Molson Coors Beverage Company

Following prepared remarks today, we look forward to taking your questions. In an effort to address as many questions as possible, we ask that you limit yourself to one question. If you have technical questions on the quarter, please pick them up with our IR team in the days and weeks that follow. Today's discussion includes forward-looking statements. Actual results or trends could differ materially from our forecasts. For more information, please refer to the risk factors discussed in our most recent filings with the SEC. We assume no obligation to update forward-looking statements except as required by applicable law. Gap reconciliations for any non-U.S. gap measures are included in our earnings release. Unless otherwise indicated, all financial results the company discusses are versus the comparable prior year period in U.S. dollars and in constant currency when discussing percentage changes from the prior year. Also, U.S. shared data references are sourced from CERCANA unless otherwise indicated. Further, in our remarks today, we will reference underlying pre-tax income, which equates to underlying income before income taxes as defined in our earnings release. So with that, over to you, Gavin.

Thanks, Greg, and thank you all for joining us this morning. In the first quarter, Molson Co. has once again delivered against our commitments, growing the top and bottom line while making strong progress on our acceleration plan. We grew NetSales revenue by over 10%, We grew underlying pre-tax income by nearly 69%, and we drove significant margin improvement in the first quarter. This morning, we reaffirmed our full year guidance, which Tracy will discuss in more detail shortly. To sum it up, we remain confident in our ability to grow the top and bottom line for a third consecutive year, but cautious about current trends in the industry. The US bear category has been challenged so far this year. While we did see some improvement in March, there was also volatility in the industry and mismatched weeks, such as Easter. So we're keeping a close eye on April's trends and taking those into account for the balance of 2024. In spite of this volatility, we remain confident in our ability to achieve top and bottom line growth in 2024. We also remain confident in our ability to achieve our long-term growth algorithms. In the first quarter, we grew brand volume and net sales per hectolitre in both business units, and our share gains in the US were consistent with the gains we saw in the second half of 2023. Having said that, we aren't the only ones who are confident in our business. Retailers are also confident, having allocated around 13% more space for Coors Light and Miller Light in the US during spring resets, which supports our confidence that these share shifts are structural. Our distributors are also confident, which is why we expect our core brands to grow distribution this year. And across the globe, we have strong commercial platforms that are designed to serve our brands in 2024 and the years to come. With that, let's get into how our business performed in the first quarter. And I'll start with the first priority of our acceleration plan, growing the revenue of our core brands. Collectively, our core brands started 2024 strong. including double-digit brand volume growth for Coors Light and Coors Banquet in the U.S., high single-digit brand volume growth for Miller Lite in the U.S., and double-digit brand volume growth for Ajusco in Croatia. In the past four months, we've launched new long-term campaigns across our core brands, starting with Coors Light during Super Bowl. Shortly thereafter, in the U.S., Coors Light became the top dollar share gainer year-to-date in the on-premise per Nielsen. Miller Lite is a close second, and their combined success has fueled 12 consecutive four-week periods of industry-leading on-premise growth for Molson Coors, four times more growth than the next largest competitor. In Canada, Coors Lite is seeing similar success and grew nearly a full sharepoint of the industry year-to-date. As I hinted earlier, Coors Lite's momentum is anchored by our new campaign, Choose Chill, This is an evolution of Coors Light's Made to Chill campaign, which helped turn the brand around. But Choose Chill is more active for consumers and more connected to the refreshment and lifestyle Coors Light represents. You'll continue to see Choose Chill as we launch a new music program this summer and expand Coors Light's presence in soccer and football. We believe work like this has driven Coors to become a trusted and desirable brand for consumers, which is true for Coors Banquet as well. After growing brand volume by nearly 20% in 2023 in the US, Banquet grew volume by 23% in the first quarter and gained nearly a quarter point of industry dollar share. I've already spoken about spring resets, but while we're talking about Banquet, I want to share the significant distribution growth we've seen for this brand and expect to continue seeing moving forward. In 2024, Banquet is expected to grow distribution by nearly 20%, driven by surging demand in parts of the U.S. where banquet has historically under-indexed, like the Southeast and Great Lakes. This is what happens when consumer demand fuels distributor and retailer confidence. This year, we plan to keep driving banquet with more television media pressure, TV advertising for the first time in several years. and several large programs with current and new partners across television, music, and apparel. Turning to Miller Lite, which grew its US