Rodney Sacks:

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Thank you, Tom. The company achieved record first quarter net sales of $1.9 billion in the 2024 first quarter, 11.8% higher than net sales of $1.7 billion in the 2023 comparable period and 15.6% higher on a foreign currency adjusted basis, 12.6% exclusive of Argentina's impact.

Operator:

[Operator Instructions] Our first question comes from Filippo Falorni of Citi.

Unknown Executive:

So the 2 extra days in April were obviously included in the numbers that we reported for April sales. The second part of your question, I actually didn't really understand. So maybe you can repeat it.

Unknown Executive:

Yes. So we've always spoken in our business about the fact that we sell to the bottlers. And in some cases, the bottlers particularly internationally in manufactured products for us, which we purchase from the bottlers and then sell to them as part of the distribution arrangements. And oftentimes, they determine when they want to produce. So we expect them to produce on such and such a day and such and such a month, they may produce in a subsequent month or they may produce earlier. So when we talk about ourselves, remember, there are sales to the bottlers, they are not sales to -- we do some business at direct to customers, but most of our sales are done to the bottlers.

Andrea Teixeira:

I was hoping if you can talk a bit about how we should be thinking of the consumer, in particular in the U.S.? We have been hearing a lot of your peers talk about a softening and how we should be thinking of in the context of pricing that you potentially alluded, some of your competitors have taken pricing. You decided to stay put at this point. Anything you can add and how it relates to aluminum going up on the spot price?

Operator:

The next question comes from Peter Grom of UBS.

Rodney Sacks:

I think that it's a question of timing. I think that given the recent softness in the market, we believe that it is an opportunistic time to execute an at-scale transaction of this nature. We believe that this structure gives the company the opportunity to repurchase a greater number of shares and do so more quickly than we could under the programs, which we've implemented, as you know, over the -- quarter by quarter, we've continually strategically bought stock back. We think that is a good use of our cash. Obviously, we look at acquisitions from time to time, but we have a lot of excess cash. .

Operator:

The next question comes from Chris Carey of Wells Fargo Securities.

Unknown Executive:

So referring to your first question. And you asked a question about gross margins and we -- and if you look at this quarter, we had a pickup, obviously, in international margins which we've been working on for some time, particularly in EMEA. And we also had a pickup in U.S. margins. So we've been working on improving margins across the board. You'll remember that I spoke in the first -- in the fourth quarter, when we had our final year results, and I said that our gross margin then had a few nonrecurring items in basically true-ups and rebate programs that were recognized in that fourth quarter. And I said that on an ongoing basis, on a stand-alone basis, we expected margins to be at the about the 53.5% level. Well, we did better than that. And it's something we've been working on and we'll continue to work on in trying to improve gross margins.

Bonnie Herzog:

Congratulations to you both, I guess, pending Rodney's decision. I had a question on your U.S. sales growth in the quarter, which was, I guess, a decent step down. It sounds like your business is maybe slowing month-to-month during the quarter and then a little bit in April. So could you touch on what's driving the slowdown and really for the entire category. I guess I'm also curious about this in light of your robust innovation pipeline and I think shelf-space gains. And then you mentioned that you continue to grow your sales in non-Nielsen measured channels. So first, could you just maybe clarify how your sales are performing on your end in the measured channels. And then could you give us a sense of what percentage of your business is now in nonmeasured channels, I guess, in the U.S.?

Kaumil Gajrawala:

Can I try maybe following up on Bonnie's question a little bit more, at least from the data and stuff that we're seeing, it sounds like there is maybe more of a slowdown than perhaps what you're seeing or how you're feeling about the category itself. And just if you could dig into, is that accurate? And if so, what do you think might be happening?

Michael Lavery:

Can you just give us an update on Bang and just some of your thinking on how it's progressing and specifically maybe some of the marketing activation or distribution momentum and what we might expect for plans for the rest of the year?

Operator:

The next question comes from Peter Galbo from Bank of America.

Unknown Executive:

Well, on the one hand, we took a conscious decision to build up inventories. So in doing so, we really had this objective of satisfying demand, which we really did not do very well at in previous years. So we have significant inventories now, and we -- our in-stock rates are climbing in the 95-plus percent levels. So we're able to service much better, but obviously, there's a cost to it. And freight, as you know, has gone up. And -- so that's one factor. Warehousing has gone up. So that's one factor in the -- in our operating expenses. There's nothing that's really that's tied to any particular period. These are all expenses that were incurred within the quarter and they reported as being in the quarter.

Rodney Sacks:

The only thing I would add is that when you look at the costs, and we've had increases in sponsorship and marketing and social media, those probably are the biggest cost increases. But we are diverting or focusing a little more on the social media platforms because of the full array of our brands that are more aligned to social media consumers. Those are going to take effect and we have these programs being put in place, and we're obviously expensing those costs as we incur. But I think some of the benefits will start -- we're hoping we'll start seeing them in the second and third quarter as we go into summer, and those programs become more, more active.

Mark Astrachan:

I wanted to ask who's going to be reading all of the country market share numbers, Rodney, when you transition to the full Chairman role, just kidding.

Mark Astrachan:

Seriously, I wanted to ask about international gross margins. Just curious how you think about the ability to potentially improve those in negotiating specifically better economics with the Coke system is Monster's importance to the system and to their revenue and profitability increases. And I guess maybe thinking about it broadly, right, a lot of these agreements were struck 9 years ago. So 10-year anniversary next year. I know some are up for renewal then. What about on a go-forward basis? And sort of how do you think about those discussions with the system?

Operator:

The next question comes from Peter Grom of UBS.

Unknown Executive:

Peter, it's really difficult because we've come to an assessment, and before we go out to our bottlers and our retailers, it would be -- it would not be appropriate for me to talk about that at this stage.

Rodney Sacks:

Thanks. Thank you. On behalf of Monster, I'd like to thank everyone for their continued interest in the company. We continue to believe in the company and our growth strategy and remain committed to continue to innovate, to develop and differentiate our brands and to expand the company both at home and abroad, and in particular, capitalizing on our relationship with the Coca-Cola Bottling System. We believe that we are well positioned in the beverage industry and continue to be optimistic about the future of the company. We hope that you remain safe and healthy. Thank you very much for your attendance.

Rodney Sacks:

Thank you very much. Good afternoon, ladies and gentlemen. Thanks for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Thank you, Tom. The company achieved record fourth quarter net sales of $1.73 billion in the 2023 fourth quarter, 14.4% higher than net sales of $1.51 billion in the 2022 comparable period and 16.1% higher on a foreign currency adjusted basis. Gross profit as a percentage of net sales for the 2023 fourth quarter was 54.2% compared to 51.8% in the comparative 2022 fourth quarter. As a result of the Bang Inventory Step-Up, gross profit was adversely impacted by approximately $5 million during the 2023 fourth quarter. Gross profit as a percentage of net sales was 54.5% for the 2023 fourth quarter, excluding the Bang Inventory Step-Up. The increase in gross profit as a percentage of net sales for the 2023 fourth quarter as compared to the 2022 fourth quarter was primarily the result of pricing actions, decreased freight-in costs and lower input costs. During this call, we will talk about impairment charges of approximately $39.9 million recorded in the 2023 fourth quarter related to the Alcohol Brands segment due in part to the continuing challenges in the craft beer and seltzer categories. We will refer to these charges as the alcohol impairment charges. The alcohol impairment charges related to certain non-amortizing intangibles as well as property and equipment acquired as part of the CANarchy transaction. Operating expenses for the 2023 fourth quarter were $504.4 million compared to $390 million in the 2022 fourth quarter. Operating expenses for the 2023 fourth quarter included the alcohol impairment charges. As a percentage of net sales, operating expenses for the 2023 fourth quarter were 29.2% compared with 25.8% in the 2022 fourth quarter. Exclusive of the alcohol impairment charges as a percentage of net sales, operating expenses for the 2023 fourth quarter were 26.8%. Distribution expenses for the 2023 fourth quarter were $79.6 million or 4.6% of net sales compared to $76.1 million or 5% of net sales in the 2022 fourth quarter. Operating income for the 2023 fourth quarter increased 10% to $434 million from $394.4 million in the 2022 comparative quarter. Operational income adjusted for the Bang Inventory Step-Up and the alcohol impairment charges increased 21.4% to $478.9 million for the 2023 fourth quarter. The effective tax rate for the 2023 fourth quarter was 18.5% compared with 23.3% in the 2022 fourth quarter. The decrease in the effective tax rate was primarily attributable to an increase in the stock compensation deduction. Net income increased 21.6% to $367 million as compared to $301.7 million in the 2022 comparable quarter. Net income adjusted for the Bang Inventory Step-Up and the alcohol impairment charges, net of tax, increased 33.1% to $401.5 million for the 2023 fourth quarter. Diluted earnings per share for the 2023 fourth quarter increased 22.3% to $0.35 from $0.29 in the fourth quarter of 2022. Diluted earnings per share adjusted for the Bang Inventory Step-Up and the alcohol impairment charges, net of tax, was $0.38 for the 2023 fourth quarter, an increase of 33.8%. The company has implemented price increases in the first quarter of 2024 in certain international markets. We are continuing to monitor opportunities for further pricing actions in both the United States and internationally. The company continues to have market share leadership in the energy drink category for all outlets combined in the United States in both the 13-week and 4-week periods ended February 17, 2024. According to Nielsen reports for the 13 weeks through February 17, 2024, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 5.5% versus the same period a year ago. Sales of the company's energy brands, excluding Bang, were up 0.9% in the 13-week period. Sales of Monster declined 0.7%. Sales of Reign were up 21.6%. Sales of NOS increased 5.1%. And sales of Full Throttle increased 3.6%. Sales of Red Bull increased 2.9%. According to Nielsen, for the 4 weeks ended February 17, 2024, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots, in dollars, increased 3.7% over the same period the previous year. Sales of the company's energy brands, excluding Bang, decreased 0.1% in the 4-week period in the convenience and gas channel. Sales of Monster decreased by 2% over the same period versus the previous year. Reign sales increased 17.2%. NOS sales were up 6%, and Full Throttle was up 1.7%. Sales of Red Bull were up 3.8%. According to Nielsen, for the 4 weeks ended February 17, 2024, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, decreased from 36.9% to 35.5%, excluding Bang. Including Bang, the company's market share is 37%. Monster share decreased from 30.8% a year ago to 29.1%. Reign's share increased 0.3 of a share points to 3%. NOS share increased 0.1 of a share point to 2.7%, and Full Throttle share remained at 0.7%. Bang share was 1.4%. Red Bull share increased 0.1 of a share point to 35.1%. Market share of certain competitors were as follows

Peter Grom:

Thanks, operator and good afternoon everyone. Hope you're doing well. So I wanted to ask a question specifically on gross margin. Clearly, the quarter came in a bit better relative to some of the commentary from the investor meeting. Maybe first, did something surprise you in the quarter? And then second, just going back to that same commentary from the investor meeting, there seem to be a lot of optimism that the gross margin trajectory would improve nicely from 4Q looking out to '24. I know you don't give guidance specifically, but just any thoughts on how we should think about the margin trajectory given the very strong exit rate? Thanks.

Operator:

The next question is from Filippo Falorni with Citi. Please go ahead.

Hilton Schlosberg:

Yes. Firstly, I don't think one should discount the fact that the weather was a factor. Secondly, we do have a lot of non-measured channels. And if you heard earlier in the call, January sales were -- in my book, were really impressive, the increase in January sales. Added to that, Nielsen doesn't cover everything, as we've discussed before, and there were some interesting things in January, for example, one of the big club store chains had what we call an MVM, which is a club store chain that is not read by Nielsen, and in itself is pretty substantial. Adding to that, if you go back to January 2023, we had very robust increases mainly because of the launch of 2 brands that really hit it out of the park. One was Monster Zero Sugar and the other was Ultra Strawberry Dreams. On the call, you would have heard that innovation for 2024 has really kicked off in February and is going through February through to March, so we didn't have the benefit of that innovation program earlier on as we did in 2023. So these are all factors that one must take into account when one examines so-called slowness in the Nielsen volumes. Also, I might add that we have a number of important resets coming up, the trade reset from January on through the early part of the second quarter. So -- and we're anticipating big gains in shelf space not only for our legacy brands, not only for the SKUs that we are about to launch, but also for the Bang brand, where a number of retailers that had hitherto really discontinued Bang because of all the litigation and all of the issues are now taking it back, and we'll see that benefit starting really in the second quarter and -- sorry, starting in the first quarter and moving into the second quarter. So there's a whole number of factors that I think are worth bearing in mind when one looks at the Nielsens, for example, in January.

Andrea Teixeira:

Thank you, operator. Just you said that you continue to look at opportunities for pricing in the U.S. What is preventing you to announce pricing at this point? Do you see -- I mean, obviously, the key competitor announced pricing back when we all saw you here in New York, you were talking about potentially looking at the impact of elasticities. It seems that things have been moderately positive. Is there any reason why you'd wait? And then second, Hilton, when you spoke about a normalized gross profit margin of 53.5%. Should we expect margins to continue to build from here given that potentially the high 50s, it's still below where you were before the pandemic at 60. Is there any reason why these new plans would not leverage as fast or any structural reasons that you would be below the high 50s?

Operator:

The next question is from Dara Mohsenian from Morgan Stanley. Please go ahead.

Hilton Schlosberg:

So, Dara, on the call, we did talk about progress internationally in very great detail. I think sometimes we give far more detail than we should, but we do. We gave market shares in various countries we indicated the new product innovations that are going to happen through -- throughout our international territories, and I'm not sure what other question -- what part of your question, we possibly have an answer. And I don't mean to be disrespectful. I just feel that a lot of your question has been covered. Rodney, I don't know if you've got anything to add.

Operator:

The next question is from Steve Powers with Deutsche Bank. Please go ahead.

Hilton Schlosberg:

Yes, we spoke about -- Steve, sorry to interrupt, but let's just answer the first. So remember, we spoke about impairment charges of $40 million in this quarter relating to the Alcohol Brands.

Hilton Schlosberg:

We'll look at that, but it's not what I've been seeing.

Hilton Schlosberg:

Yes. I think that's not a one-fix issue. That's something that's ongoing, and we are working with the Coke bottlers to improve execution. As I said earlier, we are rolling out a number of new products and the new sets are all taking place in this first quarter from February onwards and early into the second quarter. And I think you'll see that -- well, I hope you'll see from those numbers when we report them, that the positioning should be somewhat different to where we are today.

Mark Astrachan:

Yes. Hey, afternoon guys. I wanted to go back to international because I feel like it's one of those things that doesn't get the credit that's due, right? You built nearly a $3 billion run rate business at this point. And I think from the outside, it's a little bit hard to get a sense of kind of what's going on there. So not necessarily to Dara's question, but maybe talk to some of the dynamics in terms of number of SKUs that you have on shelf, not obviously by country, but sort of broader strokes of the opportunity you have to still develop your portfolio within those markets? How much opportunity is there broadly to develop the energy category? And sort of related to that, margins have improved, but they're obviously still a lot lower than your domestic margins, both gross margin and EBIT margin in that international business. How do you think about improving that over time? Is that possible relative to current levels? And kind of how do you think about the progression of that?

Operator:

This concludes -- I'm sorry, go ahead, sir.

Operator:

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

Operator:

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Rodney Sacks:

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and my Co-Chief Executive Officer is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Thank you, Tom. On July 31, 2023, the company completed its acquisition of Bang Energy, which is the Bang Transaction. The acquired assets primarily include Bang Energy Drinks and a beverage production facility in Phoenix, Arizona. Inventory purchased as part of the Bang Transaction was recorded at fair value. Certain of the purchased inventory was subsequently sold in the 2023 third quarter and was recognized through cost of sales at fair value, which we define as the Bang Inventory Step-Up hereafter in the call. As a result of the Bang Inventory Step-Up, gross profit was adversely impacted by approximately $7.8 million during the 2023 third quarter. During the 2023 third quarter, in connection with the Bang Transaction, the company recorded a gain of $45.4 million, which will be referred to hereinafter as the Bang Transaction Gain, in interest and other income and expense net within the condensed consolidated statement of income. During the 2023 third quarter, the company incurred approximately $8 million of acquisition expenses related to the Bang Transaction and those are referred to also later in this call as the Bang Transaction Expenses. The company achieved record third quarter net sales of $1.86 billion in the 2023 third quarter, 14.3% higher than net sales of $1.62 billion in the 2022 comparable period and 16.1% higher on a foreign currency adjusted basis. Gross profit as a percentage of net sales for the 2023 third quarter was 53%, compared with 51.3% in the comparative 2022 third quarter. Gross profit as a percentage of net sales was 53.4% for the 2023 third quarter, excluding the Bang Inventory Step-Up. The increase in gross profit as a percentage of net sales for the 2023 third quarter as compared to the 2022 third quarter was primarily the result of pricing actions, decreased freight-in costs and decreased aluminum can costs. Promotional allowances for the 2023 third quarter were higher than in the comparable 2022 third quarter, as well as the 2023 second quarter. Operating expenses for the 2023 third quarter were $473.2 million, compared with $415.8 million in the 2022 third quarter. As a percentage of net sales, operating expenses for the 2023 third quarter were 25.5%, compared with 25.6% in the 2022 third quarter. Operating expenses for the 2023 third quarter included approximately $8 million of Bang Transaction-related expenses. Distribution expenses for the 2023 third quarter were $85.7 million or 4.6% of net sales, compared to $83 million or 5.1% of net sales in the 2022 third quarter. Operating income for the 2023 third quarter increased to 22.2% to $510.5 million from $417.9 million in the 2022 comparative quarter. Interest and other income expense net for the 2023 third quarter increased to $71.4 million from $2.1 million in the 2022 comparative quarter. The increase was due to $39.3 million of interest income and a gain of $45.4 million related to the Bang Transaction. Such amounts were partially offset by foreign currency transaction losses of $13.2 million. The effective tax rate for the 2023 third quarter was 22.2%, compared with 23.3% in the 2022 third quarter. The decrease in the effective tax rate was primarily attributable to an increase in deductible interest expense. Net income increased 40.4% to $452.7 million, as compared to the $322.4 million in the 2022 comparable quarter. Diluted earnings per share for the 2023 third quarter increased 41.3% to $0.43 from $0.30 in the third quarter of 2022. Diluted earnings per share adjusted for the Bang Transaction Gain, the Bang Inventory Step-Up and the Bang Transaction Expenses net of tax was $0.41 for the 2023 third quarter, an increase of 34.1%. The company plans to implement additional price increases in certain international markets during the remainder of the 2023 year. 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 October 21, 2023, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category including energy shots increased by 9.2% versus the same period a year ago. Sales of the company’s energy brands excluding Bang were up 6.7% in the 13-week period, sales of Monster were up 4.8%, sales of Reign were up 36.3%, sales of NOS increased 10% and sales of Full Throttle increased 7.6%. Sales of Red Bull increased 3%. The company continues to have market share leadership in the energy drink category for all outlets combined in the United States in both the 13-week and four-week periods ended October 21, 2023. According to Nielsen, for the four weeks ended October 21, 2023, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 6.7% over the same period the previous year. Sales of the company’s energy brands, excluding Bang, increased 4.5% in the four-week period in the convenience and gas channel. Sales of Monster increased by 1.9% over the same period versus the previous year. Reign sales increased 35.2%, NOS was up 9.7% and Full Throttle was up 7.8%. Sales of Red Bull were up 1.8%. According to Nielsen, for the four weeks ended October 21, 2023, the company’s market share of the energy drink category in the convenience and gas channel including energy shots in dollars decreased from 36.8% to 36.1%, excluding Bang. Monster share decreased from 31.1% a year ago to 29.7%. Reign share increased 0.6 of a share point to 3%, NOS share increased share increased 0.1% of a share point to 2.6% and Full Throttle share remained at 0.7 of a percent. Bang share was 1.4%. Red Bull share decreased 1.7 points to 34.5, Five Hour share was lower by half a point at 3.5%, Rockstar share was down 0.4 of a point to 3.4%, Celsius’ share is 7.4%, C Four’s share is 3.3% and Ghosts’ share is 2.7%. According to Nielsen, for the four weeks ended October 21, 2023, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 8.9% over the same period the previous year. Sales of Java Monster including Java Monster 300 and Java Monster Nitro Cold Brew were 2% lower in the same period versus the previous year. Sales of Starbucks Energy was 14.9% lower. Java Monster share of the coffee plus energy drink category for the four weeks ended October 21, 2023, was 55.9%, up 3.9 points, while Starbucks Energy’s share was 43.8%, down 3.1 points. According to Nielsen, in all major channels in Canada for the 12 weeks ended October 7, 2023, the energy drink category increased 8.6% in dollars. Sales of the company’s energy drink brands increased 6.5% versus a year ago. The market share of the company’s energy drink brands was 40%, down 0.8 of a point. Monster sales increased 7.7% and its market share decreased 0.3 of a point to 36.2%. NOS sales decreased half a point and its market share decreased by 0.1 of a point to 1.2%, sorry, the sales decreased 5 point -- 0.5%. Full Throttle sales increased 12.8% and its market share remained at 0.5%. According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 20% for the month of September 2023, Monster sales increased 22.7%, Monster’s market share in value increased 0.7 points to 29.3% against the comparable period the previous year. Sales of Predator increased 60.3% and its market share increased 1.5 share points to 6.1%. The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced, positively and/or negatively by sales in the OXA convenience chain, which dominates the market. Sales in the OXA 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 September 2023 compared to September 2022, Monster’s retail market share in value increased in Argentina from 52.8% to 56.8%, in Brazil from 43% to 45.1% and decreased in Chile from 41.7% to 39.9%. Monster Energy is the leading energy brand in value in Argentina, Brazil, and Chile. I would like to point out, 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 October 8, 2023, Monster’s retail market share in value as compared to the same period the previous year grew from 30.5% to 31.3% in France, from 29.9% to 32.4% in Great Britain, from 5.4% to 5.6% in the Netherlands, from 31.6% to 34.7% in Norway and from 40.3% to 40.5% in Spain. According to Nielsen, in the 13-week period until the end of September 2023, Monster’s retail market share in value as compared to the same period the previous year grew from 15.6% to 18.4% in Germany, Monster’s retail market share in value as compared to the same period of the previous year remained flat at 31.6% in Italy, Monster’s retail market share value as compared to the same period the previous year declined from 19% to 18.4% in Poland and from 19.8% to 17.9% in South Africa. According to Nielsen, in the 13-week period ended September 10, 2023, Monster’s retail market share in value as compared to the same period the previous year grew from 15.4% to 16.8% in Belgium, from 19.3% to 21.3% in the Czech Republic, from 28% to 30% in the Republic of Ireland and from 15.4% to 16% in Sweden. According to Nielsen, in the 13-week period until the end of August 2023, Monster’s retail market share in value as compared to the same period the previous year declined from 38.8% to 38.2% in Greece. According to Nielsen, in the 13-week period until the middle of August 2023, Monster’s retail market share in value as compared to the same period the previous year grew from 27.5% to 28% in Denmark. According to Nielsen, in the 13-week period until the end of August 2023, Predators retail market share in value as compared to the same period the previous year, grew from 29.8% to 32.8% in Kenya and from 17% to 20.3% in Nigeria. According to IRI in Australia, Monster’s market sharing value for the four weeks ending October 15, 2023, increased from 14.8% to 16.4% as compared to the same period the previous year. Mother’s market sharing value decreased from 11.7% to 10.1%. Going to IRI in New Zealand, Monster’s market sharing value for the four weeks ended October 22, 2023, decreased from 13.6% to 13.3% compared to the same period the previous year, Live Plus’ market sharing value decreased from 6.2% to 5.2% and Mother’s market sharing value increased from 6.1% to 6.4%. According to INTAGE in Japan, in the month ending September 2023, Monster’s market sharing value in the convenience store channel as compared to the same period the previous year increased from 55% to 58.9%. According to Nielsen in South Korea, in the month ending September 2023, Monster’s market sharing in value in all outlets combined, as compared to the same period the previous year, decreased from 61.4% to 51.9% due to overly aggressive price promotions by a competitor. We again point out that certain market statistics that cover single months or four-week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. Net sales to customers outside the U.S. was $733.7 million or 39.5% of total net sales in the 2023 third quarter, compared to $610.6 million or 37.6% of total net sales in the corresponding quarter in 2022. Foreign currency exchange rates had a negative impact on net sales in the U.S. dollars by approximately $29.2 million in the 2023 third quarter. Included in reported geographic sales, our ourselves to the company’s military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the 2023 third quarter increased 22.3% in dollars and increased 23.6% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales for the third quarter was 31.1%, compared to 34.7% in the same quarter in 2022. We are also pleased that in the 2023 third quarter, Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, the Netherlands, Norway, the Republic of Ireland, Spain and Sweden. In Asia-Pacific, net sales in the 2023 third quarter increased 16.8% in dollars and increased 21.9% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales increased to 43.2% from 37.4% over the same period in 2022. Net sales in Japan in the 2023 third quarter increased 22.5% in dollars and increased 29% in local currency. In South Korea, net sales increased 18.7% in both dollars and local currency as compared to the same quarter in 2022. Monster remains the market leader in Japan and South Korea. In China, net sales in the third quarter increased 20.2% in dollars and increased 28.3% in 28.3% in local currency as compared to the same quarter in 2022. We remain optimistic about the prospects for the Monster brand in China. In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam, net sales increased 13.3% in dollars and increased 18.7% in local currencies. In Latin America, including Mexico and the Caribbean, net sales in the 2023 third quarter increased 25.2% in dollars and increased 38.8% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales was 37.7% for the 2023 third quarter versus 34.7% in the 2022 third quarter. In Brazil, net sales in the 2023 third quarter decreased by 4.3% in dollars and decreased by 9.6% in local currency, due in part to inconsistent purchasing patterns by our bottlers. Net sales in Mexico increased 54.4% in dollars and increased to 30.1% in local currency in the 2023 third quarter. Net sales in Chile increased 60.2% in dollars and increased 44.3% in local currency in the 2023 third quarter. Net sales in Argentina increased 61% in dollars and increased 243.4% in local currency in the 2023 third quarter. We continued with the launch of the Beast Unleashed during the quarter, which is now available in 43 states, through a network of beer distributors. We are pleased with the initial results of the Beast Unleashed and are continuing to expand distribution with the goal of being available in substantially all of the United States by the end of 2023. We plan to launch Nasty Beast Hard Tea in the first quarter of 2024 with the goal of being national -- of national distribution in the first half of next year. Nasty Beast Hard Tea will be available in four flavors and will be sold in 24-ounce single-serve cans, as well as in a variety 12-pack of 12-ounce sleek cans. In the United States, we launched Bang Energy in 12 single SKUs and two multi-pack SKUs through our Coca-Cola bottlers in the month of September. In the 2023 third quarter, we also shipped NOS Zero-Sugar 16-ounce cans to support our planned 2023 fourth quarter launch. In Mexico, during July 2023, we launched our third Predator SKU with Predator Purple Rain and expanded our Monster Zero-Sugar offering with the launch of Monster Ultra Watermelon in August 2023. In El Salvador and Honduras, during the month of September, we launched Reserve White Pineapple. And in Puerto Rico, we launched Monster Ozzy Style Lemonade in July 2023, and in September, we introduced our Reign Storm total wellness energy drinks. In Australia, Monster Ultra Peachy Keen was launched in July 2023. In September, we launched Mother Reignbow Sherbet in Australia and Mother Lava Guava in New Zealand. In EMEA, in the third quarter of 2023, we launched Monster Nitro Cosmic Peach, Reserve Watermelon and White Pineapple, Juiced Aussie Lemonade, Juiced Chaotic, Ultra Gold and Ultra Peachy Keen in a number of countries. We are excited about the launch of Monster Zero-Sugar in Great Britain in the 2023 third quarter. We will expand distribution to Poland and the Republic of Ireland in the 2023 fourth quarter and to an additional 28 markets by the end of the first quarter of 2024. During the third quarter of 2023, we launched Monster Ultra Peachy Keen in Japan and launched Predator in Iraq. In October 2023, we launched Monster Ozzy Lemonade in Japan. In India, we participate not only in the premium energy drink segment with Monster but also in the more affordable segment with Predator. We recently introduced Predator in a 250 ml PET format in a limited region in India to complement our existing product offering is 300 ml cans. We also transitioned the Monster brand in the Philippines from our independent distributor to our Coca-Cola Philippines bottler. During the 2023 third quarter, the company purchased approximately 7.3 million shares of its common stock at an average purchase price of $54.83 per share for a total amount of $400 million, excluding broker commissions. As of November 2, approximately $282.8 million remained available for repurchase under the previously authorized repurchase program. We estimate that on a foreign currency-adjusted basis, including the alcohol brands segment, October 2023 sales were approximately 25.8% higher than in the comparable October 2022 sales and 25% higher than October 2022, excluding the alcohol brands segment. We estimate that October 2023 sales including the alcohol brands segment to be approximately 24.8% higher than in October 2022 and 24% higher than in October 2022, excluding the alcohol brands segment. October 2023 had one more selling day compared to October 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 as shifts in the timing of production. In some instances, our bottlers are responsible for production and determine their own production schedules, this affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintained inventory levels according to their own internal requirements, which they may alter from time to time for their own business reasons. We reiterate that sales over a short period, such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. In conclusion, I’d like to summarize some recent positive points. The energy category continues to grow globally. We are pleased to report that our pricing actions which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand. Our AFF flavor facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower land of costs to our EMEA region. We are continuing with our plans to add a Juice facility to our AFF flavor facility in Ireland. We are pleased with our 2023 new product innovations, notably Monster Energy Zero-Sugar, Ultra Strawberry Dreams and Rainstorm 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 Beast Unleashed. We are continuing to expand distribution with the goal of being national by the end of the year. We are excited for the launch of Nasty Beast Hard Tea early next year with a goal of national distribution in the first half of 2024, as well as the additional alcohol opportunities that the CANarchy acquisition presents. We are pleased with the rollout of Predator and Fury, our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in a number of additional countries internationally. We are excited about the opportunities that the acquisition of the Bang Energy brand presents to us and believe that the brand will fit well within our broader portfolio of energy drink brands. I’d like to now open the floor to questions about the quarter. Thank you.

