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 2026. This conference call is being recorded [Operator Instructions] I would now like to introduce Chethan Mallela, Vice President of Investor Relations at Keurig Dr Pepper. Please go ahead.

Chethan Mallela: 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 reflects 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 DiSilvestro. I’ll now turn it over to Tim.

Timothy Cofer: Thanks, Chethan, and good morning, everyone. We are pleased with our start to the year. We closed the JDE Peet’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 Peet’s 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 1, we closed the acquisition of JDE Peet’s, 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 2 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.

Beverage Co. 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 stand-alone 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, JDE 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 JDE Peet’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 2 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 $0.39 declined from last year, reflecting the phasing of cost and tariff impacts 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 portfolio’s 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 3 primary lines, regular, diet and zero sugar collectively gaining share during the quarter, supported by demand generation activity and point-of-sale execution. CSD Innovation will play an important role in our plans for the rest of the year. Canada Dry Fruit Splash strawberry launch 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 2 of the top 3 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 Electrolit 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. First, the coffee category is healthy, with continued growth and manageable elasticities. The Keurig compatible subsegment 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 improve top and bottom line trends over the balance of the year. Third, despite the near-term profit pressure, we’re thoughtfully investing in the 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 Nestlé 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 JDE Peet’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 JDE Peet’s with excellence and laying the groundwork for 2 strong standalone companies. With that, I’ll turn the call over to Anthony to discuss the financials in more detail.

Anthony DiSilvestro: Thanks, Tim, and good morning, everyone. We delivered solid first quarter results that were modestly ahead of our expectations, reflecting strong momentum, particularly in cold beverages. Net sales increased 8.1% in the quarter, led by strong gains in U.S. Refreshment Beverages and International, partly offset by a decline in U.S. Coffee, as expected. Net price realization was the primary top line driver, contributing 5.5 percentage points to growth, while volume mix added 2.6 points. Gross margin contracted 220 basis points as elevated cost pressures were only partly offset by net price realization and productivity savings. We expect Q1 to represent the most significant year-over-year gross margin decline for our legacy KDP business, with trends improving as inflation and tariff impacts ease, particularly in the back half.

SG&A was flat as a percent of sales, with transportation and warehousing efficiencies offsetting increased marketing spending across all 3 segments to support our key brand equities and compelling innovation slate. All in, Q1 operating income declined 1.9%. Including the below-the-line impact of lapping last year’s $0.02 gain on the sale of our Vita Coco state, EPS decreased 7.1% to $0.39. Moving on to our segments. U.S. Refreshment Beverages net sales grew 11.9%, with volume/mix contributing 7.2 points. Net price realization added another 4.7 points, reflecting inflation-driven price increases taken early in the year. On the bottom line, segment operating income was strong, increasing 9.8%, with net sales growth and productivity savings more than offsetting inflation and a higher marketing spending.

Overall, U.S. Refreshment Beverages has strong momentum, led by healthy trends in carbonated soft drinks, energy and sports hydration. We have robust innovation and commercial plans in place for the balance of 2026, and expect another strong year for this segment. In U.S. Coffee, our Q1 performance was largely as anticipated. Net sales declined 2.3%, with volume mix driving an 8.2 percentage point decline. Odd shipments declined 7%, reflecting trade inventory adjustments along with manageable price elasticities. Brewer shipments also declined at a high single-digit rate, primarily driven by elasticity. Net price realization added 5.9 points to net sales, driven primarily by carryover pricing in both pods and brewers. Turning to profit. Segment operating income declined 21.3%.

This was primarily driven by meaningful cost pressures as higher green coffee costs and tariffs flow through our results in the quarter. Profitability was also impacted by the pod shipment decline and increased marketing spending. Collectively, these factors more than offset benefits from net price realization and productivity savings. Ultimately, our U.S. Coffee segment is tracking with our plans. While we continue to expect subdued profit for the full year, we have visibility to progressive improvement, particularly in the second half when our costs improve and short-term trade inventory dynamics normalize. In our International segment, constant currency net sales increased 8.5%. Net price realization contributed 9.2 percentage points, driven by pricing actions taken in response to cost pressures in both Mexico and Canada.