brand volume by high single digits in the first quarter on top of strong comps from the prior year. In March, Miller Lite launched its new All-Stars program, reinvigorating the debate about whether Miller Lite tastes great, is less filling, or both. This campaign brought on a new roster of long-term celebrity partners like JJ Watt, Reggie Miller, Big Puppy, Jorge Posada, and Mia Hamm. The early response has been very strong, and we have more planned for the Olympics, Major League Baseball, and football. Now, in Canada, Miller Lite sells at an above-premium price point, and year-to-date through February, it is the fastest-growing above-premium beer nationally, growing its brand volume by over 40%. Speaking of Canada, the Molson trademark also outperformed the industry and gained volume shares. In March, we announced a multi-year partnership with the Professional Women's Hockey League, which was very positively received by fans and retailers alike. Similar to other women's sports, viewership for the PWHL has surged this year, with broadcasts and in-person attendance both at record highs. We're excited to continue this partnership, and Molson will also have a strong presence at the Olympics this summer as the official beer sponsor of Team Canada. Moving on to the UK, Carling's partnership with the FA Cup began coming to life across TV, digital and retail in the first quarter. And we believe this is the perfect sponsorship to set Carling up for sustained success. According to our data, Carling is more associated with professional soccer than any other beer in the market. At a 35% association, it's nearly double the next competitor. Rounding out our core is Azushka, which has continued its strong momentum in Croatia and now has a 54% value share of the core segment. Azushka is much loved locally, but also by the many travelers who visit Croatia each year, and we've just launched a new equity campaign nationally to continue growing the brand. So our core brands have collectively continued to perform strongly in 2024, and we believe we have the right commercial plans to keep them growing for years to come. Now turning to our high-end brands, it's clear we have lots of runway in every part of our portfolio. In the first quarter, Madri Exceptional continued its substantial growth. In the UK, the brand grew value sales of the on-trade by nearly 50% and value sales of the off-trade by over 40%. Madri is currently the number three world beer in the UK total trade, and we have been consistently closing the gap to number two to keep the pressure on. We launched a new campaign in April that brings the soul of Madrid to the UK and focuses on growing Madrid's awareness. While Madrid continues to grow with a strong base in the UK, you'll recall we also brought the brands to Canada in late February. And while it's still early days, Madrid has already made it into about 6,000 accounts across the country. We believe the brand is performing very well so far. Beyond Madrid's success, there are other parts of our Hayden portfolio that we're actively working to improve, specifically Blue Moon. Between February and March, we launched new Blue Moon packaging in the US, a new name for Blue Moon Light, and a large-scale campaign called Made Brighter. So our full-scale revamp has taken shape, and while it's too early to know the full effect, we are seeing early signs of positive traction. We're also seeing great performance for Blue Moon non-alc, which is now the top selling new non-alc beer of 2024. There have been about 30 non-alc beer launches in the US this year, as well as increasing competition. So there is a truly strong sign as the brand continues to gain distribution and share. While we certainly have more to do on Blue Moon, we are committed to driving the turnaround and we are happy with the progress thus far. Speaking of progress, it was a fast start to the year for Simply Spiked. which grew U.S. brand volume by nearly 35% in the quarter. Simply Spiked Limeade hit shelves in February, and while we are still growing distribution, our variety pack already holds the number one new item spot for the flavored alternative segment since its launch. Simply Spiked had a major media presence during March Madness, along with Coors Light and Miller Light, and will continue to focus on sports as a primary passion point for Simply Spiked consumers throughout the year. And while it's still early days for our new brand, Happy Thursday, which just launched in April, we've seen a very positive response from consumers so far. And we look forward to building the brand as we approach the peak summer selling season. So as you can see, we are delivering on our long-term commitment to grow the revenue of our core power brands with strong overall performance across the world. We are delivering with the strength of high-end brands like Simply Spiked and Madrid Exceptional. And we are beginning to see positive traction on other key areas of our high-end portfolio, such as Blue Moon. And finally, we are delivering on our commitment to enhance our capabilities, with a large investment in our Golden Brewery nearing completion and a $100 million investment plan for our UK operations over the next five years, which we believe will ensure world-class production of our brands today and in the future. We are committed to our overall long-term strategy. We have delivered against it over the last three years And we plan to continue delivering against it year over year. With that, I'll turn it over to Tracy to share some details on our financials and drivers of our guidance.