Peter Grom:

Thanks, Operator. Good afternoon, guys. Hope you are doing well. So maybe one housekeeping question…

Peter Grom:

… and then one real question here. I guess, on just the Bang Transaction, I apologize if I missed this, but did you mention how much of a contribution the transaction was to sales in the quarter? And then, I guess, just my real question here is, I would love to get some more color on the quarter-to-date trends you just mentioned. I think it was 25% or so, much better than what we can see in the track data. So can you maybe unpack the drivers of that? Is that simply just much stronger growth in international markets or is there any sort of sales pull-forward or timing impacts that we need to take into consideration? Just any color there I think would be really helpful. Thanks.

Peter Grom:

Yeah. I was just trying to understand, I think you mentioned 25% or so, it’s just a lot different or stronger than what we can see in track data even after backing out kind of the Bang drag. So I just was trying to get some color in terms of what were the drivers of that, is it simply stronger growth outside the U.S. or is it -- is there any sort of timing contributions or pull-forward in sales, just any color you can provide I think would be really helpful.

Operator:

The next question is from Andrea Teixeira with JPMorgan. Please go ahead.

Rodney Sacks:

Yeah. So, remember, that number of both convenience and chain and other large stores discontinued the Bang brand during a period where there was a litigation and also with the products were questionable as regards to labeling. So there was a lot of discontinuation of Bang throughout the system. What we are doing and what our Coke bottlers are doing is regaining the distribution that is out there for Bang and also we are as a company making presentations to the large and smaller retailers, both convenience, grocery, mass, and obviously, the club channel to ensure that Bang is restocked in their sets. So that will take a little bit of time, it doesn’t happen overnight and we are hopeful that we will be able to achieve really very much extended distribution in the new sets as they come out. And then on your second question regarding the smaller brands, already we have a mission that’s focused on our brands and our brand families, and I really don’t want to comment on the competition. Other than to say that we have a very comprehensive portfolio here and we believe that we are in a good position to focus and build upon our own sales, while recognizing the achievements of the competitors and the positioning of the competitors.

Vivien Azer:

Hi. Good evening. Thank you. I wanted to follow up on your commentary, just now in terms of the conversations that you are having with retailers, recognizing that it might be a little bit early days in terms of driving for extended shelf reset and increased placement on Bang, but operationally, kind of how are you thinking about that? Is it kind of a one-for-one for every market share point of improvement you think you can drive for Bang that’s incremental square footage? Are you willing to sacrifice some linear square footage on tertiary, SKUs within your own portfolio to revitalize that brand, any incremental color would be helpful? Thank you.

Operator:

The next question is from Charlie Higgs with Redburn Atlantic. Please go ahead.

Hilton Schlosberg:

Perhaps, I will just take that. The brand, we have sort of looked at realigning the brand and focusing on the main SKUs and we are gaining additional sales and traction with the brands. So the brands, particularly, Green and Ultra, are doing very well in China and continuing to grow and getting solid sales per SKU -- per point of distribution. With regard to Predator, we are proceeding with our plans to launch Predator and that will happen towards the middle of next year, probably, the second quarter as presently planned. So that will go ahead in a PET bottle. So we are also pretty hopeful that we will have two offerings at different price points to attack the Chinese market. Thanks.

Mark Astrachan:

Yeah. Hey, guys. Good afternoon.

Mark Astrachan:

Just one follow-up on one other question. So if you look at the scanner data, we look at total distribution points for Bang, I show it’s up something like 22% at current levels or kind of a week or two ago relative to where it was even in September. So you had mentioned helping that, I think, the rollout in September was a bit more measured. So I suppose why shouldn’t we get a little more excited about what you can do from shelf space in terms of where it was? I guess it’s never going to be what it was a few years ago, but certainly seems like it’s on a good starting level there. And then, the main question, we are getting lots of questions and I am sure you are about how to think about pricing and what Red Bull is going to do in the market. I guess, how long does it take for you to figure out how much pricing Red Bull is going to pass-through and how quickly or when you have to tell the retail establishments that you are planning on following them if you decide to do that? Thanks.

Operator:

The next question is from Michael Lavery with Piper Sandler. Please go ahead.

Rodney Sacks:

Hi. Just was wondering if you could give a sense of strategically how you think about the portfolio. In the US, you have got the share headwinds are greater for the Monster brand versus some others. Maybe just how do you think about resource allocation or trying to push to protect and strengthen that brand, what kind of margin mix implications are there or is it just anything under the total corporate umbrella is -- if it it’s got momentum is great. Just give us good a little sense of how you think about the portfolio, strategy and how much -- how important it is for Monster to take the lead or not?

Hilton Schlosberg:

Rodney, I think, one other point for Michael is that, if -- Mike, you need to look at the numbers, because, I think, Red Bull is suffering far worse than Monster and the -- I think that’s something you need to look at. That’s number one. And number two, a number of our analysts are -- and we have noticed this as of late, are taking the Bang numbers and putting the Bang numbers into Monster, both this year and last year. And obviously, that’s not a great exercise, because Bang has -- Bang share and Bang sales have fallen off dramatically over the last year, particularly through all this litigation and with the removal from shelves and the discontinuations as I mentioned earlier. So that’s not a good exercise to put the Bang brand into Monster this year and last year. So what we did on this call, we actually separated Bang separately and the rest of the portfolio so one could get a feel of the performance of the Monster portfolio separately from what’s happening with Bang. Hopefully, sometime down the line we will be able to roll the two into one another and then it will make better sense of growth or otherwise.

Rodney Sacks:

Thanks. On behalf of the company, I’d like to thank everyone for their continued interest in the company. We continue to believe in the company and our growth strategy and remain committed to continuing to innovate, develop and differentiate our brands and to expand the company both at home and abroad. And in particular capitalizing on our relationship with the Coca-Cola bottler system. We believe that we are well-positioned in the beverage industry and continue to be optimistic about the future of our company. We hope that you remain safe and healthy. Thank you very much for your attendance.

Rodney Sacks:

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks :

Thanks Tom. The company achieved record second quarter net sales of $1.85 billion in the 2023 second quarter, 12.1% higher than net sales of $1.66 billion in the 2022 comparable period, and 14.4% higher on a foreign currency adjusted basis. Gross profit as a percentage of net sales for the 2023 second quarter was 52.5% compared with 47.1% in the comparative 2022 second quarter. The increase in gross profit as a percentage of net sales for the 2023 second quarter as compared to the 2022 second quarter was primarily the result of pricing actions, decreased operating costs and increased aluminum can costs. The increase was partially offset by lower gross margins in the alcohol segment and in which our sales had quite a nice bump as you seen from the release. As expected, promotional allowances for the 2023 second quarter were marginally higher than the comparable 2022 second quarter, as well as 2023 first quarter. Operating expenses for the 2023 second quarter were $450.4 million, compared with $406.9 million in the 2022 second quarter, as a percentage of net sales operating expenses for the 2023 second quarter were 24.3% compared to 24.6% in the 2022 second quarter. Distribution expenses for the 2023 second quarter decreased to $82 million, or 4.4% of net sales compared to $87.9 million or 5.3% of net sales in the 2022 second quarter. The $5.8 million decrease in distribution expenses was primarily due to decreased freight out expenses of $11.8 million partially offset by higher warehouse expenses of $4.8 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. We are purchasing aluminum cans from local sources globally. We have returned to our orbit strategy of producing in closer proximity to our customers. The costs of repositioning finished products to distribution centers are included in freight-in costs. The company continues to address certain challenges in its supply chain as it navigates the current global supply chain environment. Operating income for the 2023 second quarter increased 14.4% to $523.8 from $373 million in the 2022 comparative quarter. The effective tax rate for the 2023 second quarter was 23.2% compared with 25.3% in the 2022 second quarter, the decrease in the effective tax rate was primarily attributable to an increase in deductible interest expense, a decrease in the effective state income tax rate, as well as an increase in net income in certain foreign jurisdictions, which have lower tax rates compared to the United States. Net income increased 51.4% to $413.9 million, as compared to $273.4 million in the 2022 comparable quarter. Diluted earnings per share for the 2023 second quarter increased 52.8% to $0.39 from $0.26 in the second quarter of 2022. 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 half of 2023. The company plans to implement additional price increases in a number of other international markets during the remainder of the 2023 year. In the United States, the company implemented an additional price increase on its 18.6 ounce and 24 ounce lines effective April 1, 2023. 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 July 22, 2023 for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including Energy Shots increased by 13.6% versus the same period a year ago. Sales of the company's energy brands, including Reign were up 12.2% in the 13 week period, sales of Monster were up 10.5%, Sales of Reign were up 43.7%, sales of NOS increased 11.2% and sales a Full Throttle increased 14.7%. Sale of Red Bull increased 10.2%. The company continues to have market leaders share leadership in the energy drink category for all outlets combined in the United States in both the 13 week and four week periods ended July 22, 2023. According to Nielsen for the four weeks ended July 22, 2023, sales in dollars in the energy drink category in the convenience and gas channel, including Energy Shots in dollars increased 13.7% over the same period, the previous year. Sales of the company energy brands which include Reign increased 13.8% in the four week period in the convenience and gas channel, sales of Monster increased by 11.1%over the same period versus the previous year. Reign sales increased 54.9%, NOS was up 13.2%, Full Throttle was up 23.2% sales of Red Bull were up 8.8%. According to Nielsen for the four weeks ended July 22, 2023, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars increase from 36% to 36.1%. Monster share decreased from 30.4% a year ago to 29.8%, Reign sharing increased to 0.8 of share point to 3.1%, NOS’s share remain at 2.5% and Full Throttle share remained at 0.7%. Red Bull’s share decreased 1.6 points from 36.3% a year ago to 34.7%, VPX Bang’s share decreased 4.2 points to 1.8%. Five Hour share was lower by 0.7 point at 3.5%. Rockstar share was down 0.2 over point to 3.4%, Celsius’ share is 6.6%, C Four’s share is 3% and Ghosts share is 2.8%. Please note that VPX Bank was in bankruptcy during this period, and we will address our acquisition of Bang later in this call. According to Nielsen for the four weeks ended July 22 2023, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel decreased 3% over the same period the previous year. Sales of Java Monster including Java Monster 300 and Java Monster Nitro Cold Brew was 3.3% higher in the same period versus the previous year. Sales of Starbucks Energy was 7% lower, Java Monster share of the coffee plus energy drink category for the four weeks ended July 22, 2023 was 54.1%, up 3.3 points, while Starbucks Energy's share was 45.6% down two points. According to Nielsen in all major channels in Canada for the 12 weeks ended June 17, 2023, the energy drink category increased 14.8% in dollars. Sales of the company's energy drink brands increased 21.6% versus a year ago. The market share of the company's energy drink brands was 42.4%, up 2.4 points, Monster sales increased 25.6% and its market sharing increased 3.3 points to 38.1% NOS’s sales decreased to 5.8% and its market share decreased 0.3 over point to 1.3%. Full Throttle sales decreased 43.2% and its market share decrease 0.3 over point to 0.3%. According to Nielsen for all outlets combined in Mexico, the energy drink category increased 23.7% for the month of June 2023. Monster sales increased 25.3%. Monster’s market sharing value increased 0.4 points to 28.8% against the comparable period the previous year. Sales of Predator increased 75.3% and its market sharing increased 1.7 points to 5.6%. The Nielsen's statistics from Mexico cover single months, which is a short period that may often be materially influenced positively and or negatively by sales in the OXA convenience chain, which dominates the market sales in the OXA 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 June 2023 compared to June 2022, Monster’s retail market sharing value increased in Argentina from 50.5% to 55.5%, in Chile from 38.1% to 40.8%. And in Brazil from 41.6% to 44.4%. Monster Energy is the leading energy brand in value in Argentina, Brazil and Chile. I would like to point out that the Nielsen numbers in EMEA should only be used as a guide. Because the channels read by Nielsen in EMEA vary from country to country and are reported on varying dates within the month referred to from country to country. According to Nielsen in a 13 week period until June 18, 2023. Monster’s retail market sharing value as compared to the same period the previous year grew from 16.2% to 16.6% in Belgium, from 32.7% 33.1% in France, from 29.8% to 31.1%, in Great Britain, from 31.8% to 35.2% in Norway, from 28.1% to 30.3% in the Republic of Ireland, from 39.4% to 41.6% in Spain, and from 15.6% to 15.9% in Sweden. Monster’s retail market sharing value as compared to the same period the previous year declined from 6.6% to 5.5% in the Netherlands, according to Nielsen in the 13 week period ended until the end of June 2023, Monster’s retail market sharing values as compared to the same period the previous year declined from 19.3% to 17.7% in South Africa. According to Nielsen as 13 week period until the end of May 2023, Monster’s retail market value as compared to the same period the previous year grew from 18% to 22.1% in the Czech Republic, from 27.4% to 28%, in Denmark, from 15% to 16.4% in Germany, and from 28% to 29.9% in Italy. Monster’s retail market sharing value as compared to the same period the previous year, declined from 38.7% to 37.5% in Greece, and from 20.6% to 18.7% in Poland. According to Nielsen in the 13 week period until the end of May 2023, Predator’s retail market sharing value as compared to the same period the previous year grew from 26.3% to 31.5% in Kenya, and from 15.4% to 19.8% in Nigeria. According to IRI in Australia, Monster’s market sharing value for the four weeks ending July 9, 2023, increased from 14.1% to 16.9% as compared to the same period the previous year. Mother's market sharing value decreased from 10.4% to 10.3%. According to IRI in New Zealand, Monster’s market sharing value for the four weeks ended July 9, 2023 increased from 12.6% to 14.9% compared to the same period of the previous year. Live Plus’s market sharing value decreased from 6.5% to 5.6%, and Mother's market sharing value remained at 5.3%. According to INTAGE in Japan in the month ending June 2023 Monster’s market sharing value in the convenience store channel, as compared to the same period the previous year declined from 56.7% to 55.1%. According to Nielsen in South Korea, in the month ending June 2023, Monster’s market sharing value in all outlets combined, as compared to the same period the previous year decreased from 59.9% to 57.6%. We again point out that certain market statistics that cover single months or four week periods may often be materially influenced positively and or negatively by promotions or other trading factors during these periods. Net sales to customers outside the US was $715.4 million, 38.6% of total net sales in the 2023 second quarter compared to $649 million, or 39.2% of total net sales in the corresponding quarter in 2022. Foreign currency exchange rates had a negative impact on net sales in the US and US dollars by approximately $38.4 million in the 2023 second quarter. Included in reported geographic sales, our sales to the company's military customers, which are delivered in the US and transshipped to the military and their customers overseas. In EMEA, net sales in the 2023 second quarter, increased 13% in dollars, and increased 16.4% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales for the second quarter was 34% compared to 26.7% in the same quarter in 2022. We are pleased that in the 2023 second quarter Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, Italy, Norway, the Republic of Ireland, Spain and Sweden. In Asia Pacific, net sales in the 2023 second quarter increased 17.8% in dollars and increased 26.7% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales was 42.4% versus 40.4% over the same period in 2022. Net sales in Japan in the 2023 second quarter increased 11.9% in dollars and increased 21.2% in local currency. In South Korea, net sales increased 50.3% in dollars and increased 59.5% in local currency as compared to the same quarter in 2022. Monster remains the market leader in Japan and South Korea. In China, net sales in the second quarter increased 3.7% in dollars and increased 10.6% in local currency as compared to the same quarter in 2022. We remain optimistic about the prospects for the Monster brand in China. In the 2022 second quarter, our distribution partners restocked inventories following the easing of the COVID-19 restrictions in China. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 26% in dollars and 36.4% in local currencies. In Latin America, including Mexico and the Caribbean, net sales in the 2023 second quarter increased 0.1 of a percent in dollars, and increased 9.4% in local currencies over the same period in 2022. In Brazil, net sales in the 2023 second quarter increased by 2.5% in dollars, and 3.6% in local currency. Net sales in Mexico increased 23.3% in dollars, and 10.1% in local currency in the 2023 second quarter. Net sales in Chile decreased 23.8% in dollars, and decreased 26.6% in local currency in the 2023 second quarter. The decrease in sales in Chile were due in part to a normalization of bottler inventory levels. Net sales in Argentina decreased 19.5% in dollars, but increased 54% in local currency in the 2023 second quarter. We will now provide an update on our litigation with Vital Pharmaceuticals Inc. which will be referred to as VPX, the former maker of Bang Energy drinks. We previously discussed the trademark infringement arbitration in which an arbitrator found against VPX and awarded Monster Energy Company or MEC and Orange Bank, $175 million in damages, attorneys fees and costs and an ongoing 5% royalty on future sales of certain Bang Energy. VPX has appealed the judgment. We also previously discussed the false advertising case in the United States District Court for the Central District of California, in which the jury returned a verdict awarding MEC approximately $293 million in damages. And the District Court granted MEC’s motion for a permanent injunction in joining VPX and former CEO Jack Owoc from falsely or deceptively claiming that Bang any other beverages contained creatine or form of creatine, VPX and Jack Owoc appealed the injunction. The bodies have completed briefing on remaining post round issues On October 10, 2022 VPX, along with certain of its domestic subsidiaries, and affiliates filed for protection under Chapter 11 of the bankruptcy code in the United States District Court for the Southern District of Florida. On June 28, 2023, VPX and certain affiliates entered into an asset purchase agreement with the company, which among other things provided for the company's acquisition of substantially all of the VPX's assets. The transactions contemplated by the asset purchase agreement closed on July 31, 2023, at which time the company was deemed to have allowed general unsecured claims in VPX's bankruptcy case relating to the arbitration award, and the jury's award, subject to the potential modification of the Jury Award in the light of pending post-verdict motions filed by MEC and VPX. The asset purchase agreement also includes a mutual release between VPX and MEC which among other things, requires VPX to dismiss its appeals of the trademark infringement arbitration and the false advertising case, as well as cases that VPX filed against MEC in the United States District Court for the Southern District of Florida. This mutual release does not include any claims the company might have against Mr. Owoc in relation to their jury award. The company will not recognize the allowed general unsecured claims or the jury award as it relates to Mr. Owoc [inaudible] realized or realizable. We will not be answering questions on these legal proceedings on today's call. In June 2023, the company also entered into an agreement with Orange Bank Inc. regarding the company's use and registration of certain bank trademarks and trade names subject to the successful closure of the asset purchase agreement. Under this agreement, the company will pay Orange Bank Inc. a onetime payment of approximately $12.5 million and a 2.5% royalty on all future sales of products bearing the trade name Bang. On June 31, 2023, we completed our acquisition of substantially all of the assets of Vital Pharmaceuticals Inc. Sorry, apologize on July 31 2023, we completed its acquisition of substantially all of the assets of Vital Pharmaceuticals, Inc. and certain of its affiliates, collectively Bang Energy for a purchase price of approximately $362 million, subject to adjustments. The acquired assets include Bang Energy beverages, and a beverage production facility in Phoenix, Arizona. We successfully recruited a limited number of former VPX employees to fill certain open positions within Monster, as well as the majority of the team at the manufacturing site in Phoenix. Pursuant to Monster's obligations with the Coca Cola Company, Bang Energy will be distributed through the Coca Cola bottlers network, starting with the United States in the 2023 third quarter. As a result, there will be a temporary disruption of the product supply of Bang Energy brand energy drinks. Additionally, our intention is to rationalize Bang’s product offerings and product lines and to fully integrate Bang into the Monster infrastructure. We do not intend to manufacture or sell Bang’s other product lines such as Red Line or Shots beyond liquidating existing inventories at this time, we may consider reintroducing certain of those product lines sometime in the future. We are excited about our acquisition of the state of the art Bang Energy production facility in Phoenix, Arizona, which we intend to utilize for Bang as well as other products in the Monster portfolio. As we only completed the acquisition this week, it is still early days and we will provide you with further updates on Bang Energy on our next Investor Call in November. In the first half of 2023, we launched The Beast Unleashed which is now available in 28 states through a network of beer distributors. We are pleased with the early results and are continuing to expand distribution, with the goal of being national by the end of the year. According to Nielsen scan data, The Beast Unleashed is currently one of the top new brands in the beer category in 2023. We plan to launch a hot iced tea extension of The Beast Unleashed named Nasty Beast Hardcore Tea later this year or early next year, with a goal of national distribution in the first half of 2024. The brand will have full flavors Original, Half & Half, Razzleberry and Green. Nasty Beast Hardcore Tea will be available in 24 oz. single-serve cans as well as in a variety 12-pack in 12 ounce sleek cans. We refreshed the dials and doubled dials beer brands in the first half of 2023 and introduced Dale's American Light Lager as part of the refresh. The brand family has performed well since the refresh. The high Lybrand family the largest in our beer portfolio, from scarcity is also performing well despite overall headwinds in the craft segment and is showing growth in retail scans. Our Alcohol Beverage innovation pipeline is robust, and we look forward to sharing use of additional new products in the future. In the 2023 second quarter in the United States, we focused on gaining distribution on our first quarter product innovation. Following the success of our recent Monster Energy Zero- Sugar launch, we are planning to launch NOS Zero-Sugar in 16 ounce cans in the 2023 fourth quarter. In the 2023 second quarter, we expanded our Java Monster portfolio in Canada with the launch of Java Monster 300 Triple Shot, Mocha and Vanilla. We launched several new products in Latin America in the 2023 second quarter. In Argentina, we introduced our Monster Reserve brand, with the launch of Reserve White Pineapple in June. In the Caribbean, we continue to expand our portfolio and introduced a number of new products in different countries. After we successfully launched Java Monster Super Coffee, Mean Bean and Loca Mocha in Australia earlier this year, we expanded the launch of such products to the New Zealand market in the 2023 second quarter. We are pleased with early results in both markets. In EMEA, in the second quarter of 202,3 we launched Monster Reserve Watermelon and White Pineapple, Ultra Gold, Ultra Fiesta Mango, Ultra Paradise, Ultra Rosa, Ultra Watermelon, Used Ozzy Lemonade and Used Chaotic in a number of countries. During the 2023 second quarter, we also launched additional SK use or BPM, Burn, Nalu, Predator and Reign in certain countries. We launched the Monster Energy brand in Egypt in June 2023. To add to Predator which we launched earlier this year in Egypt. In EMEA, as part of an ongoing pan EMEA launch, we expanded the distribution of our Monster Energy Lewis Hamilton 44 Zero-Sugar Energy drink to an additional eight EMEA markets in the second quarter of 2023 for a total of 35 markets to date. During the second quarter of 2023, we launched Monster Reserve Watermelon in Japan and Monster Ultra Sunrise in Korea and Monster Reserve Pineapple in Turkey. We launched Predator in additional regions in India. We are planning to introduce the Predator brand in additional countries in APAC in the course of 2023. In July 2023, we launched Monster Ultra Peachy Keen in Japan and Predator in Iraq. Monster Energy will be launched in the Philippines later this year. We estimate that on a foreign currency adjusted basis, including the alcohol brands segment, July 2023 sales were approximately 13.7% higher than the comparable July 2022 sales and 12% higher than July ‘22 excluding the alcohol brand segment. We estimate July 2023 sales, including the alcohol brand segment to be approximately 12.1% higher than in July 2022 and 11.2% higher than in July 2022, excluding the alcohol brand segment. July 2023 had the same number of selling days as July 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 as shifts in the timing of production. In some instances, our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels according to their own internal requirements, which they may alter from time to time for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. In conclusion, I would like to summarize some recent positive points. First, the energy category continues to grow globally. Second, we are pleased to report that our pricing actions which have been implemented to partially mitigate inflationary pressures have not significantly impacted consumer demand. Third, our IFF labor facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower land of costs to our EMEA region. Fourth, we are enthusiastic for 2023 new product innovations, notably Monster Energy Zero-Sugar, Ultra Strawberry Dreams, Rainstorm and Tour Water in United States and Monster Energy Lewis Hamilton 44 Zero-Sugar in EMEA. Fifth, we are pleased with the early results from the launch of The Beast Unleashed, we are continuing to expand distribution with the goal of being national by the end of the year. Sixth, we are excited about the launch of Nasty Beast Hardcore Tea later this year or early next year, with the goal of national distribution in the first half of 2024 as well as the additional alcohol opportunities that the CANarchy acquisition presents. Seven, we are pleased with the initial results of our launch Rainstorm, our new line of Total Wellness Energy drinks. Eight, we are pleased with the rollout of Prince and Fury, our affordable energy drink portfolio internationally, we are proceeding with plans to launch our affordable energy brands in a number -- additional number of international markets. Nine, we are excited about the opportunities that the acquisition of the Bang Energy brand presents to us and believe that the brand will fit well within our broader portfolio of energy drink brands. I would like to now open the floor to questions about the quarter. Thank you.

