Q4 2022 Monster Beverage Corp Earnings Call

Speaker 2: Good afternoon and welcome to the Monster Beverage Corporation fourth quarter and full year 2022 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Speaker 3: To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Rodney Sacks and Hilton Schlossberg, co-CEOs for Monster Beverage. Please go ahead. Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlossberg, our Vice Chairman and Co-Chief Executive Officer, is on the call, as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement. Before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance, and trends.

Speaker 3: Management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company that may cause actual results to differ materially from the forward-looking statements made during this call. Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on February 28, 2022 and quarterly reports on Form 10-Q , including the sections contained therein entitled Risk Factors and Forward-Looking Statements.

Speaker 3: for discussion on specific risk and uncertainties that may affect our performance. The company assumes no obligations to update any forward-looking statements, whether as a result of new information, future events, or otherwise. I would now like to hand the call over to Rodney Sex. Thank you, Tom. The company achieved record fourth quarter net sales of 1.51 billion in the 2022 fourth quarter. 6.2% higher than net sales of 1.43 billion in the 2021 comparable period at 11.9% higher on a foreign currency adjusted basis. Since the beginning of the COVID-19 pandemic and the subsequent global supply chain challenges and disruptions, the company has prioritized product availability for its consumers and customers, despite adversely impacting gross margins and operating income. The company continues to stand by its strategy to ensure product availability and solidify the continued long-term growth of the company's brands. Kanoche was acquired in February 2022 to facilitate the company's entry into the alcohol beverage sector. During 2022, Kanoche sustained margin pressures, cost of acquisition and integration, as well as certain other costs in preparation for the launch of the company's new alcohol product lines. Gross profit as a percentage of net sales for the 2022 fourth quarter was 51.8% compared with 53.9% in the comparative 2021 fourth quarter.

Speaker 3: The decreasing growth profit as a percentage of net sales for the 2022 fourth quarter, as compared to the 2021 fourth quarter, was primarily the result of one increased ingredient and other import costs, including secondary packaging, materials and increased co-packing fees. Two, geographical and product sales mix and three increased logistical costs. The decreasing growth profit as a percentage of net sales for the 2022 fourth quarter was partially offset by pricing actions. Gross profit as a percentage of net sales increased on a sequential quarterly basis to 51.8% in the 2022 fourth quarter from 51.3% in the 2022 third quarter.

Speaker 3: Gross profit is a percentage of net sales, excluding gross profit for the company's alcohol brand segment, increased on a sequential quarterly basis to 52.5% in the 2022 fourth quarter from 51.9% in the 2022 third quarter. We continue to believe that some of these increased costs we are experiencing are likely to be transitory. The depletion of our remaining higher cost imported can inventories will continue over the next few quarters but should be fully utilized during 2023. We note that our major promotion in the fourth quarter was executed with lower cost locally sourced cans in the United States and globally. We estimate that of the increasing costs of sales in the 2022 fourth quarter, approximately 60 million was comprised of one approximately 39.6 million due to increased ingredient and other input costs, including primary and secondary packaging materials and increased coat packing fees, two approximately 12.5 million due to geographical and product sales mix and three approximately 7.9 million due to increased logistical costs.

Speaker 3: We continue to experience significant increases in distribution expenses, primarily the result of increased warehousing expenses, as well as other logistical expenses which adversely impacted operating expenses. The company continues to address the challenges in its supply chain as it navigates through the uncertainty of the current global supply chain environment. We are starting to see a reduction in freight rates in the United States. Operating expenses for the 2022 fourth quarter were $390 million, compared with $354.7 million in the 2021 fourth quarter. As a percentage of net sales, operating expenses for the 2022 fourth quarter were 25.8 percent, compared with 24.9 percent in the 2021 fourth quarter and 28.9 percent in the 2019 fourth quarter pre-COVID. Distribution expenses for the 2022 fourth quarter increased to $76.1 million, which is an increase of 9 percent or 5 percent of net sales, compared to $69.8 million or 4.9 percent of net sales in the 2021 fourth quarter and 3.5 percent of net sales in the 2019 fourth quarter pre-COVID. The $6.3 million increase in distribution expenses was primarily due to higher warehouse expenses of $11.2 million as a result of higher raw materials and finished product inventories in the United States and EMEA.

Speaker 3: Partially offset by decreased freight art expenses of 4.4 million. The increase in other operating expenses was primarily due to increased payroll expenses and increased general and administrative expenses. We are now able to purchase aluminum cans from local sources globally. We have seen a reduction in cost of sales through increased use of domestic cans as we continue to cycle through existing inventories of imported cans over the next few quarters. We have re-bilted finished product inventory levels globally to return to our over-strategy of producing closer proximity to our customers. The costs of repositioning finished products to distribution centers are included in freight in costs. Operating income for the 2022-4th quarter decreased 4.5% to 394.4 million from 412.9 million in the 2021 Comparative Quarter. Net income decreased 6.1% to 301.7 million as compared to 321.3 million in the 2021 Comparable Quarter. The alluded earnings per share for the 2022-4th quarter decreased 4.9% to 57 cents from 60 cents in the fourth quarter of 2021. The alluded earnings per share exclusive of the total income per share. The amount of the alcohol segment operating losses and the adverse impacts of foreign currency exchange rates net of tax was 64 cents in the 2022-4th quarter. Through pricing actions the company was able to achieve positive pricing appreciation in the market.

Speaker 3: bangs sales decreased 47.1%

Speaker 3: The company continues to have market share leadership in the energy-driven category in the United States for the 13 weeks ended February 11, 2023. Kojit Nielsen for the four weeks ended February 11, 2023. Sales in dollars in the energy-driven category in the convenience and gas channel, including energy shots in dollars increased 15.1% over the same period in the previous year. Sales of the company's energy brands, which include rain, increased 14.8% in the four-week period in the convenience and gas channel. Sales of months increased by 13% over the same period versus the previous year, rain sales increased 26.7%,

Speaker 3: Sales of Red Bull were up 11.9%, Rockstar was up 7%, and Five Hour was down 0.3%. VPX Bang Sales decreased 48%. According to Nielsen, for the four-week standard February 11, 2023, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, decreased from 37.1% to 37%. Monster's share decreased from 31.5% a year ago to 30.9%, Rain's share increased 0.2 of a share point to 2.7%, Northern's share increased 0.2 of a point to 2.6%, and Full Throttle's share remained at 0.7 of a%. Red Bull's share decreased one point from 36.1% a year ago to 35.1%, VPX Bang's share decreased 3.8 points to 3.1%, Five Hour's share was lower by 0.6 of a point at 3.9%, Rockstar's share was down 0.3 of a point to 3.7%, Celsius's share is 4.3%, and Northern's share was down 0.3.

Speaker 3: The line is news, share is 0.7% and Ghost's share is 2.5%. According to Nielsen, for the four weeks ended February 11, 2023, sales in dollars of the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel, increased 6.2% over the same period the previous year. Sales of Java Monster, including Java Monster 300 and Java Monster Nitro cold brew were 8.1% higher in the same period versus the previous year. Sales of Starbucks Energy were 8% higher. Java Monster's share, including Java Monster 300, Java Monster Nitro cold brew of the coffee plus energy category which primarily includes Java Monster, Java Monster 300, Java Monster Nitro cold brew Starbucks double shot and triple shot Rockstar roasted and Bangeeta coffee for the four weeks ended February 11, 2023 was 54.7% up one point, while Starbucks Energy's share was 44.9% up 0.8 of a point.

