Thank you, and hello, everyone. Earlier this morning, we issued a press release detailing our second quarter results. Consistent with previous quarters, we will be discussing our performance on an adjusted basis, which reflects constant currency growth rates and excludes items affecting comparability. The company believes that the adjusted basis provides investors with additional insight into our business and operating performance trends. While the exclusion of items affecting comparability and the use of constant currency growth rates are not in accordance with GAAP, we believe that the adjusted basis provides meaningful comparisons and an appropriate basis for discussion of our performance. Details of the excluded items are provided in the reconciliation tables included in our press release and our 10-Q, which will be filed later today. Due to the inability to predict the amount and timing of certain impacts outside of the company's control, we do not reconcile our guidance. We will also speak about the concept of underlying performance, which removes the impact of non-operational items in the current and prior years. These items include gains on asset sale leaseback transactions, reimbursement of litigation expenses related to the successful resolution of our BODYARMOR lawsuit, a business interruption insurance recovery, and a change in accounting policy for stock compensation. Finally, our discussion this morning may include forward-looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC. Here with us today to discuss our results are KDP Chairman and CEO, Bob Gamgort; Chief Financial Officer, Sudhanshu Priyadarshi; and our Chief Corporate Affairs Officer, Maria Sceppaguercio. I'll now turn it over to Bob.

