Q1 2023 Monster Beverage Corp Earnings Call

Good afternoon, and welcome to the Monster Beverage Corporation first quarter 2023 financial results Conference call.

All participants will be in a listen only mode.

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After todays presentation, there will be an opportunity to ask questions.

Please also note today's event is being recorded.

At this time I'd like to turn the floor over to Mr. Rodney sacks, and Mr. Hilton Schlosberg co Ceos of Monster beverage. Please go ahead.

Thank you very much.

Good afternoon, ladies and gentlemen, thank you for attending the school broke the sex children's plus rug Eyeglass, Chairman and co Chief Executive Officer is on Mckool as he is Tom Kelly, Our Chief Financial Officer, Tom Kelly will now read our cautionary statement.

Okay.

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 27, a of the Securities Act of 1933 as amended and section 21 E of the Securities Exchange Act of 1934 <unk>.

<unk> 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 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 March one 2023, including the sections contained therein entitled risk factors and forward looking statements.

A discussion on specific risks and uncertainties that may 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 sacks.

Thanks, Tom.

The company achieved record first quarter net sales of one 7 billion in the 2023 first quarter live important not to send higher than net sales of 1.52 billion in the 2022 comparable period and 15, 3% higher on a foreign currency adjusted basis gross profit as a percentage of net.

So for the 'twenty to 'twenty three first quarter was 52, 8% compared with 51, 1% in the comparative 2022 first quarter the increase in gross profit as a percentage of net sales.

2023 first quarter as compared to the 2022 first quarter growth.

Primarily as a result of pricing actions decreased freighting costs and decreased aluminum can cause gross profit as a percentage of net sales increased on a sequential quarterly basis 50, 248% in the 'twenty to 'twenty three first quarter from 51, 8% in the 2022 fourth quarter.

And 50, 143% in the 'twenty to 'twenty two third quarter.

Gross profit as a percentage of net sales excluding gross profit 40 companies alcohol brands segment increased on a sequential quarterly basis to 53, 6% in the 'twenty to 'twenty three first quarter up from 52, 5% in the 2022 fourth quarter and 51, 9% in the.

2022 third quarter depletion of our remaining higher cost imported cat inventories will continue over the next few quarters, which should be fully utilized during 'twenty two 'twenty three.

Operating expenses for the 'twenty to 'twenty, three first quarter with 412.8 million compared with 377 2 million into the 2022 first quarter as a percentage of net sales operating expenses for the 20th 23 for the quarter were 24, 3% compared with 24, 8% in the 2022.

The first quarter.

Distribution expenses for the trip.

Twenty-three first quarter decreased to $76 3 million or four 5% of net sales compared to $81 4 million or five 4% of net sales in the 2022 first quarter.

So I put 1 billion decreasing distribution expenses was primarily due to decreased freight expenses of $15 7 million, partially offset by higher warehouse expenses of 9.9 million as a result of higher raw materials and finished product inventories in the United States and EMEA.

The increase in other operating expenses was primarily due to increased payroll expenses.

The output you're seeing aluminum cans from locally local sources globally.

We have rebuilt finished product inventory levels globally through two into our orbit strategy of producing in closer proximity to our customers. The cost of repositioning finished products to distribution centers or included in Friday and Cros.

The company continues to address the challenges and its supply chain as it navigates through the uncertainty of the current global supply chain environment.

Operating income for the 20th twenty-three first quarter increased 21, 4% to $485 1 million from 394 5 million in the 2022 comparative quarter.

The effective tax rate for the 2023 first quarter was 21% compared with 25% in the 2022 first quarter. The decrease in the effective tax rate was primarily attributable to the increase in the stock compensation deduction in the 'twenty to 'twenty three first quarter net income increased 35 four.

1% to $397 4 million as compared to $294 2 million in the 2022 comparable quarter diluted earnings per share for the 'twenty to 'twenty three first quarter increased 36, 6% to 38 cents from 27 cents in the first quarter of 'twenty 'twenty.

Two.

Due to continued cost pressures the company implemented pricing actions in the United States.

In 2022 as well as in many other international markets in 2022 and in the first quarter of 2023.

Company plans to implement additional price increases in a number of other international markets during the binder of the 2023 yet.

Indeed in all that states the company implemented an additional price increase on its 18.6 ounce 24 ounce lines effective April one 'twenty to 'twenty three.

We will continue to review further opportunities for pricing actions in order to mitigate inflationary pressures.

According to the Nielsen reports for the 13 weeks through April 'twenty, two 'twenty twenty-three all outlets combined, namely convenience grocery drug mass merchandisers sales in dollars in the energy drink category, including energy shots increased by 12, 7% versus the same period a year ago.

Also the company's energy brands, including right, where a pinpoint 5% in the 13 week period.

Monster were up 9.5% tells a rain we were up 24.1% sales of nausea increased 14, 1% and sells a full throttle increased five 5%.

Sales of Red Bull increased 10, 6% sales of Rockstar increased by three 7% and sales of five hour decreased four 1%.

<unk> sales decreased 55.5%.

The company continues to have market share leadership in the energy drink category all outlets combined in the United States in both a 13 week and four week periods ended April 'twenty, two 2023.

According to Nielsen for the four weeks ended April 22 2023.

In dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 12, 7% over the same period the previous year.

Sales of the company's energy brands, which include reign increased 11% in the four week period in the convenience and gas channel sales of Monster increased by nine 3% over the same period versus the previous year reign sales increased 37.8% Nauseous was up eight point to 8% and full throttle was up.

Live in Sydney.

Sales of Red Bull up nine 8% Rockstar was up five 4% and five hour was down five 8%.

P X bank sales decreased 59, 5%.

According to Nielsen for the four weeks ended April 'twenty to 'twenty to 'twenty three the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars decreased from 37, 5% to 36, 9% once the share decreased from 31, 6% a year ago to 36%.

Ryan This share increased a hall for share point to 2.9% nausea share remained at 246 and full throttle share remained at 47 of a percent red Bull's share decreased four nine points from 34, 2% a year ago to 34, 3%.

P. P expands share decreased 4.2 points to two 4%.

Dollar share was lower by seven point at three 7% Rockstar share was down 1.2 of a point to three 4%.

Delphi is to shape is five 4% seafood share is two point to 8% and goes to share is 2.9%.

According to Nielsen for the four weeks ended April 22, 2000, $23000 of the coffee plus energy drink category, which includes Java Monster line in the convenience and gas channel increased 8% over the same period the previous year, It's always a Java monster, including Java Monster 300, and drove most of the mantra.

A cold brew.

Six of them sent higher.

Same period with the previous year.

The Starbucks energy with four 7% higher Java monster share of the coffee plus energy drink category for the four weeks ended April 'twenty two 2023 it was 55, 1% down 0.1 of a point, while Starbucks energy share was 44, 5% up one six points.

According to Nielsen in all major channels in Canada for the 12 weeks ended March 25, 2023, the energy drink category increased 14, 7% in dollars sales of the company's energy drink brands increased 19, 5% versus a year ago market share of the company's energy drink brands was 43.1.

Sent up one seven points Monster sales increased 19, 7% and its market share increased one six points to 38.6 nauseous sales increased four 2% and its market share decreased block 0.1 of a point to 1.3% full throttle sales decreased eight 4%.

And its market share decreased <unk>, one of a point to point to 4%.

According to Nielsen for all outlets combined in Mexico the energy.

You drink category increased 17, 8% for the month of March 2023 monster sales increased 24, 8% monsters market share in value increased one seven points to 30% against the comparable period. The previous year. Joseph credits are increased 70, 143%.

Its market share increased one seven share points to five 4% the.

The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and negatively.

In the OXXO convenience chain, which dominates the market. It's always in the OXXO 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 March 20th twenty-three compared to March 2022.

Monsters retail market share in value increased in Argentina.

Three 5% and in Chile from city, six 4% to 42, 7% in Brazil for the month and March 2023 I'll share increase drove 42, 1% to 43.9%.

Monster energy as 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 March 20th twenty-three monsters retail market share in value as compared to the same period. The previous year grew from 14 point to 8% to 15, 8% in Belgium from 18, 3% to 24, 9% in the Czech Republic from Citi, two 4% to 33.

