Keurig Dr Pepper Reports Q1 2024 Results

Keurig Dr Pepper Inc. (NASDAQ: KDP) today reported results for the first quarter of 2024, reaffirmed its full year guidance, and announced the completion of its CEO succession process.

Commenting on this final step in the CEO transition, which began in Fall 2023, Chairman and CEO Bob Gamgort stated, “It has been a privilege to help establish Keurig Dr Pepper into the formidable company it is today, and I look forward to supporting its future growth as Executive Chairman. As KDP enters its next phase, Tim and his leadership team are activating an exciting, evolved strategy that I am confident will extend our track record of success and continue to differentiate KDP within the beverage industry.”

Incoming CEO Tim Cofer added, “I am honored to lead the next chapter of value creation as CEO of Keurig Dr Pepper and excited to partner with Bob, our Board, and all 28,000 colleagues to unlock our full potential as a beverage industry leader. We have a unique and competitively advantaged business, with a significant growth opportunity that we intend to realize through our evolved strategy. I’m pleased with our strong first quarter results, which reflect consistent execution across the organization and demonstrate the health of our business. This performance underscores our confidence in our 2024 outlook, which is in-line with our long-term financial algorithm.”

First Quarter Consolidated Results

Net sales for the first quarter increased 3.4% to $3.5 billion. On a constant currency basis, net sales advanced 2.8%, driven by net price realization of 3.1%, partly offset by lower volume/mix of 0.3%.

GAAP operating income increased 31.0% to $765 million. The growth was driven by strong operating momentum, aided by a favorable year-over-year impact of items affecting comparability.

Adjusted operating income increased 17.5% to $825 million and totaled 23.8% as a percent of net sales. Adjusted operating income growth was driven by 9.7% Adjusted gross profit growth, translating to 350 basis points of Adjusted gross margin expansion. Adjusted operating income growth reflected higher net price realization and net productivity, partly offset by higher SG&A costs, including increased marketing investment, and the impact of the modest volume/mix decline.

GAAP net income for the quarter decreased 2.8% to $454 million, or $0.33 per diluted share. This performance primarily reflected an unfavorable year-over-year impact of items affecting comparability, partly offset by strong operating momentum.

Adjusted net income for the quarter advanced 10.0% to $530 million, and Adjusted diluted EPS increased 11.8% to $0.38. The Adjusted diluted EPS growth was driven by the Adjusted operating income growth and a lower share count, partly offset by a higher non-GAAP tax rate and higher non-GAAP interest expense.

Operating cash flow for the first quarter was $85 million and free cash flow totaled $(73) million. Free cash flow reflected carryover impacts of the Company’s strategic reduction in supplier financing during 2023, as well as front-loaded timing in capital expenditures in 2024.

First Quarter Segment Results

U.S. Refreshment Beverages

Net sales for the first quarter increased 4.3% to $2.1 billion, driven by net price realization of 5.6%, partly offset by a decline in volume/mix of 1.3%. This performance reflected higher pricing compared to prior year, continued manageable elasticities across most categories, and the contribution from the Company’s recently commenced Electrolit partnership.

GAAP operating income increased 25.5% to $615 million. Adjusted operating income increased 22.4% to $622 million and totaled 29.7% as a percent of net sales, driven by higher net price realization, net productivity, and an earned C4 performance incentive during the first quarter, partly offset by lower volume/mix and higher SG&A costs, including increased marketing investment.

U.S. Coffee

Net sales for the first quarter decreased 2.1% to $0.9 billion, driven by a net price decline of 1.8% and a modest volume/mix decline of 0.3%.

K-Cup® Pod shipments declined 1.1%, strengthening on a sequential basis, reflecting improving market share trends across the Company’s owned & licensed portfolio.

Brewer shipments totaled 10.0 million for the twelve months ending March 31, 2024, declining 1.9% year-over-year. In the quarter, brewer shipments grew strongly, reflecting Keurig market share momentum and timing benefits.

GAAP operating income increased 6.9% to $248 million, primarily reflecting a favorable year-over-year impact of items affecting comparability.

Adjusted operating income increased 1.4% to $289 million, primarily driven by net productivity, which more than offset the impacts of targeted price reductions and increased marketing investment. Adjusted operating income margin totaled 31.7% as a percent of net sales and expanded 110 basis points versus the prior year.

International

Net sales for the first quarter increased 11.8% to $0.5 billion. On a constant currency basis, net sales advanced 7.0%, driven by volume/mix growth of 4.8% and net price realization of 2.2%. This strong performance reflected continued momentum across markets.

GAAP operating income increased 40.0% to $112 million, aided by favorable year-over-year impacts from items affecting comparability and currency translation.

Adjusted operating income increased 25.0% to $109 million and totaled 23.5% as a percent of net sales, driven by net sales growth and net productivity, partially offset by increased marketing investment.

2024 Guidance

The 2024 guidance provided below is presented on a constant currency, non-GAAP basis. The Company does not provide reconciliations of such forward-looking non-GAAP measures to GAAP measures, due to the inability to predict the amount and timing of impacts outside of the Company’s control on certain items, such as non-cash gains or losses resulting from mark-to-market adjustments of derivative instruments, among others, which could be material. 

KDP reaffirmed its fiscal 2024 guidance for constant currency net sales growth in a mid-single-digit range and Adjusted diluted EPS growth in a high-single-digit range.

ABOUT KEURIG DR PEPPER

Keurig Dr Pepper (Nasdaq: KDP) is a leading beverage company in North America, with a portfolio of more than 125 owned, licensed and partner brands and powerful distribution capabilities to provide a beverage for every need, anytime, anywhere. With annual revenue of approximately $15 billion, we hold leadership positions in beverage categories including soft drinks, coffee, tea, water, juice and mixers, and have the #1 single serve coffee brewing system in the U.S. and Canada. Our innovative partnership model builds emerging growth platforms in categories such as premium coffee, energy, sports hydration and ready-to-drink coffee. Our brands include Keurig®, Dr Pepper®, Canada Dry®, Mott’s®, A&W®, Snapple®, Peñafiel®, 7UP®, Green Mountain Coffee Roasters®, Clamato®, Core Hydration® and The Original Donut Shop®. Driven by a purpose to Drink Well. Do Good., our 28,000 employees aim to enhance the experience of every beverage occasion and to make a positive impact for people, communities and the planet. For more information, visit www.keurigdrpepper.com and follow us on LinkedIn.