Thanks, Jane, and good morning, everyone. KDP’s second quarter once again demonstrated our portfolio’s resilience and ability to consistently deliver on our total company commitments. Our solid performance was driven by strength in U.S. refreshment beverages, encouraging developments in U.S. coffee, and continued momentum in international. Consolidated Q2 results were healthy with strong revenue momentum and sequentially accelerating operating income and EPS growth. Net sales advanced more than 6% supported by net price realization, modest category elasticities, and good share performance across much of our portfolio. For the first time since Q3 2021, reported gross margins expanded as an improving balance between pricing, inflation, and productivity began to emerge. Gross profit dollar growth funded marketing increases across all segments and helped to offset continued cost pressures in transportation, warehousing, and labor. As we forecasted, we're in the early stages of a margin recovery that we expect to become more visible in the back half. Looking ahead to the balance of the year, we are raising our 2023 net sales growth outlook to 5% to 6%, while our full-year EPS outlook is optically unchanged; it in fact represents greater than originally anticipated underlying rule with an enhanced composition to our earnings profile. As Sudhanshu will discuss in more detail, we now expect minimal non-operational items in 2023, setting KDP up for a strong and sustainable earnings base from which to grow in 2024 and beyond. U.S. refreshment beverages’ performance in Q2 was outstanding—double-digit revenue growth and strong operating margin expansion. Similar to last quarter, category growth and our own momentum remained price inelastic. Limited volume elasticities across the portfolio. Though demand is resilient, we are mindful of the various pressures facing our consumers, and are proactively meeting our needs through product and package innovation, along with strong in-market execution. These elements come together, we see market share gains. In Q2, these were most notable across our CSDs, sparkling water, coconut water, and juice portfolios. Even as price realization begins to moderate in the back half, we remain confident in our ability to drive attractive organic growth by creating value among three key dimensions. First, by driving growth in core brands through marketing and brand renovation. Second, by filling portfolio white spaces via innovation and external partnerships; and third, by enhancing the effectiveness of our omni-channel selling and distribution system. We delivered on each of these dimensions in Q2. Focusing first on our core brands. For the second consecutive quarter, Dr. Pepper was the largest share gainer in the CSD category, bolstered by the success of Strawberries & Cream, and the continued strong momentum of Dr. Pepper Zero Sugar, which was once again among the top two food and beverage products in IRI Circana’s New Product Pacesetter Innovation Ranking. Keurig also continues to outperform driven by its multicultural appeal and unsweetened sparkling waters; our partnership with Polar has now boosted the brand to the #2 volume share position nationally. We also brought significant excitement to our C4 category, driving innovation and gaining share. When it comes to the partnerships, our C4 distribution transition is proceeding well. 2023 is a year of transition and investment, and though it is still early days in our distribution rollout, we are driving gains across multiple metrics and remain confident in the growth potential of C4. KDP distributed geographies, total points of distribution increased nearly 60% versus the prior year, and weighted weeks on display across large format food outlets are up nearly 50% relative to the beginning of 2023. These gains translated into continued velocity and share momentum for C4, and accelerated the brand's already strong revenue growth even further. Clearly, our partnership approach continues to create win-win outcomes, making this model increasingly attractive to other high-potential companies including La Colombe, which I'll speak more about shortly. The effectiveness of our selling and distribution engine underpins our success across all the examples I cited. One would acknowledge the hard work our teams have done to drive improvement across the system where it shows signs of strain during the pandemic. Customer service levels have now significantly improved relative to where we were during the COVID period, and in some cases exceed pre-pandemic comparisons. But our work here is never complete. These strides are leading to even tighter in-store and on-shelf execution as our market share momentum demonstrates. Turning now to US Coffee, as we exit Q2, we saw several encouraging developments that are expected to benefit segment performance over the coming quarters. On our last earnings call, I identified three key tenets underpinning our expectations in this segment. First, at-home coffee category momentum would begin to recover in the back half, as mobility comparisons ease. Second, that we would add approximately two million new households to Keurig’s ecosystem in 2023, aided by BrewID and Pod innovation and the addition of new brands. And third, that segment operating margins would improve meaningfully in the back half supported by a better balance between pricing, inflation, and productivity. We had even more visibility to these elements playing out today with Q2 marking an expected trough in both top-line growth and margins. Let's address each point in turn. First, as anticipated, at-home coffee category momentum began to improve toward the end of the second quarter. This continued to do so in July. A lot of time our consumers are spending at home this year versus last is continuing to normalize. Since we believe time spent at home is the single largest variable driving at-home coffee consumption, it follows that volume trends are recovering too. We are observing this across broader at-home coffee, within which single-serve continues to gain share. Category recovery is very clear when looking at publicly syndicated data. In Q1, Keurig compatible Pod volumes, a good proxy for the total single-serve category, declined nearly 4% across measured channels. In