Thank you, Gavin. We are proud to report another strong quarter. Net sales revenue grew an impressive 10.1% on strong America's volume and favorable net pricing across both business units. This top-line strength, coupled with volume leverage and ongoing cost savings, drove meaningful margin expansion while we continued to invest strongly behind our brands. As a result, underlying pre-tax income grew 68.8%. Now, many of the details can be found in our earnings release and slide, so I'll focus my prepared remarks on some of the key metrics and drivers of our Courtney performance and our outlook for the year. Our double-digit top-line growth was driven by both volume and price mix. As planned, we executed global net pricing increases in the quarter. We also had favorable mix, which was driven by lower PAPS contract brewing volume. This led to a 4.2% increase in net sales per hectolitre, driven by both business units. Financial volume grew 5.7%, driven by the Americas. In the US, financial volume increased 7.6% despite an approximate 3% or nearly 350,000 hectolitre America's headwind related to the exit of low margin Pabst contract brewing volume. Our US domestic shipments benefited not only from continued strong demand, but also shipment timing. We typically build inventories in the first quarter ahead of peak season. But this year, we built more than usual in the US. This was due to elevated consumer demand and measures taken under our contingency plan related to the Fort Worth brewery strike that commenced in mid-February. For context, this year our first quarter shipments to distributors exceeded brand volume by over 750,000 hectolitres, while in the prior year, first quarter shipments exceeded brand volumes by roughly 100,000 hectolitres. This U.S. shipment timing was a driver in the financial volume growth exceeding brand volume growth. Consolidated brand volume growth was 4.4% with growth in both business units. America's growth was led by the U.S., which was up 5.8%. The growth was driven by continued strength of our core brands, with Queers Light and Banquet each up double digits and Miller Light up high single digits. In addition, our key innovations like Simply Sparked also grew. Canada also contributed to brand volume growth. While the Canadian industry has improved since the fourth quarter, it remains challenged. Still, we continue to take meaningful volume share, increasing brand volume by 3.6% driven by our above premium portfolio. In EMEA and APAC, brand volume increased 1.9% driven by growth in Central and Eastern Europe as inflation pressures ease, partially offset by challenges in the UK off-premise. Turning to costs, underlying cost of goods sold per hectolitre was up a modest 0.9%. Inflation, while moderating, continued to be a headwind, but was largely offset by a 110 basis point benefit from volume leverage. The volume leverage was driven by the Americas business, This, along with lower logistics costs, more than offset the impacts of direct materials and manufacturing inflation, which resulted in America's underlying cost of goods sold per hectolitre being essentially flat. In EMEA and APAC, underlying cost of goods sold per hectolitre increased 3.3%, which was a significant improvement from last year. The increase was due to higher direct materials and logistics costs, as well as premiumization of our portfolio. We continue to invest strongly behind our brands globally, increasing marketing spend for our core power brands in particular. This included showing up in a big way in live sports at the Super Bowl, March Madness, and the FA Cup, as well as supporting the launch of the new Blue Moon campaign. Turning to capital allocation, we deployed $144 million in capital projects, which support ongoing productivity and cost savings programs as well as our sustainability initiative. Our Golden Brewery modernization project, which is nearing completion, is a great example of this. And we continue to return cash to shareholders. We raised our quarterly dividend again by 7% and we're active in executing our $2 billion share repurchase program that was announced last October. Utilizing our sustained and opportunistic approach, we repurchased 1.8 million shares for a total cost of approximately $110 million in the quarter. Since the inception of the plan in the fourth quarter of 2023, we have already repurchased 4.3 million shares for a total cost of approximately $260 million. Now let's discuss our outlook. We are reiterating our 2024 guidance. Given that we are early in the year, and in particular, our caution around the US and Canada beer industries, which have shown accelerated softening in early April, we believe that this is a prudent approach to take. Now, while the detailed list of metrics is in our earnings release and slides, I'll highlight the primary ones. We continue to expect low single-digit net sales revenue growth on a constant currency basis, mid single-digit underlying pre-tax income growth on a constant currency basis, mid single-digit underlying earnings per share growth, and underlying free cash flow of $1.2 billion plus or minus 10%. Now let's talk about our guidance assumptions. Our goal is typically to shift to consumption for the year, and this is true for 2024. So given the strong U.S. domestic shipment volumes in the first quarter, resulting in a significant gap between shipment and decisions as I quantified, we expect U.S. brand volumes to exceed shipment volumes during the balance of the year. The termination of the PEP contract brewing agreement at the end of this year is expected to be a 1.6 million hectolitre headwind to America's financial volume over the remaining three quarters of the year. We expect positive price mix. and we continue to expect pricing in the US and Canada to be between 1% and 2% in line with historical averages, and for pricing in EMEA and APAC to trend in line with inflation. We also expect premiumization supported by our expanding above premium portfolio. This includes brands like Madrid, with its strong momentum in the UK, along with its recent expansion into Canada and Bulgaria, as well as by anticipated improvements in the Blue Moon brand family. It also includes flavour, as we enter the summer with three winning flavours for Simply Spiked, as well as our new innovation, Happy Thursday. We believe these brands should keep us moving toward our medium-term goal of reaching approximately one-third of our global net brand revenue from our above premium portfolio. On the cost side, we expect underlying costs of goods sold per hectolitre to increase due to continued, albeit moderating, inflationary pressure, including material conversion costs, higher costs related to premiumisation and lower volume leverage impacts as compared to 2023 and the first quarter of 2024. We continue to expect MG&A for the year to be roughly in line with 2023. This entails strongly supporting our core power brands and key innovations globally. This is especially true around peak season as we lean into media at both local and national levels and with robust retail programming that drives consumer engagement. In summary, our strong momentum in 2023 has continued into 2024. This shows that our strategy is working. with strong brands, supportive distributor partners, and the financial flexibility to balance growth and reinvestment with confidence in our ability to deliver our guidance in 2024 and on our long-term growth algorithm in the years to come. And with that, we look forward to answering your questions. Operator?