Speaker 3: According to Nielsen, in all major channels in Canada, for the 12 weeks ended December 31, 2022, the energy drink category increased 13.3% in dollars. Sales of the company's energy drink brands increased 16.3% versus a year ago. The market share of the company's energy drink brands was 41%, up 1.1 points. Monster sales increased 18.3%, and its market share increased 1.6 points to 36.8%. Monster sales decreased 7%, and its market share decreased by 0.3 of a point to 1.4%. Full throttle sales increased 8.4%, and its market share remained at 0.5 of a percent. According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 26.6% for the month of January 2023. Monster sales increased 34.1%.

Speaker 3: Monsters' market sharing value increased 1.7 points to 29.4% against the comparable period the previous year. Sales of predator increased 100 and 6.2% and its market share increased 2 share points to 5.1%. The Nilfless statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and unnegatively by sales in the oxo-convenience chain, which dominates the market. Sales in the oxo-convenience chain, in turn, can be materially influenced by promotions that may be undertaken in that chain by one or more energy-pring brands during a particular month. Consequently, such expectivities could have significant impact on the monthly Nilfless statistics for Mexico.

Speaker 3: compared to December 2021, Munster's retail market sharing value increased in Argentina, from 43% to 53.5% in Chile, from 34.5% to 41.7% in Brazil for the month and January 2023, our share increased from 39.9% to 41.1%. Munster is the leading energy brand in value in Argentina, Brazil and Chile. I would like to point out that the Nielsen numbers in MIA should only be used as a guide because the channels read by Nielsen in MIA vary from country to country and are reported on varying dates within the month referred to from country to country. According to Nielsen in the 13 week period until the end of January 2023, Munster's retail market sharing value is compared to the same period the previous year grew from 14.2% to 15.2% in Belgium, from 30.7% to 31.8% in France, from 29.5% to 31% in Great Britain, from 27.3% to 32.7% in Norway, from 27.7% to 27.8% in the Republic of Ireland, from 38.6% to 40.8% in Brazil. From 15.1% to 16.5% in Sweden, Munster's retail market sharing value is compared to the same period the previous year, decline from 8.1% to 4.7% in the Netherlands and from 20% to 19.2% in South Africa. According to Nielsen in the 13 week period until the end of December 2022, Munster's retail market sharing value is compared to the same period the previous year, grew from 16.3% to 40%. From 23% to 18.4% in the Czech Republic, from 26.5% to 27.8% in Denmark.

Speaker 3: and from 27.6% to 13.5% in Italy. Once this retail market share in value as compared to the same period the previous year declined from 14.6% to 13.9% in Germany, from 38.1% to 36.8% in Greece, and from 19 to 18.3% in Poland. According to Nielsen, in the 13-week period until the end of December 2022, predators retail market share in value as compared to the same period the previous year grew from 20.4% to 31.1% in Kenya, and from 14.2% to 19.2% in Nigeria. According to IRI in Australia, monsters market share in value for the four weeks ending January 29, 2023 increased from 13.1% to 16.1% as compared to the same period the previous year. Mothers market share in value decreased from 11% to 10.7%. According to IRI in New Zealand, monsters market share in value for the four weeks ended January 22, 2023 remained at 13% as compared to the same period the previous year. Live Plus' market share in value decreased from 6.7% to 6.1%, and mothers market share in value increased from 5.8% to 6%. According to Intouj in Japan, in the month ending December 2022, monsters market share in value in the convenience store channel as compared to the same period the previous year grew from 53.7% to 54.7%. According to Nielsen in South Korea, in the month ending December 2022, monsters market share in value in all-out that's combined as compared to the same period the previous year increased from 60.2% to 64.2%. We again point out that certain market statistics that cover single months or four-week periods may often be materially influenced, positively and or negatively by promotions or other trading factors during those periods.

Speaker 3: company is continuing to address the controllable challenges in the supply chain in EMEA. We are also pleased that in the 2022 fourth quarter, Monster Gain Market share in Belgium, Czech Republic, Denmark, France, Great Britain, Italy, Norway, the Republic of Ireland, Spain and Sweden. In Asia Pacific, net sales in the 2022 fourth quarter increased half a point in dollars and increased 20.6% in local currencies over the same period in 2021. Growth profit in this region as a percentage of net sales was 42.6% versus the previous one.

Speaker 3: 34.4% in local currency as compared to the same quarter in 2021.

Speaker 3: In China, sales volume in the fourth quarter increased 5.4% as compared to the same quarter in 2021, largely impacted by COVID-related lockdowns. We remain optimistic about the prospects for the monster brand in China. In Oceania, which includes Australia, New Zealand, Tahiti, French, Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 2.9% in dollars and 16.7% in local currencies.

Speaker 3: In Latin America, including Mexico, and the Caribbean, net sales in the 2022-4th quarter increased to $45.2% and increased 57.7% in local currencies over the same period in 2021. Rose Prof. in this region, as percentage of net sales was 28.4% for the 2022-4th quarter versus 38.6% in the 2021-4th quarter. In Brazil, net sales in the 2022-4th quarter increased by 19.9% in dollars and 16.6% in local currency. Net sales in Mexico increased to $64.8% in dollars and 60.6% in local currency in the 2022-4th quarter. Net sales in Chile increased to $1% in dollars but increased 16% in local currencies in the 2022-4th quarter. Net sales in Argentina increased to $92% in dollars. And increased to $196.6% in local currency in the 2022-4th quarter. We will now provide an update on our litigation with vital pharmaceuticals, Inc., which will be referred to as Vpx.

Speaker 3: the maker of bank energy drinks. We previously discussed the trademark infringement of arbitration in which an arbitrator found against VPX and awarded Monster Energy Company, or MEC, and Orange Bank 175 million in damages, attorneys fees and costs, and an ongoing 5% royalty on future sales of certain bank energy products. VPX has appealed the judgment. Additionally, on September 29, 2022, a jury in the United States District Court for the Central District of California returned a verdict of awarding MEC approximately 293 million in damages on its claims against VPX for false advertising, misappropriation of trade secrets, and interference with monsters, contracts over shelf space with certain key retailers, the parties of briefing post trial issues. On October 10, 2022, VPX along with certain misdemistics of surgeries and affiliates filed for protection under Chapter 11 of the bankruptcy curve. The company will not recognise either award or the royalty payments until next time as they are realised or realisable.

Speaker 3: As the litigation and bankruptcy proceedings are subjudicated, we will not be answering further questions on those matters on today's call. In the first quarter of 2023, we launched the Beast Unleashed in six states through a network of beer distributors. The Beast Unleashed is a flavoured malt beverage with 6% alcohol by volume based on monsters well-known and popular flavoured profiles. We are pleased with early results and plan to expand into additional markets in the second quarter of 2023 with the goal of being national by the end of the year. We recently launched Wild Base and Hard Salcer with new packaging and great new flavours and taste profiles. The Dale's Beer family will get a refresh in the second quarter of 2023, including the introduction of Dale's American Light Lager and easy drinking Lager with 4.2% alcohol by volume, 95 calories and 2.5 carbohydrates per 12 ounce serving. Alcohol beverage innovation pipeline is robust. We look forward to sharing news of additional new products in the future. In the 2022-4th quarter in the United States, Monster Reserve Orange Dream Circle was launched at retail to expand a Monster Reserve line. Monster Energy Zero Sugar was launched at retail in the United States in January 2023. Monster Energy Zero Sugar was specifically developed at an indistinguishable Zero Sugar Analog of our original unique Monster Energy Green flavour.