Peter Grom:

Thanks, operator and good afternoon, guys. Hope you're doing well. So I wanted to pick up on the gross margin commentary and just get a sense for how the quarter kind of came in versus your expectations. This is the first time we haven't really seen the sequential improvement on gross margin in about a year. And I know you mentioned promotion, I think you've talked about other costs, back at the shareholder meeting. But can you maybe just talk about how you see the drivers of gross margin evolving through the balance of the year, should we still expect to see sequential progression from here? And then maybe bigger picture, can you help frame where we are on the long term margin recovery journey. Thanks.

Operator:

Our next question comes from Andrea Teixeira with JPMorgan.

Hilton Schlosberg:

So if I talk about the energy category as such, and we started looking at the one week data because the community looks at the one week data, and the energy category is still growing in good double digits 13% in the last week, so we're seeing a good increase in the energy category. And as we look at, traditional energy and wellness energy and performance energy, obviously, you've seen kind of differences within those segments. Interesting, the Bang started off life as a very much performance energy. And today, if you look at the brand, and you analyze what it stands for, really stands for a different segment, which is really lost on energy. So you've got all these different brands that are filling different needs within the energy space. But traditionally, energy is still growing, I did a quick analysis and the traditional energy is still growing and the number I'm looking at is around 10%. You've got this other wellness energy and obviously we are participating in that segment with Rainstorm, yes, which we are really excited about. And then performance energy where we have Reign which is doing very well. The difficulty in, really going deep in -- deep dive into performance energy is that the Bang brand has suffered, because it's lost so much distribution. And that's a factor that obviously is driving that segment of the market. And then quickly, just turning to Brazil, and Chile, the energy category in those countries really grew very rapidly. And we grew extensively within those two countries, but there has been, we've seen a little bit of a slowdown in growth in both Brazil and in Chile. And as you can see, from the numbers that we reported, we are still market leaders. So it's something that is part of doing business within Brazil and in Chile, and we maintaining a market share. And we had a product issue in Chile, which have now been sorted, we bring in product from Mexico, we now are able to produce locally in Chile. But the market has taken somewhat of slowing growth. And, we've been as a market leader, we've been part of that as well.

Filippo Falorni:

Hey, good afternoon, everyone. Two clarifications on the Bang acquisition. So first, can you provide us with like, the last 12 months sales for the brand? And then bigger picture like how are you guys planning to position the brand in the US? What consumers are you going after? And then internationally, you mentioned the transition to the coke system in the US, you plan that also to transition international? And if you can give us any timeline on that. Thank you.

Operator:

The next question comes from Peter Galbo with Bank of America.

Hilton Schlosberg:

So we always look at gross profit per case. When we launch a product that's very much part of the way that this company has always examined new product introductions. So know your costs that phrase has been something that we preached for any number of years. So as we go forward with new products with new innovation, even for example, with a Bang acquisition, knowing the cost is vital to really being able to position a product within our portfolio. Now, obviously, some products have lower gross profits per case, like, for example, the coffee products, but they are an important part of our portfolio. So as we examine products, and we examine where we are, we always have to look at what we are delivering to consumers to meet to their needs, within the overall ambit of a product portfolio. Now, when we went into energy, into alcohol, I'm sorry, we went into alcohol with our eyes wide open, we knew the margins that were in alcohol would be lower than the margins in the energy drink category. So we look at margin, I've always said this on calls, I say we bank dollars, we don't bank percentages. And I've always encouraged analysts to just think, likewise, that we don't bank percentages, we bank dollars.

Chris Carey:

Hey, good afternoon. How you doing? So just one quick follow up there. And then just kind of like a capital allocation question. But would you mind providing the Latin America gross margin on the quarter? I probably missed it or I'm not sure you gave it. But that would be helpful, and just a Latin America in general. So is there a temporary disruption that we're working through? Or is what we're seeing underlying demand? So just those two follow ups? And then I realized this is a multi-part question, I'm probably going to get in trouble. But just from a capital allocation standpoint, when can you start buying back stock again, so thanks so much.

Operator:

Our next question comes from Bonnie Herzog with Goldman Sachs.

Hilton Schlosberg:

Yes, Bonnie, there always will be anomalies. And we're in the middle of summer, as you know, and it's been pretty hot out there. And we're doing our very best to stay within orbits, but there are anomalies from time to time and our mission in this company has always been to satisfy our customers. So yes, there will be, we maintaining within our orbits, but there are times when we will and we do stray from that. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Rodney Sacks for any closing remarks.

Operator:

The conference is now concluded. Thank you for attending today's presentation. You may all now disconnect.

Rodney Sacks:

Thank you very much. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Thank you, Tom. The company achieved record first quarter net sales of 1.7 billion in the 2023 first quarter, 11.9% 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 2022 first quarter. The increase in gross profit as a percentage of net sales for the 2023 first quarter as compared to the 2022 first quarter was primarily the result of pricing actions, decreased freight in costs, and decreased aluminum can costs. Gross profit as a percentage of net sales increased on a sequential quarterly basis to 52.8% in the 2023 first quarter, from 51.8% in the 2022 fourth quarter, and 51.3% in the 2022 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 2023 first quarter, from 52.5% in the 2022 fourth quarter, and 51.9% in the 2022 third quarter. The depletion of our 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 were 412.8 million, compared to 377.2 million in the 2022 first quarter. As a percentage of net sales, operating expenses for the 2023 first quarter, were 24.3% compared with 24.8% in the 2022 first quarter. Distribution expenses for the 2023 first quarter decreased to 76.3 million or 4.5% of net sales, compared to 81.4 million or 5.4% of net sales in the 2022 first quarter. The 5.1 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. We're now purchasing aluminum cans from local sources globally. We have rebuilt finished product inventory levels globally to return to our Orbitz strategy of producing in closer proximity to our customers. The cost of repositioning finished products to distribution centers are included in freight-in costs. The company continues to address the challenges in its supply chain as it navigates through the uncertainty of the current global supply chain environment. Operating income for the 2023 first quarter increased 21.4% to 485.1 million from 399.5 million in the 2022 comparative quarter. The effective tax rate for the 2023 first quarter was 20.1% 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 2023 first quarter. Net income increased 35.1% to 397.4 million as compared to 294.2 million in the 2022 comparable quarter. Diluted earnings per share for the 2023 first quarter increased 36.6% to $0.38 from $0.27 in the first quarter of 2022. 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. The company plans to implement additional price increases in a number of other international markets during the remainder of the 2023 year. In the United States, the company implemented an additional price increase on its 18.6 ounce and 24-ounce lines, effective April 1, 2023. We will continue to review further opportunities for pricing actions in order to mitigate inflationary pressures. According to the Nielsen report, 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. It's also the company's energy brands including Reign were up 10.5% in the 13-week period, sales of monster were up 9.5%, sales of Reign were up 24.1%, sales of NOS increased 14.1% and sales of Full Throttle increased 5.5%. Sales of Red Bull increased 10.6%, sales of Rockstar increased by 3.7%, and sales of 5-Hour decreased 4.1%. VPX Bang 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 4-week periods ended April 22, 2023. According to Nielsen for the four weeks ended April 22, 2023, sales in dollars in the energy drink category in the convenience and gas channel, including energy shops in dollars increased 12.7%, over the same period of 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 9.3% over the same period versus the previous year. Reign sales increased 37.8%, NOS was up 8.8% and Full Throttle was up 11.7%. Sales of Red Bull were up 9.8%, Rockstar was up 5.4% and 5-Hourwas down 5.8%. VPX Bang sales decreased 59.5%. According to Nielsen for the four weeks ended April 22, 2023, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars decreased from 37.5% to 36.9%. Once the share decreased from 31.6% a year ago to 30.6%, Reign share increased a half a share point to 2.9%, NOS share remained at 2.6 and Full Throttle share remind 0.7 of a percent. Red Bull share decreased 0.9 points from 35.2% a year ago to 34.3%. The VPX Bang share decreased 4.2 points to 2.4%, 5-Hour share was lower by [5.7] [ph] points, -- at 3.7%, Rockstar share was down point to 2 of a point to 3.4% CELSIUS share is 5.4%, C4 share is 2.8% and Ghost share is 2.9%. According to Nielsen for the four weeks ended April 22, 2023 sales in dollars of the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 0.8 of a percent over the same period the previous year. To other Java Monster including Java Monster 300 and Java Monster Nitro Cold Brew was 0.6% higher the same period versus the previous year. Sales of Starbucks energy were 4.7% higher. Java Monster share of the coffee plus energy drink category for the four weeks ended April 22, 2023 was 55.1% down point one of a point while Starbucks energy share was 44.5% at 1.6 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. The market share of the company's energy drink brand was 43.1% up 1.7 points. Monster’s sales increased 19.7% and its marketing increased 1.6 points to 38.6. NOS sales increased 4.2% and its market share decreased by point one of a point to 1.3%. Full Throttle sales decreased 8.4% and its market share decreased point one of a point to 0.4%. According to Nielsen for all outlets combined in Mexico, the energy drink category increased 17.8% for the month of March 2023. Monster’s sales increased 24.8%. Monsters’ market share in value increased 1.7 points to 30% against the comparable period the previous year. Sales of Predator increased 71.3% and its market share increased 1.7 share points to 5.4%. The Nielsen statistics from Mexico cover single month, which is a short period that may often be materially influenced positively and/or negatively by sales 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 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, Monster's retail market sharing value increased in Argentina to 53.5% and in Chile from 36.4% to 42.7%. In Brazil for the month end March 2023, our share increased from 42.1% to 43.9%. Monster Energy is the leading energy brand in value in Argentina, Brazil and Chile. I'd 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 13th week period until the end of March 2023, once this retail market share in value is compared to the same period the previous year, grew from 14.8% to 15.8% in Belgium, from 18.3% to 20.9%, in the Czech Republic, from 32.4% to 33.4%, in France, from 15% to 16.6% in Germany, from 29.3% to 30.9%, in Great Britain, or 28.2% to 30.4% Italy, from 29.7% to 34.6% in Norway, from 27.9% to 28.7% in the Republic of Ireland, from 38.2% to 39.9% in Spain, and from 15.9% or 18.1% in Sweden. Monster's retail market sharing value as compared to the same period the previous year declined from 7.8% to 4.7% in the Netherlands, from 21.2% to 19.2% in Poland, and from 20.1% to 19% in South Africa, According to Nielsen in a 13-week period until the end of February 2023, Monster's retail market share in value as compared to the same period the previous year increased from 27% to 27.7% in Denmark, once these retail market share in value as compared to the same period the previous year, declined from 38.3% to 36.5% in Greece. According to Nielsen in the 13-week period until the end of February 2023, [indiscernible] retail market share in value as compared to the same period the previous year grew from 23% to 31% in Kenya, and from 14.7% to 19.5% in Nigeria. According to IRI in Australia, Monster's market share in value for the four weeks ending April 9, 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, Monster's market share in value for the four weeks ended April 16, 2023, increased from 12.9% to 14.6% compared to the same period the previous year. Live+'s market share in value increased from 6.1% to 6.2% and Mother's market share in value decreased from 5.7% to 5.1%. According to INTAGE in Japan, in the month ending March 2023, Monster's market share in value in the convenience store channel is 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 2023, Monster's 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 months, certain market statistics that cover single months or four-week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. Net sales to customers outside the 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, by approximately $52 million in the 2023 first quarter, included in reported geographic sales, or our sales to the company's military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the 2023 first quarter, increased 5.7% in dollars, and increased 14.8% 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 30.7% compared to 29.6% in the same quarter in 2022. We are also pleased that in the 2023 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 40.9% over the same period in 2022. Net sales in Japan in the 2023 first quarter decreased 12% in dollars but increased 1.8% in local currency. In South Korea, net sales increased 4.3% in dollars, and increased 11.4% in local currency as compared to the same quarter in 2022. Monster remains the market leader in Japan and South Korea. In China, net sales in the first quarter increased 68.3% in dollars and increased 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. In Oceania 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 and the Caribbean, net sales in 2023 first quarter increased 30.8% in dollars and increased 40.4% in local currencies over the same period in 2022. Gross profit in this region as a percentage of net sales was 33% for the 2023 first quarter versus 35.4% in the 2022 first quarter. We note that 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 spots that challenges in Chile, and continuing challenges with importing raw materials in Argentina. In Brazil, net sales in 2023 first quarter increased by 28.5% in dollars, and 22.5% in local currency. Net sales in Mexico increased 31.9% in dollars, and 21.4% in local currency in 2023 first quarter. Net sales in Chile increased 36.3% in dollars and increased 36% in local currency in the 2023 first quarter, net sales in Argentina increased 13% in dollars, and increased 98.8% in local currency in the 2023 first quarter. We will now provide an update on our litigation with Vital Pharmaceuticals, which will be referred to as VPX, the maker of Bang energy drinks. We previously discussed the trademark infringement arbitration, in which an arbitrator found against VPX and awarded Monster Energy Company or MEC and Orange Bank, Inc., 175 million in damages, attorneys fees and costs and an ongoing 5% royalty on future sales of certain Bang energy product. VPX has appealed the judgment. Additionally, on September 29, 2022, a jury in the United States District Court for the Central District of California returned a verdict awarding MEC approximately 293 million in damages on its claims against VPX for false advertising, misappropriation of trade secrets and interference of Monster's contract over shelf space with certain key retailers. On April 12 2023, the district court granted MECs motion for permanent injunction which amongst other things and joins VPX and former CEO, Jack Owoc from falsely or deceptively claiming that Bang or any other beverages contain creatine or a form of creatine. The parties have completed briefing the remaining post-trial issues. On October 10, 2022, VPX along with certain of its domestic subsidiaries, and affiliates filed for protection under Chapter 11 of the bankruptcy code in the Southern District of Florida. While those proceedings are moving forward, the VPX is undertaken to make interim royalty payments subject to potential claw back in certain circumstances. On February 14, 2023, VPX made its first royalty payment in the amount of approximately 3.6 million. The company will not recognize either award or the royalty payments until such time as they're realized or realizable. As this litigation and bank bankruptcy proceedings are sub-judicate, we will not be answering further questions on those matters 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. Net sales for Beast unleashed during the first quarter were 20.5 million. We recently relaunched Wild Bass and Hard Seltzer with new packaging and great new flavors and taste profiles. We are refreshing the Dale's Beer brand and we'll be introducing Dale's American Light Lager as part of the refresh. We are planning to launch a new flavored malt beverage line within the next few months. Our alcohol beverage innovation pipeline is robust. We look forward to sharing news of additional new product in the near future. We launched the number of new products in the United States in 2023 first quarter. In January 2023, Monster Energy zero sugar was launched at retail. Monster Energy zero sugar is available in 16-ounce cans and was specifically developed as an indistinguishable zero sugar analogue of our original unique Monster Energy green flavor. In February 2023, we launched a new flavor within our highly successful Monster Ultra line with Monster Energy Ultra Strawberry Dreams available in 16-ounce cans. In March 2023, we launched Reign Storm, 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. Reign Storm is available in four flavors, Valencia Orange, Kiwi Blend, Peach Nectarine and Harvest Grape. Also in March, we launched Rehab Monster Wildberry Tea in 16-ounce cans. We are continuing to expand the distribution of Monster Tour Water in still and sparkling variants into additional states. We launched several new SKUs in the first quarter in 2023 in Canada. In February 2023, we launched Monster Ultra Peachy Keen, Punch Monster Ozzy Style Lemonade and Reign Rainbow Sherbet. In March 2023, we launched Monster zero sugar in Canada. There were several new SKUs in the 2023 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, Predator [indiscernible] at retail to further expand our affordable energy offerings. In Uruguay, we launched our second Ultra SKU with Monster Ultra Paradise. In Paraguay and Bolivia, we launched our first juice SKU with Monster Juice Manga Loca and additionally in Bolivia, we launched Fury Goldstrike. The first quarter of 2023 in Australia, we launched two Java Monster SKUs, Java Monster Mean Bean and Java Monster Loca Moca. In EMEA, in the first quarter of 2023, we launched Monster Reserve Watermelon, Ultra Gold, Ultra Rosa, Ultra Watermelon, Juicy Ozzy Lemonade and Juice Chaotic in a number of countries. During the 2023, first quarter we also launched additional SKUs of Burn, Predator and Reign in certain countries. In EMEA as part of an ongoing Pan EMEA launch, we expanded the distribution of our Monster Energy Lewis Hamilton 44 Zero Sugar Energy drink to an additional 22 EMEA markets in the first quarter of 2023, will be 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. In April 2023, we launched Monster Reserve Watermelon in Japan, we are planning to introduce the Predator 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 22 sales and 7.9% higher than April 2022, excluding the alcohol brand segment. We estimate April 2023 sales, including the alcohol brand segment, to be approximately 7.2% higher than in April 2022 and 5.1% higher than in April 2022, excluding the alcohol brands segment. April 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 for, timing of new product launches and the timing of price increases and promotions in retail stores, distributing centers, as well as shifts in the timing of production. In some instances, our bottlers are responsible for production and determine their own production shared goals. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels according to their own internal requirements, which they may alter from time to time for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter, or any future period. In conclusion, I'd like to summarize some recent positive points. One, 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, we are seeing improvements in our gross profit margins on a quarterly sequential basis. Four, our AFF Flavor Facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower land costs to our EMEA region. Five, we are enthusiastic for our 2023 new product innovations, notably Monster Energy Zero Sugar, Ultra Strawberry Dreams, Reign Storm and Pure Water 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 Beast Unleashed. We are continuing to expand distribution with the goal of being national by the end of the year. We are excited by the additional alcohol opportunities that the CANarchy acquisition presents. We are pleased with the initial results of our launch of Reign Storm, our new line of Total Wellness energy drinks. Eight, finally, we are pleased with the rollout of Predator and Fury, our 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. Thanks.

Peter Grom:

So maybe just two quick margin questions, if I may. So, one, I know you don't want to get into guidance, but you continue to comment on the sequential margin performance or improvement. So with pricing, coming in and cost 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's down quite a bit. So as we look ahead, is this 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 begins to improve? Thanks.

Operator:

Our next question comes from Filippo Falorni from Citi. Please go ahead with your question.

Hilton Schlosberg:

So we don't give guidance, Rodney, you go ahead and respond to that.

Hilton Schlosberg:

No, please. Now you go ahead, that's fine.

Operator:

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

Hilton Schlosberg:

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 results. We had good expectations for the product and our expectations seem to have been realized. We're not seeing a big dip in green. So a lot of people have asked questions about cannibalization. But we're not seeing a big dip in green at all. I mean, 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. Not only in convenience, not only in the convenience independence, but across the various channels.

Hilton Schlosberg:

Yes. And we just launched in Canada as well. So really exciting times, I think for that particular product.

Operator:

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

Hilton Schlosberg:

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 look at Nielsen, you'll be able to get a good assessment of that percentage. Secondly, on succession, obviously, the Monster Board is, and Rodney and myself are really concerned about succession. And something that we are addressing, and we continue 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 are growing and we are helping them develop. So I think from that perspective, it's something that ourselves, the board, are very well aware of. And we'll continue to address that issue. However, I don't think Rodney is going anywhere in the foreseeable future and frankly, neither am I. So we are here and will help develop and segue when the time is right, a new management team.

Andrea Teixeira:

I just have a clarification. So went back to Bonnie's question on how accretive Monster Zero has been against Ultra. In absolute terms in numbers in the U.S. it seems there has been a great launch based on the Nielsen data. But it obviously as you look at Ultra, it also has been coming at some deceleration which Obviously one would expect. Can you comment on who your first of all, how is it tracking against plan? And in terms of shelf productivity that you pointed out that you're gaining distribution and trying to make it obviously accretive? How is it number one tracking against plan. And number two, how you're seeing that, going above and beyond Ultra?

Rodney Sacks:

Just maybe I will just add on the Ultra side. We have had a really successful launch of Ultra Strawberry Dreams. I think that some of the ACV, if you look at your Nielsen's, you'll see some of the ACV or some of the additional flavors Ultra -- Ultra Heavy in fact decreased a little bit. I think that's something we just need to look at and attend, I think as you get go through this change and introducing of new flavor, 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 there's -- we think that there are solid and sound products and I think, we just need -- just really make sure we focus on just reestablishing some of the distribution levels on those. And we think those sales will continue to increase. Sales of Ultra as a brand or sub-brand 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 are doing.

Mark Astrachan:

Two housekeeping questions. One cash balance, it keeps growing. Any thoughts on how you'd like to implement spending some of it share repurchase? It was nice to see there were some interest income this quarter, I assume we shouldn't be thinking to that continues to grow. And then, on the alcohol brands gross margin, the implied number this quarter was a little better sequentially than 4Q, anything is there kind of beneath the surface that we should consider and 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.

Hilton Schlosberg:

Mark, we continually are examining options to deal with our cash balances, and it's something that, again, is a board issue that is receiving attention. So, I really don't want to comment, more than we have that -- intention is to hopefully buy back shares continue that program. But we are looking at -- some opportunities for further investments. And that's too premature to talk about them. But there are a number of possibilities that that we're looking at. And in addition, it is our plan to continue buying back our shares.

Operator:

And, at this time, we'll 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.

Operator:

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

Rodney Sacks:

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I’m Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Thank you, Tom. The company achieved record fourth quarter net sales of $1.51 billion in the 2022 fourth quarter, 6.2% higher than net sales of $1.43 billion in the 2021 comparable period and 11.9% higher on a foreign currency adjusted basis. Since the beginning of the COVID-19 pandemic and the subsequent global supply chain challenges and disruptions, the company has prioritized product availability for its consumers and customers, despite adversely impacting gross margins and operating income. The company continues to stand by its strategy to ensure product availability and solidify the continued long-term growth of the company's brands. CANarchy was acquired in February 2022 to facilitate the company's entry into the alcohol beverage sector. During 2022, CANarchy sustained margin pressures, cost of acquisition and integration, as well as certain other costs in preparation for the launch of the company's new alcohol product lines. Gross profit as a percentage of net sales for the 2022 fourth quarter was 51.8% compared with 53.9% in the comparative 2021 fourth quarter. The decrease in gross profit as a percentage of net sales for the 2022 fourth quarter as compared to the 2021 fourth quarter was primarily the result of

Peter Grom:

Thanks, operator, and good evening or good afternoon everyone. So, Hilton, I guess, I wanted to ask about gross margin. You mentioned in the release that you expect some of these cost pressures you’ve experience to be transitory, whereas others remain challenging. And I guess maybe just to start, is there any way to frame how much of the drag on gross margin is still a result of these imported cans? And then just looking ahead in the context of pricing, the cost backdrop you've outlined and kind of the modest sequential improvement we saw sequentially, how would you frame the margin recapture opportunity looking out to next year? Thanks.

Operator:

The next question comes from Chris Carey of Wells Fargo Securities. Please go ahead.

Hilton Schlosberg:

Okay. Chris, to answer your first question, we don't give guidance. And I actually gave quite a robust explanation of what we see the runway for margins. So, I just really don't want to estimate it because we really don't give guidance. But I think I gave you a good sense of where we are, probably too much, but that is where it is. In respect of the price increase in the US in September, we actually limited the bottlers to the extent of how much they could buy in. So, I don't think that there was -- in fact, we don't think there was any much pull forward from Q3. I think it was just a question of the market stabilizing. As you know, with when price increases are put into effect, there's always a little bit of a bump as you go into more steady waters. And everything we know and that we've heard is the price really -- the price increase is actually sticking. So, we had a little bit more promotional allowances in the fourth quarter, and you'll see that in the K is released, but that's really consistent with bleeding in a price increase to a market in the consumer goods industry.

Operator:

The next question comes from Andrea Teixeira of JPMorgan.

Rodney Sacks:

I think it's a combination of those things. I think we have got gas prices coming down. I think we have seen sort of now sort of increase in convenience. I remember, last year. Convenience was always ahead of the grocery and mass channels. And last year has sort of reversed, and convenience was a little slow. That seems to be coming back a little bit. And we just think that, again, pricing has sort of settled down a bit. But you can see across the whole category, there has been an increase in the Nielsen numbers across the category for most people and our competitors. So, we're just are seeing just a little bit of resurgence of confidence again.

Operator:

The next question comes from Mark Astrachan of Stifel. Please go ahead.

Rodney Sacks:

Yes, I’m fine. Just sort of remnants of a cough for the last couple of weeks.

Hilton Schlosberg:

Well, let's talk about the first question, Mark, about inventories. As you know, when we went out of 2021, our inventories were just too low. We were unable to service our customers without major upheavals and without major costs. So, we -- there was no question that the inventories had to move and move significantly up because bearing in mind where our sales are. But as we are, we believe that we have sufficient inventories, which is important for us to be able to service our customers. Are we working on getting those inventories down? Yes. And these inventories will optimize themselves in due course. So, I wouldn't be concerned. Our products have a two-year shelf life, and it's important that we maintain sufficient inventories to service our customers. And then on that second question you asked about pricing, if you know and look, for example, at a Mountain Dew at Walmart, a 20-ounce Mountain Dew Walmart, their price is $2.18. And Monster is $2.28, so we -- I think as you look at the energy category and you kind of balance the pricing of 20-ounce sodas and energy drinks. Remember that we now -- and just twisting over to convenience, we sell more -- energy drink sell more at convenience than carbonated soft drinks. So, there is a balance. And I think we have struck a very good balance. With regard to going forward, we have a price increase planned for 24-ounce, which we believe has got opportunity, and we're taking price in 24-ounce up beginning of April. So that will happen. And we'll continue to monitor the opportunities for price increases in the US, as we see margins and as we see the carbonated soft drink category, and it's a whole bundle of issues that lead us to move in the direction of whether to take price.