Volume/mix provided a partial offset, declining 0.7 percentage points. International segment operating income declined 15.1% on a constant currency basis, primarily due to cost pressures, including the Mexico beverage tax and increased marketing spending. As we previewed last quarter, we planned for a softer start to the year in this segment, and we continue to expect profit trends to improve as 2026 progresses. Turning to the balance sheet and cash flow. During the first quarter, we closed the financing for the JDE Peet’s acquisition with an optimized structure comprised of a $4.5 billion beverage company convertible preferred equity investment, a $4 billion coffee company pod manufacturing JV minority investment, approximately $6 billion in newly issued long-term senior debt and an additional term loan borrowings.

Based on this financing mix, we continue to expect net leverage of approximately 4.5x at midyear. We remain committed to investment-grade ratings for KDP and our 2 future companies and will prioritize debt paydown in the near term. Our plan is for free cash flow generation to serve as the primary deleveraging source, though we will also continue to assess noncore asset divestitures. We generated $184 million of free cash flow in the first quarter and continue to expect legacy KDP will generate approximately $2 billion for the full year. Incorporating the net cash flow contribution from JDE Peet’s this year, including the impact of incremental financing costs and onetime deal and transformation-related expenses, we expect approximately $2.5 billion of aggregate company free cash flow in 2026.

Cash generation should increase beyond this year, enabling us to further optimize Beverage Co. and Global Coffee Co’s. capital structures and over time, providing optionality for value-enhancing capital allocation. Let me now turn to guidance. We are reaffirming our 2026 outlook, which uses current FX rates and includes the anticipated contribution from JDE Peet’s as of the April 1 deal close date. We plan to report JDE Peet’s as a separate segment until separation. For the total company, we expect net sales in a range of $25.9 billion to $26.4 billion, reflecting 4% to 6% constant currency growth for legacy KDP and an $8.5 billion to $8.7 billion contribution from JDE Peet’s. On the bottom line, we expect low double-digit EPS growth in constant currency, which includes an anticipated 6 to 7 percentage points contribution from the JDE Peet’s acquisition and 4% to 6% growth for legacy KDP.

Based on current rates, we anticipate that FX will represent an approximately 1 percentage point tailwind to total company net sales and EPS growth for the full year. Below the line, we are assuming the following: interest expense of approximately $1.13 billion to $1.16 billion; an effective tax rate of approximately 22%; and approximately 1.37 billion diluted weighted average shares outstanding. As a reminder, beginning with the second quarter, our P&L will also have 2 new impacts to reflect the pod manufacturing JV and the convertible preferred security. For the balance of 2026, we expect the following: approximately $190 million in pretax coffee JV costs, which will flow through the noncontrolling interest line, and convertible preferred costs that will flow through below net income to KDP and will be calculated each quarter as the greater of the roughly $53 million quarterly preferred dividend or the securities approximately 8% proportionate share of earnings.

For 2026, we expect the calculation to default to the proportionate share of earnings. From a phasing perspective, we expect high single-digit EPS growth in Q2, with further acceleration in the back half as costs improve and synergies built. In closing, we delivered solid Q1 results. Our teams executed well in a highly dynamic environment and made important progress preparing the company for its next chapter. We remain on track to deliver our full year commitments, while also building the foundation for our 2 future stand-alone public companies. With that, I will turn the call back to Tim for closing remarks.

Timothy Cofer: Thanks, Anthony. Overall, we’re pleased with our start to the year. With clear priorities and well-crafted plans, we’re striking a healthy balance between near-term fundamental delivery and our longer-term transformation initiatives. We will remain focused on disciplined execution to achieve our 2026 commitments and capitalize on the value creation opportunity we see ahead. With that, we’re now happy to take your questions.