Speaker 3: We are excited about the opportunities that this product will provide to our Monster consumers who have come to enjoy the unique taste profile of our original Monster green flavor which remains our leading flavor. Earlier this month we also launched Monster Energy Ultra Strawberry Dreams, Monster Reserve Kiwi Strawberry, Monster Nitro Cosmic Peach and Java Monster Cafe Latte. Initial response from consumers has been positive. In February 2023 we launched a flavor of rain called Tropical Storm in the United States and also commenced with the launch of Monster Tour Water, a pure unflavored water line in still and sparkling variants in 19.2 ounce cans. We are planning to launch Rainstorm which is positioned as a total wellness energy drink in 12 ounce sleek cans at retail in March 2023 in four flavors to address a compelling opportunity in the energy drink category. We launched several new SKUs in October in Latin America. In Chile we expanded our Ultra line by launching Ultra Gold and Ultra Watermelon. In Mexico we introduced Monster Energy Reserve Watermelon. In Puerto Rico, the Cayman Islands, Curaco and Bermuda we expanded our Rain Portfolio and launched Rain White Gummy Beer and Rain Rainbow Sherbet. In Trinidad and Tobago we launched Monster Pipeline Punch. In Australia we expanded our CORE Portfolio and launched Monster Superdry. In New Zealand we expanded our Juice Portfolio and launched Monster Juice Peppalon.

Speaker 3: which is currently exceeding our expectations. In the MEA in the fourth quarter of 2022, we launched Monster Nitro, Monster Reserve Watermelon and White Pineapple in a number of countries. In certain countries we also launched Juiced Aussie Lemonade, Ultra Gold, Ultra Rosa, and Ultra Watermelon during the 2022 fourth quarter. During the 22 fourth quarter we also launched additional SKUs of Burn and Rain in certain countries. In the MEA as part of an ongoing PAN, the MEA launched. We commenced distribution of our Monster Energy Lewis Hamilton 44 zero sugar energy drink in select the MEA markets late in the fourth quarter of 2022 to be followed by an additional 25 the MEA markets in the first quarter of 2023. During the fourth quarter of 2022, we launched Monster Rehab Lemon Tea in Japan, Monster Ultra Watermelon in Turkey, Monster Ultra Paradise in Vietnam, Predator in Malaysia and we continue the national rollout of Predator in India. We are planning to introduce the Predator brand in additional countries in APEC during the course of 2023. We estimate that on a foreign currency adjusted basis including Kanochi, January 2023 sales were approximately 16.1% higher than the comparable January 2022 sales and 13.8% higher than January 2022 excluding Kanochi. We estimate January 2023 sales including Kanochi to be approximately

Speaker 3: 12.9% higher than in January 2022, and 10.6% higher than in January 2022, excluding canarchy. January 2023 at the same number of selling days is January 2022. This will go to be caution again that sales over a short period are often disproportionately impacted by various factors such as, for example, selling days, days of the week in which holidays for, timing of new product launches and the timing of price increases, and promotions in retail stores distribute incentives as well as shifts in the timing of production. In some instances, our bottles are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottles. Furthermore, our bottling and distribution partners maintain inventory levels according to their own internal requirements, which they may alter from time to time for their own business reasons. We reiterate that sales over a short period, such as a single month, should not necessarily be imputed to or regarded as indicative of the results for a full quarter or any future period. If the COVID-19 pandemic and related and favourable economic conditions continue in certain regions, our new product innovation launches in those regions could be delayed. On November 2, 2022, the bottling directors authorised a new share repurchase program for the repurchase of up to an additional 500 million of the company's outstanding common stock. During the 2022-4th quarter, the company purchased approximately 2.3 million shares of its common stock for a total amount of 21.6 million, excluding broker commissions, under the June 2022 repurchase plan, leaving approximately 682.8 million remaining available for repurchase under the previously authorised repurchase programs. The company today announced that its put of directors has approved and declared a 241 split of its common stock that will be affected in the form of a 100% stock dividend. Each stock holder of record on March 13, 2023 will receive a dividend of one additional share of common stock for each then held share.

Speaker 2: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question to allow everyone a chance to ask questions. Again, that was star then 1 to ask a question, and at this time we will pause momentarily.

Speaker 4: of the drag on gross margin is still a result of these imported cans. And then, just looking ahead in the context of what pricing, the cost backdrop you outlined, and the modest sequential improvement we saw sequentially, how would you frame the margin recapture opportunity looking out to next year? Thanks. Okay, well, if you look back at what happened in the fourth quarter, we had a price increase in September 1 in the US.

Speaker 3: We had some price increases internationally during 2022 and into the fourth quarter of 2022. We are increasing pricing in many international markets on a phased basis starting in the early part of 2023. So a lot of the increased costs that we have been absorbing should be accommodated by increased pricing. But looking forward, we all know what's happening with aluminum. It's coming down. Certain other commodities are coming down. In Europe , we see energy coming down. So overall, I think with regard to margin, we are actually in a good place. And as you saw in this quarter, we were able to move margin on a sequential basis. We do, however, have certain costs that are not going away. For example, co-packing fees have gone up. Sugar is in tight supply because of weather situations.

Speaker 3: So there are positives as well as negatives in the system. As regards the international cans, we don't have that significant quantity left in terms of what the impact will be on gross margin. So, I think we've just got to work through those cans. They're green and ultra white. We'll work through them and we'll be good. The only issue is that we do have promotional cans from time to time. And as I've spoken on this call on a number of occasions, these cans are not promotional cans. They're just straight cans that we use in non-promotional periods. And also it depends, we have other obligations with our can companies. So it's a question of sourcing cans from the most optimal place to be able to copack. So that may be too long an explanation, but I hope it gave you a sense of what we've seen from this end. The next question comes from Chris Carey of Wells Fargo Securities. Please go ahead. Hi everyone. So I just wanted to follow up on that, but then ask a question. So, Hilton, would you expect sequential gross margin improvement from here, you know, on a steady clip just given...

Speaker 5: pricing and some improvement in commodities or overall cost of inflation. I appreciate there are other inflationary factors, but would you expect to continue to sequentially improve from here? So that's just a follow up. But then from a US perspective, I think one of the things that's coming up tonight is, you had mid-singles of pricing, to high-singles of pricing in the US in September . And yet, you know, US sales were 6% to keep, you talk to any, you know, was there any pull-forward of demand because of the pricing actions? Were there any promotions in the quarter behind the pricing? You know, maybe can you just help reconcile the revenue growth in the quarter in the US, which is basically in line with the pricing that you're taking. So, you know, thanks for that follow up on Gross Markins in the US comment. Okay, Chris, to answer your first question, you know, we don't give guidance. And I actually gave quite a robust explanation of, you know, what we see the runway for margin. So I just really don't want to estimate it because, you know, we really don't give guidance. But I think I gave you a good sense of where we are, probably too much. But that's is where it is. In respect of the price increase in the US, in September ,

Speaker 3: we actually limited the bottlers to the extent of how much they could buy in. So, I don't think that there was in fact, we don't think there was any much pull forward from Q3. I think it was just a question of the market stabilizing as you know with when price increases are put into effect, there's always a little bit of a bump as you go into more steady waters. And everything we know and that we've heard is the price really, the price increase is actually sticking. So, we had a little bit more promotional allowances in the fourth quarter and you'll see that when the case is released. But that's really consistent with bleeding in a price increase to a market in the consumer goods industry. I think the only other thing I would like to just maybe just add on that is that towards the end of the fourth quarter, I think we were not alone. I think there was a number of companies, felt some softness in the consumer pool primarily in December . But that was, and that happened and then we think we've seen an uptick again in January as we've indicated from our January numbers and you can see from the Nielsen numbers. So, it probably was a little bit of a combination of just an initial hesitancy from consumers to the price increase and then ultimately just some consumer softness but that seems to...