Filippo Falorni:

Hey. Good afternoon, guys.

Filippo Falorni:

Can you talk about your expectations for your innovation pipeline in 2023, particularly on a relative basis over the last couple of years, given it seems like you have a pretty substantial pipeline this year, both in alcoholic beverage and your core energy drinks? Thank you.

Operator:

The next question comes from Steve Powers of Deutsche Bank. Please go ahead.

Hilton Schlosberg:

I think, Steve, we spoke about that about margins earlier on the call. Margins on a sequential basis were actually up. So, I'm really not sure what you're referring to. And the first question that we answered spoke -- I spoke quite heavily about the progression of gross margins and the pluses and the minuses. So maybe I'm missing something, but I think we did discuss margin earlier on the call. And with regard to the $60 million that we spoke about in the release, that was only -- the $60 million was comprised of $39.6 million due to increased ingredients in other input costs and 12.5 due to geographical product sales mix and 7.9 due to increased logistical costs. And the rest of the increase in cost of sales was normal increases as you would expect to -- in a normal business environment. Those are the kind of the exceptional ones that we called out.

Rodney Sacks:

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

Rodney Sacks:

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Thank you, Tom. The company achieved record third quarter net sales of $1.62 billion in the 2022 third quarter, 15.2% higher than net sales of $1.41 billion in the 2021 comparable period and 20.2% higher on a foreign currency adjusted basis. Since the beginning of the COVID-19 pandemic and the subsequent increased demand for the company's energy drinks, the company prioritized ensuring product availability for its customers and consumers. This strategic direction has remained in place throughout the global supply chain challenges and disruptions, despite adversely impacting the company's profitability. The company continues to stand by its strategy to ensure product availability and solidify the continued long-term growth of the company's brands. During the 2022 third quarter, the company experienced a significant increase in cost of sales relative to the comparative 2021 third quarter, primarily due to increased ingredient and other input costs, including secondary packaging materials and increased co-packing fees, increased logistical costs, increased aluminum can costs and geographical and product sales mix. We continue to believe that some of these increased costs we are experiencing are likely to be transitory. The depletion of our higher cost imported cans will continue over the next few quarters. However, our main promotion in the third quarter was executed with lower-cost, locally sourced cans in the United States and globally. We estimate that of the increasing cost of sales in the 2022 third quarter, approximately $84.2 million was comprised of approximately $40. 1 million due to increased ingredient and other input costs, including secondary packaging materials and increased co-packing fees to approximately $24.4 million due to increased freight rates and fuel costs, including costs relating to the importation of aluminum cans; 3, approximately $11.5 million due to increased aluminum can costs attributable to higher aluminum commodity pricing; and 4, approximately $8. 2 million due to geographical and product sales mix. We continue to air freight quantities of certain ingredients internationally, particularly to EMEA, Asia Pacific and Latin America at additional costs and inefficiencies to enable timely innovation launches. We continue to experience significant increases in distribution expenses, primarily as a result of increased warehousing expenses as well as other logistical expenses, which adversely impacted operating expenses. The company continues to address the challenges in its supply chain as it navigates through the uncertainty of the current global supply chain environment. Gross profit as a percentage of net sales for the 2022 third quarter was 51. 3% compared with 55.9% in the 2021 third quarter, and 47.1% for the 2022 second quarter. The decrease in gross profit as a percentage of net sales for the 2022 third was partially offset by pricing actions, including the implementation of our general price increase in the United States effective September 1, 2022, price increases in certain international markets and reductions in promotions. Such pricing actions positively impacted gross profit margins in the 2022 third quarter. Operating expenses for the 2022 third quarter were $415.8 million compared with $344.7 million in the 2021 third quarter. As a percentage of net sales, operating expenses for the 2022 third quarter were 25.6% compared to 24.4% in the 2021 third quarter and 24.5% in the 2019 third quarter pre-COVID. Distribution expenses for the 2022 third quarter increased to $83 million, which is an increase of 27.1% or 5.1% of net sales compared to $65.3 million or 4. 6% of net sales in the 2021 third quarter and 3. 3% of net sales in the 2019 third quarter pre-COVID. The $17.7 million increase in distribution expenses was primarily due to higher warehouse expenses of $11.7 million as a result of higher raw materials and finished product inventories in the United States and EMEA as well as increased freight out expenses of $4.8 million as a result of higher outbound freight rates and fuel, increased volume and out-of-orbit freight. The increase in other operating expenses was primarily due to increased payroll expenses, increased expenditures for sponsorships and endorsements and increased expenditures for travel and entertainment. Certain of these increases were the result of the company's return to activities consistent with pre-COVID-19 levels. We have decreased our reliance on imported cans and are currently purchasing aluminum cans from local sources globally. We have seen a reduction in cost of sales through increased use of domestic cans as we continue to cycle through existing inventories of imported cans over the next few quarters. We have rebuilt and increased finished product inventory levels across the United States and the EMEA to reduce the excessive cost of long distance freight, satisfy demand and to return to our strategy of producing in closer proximity to our customers. The cost of repositioning finished products to distribution centers are included in the freight in costs. Operating income for the 2022 third quarter decreased 6% to $417.9 million from $444.5 million in the 2021 comparative quarter. Net income decreased 4.4% to $322.4 million as compared to $337.2 million in the 2021 comparable quarter. Diluted earnings per share for the 2022 third quarter decreased 3.9% and to $0.60 from $0.63 in the third quarter of 2021. Through pricing actions, the company was able to achieve positive pricing appreciation in the United States and in EMEA. Due to continued cost pressures, the company implemented a net sales price increase in the range of 6% market-wide in the United States, effective September 1, 2022. In addition to price increases or pricing actions taken earlier this year in order to mitigate inflationary cost pressures, the company implemented price increases in the second half of 2022 in certain international markets and will be implementing additional price increases early in 2023 in a number of international markets. The company will continue to review further opportunities for price increases and pricing actions in order to mitigate inflationary pressures. According to the Nielsen report for the 13 weeks through October 22, 2022, all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 11. 2% versus the same period a year ago. Sales of the company's energy brands, including Reign, were up 11.2% in the 13-week period. Sales of Monster were up 11.2%. Sales of Reign were up 2.9%. Sales of NOS increased 17.2%. And sales of Full Throttle increased 1.7%. Sales of Red Bull increased 6.6%. Sales of Rockstar increased by 6. 1%. And sales of 5-Hour decreased 1.8%. VPX Bang sales decreased 22.6%. The company has regained market share leadership in the energy drink category in the United States for the 13 weeks ended October 22, '19 -- sorry, 2022. According to Nielsen, for the 4 weeks ended October 2022, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots, in dollars increased 10. 4% over the same period the previous year. Sales of the company's energy brands, which include Reign, increased 11.8% in the 4-week period in the convenience and gas channel. Sales of Monster increased by 11.4% over the same period versus the previous year. Reign sales increased 12%, NOS was up 13. 9% and Full Throttle was up 7.1%. Sales of Red Bull were up 6. 2%, Rockstar was up 8.1%, and 5-Hour was down 2.2%. VPX Bang sales decreased 27. 3%. According to Nielsen, for the 4 weeks ended October 22, 2022, the company's market share of the energy drink category in the convenience and gas channel, including energy shots, in dollars increased 0. 5 point to 36.9%. Monster share increased from 30.8% a year ago to 31. 1%, Reign share remained at 2.4%, NOS share increased 0.1% to 2.5%, and Full Throttle share remained at 0.7%. Red Bull share decreased 1.4 points from 37.5% a year ago to 36. 1%. VPX Bang share decreased 2.5 points to 4.8%, 5-Hour share was lower by 0. 5 point at 4%. Rockstar share was down with 0.1 to 3.7%. CELSIUS' share is 2. 6%, Alani new share is 0.6%, and GHOST's share is 1.8%. According to Nielsen, for the 4 weeks ended October 22, 2022, sales in dollars of the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 11.4% over the same period the previous year. Sales of Java Monster, including Java Monster 300 and Java Monster Nitro Cold Brew, were 10.4% higher in the same period versus the previous year. Sales of Starbucks Energy were 17.4% higher, Java Monster share, including Java Monster 300 and Java Monster Nitro Cold Brew of the coffee plus energy category, which primarily includes Java Monster, Java Monster 300, Java Monster Nitro Cold Brew, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee for the 4 weeks ended October 22, 2022, was 52.1%, down 0.5 point, while Starbucks Energy share was 46.9%, up 2.4 points. According to Nielsen, in all measured channels in Canada, for the 12 weeks ended October 8, 2022, the energy drink category increased 15.8% in dollars. Sales of the company's energy drink brands increased 14.9% versus a year ago. The market share of the company's energy drink brands was 40.9%, down 0.3 point. Monster sales increased 17. 3%, and its market share increased 0. 5 point to 36.6%. NOS' sales decreased 11.6%, and its market share decreased 0.4 point to 1.3%. Full Throttle's sales decreased 8% and its market share decreased 0.1 to 0.05%. According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 26% for the month of September 2022. Monster sales increased 36.4%. Monster's market share in value increased 2. 2 points to 28.6% against the comparable period the previous year. Sales of Predator increased 94% and and its market share increased 1.5 share points to 4.4%. The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales in the OXXO convenience chain in turn can be materially influenced by promotions that may be undertaken in that chain by 1 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 September 2022 compared to September 2021, Monster's retail market share in value increased in Argentina from 47.9% to 51.7%, and in Brazil from 37.7% to 41. 8%. Monster Energy continues to be the leading energy brand in value in both Argentina and Brazil. In Chile, Monster's retail share for the month of September 2022 decreased from 42.2% to 41. 7%. 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 ending October 9, 2020, Monster's reach or market share in value as compared to the same period the previous year grew from 13. 5% to 15.5% in Belgium; from 26.6% and to 31% in France; from 28.9% to 29.9% in Great Britain; from 20. 7% to 31.6% in Norway; and from 36.9% to 40.3% in Spain. According to Nielsen, in the 13-week period ending September 11, 2022, Monster's retail market share in value and as compared to the same period the previous year grew from 27.4% to 27. 9% in Denmark; from 27.5% to 28.1% in the Republic of Ireland; and from 13. 6% to 15. 5% in Sweden. Monster's market in value as compared to the same period the previous year declined from 7.8% to 5% in the Netherlands. According to Nielsen, in the 13-week period until the end of August 2022, Monster's retail market share in value as compared to the same period the previous year grew from 15% to 18.1% in the Czech Republic; from 15.3% to 15.6% in Germany; from 28. 8% to 31.6% in Italy; and from 19. 3% to 19.4% in Poland. Monster's retail market share in value as compared to the same period the previous year declined from 38.6% to 38.4% in Greece; and from 20.1% to 19.6% in South Africa. According to Nielsen, in the 13-week period until the end of August 2022, Predator's retail market share in value as compared to the same period the previous year grew from 17.4% to 29.6% in Kenya; and from 11.9% to 17% in Nigeria. According to IRI in Australia, Monster's market share in value for the 4 weeks ending October 16, 2022, increased from 14.2% to 14.8% as compared to the same period the previous year. Monster's market share in value increased from 11.2% to 11.7%. According to IRI in New Zealand, Monster's market share in value for the 4 weeks ended October 9, 2022, increased from 12.8% to 12.9% as compare to the same period the previous year. Live+ 's market share in value decreased from 6.4% to 6%, and Mother's market share in value decreased from 6.3% to 5. 9%. According to INTAGE in Japan, in the month ending September 2022, Monster's market share in value in the convenience store channel as compared to the same period the previous year grew from 53.9% to 55%. According to Nielsen in South Korea, in the month ending September 2022, Monster's market share in value in all outlets combined as compared to the same period the previous year increased from 60.4% to 61.5%. We again point out that certain market statistics that cover single months or 4-week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. Net sales to customers outside the U.S. were $610.6 million, 37. 6% of total net sales in the 2022 third quarter compared to $527.4 million or 37. 4% of total net sales in the corresponding quarter in 2021. Foreign currency exchange rates had a negative impact on net sales in U.S. dollars by approximately $71.3 million in the 2021 third quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the 2022 third quarter increased 14.1% in dollars and increased 30.4% in local currencies over the same period in 2021. Gross profit in this region as a percentage of net sales for the third quarter was 34.7% compared to 37.7% in the same quarter in 2021, and compared to 26.7% in the second quarter of 2022. The company is continuing to address the controllable challenges in its supply chain in EMEA. We're also pleased that in the 2022 third quarter, Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, Italy, Norway, Poland, the Republic of Ireland, Spain and Sweden. In Asia Pacific, net sales in the 2022 third quarter decreased 13.9% in dollars and decreased 1.5% in local currencies over the same period in 2021. Gross profit in this region as a percentage of net sales was 37. 4% versus 43.5% over the same period in 2021, due in part to a product supply issue with an ingredient that impacted a number of our products in Japan, but which has now been resolved, net sales in the 2022 third quarter decreased 35.8% in dollars and decreased 21.2% in local currency. Sales in the 2022 third quarter remain impacted by COVID in certain channels. In South Korea, net sales decreased 8% in dollars but increased 4.4% in local currency as compared to the same quarter in 2021. Monster remains the market leader in Japan and in South Korea. In China, net sales decreased 6% in dollars and 1.8% in local currency as compared to the same quarter in 2021, largely impacted by COVID-related lockdowns. We remain optimistic about the prospects for the Monster brand in China. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 30.7% in dollars and 41.5% in local currencies. In Latin America, including Mexico and the Caribbean, net sales in the 2022 third quarter increased 63.8% in dollars and increased 74.7% in local currencies over the same period in 2021. Gross profit in this region as a percentage of net sales was 34.7% for the 2022 third quarter versus 41% in the 2021 third quarter. In Brazil, net sales in the 2022 third quarter increased by 139. 4% in dollars and 142.9% in local currency. Net sales in Mexico increased 17% in dollars and 18% in local currency in the 2022 third quarter. Net sales in Chile decreased 4.4% in dollars and increased 15.1% in local currency in the 2022 third quarter. Net sales in Argentina increased 97.8% in dollars and increased 166.2% in local currency in the 2022 third quarter. We will now provide an update on our litigation with Vital Pharmaceuticals, Inc., which will be referred to as VPX, the maker of Bang Energy Drinks. We previously discussed the April 2022 final arbitration award, which the arbitrator found in favor of Monster Energy Company, or MEC, and Orange Bang Inc., and against VPX on all claims. The arbitrator awarded MEC and Orange Bang $175 million to remedy VPX' past misconduct as well as attorney's fees and costs, which amounted to nearly $9.3 million. The arbitrator also ordered VPX to pay MEC and Orange Bang an ongoing 5% royalty on all future sales of VPX Bang's energy drinks and other Bang-branded products. Pursuant to the terms of the agreement between MEC and Orange Bang, the award and future royalties will be shared equally between MEC and Orange Bang. On September 29, 2022, the United States District Court for the Central District of California entered final judgment confirming the award. On October 28, 2022, VPX filed a notice of appeal of the District Court's final judgment confirming the award. The company will not recognize the award or royalties until such time as they are realized or realizable. Additionally, on 29 September 2022, a jury in the United States District Court for the Central District of California, returned a verdict awarding MEC approximately $293 million in damages on its claims against VPX for false advertising, misappropriation of trade secrets and interference with Monster's contracts over shelf space with certain key retailers. MEC will not recognize the jury award until such time as the award is realized or realizable. On October 10, 2022, VPX, along with certain of its domestic subsidiaries and affiliates, filed for protection under Chapter 11 of the bankruptcy code in the Southern District of Florida. VPX initiated the bankruptcy action before the District Court could decide certain remaining issues. At this -- as this litigation and other pending proceedings with VPX are subjudicate, we will not be answering any questions on those matters on today's call. Our first alcohol-based product line to leverage Monster's brand equity is scheduled to launch in the first quarter of 2023. The Beast Unleashed will be a full bodied flavored malt beverage with 6% alcohol by volume and will come in 4 bold flavors, mean green, white haze, peach perfect and scary berries, all of which are based on Monster's well-known and popular flavor profiles. CANarchy Kanok will introduce The Beast Unleashed through certain beer distributors in the United States, utilizing a phased approach launch, with the goal of being national by the end of 2023. Our alcohol innovation pipeline is robust. In addition to The Beast Unleashed, we will relaunch Wild Basin Hard Seltzer with new packaging and great new flavors and taste profiles. The Dale's beer family will get a refresh, including the introduction of Dale's American Light Lager, an easy-drinking lager with 4.2% alcohol by volume, 95 calories and 2.5 carbs per 12-ounce serving. We also have several additional innovative alcohol beverage products under development and look forward to sharing use of those products at a later date. In the U.S., in September, we began shipping Monster Reserve Orange Dreamsicle to distributors for an October launch at retail. We are excited about the planned launch of our new Monster Energy Zero Sugar energy drink initially in the United States at retail in January of 2023. Monster Energy's Zero Sugar was specifically developed as an indistinguishable zero sugar analog of our original unique Monster Energy Green flavor. We are excited about the opportunities that this product will provide to our Monster consumers who have come to enjoy the unique taste profile of our original Monster Green flavor, which remains our leading flavor. We are planning to launch Monster Tour Water in the United States, in still and sparkling variants in 19.2 ounce cans in the first half of 2023. Monster Tour Water is a pure unflavored water product. In the first half of 2023, we are also planning to launch Rainstorm in 4 flavors in 12-ounce slim cans to compete directly with certain competitive new entrants in the energy drink category in the United States. In Puerto Rico, during July, we introduced our first 16-ounce 12-pack ultra variety packs. And in August, we launched Monster Reserve Watermelon and Reserve White Pineapple. In Mexico, we expanded our juice portfolio and launched Monster Juice Monarch in August. We launched Monster Dragon Tea Lemon in August in Honduras and El Salvador, and in September in Guatemala. In Australia, during the month of July, we expanded our Mother portfolio and launched Mother Lava Guava. In EMEA, in the third quarter of 2022, we launched Monster Assault and Monster Reserve White Pineapple in a number of countries. In certain countries, we also launched Juiced Monarch, Juiced Chaotic, Ultra Rosa and Ultra Watermelon during the 2022 third quarter. During the 2022 third quarter, we also launched additional SKUs of Burn, Predator and Rain in certain countries. We are excited about the planned launch at retail of our new Monster Energy Lewis Hamilton Zero Sugar Energy Drink initially in select EMEA markets late in the fourth quarter of 2022, followed by an additional 20 markets in the first quarter of 2023. During the third quarter of 2022, we launched Predator in Kazakhstan, Malaysia and Jordan, and we continued the national rollout of Predator in India. We are planning to introduce the Predator brand in additional countries in APAC in the last quarter of 2022 and the first half of 2023. We also launched Monster Super Cola in a can in Japan in August and Monster Rehab Tea Plus Lemonade in October. We estimate October 2022 sales, including CANarchy to be approximately 6. 5% higher than in October 2021 and 5% higher than in October 2021, excluding CANarchy. On a foreign currency adjusted basis, including CANarchy, October 2022 sales would have been approximately 12. 9% higher than the comparable October 2021 sales, and 11.4% higher than October 2021, excluding CANarchy. October 2022 had the same number of selling days as October 2021. The company had sufficient can capacity and co-manufacturing filling capacity across all regions to address demand for October. We would like to remind listeners that we took a general price increase in the United States effective September 1, 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, promotions in retail stores, distributor incentives as well as shifts in the timing of production. In some instances, our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels according to their own internal requirements, which they may alter from time to time for their own business reasons. We reiterate that sales over a short period, such as a single month, should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. If the COVID-19 pandemic and related unfavorable economic conditions continue in certain regions, our new product innovation launches in those regions could be delayed. Turning briefly to share repurchases. During the 2022 third quarter, the company purchased approximately 3.1 million shares of common stock, and as of November 3, 2022, approximately $182.8 million remained available for repurchase under the June 2022 repurchase program. The Board of Directors also authorized a new share repurchase program for the repurchase of up to an additional $500 million of the company's outstanding common stock. In conclusion, I would like to summarize some recent positive points. One, consumer demand remains solid, even with the pricing actions that have been taken in 2022; two, the company has increased its raw material and finished product inventories to better service its customers and ensure availability of its products; three, our AFF flavor facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower landed costs to our EMEA region; four, we are pleased with the new additions to the Monster Energy portfolio; five, we are particularly excited for the launch of Monster Energy Zero Sugar in January 2023 in the United States. As I mentioned previously, Monster Zero Sugar is an analog of our original unique Monster Energy Green flavor. Six, we are planning to launch rate auto body fuel high-performance energy drinks in additional international markets and countries. We are also pleased with the rollout of Predator and Fury, our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in an additional number of international countries. We are enthusiastic for the planned launch of The Beast Unleashed, our first flavored malt beverage alcohol product and for the opportunities that the CANarchy acquisition presents. We are also enthusiastic for the planned launches of the Monster Tour Water and Rainstorm lines in the first half of 2023 in the United States. Ten, we believe that we will be able to address many of the challenges we have experienced in our supply chain. Eleven, we consider that certain of the increased costs that we have experienced in the quarter may well be transitory. For example, the LME price for aluminum has reduced materially from its recent March highs, and we are beginning to see a reduction in freight costs as well as reductions in the cost of shipping containers and ocean freight. I would like to now open the floor to questions about the quarter. Thank you.

Andrea Teixeira :

I was hoping if you can comment on the October performance, excluding FX in the low double digits, and not to take demerit of it, but just understanding if there is some signs of retailers that may have decided to take inventory down or seeing some less or the timing of pricing? And was this performance pretty much consistent across all channels?

Operator:

Our next question comes from Dara Mohsenian from Morgan Stanley.

Hilton Schlosberg :

Yes. So Dara, I think as we look at the category internationally, EMEA really still looks pretty strong. Remember, at the end of the day, we're sending an affordable luxury. So EMEA, and there are lots of concerns in costs in EMEA, gas prices and not necessarily petrol prices, but energy costs are ramping up significantly in EMEA. We've seen lots of other costs hitting us. But at the end of the day, the consumer still seems to be spending, not at the rates they were spending in 2021, but they still seem to be spending on our products anyway. So we've seen growth in EMEA. As I look at other parts of the world, Japan had an issue with an ingredient that Rodney spoke about in his narrative. And the rest of EMEA -- the rest of Asia Pacific, I'm sorry, seems also to be -- to continuing with growth, although not at the same rate as 2021. And we're monitoring the situation. But right now, volumes still seem to be healthy.

Hilton Schlosberg :

In japan, that's correct.

Operator:

Our next question comes from Bonnie Herzog from Goldman Sachs.

Hilton Schlosberg :

Okay. So that was quite a long question, Bonnie. Let's start at the very beginning. You spoke about these more expensive imported cans that we have in the system that we brought in to satisfy demand. If you look at cost of sales in the quarter, what we talk about is not a significant number, but will be worked through as we work through normal inventory, and we're anticipating it will be worked through over probably the next, I would say, 3 quarters. So that is something that we will work through in the ordinary course. The cans of many of green and white that we sell in the ordinary course. We sold them every day. And the comment on this quarter was that we had a major promotion with Apex Legends and its city to produce promotional cans overseas because you don't know when they'll arrive, if they'll arrive on time, if they arrive late. So we stick to our core SKUs for our international cans. So -- and you're right, we have had a price increase, and in the U.S., and we've had price increases internationally, we're having more price increases in 2023, as we enunciated on the discussion earlier. So prices are going up and prices going up in response to the inflationary costs that we've seen. As you know, inflation is rampant. But on the other hand, there are some good things that are coming out. We've seen freight rates coming down. There was a lot of capital expenditure put into new equipment and containers. So we've seen freight rates coming down. Fuel is where fuel is. It's very difficult to say what's going to happen with gas prices and diesel and fuel. Aluminum is coming down, but aluminum is one of those elusive commodities in our business because we -- part of our aluminum is hedged, part is bought on n minus 1. So you don't see a perfect improvement in aluminum prices when you look at a specific quarter. So there's -- we're seeing increases in commodities. We're seeing horrific increases in energy costs in Europe. And there's a bunch of costs that are continuing to compromise progress. But all in all, we believe that the price increases that we are putting into place should be able to be tolerated by the consumer and help mitigate some of the increased costs we've seen.

Hilton Schlosberg :

And the other comment -- sorry, I just wanted to respond to another comment that Bonnie made about buying. So we restricted customers, obviously, the distributors in buying in. We didn't give them cut launch. They were allowed to buy a modest amount. And as we look at the numbers for the quarter, we believe that the -- that whatever was purchased was probably sold in the quarter. That's the numbers we've seen.

Kevin Grundy:

Just a quick 2-parter, if you'd indulge me. Number one, if you could just confirm that your understanding is still that Red Bull is going to follow the magnitude of the price increase that you took, it's lagging a little bit in the Nielsen data. If you could just confirm that. My broader question is just on the recent distribution changes from some of your competitors with CELSIUS going into the Pepsi system, Bang coming out. Very common for that to create opportunity for incumbents like you guys and Red Bull in this instance. Can you just comment on your observations with respect to the state of those transitions? And how much of that disruption, particularly around Bang, do you think is contributing positively to your market share performance and how sticky that is?

Rodney Sacks :

Yes. I'll sort of start that one. I think that the CELSIUS transition is -- will be interesting. But it's not all a panacea. It doesn't -- there's no magic in it. We think that they will then find increased distribution and increased number of outlets. I think that the discipline that a system like Pepsi will clearly introduce will also be a little bit negative on the flexibility and that they've been able to achieve or being able to enjoy through the beer distribution network. So you get pluses and minuses. And as you can see from the numbers, their strength continues to be in the grocery and large-format store channel. When you look at their numbers and sales per point in the convenience channel, there -- it's not as high. So I don't -- we don't believe that's going to have a major difference. There are a number of other brands that are all sort of getting some traction at a smaller level. I don't know what effect they're going to have. But overall, I think that we're getting a lot of our traction from the innovation and from execution and focus. And I think that will continue.

Operator:

And our next question comes from Mark Astrachan from Stifel.