0.4% in France from 15.

15% to 16, 6% in Germany.

Joining up with 3% to 34, 9% in Great Britain.

28, 2% to 34, 4% and Italy twenty-nine.

20th I'd put 7% to 34, 6% in Norway from 27 point non percent 28, 7% in the Republic of Ireland.

City eight 2% just sitting on four 9% in Spain and from 15, 9% to 18, 1% in Sweden.

Monsters retail market share in value as compared to the same period the previous year. The plant from seven point to 8% to four 7% in the Netherlands from 21, 2% to 19, 2% in Poland and from 21% to 19% in South Africa.

According to Nielsen in the 13 week period until the end of February 2023.

<unk> retail market share values compared to the same period the previous year increased from 27, 7%.

7% to 27, 7% in Denmark once this retail market share in value as compared to the same period the previous year. The clot from 38, 3% to 36, 5% in Greece.

According to Nielsen in the 13 week period until the end of February 2023, privileged as retail market share in value as compared to the same period. The previous year grew from 23% said, 1% in Kenya and from 14, 7% to 19, 5% in Nigeria.

According to IRI in Australia bumps.

Monsters market share in value for the four weeks ending April nine 2023 increased from 13, 5% to 16, 6% as compared to the same period the previous year mother's market share in value increased from 10, 3% to 10, 7%.

According to IRI in New Zealand monsters market share in value for the four weeks ended April 16, 20 twenty-three increased from 12, 9% to 14, 6% compared to the same period the previous year lift plus's market share in value increased from 6.1% to six 2% and mother's market share in value.

From five 7% to five 1%.

According to indulge in Japan in the month ending March 'twenty, two 'twenty three monsters market share in value in the convenience store channel as compared to the same period. The previous year grew from 52, 5% to 52, 7%.

According to Nielsen in South Korea in the month of ending March 'twenty, two 'twenty three monsters market share in value in all outlets combined as compared to the same period the previous year decreased from 59, 4% to 56, 8%.

We again point out that certain market statistics that cover single months or four week periods may often be materially influenced positively and negatively by promotions or other trading factors during those periods.

It sells to customers outside the U S with $622.9 billion 36, 7% of total net sales in the 'twenty to 'twenty, three first quarter compared to $553 4 million or 36, 4% of total net sales in the corresponding quarter in 2022.

Foreign currency exchange rates had a negative impact on net sales in U S dollars, while approximately $52 million in the 'twenty to 'twenty three for this quarter.

Included in reported geographic cells or ourselves to the company's military customers, which are delivered in the U S and drawn shipped to the military and their customers overseas.

In EMEA net sales in the 'twenty to 'twenty three first quarter increased five 7% in dollars and increased 14 point to 8% in local currencies over the same period in 2022.

Gross profit in this region as a percentage of net sales for the first quarter was 34, 7% compared to 29, 6% in the same quarter in 2022.

We're also pleased that in the 'twenty to 'twenty three first quarter Monster gained market share in Belgium, Czech Republic, Denmark, France, Germany, Great Britain, Italy, Norway Republic of Ireland, Spain, and Sweden.

In Asia Pacific net sales in the 2023 first quarter increased 11, 6% in dollars and increased 22.8% in local currencies over the same period in 2022.

Gross profit in this region as a percentage of net sales was 44, 4% versus 49% over the same period in 2022.

Net sales in Japan in the 'twenty to 'twenty, three first quarter decreased 12% in dollars, but increased one point to 8% in local currency.

In South Korea, net sales increased four 3% in dollars and increased 11, 4% in local currency as compared to the same quarter in 'twenty two.

Once it remains the market leader in Japan, and South Korea.

China in itself isn't the first quarter increased 68, 3% in dollars and income.

We used 81, 7% in local currency as compared to the same quarter in 2022, we remain optimistic about the prospects for the monster brand in China.

You know she Ana which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam net sales increased 46, 9% in dollars and 53, 8% in local currencies.

In Latin America, including Mexico, the Caribbean and it sells in the 'twenty to 'twenty three first quarter increased 30 point to 8% in dollars and increased 44% in local currencies over the same period in 2022.

Gross profit in this region as a percentage of in itself was 33% or 2023 first quarter versus 35, 4% in the 2022 first quarter.

Gross profit in the region was adversely affected by a fire at a warehouse in Chile, we are in.

[noise] minting measures to improve gross profit in this region the spots at the challenges in Chile, and continuing challenges with importing raw materials in Argentina.

In Brazil, it sells into 'twenty 'twenty first quarter increased by 28, 5% in dollars and 22, 5% in local currency.

It sells in Mexico increased 31, 9% in dollars and 21, 4% in local currency in the 2023 for this quarter.

Net sales in Chile increased 36, 3% in dollars and increased 36% in local currency in the 'twenty to 'twenty three for this quarter.

It sells in Argentina increased 13% in dollars and increased 98, 8% in local currency in the 'twenty to 'twenty three first quarter.

We will now provide an update on our litigation with block performed masuda goals, which will be referred to as V. P X. The maker of Bang energy drinks, we previously discussed the trademark infringement to arbitration.

In which an arbitrator found against V. P X and awarded Monster Energy company or a B C and Orange Bank, Inc, 175 million in damages attorneys' fees and costs and an ongoing 5% royalty on future sales instead of being in as your product E. P. X has appealed the judgment. Additionally on September 29.

2022.

There isn't a lot of states District court for the Central District of California returned a verdict awarding Amy used to get books really $293 million in damages on its claims against <unk> Dx for false advertising misappropriation of trade secrets and interference is amongst his contract other shelf space with certain key retailers.

On April 12, 2023, the district court granted M. A c's motion for permanent injunction, which amongst other things enjoins V. P X and former CEO , Jack Oh from falsely you'll deceptively climbing that bank or any other beverages contained creatine, where a form of equity.

Parties have completed briefing the remaining post trial issues.

On October 10, 2022 V P X along with certain of its domestic subsidiaries.

Affiliates filed for protection under chapter 11 of the bankruptcy code in the Southern District of Florida.

All of those proceedings on moving forward.

<unk> has undertaken to make interim royalty payments subject to potential claw back certain circumstances on February 14, 2023, <unk> made its first royalty payment in the amount of approximately three 6 million common.

The company will not recognize either reward or the royalty payments.

Until such problems theyre realized or realizable.

As this litigation and bank the bankruptcy proceedings or sub Judy Kay we will not be onstream further questions on those messages on today's call.

In the first quarter.

We initially launched the Beast unleashed in six states through a network of beer distributors. We are pleased with the early results and are continuing to expand distribution into additional markets with the goal of being national by the end of the year.

It sells the beast at least during the first quarter with $25 million.

We recently relaunched Wild Basin Hall itself, so with new packaging and great new flavors and taste profiles, we are refreshing the dalles via brand and we'll be introducing Dallas in American light lagers part of the refresh.

We are planning to launch a new flavored malt beverage launch within the next few months alcohol beverage innovation pipeline is robust we look forward to sharing news of additional new products in the near future.

We launched a number of new products in the United States in the 20th twenty-three first quarter.

In January 'twenty, two 'twenty three months to energy zero sugar was launched at retail.

The energy zero sugar is available in 16 ounce cans and was specifically developed as an indistinguishable zero sugar analog of the original unique monster energy Green flavor.

February 'twenty to 'twenty, three we launched a new flavor within a highly statistical monster Ultra lot with Monster energy Ultra Strawberry dreams available in 16 ounce cans in March 2023 we launched reign stool, which is positioned as a line of total wellness energy drinks in 12 ounce sleek cans to address are compelling.

<unk> in the energy drink category rainstorm is available in four flavors.

Lindsay I'll arrange kiwi blend peach nectarine into harvest grape.

Also in March we launched rehab wants to walk very T. In 16 ounce cans will continuing to expand the distribution of monster two of warfarin still and sparkling variance into additional states.

We launched several new has kept us in the first quarter and 2023 in Canada.

In February 2023 we launched monster Ultra Peachy-keen punch Monster Aussie style eliminate and reign Rainbow ship, but.

In March 2023 months of the zero sugar in Canada.