Speaker 3: have, you know, wrecked remedies itself in the first quarter now. The next question comes from Andrea Tashira of JP Morgan. Please go ahead. Hi, thank you. This is Drew Levine on for Andrea. Thank you for taking our question. So, Rodney, I want to continue on that point on the sort of rebound in January . And it also seemed like there was an acceleration for both Monster and the category on a three-year stack or three-year CAGR basis. So just wondering, you know, what you're sort of attributing that underlying strength and consumption to. Do you think it's the new product launches, increased interest in the category, gas prices coming down? So any thoughts around that would be helpful. Thank you. I think it's a combination of those things. I think we have got gas prices coming down. I think we have seen sort of a nice sort of increase in convenience. You remember last year, the convenience pool was always ahead of the grocery and mass channel. And last year it sort of reversed and convenience was a little slow. That seems to be coming back a little bit. And, you know, we just think that, again, pricing has sort of settled down a bit. But you can see across the whole category there has been an increase in the Nielsen numbers across the category for most people and competitors. So we're just asking just a little bit of resurgence of confidence again. Yeah, the other thing I think you should do is have a look at the, you know, when we announced third quarter results, we spoke about the October sales. And if you look at the October sales, it's not inconsistent with the quarter.

Speaker 5: And I'm talking about the fourth quarter of 22, sorry. The next question comes from Mark Astrandt of Steve Folt. Yeah, thanks in an afternoon. Hey guys. So hopefully you're doing all right there Rodney. Oh, I was just a bit of remnants of a cough for the last couple of weeks. Alright, that's good. Two questions for you. One sort of related to the recent line of questioning. But inventory is rough again sequentially. How do we think about the improvement there and is that kind of lead into flow through improvement and gross margin through 23 and maybe more bigger picture. How do you think about the relative affordability of monster and energy drinks for the first quarter of 23? Rodney, the US after the price increase, it seems like he take a look at other fabric categories. Pricing has been a steady riser over the last decade plus. So the gap is sort of narrowed. You took a little bit of pricing, but not nearly as much on a cumulative basis. You know, there are opportunity here to become more price rational.

Speaker 3: And then on their second question you asked about pricing. You know, if you go and look for example at a mountain dew at Walmart, a 20 ounce mountain dew at Walmart, their price is 218.

Speaker 3: And monster is 228. So I think as you look at the energy category and you kind of balance the pricing of 20 ounce sodas and energy drinks, remember that we now and just twisting over to convenience. We sell more energy drinks sell more at convenience than accommodated soft drinks. So there is a balance and I think we have struck a very good balance. With regard to going forward, we have a price increase planned for 24 ounce which we believe has got opportunity and we take in price in 24 ounce up beginning of April .

Speaker 3: on a relative basis over the last couple of years, even it seems like you have a pretty substantial pipeline this year, both in alcoholic beverage and your core energy drinks. Thank you. You know, I, you know, I'm not, the fact is that I think that we've actually got a really broad base of innovation. I think that,

Speaker 3: line in that area as well. So overall we think there will be a good contribution going forward from innovation which is which is exciting and so far you know initial response to things like our ultra strawberry dreams has been really positive from consumers and bottlers to the zero sugar and others so we are pretty optimistic and upbeat about innovation this year. Also we're introducing a lot of multi packs to try and increase the take home

Speaker 3: particularly in places like grocery. So again, we haven't described them that much on this call, but there's a whole skew of multi-pack and variety packs that we're actually doing in a multi-pack, which we think will be positive for the brand this year, for sales. Next question comes from Steve's powers of storage of bank. Please go ahead. Hey, thanks and good evening. Just I guess a couple of clean-ups on the gross margin topic. The first one is Rodney. I think you at the start of the call, you bridged to a $60 million increase in COGS. It's one good.

Speaker 6: you know, clarify what that was. I think if I'm not mistaken, it causes up like 70 plus. So just exactly what those numbers were and what they weren't. Number one, number two, I don't know if you can comment on the mix of cans in the fourth quarter, you know, old, you know, higher cost cans versus, you know, current, current cost cans. And if that was materially different than what you had seen in the third quarter. And then three, the Latin America gross margin, you call out sales growth there is fantastic, but the gross margin has been progressively under pressure and was down, I think, you know, 10 plus points in the fourth quarter. Just the driver's there. And if you, if you think you've got the ability to turn that, turn that gross margin progress around in Latin America.

Speaker 3: Thank you. I think Steve, we spoke about that about margins earlier on the call. margins on its sequential basis were actually up. So you know, I'm really not sure what you're referring to. And the first question that we answered spoke quite heavily about, you know, the progression of gross margins and the classes and the minuses. So maybe I'm missing something, but you know, I think we did we we did discuss margin earlier on the call. And with regard to the 60 million that we spoke about in the release, that was only the 60 million was comprised of 39.6 million due to increased ingredients and other input costs. And 12.5 due to geographical costs. What John Philip did was buy and buy shapes.

Speaker 3: and 7.9 due to increased logistical costs. And the rest of the increase in cost of sales was normal increases as you would expect to in a normal business environment. Those are the kind of exceptional ones that we've called out. This is a quick question. Thank you.

Speaker 2: This concludes our question and answer session. I would like to turn the conference back over to Mr. Rodney Sachs for any closing remarks.

Speaker 3: On behalf of the company, I'd like to thank everyone for their continued interest. We continue to believe in the company and our growth strategy and remain committed to continuing to innovate, developing to differentiate our brands and to expand the company both at home and abroad, and in particular capitalising on our relationship with the Coca-Cola bottling system.

Speaker 3: We believe that we are all well positioned in the beverage industry and continue to be optimistic about the future of our company. We hope that you remain safe and healthy. Thank you very much for your attendance. The conference is now concluded. Thank you for attending today's presentation and you may now disconnect. Thank you. Thank you.

Speaker 1: How is your 25th, 16th 1st February 2016

Will.

Good afternoon and welcome to the Monster Beverage Corporation fourth quarter and full year 2022 financial results conference call.

All participants will be in listen only mode. Should you need assistance, please signify conference specialists by pressing the start key, followed by zero. After today's presentation, there will be an opportunity to ask questions.

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I would now like to turn the conference over to Rodney Sachs and Hilton Schlossberg, Cohn CEO for Monster coverage. Good afternoon ladies and gentlemen. Thank you for attending this call. I'm Rodney Sachs, Hilton Schlossberg, I'm Vice Chairman of Co-Chief.

Executive Officer is on the call. As is Tom Kelly, our chief financial officer, Tom Kelly will now read our cautionary statement. Before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Security Act of 1933 as amended.

and Section 21e of the Securities Exchange Act of 1934 as amended, and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance, and trends. Management questions?

that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company that may cause actual results to differ materially from the forward-looking statements made during this call. Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on February 28, 2022 and quarterly reports on Form 10-Q , including the sections contained therein entitled Risk Factors and Forward-Looking Statements. For discussion on specific risks and uncertainties, please contact the Office of the Attorney

that may affect our performance. The company assumes no obligations to update any forward-looking statements, whether as a result of new information, future events, or otherwise. I would now like to hand the call over to Rodney Sachs. Thank you, Tom. The company achieved record fourth quarter net sales of 1.51 billion in the 2022 fourth quarter. 6.2% higher than net sales of 1.43 billion in the 2021 comparable period and 11.9% higher on a foreign currency adjusted basis. So this is the beginning of the COVID-19 pandemic and the subsequent global supply chain challenges and disruptions.