Q2, these declines moderated to less than 2%, with improvement particularly notable towards the end of the quarter. For the last four weeks, category volumes are flat to up slightly. Notably, category and KDP volume performance has been even stronger in non-track channels such as e-commerce and unmeasured club. Category trend is a positive leading indicator for our business, and we would expect sequential improvement in net sales growth in the back half. That said, we are prepared for our volume growth to lag the single-serve category in the shorter term as we focus on optimizing profitability. Pricing across all sub-segments of our K-Cup portfolio is now more fully flowing through our financials, including from our partner brands, consistent with our previous expectation that pricing would catch up to inflation, but it did have a delay. We also exited some of our lowest margin private-label contracts. Both of these elements are now filtering through our results and the syndicated data. Longer term, our growth in U.S. coffee will remain underpinned by driving incremental household penetration for the Keurig system and increasing revenues from our existing 38 million active households, which brings me to the second tenet of our coffee outlook—driving incremental household penetration. In Q2, we furthered this growth strategy by elevating our presence in cold coffee, which is an important trend among younger consumers. This spring, we nationally expanded the K-Iced Brewer platform, with specially formulated Ice K-Cup pods. Strong marketing and activation activities across all media and digital channels, including a special limited edition Rolling Stone’s K-Iced brewer that sold out in less than 24 hours. These innovations are off to a very strong start, with the K-Iced Brewer family performing extremely well and our ice pods proving highly incremental to our base business. Just last week, we announced a strategic partnership with La Colombe, a super premium and award-winning coffee brand with wide appeal and untapped potential. This partnership includes an equity investment, a sales and distribution agreement for RTD Coffee, and a K-Cup pod licensing agreement. It is a compelling example of our ability to add value to a single partner across both hot and cold beverages, which KDP is uniquely positioned to deliver. Our collaboration with La Colombe will encompass several exciting strategic avenues. We will leverage our sales and distribution capabilities to scale La Colombe across major retail classes of trade. Along with the Pete's brand, we're creating a ready-to-drink coffee platform that will enable us to better serve the needs of our consumers and retail customers in this important category. We will also work closely with La Colombe to formulate and introduce the brand into the Keurig ecosystem in a K-Cup format. Here too, we are building a super premium platform as La Colombe joins several recently added brands like Intelligentsia, BLK & Bold, and Philz. Additionally, La Colombe's vertically integrated model and specialized manufacturing knowledge are other differentiated elements that could enhance our collaboration over time. In short, this partnership has strong value creation potential that when unlocked will benefit both KDP and La Colombe as our joint ownership model. Now moving to the third element of our coffee outlook: We continue to expect segment margins for the U.S. coffee segment to meaningfully improve both sequentially and year-over-year in Q3 and Q4. Multiple factors led the segment margin contraction over the last few years, and several elements including sequential favorability in pricing, commodity costs, and productivity are now starting to come together to facilitate a margin rebuild. Pricing to offset cumulative inflation across our K-Cup portfolio—including for partner and private-label brands—will now more fully flow through starting in Q3. Commodity cost pressures, including on green coffee and packaging, are also projected to ease. Efficiency benefits should ramp up throughout the year as we have redoubled our productivity efforts following a period focused on mitigating supply chain disruptions. We will work to further enhance these elements going forward, with the expected back half margin inflection as an important marker for future profit growth. Our International segment continues to perform well, even as it begins to lapse double-digit growth in the year-ago period. In Q2, Canadian volume momentum was fueled by non-alcoholic and low-alcohol beverages, where we have multiple brands like Atypique and Labatt's gaining share. This is an exciting set of emerging categories where we plan to leverage our learnings across markets. Execution also remains strong in our Canadian coffee business, where KDP manufactured Pods grew consumption dollars and gained market share during the period. In Mexico, our DSD network continues to strengthen, which is supporting broad-based share momentum across our LRB portfolio and the ongoing rollout of our partnership with Red Bull. Across the portfolio, PEN UCL and its aide extensions into flavored sparkling waters, as well as our CSD brands, continue to perform very well. Wrapping up, our consolidated Q2 results are yet another illustration of our modern beverage company working to deliver strong, consistent, and predictable company performance. We continue to develop our business for the long term through investments in innovation, partnerships, and capabilities while demonstrating our ability to work through shorter-term normalization in coffee. We also continue to deploy our cash to create value for shareholders. It’s all this via the equity investment in La Colombe and through the opportunistic repurchase of KDP’s shares, which continued through Q2 as our share price remains dislocated. We are raising our 2023 outlook for constant currency net sales growth to 5% to 6% and reaffirming our guidance for adjusted EPS growth of 6% to 7% with an improving composition of our earnings profile. We now expect only minimal non-operational benefits within the frameworks of this guidance, implying double-digit adjusted EPS growth on an underlying basis. I'll now turn it over to Sudhanshu to discuss Q2 results and our balance of year outlook in greater detail.