We launched several new skus in the 'twenty to 'twenty three first quarter in Latin America in Brazil, We launched Monster Ultra watermelon. Additionally, we revamped our previous chaos product into the new monster juice chaotic.

In Mexico predecessor read that balloons at reach out to further expand our affordable energy offerings.

Uruguay, we launched our second ultra is get you with Monster Ultra Paradise in Paraguay, and Bolivia, We launched our first Juiciest got you with most of the juice Mango loco.

And Additionally, in Bolivia, we launched Fury goldstrike.

So let's go through 2020 three in Australia, We launched two Java Monster Skus Java Monster mean being in Java Monster Loca Moca.

In EMEA in the first quarter of 'twenty to 'twenty, three we launched Monster Reserve Watermelon Ultra gold Ultra Rosa Ultra watermelon, Juicy, Aussie lemonade, and Joost chaotic and not in the number of countries.

The 'twenty to 'twenty three first quarter. We also launched additional that you can use a boon British and Ryan in certain countries.

In EMEA as part of an ongoing Pan EMEA launch, we expanded the distribution of Monster Energy Lewis Hamilton 44 zero sugar energy drink to an additional 22 EMEA markets in the first quarter of 2023 B followed by another eight markets in the second quarter of 2023.

During the first quarter of 2023 we launched Monster Ultra Paradise in China, Taiwan, and Hong Kong.

April 'twenty to 'twenty, three we launched Monster reserve Watermelon in Japan.

Our strategy.

It is a brand in additional countries in APAC in the course of 2023.

We estimate that on a foreign currency adjusted basis, including the alcohol brand statement April 2023 sales were approximately $9, 9% higher than the comparable April 'twenty, two cells and seven point knobs in hard in April 2022 excluding the alcohol brands segment, we estimate April 20th.

Twenty's b cells, including the alcohol brands segment to be approximately seven 2% higher than in April 2022, and five 1% higher than in April 2022 excuse me the alcohol brands segment.

2023 had one less selling day compared to April 2022.

In this regard we 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 fall timing of new product launches and the timing of price increases and promotions in retail stores distributor incentives as well.

Shifts in the timing of production.

Some instances our bottlers are responsible for production and determine their unproductive shingles. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels.

Each of their own internal requirements, which they may also from time to time for their own business reasons.

Reiterate that sounds that over a short period, such as a single month should not necessarily be in Puget too well regarded as indicative of results for a full quarter or any future period.

In conclusion, I would like to summarize some recent positive points.

What the energy category continues to grow globally.

Two we are pleased to report that our pricing actions, which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand three.

Three we are seeing improvements in our gross profit margins on a quarterly sequential basis.

Well I if it flavor facility in Ireland is now providing a large number of flavors to our EMEA region.

[noise] beta service levels, and lower landed cost to our EMEA region.

Five we are enthusiastic for about 2023, new product innovations, notably Monster energy zero Sugar Ultra Strawberry Dreams rainstorm and two awards in the United States and Monster Energy Lewis Hamilton 44 zero sugar in EMEA.

We are pleased with the early results from the launch of the beach. The least we are continuing to expand distribution with the goal of being national by the end of the year.

So onto body additional alcohol opportunities that the Kentucky acquisition presents.

We are pleased with the initial results of our launch of rain storm, a new line of total wellness energy drinks.

Eight finally, we are pleased with the rollout of predator furey, our affordable energy drink portfolio internationally, we are proceeding with plans to launch our affordable energy brands and an additional number of international countries.

Now I'd like to open the floor to questions about the quarter.

Ladies and gentlemen, we will now begin the question and answer session.

Ask a question you May press Star and then one on you touched on phones.

We are using a speaker phone we do ask you. Please pick up the handset fired suppressing the keys to ensure the best sound quality.

To withdraw your question you May press star in Q.

In the interest of time, we also ask you please limit yourself to a single question.

We will pause momentarily to assemble the roster.

Okay.

Our first question today comes from Peter Grom from UBS. Please go ahead with your question.

Thanks, operator, and good evening, everyone. So maybe just two quick questions. If I may just one I know you don't want to get into guidance, but you continue to comment on the sequential margin performance or improvement so what.

You know coming in and costs moderating should we expect to see sequential improvement in gross margin from here.

For the year and then just somewhat related as we look at selling expense as a percentage of sales today versus 2019.

It's down quite a bit.

You look ahead is it high single digit rate that we've seen over the past couple of years sustainable or would you be looking to take that higher over time, particularly as gross margin up against junker of thanks.

So addressing your first question on gross margin as you know, we don't give guidance but.

What we can say and what we have said in previous quarters, and we've spoken about the price increases.

We have rolling price increases any.

EMEA during the whole year.

That's will escalate as the year goes through in the U S. We had a price increase as you know late last year, and we had a price increase on April one in larger sizes.

The 19.288, 18, four and the 24 ounce cans.

So that's something that will be reflected continually as the yoga. Two in addition, we took up some pricing later on in the year in Latam.

And that's and some in Latam in 2023 as well in Asia Pacific, We largely took up pricing in Q1 of this year. So they will be a benefit I believe from pricing as we go through 2023.

With regard to costs.

That's something that we continue to evaluate we know that for example, aluminum has kind of stabilized which is positive for I think for US and we've also had a situation where we've seen freight rates, reducing them and rebalanced.

We balanced freight in two sections in our P&L trading for materials and a full finished goods as they move to.

Distribution centers are regarded as part of cost of sales and trades out is obviously you regarded as an operating expense. So we are seeing some improvements.

Mentioned I think on previous calls and in the script today that yeah.

There are some challenges in our cost of sales, including what we are seeing in certain ingredients and co packing fees. So overall I think.

I could see a situation where we have the price you know we have the price benefits they seem as if the.

You know they they have been essentially.

Executed and that we haven't had major resistance from.

Some customers. So I think that gives you the background probably to make your own assessments.

And then on.

Your second question on selling expenses.

You know we work towards our budget on selling expenses, which we believe are necessary.

To execute at play.

And what those budgets are and where they end up with it.

Yeah. It is a factor that we very seriously consider in.

And dealing with the the needs of a consumer and the needs of the market.

So we don't really compare it to yourself.

At the end of the quarter everybody else does but we look at the needs the needs of the marketing programs and what we need to do to keep our brands exciting and a in a in the eyes of consumers.

Our next question comes from Phil Lebeau salary.

<unk> from Citi. Please go ahead with your question.

Hey, good afternoon guys.

You talked about.

Energy drink category remaining solid can you talk about what are you attacking in the violence of the AR for the category you see any signs of that.

That's a weekend at the low end of the consumer base or.

<unk> trends how about in the U S.

Particularly thank you.

So.

We don't give guidance Rodney I E, you're going to respond to that.

Go ahead.

Please go.

That's fine.

[laughter] until let's say.

We we don't give guidance and the category has in line with other consumer products seen a little bit of a slowing I think theres been a lot of our price increases across not only the energy category, but all beverage and consumer product and so there has been a little bit of slowing I think there's been a little bit of trimming of.

Benefits under a D SNP.

Programs that were increased during COVID-19 and those all sort of being pulled back a little bit generally now. So I think you would see a little bit of a of a sort of a rationalization.

Bye bye buyers as they have slightly less disposable income, but again I think that will settle down we are overall, though if you look at the look at the numbers. We gave you the Nielsen numbers. There is still a healthy growth in the energy drink category as a category, it's continuing to grow and expand.

But you know other than you know.

They the direction, you're seeing from Nielsen, we really can't.

And why don't give you any further direction, but obviously, we think that in certainly in dollar terms the academy will continue to grow.

In actual volumes they might be a little bit of a slowing but I think that we all think that it'll be more than made up by $5 increases in crossing.

Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead with your question Alright.

Alright, thank you.

I guess I wanted to ask.

A little bit about some of the innovation just maybe a little more color on you know they are a sugar the rainstorm and you know how theyre performing.

Whether they're meeting your expectation in terms of buying from retailers and shelf space allocation.

Hearing.

Got a fair amount of Incrementals.

So just wanted to verify that with you and then wanted to understand.

Yeah sure I'll take that.

Sure most of that during Q1 are you.

Expecting to kind of roll that out in a certain.

Market.

