Good morning and welcome to the Molson Coors Beverage Company third quarter fiscal year 2026 earnings conference call.

And now I'll turn it over to Barb Noverini, Vice President, Investor Relations.

Thank you, Operator. Our earnings release and presentation materials are available on the Investor Relations section of our website. Today's discussion includes forward-looking statements within the meaning of U.S. federal securities laws. Please refer to our earnings release and our most recent SEC filings for important information regarding these statements, including risk factors, as well as definitions of and reconciliations to any non-GAAP measures. Actual results may differ materially from our expectations, and we undertake no obligation to update forward-looking statements except as required by applicable law. Today we'll focus our prepared remarks on our performance and outlook before opening the line for Q&A. To allow as many participants as possible to ask a question, we ask that you limit yourself to one question. Any technical questions can be addressed with our investor relations team following the call. Unless otherwise indicated, all financial results are comparable prior year period and are in U.S. dollars. With the exception of earnings per share, All financial metrics are in constant currency when referencing percentage changes from the prior year period. Also, share data references are sourced from Circana in the U.S., unless otherwise indicated. Our remarks today will also reference underlying pre-tax income, which equates to underlying income before income taxes, and underlying earnings per share, which equates to underlying diluted earnings per share, as defined in our earnings release. And with that, I will hand it over to Rahul.