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Operator: [Operator Instructions] The first question today comes from Dara Mohsenian with Morgan Stanley.

Dara Mohsenian: So first, on U.S. Refreshment, clearly, strong sales growth on an underlying basis even adjusting for incremental gross distribution, et cetera. Can you just give us a bit more detail under the hood on what’s driving the momentum in a segment and brand level and how sustainable you think those growth drivers are going forward? And any thoughts on the impact from SNAP changes so far? And then if I can just slip one in on Coffee. There’s obviously a lot of dynamic factors impacting profitability at this point. You have the higher commodity pressure, particularly with the hedgings and the inventory timing. But at the same time, obviously, green coffee prices have come off, the tariff situations improve. So just — can you give us an update, on a quarterly basis going forward, how you see profitability in that segment playing out given those factors?

And also how pricing ties into the cost dynamics, both in terms of what you’re seeing in the marketplace and your own potential actions?

Timothy Cofer: Yes. I’ll tackle the first 2, and I’ll take it over to Anthony to talk about coffee profitability. Look, on U.S. Refreshment Beverage, we’re very pleased with our start to the year. You saw the print, double-digit growth both on the top line and the bottom line. And in terms of your question on sustainability, we expect this segment will continue to deliver strong results in the balance of the year, both top and bottom. As you think about the top line, we’ve got a great innovation slate lined up. You’ve already seen the impact on our second largest CSD brand, Canada Dry, with the Fruit Splash innovation and news there, that drove share gains. Literally in the last days a week, we’ve launched Dr Pepper Creamy Coconut.

We expect that to be a big hit this year, capitalizing on dirty sodas. Feel very good about our DSD route to market execution and the ability to continue to drive distribution gains for key brands, both owned brands that are showing strong growth continued momentum like our zero sugar lineup and a lot of partner brands, think energy, rapid hydration, prebiotic CSDs. Last thing I’d say on the top line driver is stepped up brand support. We are planning to increase marketing this year. We did it in the first quarter. You’ll see it on a full year basis, and really dialing up our precision marketing capabilities and our digital agenda. Having said that, I will say net sales will likely moderate relative to the Q1 elevated levels. The quarter, as you mentioned, Dara, did benefit from some incremental GHOST distribution year-over-year on a comparison basis and some outsized growth in some partner brands.

Having said that, top line growth will remain strong for the remainder of the year, healthy volume trends, positive net price realization and U.S. Ref Bev will be an outsized contributor relative to our MSD net sales growth guide for legacy KDP, and I expect this top line growth momentum will also translate into continued operating income as well. You then referenced SNAP. I would tell you this, we’re seeing healthy trends across our categories. Even with the pricing actions to offset inflation, the volume we’re seeing in CSCs at a category level and broader LRB have been positive this year. And I think this underscores the value that our categories provide to our consumers and what we’re doing around affordable pack sizes and some of the work on price pack architecture and RGM.

The innovation is still ringing true to consumers and providing continued appeal. So the SNAP impacts to date have been manageable and largely consistent with our expectations and our plans. We know and we monitor closely state-by-state, how these waivers roll out, and you’ll expect us to continue to monitor that and adjust in our RGM capabilities to ensure that we deliver on our guide.

Anthony DiSilvestro: On the Coffee phasing question, let me start by saying on a full year basis for 2026, we do expect a modest year-over-year profit decline for U.S. Coffee with the cost pressures continuing to exceed pricing and productivity, particularly in the first half, and you saw it in our first quarter. Our results will also reflect our decision to prioritize investment spending as we set up the business for separation despite the inflationary backdrop. From a phasing perspective, we would expect the Q1 decline will be the most significant for the year as the inflation cost pressures peaked on a year-over-year basis, and you’re seeing the green coffee cost inflation come through the P&L. And as we’ve talked about in the past, it does lag market prices by about 6 to 9 months, given our hedging programs and our inventory cycle.