Thanks, Bob, and good morning, everyone. We are pleased with our concentrated quarter two results which represented another quarter of strong sales growth with reported gross margin expansion both sequentially and year-over-year and significant reinvestment in marketing. Reported sales advanced 6.6% to $3.8 billion with 6.1% organic growth, reflecting strong pricing and a modest decline in volume mix. Consolidated top-line momentum was driven by U.S. refreshment beverages and international segments, partially offset by a trough quarter in U.S. coffee, which we anticipated. Reported gross margin expanded slightly year-over-year to 54.8% as we made progress in offsetting ongoing inflationary pressures. This is an important change in trend after nearly two years. Even with continued cost pressures across transportation, warehousing, and labor, we reinvested significantly in marketing, with increases across each segment. As a result, total SG&A as a percentage of sales deleveraged 40 basis points year-over-year. Adjusted operating income grew 4.4%, and additional below-the-line leverage helped drive adjusted EPS of $0.42, 7.7% above prior year. We continued to deploy our cash in accordance with our evolved capital allocation priorities. Over the past four quarters, we have opportunistically repurchased nearly 22 million KDP shares, including 7 million shares in quarter two in recognition of a significant long-term opportunity in our stock. Combined with our quarterly dividend, we have returned approximately $1.9 billion of cash to shareholders over this timeframe. In addition, since the merger, we have evolved our ownership structure to that of the modern beverage company we are today, increasing KDP’s public float from 13% in 2018 to 73% today. This includes the exit of Mondelēz, which earlier this month completed its final sale of the long-term strategic equity stake it took as part of the KGM Tech private in 2016. During the quarter, we continued to persistently invest in promising partnership and M&A opportunities, namely the $300 million investment we made in La Colombe announced last week. KDP’s successful track record in scaling beverage brands and strengthening our leadership positions across our key categories make us a sought-after partner for high-potential companies and brand owners. We remain discerning and disciplined at all such opportunities, seeking out only those that have compelling strategic merit, create win-win outcomes for both parties, and provide significant value creation potential. Turning now to segment performance. U.S. refreshment beverages' sales grew an impressive 11.8%, led by 12 percentage points from pricing with virtually no volume mix impact. This resilient volume mix performance continues to reflect the strength of our portfolio, ongoing market share gains, manageable category elasticities in the face of significant pricing, and the contribution from C4 energy. Segment operating income increased 18.1%, and segment margins expanded 150 basis points as pricing and productivity benefits more than offset commodity, manufacturing, and labor inflation and an increase in marketing investments. In U.S. coffee, sales declined by 0.7%, with positive pricing more than offset by anticipated volume decline, which I will further explain now. Focusing first on the consumable parts business, as Bob indicated, we are encouraged by the improving consumption volume trends in the single-serve category exiting the first half. We see this category trend as the leading indicator for the direction of our business. Further, in quarter two, our reported pod shipment declines had yet to reflect any improvement due to three primary factors. First, category volume recovery began later in the period and therefore had a limited impact on quarterly results. Second, we lapped a period last year when we were replenishing retailer and partner inventories after supply disruptions, creating a difficult shipment comparison. And third, our consumption and shipment volume were impacted by our decision to exit some low-value private-label contracts. We expect some lingering impact to our shipment volume from factors two and three as we move into quarter three. Even so, revenue trends are projected to sequentially strengthen driven by positive pricing and moderating volume declines. On a trailing 12-month basis, brewer shipments declined 11% year-over-year. For perspective, our brewer volume is still 18% higher than the comparable 12-month period ending quarter two 2019, which represents a clean pre-pandemic comparison. The point here is that, despite all the volatility of the last several years, the surging demand during the height of COVID, and the later stages of normalization we are working through, demand for the Keurig ecosystem is greater today than it was four years ago among both consumers and retail partners. Our Q2 brewer shipment declined 10.9%, a sequential improvement relative to quarter one, and were impacted by the same factors we discussed last quarter. With improved discretionary spending for smaller appliances, including brewers, which saw mid-single-digit consumption declines, and additional, albeit moderating, pressures from trade inventory rebalancing. After two quarters of inventory adjustments, we believe these are largely behind us looking out to the back half. Importantly, Keurig branded brewers gained share of all coffee makers sold in quarter two, with our recently launched KI brewers seeing good traction in the market. We will further support these new brewers and highly incremental ice bars in the back half as we continue to expand our cold coffee platform and offerings. U.S coffee operating income contracted 14.6%; segment margins were similar to quarter one levels but 310 basis points lower year-over-year. Versus the prior year, this performance reflected a continued unfavorable relationship between pricing and inflation, as well as a significant investment in higher marketing to support our ice innovation launches. Looking to the back half of the year in U.S. coffee, we forecast a gradual recovery in revenue growth, coupled with significantly improved margins. This combination underpins our outlook for a strong rebound in segment operating income with positive growth in quarter three to be followed by very attractive gains in quarter four. Our international segment performance in quarter two remains strong even as we lapped tougher year-ago comparisons. Net sales increased 10.9% on a reported basis with constant currency growth up 7%. Net price realization contributed 6.1% and volume mix was up 0.9% year-over-year. Segment operating income grew 11.5% on a reported basis and 7.7% in constant currency, reflecting the benefit of the growth in net sales and increased productivity, partially offset by inflationary pressures and a significant increase in marketing investment. Turning briefly to cash flow. Free cash flow totaled almost $300 million in the second quarter. As we enter the seasonally more cash-generative back half, we would expect our absolute levels of free cash flow, as well as free cash conversion, to meaningfully improve from here. This brings me to our consolidated outlook for 2023, which we updated in our press release this morning. Our outlook for constant currency net sales growth is now higher at 5% to 6%, and we continue to expect adjusted EPS to grow 6% to 7%. While our EPS outlook is unchanged on the surface, the expected profile of our earnings is now further improved relative to our guidance earlier this year. Specifically, you'll recall that 2022 benefited from several non-operational items, and at the start of this year we expected to reduce the use of these items by approximately 50% in 2023. I am pleased to share that our EPS forecast now includes only minimal such benefits. As a result, on an underlying basis, our EPS growth is now projected to be in the double digits versus our prior expectations for a high-single-digit gain. This very strong underlying performance demonstrates the earnings power inherent in KDP’s model. It is also effectively an increase to our 2023 growth outlook and will preclude any further upside to EPS expectations for this year while setting us up for a strong and sustainable base from which KDP can grow earnings in 2024. Our full-year guidance includes the following expectations for below-the-line items: interest expense in the $470 million to $475 million range; equity method earnings from Nutrabolt of approximately $40 million to $45 million; an effective tax rate of 22% for the year; and approximately $1.4 billion diluted, which is average shares outstanding. We have covered a lot of ground today. So I would just finish by remarking on the projected cadence of earnings for the balance of the year. Given the evolution of pricing, inflation, and productivity, along with the timing of planned reinvestments over the back half, we expect only modest EPS growth in quarter three, followed by very strong results in quarter four. With the good first half in the books and the enhanced visibility to the balance of the year, we are confident in our robust finish to 2023. With that, I'll now turn the call back to Bob for closing comments.