The company has prioritised product availability for its consumers and customers, despite adversely impacting gross margins and operating income. The company continues to stand by its strategy to ensure product availability and solidify the continued long-term growth of the company's brands. Kanoche was acquired in February 2022 to facilitate the company's entry into the alcohol beverage sector. During 2022 Kanoche sustained margin pressures, cost of acquisition and integration, as well as certain other costs in preparation for the launch of the company's new alcohol product lines.

Gross profit as a percentage of net sales for the 2022 fourth quarter was 51.8% compared with 53.9% in the comparative 2021 fourth quarter. The decreasing gross profit as a percentage of net sales for the 2022 fourth quarter as compared to the 2021 fourth quarter was primarily the result of one increased ingredients and other import costs including secondary packaging materials and increased co-packing fees.

2, geographical and product sales mix and 3 increased logistical costs. The decreasing growth profit is a percentage of net sales for the 2022 fourth quarter was partially offset by pricing actions. Gross profit is a percentage of net sales increased on a sequential quarterly basis to 51.8% in the 2022 fourth quarter from 51.3% in the 2022 third quarter. Gross profit is a percentage of net sales excluding gross profit for the company's alcohol brand segment increased on a sequential quarterly basis to 52.5% in the 2022 fourth quarter.

from 51.9% in the 2022 third quarter. We continue to believe that some of these increased costs we are experiencing are likely to be transitory. The depletion of our remaining higher cost imported can inventories will continue over the next few quarters.

but should be fully utilised during 2023. We note that our major promotion in the fourth quarter was executed with lower cost locally sourced cans in the United States and globally.

We note that our major promotion in the fourth quarter was executed with lower cost locally sourced cans in the United States and globally. We estimate that of the...

Increasing costs of sales in the 2022-4th quarter. Approximately 60 million was comprised of 1.39.6 million due to increased ingredient and other input costs including primary and secondary packaging materials and increased code packing fees.

2.0, approximately 12.5 million due to geographical and product sales mix, and 3.0, approximately 7.9 million due to increased logistical costs. We continue to experience significant increases in distribution expenses, primarily the result of increased warehousing expenses, as well as other logistical expenses which adversely impacted operating expenses.

The company continues to address the challenges in its supply chain and it navigates through the uncertainty of the current global supply chain environment. We are starting to see a reduction in freight rates in the United States, operating expenses for the 2022-4th quarter with 390 million compared with 354.7 million.

in the 2021 fourth quarter. As a percentage of net sales, operating expenses for the 2022 fourth quarter were 25.8% compared with 24.9% in the 2021 fourth quarter and 28.9% in the 2019 fourth quarter pre-COVID.

Distribution expenses for the 2022 fourth quarter increased to 76.1 million, which is an increase of 9% or 5% of net sales compared to 69.8 million or 4.9% of net sales in the 2021 fourth quarter and 3.5% of net sales in the 2019 fourth quarter pre-COVID.

The 6.3 million increase in distribution expenses was primarily due to higher warehouse expenses of 11.2 million as a result of higher raw materials and finished product inventories in the United States and EMEA, partially offset by decreased freight art expenses of 4.4 million. The increase in other operating expenses was primarily due to increased payroll expenses

and increased general and administrative expenses. We are now able to purchase aluminum cans from local sources globally. We have seen a reduction in cost of sales through increased use of domestic cans as we continue to cycle through existing inventories of imported cans over the next few quarters. We have rebuilt finished product inventory levels globally to return to the market.

to our orbit strategy of producing in closer proximity to our customers. The costs of repositioning finished products to distribution centres are included in freight in costs. Operating income for the 2022 fourth quarter decreased 4.5% to $394.4 million from $412.9 million in the 2021 comparative quarter.

Net income decreased 6.1% to $301.7 million as compared to $321.3 million in the 2021 comparable quarter. Diluted earnings per share for the 2022 fourth quarter decreased 4.9% to $0.57 from $0.60 in the fourth quarter of 2021.

diluted earnings per share exclusive of the alcohol segment operating losses and the adverse impacts of foreign currency exchange rates, net of tax was 64 cents in the 2022 fourth quarter. Through pricing actions the company was able to achieve positive pricing appreciation in the United States.

24-ounce line effective April 1, 2023.

The company also implemented price increases in the second half of 2022 in certain international markets and will be implementing additional price increases on a phased approach during the first half of 2023 in a number of international markets. The company will continue to review further opportunities for price increases and pricing actions

in order to mitigate inflation or repressions. According to the Nielsen reports for the 13 weeks through February 11, 2023 for all our blood's combined, namely convenience, grocery drug, mass merchandise, sales in dollars in energy drink category including energy shots increased by 13.1% versus the same period a year ago. Sales of the company's energy brands including Ryan.

We're up 12.1% in the 13-week period. Sales of months to up 11.3%, sales of rain were up 15.6%, sales of noise increased 20.6%, and sales of full throttle increased 1.3%.

Cells of rib will increase to 11.5%, cells of rock store increased by 3.4% and cells of 5-hour decreased to 2.4%.

VPX, banks, and sales decreased 47.1%. The company continues to have market share leadership in the energy-driven category in the United States for the 13 weeks in the February 11, 2023. According to Nielsen for the four-week ended February 11, 2023, sales in dollars in the

and energy drink category in the convenience and gas channel, including energy shots in dollars, increased 15.1% over the same period the previous year. Sales of the company's energy brands, which include rain, increased 14.8% in the four-week period in the convenience and gas channel. Sales of months to increase by 13% over the same period versus the previous year.

Rain sales increased 26.7%, Nozas was up 23.7% and Full Throttle was up 14.9%. Sales of Red Bull were up 11.9%, Rockstar was up 7% and 5-hour was down 0.3%. BPX Bang Sales decreased 48%.

According to Neilson for the four weeks ended February 11, 2023, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, decreased from 37.1% to 37%. Months of the share decreased from 31.5% a year ago to 30.9%.

Range share increased 0.2 of a share point to 2.7%, Northern share increased 0.2 of a point to 2.6%, and full throttle share remained at 0.7 of a percent. Red Bull share decreased 1 point from 36.1% a year ago to 35.1%.

Vpx bang share decreased 3.8 points to 3.1%. 5 hours share was lower, about 0.6 of a point at 3.9%. Rockstar share was down 0.3 of a point to 3.7%. Selfiest share is 4.3%. Lawnies news share is 0.7% and Ghosts share is 2.5%.

According to Neilson for the four weeks ended February 11, 2023, sales in dollars of the coffee plus energy drain category, which includes our Java Monster line in the convenience and gas channel, increased 6.2% over the same period the previous year. Sales of Java Monster, including Java Monster 300 and Java Monster Nitro,

includes Java Monster, Java Monster 300, Java Monster Nitro Cold Brew, Starbucks Double Shot and Triple Shot, Rockstar Roasted and Bancito Coffee for the four weeks ended February 11, 2023 was 54.7% up one point while Starbucks Energy's share was 44.9% up 0.8 of a point.

According to Neilson in all major channels in Canada for the 12 weeks in December 31, 2022, the energy drink category increased 13.3% in dollars. Sales of a company's energy drink brands increased 16.3% versus a year ago. Margaret's share of the company's energy drink brands was 41% up 1.1 points. Months to sales increased 18.3% and its market share increased 1.6 points.

to 36.8%. Nozze's sales decreased 7% and its market share decreased by 0.3 of a point to 1.4%. Full throttle sales increased 8.4% and its market share remained at 0.5 of a percent.