I would also say in the first quarter, a little bit of extra drag, top and bottom line from some adjustments and reductions in trade inventory levels, particularly in pod. And also, as I said, our higher marketing spend behind initiatives like Keurig Coffee Collective and the Keurig Anthem campaign. This pressure should begin to moderate a bit in Q2, but the larger improvement will be in the back half. Cost inflation will meaningfully ease in the second half and our innovation and commercial [ programming ] will begin to kick in and we should see some top line improvement. And I would end by saying, look, based on current coffee prices, this could be a tailwind for us going into 2027.

Operator: The next question comes from Chris Carey with Wells Fargo.

Christopher Carey: So I wanted to follow up on this line of thinking. Just [ 2 ]. Number one, you stress test confidence a bit more. I look at consensus estimates for coffee margins specifically and see roughly 1,000 basis points of margin improvement into the back half of the year. Certainly, you’re not talking about guiding to segment margins, but there’s clearly some nice improvement in margins if you’re going to see modest profit declines in the full year. There’s also roughly high teens or 20% earnings growth in the back half if you’re delivering high single digits in Q2. So I just wanted to maybe dig in a bit deeper on the cost front. How much visibility do you have in your coffee costs at this point of the year, I assume, high?

And secondly, how much visibility do you have that your stronger consumption trends in coffee will be reflected in stronger shipment trends so as to avoid some of the volume mix deleverage into the back half of the year? And just one quick follow-up as well on U.S. Refreshment. From the Creamy Coconut launch, are you expecting any uplift into Q2? Because I would imagine that would offset some of the drop-off in GHOST.

Timothy Cofer: Okay. Let me start broadly with — talking about U.S. Coffee and how we’re seeing the various puts and takes on the year. And then, Anthony, maybe you can talk more specifically on green coffee cost and how we’re seeing that flow through the P&L on a quarterly basis. I think — our focus in 2026 in U.S. Coffee is to navigate these near-term headwinds while really positioning our business for long-term success. So as we anticipated and as we shared at the guide at the beginning of the year, the first half of the year features headwinds from real peaking cost pressures and some trade inventory adjustments. And so you’ve seen that flow through, impacting both our top and our bottom line performance in the first quarter, but this is tracking right on to our expectations.

Anthony mentioned this a minute ago, we’re also deliberately stepping up our investment behind long-term growth initiatives even as we manage through these higher cost peak inflationary environment in Q1 from a P&L standpoint. So we’ve meaningfully increased our Q1 marketing. Anthony said it earlier, on both pods and brewers and against our fairly robust active innovation slate on both the pod and the brewer side, Keurig coffee collective new brewers and then preparing for Alta. All of this gives us good line of sight to an improving top and bottom line trend as the year progresses. Net sales will improve as our innovation, our marketing, our commercial investment will build through the quarters, and operating income will also benefit from the improving coffee cost envelope, particularly starting in the second half.

Anthony, do you want to talk a little more on coffee cost, green…

Anthony DiSilvestro: Sure. Let me step back a bit. We are guiding — and we have a high degree of confidence to our low double-digit EPS guide. And as Tim mentioned, that’s going to accelerate as we go through the year here for a number of reasons. The most significant one would be green coffee cost, and we have very good visibility to how this will flow through balance of the year, given our current hedging program as well as our inventory cycle. I would add to that, we are mostly hedged on other commodities, including those that have been impacted by the recent conflicts in the Middle East. We are also bringing on board, obviously, JDE Peet’s. And JDE Peet’s profile will follow a one that’s similar to our U.S. Coffee segment, right?

As coffee prices improve, their quarterly performance will improve as well. And also, again, we have good visibility to that. Now as they bring JDE Peet’s into the fold, we will build synergies throughout the year, and that will obviously have a building impact on our performance as we go through the quarters. So sitting here today, good visibility to the rest of the quarters and — which gives us a high level of confidence in our guide.