Thank you, Barb. And good morning, everyone. Since launching Horizon 2030 earlier this year, we've been laying important groundwork for long-term success. We are building the portfolio, the capabilities, the routines, and the operating discipline to perform more consistently across the business. We've taken decisive actions intended to strengthen our share trend, accelerate our portfolio transformation, simplify our cost structure, and return cash to shareholders. In the U.S., core bear share trend improved from Q2 levels as share losses narrowed. We're seeing growth emerge across several important parts of the portfolio where we have been intentional in our activation and investments. and we're seeing encouraging signs that our new operational approach is helping us compete more effectively across our regions. Our strategy is only in its first year and these signs give us confidence that it's working well even as the operating environment remains challenging. Through the first half of this year, US industry trends were tracking better than 2025 and our own performance has largely been tracking in line with our previously announced 2026 guidance range. However, some external headwinds intensified as we moved into the third quarter and we are continuing to experience category softness in the US, increased promotional activity in the UK and elevated freight and fuel costs in the US. As a result, we are lowering our full year 2026 guidance ranges for NSR, underlying pre-tax, income, underlying EPS, and underlying free cash flow. We do expect some of these headwinds to persist into 2027, but our team has been taking actions to reduce their impact. In addition, Midwest premium costs have significantly impacted our margins and have remained at levels that we ultimately do not view as sustainable. In a moment, Tracey will detail the drivers of our guidance revisions, but let me reiterate that we are controlling the controllables. And the changes we've already made with Horizon 2030 are beginning to pay off. Here is what matters most. Our strategy is driving results across the business as we navigate persistent industry headwinds. Our U.S. share trend is moving in the right direction. Our fastest growing brands are achieving greater scale. We're positioning our portfolio toward areas where the category is growing. We're continuing to invest in our brands to drive volume growth. and we're investing in capabilities to help insulate us from external forces that are outside our control. In the first year of our five-year strategy, the signals are there. With continued focus and execution, we believe these signals will amplify. While the road ahead may not always be linear, our objective is straightforward. We're evolving the business to win more occasions with more consumers, All income levels. And we are also realistic about the work in front of us. So let's get into it. I'll start with Corbia. In the US, Coors Light and Miller Light were our biggest drivers of share trend improvement from Q2 to Q3. Getting these brands back on a strong trajectory remains one of our highest priorities. While we've seen progress, we're not satisfied with simply narrowing share losses. Our goal is to stabilize these brands and return them to share growth. That's why local execution is such an important part of Horizon 2030. As I've said before, beer is local. Consumers in Texas, Wisconsin, and New York aren't buying the same beer for the same reasons. Just look at what is happening in Wisconsin. I do want to take a moment to congratulate the Milwaukee Brewers on last week's World Series win. The excitement in Milwaukee has been undeniable and Miller Lite is proud to be the official beer of the Brewers. We've also made the most of this time with strong marketing. like giving away cans of Miller Lite that were brewed the exact moment the brewers won the title. It's a great example of how local relevance creates opportunities to connect consumers to our brands. Moments like these reinforce why local execution matters. So under Horizon 2030, we're deploying data-driven investments in the US by region. A good example of this approach comes from our South Central region, where stronger alignment between our local teams, distributors, and targeted investments contributed to a meaningful improvement in share trends from Q2 to Q3. The second best share trend improvement from Q2 came from the Great Lakes region, where targeted investment behind Miller Lite defended our competitive position in the market. With three of our four US regions showing improved share trends in the third quarter, we're encouraged that Horizon 2030's focus on local execution is driving results. In the US, Coors Light demonstrated the strongest improvement in share trend across our portfolio in Q3 as it continued to narrow its year-over-year share loss. Banquet delivered its 21st consecutive quarter of volume share growth in Q3 and remained a top five US beer brand for volume share growth. Looking ahead, we plan to build on this momentum through a new creative direction for Coors Light, continued investment behind Banquet and the national launch of Coors Zero Zero. Moving to the UK, category pressure and consumer weakness have intensified throughout the year. So we're investing behind the Carling brand to improve its relevance with today's consumer. Earlier this year, we introduced Carling Black Label, our first new premium lager launch for this brand family in over a decade. More recently in October, we launched the most significant brand refresh for Carling in over 30 years. The brand's bold new look keeps the heritage that drinkers love while capturing the attention of a new generation. These are exactly the types of investment in co-brands that Horizon 2030 is designed to support, which is also true for how we are approaching our value brands. Under Horizon 2030, value has moved from a supporting role to a strategic priority, especially as consumers feel more macroeconomic pressure. So we are leaning into more commercial support for Miller High Life and Keystone Light in the Americas. Today, I want to focus on Miller High Life. This brand is a gem in our portfolios. and if you think about it, Miller High Life possesses many of the same qualities that have fueled the success of a brand like Banquet. It has a rich heritage, great packaging and a level of authenticity that cannot be manufactured. It's the champagne of beers, after all. So, we're focused on making High Life relevant to a new generation of consumers. Through local activation and retail programs, we're showing how the high life isn't just for special occasions, it's about elevating everyday moments. We're also capitalizing on momentum outside of the U.S., like in Mexico, where high life ranks in the top five of beer brands' growing share. In Q3, it's contributing to driving 9% brand volume growth in Mexico and sells at an above premium price point. So while we remain early in our efforts, we believe that our refocused value portfolio has clear potential and we plan to support our priority brands accordingly. Turning to above premium. Peroni continues to perform well and remains a strong proof point supporting our premiumization strategy as it continues to gain relevance with consumers. Given its scale, Blue Moon's softness also continues to have an outsized impact on our performance in the above premium category, which is why improving the brand's trajectory remains a priority. We're focused on repositioning the brand away from its craft beer roots and into a more modern premium space, which you'll soon begin to see in our marketing and our approach at retail. Outside North America, we're continuing to see that innovation can be an effective lever in a highly competitive environment. For example, in the UK, Madrid Limon has performed well by aligning with regional taste preferences, reinforcing our view that successful innovation starts with local market insights. Turning to Beyond Beer, our portfolio today is stronger and more diversified than it was a year ago. And we're seeing that reflected in the performance of Beyond Beer brands like Fevertree and Monaco. Fevertree continues to benefit from increased commercial support and distribution just in time for peak cocktail season, and we're confident in the groundwork we've laid for the upcoming holidays. We're also pleased with the performance of Monaco, which continues to track ahead of our initial expectations. The third quarter of 2026 marked the highest NSR quarter in the brand's history. Monaco is a strong addition to our business and our distributors' businesses, and its success shows that we can add mix-enhancing growth in a pressured consumer environment. Monaco's strength in convenience stores and single-serve cans also shows that consumers are still willing to pay for brands that deliver the right value propositions. Beyond our portfolio, we are focused on strengthening our capabilities to help support future performance. This includes the launch of projects aimed at fortifying our supply chain and diversifying our source of critical materials including aluminum cans. Both efforts are meant to enhance flexibility and gain greater control over sourcing operations. We have also reinvested in vertical integration to control more of our own can supply. These initiatives have multi-year timelines, but they are essential to building a stronger, more cost competitive company over time. As we look ahead, we believe these capabilities will help us get ahead of changing consumer and market conditions. Throughout this year, we've continued to make solid progress against our 450 million cost savings program. Those actions have helped offset a portion of the inflationary pressure we've seen across commodities, freight, and other input costs. As we move through the year, however, the magnitude of the inflationary headwinds increased to a level that began to outweigh the benefits of our cost actions. We cannot cost cut our way to sustainable growth. Our cost savings program is strengthening the resilience of our business as it was designed to do. Delivering stronger long-term performance will require both stronger commercial execution to support top-line growth and continued discipline in managing our cost structure. Ultimately, the actions we've taken this year are intended to preserve flexibility as we execute our strategy, continuing investing in the business and build a stronger company that is positioned to create long-term value. Our capital allocation priorities also remain unchanged. We will continue supporting the opportunities that strengthen our portfolio and improve our competitive position. while returning cash to shareholders through our dividend and share repurchases. Our cash generation and balance sheet gives us choices and we will remain disciplined in how we deploy capital. All that being said, we recognize that the work we started with Horizon 2030 is far from finished. But the actions we've taken this year demonstrate our ability to move the organization in the right direction. Thank you for joining us. With that, I'll turn it over to Tracey to discuss our financial performance and provide the details of our outlook.

