Canada Dry and Schweppes. And we actually think those brands are much more fit for the ginger ale and CSD business, they are in sparkling water. But it made some sense when we didn't have anything. The Polar is the brand that we're backing. We're happy with the velocity. We're really pleased with the ACV that we're at right now, which is 55%. And where does it go from here? It's going to deliver at the HCD level of all of our top brands. You know, that's almost universal distribution. So there's no reason why this is one of our big investment areas is not going to achieve that strength. With regard to how do we plan on playing within sparklings? We have some niche brands. The businesses that we can add around the edges here, Limitless was one which is caffeinated, that we're expanding beyond just caffeinated, that we will position against that. But I think very clearly Polar is the brand that we're backing. It's an important brand in a high growth segment, one that's been a gap in our portfolio, and like our position in premium water in total, where we've now become the number two player we’re being very intentional about making sure that we have a good position in sparkling water going forward. Operator: All right, thank you. That concludes the Q&A session of today's call. I'll hand the call back to Tyson. Tyson Seely: Thank you, Jerome. And thank you everyone for your participation today. The IR team is around as usual. I know it's a busy day for everyone. We didn't get to everyone in the queue, but the IR team is here for your questions throughout the day. Please reach out to us. Have a good day. Operator: Thank you, presenters. And thank you ladies and gentlemen. That concludes today's conference. Thank you all for joining. You may now disconnect.