PepsiCo(PEP) - 2025 Q2 - Quarterly Results

Financial Highlights PepsiCo's Q2 2025 results show a 1.0% net revenue increase but a significant 59% GAAP EPS decrease, with non-GAAP organic revenue up 2.1% Q2 & YTD 2025 Key Results In Q2 2025, PepsiCo reported a 1.0% increase in net revenue, but a significant 59% decrease in GAAP EPS to $0.92 Q2 & YTD 2025 GAAP Results | | Second-Quarter | Year-to-Date | | :--- | :--- | :--- | | Net revenue performance | 1.0% | (0.3)% | | Foreign exchange impact on net revenue | (1.5)% | (2)% | | Earnings per share (EPS) | $0.92 | $2.25 | | EPS change | (59)% | (39)% | | Foreign exchange impact on EPS | (2)% | (3)% | Q2 & YTD 2025 Organic/Core (Non-GAAP) Results | | Second-Quarter | Year-to-Date | | :--- | :--- | :--- | | Organic revenue performance | 2.1% | 1.7% | | Core EPS | $2.12 | $3.59 | | Core constant currency EPS change | (5)% | (4.5)% | Management Commentary CEO Ramon Laguarta highlighted accelerated net revenue growth driven by international momentum and improved North America execution, reaffirming 2025 financial targets - Management is encouraged by accelerated net revenue growth, with continued momentum in international business and improved execution in North America[5] - Future plans include portfolio innovation and cost optimization to drive growth and profitability[6] - The company is confident in delivering low-single-digit organic revenue growth for fiscal 2025, with an improved core USD EPS outlook due to moderating foreign exchange headwinds[6] Segment Performance International segments demonstrated strong organic revenue growth in Q2 2025, while North America showed mixed results with significant GAAP operating profit declines due to impairment charges Second-Quarter 2025 Segment Performance In Q2 2025, international segments showed strong organic revenue growth, while North America was mixed, with GAAP operating profit severely impacted by impairment charges Q2 2025 Revenue Performance by Segment | Segment | Reported % Change | Organic % Change | Convenient Foods Volume % Change | Beverages Volume % Change | | :--- | :--- | :--- | :--- | :--- | | PFNA | 1% | (2)% | (1)% | N/A | | PBNA | 0% | 1% | N/A | (2)% | | IB Franchise | 3% | 5% | N/A | 1% | | EMEA | 8% | 7% | (6)% | 1% | | LatAm Foods | (7)% | 6% | 4% | N/A | | Asia Pacific Foods | 0.5% | 0% | 5% | N/A | | Total | 1% | 2% | (1.5)% | 0% | Q2 2025 Operating Profit Performance by Segment | Segment | GAAP Reported % Change | Core Constant Currency % Change | | :--- | :--- | :--- | | PFNA | (17)% | (13)% | | PBNA | (165)% | 0% | | IB Franchise | 7% | 9% | | EMEA | (36)% | 6% | | LatAm Foods | 0% | 16% | | Asia Pacific Foods | (90)% | (13)% | | Total | (56)% | (3)% | Year-to-Date 2025 Segment Performance Year-to-date 2025 performance mirrored Q2 trends, with international segments driving organic revenue growth and major GAAP operating profit declines in PBNA and Asia Pacific Foods YTD 2025 Revenue Performance by Segment | Segment | Reported % Change | Organic % Change | Convenient Foods Volume % Change | Beverages Volume % Change | | :--- | :--- | :--- | :--- | :--- | | PFNA | 0% | (2)% | (1)% | N/A | | PBNA | 0% | 1% | N/A | (3)% | | IB Franchise | 3% | 6% | N/A | 2% | | EMEA | 5% | 7% | (7)% | (1)% | | LatAm Foods | (9)% | 5% | 2% | N/A | | Asia Pacific Foods | (1)% | 0% | 4% | N/A | | Total | 0% | 2% | (2)% | 0% | YTD 2025 Operating Profit Performance by Segment | Segment | GAAP Reported % Change | Core Constant Currency % Change | | :--- | :--- | :--- | | PFNA | (8)% | (10)% | | PBNA | (112)% | 5% | | IB Franchise | 6% | 10% | | EMEA | (26)% | 8% | | LatAm Foods | (8)% | 8% | | Asia Pacific Foods | (39)% | (9)% | | Total | (35)% | (2)% | 2025 Financial Guidance and Outlook PepsiCo affirmed its full-year 2025 non-GAAP guidance for low-single-digit organic revenue growth and stable core constant currency EPS, with an improved foreign exchange outlook - The company continues to expect for 2025: - A low-single-digit increase in organic revenue - Core constant currency EPS to be approximately even with the prior year - A core annual effective tax rate of approximately 20 percent - Total cash returns to shareholders of approximately $8.6 billion ($7.6 billion dividends, $1.0 billion share repurchases)[18] - The expected negative impact from foreign exchange translation has been revised down to approximately 1.5 percentage points on net revenue and core EPS, from a previous estimate of 3 percentage points[15] - The updated guidance implies a 1.5% decline in core EPS in 2025, an improvement from the previously forecasted 3% decline, compared to 2024 core EPS of $8.16[16] Consolidated Financial Statements PepsiCo's Q2 2025 consolidated financial statements reflect a significant decline in operating profit and net income due to impairment charges, alongside increased debt and acquisitions Condensed Consolidated Statement of Income For the 24 weeks ended June 14, 2025, net revenue was nearly flat, but operating profit and net income saw sharp declines due to a $1.86 billion impairment charge Statement of Income Summary (24 Weeks Ended) | (in