Hilton Schlosberg :

So let me start off, Mark. Our sales team has an objective because this is the time where we do shelf plans and shelf negotiations. And our sales team, both on the convenience side and on the large store side, are very active in achieving additional shelf space for our brands because we do feel that they are under spaced, and they do deserve further space relative to what's happening in the market. For example, in convenience, we sell more than single-serve sparkling beverages. So as a category, the energy category really requires more space relative to their fair share. And as such, our brand, which is growing, and we mentioned that we've overtaken Red Bull as a company with all -- the various brands and makeup. The company, our mission is to increase our shelf space at retail. I think we have to.

Hilton Schlosberg :

Yes. But remember, the category is growing here, Mark. And that in and of itself, that's a factor for the retailer. The space that they allocate to energy generates them really good returns, really good revenue. And it's something -- space is something that we always strive for, including putting our own coolers in retailers. So that's a big push for us, and always has been.

Peter Galbo:

I'll be pretty quick. Just to clarify, Hilton, your fourth quarter gross margins, you're going to be lapping, I guess, the promo benefit from 3Q, but should we still expect a sequential improvement in the gross margin? Or is that promo benefit you saw in the third quarter enough that you'd be actually down quarter-on-quarter into 4Q?

Operator:

And at this time, we will conclude today's question-and-answer session. I would like to turn the conference call back over to Mr. Sacks for any closing remarks.

Operator:

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

Rodney Sacks:

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call, as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Thank you, Tom. The company achieved record second quarter net sales of $1.66 billion in the 2022 second quarter, 13.2% higher than net sales of $1.46 billion in the 2021 comparable period and 16.9% higher on foreign currency adjusted basis. Since the beginning of the COVID-19 pandemic and the subsequent increased demand for the company’s energy drinks, the company prioritized ensuring product availability for its customers and consumers. This strategic direction has remained in place throughout the global supply chain challenges and disruptions despite adversely impacting the company’s profitability. The company continues to stand by its strategy to ensure product availability and solidify the continued long-term growth of the company’s brands. During the 2022 second quarter, the company experienced a significant increase in cost of sales relative to the comparative 2021 second quarter, primarily due to increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, increased ingredient and other input costs, including secondary packaging materials and increased co-packing fees, increased aluminum can costs attributable to higher aluminum commodity pricing, geographical and product sales mix and production inefficiencies. The company estimates that of the increase in cost of sales in the 2022 second quarter of $250.3 million, approximately $164.4 million was comprised of; one, approximately $66.7 million due to increased freight rates and fuel costs, including costs relating to the importation of aluminum cans; two, approximately $45.9 million due to increased ingredient and other import costs, including secondary packaging materials and increased co-packing fees; three, approximately $27.5 million due to increased aluminum can costs attributable to higher aluminum commodity pricing; four, approximately $15.1 million due to geographical and product sales mix; and five, approximately $9.2 million due to production inefficiencies. The company continued to experience additional global supply chain challenges, including the lack of adequate shipping containers and port congestion, which resulted in shortages of certain ingredients and finished products. As a result, the company continued to air freight substantial quantities of certain ingredients internationally, particularly to EMEA, Asia-Pacific and Latin America at additional costs and inefficiencies. Furthermore, the company experienced significant increases in distribution expenses, including increased fuel, freight and warehousing costs, which adversely impacted operating expenses. The company continued to address the challenges in its supply chain as it navigates through the uncertainty of the current global supply chain environment. Gross profit as a percentage of net sales for the 2022 second quarter was 47.1%, compared to 57.2% in the 2021 second quarter. The decrease in gross profit as a percentage of net sales for the 2022 second quarter was partially offset by pricing actions. Operating expenses for the 2022 second quarter were $406. 9 million, compared with $310.9 million in the 2021 second quarter. The comparative operating expenses for the 2021 second quarter included a $16.9 million reversal of amounts previously accrued in connection with an intellectual property claim. As a percentage of net sales, operating expenses for the 2022 second quarter were 24.6%, compared with 21.3% in the 2021 second quarter and 25.6% in the 2019 second quarter pre-COVID. Distribution expenses for the 2022 second quarter increased to $87.9 million, which is an increase of 36% or 5.3% of net sales, compared to $64.6 million or 4.4% of net sales in the 2021 second quarter and 3.4% of net sales in the 2019 second quarter pre-COVID. The $23.3 million increase in distribution expenses was primarily due to increased freight out expenses of $13.5 million as a result of higher outbound freight rates and fuel, increased volume and out-of-orbit freight, as well as higher warehouse expenses of $9.7 million as a result of higher raw material and finished product inventories in the United States and EMEA. The increase in other operating expenses was primarily due to increased payroll expenses, increased expenditures for sponsorships and endorsements, and increased expenditures for travel and entertainment. Certain of these increases were the result of the company’s return to activities consistent with pre-COVID-19 levels. We have decreased our reliance on imported cans and are currently purchasing aluminum cans from local sources in both the U.S. and EMEA. We anticipate seeing a reduction in cost of sales through increased use of domestic cans as we cycle through existing inventories of imported cans over the next few quarters. We rebuilt and increased finished product inventory levels across the United States and EMEA to reduce the excessive cost of long distance freight to satisfy demand and to return to our orbit strategy of producing in closer proximity to our customers. The cost of repositioning finished products to distribution centers are included in freight-in costs. Operating income for the 2022 second quarter decreased 29.1% to $373.0 million from $526 million in the 2021 comparative quarter. Net income decreased 32.3% to $273.4 million, as compared to $403.8 million in the 2021 comparable quarter. Diluted earnings per share for the 2022 second quarter decreased 32.2% to $0.51 from $0.75 in the second quarter of 2021. Through pricing actions, the company was able to achieve positive pricing appreciation in the United States and in EMEA. Due to continued cost pressures, the company is implementing a net sales price increase in the range of 6% market wide in the United States effective September 1, 2022. The company will also be implementing price increases in the second half of 2022 in certain international markets, some in addition to price increases or pricing actions taken earlier this year in order to mitigate inflationary cost pressures. According to the Nielsen reports, for the 13 weeks through July 23, 2022, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 8.2% versus the same period a year ago. Sales of the company’s energy brands including Reign were up 6% in the 13-week period, sales of Monster were up 7. 4%, sales of Reign were down 5.6%, sales of NOS decreased 3.9% and sales of Full Throttle decreased 0.8%. Sales of Red Bull increased 3.8%, sales of Rockstar increased by 2.1% and sales of 5-Hour decreased 3%. VPX Bang’s sales decreased 14.5%. The sales growth of the Monster brand exceeded that Red Bull in the period. According to Nielsen for the four weeks ended July 23, 2022, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 6.6% over the same period the previous year. Sales of the company’s energy brands, which include Reign, increased 5.6% in the four-week period in the convenience and gas channel, sales of Monster increased by 6.4% over the same period versus the previous year, Reign sales increased 0.9%, NOS was down 1.8% and Full Throttle was down 2.5%. Sales of Red Bull were up 3.9%, Rockstar was down 1.8% and 5-Hour down 3.5%. VPX Bang sales decreased 16.3%. According to Nielsen for the four weeks ended July 23, 2022, the company’s market share of the energy drink category in the convenience and gas channel, including energy shots in dollars decreased 0.4 point to 36.1%. Monster share decreased from 30.6% a year ago to 30.5%, Reign share decreased 0.1 of a share point to 2.3%, NOS share decreased 0.2 point to 2.5% and Full Throttle share remained at 0.7%. Red Bull share decreased one percentage point from 37.4% a year ago to 36.4%, Rockstar share was down 0.3 point to 3.5%, 5-Hour share was lower by 0.4 at 4.2% and VPX Bang share decreased 1.6 points to 6%. According to Nielsen for the four weeks ended July 23, 2022, sales in dollars of the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 4.4% over the same period the previous year. Sales of Java Monster, including Java Monster 300 and Java Monster Nitro Cold Brew were 2.3% higher in the same period versus the previous year. Sales of Starbucks Energy were 9.4% higher. Java Monster share, including Java Monster 300 and Java Monster Nitro Cold Brew of the coffee plus energy category, which primarily includes Java Monster, Java Monster 300, Java Monster Nitro Cold Brew, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee for the four weeks ended July 23, 2022 was 50.9%, down 1 point, while Starbucks Energy share was 47.7%, up 2.2 points. According to Nielsen in all measured channels in Canada, for the 12 weeks ended June 18, 2022, the energy drink category increased 12.8% in dollars. Sales of the company’s energy drink brands increased 8.5% versus a year ago. The market share of the company’s energy drink brands was 40%, down 1.6 points. Monster sales increased 10.8% and its market share decreased 0.7 point to 34.8%. NOS’ sales decreased 9.6% and its market share decreased 0.4 to 1.5%. Full Throttle sales increased 13% and its market share remained at 0.6%. According to Nielsen for all outlets combined in Mexico, the energy drink category increased 21.2% for the month of June 2022. Monster sales increased 26.9%. Monster’s market share in value increased 1.3 points to 28.4% against the comparable period the previous year. Sales of Predator increased 53.1% and its market share increased 0.8 of a share point to 4%. The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales 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 June 2022, compared to June 2021, Monster’s retail market share in value increased in Argentina from 46.9% to 49.2%. Monster Energy continues to be the leading brand in value in Argentina. According to Nielsen for the month of June 2022 compared to June 2021, Monster’s retail market share in value increased in Brazil from 35.7% to 39.9%. Monster is now the leading energy brand in value in Brazil, marking another important milestone for our brand in South America. In Chile, Monster’s retail share for the month of June 2022 decreased from 41.9% to 38.1% due to a shortage of shipping containers. 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 ending July 17, 2022, Monster’s retail market share in value as compared to the same period the previous year, grew from 25.8% to 31.6% in France from 27.8% to 32.1% in Norway and from 37.6% to 39.7% in Spain. According to Nielsen in the 13-week period until the end of June 2022, Monster’s retail market share in value as compared to the same period the previous year grew from 15.3% to 16% in Belgium, from 15. 1% to 15.4% in Germany, from 28.9% to 29.9% in Great Britain and from 19.4% to 19.8% in Poland. Monster’s retail market share in value as compared to the same period the previous year declined from 20.5% to 20% in South Africa. According to Nielsen in the 13-week period ended June 19, 2022, Monster’s retail market share in value as compared to the same period the previous year, grew from 14.5% to 15.6% in Sweden, Monster’s retail market share in value compared to the same period the previous year declined from 8.5% to 6.6% in the Netherlands and from 29.3% to 28.1% in the Republic of Ireland. According to Nielsen in the 13-week period until the end of May 2022, Monster’s retail market share in value as compared to the same period the previous year grew from 15% to 17.5% in the Czech Republic and from 37.9% to 38.7% in Greece. Monster’s retail market share in value as compared to the same period the previous year declined from 30.1% to 28.3% in Italy. According to Nielsen in the 13-ewek period ending May 22, 2022, Monster’s retail market share in value as compared to the same period the previous year grew from 25.7% to 27.5% in Denmark. According to Nielsen in the 13-week period until the end of May 2022, Predator’s retail market share in value as compared to the same period the previous year grew from 17.1% to 26.8% in Kenya and from 8.1% to 15.4% in Nigeria. According to IRI in Australia, Monster’s market share in value for the month ending July 3, 2022, increased from 13.2% to 14.2% as compared to the same period the previous year. Mother’s market share in value decreased from 11.5% to 10.2% during the same period. The market share of the company’s brands in Australia for the month ended July 3, 2022, decreased from 24.7% to 24.5%. According to IRI in New Zealand, Monster’s market share in value for the four weeks ended July 10, 2022, increased from 12.4% to 12.6% as compared to the same period the previous year. LIVE+’s market share in value decreased from 6.9% to 6.5% and Mother’s market share in value decreased from 6.3% to 5.3%. The market share of the company’s brands in New Zealand for the four weeks ended July 10, 2022, decreased from 25.6% to 24.5%. According to INTAGE in Japan, in the month ending June 2022, Monster’s market share in value in the convenience store channel as compared to the same period the previous year grew from 50.6% to 56.7%. According to Nielsen, in South Korea, in the last month ending June 2022, Monster’s market share in value in all outlets combined as compared to the same period the previous year decreased from 61. 9% to 59.9%. We again point out that certain market statistics that single months or four-week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. Net sales to customers outside the U.S. were $649 million, 39.2% of total net sales in the 2022 second quarter, compared to $546.3 million or 37.4% of total net sales in the corresponding quarter in 2021. Foreign currency exchange rates had a negative impact on net sales in U.S. dollars by approximately $53.4 million in the 2022 second quarter. Included in reported geographic sales are our sales to the company’s military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the 2022 second quarter increased 13.8% in dollars and increased 26.8% in local currencies over the same period in 2021. Gross profit in this region as a percentage of net sales for the second quarter was 26.7%, compared to 39.8% in the same quarter in 2021. Gross profit in the second quarter was impacted by increased freight for imported cans, increased raw material and ingredient costs and increased co-packing fees, higher aluminum commodity pricing and air freight costs. In local currencies, gross profit as a percentage of net sales for the quarter was 27.1%. The company is continuing to address the controllable challenges in its supply chain in EMEA. We are also pleased that in the 2022 second quarter, Monster gained market share in Belgium, Czech Republic, Denmark, France, Germany, Great Britain, Greece, Norway, Poland, Spain and Sweden. In Asia-Pacific, net sales in the 2022 second quarter decreased 1.1% in dollars and increased 8.2% in local currencies over the same period in 2021. Gross profit in this region as a percentage of net sales was 40.4% versus 44.4% over the same period in 2021. In Japan, net sales in the 2022 second quarter decreased 9.6% in dollars and increased 3.3% in local currency. Sales performance for the comparable period in 2021 was largely impacted due to COVID-19 restrictions in Japan. In South Korea, net sales decreased 5.2% in dollars and increased 3.8% in local currency as compared to the same quarter in 2021. Monster remains the market leader in Japan and South Korea. In China, net sales decreased 2.1% in dollars and 8% in local currency as compared to the same quarter in 2021, largely impacted by COVID-related lockdowns. We remain optimistic about the prospects for the Monster brand in China. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea, and Guam, net sales increased 1.3% in dollars and 7.6% in local currencies. Sales in Australia and New Zealand were negatively impacted by shipping delays of certain flavors, concentrates and ingredients. Furthermore, sales in Australia were also impacted by severe flooding in that country in the 2022 second quarter. In Latin America, including Mexico and the Caribbean, net sales in the 2022 second quarter increased 66.7% in dollars and increased 69.7% in local currencies over the same period in 2021. Gross profit in this region as a percentage of net sales was 36.4% for the 2022 second quarter versus 40.7% in the 2021 second quarter. In Brazil, net sales in the 2022 second quarter increased by 8.8% in dollars and 63.9% in local currency. Net sales in Mexico increased 49.3% in dollars and 49% in local currency in the 2022 second quarter. Net sales in Chile increased 26.1% in dollars and 45.3% in local currency in the 2022 second quarter. Net sales in Argentina increased 200.1% in dollars and 26 9.4% in local currency in the 2022 second quarter. I will now provide the most recent update on our litigation with Vital Pharmaceuticals, Inc., which I will refer to as VPX, the maker of Bang energy drinks. In June 2020, Monster Energy Company, which I will refer to as MEC and Orange Bang, Inc., a family-owned beverage business and the rightful owner of several trademark registrations to the Bang marks initiated an arbitration against VPX. MEC and Orange Bang alleged that VPX breached a 2010 settlement agreement with Orange Bang that restricted VPX’s use of the Bang trademark to products that are creatine-based or marketed and sold only in nutritional channels, as well as claims that VPX infringed Orange Bang’s trademark rights to the Bang marks. In April 2022, the arbitrator issued a final award finding in favor of MEC and Orange Bang on all claims. The arbitrator awarded MEC and Orange Bang $175 million to remedy VPX’s past misconduct, as well as attorneys’ fees and costs, which amounted to nearly $9.3 million. The arbitrator also ordered VPX to pay MEC and Orange Bang an ongoing 5% royalty on all future sales of VPX Bang’s energy drinks and other Bang branded products. Pursuant to the terms of the agreement between MEC and Orange Bang, the award and future royalties will be shared equally between MEC and Orange Bang. On July 1, 2022, the United States District Court for the Central District of California granted MEC and Orange Bang’s motion to confirm the arbitrator’s award and denied VPX’s motion to vacate the arbitrator’s award. MEC and Orange Bang have requested that the court end to final judgment. On July 28, 2022, VPX filed a notice of appeal to the United States Court of Appeals for the non-circuit. The company will not recognize the award or royalties until such time as they are realized or realizable. Yesterday, the United States Court of Appeals for the 11th Circuit issued a ruling affirming the decision of the United States District Court in the Southern District of Florida, in which the District Court rejected VPX’s claim that MEC’s line of Reign energy drinks infringed the trade rest of its line of Bang energy drinks. MEC’s lawsuit against VPX for force advertising, unfair competition and misappropriation of trade secrets in the Central District of California is still pending with trial scheduled to begin later this month. As this litigation and other pending proceedings with VPX are subdued, I will not be answering any questions on those matters on today’s call. The first alcohol-based product line that we plan to launch since the acquisition of CANarchy will be a full bodied flavored malt beverage that will be launched late in the 2022 fourth quarter under the brand name the Beast Unleashed. Beast Unleashed will leverage Monster’s brand equity, while carving out its own unique space in the beverage alcohol sector and will be distinguishable from the many hard seltzer brands that have become so ubiquitous over the last several years. The Beast Unleashed will have a 6% alcohol content by volume and will come in four great tasting bold flavors, which are based on certain of Monster’s well-known and popular flavor profiles. Beast Unleashed will be launched through beer distributors in the United States, utilizing a phased state launch approach, with the goal of being national by the end of 2023 and will initially be offered in 16-ounce single-serve cans, as well as a 12-can variety pack in 12-ounce sleek cans. Our alcohol innovation pipeline is robust, with a number of additional innovative product lines currently under development. We look forward to sharing use of such additional alcohol beverage products at a later date. We are excited about the planned launch of our new Monster Energy Zero Sugar energy drink in the 2022 fourth quarter initially in the United States. Monster Energy Zero Sugar was specifically developed as an indistinguishable Zero Sugar analog of our original unique Monster Energy Green flavor. We are excited about the opportunity that this product will provide to our Monster consumers who have come to enjoy the unique taste profile of our original Monster Green flavor, which remains our leading flavor. In April of 2022, we launched Pure North Energy Seltzers in sleek 355 ml cans in three flavors Cucumber Lime, Black Cherry and Grape fruit Lemonade in Canada. At the end of June 2022, we expanded our core Monster Energy portfolio in Canada by launching Monster Reserve in two flavors, Watermelon and White Pineapple, both in 473 ml cans. In Latin America, we introduced several new energy drinks in our Monster Energy Predator and Fury product lines in certain Latin American countries in the 2022 second quarter. In April 2022 in New Zealand, we launched LIVE+ Watermelon, our fourth LIVE+ flavor. In EMEA, in the second quarter of 2022, we launched Monster Nitro and Monster Assault in a number of countries. In certain countries, we also launched Juiced Monarch and Chaotic during the 2022 second quarter. During the 2022 second quarter, we also launched additional SKUs of Burn, Relentless, Nalu and Reign in certain countries. During the second quarter of 2022, we launched Predator in Turkey and we continued the national rollout of Predator in India and Vietnam in June, expanding the brand to East India and North Vietnam. We also launched Predator in Cambodia in July 2022. We are planning to introduce the Predator brand in several additional countries in APAC in the second half of 2022. In Japan, we launched Monster Super Fuel Killer Kiwi and Monster Energy Ultra Sunrise in China. We estimate July 2022 sales, including to be CANarchy to be approximately 12.9% higher than in July 2021 and 11.2% higher than in July 2021 excluding CANarchy. On a foreign currency adjusted basis, excluding CANarchy, July 2022 sales would have been approximately 16.6% higher than the comparable July 2021 sales. July 2022 has had one less selling day compared to July 2021. The company had sufficient can capacity and co-manufacturing facility -- capacity across all regions to address demand for July. 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 as shifts in the timing of production in some instances where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers, as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. If the COVID-19 pandemic and related unfavorable economic conditions continue, in certain regions our new product innovation launches in those regions could be delayed. In conclusion, I would like to summarize some recent positive points. One, the company is increasing its raw material and finished product inventories to better service its customers and ensure availability of its products. Two, our AFF flavor facility in Ireland is now providing a large number of flavors to our EMEA region, enabling better service levels and lower landed costs to our EMEA region. Three, we are pleased with the new additions to the Monster Energy portfolio. Four, we are planning to continue additional launches of our Reign Total Body Fuel high-performance energy drinks in additional international countries. Five, we are pleased with the rollout of Predator and Fury, our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in an additional number of international countries. Six, we are enthusiastic for the planned launch of the Beast Unleased, our first flavored malt beverage alcohol product and for the opportunity that the CANarchy acquisition presents. Seven, we believe that we will be able to address many of the challenges we have experienced in our supply chain. Eight, we consider that certain of the increased costs we have experienced in the quarter may well be transitory. For example, the current cost of aluminum has reduced materially from its recent March highs and we are beginning to see a reduction in fuel and freight costs, as well as reductions in the cost of shipping containers and ocean freight. I would like to now open the floor to questions about the quarter. Thank you.

Bonnie Herzog:

Hi. Thanks. Hi.

Bonnie Herzog:

Okay. Thank you. I guess a question on gross margins. I simply don’t understand really why they were the bad in the quarter. I guess I was under the impression that you were already buying a fair amount of your aluminum cans from U.S., and therefore, should have been less reliant on the importation of cans, I guess, at least in the U.S. So, I thought that was the plan. However, I do see your inventory levels in the quarter went even higher and are almost three times the level they were last year. So, I guess, help us understand that and just trying to think through, is this really the right way to manage the business? And then, Hilton, you mentioned these pressures are transitory or it was in the release, but I guess, they are not really feeling like it. So when do you guys expect to be 100% buying in the U.S. and EMEA for your supply, and really no longer importing aluminum cans?

Operator:

Your next question.

Bonnie Herzog:

But, I guess, for me, it’s still back the question as you are making this conscious decision to keep have a bigger supply of cans and have elevated inventory. How do we think about that as I assume you are going to work down that inventory now? Is that starting to happen or will happen in Q3 and Q4, and I assume it’s very elevated cost. So do we think about these pressures on your gross margin, quite frankly, very much continuing Q3 and Q4, is that right about the product?

Operator:

Your next question comes from the line of Andrea Teixeira with JPMorgan.

Hilton Schlosberg:

Okay. So those were two questions all in. I will start with the first one. So we don’t give guidance and what I have tried to do on this call is give some direction. That’s what we are saying -- that’s what we are seeing is coming down. It’s not going to happen overnight, because there are costs in the system that will take their time to work through. So, in principle as, since we don’t give guidance, I have given some general direction, which I hope you will find helpful and the other analysts will find helpful in analyzing where we go from here. But I just want to repeat yet again that we are in this business for the long-term. We are in this business to support our customers. And yes, maybe we did take a hiccup in gross margin in 2022 -- the second quarter of 2022, but there have been a lot of other cost pressures, including imported cans, imported cans being one of them, but at least we were able to bring our inventories back to a situation where we are able to service customers and we are able to service consumers. Look, it will be a terrible situation, when our price goes up in September 1 and we don’t have sufficient inventories to satisfy demand. I mean, that would just be the end. So we have done our very best to stay on track and to work within a very, very difficult supply chain environment.

Operator:

Your next question comes from Mark Astrachan.

Hilton Schlosberg:

Yeah. So, with regard to your first point, I think I have already answered that. I believe that the second quarter is probably -- we are probably going to see the lowest margin in the year. And as regards better direction than that, Mark, we just don’t do it. We just don’t give guidance. So, that’s the first point. And then on the second point is, we are really not sure and we have had discussions with our distribution partner on a number of issues. And we are not sure that further engagement with them on any of these topics would be positive, but -- positive in terms of lowering cost of sales. But we are continuing to have those discussions and if it makes sense, then definitely we will -- we definitely will. I don’t want to disclose too much, but one of our partners in Europe, that is actually part of the Coca-Cola system, did not fare better in procuring cans than we were able to. So I just want to just put all of this in perspective that it’s not necessarily a panacea.

Peter Grom:

Hey. Good afternoon, everyone. Hope you are doing well. I guess I will ask about topline I guess. So, Rodney, Hilton, I guess, I just wanted to ask about Bang, like what are you seeing there in terms of shelf space and kind of what do you expect as they kind of transition to distributors? And I guess, do you see a potential opportunity for you to capture some of that incremental shelf space?

Rodney Sacks:

Yeah.

Rodney Sacks:

Yeah. Just to bullet lightly. I mean, the -- if Bang transitions out of the Pepsi coolers, you have obviously all aware of the announcement that Celsius who’s been trying to secure and has been securing additional shelf space, we will go into the Pepsi system. So there will be a lot of fighting going on. There’s the Ghost brand lining you to a lesser degree and C4. So you have got all of these sort of performance brands basically fighting for some more shelf space, and obviously, we will do the same. So there will be a lot of transition going on and we believe that we are obviously focused on that as well and our own brands and increasing our own shelf space.

Kaumil Gajrawala:

Hi guys. One of the things we have been watching care…

Kaumil Gajrawala:

Hey. Hi, Hilton. We have been watching carefully about the impact on inflation on the consumer with gas prices and stuff. It doesn’t seem like we have seen a slowdown at all. I am curious which you are observing and maybe if you have done any test in markets like maybe Midland, Texas or Phoenix, or some of those markets where inflation is much higher than it has been nationally if you are perhaps seeing different trends?

Operator:

And our final question for today’s Q&A will come from Charlie Higgs with Redburn.

Hilton Schlosberg:

Hi, Charlie. Totally fine.

Hilton Schlosberg:

Yeah. There’s a range of countries that we took prices in the first half of 2022, either directly in price increases or through a reduction in promotions. And we see an uplift effecting the quarter already of the impact of those price increases. As regards the second six months, there’s really a list of countries and I don’t think we have got the time to go through them now, but there’s a list of countries where we will be taking further price increases where we can. For example, in France, you cannot, if you have gone -- if you have had one price increase in a year, you cannot go with the second price increase. So, there’s a range of different countries where we will be taking price increases. Brazil, we took price increases earlier this year. Chile, we took a price increase earlier this year. So we have been doing this on a consistent basis, not to profiteer from inflation, but really to mitigate the whole cost in the system has -- you guys will appreciate.

Operator:

This concludes Monster Beverage second quarter 2022 conference call. Thank you for attending today’s presentation. You may now disconnect.

