01—Abstract
Summary
Summary of the 10-Q filed October 24, 2024. Cited figures are marked; the original filing is the authoritative source.
Keurig Dr Pepper Inc. reported third-quarter 2024 net sales of $3,891 milliona, up $86 million, or 2.3%, from $3,805 million a year earlier.
Income from operations rose $6 millionb, or 0.7%, to $902 million, and net income increased $98 million, or 18.9%, to $616 million, primarily driven by lower interest expense ($106 million versus $237 million). Diluted EPS was $0.45 compared with $0.37. For the first nine months of 2024, net sales were $11,281 million (up 3.1%), net income was $1,585 million, and net cash provided by operating activities was $1,370 million versus $1,032 million in the prior-year period.
Balance sheet and capital return activity were significant during the period. The company issued $3,000 millionc of senior unsecured notes in March 2024 and repaid $1,150 million of Notes, while repurchasing $1,105 million of common stock and paying $883 million in cash dividends in the first nine months. Total long-term obligations and short-term borrowings were $14,885 million at September 30, 2024, and $1,810 million remained available under the share repurchase authorization.
The company also completed the Kalil Acquisition in August 2024 for total consideration of $103 milliond and raised its annualized dividend rate 7.0% to $0.92 per share. After quarter end, on October 23, 2024, KDP agreed to acquire a 60% controlling interest in GHOST Lifestyle LLC for aggregate consideration of $990 million, with the remaining 40% to be acquired in 2028. The filing also discloses a pending antitrust litigation in which plaintiffs claim more than $5 billion in damages; the company has not accrued a loss contingency and states it cannot predict the outcome.
02—Key points
Key Highlights
- Third-quarter net sales rose 2.3% to $3,891 million, with U.S. Refreshment Beverages up 5.3% to $2,390 million and U.S. Coffee down 3.6% to $976 million.
- Third-quarter net income increased 18.9% to $616 million and diluted EPS rose to $0.45 from $0.37, driven primarily by a reduction in interest expense to $106 million from $237 million.
- Nine-month operating cash flow was $1,370 million, up from $1,032 million, with the company citing a favorable working capital comparison.
- KDP issued $3,000 million of senior unsecured notes in March 2024 and repurchased $1,105 million of common stock in the first nine months of 2024.
- Completed the Kalil Acquisition in August 2024 for $103 million, adding bottling and distribution rights in Arizona to key brands.
- Entered into a definitive agreement on October 23, 2024 to acquire a 60% stake in GHOST for $990 million, with the remaining 40% to be acquired in 2028.
- Keurig antitrust litigation in the Multidistrict Antitrust Litigation seeks more than $5 billion in damages; no loss accrual has been recorded.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Keurig Dr Pepper kept $0.16.
- Revenue$3.89B100.0%
- Cost of revenue−$1.75B45.0%
- Gross profit$2.14B55.0%
- Operating costs−$1.24B31.8%
- Operating income$902.0M23.2%
- Interest, other & tax−$286.0M7.4%
- Net income$616.0M15.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 24, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $3.89B$3.81B | +2.3% |
| Cost of Revenue | $1.75B$1.69B | +3.4% |
| Gross Profit | $2.14B$2.11B | +1.4% |
| SG&A Expenses | $1.25B$1.22B | +2.3% |
| Operating Income | $902.00M$896.00M | +0.7% |
| Net Income | $616.00M$518.00M | +18.9% |
| EPS (Basic) | $0.45$0.37 | +21.6% |
| EPS (Diluted) | $0.45$0.37 | +21.6% |
| Shares Outstanding (Basic) | 1.36B1.40B | −2.9% |
| Shares Outstanding (Diluted) | 1.36B1.41B | −3.2% |
05—Questions
Frequently Asked Questions
How did Keurig Dr Pepper perform in the third quarter of 2024?
Net sales increased 2.3% to $3,891 million and income from operations increased 0.7% to $902 million. Net income rose 18.9% to $616 million, mainly because interest expense fell to $106 million from $237 million. Gross margin was 55.0% compared with 55.5% a year earlier.
Which segments drove the results?
U.S. Refreshment Beverages net sales rose 5.3% to $2,390 million and its income from operations increased 6.8% to $722 million. U.S. Coffee net sales declined 3.6% to $976 million, with income from operations down 13.3% to $254 million, reflecting unfavorable net price realization of 6.3%. International net sales were $525 million, up 0.4%.
How is the company managing its debt and shareholder returns?
In March 2024 KDP issued $3,000 million of notes and repaid $1,150 million of 2024 Notes and commercial paper. Total Notes principal was $13,093 million at September 30, 2024. The company repurchased $1,105 million of common stock in the first nine months and declared dividends of $0.66 per share, with $1,810 million left under its share repurchase authorization.
What is the GHOST transaction?
On October 23, 2024, KDP agreed to acquire a 60% stake in GHOST Lifestyle LLC for aggregate consideration of $990 million, subject to customary closing conditions. The remaining 40% stake must be sold to KDP in 2028 under a subsequent agreement. GHOST is described as a lifestyle sports nutrition business anchored by GHOST Energy.
What legal and restructuring risks does the filing disclose?
KDP's subsidiary Keurig faces Multidistrict Antitrust Litigation in which plaintiffs claim more than $5 billion in damages, and the company says it cannot predict the outcome and has not accrued a loss contingency. Separately, the 2024 Network Optimization program has expected pre-tax restructuring charges of $125 million to $145 million through the second quarter of 2025, and the company paid a $1.5 million civil penalty to settle an SEC matter concerning K-Cup pod recyclability claims.
06—Continue