<unk>. Thank you.

Okay.

Okay. So if you look at zero sugar, we launched zero sugar, we rolled it out in Q1, so most markets.

By far the majority of them rolled out zero sugar in Q1.

As regards zero sugar.

We have actually been very pleased with the result, we had good expectations for the product and I expectations seem to have been realized.

We are not seeing a big dip in green So a lot of people have asked.

Questions about cannibalization.

But we're not seeing we're not seeing a big dip in green at all.

Green seems very much to be holding its own.

So I think that as we look at shelf space. Obviously, we've negotiated very actively this year for additional shelf space and we have achieved really commendable increases in shelf space northern being convenience not only in the in the convenience.

Independence, but across you know across the various channels.

So the only thing I would add is a bunny is internationally, we do have plans to also row.

Wrote off the zero sugar into a number of international markets, but that is not going to go everywhere at the same time, we have other things on the agenda today actually need two rollouts that there'll be an orderly rollout of other innovation internationally, but in many markets, including any image in EMEA, we will be rolling out zero sugar as well.

Yeah, and we just launched it in Canada as well so.

Really exciting times I think for that particular product.

Now with regard to the expectations Bunny sort of rainstorm really was launched right at the end of the of.

The first quarter. So it's just too early to tell but obviously, we are optimistic about it guy in the end with regard to the Beast.

Rolling it out slowly and we trying to do that in a in a cautious way and so far the results sales are some of the repeat sales have also been encouraging but again. It's early on we have a lot of additional innovation in alcohol that we are looking at and planning.

So we were quite excited it just it takes time and were all rolling it out it through this whole new distribution system, which we are continuing to build you know distributor by distributor.

It's taking time to get there, but as we see it on the call we hope to be national by the end of the year, we hope to have additional product. So you know the the whole the whole system I think he is working moving forward. According to plan.

Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead with your question.

Hi, everyone.

Hey, Chris just 111 clarification or.

Maybe if you could help the 18.6 24 hours.

You know what how meaningful are those the percentage of your overall portfolio or is there just.

Any way to frame it.

The size of that that price increase and the contribution of the total business.

And then yes.

Just a bit of a bigger picture one out of left field, a little bit but.

I guess I get question pretty often just about.

Session planning long term succession planning on monster and how.

Hum.

How strong is the bench.

How much of that bench building is going on behind closed doors.

It comes up enough that you know I I thought maybe this could be an interesting.

Place to just maybe maybe offer some perspective on just how you think about developing talent and developing talent for the long term. So yeah. Thanks for that maybe a little bit of help on the scope and the pricing and Jan just on talent development. Thanks.

Yeah, Chris.

I would refer you.

To the Nielsen numbers, and you'll see that those larger sizes are less than.

10%, probably in the 6% to 8% range, but if you are if you look at Nielsen, you'll be able to get a good good assessment.

That percentage.

On succession.

Obviously the months aboard is and Rodney and myself, we're really concerned about succession.

And it's something that we are addressing and we continued to address on an ongoing basis.

We have a very.

In our view a deep.

Strength in the bench of the team below us that are being developed and Oh growing and we are helping them develop.

So I.

I think from from from that perspective, it's something that.

As the board are very well aware of.

And we'll.

We are continuing to address that issue.

However, I didn't think Rodney is getting anywhere in the foreseeable future in fact, another a month so we.

We and will help develop and segue way when the time is right.

A new management team.

Our next question comes from Andrea <unk> from J P. Morgan. Please go ahead with your question. Thank you, operator, and Hi, Rodney.

Right.

Hi, I just have a clarification. So went back to bonnie's question on how accretive small space zero has been against ultra.

Absolutely.

And numbers in the U S. It seems that has been a great launch based on the Nielsen data, but it obviously as you look at Altra. It also has been coming at some deceleration, which obviously one would expect can.

Can you comment on who your.

First of all how is it tracking I guess plan and in terms of shelf productivity that you that you pointed out that you are gaining distribution and trying to make it obviously I created how is that number one tracking against plan and number two how you were seeing that going above and beyond the altera.

Okay. So.

Remember that we had a product called absolute zero.

And.

Zero sugar is really the the new variants of absolutely zero. So it's it's a product that was in a market that has been replaced by zero sugar. So when you compare them.

The the numbers for two zero sugar you could see that on an ACB basis, we've moved from 42% from absolute zero to 72% for zero sugar.

Distribution of zero sugar is increasing and it's climbing.

Hum.

It's not that it's it's a new product.

We had a as I say the product called absolute zero and so when we when we look at zero sugar and we look at our plans. We look at our plans for ultra we have been very satisfied so far with the launch of zero Sugar you know you look at the the ACB growth.

And.

The sales per point, and it's something that we really as I said. This earlier, we really are very excited with zero sugar.

I'm, just maybe I would just add on the ultra side you know we have.

<unk> had a really successful launch of ultra Strawberry dreams, I think that some of the I used to be if you look at your Nielsen's Youll see some of the ICB of some of the additional flavors altra of ultra heavy in fact decreased a little while I think that's something we just need to look at it and I think as you go through this change in <unk> and <unk>.

Producing a new flavor sometimes.

Some of these additionally, sky use they don't know what the top three or four or five sometimes get a little bit lost in the wash.

So that's where we've seen a little bit of a drop off in some of those additional flavors, but I think these you know these we think that there is solid and sound products and I think we just need to get it just right.

We make sure we focus on.

Just reestablishing some of the distribution levels on does and we think themselves will continue due to increased sales of ultra as a brand or sub brand have have gone up in the United States and internationally, but I think that we've had as I said some of those flanker sort of flavors are we need to just put some focus behind which we which we are doing.

And our next question comes from Mark.

Astra Chan from Stifel. Please go ahead with your question.

Hey, guys afternoon.

No.

Two two housekeeping questions, one cash balance keeps keeps growing.

Any thoughts on how.

You'd like to implement spending some of it you know share repurchase it was nice to see you. There was some interest income this quarter I assume we shouldn't be thinking that that continues to grow and then on the alcohol brands gross margin. The implied number this quarter was a little better sequentially than <unk>.

For Q anything is there kind of beneath the surface that we should consider in trying to model that business because it's clearly a lot harder to see what's going on there and then sort of the legacy business. Thanks.

So that's all.

Okay go ahead Joe.

Yeah go ahead go ahead.

That's funny.

On the alcohol side I think that what we did was we.

We had quite a drop off in the Seltzer business that we you know which is part of the brands that we acquired.

And that affects it.

The operating business, where they're running their own production that that affected their their their overhead costs because you've got some fixed cost. So as you noted in the earlier.

Last quarter last the last quarter of last year, we reported on the modules were really very centered on the what we'd call. The legacy business. Those margins are are improving we are busy sort of refreshing. The the one line out to be able to increase the capacity for doing the beast products.

And as we go forward, we will start seeing an improvement in the margin in the legacy business.

Margins on the beef side all healthier.

You know quite quite a lot better than on the legacy Kraft business side.

And as again as we that was all property smaller lower now than they will be as we start getting some some scale. We are doing some co packing we will be using our own facility and will obviously be maximizing that as we go forward. We will start working on using a different additional co Packers, we will actually lower our costs. So we do.

I think there will be additional additional margin going forward, but it is I send a margin product and we obviously are traditionally used to seeing on on the on the months Assad.

And maybe he'll take the Christian on the cash side and sure.

Okay.

Yes, Mark.

We continually are.

Are examining options to to deal with our cash balances and it's something that.

The gain is a is a board issue that Ah is receiving attention so yeah.

I really don't want to comment more than we have.

Our intention is to hopefully buy back shares to continue that program, but we are looking at some opportunities.

For further investments.

And.

It's too premature to talk about them, but there are a number and a number of possibilities that that we're looking at and in addition, it is our plan to continue.

Buying back our shares.

Yeah.

And at this time, we will be concluding today's question and answer session I'd like to turn the floor back over to Mr. Rodney sacks for any closing remarks.

Thank you 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 we 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 Bottler.

We believe that we are well positioned in the beverage industry and continue to be optimistic about the future.

Oh Gosh company, you hope that you remain safe and healthy and thank you for your attendance.