Timothy Cofer: Yes. And then, Chris, your last question back on Dr Pepper and Creamy Coconut. As you think about Q1 on Dr Pepper, it did reflect a bit of innovation timing shift. So Blackberry a year ago launched early in the year, and we lapped that. So we saw a little bit of pressure there. But as I mentioned in my prepared remarks, our 3 core Dr Pepper lines, regular, zero, and diet Dr Pepper collectively grew share. So overall, I feel great about Pepper momentum, now layer in Creamy Coconut. And we’ve got a lot of confidence. Creamy Coconut is going to be a big success this year. Already in the first few weeks, we’ve seen a ton on social and in-store activity. There’s a lot of excitement building as we roll into summer on Creamy Coconut, and I do think that will be an important contributor year to go for brand Dr Pepper.

On top of that, I would tell you, we still have — we’re going after some unique occasions and consumers. There’s still distribution gaps we can close. Dr Pepper Zero Sugar continues to grow at a double-digit rate and has upside. And we’re layering on our enhanced precision and personalized marketing capabilities. So Dr Pepper will be a great growth standout. We expect another year of share growth and a meaningful contributor to outsized growth in U.S. Refreshment Beverage.

Operator: The next question comes from Michael Lavery with Piper Sandler.

Michael Lavery: You touched on each of the segments and just unpacked how some of the year unfolds. Helpful color. But could you walk us through the JDE Peet’s piece of that and just considerations on what’s left for the rest of the year and how to think about just moving parts and what’s going on there?

Timothy Cofer: Sure. Let me start by saying, overall, we closed the deal April 1. And I think, overall, I’d tell you, what we’ve learned in the last few weeks confirms everything we saw in our planning process and the deal close period. This is a business that has a healthy foundation, strong brands, strong capabilities and a talented team. I’m seeing already the energy and the opportunity behind both their, what they called reignite the amazing strategy, which is in its early stages but has lots of runway, and now the combination benefits of combining legacy Keurig Green Mountain with JDE Peet’s. We’ve announced and we can confirm confidence in the $400 million in synergies as well as some incremental revenue opportunities, in particular here in North America between the Peet’s brands and the Keurig brands.

So feel very good broadly about what we’ve seen since the close. In terms of performance of the business, obviously, we just took ownership of the business, so I’ll speak at a high level on what we’ve seen year-to-date. I would say the trends are consistent with our expectations. Even back to when we announced the deal, obviously, back in ’25, they delivered a solid year, managing through the very unfavorable see price inflation. And we are on track for another good year here in 2026. I would say the phasing of the results will be influenced by commodity cost timing just like we’re seeing in the KDP Coffee business. And the profit will be more constrained in this inflationary first half. We saw that in Q1. We expect that to continue into Q2.

But at the same time, we have good visibility to accelerating trends in the second half as green coffee becomes more favorable.

Operator: The next question comes from Andrea Teixeira with JPMorgan.

Andrea Teixeira: I was hoping to see if you can talk about like as the green cost prices improve, are you planning to roll back some of the pricing you had for [ coffee ] parts to just reignite volumes and improve operating leverage? And just as a clarification, as we decompose U.S. Refreshment Beverages volume mix, in particular because of cost, can you comment on how it behaves on a more organic basis?

Anthony DiSilvestro: Sure. I’ll start on the coffee pricing question. So in coffee, our pricing in 2026 that you’re seeing in the sales bridge is primarily the carryover from 2025 actions that we took to offset inflation. And as we talked about the inflation, it’s persisting in the first and second quarter of this year as we see it come through the P&L. And as we move into the second half, that the current coffee price pullback should ease pressure on our P&L. So we should see a moderating impact of year-over-year pricing as that happens and that moderation come through in the second half, and we lapped some of those prior year increases. Beyond that, it’s probably not appropriate for us to speculate on future pricing actions. We’ll certainly continue to monitor the inflationary environment. We keep an eye on the elasticities. We are mindful of any price gaps and certainly prioritize providing value to our consumers as we consider these longer-term pricing actions.