According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 26.6% for the month of January 2023. Monster's sales increased 34.1%, Monster's market sharing value increased 1.7 points to 29.4%, and Monster's sales increased 34.1%.

against the comparable period the previous year. Sales of predator increased 106.2% and its market share increased to 2 share points to 5.1%. The Nilfn statistics for Mexico cover single months, which is a short period that may often be materially influenced.

positively and or negatively by sales in the OXO convenience chain which dominates the market. Sales in the OXO convenience chain in turn can be materially influenced by promotions that may be undertaken in that chain by one or more energy drink brands during a particular month. Consequently, such activities...

could have a significant impact on the monthly Nielsen statistics for Mexico. According to Nielsen, for the month of December 2022, compared to December 2021, Monster's retail market sharing value increased in Argentina from 43% to 53.5%, in Chile from 34.5% to 41.7%.

In Brazil for the month end January 2023 our share increased from 39.9% to 41.1%. Monster is the leading energy brand in value in Argentina, Brazil and Chile. I would like to point out that the Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen in EMEA vary from country to country.

and are reported on varying dates within the month referred to from country to country. According to Nielsen, in the 13-week period until the end of January 2023, Monster's retail market share in value as compared to the same period the previous year grew from 14.2% to 15.2% in Belgium.

from 30.7% to 31.8% in France, from 29.5% to 31% in Great Britain, from 27.3% to 32.7% in Norway, from 27.7% to 27.8% in the Republic of Ireland, from 38.6% to 40.5% in the United States.

4% in Spain and from 15.1% to 16.5% in Sweden. Monster's retail market sharing value is compared to the same period the previous year Declined from 8.1% to 4.7% in the Netherlands and from 20% to 19.2% in South Africa According to Nielsen in the 13 week period until the end of December 2022

Monstler's retail market share in value as compared to the same period the previous year grew from 16.3% to 18.4% in the Czech Republic, from 26.5% to 27.8% in Denmark, and from 27.6% to 13.5% in Italy. Monstler's retail market share in value as compared to the same period the previous year declined from 14.6% to 13.9% in Germany, from 38.1% to 36.8% in Greece.

and from 19 to 18.3% in Poland. According to Nielsen, in the 13th week period until the end of December 2022, Predates his retail market share in value as compared to the same period the previous year grew from 20.4% to 31.1% in Kenya and from 14.2% to 19.2% in Nigeria. According to IRI in Australia, monster's market share in value for the four weeks ending January 20th.

to the same period the previous year. Luftpluses market sharing value decreased from 6.7% to 6.1%, and mothers market sharing value increased from 5.8% to 6%. According to Intorge in Japan in the month of December 2022, monsters market sharing value in the convenience store channel has compared to the same period the previous year grew from 53.7% to 54.7%.

According to Nielsen in South Korea, in the month ending December 2022, Monster's market sharing value in all outlets combined, as compared to the same period the previous year, increased from 60.2% to 64.2%. We again point out that certain market statistics that cover single months or four-week periods.

may often be materially influenced positively and or negatively by promotions or other trading factors during those periods. Net sales to customers outside the US were 542.5 million, 35.9% of total net sales in the 2022 fourth quarter, compared to 508.1 million, 35.7% of total net sales in the corresponding quarter in 2021.

Foreign currency exchange rates had a negative impact on net sales in US dollars by approximately 81.9 million in the 2022 fourth quarter. Included in reported geographic sales are our sales to the company's military customers which are delivered in the US, drawn shipped to the military and their customers overseas.

In MEA, net sales in the 2022-4 quarter decreased 2.3% in dollars, but increased 14.7% in local currencies over the same period in 2021. Gross profit in this region as a percentage of net sales in the fourth quarter was 33.9% compared with 32.6% in the same quarter in 2021, and compared to 34.7% in the third quarter of 2022. The company is continuing to address the controllable challenges as far chain in MEA.

6% versus 41.4% over the same period in 2021. Due in part to a product supply issue with an ingredient that impacted a number of our products in Japan, but has now been resolved net sales in the 2022-4th quarter decreased $40.4% in dollars, but increased 10% in local currency.

Sales in the 2022 fourth quarter continue to be impacted by COVID in certain channels. In South Korea, net sales increased 13.9% in dollars and increased 34.4% in local currency as compared to the same quarter in 2021. He wants to remain in regional markets, despite the overall Marsh fireball level.

to be impacted by COVID in certain channels. In South Korea, net sales increased 13.9% in dollars and increased 34.4% in local currency as compared to the same quarter in 2021. The

In China, sales volume in the fourth quarter increased 5.4% as compared to the same quarter in 2021, largely impacted by COVID-related lockdowns. We remain optimistic about the prospects for the Monster Brand in China.

In Oceania, which includes Australia, New Zealand, Tahiti, French, Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 2.9% in dollars and 16.7% in local currencies.

In Latin America, including Mexico and the Caribbean, net sales in the 2022 fourth quarter increased 45.2% in dollars and increased 57.7% in local currencies over the same period in 2021. Rose profit in this region is percentage of net sales was 28.4% for the 2022 fourth quarter versus 38.6% in the 2021 fourth quarter.

dollars but increased 16% in local currencies in the 2022 fourth quarter. Net sales in Argentina increased 92% in dollars and increased 196.6% in local currency in the 2022 fourth quarter.

We've now provided an update on our litigation with vital pharmaceuticals, Inc., which will be referred to as Vpx, the maker of bang energy drinks. We previously discussed the trademark infringement arbitration in which an arbitrator found against Vpx and awarded monster energy company, or MEC, and Orange Bang 175 million in damages, attorneys fees and costs, and an ongoing 5% royalty on future sales of certain bang energy products.

VPX has appealed the judgment. Additionally, on September 29, 2022, a jury in the United States District Court for the Central District of California returned a verdict awarding MEC approximately $293 million in damages on its claims against VPX for false advertising, misappropriation of trade secrets, and interference with Monster's contracts over shelf space with certain key retailers.

the parties are briefing post-trial issues. On October 10, 2022, VPX, along with certain of its domestic subsidiaries and affiliates, filed for protection under Chapter 11 of the Bankruptcy Code in the Southern District of Florida. While those proceedings are moving forward, VPX has undertaken to make interim royalty payments subject to potential clawbacks in certain circumstances. On February 14, 2023, VPX made its first royalty payment in the amount of approximately 3.6...

6% alcohol by volume based on Monster's well-known and popular flavor profiles. We are pleased with early results and plan to expand into additional markets in the second quarter of 2023 with the goal of being national by the end of the year.

We recently launched Wild Base and Hots also with new packaging and great new flavours and taste profiles. The Dalles Beer family will get a refresh.

In the second quarter of 2023, including the introduction of Dale's American Light Lager, an easy drinking Lager with 4.2% alcohol by volume, 95 calories and 2.5 carbohydrates per 12 ounce serving. Alcohol beverage innovation pipeline is robust. We look forward to sharing news of additional new products in the future.