Ladies and gentlemen, the conference has now concluded we thank you for attending today's presentation. You may now disconnect your lines.

[laughter].

[noise].

Yes.

[music].

Yes.

[music].

Okay.

[music].

Sure.

Okay.

Great.

[music].

Okay.

[music].

Good afternoon, and welcome to the Monster Beverage Corporation first quarter 2023 financial results Conference call.

All participants will be in a listen only mode.

Should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions. Please.

Please also note today's event is being recorded.

At this time I would like to turn the floor over to Mr. Rodney sacks, and Mr. Hilton Schlosberg co Ceos of Monster beverage. Please go ahead.

Thank you very much.

Good afternoon, ladies and gentlemen, thank you for attending this call broking sector children's plus Brogan, Vice Chairman and co Chief Executive Officer is on the call as he is Tom Kelly, Our Chief Financial Officer, Tom Kelly will now read our cautionary statement.

Yeah.

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 27 a.

Of the Securities Act of 1933 as amended and section 21 E 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 even.

<unk> financial performance and trends.

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 March one 2023.

Including the sections contained therein entitled risk factors and forward looking statements.

For a discussion on specific risks and uncertainties that may 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 sacks.

Thanks, Tom.

The company achieved record first quarter net sales of $1 7 billion in the 'twenty to 'twenty three first quarter live important 9% higher than net sales of 1.52 billion in the 2022 comparable period and $15, 3% higher on a foreign currency adjusted basis gross profit as a percentage of net.

Sales for the 2023 first quarter was 52, 8% compared with 51, 1% in the comparative 'twenty pretty to first quarter. The increase in gross profit as a percentage of net sales.

Turning to the first quarter as compared to the 'twenty 'twenty. Two first quarter was primarily the result of pricing actions decreased freighting costs and decreased aluminum can cause gross profit as a percentage of net sales increased on a sequential quarterly basis to 52, 8% in the 'twenty to 'twenty three first quarter.

From 51, 8% in the 2022 fourth quarter and 50, 143% in the 'twenty to 'twenty two third quarter.

Gross profit as a percentage of net sales excluding gross profit for the company's alcohol brands segment increased on a sequential quarterly basis to 53, 6% in the 'twenty to 'twenty three first quarter up from 52, 5% in the 2022 fourth quarter and 51, 9% in the <unk>.

2022 third quarter.

We should have a remaining higher cost imported can inventories will continue over the next few quarters, but should be fully utilized during 2023.

Operating expenses for the 2023 first quarter with $412 8 million compared to $377 2 million in the 2022 first quarter as a percentage of net sales operating expenses for the 2023 for the quarter were 24, 3% compared with 24, 8% in the 2022.

The first quarter.

Distribution expenses were 2023 first quarter decreased to $76 3 million or four 5% of net sales compared to 81 4 million or five 4% of net sales in the 'twenty to 'twenty two first quarter.

$501 million decrease in distribution expenses was primarily due to decreased freight out expenses of $15 7 million, partially offset by higher warehouse expenses of $9 9 million as a result of higher raw materials and finished product inventories in the United States and EMEA.

The increase in other operating expenses was primarily due to increased payroll expenses.

Outputs, you're seeing aluminum cans from locally local sources globally. We have rebuilt the finished product inventory levels globally to return to our orbit strategy of producing in closer proximity to our customers.

Cost of repositioning finished product to distribution centers or included in freighting costs.

The company continues to address the challenges and its supply chain as it navigates through the uncertainty of the current global supply chain environment.

Operating income for the 'twenty two 'twenty three first quarter increased 21, 4% to $485 1 million from $319 5 million in the 2022 comparative quarter.

Effective tax rate for the 2023 first quarter was 21% compared with 25% in the 2022 first quarter. The decrease in the effective tax rate was primarily attributable to the increase in the stock compensation deduction in the 'twenty to 'twenty three first quarter.

Income increased 35, 1% to $397 4 million as compared to $294 2 million in the 'twenty to 'twenty two comparable quarter diluted earnings per share for the 2023 first quarter increased 36, 6% to 38 cents from 27 cents in the.

First quarter of 2022.

Due to continued cost pressures the company implemented pricing actions in the United States.

2022 as well as in many other international markets in 2022 and in the first quarter of 2023, the company plans to implement additional price increases in a number of other international markets. During the remainder of the 2023 year Indeed.

Indeed, it states the company implemented an additional price increase on its 18 six ounce 24 hours lines effective April one 'twenty to 'twenty three we will continue to review further opportunities for pricing actions in order to mitigate inflationary pressures.

According to the Nielsen reports for the 13 weeks through April 22, 2023, all outlets combined, namely convenience grocery drug mass merchandisers sales.

In dollars in the energy drink category, including energy shots increased by 12, 7% versus the same period a year ago.

Sales of the company's energy brands, including reign were up 10, 5% in the 13 week period.

It's a monster were up nine 5% sales of reign were up 24, 1% sales of Naus increased 14, 1% and sells a full throttle increased five 5%.

Red Bull increased 10, 6% sales of Rockstar increased by three 7% and sales of five hour decreased four 1%.

<unk> sales decreased 50, 545%.

The company continues to have market share leadership in the energy drink category all outlets combined in the United States in both a 13 week and four week periods ended April 'twenty, two 2023.

According to Nielsen for the four weeks ended April 22, 2000, $23000 in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 12, 7% over the same period the previous year.

Sales of the company's energy brands, which include reign increased 11% in the four week period in the convenience and gas channel sales of Monster increased by nine 3% over the same period versus the previous year reign sales increased 37, 8% Nauseous was up eight 8% and full throttle was up.

Kevin.

Sales of Red Bull up nine 8% Rockstar was up 5.4% five hour was down five 4%.

<unk> sales decreased 59, 5%.

According to Nielsen for the four weeks ended April 'twenty to 'twenty to 'twenty three the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars decreased from 37, 5% to 36, 9% once the shaded decrease from Citi, one, 6% a year ago to 36%.

And Ryan this share increased a hall for share point to 2.9% Nauseous share remained at 246 and full throttle share remained at 47 of a percent Red Bull share decreased <unk> nine points from 34, 2% a year ago to 34, 3%.

<unk> Bancshares decreased 4.2 points to two 4%.

I wish it was lower by seven point at three 7% Rockstar share was down <unk> two of a point to three 4%.

Celsius shape is five 4% see for sure is to point to 8% and goes share is 2.9%.

According to Nielsen for the four weeks ended April 22, 2000, $23000 of the coffee plus energy drink category, which includes Java Monster line in the convenience and gas channel increased 8% over the same period, the previous year sales of Java Monster, including Java Monster 300, and drove almost Sinatra.

Our cold brew.

Six of a percent higher.

Same period previous year.

Starbucks energy were four 7% higher Java monster share of the coffee plus energy drink category for the four weeks ended April 22, 2023. It was 55, 1% down 0.1 of a point, while Starbucks energy share was 44, 5% up one six points.

According to Nielsen in all major channels in Canada for the 12 weeks ended March 25, 2023, the energy drink category increased 14, 7% in dollars sales of the company's energy drink brands increased 19, 5% versus a year ago market share of the company's energy drink brands was 43.1.

Sent up one seven points Monster sales increased 19, 7% and its market share increased one six points to 38, six nauseous sales increased four 2% and its market share decreased <unk> one of a point to 1.3% full throttle sales decreased eight 4%.

And its market share decreased <unk>, one of a point to point to 4%.

According to Nielsen for all outlets combined in Mexico the energy.

You drink category increased 17, 8% for the month of March 2023 monster sales increased 24, 8% monsters market share in value increased one seven points to 30% against the comparable period the previous year.

The credits are increased 71, 3% and its market share increased one seven share points to five 4% the.

The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively Andrew negatively ourselves in the OXXO convenience chain, which dominates the market.

Sales in the OXXO convenience chain in turn can be materially influenced by promotions that may.

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 March 2023, compared to March 2022.

Monsters retail market share in value increased in Argentina.

Three 5% and in Chile from city, six 4% to 42, 7% in Brazil for the month and March 2023 our share increased from 42, 1% to 43, 9% Monster energy as 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 March 2023, monsters retail market share in value as compared to the same period. The previous year grew from 14 point to 8% to 15 point to 8% in Belgium from 18, 3% to 24, 9% in the Czech Republic from Citi, two 4% to study.

