Mr. Gavin Hattersley reports

MOLSON COORS BEVERAGE COMPANY REPORTS 2023 THIRD QUARTER RESULTS

Molson Coors Canada Inc. parent company Molson Coors Beverage Company has released results for the 2023 third quarter. Unless otherwise indicated in this release, all financial amounts are in U.S. dollars.

2023 third quarter financial highlights:

• Net sales increased 12.4 per cent reported and 11 per cent in constant currency.
• Net sales per hectolitre increased 8.9 per cent reported and 7.6 per cent in constant currency.
• U.S. GAAP (generally accepted accounting principles) income before income taxes of $544-million increased 99.3 per cent reported.
• Underlying (non-GAAP) income before income taxes of $525.4-million improved 43.5 per cent in constant currency.
• U.S. GAAP net income attributable to Molson Coors Beverage of $430.7-million, $1.98 per share on a diluted basis. Underlying (non-GAAP) diluted earnings per share (EPS) of $1.92 per share increased 45.5 per cent.

Chief executive officer and chief financial officer perspectives

In the third quarter of 2023, Molson Coors delivered another quarter of strong results growing net revenue by 12.4 per cent reported and income before income taxes by 99.3 per cent reported and by 43.5 per cent on an underlying constant currency basis. The strong performance was driven by double-digit top- and bottom-line growth across both business units.

Given its strong performance, Molson Coors is reaffirming its top-line guidance but anticipates it at the high end of the range and is raising its underlying income before income tax guidance for the full-year 2023 on a constant currency basis. The guidance increase is driven by a healthier U.S. beer industry than previously anticipated, more robust brand volume performance, higher-than-expected pricing primarily in Canada as well as lower net interest expense due to higher cash balances generating increased interest income.

The trajectory of the business has been improving for several years, positioning the company well to benefit from the accelerated demand in the United States for its core brands. The company, in partnership with its distributors, has worked diligently to ensure that the U.S. share gains are sustainable -- by supplying the elevated level of demand, pro-actively engaging with retailers to secure more shelf space or with on-premise accounts to add more tap handles, and executing targeted sales and marketing efforts to promote trial and retention of consumers, among others.

Gavin Hattersley, president and chief executive officer, statement:

"Our third quarter results represent another quarter of incredible growth across our global business, and we are on track to deliver a second straight year of top- and bottom-line growth. The improvement in our business is not limited to one market, a couple brands or one segment of the category, and the improvement in our business started before April 1. We believe these gains are sustainable, and the strength of our brands coupled with the work we are doing gives us confidence we can maintain the gains we have achieved and grow off of them."

Tracey Joubert, chief financial officer, statement:

"We are proud to report another quarter of strong results. Both our business units contributed to double-digit top- and bottom-line growth, while strong cash generation enabled us to continue to invest in our business, reduce net debt and return cash to shareholders. Our performance underscores the strength of our business, which has consistently improved over the last several years. As we continue to navigate a challenging and dynamic global macroeconomic environment, the fundamental strengths of our business and our actions to sustain the momentum we have achieved give us confidence we can sustainably deliver top- and bottom-line growth in the years to come."

Quarterly consolidated highlights (versus third quarter 2022 results):