In the 2022-4th quarter in the United States, Monster Reserve Orange Dream Circle was launched at retail to expand our Monster Reserve line. Monster Energy Zero Sugar was launched at retail in the United States in January 2023. Monster Energy Zero Sugar was specifically developed as an indistinguishable zero-sugar analog of our original unique Monster Energy Green flavor. We are excited about the opportunities that this product will provide.

to our Monster consumers who have come to enjoy the unique taste profile of our original Monster Green flavor which remains our leading flavor. Earlier this month we also launched Monster Energy Ultra Strawberry Dreams, Monster Reserve Kiwi Strawberry, Monster Nitro Cosmic Peach and Java Monster Cafe Latte. Initial response from consumers has been positive. In February 2023 we launched a flavor of rain called Tropical Storm in the United States.

and also commenced with the launch of Monster Tour Water, a pure, unflavered water line installed and sparkling variants in 19.2 ounce cans. We are planning to launch a rainstorm which is positioned as a total wellness energy drink in 12 ounce sleek cans at retail in March 2023 in four flavors to address a compelling opportunity in the energy drink category. We launched several new SKUs in October in Latin America. In Chile we expanded our ultra line by launching ultra gold and ultra water melon. In Mexico we introduced Monster Energy Reserve Watermelon.

In Puerto Rico, the Cayman Islands, Curaçao and Bermuda, we expanded our rain portfolio and launched rain white gummy bear and rain rainbow sherbet. In Trinidad and Tobago, we launched monster pipeline punch. In Australia, we expanded our court portfolio and launched monster super dry. In New Zealand, we expanded our juice portfolio and launched monster juice papillon, which is currently exceeding our expectations. In the fourth quarter of 2022, we launched monster nitro, monster reserve watermelon and white pineapple in a number of countries.

In certain countries we also launched juiced Aussie lemonade, ultra gold, ultra rosa and ultra watermelon during the 2022 fourth quarter. During the 2022 fourth quarter we also launched additional SKUs of burn and rain in certain countries.

In EMEA as part of an ongoing PAN EMEA launch, we commenced distribution of our monster energy Lewis Hamilton 44 zero sugar energy drink in select EMEA markets late in the fourth quarter of 2022 to be followed by an additional 25 EMEA markets in the first quarter of 2023.

During the fourth quarter of 2022, we launched Monster Rehab lemon tea in Japan, Monster Ultra watermelon in Turkey, Monster Ultra paradise in Vietnam, Predator in Malaysia and we continued the national rollout of Predator in India. We are planning to introduce the Predator brand in additional countries in APAC during the course of 2023. We estimate that on a foreign currency adjusted basis including Ken subjective.

January 2023 sales were approximately 16.1% higher than the comparable January 2022 sales and 13.8% higher than January 2022, excluding Kanaki. We estimate January 2023 sales, including Kanaki, to be approximately 12.9% higher than in January 2022 and 10.6% higher than in January 2022, excluding Kanaki. January 2023 had the same number of selling days as January 2022.

In this regard we caution again that cells of a resort period are often disproportionately impacted by various factors such as for example, selling days, days of the week in which holidays fall, timing of new product launches and the timing of price increases.

and promotions in retail stores, distributed incentives, as well as shifts in the the dozens of

In some instances our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers.

Furthermore, our bottling and distribution partners maintain inventory levels according to their own internal requirements, which they may alter from time to time for their own business We reiterate that sales over a short period, such as a single month, should not necessarily be imputed to or regarded as indicative of the results for a full quarter or any future period.

If the COVID-19 pandemic and related and favorable economic conditions continue in certain regions, our new product innovation launches in those regions could be delayed. On November 2, 2022, the board of directors authorized a new share repurchase program for the repurchase of up to an additional 500 million of the company's outstanding common stock. During the 2022 fourth quarter, the company purchased approximately 2.3 million shares of its common stock.

for a total amount of 201.6 million, excluding broker commissions, under the June 2022 repurchase plan, leaving approximately 682.8 million remaining available for repurchase under the previously authorized repurchase programs.

The company today announced that its board of directors has approved and declared a 2-4-1 split of its common stock that will be affected in the form of a 100% stock dividend. Each stockholder of record on March 13, 2023 will receive a dividend of one additional share of common stock for each then held share to be distributed after the close of trading on March 27, 2023.

The company anticipates its common stock to begin trading at the split adjusted price on March 28, 2023. In conclusion, I'd like to summarize some recent positive points. One, the energy category continues to grow globally. Two, the company has increased its raw material and finished product inventories to better service its customers and ensure availability of its products.

Three, we are seeing improvement in our growth profit margins on a quarterly sequential basis due to supply chain normalization. Four, our AFF flavour facility in Ireland is now providing a large number of flavours to our EMEA region, enabling better service levels and lower land costs to our EMEA region.

Five, we are enthusiastic for our 2023 new product innovations, notably Monster Energy Zero Sugar, which launched in January 2023 in the United States, and Monster Energy Lewis Hamilton 44 Zero Sugar energy drink in EMEA. We are also particularly enthusiastic for the planned launches of Rainstorm in March 2023, as well as tour water in the United States.

We are pleased with the early results from the launch of the Beeston Least, our first flavoured malt beverage alcohol product in six states, and the plan roll out two additional states as well as the additional alcohol opportunities that the Kanawki acquisition presents.

7. We are planning to launch rain. Total body fuel art performs energy drinks in additional international countries. And finally, 8. We are pleased with the role of predator and fury. Our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in an additional number of international countries.

I would now like to open the floor to questions about the year. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key.

To withdraw your question, please press star then 2. In the interest of time, please limit yourself to one question to allow everyone a chance to ask questions. Again, that was star then 1 to ask a question, and at this time we will pause momentarily to assemble the roster. And our first question will come from Peter Grom of UBS.

And then, you know, just looking ahead in the context of pricing, the cost backdrop you outlined and kind of the modest sequential improvement we saw, you know, sequentially, how would you frame the margin recapture opportunity looking out to next year? Thanks.

Okay, well, if you look back at what happened in the fourth quarter, we had a price increase in September 1 in the US. We had some price increases internationally during 2022 and into the fourth quarter of 2022.

We are increasing pricing in many international markets on a phased basis, starting in the early part of 2023.

So a lot of the increased costs that we have been absorbing should be accommodated by increased pricing, but you know I Looking forward. We know all know what's happening with aluminum Is coming down certain other commodities are coming down in

Europe we see energy coming down. So overall I think with regard to margin, we were actually in a good place and as you saw in this quarter we were able to move margin on a sequential basis.

We do, however, have certain costs that are not going away. For example, co-packing fees have gone up, sugar is in tight supply because of weather situations, so there are positives as well as negatives in the system. As regards the international cans, we don't have that significant quantity left in terms of the amount of water that's left in the system. And we do, however, have certain costs as regards to the international cans, so there are positives as well as negatives in the system. For example, co-packing fees have gone up, sugar is in tight supply because of weather situations,

what the impact will be on growth margin. So, I think we've just got to work through those cans. Their green and ultra white will work through them and will be good. The only issue is that we do have promotional cans from time to time. And as I've spoken on this call on a number of occasions, these cans are not promotional cans. They just straight cans that we use in non-promotional periods. And also it depends.

we have other obligations with our can companies. So it's a question of sourcing cans from the most optimal place to be able to co-pack. So that may be too long an explanation, but I hope it gave you a sense of what we've seen from the send. The next question comes from Chris Carey of Wells Fargo Securities. Please go ahead.

Hi, everyone. So I just wanted to follow up on that, but then ask a question. So Hilton, would you expect sequential gross margin improvement from here on a steady cliff just given pricing and some improvement in commodities or overall cost inflation? I appreciate there are other inflationary factors, but would you expect to continue to sequentially improve from here?

So that's just a follow up. But then, you know, from a US perspective, I think one of the things that's coming up tonight is, you know, you had, you know, mid-single digit pricing to high single digit pricing in the US in September , and yet, you know, US sales were 6%. So can you talk to any, you know, was there any pull forward of demand because of the pricing action? Were there any promotions in the quarter behind the pricing?