3.4% in France.

15% to 16, 6% in Germany from turning up with 3% to 39% in Great Britain from.

28, 2% to 34, 4% in Italy from 'twenty.

We don't put 7% to 34, 6% in Norway.

27, 9% to 28, 7% in the Republic of Ireland.

38, 2% just sitting on four 9% in Spain, and from 15, 9% to 18, 1% in Sweden.

<unk> retail market share in value as compared to the same period the previous year declined from seven point to 8% to four points of essentially in the Netherlands.

21, 2% to 19, 2% in Poland and from 21% to 19% in South Africa.

What is your Nielsen in the 13 week period until the end of February 2023, monsters retail market share in value as compared to the same period the previous year increased from 27, 7% pre.

27% to 27, 7% in Denmark monsters retail market share in value as compared to the same period. The previous year declined from 38, 3% to 36, 5% decrease.

According to Nielsen in the 13 week period until the end of February 20th twenty-three privileged as retail market share in value as compared to the same period. The previous year grew from 23% said, 1% in Kenya and from 14, 7% to 19, 5% in Nigeria.

According to IRI in Australia.

Monsters market share in value for the four weeks ending April <unk> 2023 increased from 13, 5% to 16, 6% as compared to the same period the previous year mother's market share in value increased from 10, 3% to 10, 7% CT.

According to IRI in New Zealand monsters market share value for the four weeks ended April 16, 2023 increased from 12, 9% to 14, 6% compared to the same period the previous year lift plus's market share in value increased from six 1% to six 2% and mother's market share in value decree.

From five 7% to five 1%.

According to indulge in Japan in the month ending March 'twenty, two 'twenty three monsters market share in value in the convenience store channel as compared to the same period. The previous year grew from 52, 5% to 52, 7%.

According to Nielsen in South Korea in the month of ending March 'twenty, two 'twenty three monsters market share in value in all outlets combined as compared to the same period the previous year decreased from 59, 4% to 56, 8%.

We again point out that certain market statistics that cover single months or four week periods may often be materially influenced positively and negatively by promotions or other trading factors during those periods.

It sells to customers outside the U S was $622 $9 million 36, 7% of total net sales in the 2023 first quarter compared to $553 4 million or 36, 4% of total net sales in the corresponding quarter in 2022.

Foreign currency exchange rates had a negative impact on net sales in U S dollars, while approximately $52 million in the 2023 first quarter.

Included in reported geographic cells or ourselves to the company's military customers, which are delivered in the U S and drawn shipped to the military and their customers overseas.

In EMEA net sales in the 'twenty to 'twenty three first quarter increased five 7% in dollars and increased 14 point to 8% in local currencies over the same period in 2022.

Gross profit in this region as a percentage of net sales for the first quarter was 34, 7% compared to 29, 6% in the same quarter in 2022.

We're also pleased that in the 'twenty to 'twenty three first quarter Monster gained market share in Belgium, Czech.

Czech Republic, Denmark, France, Germany, Great Britain, Italy, Norway Republic of Ireland, Spain, and Sweden.

In Asia Pacific net sales in the 2023 first quarter increased 11, 6% in dollars and increased 22, 8% in local currencies over the same period in 2022.

Gross profit in this region as a percentage of net sales was 44, 4%. This is 49% over the same period in 2022.

Sales in Japan in the 'twenty to 'twenty, three first quarter decreased 12% in dollars, but increased one point to 8% in local currency.

South Korea net sales increased four 3% in dollars and increased 11, 4% in local currency as compared to the same quarter in 22.

Once it remains the market leader in Japan, and South Korea.

China net sales in the first quarter increased 68, 3% in dollars I think.

Kris 81, 7% in local currency as compared to the same quarter in 2022, we remain optimistic about the prospects for the monster brand in China.

She Ana which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam net sales increased 46, 9% in dollars and 53, 8% in local currencies.

In Latin America, including Mexico, the Caribbean.

It sells into 'twenty two 'twenty three first quarter increased 38% in dollars and increased 44% in local currencies over the same period in 2022.

Gross profit in this region as a percentage of in itself was 33% for the 'twenty to 'twenty three first quarter versus 35, 4% in the 2022 first quarter.

Gross profit in the region was adversely affected by a fire at a warehouse in Chile, we are implementing measures to improve gross profit in this region the spot such challenges in Chile, and continuing challenges with importing raw materials in Argentina.

In Brazil, it sells into 'twenty 'twenty first quarter increased by 28, 5% in dollars and 22, 5% in local currency.

It sells in Mexico increased 31, 9% in dollars and 21, 4% in local currency in the 2023 for this quarter.

Net sales in Chile increased 36, 3% in dollars and increased 36% in local currency in the 'twenty to 'twenty three first quarter net sales in Argentina increased 13% in dollars and increased 98, 8% in local currency in the 'twenty to 'twenty three first quarter.

We will now provide an update on our litigation with vital pharmaceuticals.

Which will be referred to as V. P X the maker of Bang energy drinks, we previously discussed the trademark infringement to arbitration.

You know, which an arbitrator found against VPN and awarded Monster Energy company or a B C and Orange Bank, Inc, 175 million in damages attorneys' fees and costs and an ongoing 5% royalty on future sales of <unk> Bang and as your product.

<unk> has appealed the judgment. Additionally on September 29 2022.

It States District Court for the Central District of California returned a verdict awarding Amy approximately $293 million in damages on its claims against <unk> for false advertising misappropriation of trade secrets and interference with once this contract of a shelf space with certain key retailers.

On April 12, 2023, the district court granted <unk> motion.

For permanent injunction, which amongst other things enjoins, vps and former CEO Jack <unk>.

From falsely you'll deceptively climbing that bank or any other beverages contained creatine, where a form of coty.

Parties have completed briefing the remaining post trial issues.

On October 10, 2022 V P X 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.

Those proceedings are moving forward.

<unk> undertaken to make interim royalty payments subject to potential claw back in certain circumstances on February 14th 2023, <unk> made its first royalty payment in the amount of approximately $3 6 million to.

The company will not recognize either reward or the royalty payments.

Until such time as their realized or realizable.

As this litigation and bank the bankruptcy proceedings or subdue decay, we will not be onstream further questions on those messages on today's call.

In the first quarter.

We initially launched the Beast unleashed in six states through a network of beer distributors. We are pleased with the early results and are continuing to expand distribution into additional markets with the goal of being national by the end of the year.

It sells the visa leased during the first quarter with $25 million.

We recently relaunched Wild Basin Hall itself, so with new packaging and great new flavors and taste profiles, we are refreshing the dalles via brand and we'll be introducing Dallas in American light lagers part of the refresh.

We're planning to launch a new flavored malt beverage launch within the next few months.

<unk> beverage innovation pipeline is robust we look forward to sharing news of additional new products in the near future.

We launched a number of new products in the United States in the 'twenty to 'twenty three first quarter.

In January 2023 months to energy zero Sugar was launched at retail.

The energy zero sugar is available in 16 ounce cans and was specifically developed as an indistinguishable zero sugar analog of the original unique monster energy Green flavor.

In February 2023, we launched a new flavor within a highly statistical amongst the ultra lot with Monster energy Ultra Strawberry dreams available in 16 ounce cans.

In March 2023 we launched reign stool, which is positioned as a line of total wellness energy drinks in 12 ounce sleek cans to address a compelling opportunity in the energy drink category rainstorm is available in four flavors Valencia, Orange Kiwi blend Peach nectarine and harvest grape also.

In March we launched rehab Monster WILDBERRY T 16 ounce cans will continuing to expand the distribution of monster to a watering still and sparkling variance into additional states.

We launched several new has kept us in the first quarter in 'twenty to 'twenty three in Canada.

February 2023 we launched monster Ultra Peachy-keen punch Monster Aussie style laminate and reign Rainbow ship it.

March 'twenty two 'twenty three once the zero sugar in Canada.

We launched several new skus in the 'twenty to 'twenty three first quarter in Latin America in Brazil, We launched Monster Ultra watermelon. Additionally, we revamped our previous chaos product.