Timothy Cofer: Good. And then Andrea, you asked a question related to GHOST, and I think I mentioned that in response to Dara’s question. Q1 did benefit from some incremental year-over-year GHOST distribution benefits. And if I had to dimensionalize that, that’s worth a couple of points in terms of that onetime impact as we lap that a couple of points to the US RB growth performance. Now we’ve cycled that kind of onetime benefit. And now we’re just in core KDP DSD growth, which we expect will continue to be outsized, right? There’s still distribution growth opportunities feature and display, cold cooler presence as well as a robust innovation slate for GHOST. So GHOST will continue to be an outsized growth driver, but Q1, in particular, benefited from a couple of months of outsized performance.

Operator: The next question comes from Peter Galbo with Bank of America.

Peter Galbo: Anthony, I wanted to go back to a comment that you made around kind of being hedged on input costs that may be tied to the Middle East, at least for the remainder of this year. I think maybe it would just be helpful to sensitize or help us sensitize some of the exposures to things like aluminum and PET, if we do get a prolonged kind of rally here in resins and aluminum costs that lasts into ’27. So just any additional color you can help us with there as we start to contemplate maybe what the margin implication could be going forward?

Anthony DiSilvestro: Sure, sure. Look, as with many CPG companies, we have both direct and indirect exposure to commodities that have been impacted by the Middle East conflict. And this includes a number of inputs tied to the packaging and energy areas such as aluminum, resins, diesel, that’s in our DSD network, freight costs. And I would say that no single one of those inputs has an outsized impact on our cost structure, but they’re all important. And as we’ve seen the recent inflationary moves, we have a very systematic and comprehensive hedging program, and those hedges and forward cover are in place to help insulate us in the near term from that volatility. For 2026, we are largely hedged and wouldn’t expect to see the recent movement impact our P&L in 2026. But I would say, to the extent those higher prices sustain, we would develop mitigating action plans that we would execute longer term to protect our margins.

Operator: The next question comes from Robert Moskow with TD Cowen.

Robert Moskow: You may have mentioned it before, but you said in your prepared remarks that after the split, you’ll have optionality for value-enhancing capital actions. I want to know if you could give any more color on what those actions might entail? And would they have anything to do with the convertible you have and the minority investments?

Timothy Cofer: Yes. I’ll take that. And I did make that comment as it relates BevCo. I think specifically, obviously, both companies on the other side of this separation will have the independent optionality to make the best choices for their business and their shareholders. As I think about BevCo, let me start by saying that I love this portfolio, the leadership positions we have across the LRB categories, the advantaged capabilities that we’ve built and really this very entrepreneurial challenger culture that runs through our company. And I’m confident that with these set of characteristics and advantages, we can deliver consistent top-tier results and we can create a lot of value. As an independent company, we — I do believe we’ll have some additional strategic optionality that perhaps was less actionable under a combined KDP umbrella.

And what could those look like? I mean one is around route to market. I’m a big believer in the power of DSD. It’s a source of competitive advantage. And I do think today, it is optimal for us to own DSD in most markets. We take a very local decision case by case and we let the scale and the economics and what’s best for our brands dictate that ultimate route to market. But as a stand-alone, BevCo will be incentivized to continue to test the optimal model as it relates route to market. And I think as a stand-alone company, we’ve got that optionality. The other area is just around portfolio and continuing to future-proof this portfolio, ensure this portfolio is structurally advantaged, pursuing white space expansion has always been a priority for KDP.

And I think BevCo will be even more agile and even more proactive in this area. We can consider earlier-stage partnerships, new geographies, more creative structures. So overall, we’ve got a lot of conviction in the future of BevCo and our ability to drive healthy top and bottom line growth in our current portfolio and with enhanced optionality.

Operator: Next question comes from Kaumil Gajrawala with Jefferies.