Thomas Kelly:

Now before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance and trends, as well as the future impact of the COVID-19 pandemic on the company's business and operations.

Dara Mohsenian:

Your U.S. sales continue to come in very strong again this quarter, and show a sustained decoupling versus the scanner data, implying obviously very strong growth in the untracked channels. Can you just review for us what level of growth you're seeing in those untracked channels? What are the key drivers behind it?

Hilton Schlosberg:

So Dara, turning to your first question, there's always a disconnect between our sales, which are sales in the main to distributors and as well, we sell, obviously, to some direct accounts, including the untracked channels. It's really difficult for us to get that information to this investor group. There will always -- all I can say is there will always be a disconnect. And Nielsen is not a true indication even for sales through the distributor system, because the lags in the distribution system as well.

Rodney Sacks:

The only thing I would maybe add just from 1 aspect. Traditionally, the convenience channel was growing more quickly for the energy category than the mainstream grocery and drug channels. And in recent quarters, that had been reversed with less -- lower driving through COVID and then you've got higher gas prices.

Hilton Schlosberg:

If you look, for example, at the last 2 weeks, Nielsen in convenience, April the 16, we're seeing Nielsen sales in convenience for the energy category growing at 4.8%. And we're seeing the following week, which is April 23, which is what we discussed on this call, convenience in that 1-week growing 7%.

Operator:

Our next question comes from Andrea Teixeira from JPMorgan.

Hilton Schlosberg:

So that price increase is in addition to the pricing actions that we took in the first quarter that we started taking in the last quarter of 2021, and will continue through this year. So we have taken pricing actions. We'll continue to take pricing actions. September 1, there will be a market-wide increase. And we said approximately 6% depending on channel. And so far, we have not heard any rumblings from competitors about what they're doing and what they're not doing. We haven't heard anything from retailers.

Operator:

Our next question comes from Bonnie Herzog from Goldman Sachs.

Hilton Schlosberg:

Let me just deal with the first part of your question, Bonnie, and then we can obviously get Rodney's input on the rest.

Kevin Grundy:

Two, if I could. Just to come back to the 6% pricing, which is certainly a step in the right direction, but not nearly enough to cover the inflationary pressures that you've seen over the past couple of years. Maybe just comment on the magnitude of it, how you arrived at that, why you believe that's the appropriate number?

Hilton Schlosberg:

Remember the hurdle we had in '21, that was probably one of the biggest hurdles we've seen. And -- so I think that April, as we've always said, 1-month in isolation should not be construed as indicative of performance for a quarter or a longer period of time.

Operator:

The next question comes from Mark Astrachan from Stifel.

Hilton Schlosberg:

No. It's a short answer.

Hilton Schlosberg:

It's a short question and short answer.

Rodney Sacks:

Thanks very much. On behalf of Monster, I'd like to thank everyone for their continued interest in the company. We continue to believe in the company and our growth strategy and remain committed to continue to innovate, develop and differentiate our brands and to expand the company both at home and abroad, and in particular, to expand distribution of our products through the Coca-Cola bottling system internationally. We believe that we are well positioned in the beverage industry and continue to be optimistic about the future of our company. We hope that you will stay safe and healthy. Thank you very much for your attendance.

Rodney Sacks :

Thanks. Good afternoon, ladies and gentlemen. Thanks for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom will now read our cautionary statement.

Rodney Sacks :

Thanks, Tom. The company achieved record fourth quarter and full year net sales with annual net sales topping the $5.5 billion mark for the first time in the company's history. Despite certain challenges in the 2021 fourth quarter, the company achieved solid results overall. We note that the comparative 2020 fourth quarter included a nonrecurring tax benefit of $165.1 million as well as reduced marketing, sponsorships and certain other operating expenses, largely as a consequence of the COVID-19 pandemic. These items should be taken into consideration when evaluating comparative performance over the 2020 fourth year and full year, -- fourth quarter and full year. During the 2021 fourth quarter, the company continued to procure additional quantities of aluminum cans from suppliers in the United States and abroad in response to increased consumer demand. In addition, the company continued to experience additional global supply chain challenges, including freight inefficiencies, shortages of shipping containers, port of entry congestion and delays in the receipt of certain ingredients. In the United States, the company lacked sufficient co-packing capacity to meet increased demand for certain of its products. As a result, the company was not able to fully satisfy increased demand for its products in a number of markets in the 2021 fourth quarter. During the 2021 fourth quarter, the company experienced increased aluminum can costs attributable to higher aluminum commodity pricing as well as the cost of importing aluminum cans. In addition, the company experienced increased ingredient and other input costs, including shipping and freight, labor, trucking, fuel, co-packing fees, secondary packaging materials, increased outbound freight costs and production and efficiencies, which resulted in increased costs of sales and increased operating costs in the 2021 fourth quarter. The company continues to address the challenges in its supply chain as it navigates through the uncertainty of the current global supply chain environment. In the fourth quarter of 2021, net sales were $1.43 billion compared with $1.20 billion in the fourth quarter of 2020, an increase of 19.1%. Adjusting for foreign currency movements, net sales for the 2021 fourth quarter would have been up 19.3%. The comparative net sales for the 2020 fourth quarter were negatively impacted by $15.2 million related to prior returns from our customers as a result of a European formulation issue with a limited number of products in Europe and labeling issue concerning 1 product in Japan, which we will refer to as the 2020 product returns. Gross profit as a percentage of net sales for the 2021 fourth quarter was 53.9% compared with 57.7% in the 2020 fourth quarter. The decrease in gross profit as a percentage of net sales for the 2021 fourth quarter was primarily the result of increased freighting costs, increased aluminum can costs attributable to higher aluminum commodity pricing, geographical and product sales mix and production inefficiencies. Operating expenses for the 2021 fourth quarter were $334.7 million compared with $288.4 million in the 2020 fourth quarter. As a percentage of net sales, operating expenses for the 2021 fourth quarter were 24.9% compared with 24.1% in the 2020 fourth quarter and 28.9% in the 2019 fourth quarter pre-COVID. The increase in operating expenses was primarily due to increased outbound freight and warehouse costs, increased expenditures for sponsorships and endorsements and increased expenditures for other marketing activities including social media and digital marketing and increased payroll costs. During the comparative 2020 fourth quarter, the company decreased expenditures for sponsorship and endorsements and decreased expenditures for travel and entertainment, each largely as a consequence of the COVID-19 pandemic. The impact of the COVID-19 pandemic was less pronounced on our sales and marketing programs during the 2021 fourth quarter. Distribution costs for the 2021 fourth quarter increased to $69.8 million, which is an increase of 48.4% or 4.9% of net sales compared to $47 million or 3.9% of net sales in the 2020 fourth quarter and 3.5% of net sales in the 2019 fourth quarter. Operating income increased 2.6% to $412.9 million from $402.3 million in the fourth quarter of 2020. We believe that a portion of the increase in costs that we experienced in the quarter and the 2021 full year are likely to be transitory. With our 2 new suppliers of aluminum cans in the United States operational, we will begin to decrease our reliance on the use of imported aluminum cans in the United States, although we will continue to import aluminum cans into the United States, although at a reduced level in the first half of 2022. In 2022, we expect to continue to import aluminum cans into EMEA reducing such imports in the second half of 2022. The supply chain challenges we are experiencing are significantly increasing and the logistic costs of importing and shipping raw materials and ingredients as well as other freighting costs, which are included in cost of sales. The cost of repositioning finished products to distribution centers are included in freight-in costs. We are rebuilding and increasing inventories in an effort to reduce the excessive cost of trucking long distances to satisfy demand and to return to our Orbitz strategy of producing in proximity to our customers. Increased freight in costs, including the shipment cost of importing cans amounted to approximately $38 million in the 2021 fourth quarter and approximately $100 million for the 2021 full year. Our out-of-orbit freight costs, which are included in distribution expenses amounted to approximately $15 million in the 2021 fourth quarter and $54 million for the 2021 full year. Net income decreased 31.9% to $321.3 million as compared to $471.7 million in the 2020 comparable quarter. Net income for the 2020 fourth quarter was positively impacted by the recognition of a nonrecurring tax benefit of approximately $165.1 million. Net income for the comparative 2020 fourth quarter, excluding the nonrecurring tax benefits, the impact of the 2020 product returns, associated inventory provisions and other related costs was $328.6 million. Diluted earnings per share for the 2021 fourth quarter decreased 32.1% to $0.60 from $0.88 in the fourth quarter of 2020. Diluted earnings per share for the comparative 2020 fourth quarter excluding the nonrecurring tax benefit, the impact of the 2020 product returns, associated inventory provisions and other related costs was $0.62. According to the Nielsen reports, for the 13 weeks through February 12, 2022, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 13.3% versus the same period a year ago. Sales of the company's energy brands, including Reign, were up 8.1% in the 13-week period. Sales of Monster were up 10.5%. Sales of Reign were down 1.7%. Sales of NOS decreased 12.5% and sales of Full Throttle increased 12.4%. The decrease in sales of NOS retail during the fourth quarter was as a result of shortages in the supply of concentrate for NOS. The NOS supply issues are improving. Sales of Red Bull increased 13.8%. Sales of Rockstar decreased by 1.3% and sales of 5-Hour increased 2.1%. Sales of VPX Bang increased 0.4%. According to Nielsen, for the 4 weeks ended February 1, 2022, and sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars, increased 7.4% over the same period the previous year. Sales of the company's energy brands, which include Reign increased 4% in the 4-week period in the convenience and gas channel. Sales of Monster increased by 5.7% over the same period versus the previous year. Reign sales decreased 0.9% and NOS sales was down 10.8% and Full Throttle was up 6.3%. Sales of Red Bull were up 8.3%, Rockstar was down 4.5% and 5-Hour was down 1.3%. VPX Bang's sales decreased 4%. According to Nielsen, in the 4 weeks ended February 12, 2022, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, decreased 1.2 points to 37.2%. Monster share decreased 0.5 a share point to 31.6%. Reign's share decreased 0.2 of a share point to 2.4%. NOS' share decreased a 0.5 of a point 2.5% and Full Throttle share remained at 0.8%. Red Bull's share increased 0.3 points to 36.2%. Rockstar's share was down 0.5 a point to 4%. 5-Hour share was lower by 0.4 of 4.5%. And VPX Bang share decreased 0.8 of a points to 7%. According to Nielsen, for the 4 weeks ended February 12, 2022, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 2.3% over the same period the previous year. Sales of Java Monster including Java Monster 300 were 4.2% higher in the same period versus the previous year. Sales of Starbucks Energy were 0.7 of a percent higher. Java Monster's share including Java Monster 300 of the coffee -- plus energy category, which primarily includes Java Monster, Java Monster 300, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee, for the 4 weeks ended February 12, 2021, was 53.7%, up 1 point, while Starbucks Energy share was 44.1%, down 0.7 of a point. According to Nielsen, in all measured channels in Canada, for the 12 weeks ended January 29, 2022, the energy drink category increased 12.3% in dollars. Sales of the company's energy drink brands increased 10.8% versus a year ago. The market share of the company's energy drink brands was 40.8%, down 0.6 of a point. Monster sales increased 13.9% and its market share increased to 0.5 points to 36.3%. NOS sales decreased 7.2% and its market share decreased 0.3 point to 1.6%. Full truffle sales decreased 25.4% and its market share decreased 0.3 of 0.25%. According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 25.9% for the month of January 2022. Monster sales increased 24.5%. Monster's market share in value decreased 0.3 points to 27.8% against the comparable period the previous year. Sales of Predator increased 38.3% and its market share increased 0.3 of a share point to 3.1%. The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales in the OXXO convenience chain in turn can be materially influenced by promotions that may be undertaken in that chain by 1 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 January 2022 compared to January 2021, Monster's retail market share in value increased in Argentina from 41.3% to 43.8%. Monster Energy continues to be the leading energy brand in value in Argentina. According to Nielsen, for the month of January 2022 compared to January 2021, Monster's retail market share in value increased in Brazil from 32.2% to 37.8%. In Chile, Monster's retail share for the month of January 2022 decreased from 47.2% to 33.1% due to a shortage of shipping containers. 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. In addition, the company experienced supply issues in EMEA during 2021, which impacted the Nielsen statistics in different countries. According to Nielsen, in the 13-week period ending January 29, 2022, Monster's retail market share in value as compared to the same period the previous year grew from 27.3% to 29.5% in Great Britain, from 7.9% to 8.1% in the Netherlands and from 36.8% to 38.4% in Spain. Monster's retail market share in value as compared to the same period the previous year declined from 15.3% to 14.2% in Belgium and from 31.1% to 30.3% in France, and from 20.1% to 19.3% in Poland. According to Nielsen, in the 13-week period ending January 2, 2022, Monster's retail market share in value as compared to the same period the previous year grew from 26.4% to 26.5% in Denmark from 15.1% to 15.8% in Germany and from 14.5% to 14.6% in Sweden. Whilst the retail market share in value as compared to the same period the previous year declined from 27.9% to 27% in Italy from 29.3% to 25.3% in Norway, and from 28.3% to 27.6% in the Republic of Ireland. According to Nielsen for the 13-week period ending December 31, 2021, Monster's retail market share in value as compared to the same period the previous year grew from 15.2% to 15.6% in the Czech Republic, from 37.4% to 38% in Greece and from 20.4% to 20.5% in South Africa. According to Nielsen, in the 13-week period until the end of December 2021, Predators retail market share in value as compared to the same period the previous year grew from 12.9% to 20.8% in Kenya and from 1.9% to 14.4% in Nigeria. According to IRI in Australia, Monster's market share in value for the month ending February 6, 2022, increased from 12.2% to 12.8% as compared to the same period the previous year. Mother's market share in value decreased from 11.8% to 11% during the same period. The market share of the company's brands in Australia for the month ended February 6, 2022, decreased from 24% to 23.8%. According to IRI in New Zealand, Monster's market share in value for the 4 weeks ended February 6, 2022, increased from 11.6% to 13.3% as compared to the same period the previous year. Live+ market share in value remained the same at 7.1% and Mother's market share in value decreased from 6.3% to 6%. The market share of the company's brands in New Zealand for the 4 weeks ended February 6, 2022, increased from 25% to 26.4%. According to INTAGE in Japan, for the month ended January 2022, Monster's market share in value in the convenience store channel as compared to the same period the previous year grew from 50.8% to 56.3%. According to Nielsen, in South Korea for the month of December ended December 2021, Monster's market share in value in all outlets combined as compared to the same period the previous year, grew from 56.5% to 60.2%. Monster continues to be the leading energy brand in Japan and South Korea. We again point out that certain market statistics that cover single months or 4-week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. Net sales to customers outside the U.S. were $508.1 million, which is 35.7% of total net sales in the 2021 fourth quarter compared to $384.8 million or 32.2% of total net sales in the corresponding quarter in 2020. Foreign currency exchange rates had a negative impact on net sales in U.S. dollars by approximately $2.4 million in the 2021 fourth quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the 2021 fourth quarter increased 47.5% in dollars and increased 46.1% in local currencies over the same period in 2020. Net sales adjusted for the 2020 product returns in this region increased 41.2% in dollars and increased 39.9% in local currencies. Gross profit in this region as a percentage of net sales for the fourth quarter was 32.6% compared to 30.2% in the same quarter in 2020. Gross profit in the fourth quarter was impacted by can freight and raw material airfreight costs. In local currencies, gross profit as a percentage of net sales for the quarter was 32.2%. Gross profit as a percentage of net sales, excluding the impact of the 2020 product returns in this region associated inventory provisions and other related costs was 40.1% for the 2020 fourth quarter. In 2021 fourth quarter, can supply shortages, lack of ingredient availability, it's sufficient canning capacity and a shortage of trucking availability together had an adverse impact on sales in EMEA. In some cases, impacting the availability of our products on shelf at retailers. However, the shortages of trucking availability will largely resolve in the latter part of the quarter. The company is continuing to address the controllable challenges in its supply chain in EMEA by continuing to import cans and expanding its co-packing capacity. We are also pleased that in the 2021 fourth quarter, Monster gained market share in the Czech Republic, Denmark, Germany, Great Britain, Greece, the Netherlands, South Africa, Spain and Sweden. In Asia Pacific, net sales in the 2021 fourth quarter increased 19.2% in dollars and increased 22.8% in local currencies over the same period in 2020. In Asia Pacific, excluding the impact of the 2020 product returns and the labeling issue in this region in the 2020 fourth quarter, net sales in the 2021 fourth quarter increased 10.7% in dollars and 14.1% in local currency over the same period in 2020. Gross profit in this region as a percentage of net sales was 41.4% versus 34.8% over the same period in 2020. Excluding the impact of the 2020 product returns in this region, associated inventory provisions and related costs, gross profit as a percentage of net sales would have been 40.3% in 2020. In Japan, net sales in the 2021 fourth quarter increased 12.7% in dollars and 20% in local currency. Without the impact of the 2020, product returns in Japan net sales decreased 1.2% in dollars and increased 5.2% in local currency over the same period in 2020, largely due to COVID-19 restrictions in Japan. In South Korea, net sales increased 31.3% in dollars and 35.5% in local currency as compared to the same quarter in 2020. Monster remains the market leader in Japan and South Korea. In China, net sales increased 22.6% in dollars and 17.6% in local currency as compared to the same quarter in 2020. We are reevaluating the optimal product range for China going forward. We remain optimistic about the prospects for the Monster brand in China. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 7.5% in dollars and 4.8% in local currencies due to timing of sales into bottlers. In Latin America, which includes Mexico and the Caribbean, net sales in the 2021 fourth quarter increased 17% in dollars and increased 21% -- 21.6% in local currencies over the same period in 2020. Gross profit in this region as a percentage of net sales was 38.6% for both the 2021 and 2020 fourth quarters. In Brazil, net sales in the 2021 fourth quarter increased by 36.9% in dollars and 39.6% in local currency. Net sales in Chile increased 6% in dollars and 9% in local currency in the 2021 fourth quarter. Net sales in Argentina increased 30.7% in dollars and 66.7% in local currency in the 2021 fourth quarter. There are a number of pending proceedings with VPX but as they are subjudicate, we will not be answering any questions on this matter on today's call. In the United States, we launched our new True North Pure Energy Seltzer line in e-commerce and selected natural channels in the third quarter. In early 2022, we launched this said line nationally into mainstream channels with our Coca-Cola bottlers. In October 2021, we commenced the launch of our new reserve line of Monster Energy drinks in 2 flavors, Watermelon and White Pineapple. We have launched multiple innovation SKUs, 2 new 12-ounce flavors as well as new package configurations in the 2022 first quarter. This month, we launched 4 new flavor extensions in 16-ounce cans to the retail trade, namely Ultra Peachy Keen, Juice Monster Aussie Star Lemonade, Rehab Watermelon and Reign Rainbow Sherbet. In January 2022, we launched additional multipack options, such as 4-pack, Ultra Watermelon, a 4-pack Reign White Gummy Bear, 2 Ultra Variety packages in a 12-pack format. Additionally, we have launched 12-ounce 6 packs of Monster Energy, Zero Ultra, our new Peachy Keen Ultra, Java Monster Mean Bean and Java Monster Loca Mocha, Ultra Peachy Keen also launching in a 12-ounce option along with our Ultra Watermelon. In addition, Java Monster Nitro Cold Brew is scheduled to launch in the 2022 second quarter with 2 lower-calorie SKUs, Sweet Black and Latte. In the 2022 first quarter in Canada, we are planning to launch 9 new innovations, including the transition into a 355 ml 8-pack for Monster Energy, Zero Ultra and Ultra Paradise. In January 2022, we launched Ultra Gold in a 473 ml single can and 4-pack. We also launched Ultra Watermelon in a 4-pack and Ultra Paradise in a 710 ml can. We are in the process of launching a 4-pack Reign of Raspberry as well as introducing Reign White Gummy Bear in a 473 ml can. In the 2021 fourth quarter, we launched Monster Energy Mango Loco in Uruguay and Ecuador as well as Monster Ultra Watermelon and Predator Gold Strike in Trinidad. In Honduras, we expanded our Fury package offerings with the 355 mL returnable glass bottle. We are planning a national launch of Monster Pacific Punch, Monster Dragon Tea Peach, Reign, Orange Dreamsicle and Reign Mango Magic in Brazil in the first half of 2022. Additional 2022 first quarter LatAm innovations include Monster Zero Sugar in Ecuador, Pipeline Punch in Central America and Trinidad Monster Mango Loco in Peru and Colombia and VR46, the doctor in Argentina. In Chile, we are launching Reign Melon Mania, Reign Lemon Heads and Reign Orange Dreamsicle. In Mexico, we will introduce our second predator flavor with Predator Mean Green. In the 2021 fourth quarter in New Zealand, we launched Monster Ultra Fiesta Mango. In the 2022 first quarter, we launched Monster Ultra Gold and Mother Kiwi Sublime in Australia and are planning to launch Super Fuel Tropical Thunder in New Zealand. In EMEA, in the fourth quarter of 2021, we launched Monster Green, Monster Nitro and Monster Result in a number of countries. We also launched Ultra Watermelon, Golden Paradise and Juice Monarch Mango Loca and Pacific Punch in a number of countries during the 2021 fourth quarter. Monster Super Fuel Mean Green Watermelon and Subzero were launched in 2 countries in the fourth quarter of 2021. During the 2021 fourth quarter and 2022 first quarter, we also launched our Strategic Brands innovation and Predator in additional countries. In particular, we launched our Predator Spicy Ginger and Tropical in South Africa. During the fourth quarter of 2021, we launched Monster Rose in Japan in October, and the Predator brand in Vietnam in November 2021. We are planning to introduce the Predator brand in several additional countries in APAC in the course of 2022. We are planning to launch a number of additional products or product lines in our domestic and international markets later this year. On February 17, 2022, we completed our acquisition of CANarchy Craft Brewery Collective, a craft beer and hard sales for company for $330 million in cash subject to adjustments. The transaction brings the Cigar City, Jai Alai IPA and Florida Man IPA, Oskar Blues, Dale's Pale Ale and Wild Basin Hard Seltzer, Deep Ellum, Dallas Blonde and Deep Ellum IPA, Perrin Brewing, Black Ale, Squatters, Hop Rising Double IPA and Juicy IPA and Wasatch, Apricot Hefeweizen brands to our beverage portfolio. The transaction does not include CANarchy stand-alone restaurants. Our organizational structure for our existing energy beverage business will remain unchanged. CANarchy will function independently, retaining its own organizational structure and team. We are enthusiastic about the opportunities that this acquisition presents to us in the alcohol space and through their distribution network. We estimate January 2022 sales to be approximately 20.2% higher than in January 2021. On a foreign currency adjusted basis, January '22 sales would have been approximately 23% higher than the comparable January 2021 sales. January 2022 had 1 more selling day than in January 2021. Although we see some improvement, the company has continued to experience supply chain challenges in January, which adversely impacted sales. 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 as shifts in the timing of production in some instances where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons. We reiterate that sales over a short period, such as a single month, should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. If the COVID-19 pandemic and related unfavorable economic conditions continue in certain regions, our new product innovation launches in those regions could be delayed. In conclusion, I'd like to summarize some recent positive points. Currently, the company's flavor manufacturing facilities, its co-packers, warehouses and shipment facilities and bottlers and distributors are all operating. The company continues to address the challenges in its supply chain as it navigates through the uncertainty of the current global supply chain environment. We are continuing to experience increased costs in our operations, some of which may be transitory, and we have and are in the process of implementing reductions in promotions and other pricing actions in the United States and EMEA to mitigate against such increased costs. Our AFF flavor facility in Ireland is operational and is providing flavors to our EMEA region and will improve service levels in EMEA. We are pleased with the new additions to the Monster Energy portfolio. We are planning to continue additional launches of our Reign Total Body Fuel high-performance energy drinks in additional international countries. We are pleased with the rollout of Predator and Fury, our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in a number of international countries. Our supply chain challenges are improving. We are enthusiastic about the opportunities that CANarchy presents. I would like to now open the floor to questions about the quarter and the year. Thank you.

Kaumil Gajrawala:

Thank you operator. Hey everybody. You talked a lot about improved supply and the things you're doing to increase supply. Your margins obviously were down quite a bit, I think, 540 basis points. Speaking -- can you speak maybe more to margins as opposed to just availability of product and how we should be thinking about that within the context of some of the changes that are being made for '22?

Operator:

The next question is from Chris Carey of Wells Fargo. Please go ahead.

Hilton Schlosberg:

Well, let's go back to the -- your second question. That number -- the U.S. is very close to that number for January. So we can -- we have a lot of unmeasured channels in our system, and Nielsen is not always a good indicator of our sales to our distributors. So let's go -- if we can, let's take a step back and look at your -- and address your first question. So aluminum jumped up today significantly. It's been moving up I gave you the number as of today, as of yesterday, it was $0.10 a ton less than that. So with this war and everything else going on in the world, I can't say for certain, and I don't think anyone can tell you what aluminum is going to do and what it's going to be. And obviously, with most of our products being packaged in aluminum cans that is a significant item. Looking back at some of your other comments, I mentioned that -- we mentioned at least on the script that we have sufficient cans now. So we're able to start working towards closing off and close going back to the orbits, which means that trading costs should significantly reduce. When? I can't say for certain, but it's going to happen. Other costs in the system are being controlled. And so what -- looking forward, I think that we will continue to have a difficult 2022. Will the margins stay at the level that we talked about on this call? I don't know. Honestly, a lot depends on what happens with aluminum. So the rest of the stuff is coming under control. I mentioned that we were importing less cans into the U.S. than we did in 2020. That will have a positive impact on margins from the second half of the year will be -- we believe, will be totally self-sufficient with cans in the U.S. So that's a positive factor. And then in EMEA, we will be importing cans in the first half with a significant reduction in the second half. So there's a lot of good things in the cost story, but unfortunately, it is what it is. On the sales side and price increases, we spoke about that. On previous calls, as you know, we have a play that we're running, irrespective, really, I think, of what Red Bull is doing, we've come to the conclusion that we're going to run our own play. We know what we want to do, and we're working on reducing promotional ounces. You've seen prices go up already in the trade, and you've seen them going up in Nielsen. So that is something that is happening as well. What else do I want to say? So we spoke about prices went up in the -- through reductions in promotional launches in the quarter that we look at, although at a very modest degree. And as we go through 2022, you'll see prices -- price increases in our business accelerating.

Andrea Teixeira:

Hi, how are you. I just wanted to perhaps elaborate more on what you said, Hilton on the pricing front. Are you saying that you -- we should be able to see pricing be on what was passed through by top manufacturing at some point in 2022? And then regarding that, are you seeing any impact from the gas stations given the gas price is going up? Or this is not a concern for affordability at this point?

Rodney Sacks :

Of a pickup may add -- sorry, just been a little bit of a pickup in the last week. If you look at the single last week's numbers, again, that's a very short period, but we are seeing a pickup in convenience with the price increase -- effective price increase, it still is translating. So we'll see how that extends.

Operator:

The next question is from Kevin Grundy of Jefferies. Please go ahead.

Rodney Sacks :

I think that the CANarchy acquisition is not the complete answer to everything. They are craft brands. They are -- they have a distribution network. They have some sales of brands. We do have a good infrastructure in staff there, and we have -- we're going to use that to build on. We are going to look at taking the distribution system, refining a little bit. We're looking at addressing their products and taking steps to invigorate their sales and looking at our own products that we've been developing, that we have discussed previously and taking and deciding where to and help to launch those through the CANarchy system. And we will separately address the possible M&A of additional brands, whether in a -- sort of in the malt side, the beer side or the spirit side. Those are things that are opportunities. But again, we're looking at the whole business now and reviewing it, but it's the platform that is really good for us. And I think that is what is -- that's the function that's going to serve for us. We are going to obviously have to address issues and other matters in getting that fully implemented. It's not just a perfect system that we've taken over. But it's a good base for us, and we're going to build on it, and we're very confident and we're very pleased with having closed that acquisition, which will give us the springboard from here on.

Vivien Azer:

Hi, good evening. Thank you for the questions. I was wondering if you could just offer some better detail on your supply chain in Russia, in the Ukraine and if you could quantify your exposure to those two countries, please?

Operator:

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

Operator:

The conference has now concluded. Thank you for attending today's presentation.

Operator:

Good afternoon, and welcome to the Monster Beverage Company, Third Quarter 2021 Conference Call. All participants will be in listen-only mode. . I would now like to turn the conference over to Rodney Sacks and Hilton Schlosberg Co-CEO. Please go ahead.

Tom Kelly:

Before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended, and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance, trends, as well as the future impact of the COVID-19 pandemic on the company’s business and operations. 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 1, 2021, including the sections contained therein entitled Risk Factors and Forward-looking Statements, for a discussion on specific risks and uncertainties that may affect our performance. The company assumes no obligations to update any forward-looking statements, whether as a result of new information, future events or otherwise. I would now like to hand the call over to Rodney Sacks.

Operator:

Our first question comes from Wendy Nicholson with Citi. Please go ahead.

Hilton Schlosberg:

Okay Wendy, this is Hilton. That's an excellent question. So we have a department called Revenue Growth Management that balances pricing and balances promotions in line with the expectations that we set for the business and for our brands. So we’ve been working very closely and started in this quarter, in fact slightly before this last quarter in cutting back promotions and using them very judiciously. So we look at this on an ongoing basis. We have plans for 2022 which involves changing retail pricing on shelves, which leads to obesity reduction in promotions and we don't rule out the possibility of a full price increase later on in 2022. But we keep our options open. We prefer to accomplish the objectives through reductions in promotions, but we have to see what the cost environment looks like going into the 2022. Obviously if you haven't got product and you showed a product that doesn't make sense to promote extensively, but we still have to promote in order to fulfill the contract that we've had this year with our customers and our retailers which was set at the beginning of the and so some cannot be changed and as we move into 2020, adjust pricing through promotions and/or price increases.

Bonnie Herzog:

Alright, thank you. Hi Rodney and Hilton!

Tom Kelly:

Hey Bonnie!

Hilton Schlosberg:

No, no. Is it one question or two?

Hilton Schlosberg:

Okay, so the situations did not improve in Q3 relative to Q2. Q3 really presented more challenges in supply chain as we anticipated. Although cans have come, we've achieved cans from overseas partners as we expected. So we have cans in the system, we have opened up a number of co-packers in the – which will be supplying in the fourth quarter. So if we look at Q3 and Rodney will probably kill me, but I’ll give you an estimate. My estimate is that we shorted in the high single digits; that's my estimate, in terms of millions of cases.

Peter Galbo :

Hey guys! Good afternoon. Thank you for taking the question. I was just wondering Hilton, you know the comments on other pricing actions, you know retail pricing on shelves, potential for a full list price increase. Just can you give us a sense on maybe when you would consider that more thoroughly? Is there a reason why it's not now, is there a shelf reset period that you need to wait for. Just, you know listening to some of the commentary from some of the bottlers, it seems like they are taking pricing now. Just why wait?

Operator:

The next question is from Mark Astrachan with Stifel. Please go ahead.

Hilton Schlosberg:

Mark, perhaps I’ll take that one. I mean there are two different relationships, there is Coke as a corporate partner, and there's also the individual Coke bottlers. You know I think that our relationship with Coke is fine. I think there is no issue, it’s a good relationship. I think that with the bottles are relationships again are also good. But I think the bottles have been struggling a little bit as you know with labor issues and cost issues as well. And that has sort of affected I think the level of service to smaller accounts and in field activities and that's why that has perhaps disproportionately hurt our brand over this whole pandemic period and that’s something that we are addressing, particularly when you compare that to, not against other similarly - similar systems, but as against Red Bull which has its own dedicated system out there. And so we are taking steps to address that. We have our home fields’ force that we've implemented to supplement and assist the bottlers. We even had fuel filed forces suffering from labor issues and trying to hire people. It's not been easy, we have a number of open positions. But we are, actually we’ve seen good success from what we've implemented and we actually are expanding on filed team and we are going to do that in conjunction with the bottlers. But that’s part of the challenges we've had in our supply chain and part of the challenges we've had which has affected our sales, have been you know just inefficiencies getting products on shelf. And there are different, different parts of the country and different parts of the world even, it varies and in some cases you see empty shelves or you see shelves that haven’t been refilled, which is obviously heart breaking for us and we try and address it. But that is something we are facing and that's been a labor issue that many of our bottlers are going through at the moment. But hopefully we are trying to work out ways of improving and hopefully that will start improving going forward. But despite that, we've been able to continue to manage pretty healthy increase in sales and it's the, it’s just meeting the increased demand that has been our big challenge. And again, we are working with our bottles to try to achieve what we can. So a tough environment for our bottlers, when also we can’t supply all of their orders and fill them in full, and that’s been difficult for us to juggle deliveries around the country, and it resulted in increased costs out of orbit and in delivering products out of our normal ranges in order to make sure we are trying to maximize deliveries to bottlers.

Andrea Teixeira:

Thank you. Good afternoon there. I wanted to just go back to the magnitude of pricing in your comments in the last earnings call. That you expect the cost pressures and supply challenge to abate in the fourth quarter. Are you still expecting that to be the case or sequentially quite worse and we should brace for something similar in the fourth quarter against the third quarter. And just for clarification, you said high single digit million cases impact or you said high single digit percentage impact that would have been?

Andrea Teixeira:

Okay, that’s a mid-single digit impact, okay.

Andrea Teixeira:

And on the pricing Hilton, can you let us know the magnitude that you're trying to put through and how we should think about cogs into the fourth quarter.

Rodney Sacks :

Thank you. On behalf of the company I'd like to thank everyone for their continued interest in the company. We continue to believe in the company and our growth strategy and remain committed to continuing to innovate, develop and differentiate our brands and to expand the company both at home and abroad. And in particular expend distribution of our products through the Coca-Cola bottler system internationally. We believe that we are well positioned in the energy drink category and continue to be optimistic about our total portfolio of energy drink brands. We hope that you will stay safe and healthy. Thank you very much for your attendance.

Rodney Sacks:

Good afternoon, ladies and gentlemen. Thank you for attending this call. I’m Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer, is on the call; as is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Thank you, Tom. The company’s top priority remains the health, safety and well-being of its employees. The company’s flavor manufacturing facilities, its co-packers, warehouses and shipment facilities have operated throughout the COVID-19 pandemic. The company’s bottlers and distributors are operating, and the company’s products remain generally available to consumers. In limited countries, the operations of the company’s bottlers and distributors have, in part, been negatively affected for varying periods of time. Despite the ongoing impact of the COVID-19 pandemic, the company achieved record second quarter net sales. Currently, the company does not foresee a material impact on the ability of its co-packers to manufacture and its bottlers and distributors to distribute its products as a result of the COVID-19 pandemic. The company’s supply chain remains largely intact. However, the company continues to experience shortages in its aluminum can requirements in the United States and EMEA, given the company’s volume growth and the current supply constraints in the aluminum can industry. The company is also experiencing delays in procuring certain ingredients, both domestically and internationally. As a result, the company was unable to fully satisfy demand in the 2021 second quarter in the United States and EMEA. We expect such challenges to continue for the next few months. The company has taken steps to source additional quantities of aluminum cans from the United States, South America and Asia. The company has entered into new supply agreements with two new aluminum can suppliers in the United States, and which are expected to be operational in the 2021 fourth quarter. We expect deliveries of additional quantities of cans increasing sequentially during the latter part of the year. Logistical issues, including shortages of shipping containers and port of entry congestion could delay ongoing international supply of aluminum cans. Separately, we are continuing to experiencing – experience freight inefficiencies as well as significant increases in domestic and international freight costs and like other beverage companies are incurring increased aluminum can and other costs in the current environment, all of which in addition to other factors, will continue to adversely impact gross margin percentages. In the second quarter of 2021, net sales were $1.46 billion, compared with $1.09 billion in the second quarter of 2020, an increase of 33.6%. Adjusting for foreign currency movements, net sales for the 2021 second quarter would have been up 30.1%. Gross profit as a percentage of net sales for the 2021 second quarter was 57.2% compared with 60.3% in the 2020 second quarter. The decrease in gross profit as a percentage of net sales for the three months ended June 30, 2021, was primarily the result of geographical sales mix and increased input costs, mainly increased raw material freight in costs and aluminum can costs. Operating expenses for the 2021 second quarter were $310.9 million, compared with $252.2 million in the 2020 second quarter. As a percentage of net sales, operating expenses for the 2021 second quarter were 21.3%, compared with 23.1% in the 2020 second quarter. Operating income increased 29.1% to $526 million, up from $407.3 million in the second quarter of 2020. Net income increased to 29.7% and to $403.8 million compared to $311.4 million in the 2020 comparable quarter. Diluted earnings per share for the 2021 second quarter increased to 28.6% to $0.75 from $0.59 in the second quarter of 2020. According to the Nielsen reports for the 13 weeks through July 24, 2021, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 14.2% versus the same period a year ago. Sales of the company’s energy brands, including Reign were up 8.6% in the 13-week period. Sales of Monster were up 11.1%. Sales of Reign were down 6.1%. Sales of NOS decreased 4.1%. And sales of Full Throttle increased 7.9%. Sales of Red Bull increased 15.3%. Sales of Rockstar decreased by 15.7%, and sales of 5-Hour increased 8.5%. VPX Bang sales increased 20%. According to Nielsen, for the four weeks ended July 24, 2021, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 7.4% over the same period the previous year. Sales of the company’s energy brands, which include Reign, increased 3.6% in the four-week period in the convenience and gas channel. Sales of Monster increased by 5.8% over the same period versus the previous year, Reign sales decreased 6.8%, NOS was down 10.7%, and Full Throttle was up 13.2%. Sales of Redbull were up 9%. Rockstar was down 18.6%, and 5-Hour was up 3.2%. VPX Bang sales increased 12.2%. According to Nielsen, for the four weeks ended July 24, 2021, the company’s market share of the energy drink category in the convenience and gas channel, including energy shots, in dollars, decreased 1.3 points to 36.5%. Monster share decreased 0.4 of a share point to 30.6%. Reigns decreased 0.4 of a share point to two points – sorry, 2.4%. NOS’s share decreased 0.5 of a point to 2.7%, and Full Throttle share remained at 0.7%. Redbull’s share increased point – six points to 37.4%. Rockstar’s share was down 1.2 points to 3.8%. 5-Hour share was lower by 0.2 points at 4.6%. VPX Bang share increased 0.3 points to 7.6%. As previously reported, Coca-Cola Energy is being discontinued in the United States and Canada by the end of 2021. According to Nielsen, for the four weeks ended July 24, 2021, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel, increased 4.2% over the same period the previous year. Sales of Java Monster, including Java Monster 300 were 5.9% higher in the same period versus the previous year. Sales of Starbucks Energy were 0.4% higher. Java Monster share including Java Monster 300 of the coffee plus energy category, which primarily includes Java Monster, Java Monster 300, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee for the four weeks ended July 24, 2021, was 51.9%, up 0.9 of a share point, while Starbucks’ energy share was 45.5%, down 1.7 points. According to Stackline, which tracks energy drink sales by Amazon in the United States, in the four-week period ending July 3, 2021, sales in dollars in the energy category by Amazon, including energy shots increased to 104.5% over the same period the previous year. Sales of Monster increased 59.9%. And its share was 28.1%, down 7.8 share points versus the same period a year ago. Red Bull sales increased 109.4%, and its share was 16.6%, up 0.4 points. Celsius’ sales increased 133.1%. And its share increased 1.8 points to 14.3%, 5-Hour sales increased 40.9% and its share declined 1.3 points to 2.9%. VPX Bang sales increased 216.1% and its share increased 1.8 share points to 5.2%. Reign’s share decreased 0.1 of a share point to 5.3%. Rockstar’s share increased 0.9 of a share point to 3.9%. According to Nielsen, in all measured channels in Canada, for the 12 weeks ended June 19, 2021, the energy drink category increased 17.9% in dollars. Sales of the company’s energy drink brands increased 28.3% versus a year ago. The market share of the company’s energy drink brands was 41.5%, up 3.4 points. Monster sales increased 18.3%, and its market share increased by 0.1 of a point to 35.4% – sorry, 35.4. NOS’ sales increased 12.6%, and its market share decreased 0.3 of a point to 1.9%. Full Throttle sales decreased 2.1%, and its market share decreased 0.1 of a point to 0.6%. Red Bull sales increased 18.1%, and its market share increased 0.1 of a point to 38.7%. Rockstar sales decreased 8.6%, and its market share decreased 3.3 points to 11. 4%. GURU’s sales increased 35.9%, and its share increased 0.5 of a share point to 4%. According to Nielsen, for all outlets combined in Mexico, the energy drink category increased 45.2% for the month of June 2021. Monster sales increased 38.7%. Our market share in value decreased by 1.3 points to 27.2% against the comparable period the previous year. Red Bull sales increased 41.4%, and its market share decreased by 0.2 of a point to 6.5%. Vive 100 sales increased 30.2%, and its market share decreased by 2.4 points to 20.5%. Volt’s sales increased 41.1%, and its market share decreased 0.5 of a share point to 18.5%, while Boost’s sales increased 15.7%, and its market share decreased 1.3 points to 5.1%. Amp’s sales increased 91.9%, and its market share increased 4.4 points to 17.9%. Predator, which was launched in March 2020, achieved a market share of 3.1%. The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales 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 June 2021 compared to June 2020, Monster’s retail market share in value increased in Argentina from 40.1% to 46.9% and in Brazil from 29.6% to 35.4%. In Chile, Monster’s retail market share decreased from 45.7% to 41.9%. Monster Energy continues to be the leading energy brand in value in Argentina. 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 ending July 18, 2021, Monster’s retail market share in value as compared to the same period the previous year grew from 34.2% to 37.4% in Spain. According to Nielsen, in the 13-week period to the end of June 2021, Monster’s retail market share in value as compared to the same period the previous year grew from 14.5% to 15.3% in Germany, from 18.4% to 19.4% in Poland and from 18.4% to 20.1% in South Africa. According to Nielsen, for the 13-week period ending June 20, 2021, Monster’s retail market share in value as compared to the same period the previous year grew from 12.5% to 16.2% in Belgium, from 24.2% to 25.3% in Denmark, from 25.8% to 28.2% in France, from 25% to 29% in Great Britain, from 6.7% to 8.4% in the Netherlands, from 27.1% to 31.2% in Norway, from 25.6% to 29.3% in the Republic of Ireland and from 13.4% to 14.5% in Sweden. According to Nielsen, in the 13-week period until the end of May 2021, Monster’s retail market share in value compared to the same period the previous year grew from 13.3% to 14.5% in the Czech Republic, from 35.1% to 37.9% in Greece and from 16.6% to 29% in Italy. According to Nielsen, in the 13-week period until the end of May 2021, Predator’s retail market share in value as compared to the same period the previous year grew from 5.1% to 17.3% in Kenya and from 0% to 8.1% in Nigeria. 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. According to IRI in Australia, Monster’s market share in value for the month ending June 2021 increased from 11.6% to 14% as compared to the same period the previous year. Mother’s market share in value decreased from 13.3% to 11.6% during the same period. The market share of the company’s brands in Australia for the month ended June 2021 increased from 24.9% to 25.5%. According to IRI in New Zealand, Monster’s market share in value for the four weeks ended July 11, 2021, increased from 9.9% to 12.4% as compared to the same period of the previous year. Live+ market share in value remained the same at 6.9%, and Mother’s market share in value increased from 6.2% to 6.3%. The market share of the company’s brands in New Zealand for the four weeks ended July 11, 2021, increased from 23.1% to 25.6%. According to Nielsen, in South Korea, Monster’s market share in value in all outlets combined for the month of June 2021 increased from 53.3% to 61.9% as compared to the same period in the previous year. According to INTAGE, in Japan, Monster’s market share in value in the convenience store channel for the month of June 2021 was 50.6% as compared to 51% in the same period the previous year. Monster remains the market leader in Japan. We again point out that certain market statistics that cover single months or four week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. Net sales to customers outside of the U.S. were $546.3 million, 37.4% of total net sales in the 2021 second quarter compared to $328.3 million or 30% of total net sales in the corresponding quarter in 2020. Foreign currency exchange rates had a positive impact on net sales in the U.S. dollars by approximately $38.6 million in the 2021 second quarter. Included in reported geographic sales are our sales to the company’s military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the 2021 second quarter increased to 105.7% in dollars and increased 86.5% in local currencies over the same period in 2020. Gross profit in this region as a percentage of net sales for the second quarter was 39.8% compared to 38.1% in the same quarter in 2020, primarily due to a favorable country and product mix. We’re also pleased that in the 2021 second quarter, Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, Greece, Italy, the Netherlands, Norway, Poland, the Republic of Ireland, South Africa, Spain and Sweden. In Asia Pacific, net sales in the 2021 second quarter increased 5.2% in dollars and decreased 0.1 of a percent in local currencies over the same period in 2020, largely due to sales in Japan and China. Gross profit in this region as a percentage of net sales was 44.4% versus 43.3% over the same period in 2020. In Japan, net sales in the 2021 second quarter decreased 15.1% in dollars and 13.9% in local currency, largely due to COVID-19 restrictions in Japan and distributor inventory adjustments. Depletions increased 7% during the quarter. Monster remains the market leader in Japan for the month of June 2021. In South Korea, net sales increased 63% in dollars and 50.4% in local currency as compared to the same quarter in 2020. In China, net sales decreased to 21.4% in dollars and 27.8% in local currency as compared to the same quarter in 2020. In this regard, we note that sales in the second quarter of 2020 included the initial launch of Dragon Tea. We are reevaluating the viability of this SKU and the optimal product range for China going forward. We remain optimistic about the prospects for the Monster brand in China. In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased to 146.5% in dollars and 98.2% in local currencies. Sales of the Monster brand in Oceana increased 210% in dollars and 155.6% in local currency as compared to the same quarter in 2020. In Latin America, including Mexico and the Caribbean, net sales in the 2021 second quarter increased to 119.7% in dollars and increased 117.6% in local currencies over the same period in 2020. Gross profit in this region as a percentage of net sales was 40.7% compared to 41.2% over the same period in 2020, primarily as a result of foreign exchange rates and certain raw materials and ingredients for products in this region are purchased in U.S. dollars. In Brazil, net sales in the 2021 second quarter increased by 194.9% in dollars and 201.7% in local currency. Net sales in Chile increased 77.5% in dollars and 52% in local currency in the 2021 second quarter. Net sales in Argentina increased 291.4% in dollars and 458% in local currency in the 2021 second quarter. In March 2019, VPX, the maker of Bang Energy drinks, sued Monster, alleging that its Reign products infringed VPX’s Bang trademarks and trade risk. A trial was held last year. And on August 3, 2021, the court issued an order denying all of VPX’s claims and holding that VPX is entitled to no relief whatsoever. In fact, the court specifically found that VPX copied its bank trade risk from the original Monster Energy cans. The court’s decision confirms that Monster and Poland retail partners are free to continue to sell our Reign products without any changes and without any restrictions. Monster always believed and maintained that VPX’s claims were frivolous, and we are extremely pleased that the court rejected all of VPX’s claims while vindicating Monster’s rights. As other pending proceedings with VPX are subjudicate, we will not be answering any questions on this matter on today’s call. Our new product introductions in the United States in the first half of 2021 were primarily focused in the first quarter. In the United States, during the second quarter of 2021, we refreshed our can graphics on our Rehab Monster brand family as well as our Full Throttle line, also updating the name for Blue Agave to TrueBlue. Monster Energy Ultra Fiesta received a refresh and updated can graphics as well as the name change to Monster Energy Ultra Fiesta Manga. In May 2021, we launched Monster Ultra Fiesta in a 24-ounce option with an update to our Ultra Fiesta Manga plan for later this year. We are in the process of launching a new line of non-alcoholic pure energy sales under the True North brand name in 12-ounce sleek cans, which contained an organic plant-based energy blend and ingredients for immunity support. True North is being offered in six flavors, Cucumber Lime, Black Cherry, Grapefruit Lemonade, Water Mellon Mist, White Peach Pear and Mandarin Yuzu. True North has a limited customer target in 2021 with plans for a full launch into mainstream channels in 2022. While cognizant of the can shortages, we believe that it is important to continue with our innovation plans. And to this end, we will be launching our new flavors reserve line of Monster Energy drinks in Water Mellon and White Pineapple in October 2021. We have deferred the launch of our new line of Java Monster Cold Brew Coffee+ energy drinks until early 2022. In Canada, during the second quarter, we launched two new products

Dara Mohsenian:

Hey, guys.

Dara Mohsenian:

Great top line growth in the quarter, but we have seen share losses in U.S. track channel data worsened recently. A, just short-term, how much of that do you think is attributable to out of stocks and the supply constraints that you mentioned? Is that a material factor in retail sales? And then maybe, B, from a longer-term standpoint, it has been a couple of quarters now where the share losses have reaccelerated year-over-year, just some progress in the beginning of the year. So, I was just hoping you could review some of the key factors that have been driving the share losses in the U.S.? And how you think about those factors going forward in terms of continuing or dissipating and how you guys are positioned? Thanks.

Hilton Schlosberg:

All right. I think, Dara, what’s important is that, that’s not a result and not due to us not growing. We are not keeping up with our share, but our business is certainly growing. And you can track that from Nielsen. You can also track that from the non-measured channels, which are growing really very nicely. So while we’re not keeping up necessarily with Red Bull in the major channels. As I’ve spoken on previous calls, Red Bull had a very large on-premise business, which has moved to off-premise and moved to off-premise during COVID. And that led to an acceleration in their share. However, we mentioned that we had and are continuing to sustain can issues and result in supply. And of course, that’s having an impact on the share numbers that you are seeing. So I think on balance, the business is growing. You’ve seen the results. It’s continuing to grow. And we are growing, but not at the extent of the market. I think with the full deck of cards, the situation may well be very different. But right now, we really are struggling with sufficient supplies of aluminum cans really to keep up with demand, which is, I suppose, a good position to be in. And on the other hand, is not such a good position to be in. The business is growing. And, that’s the message I want to leave you with and other investors.

Hilton Schlosberg:

Yes, I think we should also – Dara, I think we should also add that what we’re seeing with cans is something that will persist through this year. I’m a bit more optimistic about the fourth quarter because we have two new can suppliers coming on board. But the situation will persist. And then make sure, we should be in – we believe we’ll be in very good shape. But again, it all depends on consumer demand, which is growing, and you’ve seen that month-by-month and quarter-by-quarter.

Bonnie Herzog:

Thank you. Hi, everyone. I just wanted to ask about your gross margins. Clearly, they continue to be pressured as broadly expected, which you guys have been discussing with us. But just want to get your outlook for these pressures in the back half of the year? Hilton, you just mentioned that you’re optimistic. So just wanted to verify that you still expect some of these pressures to ease by Q4? Or do you think it’s going to take a little bit longer, especially in light of the recent spike in aluminum prices. So trying to understand how that factors in? And then just a clarification on the can shortages that you mentioned that you’re still experiencing, I guess, it sounds like it’s getting worse, but I really did want to clarify that. And is there any way that you guys could quantify how big of an impact the supply shortages had on your top-line either in the quarter or in July? Just trying to understand how much you think your shipments would have been up in July without these shortages, for instance? Thanks.

Rodney Sacks:

Perhaps, if I just on the shortage level, just to add that when we buy cans in contracted for our annual amount, they usually are sort of reasonably flat line across the year. And we used the first half of the year to build up can inventories and finished product inventories with ourselves and our bottlers. Earlier this year, obviously, demand sort of was strong, and so we really didn’t have that opportunity. So what has happened is that in June and July, which is your normal peak months, the demand has been higher, but our supply has been more level until we can get more can inventories into the market. So what happened is just that we have had a sort of a heartened increased shortage in the last month and July and probably will be a little bit in August. And then obviously, as we start increasing our – the cans we’re getting in, and then we’re able to balance it more and our demand balances more, we’ll start to have less of a different delta between these demand and supplier and eventually be able to – we’re hoping to able to build up our inventories and supply back to normal by the end of the fourth quarter or during or by the end of the fourth quarter.

Operator:

The next question will come from Andrea Teixeira with JPMorgan. Please go ahead.

Rodney Sacks:

Hi.

Andrea Teixeira:

How are you Hilton? Hi.

Andrea Teixeira:

Yes. Just on the gross margin, because your gross margin comments were very helpful and given this deterioration obviously that its probably here to stay in the next few quarters. How are you thinking about pricing? Obviously, you can’t supply the service levels that are used to with the retailers. So is that is something that takes – obviously, you have to take into account? Or perhaps as you get more informed on how the aluminum cost will evolve, you may contemplate it again?

Andrea Teixeira:

Thank you. That’s fair. Thank you, both.

Andrea Teixeira:

Thank you, Rodney.

Rodney Sacks:

Thanks very much. Thank you, everyone, for your continued interest and support of the company. We continue to believe in the company and our growth strategy to remain committed to continuing to innovate, develop and differentiate our brands and to expand the company, both domestically and abroad. And in particular, expand distribution of our products through the Coca-Cola bottler system internationally. We believe that we will be able to navigate through the challenges ahead as a result of the COVID-19 pandemic and hope that this unfortunate situation will resolve itself in the near future. We believe that we are well-positioned in the energy drink category and will continue to be and are optimistic about our total portfolio of energy drink brands. We hope that you will stay safe and healthy. Thank you very much for your attendance.