Maybe can you just help reconcile the revenue growth in the quarter in the US, which is basically in line with the pricing that you're taking. So thanks for that. Follow up on Gross Markins in the US comment. Okay Chris, to answer your first question, you know we don't give God.

And I actually gave quite a robust explanation of what we see the runway for margin. So I just really don't want to estimate it because we really don't give guidance. But I think I gave you a good sense of where we are, probably too much. But that is where it is. In respect of the price increase in the US in September , we actually limited the botless to the extent of how much they could buy in.

So, you know, I don't think that there was, in fact, you know, we don't think there was there was any, if much, pull forward from Q3. I think it was just a question of the market stabilizing, as you know, with when price increases are put into effect, there's always a little bit of, you know, a little bit of a bumpers you go into more steady waters. And everything we know and that we heard is the price really, the price increase is actually sticking.

So we had a little bit more promotional answers in the fourth quarter and you'll see that when the the case is released. But that's really consistent with bleeding in a price increase to market in the consumer goods industry. I think the only other thing I would like to just maybe just add on that is that towards the end of the fourth quarter, I think we were not alone.

I think there was a number of companies, felt some softness in the consumer pool, primarily in December . But that was, and that happened, and then we think we've seen an uptick again in January as we've indicated from our January numbers, and you can see from the Nielsen numbers. So it probably was a little bit of a combination just in initial hesitancy from...

consumers to the price increase and then ultimately just some consumer softness. But that seems to have, you know, rigged remedies itself in the first quarter now. The next question comes from Andrea Tashira of JPMorgan. Please go ahead. Thank you. This is Trilvia and Non for Andrea. Thank you for taking our question. So, Ron, I want to continue on that point on the sort of rebound in January . And it also seemed like there was an acceleration for both monster and the category on a three or stack or three or K or basis. So just wondering, you know, what you're sort of attributing that underlying strength and consumption to do you think it's good?

new product launches, increased interest in the category, gas prices coming down, so any thoughts around that would be helpful, thank you. I think it's a combination of those things. I think we have got gas prices coming down. I think we have seen sort of a nice sort of increase in convenience, remember last year convenience was always ahead of the.

grocery and mass channels and last year it sort of reversed and convenience was a little slow. That seems to be coming back a little bit and you know we just think that again pricing has sort of settled down a bit but you can see across the whole the whole category there has been an increase in the Nielsen numbers across the category for most people and competitors so we just are seeing just a little bit of resurgence of confidence again.

The other thing I think you should do is have a look at the, when we announced third quarter results, we spoke about the October sales. And if you look at the October sales, it's not inconsistent with the quarter.

And I'm talking about the fourth quarter of 22, sorry. The next question comes from Mark Ashton of SAFAL. Please go ahead.

Thanks and good afternoon. Hopefully you're doing alright there, Rodney. I'm fine. I just got a remnants of a cough for the last couple of weeks. That's good. Two questions for you. One sort of related to the recent line of questioning. The inventory is rough again.

has been a steady riser over the last decade plus so the gap is sort of narrow. You took a little bit of pricing but not nearly as much on a cumulative basis. You know, there are opportunity here to become more price rational from an energy category standpoint as we move forward.

Well, let's talk about the first question, Mark, about inventories. As you know, when we went out of 2021, our inventories were just too low. We were unable to service our customers without major upheavals and without major costs. …

We there you know there was no question that the inventories had to move and Move you know significantly up because bearing in mind where our sales are but as as we are you know we believe that We have sufficient inventories which is important for us to be able to service our customers Are we working on getting those inventories down? Yes? and The inventories will optimize themselves in due course

So I wouldn't be concerned, our products have a tier shelf life and it's important that we maintain sufficient inventories to service our customers. And then on that second question you asked about pricing. You know.

If you go and look, for example, at a mountain dew at Walmaw, at 20-ounce mountain dew at Walmaw, their price is 218. And monster is 228. So I think as you look at the energy category, and you kind of balance the pricing of 20-ounce so it is.

and energy drinks, remember that we now, and just twisting over to convenience, we sell more, energy drinks sell more at convenience than carbonated soft drinks. So there is a balance, and I think we have struck a very good balance. With regard to going forward, we have a price increase planned for 24 ounce, which we believe...

has got opportunity and we're taking price in 24-ounce up beginning of April . So that'll happen and we'll continue to monitor the opportunities for price increases in the US as we see margins and as we see the carbonated soft drink category. It's a whole bundle of issues that lead us to move in the direction of whether to take price.

Next question comes from Filippo Falorni of Citi. Please go ahead. Hey, good afternoon, guys. You talk about your expectations for your innovation pipeline in 2023, particularly on a relative basis over the last couple of years. Even it seems like you have a pretty substantial pipeline this year, both in alcoholic beverage and your core energy drinks. Thank you.

you know I you know I'm working the fact is that I think that we've actually got a really broad base of innovation I think that it has sort of improved over the last few years and I think we were sort of getting it right I think that will be positive for for the brand we also

or being able to secure a little more shelf space across the different channels which is helping us uh... with with innovation because uh... you know in some cases uh... we didn't get your space in some of the years post or was a difficult to to actually get the innovation to achieve the you know it's uh... the benefits that we had hoped for we think that this year we will be able to achieve those benefits we have rationalized some of the s k use and we think that we'll be able to get a good selection of our innovation on on shelf

particularly the new energy zero sugar and also the new rain subline which will go up against you know other competitors in the 12-ounce category and there there has been some additional shell space not only in the energy category but also in the sort of wellness category so I think you know in some places we'll also be able to place the rain storm sort of line in in that area as well so overall we think there will be a good contribution going forward from innovation which is which is exciting and so far you know initial response to things like our ultra strawberry

dreams has been really positive from consumers and bottlers to the zero sugar and others so we are pretty optimistic and upbeat about innovation this year. Also we're introducing a lot of multi packs to try and increase the take-home particularly in places like groceries so again we haven't described them that much on this call but there's a whole skew of multi pack and variety packs that we're actually...

you're doing in a multi-peck, which we think will be positive for the brand this year, for sales. Next question comes from Steve's powers of storage of bank. Please go ahead. Hey, thanks and good evening. Just, I guess, a couple of clean-ups on the Gross Margin topic. The first one is Rodney. I think at the start of the call, you bridged to a $60 million increase in COS. I just wanted to clarify what that was. I think if I'm not mistaken, COS is up like 70 plus. So just exactly what those numbers were and what they weren't. Number one, number two, I don't know if you can comment on the mix of cans in the fourth quarter.

not sure what you're referring to and the first question that we answered spoke, I spoke quite heavily about the progression of gross margins and the pluses and the minuses.

So maybe I'm missing something but you know I think we did discuss margin earlier on the call. And with regard to the 60 million that we spoke about in the release, that was only the 60 million was comprised of 39.6 million due to increased ingredients and other input costs.

and 12.5 due to geographical product sales mix, and 7.9 due to increased logistical costs. And the rest of the increase in cost of sales was normal increases as you would expect in a normal business environment. Those are the kind of exceptional ones that we pulled out.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Rodney Sacks for any closing remarks.

Thanks. On behalf of the company I'd like to thank everyone for their continued interest. We continue to believe in the company and our growth strategy and remain committed to continuing to innovate, develop and differentiate our brands and to expand the company both at home and abroad, and in particular capitalizing on our relationship with the Coca-Cola bottling system. We believe that we are well positioned in the beverage industry.

and continue to be optimistic about the future of our company. We hope that you remain safe and healthy. Thank you very much for your attendance. The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.