Keurig Dr Pepper Inc.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Keurig Dr. Pepper's earnings call for the first quarter of 2026. 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 Chetan Malala, Vice President of Investor Relations at Keurig Dr. Pepper. Please go ahead.

Thank you, and hello, everyone. Earlier this morning, we issued a press release detailing our first quarter 2026 results, which we will discuss on today's call. An accompanying slide presentation is available and can be viewed in real time on the 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 our latest 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 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, Anthony DiSalvestro. I'll now turn it over to Tim.

Thanks Chetan and good morning, everyone. We're pleased with our start to the year. We closed the JDP's acquisition and made steady progress on our transformation initiatives while continuing to drive our base business with first quarter results that tracked slightly ahead of our expectations. In a dynamic operating environment, our teams remain focused. on balancing longer-term foundational work with near-term execution. Looking ahead, our top priorities for 2026 remain unchanged, delivering our low double-digit EPS growth guidance in a high-quality way, seamlessly integrating JDE-PETS and beginning to unlock combination benefits, and achieving key milestones to set up a successful separation. While there's plenty of work ahead, our well-constructed plans and year-to-date progress reinforce our confidence in delivering on these commitments. Before discussing our quarterly results, let me briefly touch on our transformation work. On April 1st, we closed the acquisition of JDE-Pete. Welcoming over 20,000 new colleagues to KDP and bringing our complementary portfolios and capabilities together, united by a shared passion for great brands and exceptional coffee experiences. With the transaction now closed, we have begun to operationalize our integration plans, led by a dedicated transformation management office and guided by clear work streams and accountability. At the same time, we're also advancing our work to separate into two advantaged pure play public companies, which will be well positioned to create value through increased focus and organizational clarity with fit for purpose strategies and capital allocation policies. BeverageCo will be a growth-oriented challenger in the large and attractive $300 billion North American refreshment beverages market. With iconic brands, differentiated go-to-market capabilities, and a proven track record of white space expansion, the standalone beverage business should deliver compelling financial results while also possessing strategic optionality over time. Global Coffee Co. will be a scaled leader in the $400 billion global coffee market with an enhanced set of capabilities to meet consumer needs across formats, channels, and geographies. Supported by a portfolio of leading global and regional brands, deep expertise in sourcing, blending, and appliances, and strong synergy potential, the coffee business will also have a compelling value creation model. As we balance near-term performance with our transformation agenda, we have put in place an operating model designed to maintain enterprise focus while preparing each business unit to operate independently at separation. Under this structure, the centralized KDP leadership team is responsible for strategic oversight, total company commitments, and transaction execution, while our dedicated beverage and coffee operating units are accountable for delivering their 2026 business plans and shaping the strategic direction for each business. As CEO of KDP and the future CEO of Beverage Co., I am overseeing both the KDP leadership team and the beverage operating unit. As we recently announced, J.D.E. Peet's CEO, Rafa Oliveira, has been selected by the board to lead the coffee operating unit and become the future CEO of Global Coffee Co. upon separation. Rafa has meaningful CPG experience, a track record of navigating complex global markets, and is the architect of J.D. Pete's brand-led strategy. He's the natural choice to lead our coffee business today and in the future, and I look forward to advancing our partnership as we prepare to stand up two winning companies. Overall, our transformation work is progressing well and we continue to target operational readiness to separate by the end of 2026 with the official separation likely to occur in early 2027 subject to market conditions. Turning now to our first quarter results, net sales grew 8% with positive contributions from both net price realization and volume mix. Top line performance was led by continued strong momentum in U.S. refreshment beverages and international, partly offset by previously discussed temporary pressures in U.S. coffee. Our EPS of 39 cents declined from last year, reflecting the phasing of cost and tariff impact and lapping a below the line gain in the year ago period. Importantly, as Anthony will discuss, we have visibility to healthy EPS growth beginning in the second quarter with further acceleration in the back half. Let me now discuss our Q1 segment performance. I'll start with U.S. refreshment beverages, which delivered another robust growth quarter. Net sales and operating income each grew at a double digit rate driven by favorable trends in our core carbonated soft drink business and continued momentum in our portfolios emerging growth areas. Within CSDs, the category remained healthy with Q1 retail sales dollars growing at a mid single digit rate and accelerating from Q4. While Dr. Pepper faced a difficult innovation comparison versus the BlackBerry launch last year, our underlying trends were strong, with the brand's three primary lines, regular, diet, and zero sugar, collectively gaining share during the quarter, supported by demand generation activity and point of sale execution. TSD innovation will play an important role in our plans for the rest of the year. Canada Dry fruit splash strawberry launched