Net Income more than doubled in a year, from $149 million in Q3 2018 to $304 million in Q3 2019
KDP's stock responded with a 6% rise on their earnings announcement
As detailed in the chart to the right, the $155 million increase in Net Income can be attributed to:$138 million increase in Total Revenue$17 million decrease in Total Expenses
Change in Net Income
(A) Revenues increased by $0.14 billion or 5.1%, from $2.73B in Q3’18 to $2.87B in Q3’19
Healthy revenue growth was primarily driven by the impact of the merger between Dr Pepper Snapple and Maple Holdings Parent Corp. (which owned Keurig) in July 2018, which helped Keurig diversify its business from coffee to other offerings such as Packaged Beverages and Concentrates.
As detailed in the chart to the right, the $138 million increase in Total Revenue can be attributed to:
$69 million increase in Packaged Beverages Revenue$43 million increase in Beverage Concentrates Revenue$14 million increase in Latin America Revenue$12 million increase in Coffee Systems Revenue
Change in Total Revenues
(a) Change in Packaged Beverages and Beverage Concentrates' revenues together contributed to about 81% of the total increase in KDP's revenue in Q3'19
To understand KDP's business model and revenue expectations, refer to our interactive dashboard - Keurig Dr Pepper Revenues: How Does KDP Make Money?
Change in Beverage Concentrates Revenue
[Left Chart] Revenue growth of 13.6% in Beverage Concentrates' division was driven by-
7.5% rise in volume sales6.1% improvement in price realization
[Right Chart] Revenue growth of 5.6% in Packaged Beverages' division was driven by-
5.4% rise in volume sales0.2% improvement in price realization
Change in Packaged Beverages Revenue
(b) Decrease in Cost of Sales and Loss on Extinguishment of Debt were the major contributors to decrease in total expenses
Change in Cost of Sales
Cost of sales decreased by $0.12 billion in Q3'19, mainly due to inventory step-up (increasing value of COGS to its fair value) in the prior year period due to the DPS merger, which led to higher cost in Q3'18. Additionally, strong productivity and synergies and the impact of an additional 8 days of DPS operations in Q3'19, led to lower cost of sales.
A complete elimination of loss of debt extinguishment also contributed to $11 million decrease in total expenses
Change in Loss on Debt Extinguishment