Kaumil Gajrawala: I guess one quick just clarification on the guidance for Q2. Is that total company guidance? Or is it, I guess, legacy KDP? And then sort of drafting off of Robert’s question on the portfolio. Maybe just to add to that, what Anthony had mentioned on the potential sale of noncore assets, what types of things would that be? And is the intention just to maybe have a tighter portfolio there? And — or is it more in the spirit of bringing down leverage?

Anthony DiSilvestro: Yes, in answer to your first question, the high single digit is total company outlook for the second quarter. In terms of your other question, just stepping back a little bit, we are very focused on committed to investment-grade ratings, not only for KDP, but for the 2 future companies. And our ability to deleverage is primarily driven by our ability to generate significant free cash flow. And you heard it in our prepared remarks, we are expecting $2.5 billion of free cash flow, which includes 9 months of JDE Peet’s and all the related costs of the debt financing. We also said that free cash flow obviously will support our dividend and enable us to deleverage by about [ a half a turn ] per year. And that will get us to our stated leverage target that separation, which is 3.5 to 4x for BevCo, [ 3.75 to 4.25 ] for Global Coffee Co., but we also said we’ll look for additional opportunities to accelerate deleveraging.

Not appropriate to getting any specific details, but there are a number of things that we’re looking at across non-core assets and minority investments to help us along.

Operator: The last question today comes from Filippo Falorni with Citi.

Filippo Falorni: I wanted to ask on your energy drink portfolio. We continue to see very solid growth for both GHOST and Bloom in track channel data. Can you comment a bit on the shelf space gains that you’re realizing in the spring resets? Like how much room do you see in terms of further distribution for both brands? And then on the other side, C4 has been a little bit softer. Do you see any cannibalization from GHOST? Or what are the plans to reaccelerate that brand?

Timothy Cofer: Sure. Thanks, Filippo. You’ve heard me say this many times, big believer in energy as a category. It’s 29 billion. It’s growing mid-teens. And there are structural growth drivers in place that suggests this is a category that continues to have a long runway for growth. I think there’s distribution expansion, particularly when you think about channels outside of C-store. There’s household penetration upside. There’s occasions to go after. There’s cohorts, obviously, female forward brands are experiencing tremendous growth right now, and we have one of those in our portfolio in Bloom. So it’s a great category, strong growth, and we see continued runway. We like the approach we’ve taken. We’ve taken a portfolio approach.

We have 4 brands of scale that we go to market with. GHOST, a great lifestyle brand; C4 in performance; Bloom, female forward; and Black Rifle in mainstream, and feel good about that position. And you saw continued market share growth here in the first quarter, and we expect that to continue on the year. Our portfolio is well over $1 billion now, and we see continued upside. As it relates to your other 2 kind of sub-questions on — one on shelf space and one on C4. On shelf space, we had a successful sell-in cycle for our energy portfolio this year. And we are beginning to see and would expect on the year meaningful distribution gains, incremental PDPs or total distribution points, including in the critical convenience retail channel expanded space as well in kind of up and down the street.

And you’re seeing that particularly with GHOST and with Bloom. On C4, we feel great about our partnership with Nutrabolt, and what we’re building together on C4, we’ve created a lot of value for both parties. Since we first took distribution back in 2023, C4 has more than doubled its retail sales, added more than 1 point of market share. And as it relates near in performance, it is fair to say we made some decisions together with our Nutrabolt partners to rationalize some elements of the portfolio. So there was a smart subline that we’re no longer distributing through DSP, and the ultimate line has been repositioned for even stronger performance, and that’s in the high stimulation 300 mg type of caffeine segment. So when you adjust for those factors, we feel good about the underlying trends and kind of the core yellow can performance line, excited about the innovation that we’re bringing to market with our Nutrabolt partners and confident in C4’s long runway ahead to drive brand momentum.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Chethan Mallela for any closing remarks.

Chethan Mallela: Thanks, Betsy, and thanks, everyone, for joining us today and for your interest in KDP. The IR team is available if you have any follow-ups. Thanks so much, and have a great day.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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KEURIG DR PEPPER INC

Q1 2026

Earnings Transcript

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