And you months to juice chaotic.

In Mexico predecessor, read Apple launched at reach out to further expand our affordable energy offerings.

Uruguay, we launched our second ultra is get you with Monster Ultra Paradise in Paraguay, and Bolivia, We launched our first Juiciest got you with most of the juice Mango loco.

And Additionally, in Bolivia, we launched Fury goldstrike.

So let's go through 2023 in Australia, We launched two Java Monster Skus Java Monster mean being in Java Monster Loca Moca.

In EMEA in the first quarter of 'twenty to 'twenty, three we launched Monster Reserve Watermelon Ultra gold Ultra Rosa Ultra watermelon, Juicy always eliminate and joost chaotic and not in the number of countries.

During the 2023 first quarter. We also launched additional skus have been criticized and Ryan in certain countries in.

In EMEA as part of an ongoing Pan EMEA launch, we expanded the distribution of Monster Energy Lewis Hamilton 44 zero sugar energy drink to an additional 22 EMEA markets in the first quarter of 2023, followed by another eight markets in the second quarter of 2023.

During the first quarter of 'twenty to 'twenty, three we launched Monster Ultra Paradise in China, Taiwan, and Hong Kong.

April 2023 we launched Monster reserve Watermelon in Japan, we are planning to use the privilege of brand in additional countries.

In the course of 2023.

We estimate I don't know if foreign currency adjusted basis, including the alcohol brands segment April 2023 sales were approximately $9, 9% higher than the <unk>.

Comparable April 'twenty, two cells and seven 4% higher than April 2022, excluding the alcohol brands segment.

Just to make the April 2023 sales, including the alcohol brands segment would be approximately seven 2% higher than the <unk>.

2022 and five 1% higher than in <unk>.

2022 excuse me the alcohol brands segment.

April 2023 had one less selling day compared to April 2022.

This regard we 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 fall timing of new product launches and the timing of price increases and promotions in retail stores distributor incentives as well as <unk>.

<unk> and the timing of production.

In some instances our bottlers are responsible for production and determine their unproductive shingles. 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 that may alter from time to time for their own business reasons.

We'd reiterate that sounds that over a short period, such as a single month should not.

Not necessarily be imputed to well regarded as indicative of results for a full quarter or any future period.

In conclusion, I would like to summarize some recent positive points.

What the energy category continues to grow globally. Two we're pleased to report that our pricing actions, which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand.

We are seeing improvements in our gross profit margins on a quarterly sequential basis.

Cool.

If if flavor facility in Ireland.

Now, providing a large number of flavors to our EMEA region, enabling better service levels and lower landed cost to our EMEA region.

I've got enthusiastic throughout 'twenty, 'twenty, three new product innovations, notably Monster energy zero sugar.

Strawberry Dreams rainstorm.

And two awards in the United States and Monster Energy Lewis Hamilton 44 zero sugar in EMEA.

Pleased with the early results from the launch of the beach. The least we are continuing to expand distribution with the goal of being national.

End of the year.

So onto body additional alcohol opportunities that cannot be acquisition presents well.

We are pleased with the initial results of our launch of rain storm, a new line of total wellness energy drinks.

Eight finally, we are pleased with the rollout of predictive theory are affordable energy drink portfolio internationally, we are proceeding with plans to launch our affordable energy brands and additional number of international countries.

I would now like to open the floor to questions about the quarter.

Ladies and gentlemen, we will now begin the question and answer session.

To ask a question you May press Star and then one on you touched on phones.

You are using a speaker phone, we do ask that you. Please pick up the handset fired suppressing the key is to ensure the best sound quality.

So withdraw your question you May press Star two.

In the interest of time, we also ask you please limit yourself to a single question.

We will pause momentarily to assemble the roster.

Yeah.

Our first question today comes from Peter Grom from UBS. Please go ahead with your question.

Thanks, operator, and good evening, everyone. So maybe just two quick questions if I may.

One I know you don't want to get into guidance, but you continue to comment on the sequential margin performance or improvement.

<unk> coming.

Coming in and costs moderating should we expect to see sequential improvement in gross margin from here as we move through the year.

And then just somewhat related as we look at selling expense as a percentage of sales today versus 2019.

It is.

Is down quite a bit so as you look ahead is it high single digit rate that we've seen over the past couple of years sustainable or would you be looking to take that higher over time, particularly as gross margins begin to improve.

So addressing your first question on gross margin as you know, we don't give guidance but.

What we can say.

What we have said in previous quarters, and we've spoken about the price increases.

We have rolling price increases.

The EMEA during the whole year so.

That will escalate as the year goes through in the U S. We had a price increase as you know late last year, and we had a price increase April one in <unk>.

Largest sizes.

The 90, 288, 18, four and the 24 ounce can.

So that's something that will be reflected continually as the yoga. Two in addition, we took up some pricing later on in the year in.

In Latam.

And thats in some in Latam in 2023 as well in Asia Pacific, We largely took up pricing in Q1 of this year. So they will be a benefit I believe from pricing as we go through 2023.

With regard to costs.

That's something that we continue to evaluate we know that for example, aluminum has kind of stabilized which is positive for I think for US and we've also had a situation where we've seen freight rates reducing.

And.

We balanced freight in two sections in our P&L trading.

For materials and food.

<unk> finished goods as they move to.

Distribution centers are regarded as part of cost of sales and.

<unk> is obviously regarded as an operating expense. So we are seeing some improvements.

We mentioned I think on previous calls and in the script today that yes.

There are some challenges in our cost of sales, including what we are seeing in certain ingredients.

And co packing fees, so overall I think.

I could see a situation where we have the price.

Price benefits they seem as if the.

They have been essentially.

We executed and that we haven't had major resistance from.

Some customers. So I think that gives you the background probably to make your own assessments.

And then on.

Your second question on selling expenses.

We work towards our budget on selling expenses, which we believe are necessary.

To execute our play.

And.

What does budgets are and where they end up.

Yes. It is.

The fact that we very seriously consider in.

In dealing with the the needs of a consumer and the needs of the market.

So we don't really compare it to sustain yourselves.

At the end of the quarter everybody else does but we look at the needs the needs of the marketing programs and what we need to do to keep our brands exciting and in the eyes of consumers.

Our next question comes from Phil Lebeau salary.

<unk> from Citi. Please go ahead with your question.

Hey, good afternoon guys.

You talked about.

The energy drink category remaining solid can you talk about what are you attacking in the balance of the year for the category you see any signs of potential weakness at the low end of the consumer base or youre seeing trends how about you.

You asked particularly thank you.

So.

We don't give guidance Rodney I E.

Just wanted to go ahead.

Please go.

That's fine.

[laughter] as Hilton said we.

We we don't give guidance and the category has in line with other consumer products seen a little bit of a slowing I think theres been a lot of our price increases across not only the energy category, but all beverage and consumer product and so there has been a little bit of slowing I think there's been a little bit of trimming of.

Benefits under the snap.

The programs that were increased during COVID-19 and those all sort of being pulled back a little bit generally now. So I think you would see a little bit of a of a sort of of rationalization.

Bye bye bye as they have slightly less disposable income, but again I think that will settle down we are overall, though if you look at the look at the numbers. We gave you the Nielsen numbers. There is still a healthy growth in the energy drink category as a category, it's continuing to grow and expand.

But you know other than you know.

The direction, you're seeing from Nielsen, we really can't.

And why don't give you any further direction, but obviously, we think that in.

And certainly in dollar terms the academy will continue to grow.

In actual volumes they might be a little bit of a slowing but I think that we all think that it'll be more than made up by $5 increases in pricing.

Our next question comes from Bonnie Herzog from Goldman Sachs. Please go ahead with your question Alright.

Alright, thank you.

I guess I wanted to.

Asked a little bit about some of the innovation, just maybe a little more color on that.

The sugar the rain dart.

How theyre performing.

Whether they're meeting your expectation in terms of buying from retailers and shelf space allocation.

Yeah.

Got a fair amount of Incrementals.

So just wanted to verify that with you and then wanted to understand.

Sure.

I'm sure most of that during Q1 are you.

You know expecting to kind of roll that out and start.

Market.

<unk>. Thank you.