nationally in February and has driven healthy consumer trial, strong on-shelf velocities, and incrementality to the franchise. The launch contributed to Canada Dry's Q1 share gains and should provide a further tailwind in coming quarters. In addition, the fan favorite Dr. Pepper Creamy Coconut Limited Time Offering relaunched earlier this month. And we're confident it will build on its successful initial run during 2024 as it taps into ongoing consumer interest in dirty sodas. Our performance in 2026 will also benefit from our continued focus on aligning our CSD portfolio with consumer needs around both value and wellness. With consumers seeking affordability in the current environment, we have refined our promotional strategies to offer compelling price points in key channels while maintaining discipline to ensure net price realization continues to offset inflationary pressures. We're also leaning into the better few areas of our portfolio with bloom pop, prebiotic CSDs expanding rapidly off a small base and our zero sugar CSD offerings growing at a double digit rate in Q1. Beyond CSDs, we continue to build our presence in emerging growth areas in energy, we once again expanded market share during the first quarter, led by Bloom and Ghost, which were two of the top three fastest growing major trademarks in the category. Our performance reflected strong innovation, incremental distribution wins, and high quality DSD execution. We believe our portfolio approach to the category remains a clear advantage and continue to see meaningful growth potential across C4, Ghost, Bloom, and Black Rifle. Our sports hydration partnership with Electrolyte is also delivering healthy results with the brand gaining significant share in Q1 through distribution expansion and strong velocities. Overall, U.S. refreshment beverages continues to represent an outsized growth driver for KDP, and we expect this segment to remain a key contributor in 2026. Turning now to U.S. coffee. While both net sales and operating income declined, the quarter largely played out as we expected, and we have conviction in both the category and our business. I'd highlight a few key points. The coffee category is healthy with continued growth and manageable elasticities. The Keurig compatible sub-segment grew retail sales at a nearly 4% rate with our owned and licensed brands keeping pace. Our licensed Lavazza brand was a standout performer, growing K-Cup sales more than 50% in the quarter through brand strength, successful innovation, and increased distribution breadth and quality. Second, as expected, our reported results were impacted by some meaningful but temporary headwinds. Peak year-over-year cost pressures constrained Q1 segment profitability, reflecting the timing of higher cost green coffee hedges and tariffs. And as previewed last quarter, trade inventory adjustments pressured pod shipments, which declined 7% and lagged point-of-sale trends weighing on operating income. Importantly, these headwinds should ease slightly in Q2 and moderate more meaningfully in the back half, providing visibility to improved top and bottom line trends over the balance of the year. Third, Despite the near-term profit pressure, we're thoughtfully investing in long-term growth initiatives. Let me provide a few examples. We're enhancing our premium owned and licensed segment through the well-supported Keurig Coffee Collective innovation launch, which is off to an encouraging start with strong retailer enthusiasm and early consumer trial. We are continuing to execute our coffee partnership strategy, as evidenced by the recent renewal and expansion of our K-Cup agreement with Nestle USA. This agreement deepens and extends a highly successful relationship and will enable us to expand distribution and innovation for the Starbucks brand in the Keurig ecosystem. And we continue to prepare the Keurig Alta system for its initial targeted direct-to-consumer launch planned for later this year. This disruptive next-generation coffee system will feature our Keurig brand, the newly acquired premium Peet's coffee brand, and over time, the likely participation of partner brands as well. Putting it all together, combining constructive category trends With our investments to support long-term growth initiatives, we remain confident in the prospects for our coffee business. In international, Q1 net sales grew at a high single-digit rate, driven by net price realization. While volume mix declined modestly due to some short-term impacts related to the Mexico beverage tax, we're encouraged by the resilience of underlying consumer demand and our share trends across key categories. Despite the top line strength, operating income declined, reflecting cost pressures and higher investment spending in a seasonally smaller profit quarter. Looking ahead, we expect profitability trends to improve as inflationary pressures ease volume mix strengthens, and we execute our commercial plans for the year, including summertime activations to drive engagement and celebrate soccer fandom. Overall, we continue to expect our international segment will remain a meaningful growth contributor over time, given our strong local share positions in attractive categories as well as portfolio and distribution expansion opportunities in both Canada and Mexico. We will also be disciplined and opportunistic in targeting other geographies. For example, we recently evolved our Suntory partnership in Europe to a more collaborative concentrate supply model that will provide access to incremental consumers through a capital light low-risk model. To close, we're starting the year on solid footing. We completed the J.D.E. Pete's acquisition. We're making steady progress advancing our transformation agenda, and we remain on track to achieve our full-year outlook. As we look ahead to the rest of the year, we're focused on sustaining base business momentum integrating J.D. Peets with excellence, and laying the groundwork for two strong standalone companies. With that, I'll turn the call over to Anthony to discuss the financials in more detail.