COCA_COLA Earningcall Transcript Of Q2 of 2024

John Murphy -- President and Chief Financial Officer

Thank you, James, and good morning, everyone. In the second quarter, we delivered strong
results. We grew organic revenues 15%. This consisted of 2% unit case growth.

Concentrate sales were ahead of volume by four points, driven primarily by timing of
concentrate shipments and some disruptions in the global supply chain that we partly expect to
reverse next quarter. Our price/mix growth of 9% in the quarter was primarily driven by two
items: one, approximately five points of intense inflationary pricing across a handful of markets
to offset significant currency devaluation and two, an array of pricing and mix actions across our
markets. Excluding the impacts from concentrate shipment timing and pricing from markets
with intense inflation, Organic revenue growth during the quarter was at the high end of our
long-term growth algorithm. Comparable gross margin was up approximately 200 basis points,
driven by underlying expansion and the benefit from bottler refranchising partially offset by
currency headwinds.

Comparable operating margin expanded approximately 120 basis points. Comparable operating
margin expansion was less than comparable gross margin expansion due to less benefit from
bottler refranchising and greater currency headwinds to comparable operating margin. Putting it
all together, second quarter comparable EPS of $0.84 was up 7% year over year despite 10%
currency headwinds and 2% headwind from bottler refranchising. Free cash flow was
approximately $3.3 billion, down approximately $700 million versus the prior year.

due to higher tax payments, cycling working capital benefits from the prior year and higher
capital expenditures. We continue to take actions to achieve a fit for purpose balance sheet that
will best support our growth agenda. During the quarter, we raised approximately $4 billion in
cash by issuing long-term debt for general corporate purposes. This may include pre-funding
upcoming payments related to the IRS tax case and the Fairlife contingent consideration.

With respect to our IRS tax case, which we continue to vigorously defend. We're making
progress to our next steps, and we expect we will be able to move forward an appeal by the end
of the year. Given the continued outperformance of Fairlife, we recorded a charge of $1.3 billion
during the quarter. Our estimated final payment related to this acquisition is $5.3 billion, which
will be made in 2025.

We are encouraged by Fairlife's performance and the value it has created for our company. So
far this year, we've realized nearly $3 billion in gross proceeds from bottler refranchising and
streamlining our equity investments. We'll continue to prioritize higher growth businesses and
take passive capital off the table. Return on invested capital is 24%, up approximately five points
from three years ago.

Our balance sheet is strong, as demonstrated by our net debt leverage of one and a half times
EBITDA which is well below our targeted range of two to two and a half times. We have ample

capacity to pursue our capital allocation agenda, which prioritizes investing to drive further
growth, continuing to support our dividend and staying dynamic, agile and opportunistic. As
James mentioned, we're proactively managing our portfolio to deliver on our commitments. Our
updated 2024 guidance reflects the momentum of our business in the first half of the year.

and our confidence in our ability to execute on our plans during the second half of this year. We
now expect organic revenue growth of 9% to 10% and comparable currency-neutral
earnings-per-share growth of 13% to 15%. Bottler refranchising is still expected to be a four- to
five-point headwind to comparable net revenues. And we now expect a one- to two-point
headwind to comparable earnings per share.

Based on current rates and our hedge positions, we now anticipate an approximate five- to
six-point currency headwind to comparable net revenues and an approximate eight- to nine-point
currency headwind to comparable earnings per share for full year 2024. This increase in
currency headwind is driven by a small number of intensive treasury markets, while the rest of
the currency basket is relatively neutral to our results. All in, we now expect comparable
earnings-per-share growth of 5% to 6% versus $2.69 in 2023. There are some considerations to
keep in mind.

We expect unit cases and concentrate shipments to be relatively in line with each other for the
full year 2024. Please keep in mind there are two extra days in the fourth quarter. Taking
everything into consideration, we expect earnings growth during the remainder of 2024 will be
weighted toward the fourth quarter. To summarize, we're encouraged by our track record and
the underlying momentum of our business.

Our system remains incredibly focused and motivated to drive growth. We're continuing to drive
quality top line growth, expand margins grow comparable earnings per share and improve the
return profile of our business. And we're confident we will deliver on our guidance and
longer-term objectives. With that, operator, we are ready to take questions.

Questions & Answers: