The Monster Beverage Company is holding a conference call to discuss their first quarter results for 2024. CEO Rodney Sacks, Vice Chairman and Co-CEO Hilton Schlosberg, and CFO Tom Kelly are present on the call. Tom Kelly reminds listeners that certain statements made during the call may be considered forward-looking statements and are subject to risks and uncertainties. The company assumes no obligation to update these statements.

In the 2024 first quarter, the company achieved record net sales of $1.9 billion, a 11.8% increase from the previous year. There was a clerical error in the press release, but all other numbers are correct. Gross profit as a percentage of net sales increased due to decreased costs and pricing actions, offset by geographical sales mix. Operating expenses also increased, primarily due to increased storage and marketing expenses. Distribution expenses were $94.4 million, or 5% of net sales.

The 2024 first quarter saw an 11.7% increase in operating income and a 11.2% increase in net income compared to the 2023 first quarter. The effective tax rate also increased due to a decrease in stock based compensation deduction. The company implemented price increases in certain markets and continues to have market share leadership in the energy drink category in the United States. Sales for the company's energy brands saw mixed results, with Reign and NOS seeing increases while Monster and Full Throttle saw declines. Sales in the energy drink category overall increased in both the 13-week and four-week periods.

In the convenience and gas channel, the company's energy brand sales decreased by 2.1%, with Monster sales down by 3.3%. Reign and NOS saw increases, while Full Throttle and Red Bull had mixed results. The company's market share in the energy drink category decreased to 35.7%, but including Bang, it increased to 37.3%. Competitors such as Celsius, C4, and Five Hour also had significant market shares. In the coffee plus energy drink category, sales decreased by 10.7%, with Java Monster and Starbucks Energy seeing decreases. However, Java Monster's market share increased to 59.5%, while Starbucks Energy's decreased to 40.1%. In Canada, the energy drink category saw an overall increase in sales, while the company's energy drink brands saw a smaller increase and a decrease in market share.

In March 2024, Monster's sales and market share in Mexico decreased, while Full Throttle and Predator saw increases. The energy drink category also saw a significant increase in sales. In Brazil, Monster's sales and market share increased, while in Argentina and Chile they saw even larger increases. Inflation and promotions in the OXXO convenience chain can greatly impact sales in these countries. Overall, Monster remains the top energy brand in Argentina, Brazil, and Chile.

The Nielsen numbers for Monster's retail market share in value in different countries in EMEA vary and should only be used as a guide. In some countries, Monster's market share grew, while in others it declined. In Australia, the energy drink category saw a 9.5% increase and Monster's sales increased by 27.5%.

In the first quarter of 2024, Monster's market share in Japan increased by 6.8 points to 59.5%, while in South Korea it decreased by 5.3 points to 51.4%. Net sales outside of the U.S. accounted for 39.2% of total net sales, with a negative impact from foreign currency exchange rates. In EMEA, net sales increased by 28.2% in dollars and 32% on a currency neutral basis, with a gross profit percentage of 34%. Monster launched a strategic initiative in 27 markets with the release of Monster Energy Sugar and gained market share in various countries in the region.

In the Asia Pacific region, net sales were flat in dollars but increased 6% on a currency neutral basis in the first quarter of 2024. Japan and South Korea saw decreases and increases in net sales respectively, while China saw significant growth. In Oceania, net sales decreased, and in Latin America, net sales increased significantly, excluding the impact of Argentina. Gross profit in the region also increased. Brazil and Mexico saw significant increases in net sales in the first quarter of 2024.

In the first quarter of 2024, net sales in Chile and Argentina decreased in dollars but increased on a currency neutral basis. The company continued to expand distribution of their Beast Unleashed and Nasty Beast brands. In the US, new flavors were launched for Reign Storm, Monster Rehab, Monster Juice, Monster Reserve, and Monster Energy Ultra. In Canada, new flavors were launched for Monster Energy Ultra, Reign Total Body Fuel, Monster Reserve, and Monster Rehab. In Mexico, Monster Energy Zero Sugar and Predator Tropical were launched in January.

During the first quarter of 2024, Monster Energy launched new products in Brazil, Puerto Rico, Oceania, EMEA, Japan, Korea, Taiwan, Hong Kong, China, the Philippines, and Azerbaijan. The company also repurchased shares of its common stock and plans to initiate a Dutch auction tender offer for up to $3 billion in value of its common stock. This offer is seen as a way for shareholders to obtain liquidity without disrupting the market.

The Company plans to fund a tender offer with $2 billion in cash and $1 billion in borrowings. The tender offer will not affect the company's authorized repurchase programs and the co-CEO intends to participate for investment and estate planning purposes. In 2025, the co-CEO plans to reduce day-to-day management responsibilities and remain as Chairman of the Board, while the other co-CEO will become CEO. April 2024 sales, including the alcohol brand segment, were estimated to be 12.9% higher than April 2023 and 14.9% higher than April 2023 excluding the alcohol brands segment. Excluding Argentina's impact, April 2024 sales were estimated to be 11.5% higher than April 2023 and 13.5% higher than April 2023 excluding the alcohol brands segment.