• Net sales increased 12.4 per cent driven by favourable price and sales mix, higher financial volumes, and favourable foreign currency impacts. Net sales increased 11 per cent in constant currency. Financial volumes increased 3.2 per cent, primarily due to higher financial volumes in the Americas segment, partially offset by a decrease in EMEA (Europe, Middle East, Africa) and APAC (Asia-Pacific) financial volumes. Brand volumes improved 1.1 per cent due to a 3.6-per-cent increase in the Americas, partially offset by a 5.2-per-cent decline in EMEA and APAC. Price and sales mix favourably impacted net sales and net sales per hectolitre by 7.8 per cent and 7.6 per cent, respectively, primarily due to increased net pricing including the rollover benefit of taking several price increases in the prior year, as well as favourable sales mix driven by geographic mix.
• Cost of goods sold (COGS) remained relatively flat compared with the prior year with higher financial volumes and unfavourable foreign currency impacts offset by lower cost of goods sold per hectolitre. Cost of goods sold per hectolitre decreased 3 per cent, including the unfavourable impact of currency of 1.3 per cent, primarily due to changes to the company's unrealized mark-to-market derivative positions of $133.4-million, cost savings initiatives and the benefits of volume leverage, partially offset by cost inflation related to materials and manufacturing expenses and unfavourable mix. Underlying COGS per hectolitre increased 2.6 per cent in constant currency, primarily due to cost inflation related to materials and manufacturing expenses and unfavourable mix, partially offset by cost savings initiatives and volume leverage.
• Marketing, general and administrative (MG&A) increased 13.2 per cent on a reported basis, primarily due to increased marketing investment on core brands and higher incentive compensation expense. Underlying MG&A increased 11.6 per cent in constant currency.
• U.S. GAAP income (loss) before income taxes increased 99.3 per cent on a reported basis, primarily due to increased net pricing to customers, changes in the company's unrealized mark-to-market derivative positions of $133.4-million and higher financial volumes, partially offset by cost inflation related to materials and manufacturing expenses, higher MG&A expense, and the loss on the sale of the company's controlling interest in the Truss joint venture in Canada.
• Underlying income (loss) before income taxes improved 43.5 per cent in constant currency, primarily due to increased net pricing to customers and higher financial volumes, partially offset by cost inflation related to materials and manufacturing expenses and higher MG&A expense.

Quarterly segment highlights (versus third quarter 2022 results)

Americas segment:

• Net sales increased 10.8 per cent driven by increased net pricing, as well as higher financial volumes, partially offset by unfavourable sales mix and unfavourable foreign currency impacts. Net sales increased 11.2 per cent in constant currency. Financial volumes increased 6.6 per cent primarily due to an increase in U.S. domestic shipments driven by volume growth in the company's core brands. The increase in U.S. volume was impacted by the continued shifts in consumer purchasing behaviour largely within the premium beer segment. Americas brand volumes increased 3.6 per cent, including a 4.5-per-cent increase in the U.S. driven by growth in the company's core brands, with Coors Light and Coors Banquet each up double digits and Miller Lite up high single digits, partially offset by the timing impacts related to one less trading day in the current quarter and cycling a shift in volume ahead of price increases taken early in the fourth quarter in the prior year. Canada brand volumes increased 0.2 per cent mainly driven by growth in the above premium brands. Latin America volume decreased 2.5 per cent largely due to economic conditions in key markets. Price and sales mix favourably impacted net sales and net sales per hectolitre by 4.6 per cent and 4.3 per cent, respectively, primarily due to increased net pricing, including the rollover benefit of several price increases taken in the previous year, partially offset by unfavourable sales mix.
• U.S. GAAP and underlying income (loss) before income taxes: U.S. GAAP income before income taxes improved 28.2 per cent on a reported basis and underlying income before income taxes improved 32.2 per cent in constant currency, primarily due to increased net pricing, higher financial volumes and lower logistics expenses, partially offset by cost inflation related to materials and manufacturing expenses, as well as higher MG&A expense. Higher MG&A spend was primarily due to increased marketing investment behind our core brands and higher incentive compensation expense.

EMEA and APAC segment:

• Net sales increased 19.2 per cent driven by favourable price and sales mix as well as favourable foreign currency impacts, partially offset by a decline in financial volumes. Net sales increased 10.4 per cent in constant currency. Financial volumes decreased 5.5 per cent and brand volumes declined 5.2 per cent in all regions throughout the segment driven by continued industry softness and inflationary pressures on the consumer in Central and Eastern Europe. Price and sales mix favourably impacted net sales and net sales per hectolitre by 15.9 per cent and 16.8 per cent, respectively, primarily due to increased net pricing including the rollover benefits from price increases taken in the prior year and favourable sales mix.
• U.S. GAAP and underlying income (loss) before income taxes: U.S. GAAP income before income taxes improved 45.5 per cent on a reported basis and underlying income before income taxes improved 58.1 per cent in constant currency, primarily due to increased net pricing to customers and favourable sales mix, partially offset by lower financial volumes and cost inflation on materials, logistics and manufacturing expenses.

Cash flow and liquidity highlights:

• U.S. GAAP cash from operations: Net cash provided by operating activities was $1,604.5-million for the nine months ended Sept. 30, 2023, which improved $487-million compared with the prior year primarily due to higher net income and the favourable timing of working capital in the Americas, partially offset by higher income taxes paid.
• Underlying free cash flow: Cash received of $1,121.6-million for the nine months ended Sept. 30, 2023, which represents an increase of $524.2-million from the prior year, was primarily due to higher net cash provided by operating activities and lower capital expenditures as a result of the timing of capital projects.
• Debt: Upon its maturity on July 15, 2023, the company repaid its $500-million (Canadian) 2.84 per cent notes using cash on hand. Total debt as of Sept. 30, 2023, was $6,179.9-million and cash and cash equivalents totalled $801.7-million, resulting in net debt of $5,378.2-million and a net debt to underlying EBITDA (earnings before interest, taxes, depreciation and amortization) ratio of 2.23 times. As of Sept. 30, 2022, the company's net debt to underlying EBITDA ratio was 3.13 times.
• Dividends: A cash dividend of 41 cents per share was declared and paid to eligible shareholders of record on the respective quarterly record dates during the nine months ended Sept. 30, 2023, for a total of $1.23 per share or a Canadian-dollar equivalent of $1.63 (Canadian) per share. A cash dividend of 38 cents per share was declared and paid to eligible shareholders of record on the respective quarterly record dates during the nine months ended Sept. 30, 2022, for a total of $1.14 per share or a Canadian-dollar equivalent of $1.45 (Canadian) per share.
• Share repurchase program: For the nine months ended Sept. 30, 2023, the company repurchased 980,000 shares under the share repurchase program at a weighted average price of $62.10 per share, including brokerage commissions, for an aggregate value of $60.9-million. For the nine months ended Sept. 30, 2022, the company repurchased 740,000 shares at a weighted average price of $52.36 per share, including brokerage commissions, for an aggregate value of $38.8-million. On Sept. 29, 2023, the company's board of directors approved a new share repurchase program authorizing the repurchase of up to an aggregate of $2-billion of its Class B common stock, with an expected program term of five years. The program is part of the company's balanced and cohesive approach to prioritizing capital allocation intended to improve shareholder value creation. This repurchase program replaces and supersedes any repurchase program previously approved by the board.

Other results:

• The increase in the company's third quarter U.S. GAAP effective tax rate was primarily due to the impact of geographic mix with higher pretax income in higher-tax-rate jurisdictions, partially offset by the net effect of discrete tax items in the period. The company recognized $15.5-million GAAP discrete tax benefit in the three months ended Sept. 30, 2023, compared with $5.9-million GAAP discrete tax expense in the three months ended Sept. 30, 2022.
• The decrease in the company's third quarter underlying effective tax rate was primarily due to the net effect of discrete tax items in the period, offset in part by the impact of geographic mix with higher pretax income in higher-tax-rate jurisdictions. The company recognized $14.3-million underlying discrete tax benefit in the three months ended Sept. 30, 2023, compared with $900,000 underlying discrete tax expense in the three months ended Sept. 30, 2022. Geographic mix was less impactful to the company's underlying rate due to the removal of non-GAAP items.

2023 outlook

Molson Coors is adjusting certain full-year 2023 financial guidance metrics:

• Net sales: Reaffirming high-single-digit increase versus 2022 on a constant currency basis but narrowing to the high end of the range. The adjustment is due to the U.S. beer category being healthier than projected as well as stronger-than-expected brand volume growth, which the company expects to accelerate in the fourth quarter. Also, pricing across the company's global markets, in particular Canada, is better than previously expected.
• Underlying income (loss) before income taxes: 32-per-cent-to-36-per-cent increase compared witho 2022 on a constant currency basis from the company's previous guidance of a 23-per-cent-to-26-per-cent increase. This is primarily due to the net sales drivers described above as well as lower net interest expense as described below.
• Consolidated net interest expense: $210-million, plus or minus 5 per cent from the company's previous guidance of $225-million, plus or minus 5 per cent. The decrease is due to higher than previously anticipated cash balances generating higher interest income.