Thanks, Sudhanshu. If you haven't done so already, I encourage all of you to read our 2020 corporate responsibility report, which was published last month. Highlighted within its pages is the significant work KDP is doing to further our sustainability agenda. We're very proud of our progress across multiple focus areas, including renewable energy, water stewardship, and diversity and inclusion. To close, Q2 was a very good quarter for KDP across multiple dimensions. Performance in U.S. refreshment beverages was once again exceptional, and international posted another great quarter. US coffee is approaching an important inflection with improved visibility to a significant margin recovery, which we expect to lead to strong operating income growth as we close out this transitional year for the segment. On a consolidated basis, our efforts to offset inflation are increasingly evident in gross margin stability, and marketing reinvestment across all segments. And as we discussed today, full year guidance implies double-digit underlying EPS growth, with an even stronger top-line outlook. These are all key elements to set us up for ongoing momentum in the back half and ultimately into next year. I will now turn the call over to the operator for questions.

Our first question will come from Chris Carey with Wells Fargo Securities. You may now go ahead.

Hi, good morning, everyone.

Hi, Chris.

So, clearly, all results on a total company level, but at the same time so much of the debate has been around coffee. And I think there's been a bit of a misunderstanding that the underlying assumption of the category has actually been improving through the year. And I think what I hear today is that that improvement has continued to accelerate through the quarter and into the quarter-to-date. And so, I just have a couple of specific questions around that. So first, why do you think that underlying improvement has been occurring? And really I'm trying to get to the context of sustainability. Is it as simple as the away-from-home channel was recovering in the front half of the year, now the at-home channel has normalized as well? Secondly, it sounds like you expect to remain below consumption in coffee into the second half of the year. Is that a Pod and Brewer comment? And just given the tough comps and you're making some changes to the portfolio, would you expect that dynamic to carry into 2024? Or is this predominantly in Q3, or Q4, and then you've normalized from there? Thanks for any perspective on just underlying durability of this improvement. We've seen in the at-home coffee channel and also this dynamic of shifting to consumption and when you think you can start to close that gap over the next two to four quarters? Thanks so much.

Okay, Chris. Let me start at a very high level with the total category, because I think that is most important. We've clearly weathered a storm over the past year or so that's impacted our category and our profitability within the negative impacts focused on at-home coffee. We saw this category decline in all forms globally. And to answer your question, we have seen that as primarily driven by mobility changes. This is the post-COVID recovery mobility impact. That's largely played out. I think, by the end of the third quarter for sure that will be resolved. We also had some issues in terms of supply chain recovery coming out of COVID, where it was a service-at-all-cost mindset, and we were also not focused on productivity and, of course, inflation. And that was combined with the lag in our pricing realization. When you combine those challenges, that's quite a list affecting our coffee business over the past year. If you look at our current setup, it’s much more constructive. We're seeing a rebound in the category, and that's largely driven by normalized mobility. To your specific question about away-from-home versus at-home, that hasn't changed that much, right? If you look at office occupancy, it's pretty stable; it’s improving very, very gradually. Over time, if that improves, then we'll get the benefits from that in our away-from-home coffee business. But that's not something that we're banking on. It's really been an at-home coffee consumption story driven by changes in mobility. What we're seeing is a rebound in category. As we discussed in our prepared remarks, we're seeing that pricing we talked about that lagged now flowing through the P&L, and we're also seeing a moderation in inflation; the combination of these factors is very constructive going forward. And one thing I would point out is that single-serve coffee has gained share of all forms of coffee over this time period. In terms of our shipments below consumption, the best way to evaluate us over the long term is to note that our shipments generally approximate category consumption over time. We focus on category growth. We have about an 80% share of all Pods that go through the system. Mix can change over time, but again, we're focused on category growth. I think you should view the category rebound as consistent with our long-term shifts and trends. But in the short term, we do expect volume recovery to lag the single-serve category temporarily, as we concentrate on optimizing profitability. Pricing across all these segments is now more comprehensively flowing through our financials. We've also exited several low-margin private-label contracts. I believe these decisions are correct and necessary to prioritize margin recovery in a recovering category, and this is why some separation occurs between consumption and shipments in the short term. There’s no reason to think that's the case over the long term, and indeed I would point you towards category consumption as the long-term indicator.