Thank you, Rahul. In the third quarter, our results reflected a more challenging category and cost environment than we anticipated at the start of the year, while pricing, mix and cost savings actions continue to support our plan. Industry softness, freight tightening, and commodity-driven input cost pressures intensified as the year progressed. We expect these factors to persist in the near term. With that context in mind, let's review our three key metrics. For Q3 on a year-over-year basis, consolidated net sales revenue of $2.9 billion declined 1.2%, Underlying pre-tax income of $349 million was down 17.4% and underlying earnings per share of $1.46 decreased 12.6%. Let's first walk through the drivers of the quarter, which will help frame our revised guidance for fiscal 2026. Starting with the top line. Lower financial volumes in the Americas and the UK were partially offset by positive net pricing in the Americas and favourable sales mix. The US beer industry declined more than 4% based on our internal estimates. Our US volume share trend improved by almost 20 basis points from Q2 2026. Financial volumes declined by 3% while brand volumes declined by 4.9%. Net pricing and positive sales mix drove positive 2% NSR per hectare growth in the Americas, with favorable mix mainly driven by Monaco. EMEA APAC delivered a positive 1.1% NSR per hectare growth in the quarter, mainly driven by favorable sales mix, while the promotional environment in the UK remained competitive. Turning to profitability. Underlying COGS per hectolitre increased 8.1%, mainly driven by continued higher Midwest premium and aluminum costs, freight market tightening, and fuel prices. The Midwest premium alone drove approximately $30 million of year-on-year cost increase in the third quarter, representing roughly 40% of the year-over-year profit decline. As expected, MG&A was down 7.4% largely due to targeted cost reductions in marketing and cost savings initiatives offset by higher technology expenses. Turning to our balance sheet, our net debt to underlying EBITDA ratio was 2.53 times at the end of the quarter, modestly above our below 2.5 times target. Over the last several years, we've worked deliberately to strengthen the balance sheet and improve our financial flexibility. That work is particularly important in an environment like this. While we expect commodity and freight costs to remain elevated in the near term, our balance sheet remains strong, which we believe gives us capacity to manage near term volatility while continuing to invest behind our long term priorities. That flexibility is also reflected in our capital allocation approach. We continue to prioritize investments that will strengthen the long-term performance of our business while also returning capital to shareholders through a durable dividend and our share repurchase program. We continue to generate strong cashflow and year to date, we have returned to shareholders $273 million through dividends and $250 million through share repurchases. Since the plan was announced in October, 2023, We have repurchased 16% of our Class B shares outstanding and we have $2.3 billion remaining under our authorization. With that, let's discuss the drivers of our updated 2026 guidance. We now expect net sales revenue to decline minus 1 to minus 2% on a constant currency basis versus our previously guided range of flat plus or minus 1%. While the US industry continues to track modestly better than 2025 on a year-to-date basis, that improvement largely reflects the strongest start to the year. More recent trends have been softer. Our revised top-line guidance assumes that soft industry volume trends in both the US and EMEA APAC and promotional pressure in the UK will persist through the remainder of 2026. We continue to expect an annual net price increase of 1-2% in North America in line with the average historical range and our assumptions for 9 months of NSR contribution from Monaco remain unchanged. Year to date, we've seen quarterly variability in financial versus brand volume trends that has mainly been driven by shipment timing. We still anticipate the convergence of financial volumes toward brand volumes in the balance of the year on the assumption that US financial and brand volume trends will largely align. Moving down the P&L, we now expect underlying pre-tax income to decline minus 21 to minus 24%, which equates to approximately 18 million at the midpoint on a constant currency basis, as compared to our previously guided range of minus 15 to minus 18%. As Rahul mentioned earlier, we're expecting lower profitability for the balance of the year than our year-to-date performance would imply. This is largely due to the impact of higher commodity and logistics costs. For the full year, we continue to expect Midwest premium costs to exceed the prior year by approximately $113 million. To put that into perspective, the year-over-year increase in this surcharge alone to roughly 10 percentage points of underlying pre-tax income impact or more than 50 cents of underlying earnings per share at the midpoint of our 2026 guidance. We now expect underlying earnings per share to decline minus 16 to minus 19% as compared to our previously guided range of minus 11 to minus 15%. We have also updated our underlying free cash flow guidance range to $1 billion plus or minus 10% versus our previously guided range of $1.1 billion, plus or minus 10%. This was mainly driven by the reduction in our previously guided underlying pre-tax income range. All other guidance drivers remain unchanged. Looking ahead, we currently expect several of these inflationary pressures to continue into 2027. On the Midwest premium specifically, we do have hedge coverage in place for 2027. However, as we have previously discussed, the Midwest premium remains difficult and expensive to hedge and our exposure is never fully hedged. We expect market conditions for commodities to remain dynamic into 2027. On the productivity side, the previously announced restructuring actions in EMEA are now producing benefits that will extend into 2027 and beyond. Separately, certain brand owners have sought to terminate their distribution agreements with Coors Distributing Company, our wholly owned distributor in Colorado. CDC is pursuing legal actions to enforce its rights under those agreements. We don't expect this to have a material impact on our fiscal 2026 results, and the impact on 2027 will depend on the outcome of these legal actions. We will provide an update as the situation develops. will provide our formal 2027 outlook on our fourth quarter call as is normal practice. In the meantime, we remain focused on the factors within our control, productivity, disciplined revenue management, investing in our brands, and prudent capital allocation. We recognize that any individual year, 2026 included, can be significantly affected by the external cost and category environment. Thank you for joining us today. Together, we believe these attributes give us the financial resilience and flexibility to navigate near-term pressures while continuing to invest in the long-term evolution of the business. With that, we will take your questions.