The paragraph discusses the estimated sales for April 2024, cautioning that short-term sales can be impacted by various factors. The company is pleased with the growth of the energy category and the success of their pricing actions. They also mention improvements in their flavor facility and plans for a new juice facility. The company is optimistic about their innovation plan for 2024 and the performance of their new products, including Nasty Beast Hard Tea and opportunities in the alcohol market. Initial feedback from retailers and consumers has been positive.

The company is pleased with the success of their affordable energy drink portfolio, including the recent launch of a non-carbonated formula in China. They are also excited about the acquisition of the Bang Energy brand. The company achieved record first quarter net sales and is open to questions about the quarter. The April sales numbers include the two extra days and there were no major timing impacts on shipment to bottlers.

The company sells to bottlers and sometimes purchases products from them. They expect the bottlers to produce on a certain day, but this may vary. Most of the company's sales are to bottlers, not direct customers. The next question is about the consumer in the US and how the company is thinking about pricing in light of potential softening and rising aluminum prices. The company has a strong brand and will only take pricing actions when it makes sense strategically. They have evaluated the situation and have decided that a pricing opportunity may be available.

The company is planning to implement a modified Dutch auction in order to repurchase a greater number of shares and do so more quickly. This decision was made due to recent softness in the market and excess cash on hand. The company has done a similar auction in the past and plans to implement it in the next week or so.

Hilton Schlosberg states that the tender offer will not affect their existing plans for buying shares and they will continue to do so opportunistically. The next question is about the pricing announcement in Q4 and whether it applies to the entire U.S. portfolio. The question also asks about the improvement in international gross margins and whether it is due to cyclical factors or structural changes. Rodney Sacks responds by saying that they have been working on improving margins across the board and that they have had a pickup in both international and U.S. margins. He also mentions that in the previous quarter, there were some non-recurring items that boosted the gross margins, but on an ongoing basis, they expect it to be at 53.5%. However, they have exceeded this expectation and will continue to work on improving margins. The next question asks about the impact of the tender offer on their existing plans for buying shares and whether they will continue to do so opportunistically. Hilton Schlosberg responds by saying that the tender offer will not affect their existing plans and they will continue to buy shares as and when they see fit.

Bonnie Herzog congratulates the company on their sales growth and asks about the slowdown in the U.S. market. Rodney Sacks responds by mentioning their strong performance in non-measured channels and their important customers in that category. He also clarifies that the company reports on sales to bottlers and direct customers, as well as sales to non-measured channels, which may explain the discrepancy between their reported numbers and Nielsen's numbers. He also mentions that they are considering reporting the percentage of sales in non-measured channels in the future.

The speaker discusses the portfolio of the company in the U.S. and mentions a potential price increase for the Monster Energy line. They also acknowledge a slight slowdown in the industry, possibly due to inflation and high gas prices. However, they remain optimistic about sales picking up in the summer and note that the company's other channels, such as the other channel business, are showing healthy sales. The company is also introducing new innovations that are gaining listings.

The speaker is discussing the positive outlook for sales and the implementation of plans going forward. They then take a question from Michael Lavery about the progress of the Bang brand and their marketing and distribution plans. The speaker mentions that sales for Bang are starting to accelerate due to increased listings in chains. They also mention that the brand was discontinued last year and they are now working to get it up and running again. The marketing for the brand is gaining momentum, and they are in the process of implementing a large influencer platform to help accelerate the brand. The speaker acknowledges that investing in marketing is necessary to achieve the brand's positioning as a lifestyle brand. The next question is from Peter Galbo about the increase in operating expenses, which the speaker acknowledges.

The company has made a conscious decision to build up inventories in order to better satisfy demand, resulting in higher operating expenses. These expenses include increased costs for freight, warehousing, sponsorships, payroll, and marketing. The company is focused on getting costs down, but acknowledges that these increases are necessary in the current competitive market. They are also investing more in social media platforms for their brands, which will have both immediate and future benefits.

Mark Astrachan of Stifel asks about international gross margins and the potential for improvement through negotiations with the bottling system. Rodney Sacks responds that they must be careful not to jeopardize the motivation behind the brands and must approach it in a judicious manner. Peter Grom of UBS asks for more information about the magnitude of the U.S. fourth quarter price increase.

The speaker is unable to disclose information about their assessment before discussing it with bottlers and retailers. The Q&A session has ended and the speaker thanks everyone for their interest in the company. They are committed to growth and believe they are well positioned in the beverage industry. The conference has concluded.

This summary was generated with AI and may contain some inaccuracies.