Our next question will come from Bryan Spillane with Bank of America. You may now go ahead.

Thank you. Thanks, operator. Good morning, everyone. So, just two quick ones for me. Sudhanshu, just the flip of non-operational gains now not contributing as much—that's obviously good news. Is that a change in just the way you're going to treat them, one, backing them out versus including those? Have things changed? So, some of these financial moves like sale-leaseback are just not as attractive anymore? And then the second one for you, Bob, is just the 2 million household penetration or new household penetration in coffee brewers still a possibility this year? Or might that be a little bit below that given the current environment?

So, Bob, let me take the first one. So, Bryan, no, as we have said at the beginning of the year, KDP is focused on delivering best-in-class CPG activity performance. This also includes enhancing the composition of our earning profile. Last year, we had a lot of non-operating items when we started the year with our targeted 50% reduction, but as you can see from our first half performance, our underlying business performance is strong. We are also seeing margin recovery in coffee in the second half. So we have enhanced visibility. Thus, we believe that now we will have a minimal non-operating impact, and we will deliver better underlying operating performance this year. This will also help us in 2024 because we will not have this roughly 50% of headwinds from last year, which was roughly $150 million or $160 million. We had half of that this year. We don't expect that to continue, and that will help us in 2024 and beyond. So, there is no change; it's just our strong operating performance that we planned all along.

Bryan, on the two million households, yes, it's still our target for 2023. As we discussed many times, brewer sales are an excellent predictor of household penetration. So, the two million is still where we're trending. The one thing I would point out is, as you know, we are heavily fourth-quarter loaded. Holiday season gifting has performed well for us even in a difficult economic environment, as people tend to opt for more functional gifts during that time period. Our innovation pipeline, the promotions, and retailer support that we’re getting for the fourth quarter are all great, so we still have a lot of game left in that part of the year.

Our next question will come from Dara Mohsenian with Morgan Stanley. You may now go ahead.

Hey, good morning.

Hey, Dara.

So, on the coffee side, you were very clear and comprehensive in your remarks on the second half improvement and what drives the improvement versus the first half. But in theory, it's a pretty big dichotomy. So, I guess it just would be helpful to hear how much visibility you think you have at this point in coffee, particularly relative to some of the first half disappointments. Maybe rank order some of the factors you mentioned in terms of driving that sequential improvement? But also just in longer-term, broader context for the volatility we're seeing this year and what you think it sort of means for future growth prospects as we look out longer term? And then be, I'm sure coffee will get a lot of the airtime as usual, but we probably would be remiss if we didn't touch on the US refreshment and international strength in the first half of the year. How sustainable do you think are the factors there that have driven the strength as you consider go-forward trends from here? Thanks.