Thank you. We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Peter Grom with UBS. Your line is open. Please go ahead.

Great. Thank you. Good morning, everybody. I hope you're doing well. So the updated guidance implies a relatively wide range of outcomes for the fourth quarter on the bottom line, a pretty challenging exit rate. So maybe could you walk through kind of the puts and takes that will put you in the high end versus the low end? But maybe related, I would love to understand how we should be thinking about this exit rate as we begin to kind of adjust our models for 27, maybe just some guardrails in terms of what we know today. And I ask this just in the context, it doesn't seem like category trends are improving. It sounds like, Tracey, to your point, inflation is volatile and persists. So trying to think about how you manage these headwinds or balancing these headwinds versus setting up the business for better performance over the longer term.

Good morning, Peter. Thanks for the question. So let me help break down your first part of the question, which is around the guidance, the wide range, etc. And then we can talk a little bit about 27. So the four pieces maybe I call out is let's talk about the top line first. So you talked about the category. and many more. Thank you for watching. So, you know, those are the big drivers, I would say, for the top line. The added piece on the bottom line is the pressure on commodities, predominantly freight and fuel. If you think about this year coming in, you know, we understood the pressures on the aluminum Midwest premium. We have all the right actions, whether it's around the hedging, around the cost savings initiatives. But we do see that playing out for the balance of the year in terms of the inflationary pressures. There are a couple of other elements in terms of just timing, you know, shipment timing and financial volume and brand volume. But all of that will get caught up by the end of the year. And then there is a little bit on timing in terms of G&A. So, you know, hopefully that gives you a sense on just Q4 timing and the range, just given the volatility and some of the variables as The way I would say is, you know, obviously we'll give guidance to the business, but it goes back to what we're looking at, you know, the core foundations of Horizon 2030. You know, the category has been volatile. If you look this year between Q1 and Q2, what's important for us to make sure our portfolio is leading in different parts of the category. So our focus on our core Thank you for joining us.

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