Financial Highlights

• Achieved record Q1 net sales of $1.9 billion, an increase of 11.8% year-over-year. 
• Gross profit margin increased to 54.1% in Q1 2024 from 52.8% in Q1 2023. 
• Operating expenses rose to $485.1 million, with operating income increasing 11.7% to $542 million. 
• Net income for Q1 2024 was $442 million, up 11.2% from Q1 2023. 
• Diluted earnings per share increased to $0.42, up 12% from the previous year. 
• Implemented price increases in certain international markets during Q1 2024. 

Market Performance and Strategy

• Maintained market share leadership in the energy drink category in the U.S. 
• Recorded varied performance across brands in both U.S. and international markets. 
• Launched Monster Energy Sugar in 27 EMEA markets and continued expansion of the Beast Unleashed and Nasty Beast brands in the U.S. 
• Introduced several new products and flavors across different regions. 

Sales and Distribution

• International sales constituted 39.2% of total net sales in Q1 2024. 
• Notable sales performance in EMEA, Latin America, and China, with various impacts from foreign currency exchange rates. 
• Expanded distribution of Beast Unleashed to 49 states in the U.S. and planned full coverage by summer. 

Share Repurchase and Tender Offer

• Purchased approximately 1.8 million shares for $97.2 million in Q1 2024. 
• Announced a modified Dutch auction tender offer for up to $3 billion in shares, funded by cash and borrowing. 

Future Outlook

• Co-CEO Rodney Sacks considering reducing day-to-day management responsibilities starting in 2025. 
• Estimated sales in April 2024 were approximately 10-14.9% higher than April 2023, adjusting for foreign currency and excluding the impact of the Argentina market. 

Product Innovation and Expansion

• Launched and planned further launches of affordable energy drink brands internationally, including Predator in China. 
• Acquired Bang Energy brand, aiming to integrate it into the broader portfolio. 

Question and Answer

April Sales and Timing Impacts

Question

• Can you clarify the April sales figure, including whether the two extra days were included and any timing-related impacts? 

Answer

• The April sales figure includes the two extra days. 
• There may be timing impacts due to the nature of the business, where sales are made to bottlers who determine production schedules. 

Consumer Trends and Pricing Strategy

Question

• How should we think about the U.S. consumer, considering potential softening and the impact of aluminum prices? 

Answer

• Monster Energy has a strong brand positioning as an affordable luxury, and pricing decisions are made strategically. 
• A price increase is being considered for later this year, likely in the fourth quarter, with details to be announced to bottlers and retailers in the coming months. 

Dutch Auction and Balance Sheet

Question

• Can you provide perspective on the decision to conduct a Dutch auction now, the use of debt, and any changes in balance sheet strategy? 

Answer

• The Dutch auction is opportunistic due to recent market softness and provides a more efficient way to repurchase shares compared to the existing programs. 
• The auction is expected to be implemented shortly, with formal announcements and documentation coming in the next week or so. 
• The tender offer is in addition to existing buyback plans, demonstrating the company’s commitment to returning capital to shareholders. 

U.S. Price Increase and International Margins

Question

• Is the U.S. price increase planned for the entire portfolio, and what factors are contributing to the best international gross margins in several years? 

Answer

• The price increase is targeted at the main Monster Energy line in the U.S., with the possibility of extending to other products. 
• International gross margins have improved due to ongoing efforts to enhance margins across the board, particularly in EMEA, and the company has exceeded previous margin expectations. 

U.S. Sales Growth and Category Trends

Question

• Can you address the factors behind the deceleration in U.S. sales growth, the performance of the category, and the contribution of shelf-space gains and innovation? 

Answer

• There has been a slight slowdown in the category, likely influenced by inflation and higher gas prices impacting consumer behavior. 
• Monster Energy remains optimistic, expecting a pickup in sales with the arrival of summer and continued innovation. 

Bang Energy and Marketing Strategy

Question

• Can you provide an update on Bang Energy, its progress, marketing activation, and distribution momentum? 

Answer

• Bang Energy sales are accelerating due to increased listings and the brand’s relaunch. 
• Marketing efforts are gaining momentum, with plans to accelerate influencer platform usage and invest in building the brand as a lifestyle brand. 

Operating Expense Build and Inventory Strategy

Question

• What are the drivers behind the build in operating expenses, and is it related to shelf resets, Bang Energy, or other factors? 

Answer

• Operating expenses have increased due to conscious decisions to build up inventories, improve in-stock rates, and better service demand. 
• Costs related to freight, warehousing, sponsorships, and payroll have contributed to the expense build. 
• The company maintains a focus on cost management and is actively working to reduce expenses. 

International Gross Margin Improvement and Future Negotiations

Question

• How do you view the potential for further improvement in international gross margins, particularly through negotiations with the Coca-Cola system as agreements approach renewal? 

Answer

• Improving international gross margins requires a multi-faceted approach, including managing commodities, pricing, and negotiations with the bottling community. 
• The company values its strong relationships with bottlers and is committed to maintaining a mutually beneficial partnership. 

Magnitude of U.S. Price Increase

Question

• Can you share any details regarding the potential magnitude of the U.S. price increase in the fourth quarter? 

Answer

• It would not be appropriate to discuss the specific magnitude of the price increase at this stage, as details are still being finalized before communication to bottlers and retailers.