millions, except per share) | 6/14/2025 | 6/15/2024 | | :--- | :--- | :--- | | Net Revenue | $40,645 | $40,751 | | Gross Profit | $22,415 | $22,584 | | Operating Profit | $4,372 | $6,765 | | Net Income Attributable to PepsiCo | $3,097 | $5,125 | | Diluted EPS | $2.25 | $3.71 | - A significant charge of $1.86 billion was recognized for the impairment of the Rockstar and Be & Cheery brands, which heavily impacted operating profit[20] Condensed Consolidated Statement of Cash Flows For the first 24 weeks of 2025, net cash from operating activities decreased, while net cash used for investing activities significantly increased due to acquisitions, offset by higher long-term debt issuance Statement of Cash Flows Summary (24 Weeks Ended, in millions) | | 6/14/2025 | 6/15/2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $996 | $1,315 | | Net Cash Used for Investing Activities | $(4,127) | $(1,454) | | Net Cash Provided by/(Used for) Financing Activities | $1,868 | $(2,900) | | Net Decrease in Cash | $(841) | $(3,343) | | Cash and Cash Equivalents, End of Period | $7,712 | $6,418 | Condensed Consolidated Balance Sheet As of June 14, 2025, PepsiCo's total assets and liabilities increased, primarily driven by growth in current assets and a significant rise in short-term debt obligations Balance Sheet Summary (in millions) | | 6/14/2025 | 12/28/2024 | | :--- | :--- | :--- | | Total Current Assets | $28,210 | $25,826 | | Total Assets | $105,345 | $99,467 | | Total Current Liabilities | $36,396 | $31,536 | | Total Liabilities | $86,786 | $81,296 | | Total Equity | $18,559 | $18,171 | Reconciliation of GAAP and Non-GAAP Measures This section defines and reconciles non-GAAP financial measures, such as organic revenue and core results, which are used to provide a clearer view of underlying business performance Explanation of Non-GAAP Measures and Glossary This section defines non-GAAP financial measures like 'organic revenue performance' and 'core results', used for internal decision-making and investor transparency - PepsiCo uses non-GAAP measures internally for operating and strategic decisions and believes they provide additional transparency for investors to evaluate business performance and trends[28] - Items excluded from GAAP results to arrive at 'Core' non-GAAP results include mark-to-market net impacts, restructuring and impairment charges, acquisition/divestiture-related charges, and product recall impacts[34][35][36] - Organic revenue is a non-GAAP measure that adjusts reported revenue for the impacts of foreign exchange translation, acquisitions, and divestitures to provide a clearer view of ongoing business performance[43] Financial Reconciliations This section provides detailed reconciliations between GAAP and non-GAAP figures, adjusting reported net revenue, operating profit, and EPS for significant items like impairment charges Organic Revenue Performance Reconciliation For Q2 2025, total reported net revenue growth was 1%, adjusted to 2% organic growth after accounting for foreign exchange impacts Q2 2025 Revenue Reconciliation Summary | (in millions) | Reported Net Revenue (GAAP) | Organic Revenue (non-GAAP) | | :--- | :--- | :--- | | Q2 2025 | $22,726 | $22,970 | | Q2 2024 | $22,501 | $22,501 | | % Change | 1% | 2% | YTD 2025 Revenue Reconciliation Summary | (in millions) | Reported Net Revenue (GAAP) | Organic Revenue (non-GAAP) | | :--- | :--- | :--- | | YTD 2025 | $40,645 | $41,433 | | YTD 2024 | $40,751 | $40,751 | | % Change | 0% | 2% | Operating Profit and EPS Reconciliation For Q2 2025, reported operating profit of $1,789 million was adjusted by a $1,860 million impairment charge to arrive at a core operating profit of $3,911 million Q2 2025 Operating Profit Reconciliation (in millions) | | Amount | | :--- | :--- | | Reported Operating Profit (GAAP) | $1,789 | | Impairment and other charges | $1,860 | | Restructuring and impairment charges | $215 | | Acquisition and divestiture-related charges | $62 | | Mark-to-market net impact | $(15) | | Core Operating Profit (non-GAAP) | $3,911 | Q2 2025 EPS Reconciliation | | Amount | | :--- | :--- | | Reported Diluted EPS (GAAP) | $0.92 | | Impairment and other charges | $1.05 | | Restructuring and impairment charges | $0.12 | | Acquisition and divestiture-related charges | $0.03 | | Mark-to-market net impact | $(0.01) | | Core Diluted EPS (non-GAAP) | $2.12 | Fiscal 2024 EPS Reconciliation | | Amount | | :--- | :--- | | Reported diluted EPS (GAAP) | $6.95 | | Adjustments (Restructuring, Impairment, etc.) | $1.21 | | Core diluted EPS (non-GAAP) | $8.16 | Cautionary Statement This section serves as a legal disclaimer, advising that all forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are based on currently available information and are not guarantees of future performance[80] - Identified risks include, but are not limited to: future demand, brand image, product quality, competition, supply chain costs, geopolitical conditions, economic changes, cyber incidents, and new taxes or regulations[80] - The company undertakes no obligation to update any forward-looking statements[81]