The company continues to expect the following targets for full-year 2023:

• Underlying free cash flow: $1.2-billion, plus or minus 10 per cent;
• Capital expenditures: $700-million incurred, plus or minus 5 per cent;
• Underlying depreciation and amortization: $690-million, plus or minus 5 per cent;
• Underlying effective tax rate: In the range of 21 per cent to 23 per cent for 2023.

The company's updated full-year 2023 guidance implies the following for the fourth quarter:

• Net sales: Mid-single-digit growth for the fourth quarter on a constant currency basis as the company will lap higher than typical pricing taken in late 2022. In addition, the company expects its brand volume growth to outpace its financial volume growth due to U.S. breweries shipping above expectations in the third quarter resulting in healthy distributor inventories and planned downtime in the U.S. network for system maintenance. The company also expects a financial volume headwind as the wind-down of a large and low-margin contract brewing agreement accelerates in the fourth quarter.
• Underlying income (loss) before income taxes: At the midpoint, a high-single-digit decrease for the fourth quarter on a constant currency basis, including mid-single-digit top-line growth. This is due to an increase in underlying COGS per hectolitre due to continued high inflation in EMEA and APAC and lower-volume leverage than the prior two quarters. Furthermore, the company expects MG&A to be up approximately $90-million, largely related to planned investment behind its core brands and higher incentive compensation due to the company's strong performance this year.

2023 third quarter investor conference call

Molson Coors Beverage Company will conduct an earnings conference call with financial analysts and investors at 11 a.m. Eastern Time today to discuss the company's 2023 third quarter results. The live webcast will be accessible via the company's website. An on-line replay of the webcast will be available until 11:59 p.m. Eastern Time on Feb. 12, 2024. The company will post this release and related financial statements on its website today.

Overview of Molson Coors Beverage Company

For more than two centuries Molson Coors Beverage Company has been brewing beverages that unite people to celebrate all life's moments. From Coors Light, Miller Lite, Molson Canadian, Carling, Ozujsko and Staropramen to Coors Banquet, Blue Moon Belgian White, Vizzy Hard Seltzer, Leinenkugel's Summer Shandy, Miller High Life and more, Molson Coors produces many beloved and iconic beer brands. While the company's history is rooted in beer, Molson Coors offers a modern portfolio that expands beyond the beer aisle as well.

The company's reporting segments include: Americas, operating in the U.S., Canada and various countries in the Caribbean, Latin and South America; and EMEA and APAC, operating in Bulgaria, Croatia, Czech Republic, Hungary, Montenegro, the Republic of Ireland, Romania, Serbia, the United Kingdom, various other European countries, and certain countries within the Middle East, Africa and Asia Pacific. In addition to its reporting segments, the company also has certain activity that is not allocated to its reporting segments and reported as unallocated, which primarily includes financing-related costs such as interest expense and income, foreign exchange gains and losses on intercompany balances, and realized and unrealized changes in fair value on instruments not designated in hedging relationships related to financing and other treasury-related activities and the unrealized changes in fair value on its commodity swaps not designated in hedging relationships recorded within cost of goods sold, which are later reclassified when realized to the segment in which the underlying exposure resides. Additionally, only the service cost component of net periodic pension and OPEB (other postemployment benefits) cost is reported within each operating segment, and all other components remain unallocated.

The company's environmental, social and governance (ESG) strategy is focused on people and planet with a strong commitment to raising industry standards and leaving a positive imprint on its employees, consumers, communities and the environment.

About Molson Coors Canada Inc.

Molson Coors Canada is a subsidiary of Molson Coors Beverage Company. Molson Coors Class A and Class B exchangeable shares offer substantially the same economic and voting rights as the respective classes of common shares of Molson Coors Beverage, as described in Molson Coors Beverage's annual proxy statement and Form 10-K filings with the U.S. Securities and Exchange Commission. The trustee holder of the special Class A voting stock and the special Class B voting stock has the right to cast a number of votes equal to the number of then outstanding Class A exchangeable shares and Class B exchangeable shares, respectively.

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