Yes.

Okay. So if you look at zero sugar.

We launched zero sugar, we rolled it out in Q1, so most markets.

By far the majority.

Rolled out zero sugar in Q1.

As regards zero sugar.

We have actually been very pleased with the result, we had good expectations for the product and I expectations seem to have been realized.

We are not seeing a big dip in green So a lot of people have asked.

Questions about cannibalization.

But we're not seeing we're not seeing a big dip in green at all.

Green seems very much to be holding its own.

So.

I think that.

As we look at shelf space, obviously, we've negotiated.

Very actively this year for additional shelf space and we have achieved really commendable increases in shelf space northern being convenience not only in the convenience independence, but across across the various channels.

So the only thing I would add is a bunny is internationally, we do have plans to also.

Ro.

[noise] wrote off the zero sugar into a number of international markets, but that is not going to go everywhere at the same time, we have other things on the agenda today actually need to road outside there'll be an orderly rollout of other innovation internationally, but in many markets, including in EMEA in EMEA, we will be rolling up to zero sugar as well.

Yes.

Yes, and we just launched in Canada as well so.

Really exciting times I think for that particular product.

Now with regard to the expectations body sort of.

Rainstorm really was launched right at the end of the.

Of the first quarter. So it's just too early to tell but obviously, we are optimistic about it again.

The guy in the end with regard to the Beast.

Rolled it out slowly and we're trying to do that in a cautious way and so far the results sales. Some of the repeat sales have also been encouraging but again. It's early on we have a lot of additional innovation in alcohol that we are looking at and planning.

So we were quite excited it just takes time and were all rolling it out through this whole new distribution system, which we are continuing to build you know distributor by distributor. So it's taking time to get there, but as we see it on the call we hope to be national by the end of the year, we hope to have additional products. So you know the the whole the whole system I think.

<unk> is working moving forward according to plan.

Our next question comes from Chris Carey from Wells Fargo Securities. Please go ahead with your question.

Hi, everyone.

Hey, Chris just 111 clarification or.

Maybe if you could help the 18 24 hours.

What how meaningful are those the percentage of your overall portfolio or is it just.

Any way to frame that.

The size of that that price increase.

Contribution of the total business.

And then just.

A bigger picture one out of left field, a little bit but.

I guess I get question pretty often just about.

Session planning long term succession planning on monster Yeah.

Now.

Hum.

How strong is the badge.

How much of that bench building going on behind closed doors.

Just it comes up in op that I thought maybe this could be an interesting.

Place to just maybe maybe offer some perspective on just how you think about developing talent and developing talent for the long term. So yes. Thanks for that maybe a little bit of help on the scope of the pricing and Jan just on talent development.

Hey, Chris.

I would refer you.

Two the Nielsen numbers and Youll see that those larger sizes are less than 10.

10%, probably in the 6% to 8% range, but if you are if you look at Nielsen you.

Be able to get a good good assessment of.

Of that percentage.

On succession.

Obviously the months the board is and Rodney and myself, we're really concerned about succession.

And it's something that we are addressing and we continued to address on an ongoing basis.

We have a very.

In our view a deep.

Strength in the bench of the team below us, they're all being developed and are growing and we are helping them develop.

So I.

I think from from from that perspective, it's something that.

The board are very well aware of.

And we'll.

We are continuing to address that issue.

However, I don't think Rodney is gang anyway in the foreseeable future in fact, another a month so.

And will help develop and segue.

When the time is right.

A new management team.

Our next question comes from Andrea <unk> from Jpmorgan. Please go ahead with your question. Thank you, operator, and Hi, Rodney.

Okay.

Hi.

Couple of clarifications, so going back to Bonnie's question on how accretive small stage zero has been I guess ultra.

Absolutely.

And numbers in the U S. It seems that has been a great launch based on the Nielsen data, but it obviously as you look at Altra. It also has been coming at some deceleration, which obviously one would expect can.

Can you comment on who you are.

First of all how is it tracking I guess plan and in terms of shelf productivity that you that you pointed out that you are gaining distribution and trying to make it obviously accretive how is that number one tracking against plan and number two how youre seeing that.

Going above and beyond the Alterra.

Okay. So.

Remember that we had a product called absolute zero.

And.

Zero sugar is really the the.

The new variants of absolute zero.

That was in the market that has been replaced by zero sugar. So when you compare.

The numbers for two zero sugar you could see that on an ACB basis, we've moved from 42% from FCB zero to 72% for zero sugar. So the distribution of zero sugar is increasing and it's climbing.

Hum.

It's not that it's a new product.

We had as I say the product called absolute zero and so when we when we look at zero sugar and we look at our plans and we look at our plans for ultra we have been very satisfied so far with the launch of zero sugar.

You look at the the ACB growth.

And.

The sales per point, and it's something that we really as I said.

Said this earlier, we really are very excited with zero sugar.

Just maybe I would just add on the ultra side you know.

We have had a really successful launch of ultra Strawberry dreams, I think that some of the I used to be if you look at your Nielsen's, you'll see some of the ICB of some of the additional flavors altra of ultra heavy in fact decreased.

It's something we just need to look at and I think as you go through this change and introducing a new flavors sometimes.

Some of these additional skus that are not the top three or four or five sometimes get a little bit lost in the wash.

So that's where we've seen a little bit of a drop off in some of those additional flavors, but I think these you know these we think that there is solid and sound products and I think we just need to get it just right.

We make sure we focus on.

Just reestablishing some of the distribution levels on those and we think themselves will continue to to increase sales of ultra as a brand or sub brand have have gone up in the United States and internationally, but I think that we've had as I said some of those.

Flanker sort of flavors are we need to just put some focus behind which we which we are doing.

And our next question comes from Mark.

Oscar Chen from Stifel. Please go ahead with your question.

Hey, guys afternoon.

Bob.

Two two housekeeping questions, one cash balance keeps keeps growing.

Thoughts on how you'd.

You'd like to implement spending some of it you know share repurchase it was nice to see there is some interest income this quarter I assume we should all be thinking that that continues to grow and then on the alcohol brands gross margin. The implied number this quarter was a little better sequentially than <unk>.

For Q anything is there kind of beneath the surface that we should consider in trying to model that business because it's clearly a lot harder to see what's going on there and then sort of the legacy business.

So episodic.

Go ahead to.

That's fine.

On the alcohol side I think that what we did was.

We had quite a drop off in the seltzer business that which is part of the brands that we acquired.

And that affects it.

The operating business, where they're running their own production that affected their their overhead cost because you've got some fixed cost. So as you noted in the earlier.

Last quarter last the last quarter of last year, we reported on the modules were really very centered on the what we would call. The legacy business. Those margins are are improving we are busy sort of researching the the one line out to be able to increase the capacity for doing the beef products and.

And as we go forward, we will start seeing an improvement in the margin in the legacy business.

Margins on the beef side all healthier.

It was quite quite a lot better than on the legacy Kraft business side.

And as again as we those are probably smaller lower now than they will be as we start getting some sub scale. We are doing some co packing we will be using that facility and we will obviously be maximizing that as we go forward. We will start working on using a different additional co Packers, we will actually lower our costs. So we do.

I think there will be additional additional margin going forward, but it is I send a margin product and we obviously are traditionally used to seeing on the on the months facade.

Then maybe he'll take the question on the cash side and sure.

Yes, Mark.

We continually.

Are examining options to.

To deal with our cash balances and it's something that.

Again. This is a board issue that has received my attention. So.

I really don't want to comment more than we have that our intention is to hopefully buy back shares to continue that program.

But.

We are looking at some opportunities for.

For further investments.

And.

It's too premature to talk about them, but.

There are a number and a number of possibilities that that we're looking at and in addition, it is our plan to continue.

Buying back our shares.

Yes.

And at this time, we will be concluding today's question and answer session I'd like to turn the floor back over to Mr. Rodney sacks for any closing remarks.

Thank you in 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 we 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 Bottler.

We believe that we are well positioned in the beverage industry and continue to be optimistic about the future.

While the company.

That you remain safe and healthy and thank you for your attendance.

Ladies and gentlemen, the conference has now concluded we thank you for attending today's presentation. You may now disconnect your lines.