Okay. I'll take both of these. I think it's always helpful, and I feel like I’d remind everybody that's on many of our calls, but I do think it's helpful to step back and look at the coffee category over the longer term that gives you the best context. It is always short-term volatility, particularly in the COVID and post-COVID world. But if you go back, and it's in our press release, if you go back and look from pre-COVID, from 2019 to our latest period, the CAGR on Pods is mid-single digits, and CAGR on brewers is also about mid-single digits. So there's a lot of bumpiness, and it's been tough for all of you to navigate through the pluses and minuses over the past couple of years. This context is always helpful and it serves as a reminder that this is a growing category driven by generation Z consumers shifting from brewing in pots to brewing by the cup. We are central to that transformation. Our partners benefit from that. Our retailers benefit from that, so does Keurig because we participate in 80% of those transactions, and that’s the most significant takeaway regarding the quarterly results on the business. In terms of visibility for the back half of the year, it’s a good question. The area that has been most challenging for us over the past couple of years is predicting consumer mobility. It’s not a factor we thought we could anticipate prior to COVID. Aligning consumer mobility against at-home coffee consumption has required a steep learning curve on our part. Also, being able to forecast it has proved difficult given how even economists struggle with that. However, I believe that unpredictability is largely behind us, which is the most crucial takeaway. We should see normalization in category growth as consumer behavior stabilizes. The area where we still have the most visibility is around margins. I know that's been another pressure point on the business we explained previously. As we look forward, we understand coffee pricing in advance. We understand what our pricing will be. We also know the agreements we had with our partners and private-label partners which allows us to recover inflation, but it had a lag effect. There's only so much we can discuss before showing proof. We're now seeing that proof flow through, and we have great visibility into it for the back half of the year. Our assumptions for the back half continue to show a gradual recovery in the category overall. We are still gaining share on total at-home coffee and single-serve, along with an improvement in margins, which is driven by pricing adjustment, moderation in inflation, and our ability to focus on productivity now that our supply chain is in pretty good condition across the board. Our customer service in coffee has been excellent. To summarize the refreshment beverages: It’s a fantastic story that I’m glad you raised because we do not take it for granted nor should anyone else. What has been working for us points to three factors. We’ve been gaining share in a growing category, and I don't make light of that because each of these elements is essential. It's driven by marketing, innovation, and, importantly, outstanding retail execution. Gaining share in a growing category is always positive. Our pricing and productivity are catching up to inflation, which had required significant adjustments. Consumers have been resilient, which has allowed the category to absorb all the pricing required to offset inflation. The last point is that we're monitoring closely: We see general elasticity holding up nicely; however, we’re seeing some greater elasticities within specific segments of LRB that we need to keep an eye on. To summarize this cold beverage business: we are gaining margin, increasing share, and engaging in a growing category, a nearly ideal formula for success. We plan to continue executing in every aspect I just described and add new partnerships as we have recently done with C4 and, most recently, La Colombe.

Our next question is from Andrea Teixeira with JPMorgan. You may now go ahead.

Thank you. Good morning. I have a couple of questions to the Sudhanshu’s point on EPS and then a question to Bob on the pods. First on the EPS growth outlook for Q3, what would be the underlying growth excluding non-operational items for the quarter? Because we understand there were no operational items in Q3 last year? And the question for Bob on the pods would be regarding shipment inflection. Should we expect shipments to converge to consumption in Q4? Or could you bridge the impact for the private-label exits, which is one of the factors that was a headwind in the quarter and also in the second half? And sorry for the two-part question. But on the pricing and improved mix as you exit these third-party manufacturing schemes, should we expect pricing to lap in Q3? Or do you expect to still have some benefit on pricing for pods into the second half of the year? Thank you.

Let me take the first one. First, I would urge you to think about the back half in total with the cadence between Q3 and Q4 EPS, just as a matter of phasing. Our second half growth is expected to be largely Q4 loaded, reflecting the expected flow of investment spend and the cadence of pricing and productivity relative to inflation. In forecasting quarter three EPS, there were no non-operational items in Q3 of last year; we had those in Q4. We expect that to be minimal as well. However, the reason we expect a modest uptick year-over-year is due primarily to three key components. First is U.S. refreshment beverages, where we are lapping the year-ago pricing while forecasting heavier investment. Second is U.S. coffee with positive operating income growth as margins begin to inflect in quarter three and then more to come in quarter four. These two main reasons are mostly driven by our decision to make significant reinvestments into the business to secure long-term dominance. However, let's keep an eye on the second half of the year, and you will see that we have strong expectations for EPS growth.

Yes, let me reiterate what I said before, which is over the long-term, consumption aligns with shipments. There’s no reasonable expectation that they would diverge. As is often the case, you see some separation between the two on a quarterly basis. We have external factors affecting us, such as supply chain issues contributing to under-shipment, while we have also been overshipping to manage our inventory and recover from earlier disruptions. What’s happening right now in the back half of the year is matching up with our forecasts: we’re seeing consumption gradually recover in the total at-home coffee category. Single-serve coffee continues to gain share among at-home coffee occasions. As for shipments being below consumption, two factors are unique to us affecting that separation. First, we are lapping year-ago shipment timing due to recovery from supply constraints. We have also discussed the licensing pricing changes and the piloting of those agreements. We’ve taken several private-label contracts that were low-margin out of the mix. We did talk earlier about coffee revenue being up 1% and operating income growing 3% to 4%. If I look at how things are unfolding, and it’s tricky to forecast with accuracy, we have strong visibility into margin improvement. Thus, we anticipate strong operating income growth in the back half. To address your concerns about revenue, it may trend somewhat below these estimates, and I don't see this as particularly significant. The adjusted segment on an underlying basis is even stronger than previously indicated. Everything launched points to the back half improving, and overall, the underlying strength of the business is improving. Any discrepancies in those projections come from our intentional strategies.

