Keurig Dr Pepper Inc.

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 and there will be a question and answer session at the end of the call. I would like to introduce Keurig Dr. Pepper's Vice President of Investor Relations, Mr. Steve Alexander. Mr. Alexander, please go ahead.

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 will 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 Dotmesioglu, and our Chief Corporate Affairs Officer Maria Scappagurcio. 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.

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 6 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 also began hitting shelves in the quarter. with single-serve coffee pod pricing up more than 5% at retail during the quarter, with additional pricing still to come. Across our cold portfolio, it's a story of continued volume growth at the same time we're implementing meaningful pricing actions, with the combination leading to double-digit revenue growth in packaged beverages, beverage concentrates, and Latin America beverages. Given that we're still in the steep portion of the inflation curve, the timing of pricing is lagging inflation, which leads to pressure on margins. 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 comparisons. 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. Buy 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 startup of our new Spartanburg manufacturing facility pressured our capacity. We prioritize 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 in 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 a 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 Plus Ice Coffee Maker, which debuted as a Target and Keurig.com exclusives. More than half of K Slim Plus ice 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 5 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 cake 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 plan for later this year. Lastly, we are pleased to announce that Community Coffee, the largest family-owned retail coffee brand in the U.S., 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 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 food service channels. Available nationally in Chipotle restaurants since 2020, Tractor offers the first and only certified organic non-GMO beverage solution specifically tailored to food service 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 food service 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 7-Up and a new 7-Up line with clean, simple ingredients and reduced sugar, as well as Sunkiss Mango Orange to expand our fast-growing Sunkiss brand lineup. Finally, returning this summer as a limited-time offer is a fan-favorite Dr. Pepper Darkberry, including zero-sugar varieties. 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.