Our next question will come from Lauren Lieberman with Barclays. You may now go ahead.

Great. Thanks. Good morning. I was hoping we could maybe take a step back and do something a bit educational on coffee. In the Nielsen data, I know you guys are more attuned to IRI, but in the Nielsen data, you can see that owned and licensed brands within pods have been losing share, which has garnered a bit of attention from the investment community. So, I was hoping you could talk about, I know that you’ve said historically you manage the margin profile of owned and licensed to be comparable to that of partner. But I was curious if you could talk about why we should or shouldn't worry about that from a dollar profit contribution over time and how you manage sort of the—let's call it the potential conflict of interest with partners versus what's owned in terms of market share and so on, you know, and how you manage that relationship. Also, just Bob, you mentioned pricing on owned and licensed products, and I just wanted to clarify if that was new pricing that's recently hit the market or if that's still to come. Finally, I know that inventory destocking for pods at retail had been a potential watchpoint that hasn’t come up, so I'm assuming it's a non-issue, but I just wanted to check in on that front as well. Thanks.

Sure. Yes. Thanks for the opportunity for me to clarify. We manage an ecosystem that includes our brands, partner brands, and private-label brands, and it's critical that retailers are regarded as partners in this entire ecosystem. As the industry transitions to brewing by the cup, this shift benefits all stakeholders involved. Our objective has always been providing a system that is expanding and growing. We strive for the category to thrive. Part of that involves managing our own brands and doing so in a way that’s separate from our partners. There’s no conflict between the two because we manage them independently, allowing us to focus on that category growth unimpaired. We see ongoing opportunities for increased pricing within our brands across the category. If you look closely at our price gaps compared to other forms of coffee, even though there has been single-serve pricing adjustments, our prices relative to all forms of at-home coffee are now the closest they’ve ever been. In fact, that narrowing is in a position detrimental to driving sustained category growth. Partnerships might have short-term objectives in terms of share gain, which leads to some promotional rivalry and brand switching, but this strategy undermines the growth we are trying to build for the category—our focus must be on long-term health. Regarding the decline in owned and licensed brands, I realize there may be concern, but we believe that our projections around margin improvements going forward will cushion any significant impact. We’re observing and managing the multiple pricing inflation, and productivity procedures effectively. You also asked about pod inventory destocking; we have not encountered that issue at retail, nor do we expect it to arise.

Our last question will come from Steve Powers with Deutsche Bank. You may now go ahead.

Yes. Hey, good morning. Thank you.

Hey, Steve.

I wanted to ask on the free cash flow conversion. Sudhanshu, you talked about the improvements to come, which is great. Is there a way to frame where you think you'll land on conversion for the year? And as we think ahead, is there any reason that a return to 100% free cash flow conversion or thereabouts is too ambitious for 2024 and beyond? And I guess, within that, if there is any—are there any changes you’re considering or have implemented more structurally with regards to supply chain financing that would be useful to know?

It's a great question. As you know, KDP has been highly cash-generative since the merger, and we expect to continue generating significant free cash flow going forward. In the first half, our cash flow generation was lower primarily due to two factors compared to last year: One was the lapping of some discrete items, and the other was our proactive choice to selectively reduce a portion of our supplier financing program in a less attractive rate environment. Free cash flow conversion will be significantly higher in the second half compared to the second quarter as well as the first half. Thus, for the year, it will improve somewhat below 100%. However, as you know, we look beyond 2023, and we continue to target industry-leading levels of free cash flow conversion. There are not too many significant changes in this area. We are still generating significant cash; it’s a second half business. You'll see the improvement. But we are making some proactive strategic decisions with supply chain financing. This was very attractive in a low-rate environment but is less attractive now.

And last point, are you through those changes? Or do you anticipate there may be still changes to come given where rates are and where they may go?

No, we view this more as an overall capital allocation policy. We have our growth objectives. Our goal is to maintain low leverage, and we generate a lot of cash. We may make those decisions on a case-by-case basis. I wouldn't say that supply chain financing will completely diminish, but yes, we're looking at every decision on its merits. It’s gradual, and will not be everything happening this year—it will be a gradual reduction over the next couple of years.

This concludes our question-and-answer session. I would like to turn the conference back over to Jane Gelfand for closing remarks.

Thanks, Anthony, and thank you, everyone. We appreciate your time and attention on what we know is a busy morning. The investor relations team is available should you have any follow-up questions. Have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.