Rodney Sacks:

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and my Co-Chief Executive Officer is on the call. As is Tom Kelly, our Chief Financial Officer. Tom Kelly will now read the cautionary announcement.

Rodney Sacks:

Thank you, Tom. The company’s top priority remains the health, safety and well-being of its employees. The company’s flavor manufacturing facilities, its co-packers, warehouses and shipment facilities have operated throughout the COVID-19 pandemic. The company’s bottlers and distributors are operating and the company’s products remain generally available to consumers. In limited countries, the operations of the company’s bottlers or distributors have, in part be negatively affected for varying periods of time. Despite the ongoing impact of the COVID-19 pandemic, the company achieved record first quarter net sales. Currently, the company does not foresee a material impact on the ability of its co-packers to manufacture and its bottlers and distributors to distribute its products as a result of the COVID-19 pandemic. The company’s supply chain remains largely intact. However, the company is experiencing shortages in its aluminum can requirements in North America and Europe given the company’s volume growth and the current supply constraints in the aluminum can industry. The company has taken steps to source quantities of aluminum cans from South America and Asia. However, logistical issues, including ocean freight and port of entry congestion, could delay such supply. Logistical issues in relation to the importation of certain other raw materials and ingredients could impact future supply. Furthermore, we are continuing to experience freight inefficiencies and like other beverage companies are incurring increased aluminum can and other costs in the current environment. In the first quarter of 2021, net sales were $1.24 billion compared to $1.06 billion in the first quarter of 2020, an increase of 17.1%. Adjusting for foreign currency movements, net sales for the 2021 first quarter would have been up 16.2%. Gross profit as a percentage of net sales for the 2021 first quarter was 57.5% and compared with 60% in this 2020 first quarter. The decrease in gross profit as a percentage of net sales for the 3 months ended March 31, 2021 was primarily the result of increased input costs mainly increased raw material freight-in costs, geographical sales mix and higher promotional allowances as a percentage of net sales. Operating expenses for the 2021 first quarter were $300.8 million compared with $272.2 million in the 2020 first quarter. As a percentage of net sales, operating expenses for the 2021 first quarter were 24.2% compared with 25.6% in the 2020 first quarter. Operating income increased 13.5% to $414.1 million, up from $365 million in the first quarter of 2020. Net income increased 13% to $315.2 million as compared to $278.8 million in the 2020 comparable quarter. Diluted earnings per share for the 2021 first quarter increased 14.2% to $0.59 from $0.52 in the first quarter of 2020. According to the Nielsen reports for the 13 weeks through April 24, 2021 for all outlets combined namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 20.3% versus the same period a year ago. Sales of the company’s energy brands, including Reign, were up 17.2% in the 13-week period; sales of Monster were up 20.7%; sales of Reign were down 0.6%; sales of NOS increased 1.4%; and sales of Full Throttle increased 8.1%. Sales of Red Bull increased 27.9%; sales of Rockstar decreased by 11.9%; sales of 5-hour increased 11.6%; and sales of Amp increased 6.9%. VPX Bang sales increased 16.3% and Coca-Cola Energy sales decreased 59.3% with a market share of 0.4%. According to Nielsen, for the 4 weeks ended April 24, 2021, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars, increased 34% over the same period the previous year. Sales of the company’s energy brands, which include Reign, increased 27% in the 4-week period in the convenience and gas channel. Sales of Monster increased by 30.9% over the same period versus the previous year. Reign sales increased 13.4%, NOS was up 5.7%, and Full Throttle was up 17.2%. Sales of Red Bull were up 41.2%. Rockstar was down 9.9%, 5-hour was up 41.4%, and Amp was up 14.6%. VPX Bang sales increased 35.5% and Coca-Cola Energy was down 45.8%. According to Nielsen, for the 4 weeks ended April 24, 2021, the company’s market share of the energy drink category in the convenience and gas channel, including energy shots, in dollars, decreased 2.1 points to 37.4%. Monster share decreased by 0.7 of a share point to 31.2% and Reign’s decreased 0.5 of a share point to 2.6%, NOS’ share decreased 0.8 of a point to 2.8%, and Full Throttle share decreased 0.1 of a point to 0.7%. Red Bull share increased 1.9 points to 36.9%; Rockstar share was down 1.9 points to 3.8%; 5-hour share was higher by 0.3 of a point at 4.8%; and Amp share remained at 0.4%. VPX’s Bang share increased 0.1 of a point to 7.5% and Coca-Cola Energy share decreased 0.3 of a point to 0.2%. According to Nielsen, for the 4 weeks ended April 24, 2021, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel, increased 47.5% over the same period the previous year. Sales of Java Monster, including Java Monster 300, were 44.7% higher in the same period versus the previous year. Sales of Starbucks Energy were 53.8% higher. Java Monster share, including Java Monster 300 of the Coffee Plus energy category, which primarily includes Java Monster, Java Monster 300, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee for the 4 weeks ended April 24, 2021, was 51.1%, down 1 point, while Starbucks Energy’s share was 46%, up 1.9 points. According to Stackline, which tracks energy drink sales by Amazon in the United States for the 4-week period ending April 17, 2021, sales in dollars in the energy category by Amazon, including energy shots, increased 160.1% over the same period the previous year. Sales of Monster increased 163% and its share was 35.6%, up 0.4 of a share point versus the same period a year ago. Red Bull sales increased 135.4% and its share was 13.7%, down 1.4 points. CELSIUS’ sales increased 265.2% and its share increased 4.5 points to 15.5%. 5-hour’s sales increased 29.5% and its share declined 3.2 points to 3.1%. VPX Bang sales increased 306.4% and its share increased 1.8 share points to 4.9%. Reign share increased 0.2 of a share point to 5.1%, and Rockstar share increased 0.6 of a share point to 3.5%. According to Nielsen, in all measured channels in Canada, for the 12 weeks ended March 27, 2021, the energy drink category increased 17.5% in dollars. Sales of the company’s energy drink brands increased 27.2% versus a year ago. The market share of the company’s energy drink brands was 42.1%, up 3.2 points. Monster sales increased 22.2% and its market share increased 1.4 points to $37.1 million. NOS’ sales decreased 4% and its market share decreased by 0.4 of a point to 1.9%. Full Throttle sales increased 0.2 of a percentage point and its market share decreased 0.1 of a point to 0.7%. Red Bull sales increased 24.8% and its market share increased 2.2 points to 37.7%. Rockstar sales decreased 17% and its market share decreased 4.2 points to 10%. Guru’s sales increased 12.8% and its share decreased 0.2 of a share point to 3.9%. Coca-Cola Energy sales increased 36.6% and its share increased 0.1 percentage point to 0.8%. According to Nielsen for all outlets combined in Mexico, the energy drink category increased 18.5% for the month of March 2021. Monster sales increased 19.3%. Our market share in value increased 0.2 of a point to 27.5% against the comparable period the previous year. Red Bull sales increased 17.6% and its market share decreased by 0.1 of a point to 6.8%. Vive 100 sales increased 1.9% and its market share decreased by 3.3 points to 20.3%. Vault’s sales increased 20.1% and its market share increased 0.2 of a share point to 19.1%, while Boost sales decreased 1.3% and its market share decreased 1.1 points to 5.6%. Amp’s sales increased 45% and its market share increased 3 points to 16.4%. Coca-Cola Energy sales decreased 94% and its market share decreased 2.1 points to 0.1%. Predator, which was launched in March 2020, achieved a market share of 2.7%. The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales in the OXXO convenience chain in turn can be materially influenced by promotions that maybe 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 2021 compared to March 2020, Monster’s retail market share in value increased in Argentina from 37.9% to 45.2% and in Brazil from 25.4% to 34.7%. In Chile, Monster’s retail market share decreased from 42.1% to 40%. Monster Energy continues to be the leading energy brand in value in Argentina. 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 ended April 4, 2021, Monster’s retail market share in value as compared to the same period the previous year grew from 15.8% to 16% in Germany, from 19.7% to 28.1% in Italy, and from 17.3% to 20.6% in South Africa. According to Nielsen in the 13-week period till the end of March 2021, Monster’s retail market share in value as compared to the same period the previous year grew from 13.2% to 15.1% in Belgium; from 12.6% to 14.8% in the Czech Republic; from 24.5% to 26.4% in Denmark; from 28% to 31.8% in France; from 22.7% to 27.9% in Great Britain; from 34% to 37.7% in Greece; from 6.4% to 8% in the Netherlands; from 24.7% to 29.1% in Norway; from 15.3% to 18.2% in Poland; from 23.8% to 28% in the Republic of Ireland; and from 34% to 36% in Spain; and from 13.5% to 14.9% in Sweden. 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. According to IRI in Australia, Monster’s market share in value for the 4 weeks ended April 11, 2021 increased from 10% to 13.1% as compared to the same period the previous year. Mother’s market share in value decreased from 13.6% to 11.8% during the same period. The market share of the company’s brands in Australia for the 4 weeks ended April 11, 2021 increased from 23.6% to 24.9%. According to IRI in New Zealand, Monster’s market share in value for the 4 weeks ended April 18, 2021 increased from 9.9% to 12.7% as compared to the same period the previous year. Live+’s market share in value decreased from 7.4% to 6.5% and Mother’s market share in value decreased from 6.5% to 5.6%. The market share of the company’s brands in New Zealand for the 4 weeks ended April 18, 2021 increased from 23.9% to 24.8%. According to Nielsen, in South Korea, Monster’s market share in value in all outlets combined for the month of March 2021 increased from 52.3% to 54.8% as compared to the same period in the previous year. According to INTAGE in Japan, Monster’s market share in value in the convenience store channel for the month of March 2021 decreased from 62.1% to 50.1% as compared to the same period in the previous year. Monster remains the market leader in Japan. However, our share was negatively impacted by the labeling issue of a product referenced in our fourth quarter 2020 release, which was re-listed on retail shelves in April 2021 by the introduction of new SKUs by new competitor and by the timing of our 2021 innovation. We again pointed out that certain market statistics that cover single months or 4-week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. Net sales to customers outside the U.S. was $459.4 million, a 36.9% of total net sales in the 2021 first quarter compared with $356.8 million and 33.6% of total net sales in the corresponding quarter in 2020. Foreign currency exchange rates had the effect of increasing net sales in U.S. dollars by approximately $9.3 million in the 2021 first quarter. Included in reported geographic sales are our sales to the company’s military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the 2021 first quarter increased 27.7% in dollars and increased 21.2% in local currencies over the same period in 2020. Gross profit in this region as a percentage of net sales in the first quarter was 37.3% compared to 43.1% in the same quarter in 2020 primarily...

Rodney Sacks:

41.3% primarily due to unfavorable country and product mix. We are also pleased that in the 2021 first quarter, Monster gained market share in Belgium, the Czech Republic, Denmark, France, Germany, Great Britain, Greece, Italy, the Netherlands, Norway, Poland, the Republic of Ireland, South Africa, Spain and Sweden. In Asia-Pacific, net sales in the 2021 first quarter increased 24.8% in dollars and 17.4% in local currencies over the same period in 2020. Gross profit in this region as a percentage of net sales, was 48.8% versus 42% over the same period in 2020. In Japan, net sales in the 2021 first quarter increased 9.2% in dollars and 4.1% in local currency. In South Korea, net sales increased 17% in dollars and 9.6% in local currency as compared to the same quarter in 2020. In China, net sales increased 59.4% in dollars in the 2021 first quarter and 48% in local currency as compared to the same quarter in 2020. In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 66% in dollars and 47.8% in local currencies. Sales of the Monster brand in Oceana increased 65.6% in dollars and 48.1% in local currency as compared to the same quarter in 2020. In Latin America, including Mexico and the Caribbean, net sales in the 2021 first quarter increased 35.7% in dollars and increased 55.9% in local currencies over the same period in 2020. Gross profit in this region as a percentage of net sales was 37.9% compared to 42.5% over the same period in 2020 primarily as a result of foreign exchange rates as certain raw materials and ingredients for products in this region are purchased in U.S. dollars. In Brazil, net sales in the 2021 first quarter increased by 34% in dollars and 70.1% in local currency. Net sales in Chile increased 48.9% in dollars and 37.7% in local currency in the 2021 first quarter. Since our last earnings call in February 2021, there have been no significant updates on our litigation with Vital Pharmaceuticals Inc., the maker of Bang energy drinks. As this litigation and other pending proceedings with VPX are subjugate, we will not be answering any questions on this matter on today’s call. In the United States, during early January 2021, we converted our 10-pack Monster portfolio into 12 packs. In late January 2021, we launched Reign Cherry Limeade and Reign White Gummy Bear as well as Reign Inferno Watermelon warlord. We also launched Monster Ultra Gold in singles and in a 4-pack. In late February 2021, we launched four core flavors

Bonnie Herzog:

Hi, everyone.

Bonnie Herzog:

I wanted – hello. I wanted to ask you guys about the shortages of cans you’re experiencing. Could you give us a sense of how big of a driver that was of your gross margin contraction in the quarter? I mean was it the bulk of that, for instance? And I’m curious to hear if the situation has deteriorated further in April and May? And then finally, when do you expect the shortage situation to improve or maybe stabilize? I mean, I guess, trying to understand if we all should assume this will be a pretty big issue for the remainder of the year? Thanks.

Operator:

The next question is from Laurent Grandet of Guggenheim. Please go ahead.

Hilton Schlosberg:

So Laurent, we spoke about the first quarter. In the first quarter, the impact of the aluminum can costs were not a major factor. And as you know, and everyone else on the call probably knows as well that we have suffered significant and will set a significant increases in aluminum costs going forward. So for example, it’s no secret, but if you look back on a year ago, aluminum costs are up 83.6%, including the Midwest premium in the U.S., and they are up 71%, 71.1% in Europe. So as we go forward, we may not have some of the cost impacts on gross margin, but we certainly will have impacts on aluminum in the second and subsequent quarters. So for me to talk more about the first quarter, we don’t actually give the numbers out that you’re asking for. But what I can say is that I don’t expect the margins to improve going forward this year. I expect that we will not – that our margins will not improve as we go into the second, third. Possibly the fourth quarter, I think things will be better. That’s my analysis. But certainly in the second and third quarter, we will continue to suffer gross margin percentage in our stress gross margin percentage erosion.

Chris Carey:

Hi everyone.

Chris Carey:

So obviously, a big – hey, so obviously, a big number quarter to-date. And I guess the question is, with the aluminum supply shortages that you have, are you going to run into some issues with the ability to fill that demand? And could that prevent you from doing some things that might help with your gross margin, which sounds like they could improve by Q4, like taking any pricing in the business?

Operator:

The next question is from Andrea Teixeira of JPMorgan. Please go ahead.

Rodney Sacks:

Perhaps I’ll take the part of it, and Hilton can take part of it. On True North, we are, as I indicated, we are going to have limited sales just going into and seeding the market this year. The full launch and rollout will take place early in – from the beginning or early in 2022. So it will – we think it will have an impact in 2022, and we will have much less of an impact this year.

Rodney Sacks:

Yes. Just – and then just to complete your question with regard to the alcoholic CELSIUS side. I don’t think you can assume that we are going into it or not going into it. Don’t make that assumption. We’ve addressed the nonalcoholic sell some market. We’ve decided a strategy, and we’ve developed products. And align, and we are going to launch that line. As regards to alcoholic sensing, we are still looking at the market. I think if you have been watching the market, I’m sure the analysts have been. I think you’ve seen quite a lot of – a fortune of new products being launched, many – in cases from the same companies, just different variants. Throwing them against the wall and seeing what’s going to stick. What you’ve also seen in the last 3 months, what we’ve noticed is quite a falloff in the rate of increase in the category. And as the category is maturing, so the increase is also tempering. So we are involved in looking at that category in developing products and as I think I’ve said in the last call, we simply don’t want to launch a product. That’s me-too and that follows everyone else. It’s just no point in that and taking the time and effort and detracting from our focus on our core energy brands and portfolio, where we get a better return and have, obviously, it’s much easier for us to get meaningful sales. But we are continuing to monitor the alcoholic energy seltzer category. And we may well do something in that. But how we do it and what we do it is still not being determined and still not – we don’t have a firm direction. So, all I can really say is just that we are addressing it, but we shouldn’t assume that we are definitely going to go ahead or definitely not going to go ahead or how.

Mark Astrachan:

Yes. Hey, thanks, and good afternoon everyone. I guess, don’t kill me I am going to ask a bunch of it for follow-up questions here so helping restrain yourself for a second.

Mark Astrachan:

I guess on – are can shortages impacting your U.S. market share, if not, or if they are, could you maybe just talk about kind of what you’re seeing in the U.S. also, could you clarify on the gross margin you’re talking about relative to 1Q levels for 2Q and 3Q? Or are you talking about – you’re not giving us any sort of color on 2Q and 3Q relative to 1Q? And then back to the other question on pricing and then related to promotional allowances. So your capacity constrained, at least for the time being, what’s the harm in taking price to constrain the demand and then also, you’re suggesting then the promotional allowances after 1Q will lessen in 2Q, 3Q kind of for the same effect?

Mark Astrachan:

Pricing and promotional allowances relative to capacity constraints.

Operator:

Next question is from Dara Mohsenian of Morgan Stanley. Please go ahead.

Hilton Schlosberg:

So maybe I’ll just take the first one, and then we will get Rodney to take the second one. So Dara, if you look at April sales, for example, and you take out – you strip out what happened in 2020. And you can see that there was a very big impact in sales in the second quarter and a very positive impact. So it is presenting challenges to the supply chain team, and we are doing everything we can to ensure that we’re able to keep as much as possible in stock. In fact, we’re focusing on the SKUs that are generating the significant part of our volumes at the expense of SKUs that are not performing as well. So that’s really where we’re at with regard to the second quarter. We will be getting cans in. If these port issues resolve themselves, and we will – we’re trying as best as we can to get back in stock as soon as possible.

Tom Kelly:

Yes. So the only thing I would add to that is that I always look at the first quarter of 2020 because that was kind of a pure quarter for us. COVID started kind of late in the quarter, where our sales were already in-house. And so the first quarter for us was really 2020 was really kind of a normal quarter. And if you look back to that first quarter, and I always do. First quarter net sales in 2020 over 2019 rose 12.3%. So even as we entered into COVID, our sales were strong.

Rodney Sacks:

Thanks very much. On behalf of Monster, I’d like to thank everyone for their continued interest in the company. We continue to believe in the company and our growth strategy it’s remain committed to continuing to innovate, develop and differentiate our brands and to expand the company both at home and abroad, and in particular, expand distribution of our products through the Coca-Cola bottling system internationally. We believe that we will be able to navigate through the challenges ahead as a result of the COVID-19 pandemic and hope that this unfortunate situation will resolve itself in the near future. We believe that we are well positioned in the energy drink category and continue to be optimistic about our total portfolio of energy drink brands. We hope that you will all stay safe and healthy. Thank you very much for your attendance.

Rodney Sacks:

Thank you. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and Co-Chief Executive Officer is on the call, as is Tom Kelly, our Chief Financial Officer. Tom will now read the cautionary announcement statement.

Rodney Sacks:

Thank you, Tom. The company's top priority continues to be the health, safety and well-being of its employees. Early in March 2020, the company implemented global travel restrictions and work-from-home policies for employees who are able to work remotely. For those employees who are unable to work remotely, safety precautions have been instituted, which were developed and adopted in line with guidance from public health authorities and professional consultants. Throughout this period, the company has engaged with its employees through ongoing communications, online training and personnel development opportunities to promote their well-being and motivation. The company's flavor manufacturing facilities, its co-packers, warehouses and shipment facilities are all operating. Certain of the company's bottlers and distributors have implemented modifications to their core points and service levels, but the company's products remain generally available to consumers. In limited countries, the operations of its bottlers and distributors have been more affected. Despite the ongoing impact of the COVID-19 pandemic, the company achieved record fourth quarter net sales. While our performance in EMEA was solid in the fourth quarter, EMEA remained adversely affected by the COVID-19 pandemic. Since mid-March 2020, the company has seen a shift in consumer channel preferences and package configurations, including an increase in at-home consumption and a decrease in foodservice on-premise consumption. The company's sales in the 2020 second quarter were initially adversely affected as a result of a decrease in foot traffic in the convenience and gas channel, which is the company's largest channel, but improved sequentially from the latter half of the 2020 second quarter and throughout the 2020, third and fourth quarters. The company's sales in e-commerce, club store, mass merchandiser and grocery and related business continued to increase in the fourth quarter, while its foodservice on-premise business, which is a small channel for the company remained challenged. Currently, the company does not foresee a material impact on the ability of its co-packers to manufacture and it’s bottlers and distributors to distribute it’s product as a result of the COVID-19 pandemic. In addition, the company is not experiencing significant raw material or finished product shortages, and its supply chain remains intact. Company is continually addressing the increase in it’s aluminum can requirements, given the companies volume growth and the current supply constraints in the aluminum can industry. In the fourth quarter of 2020, net sales were $1.2 billion compared with $1.02 billion in the fourth quarter of 2019. Adjusting for foreign currency movements, net sales for the 2020 fourth quarter would have been up 18.3%. Net sales for the 2020 fourth quarter were negatively impacted by $15.2 million related to product returns from our customers as a result of a European formulation issue with a limited number of products in Europe and a labeling issue concerning one product in Japan. We will refer to this on our call as product returns. Gross profit as a percentage of net sales for the 2020 fourth quarter was 57.7% compared with 60% in the 2019 fourth quarter. The decrease in gross profit as a percentage of net sales for the 2020 fourth quarter was primarily the result of the impact of the product returns, associated inventory provisions and other related costs. Gross profit as a percentage of net sales excluding the impact of the product returns associated inventory provisions and other related costs was 59.3% for the 2020 fourth quarter. To a lesser extent, the decrease in gross profit as a percentage of net sales was the result of increased input costs and unfavorable geographical mix during the 2020 fourth quarter, which were partially offset by favorable product mix. Operating expenses for the 2020 fourth quarter were $288.4 million compared to $293.7 million in the 2019 fourth quarter. As a percentage of net sales, operating expenses for the 2020 fourth quarter were 24.1% compared to 28.9% in the 2019 fourth quarter, primarily Q2 decreased expenditures of $13.5 million for legal settlements and decreased expenditures for sponsorships and endorsements as well as travel and entertainment as a consequence of the COVID-19 pandemic. The cost for certain postponed or rescheduled events have been or may be deferred to future periods. Due to the uncertainty surrounding the COVID-19 pandemic, the company is unable to estimate in which future periods, if any, such deferred sponsorship and endorsement costs will be recognized. The decrease in operating expenses as a percentage of net sales was partially offset by increased payroll expenses of $12.1 million, increased outbound freight and warehouse costs of $11.4 million and increased expenditures of $8.2 million for social media and digital marketing. Operating income increased 26.9% to $402.3 million, up from $317 million in the fourth quarter of 2019. Operating income for the 2020 fourth quarter, excluding the impact of the product returns associated inventory provisions and other related costs increased 35.5% to $429.6 million from $317 million in the 2019 fourth quarter. Net income increased 85% to $471.7 million as compared to $255 million in the 2019 comparable quarter. Net income for the 2020 fourth quarter was positively impacted by a non-recurring tax benefit of approximately $165.1 million, due to an intra entity transfer of intangible assets between certain of the companies foreign subsidiaries, which resulted in a step-up of the tax deductible basis in the transferred assets in a foreign jurisdiction and created a temporary difference between the tax basis and the book basis of such intangible assets. Net income for the 2020 fourth quarter, excluding the non-recurring tax benefit, the impact of the product returns, associated inventory provisions and other related costs increased 28.9% to $328.6 million from $255 million in the 2019 fourth quarter. Diluted earnings per share for the 2020 fourth quarter increased 87.5% to $0.88 from $0.47 in the fourth quarter of 2019. Diluted earnings per share for the 2020 fourth quarter excluding the non-recurring tax benefit, the impact of the product returns associated inventory provisions and other related costs increased 30.6% to $0.62 from $0.47 in the fourth quarter of 2019. According to the Nielsen reports for the 13 weeks through February 13, 2021, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 11.2% versus the same period a year ago. Sales of the company's energy brands, including Reign were up 10.8% in the 13-week period. Sales of Monster were up 13.2%. Sales of Reign were down 2.1%. Sales of NOS increased 0.7% and sales of Full Throttle decreased 0.2%. Sales of Red Bull increased 18.7%. Sales of Rockstar decreased by 14% and sales of 5-hour decreased 0.4% and sales of Amp decreased 7.4%. VPX Bang sales decreased 3.5% and Coca-Cola Energy sales increased 29.5% with a market share of 0.4%. According to Nielsen, for the four weeks ended February 13, 2021, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots in dollars increased 8.6% over the same period the previous year. Sales of the company's energy brands, which include Reign, increased 9.3% in the four week period in the convenience and gas channel. Sales of Monster increased by 13% over the same period versus previous year. Reign sales decreased 9.2% and NOS was down 5.2% and Full Throttle was up 0.8%. Sales of Red Bull were up 19%. Rockstar was down 20.9%. 5-hour was up 0.4% and Amp was down 1.1%. VPX Bang sales decreased 9.7% and Coca-Cola Energy was down 52.4%. According to Nielsen, for the four weeks ended February 13th, 2021, the company's market share of the energy drink category in the convenience and gas channel, including energy shots in dollars, increased 0.2 points to 39%. Monster share increased 1.3 share points to 32.5%. Reign's share decreased 0.5 of a share point to 2.7%. NOS share decreased 0.4 of a point to 3%. Full throttle share remained at 0.8%. Red Bull share increased 3.2 points to 36.4%. Rockstar share was down 1.6 points to 4.4% and 5-hour share was lower by 0.4 of a point at 4.9%, and Amp share remained at 0.4%. VPX Bang share decreased 1.4 points to 7% and Coca-Cola Energy share decreased 0.4 of a point to 0.3%. According to Nielsen, in the four weeks ended February 13th, 2021, sales in dollars in the coffee + energy drink category, which includes our Java Monster line, in the convenience and gas channel increased 18.5% over the same period the previous year. Sales of Java Monster, including Java Monster 300 were 26.7% higher in the same period versus the previous year. Sales of Starbucks Energy were 18.5% higher. Java Monster share, including Java Monster 300 of the coffee + energy category, which primarily includes Java Monster, Java Monster 300, Starbucks, Doubleshot and Tripleshot, Rockstar Roasted and Ban Keto Coffee for the four weeks ended February 13th, 2021, was 52.9%, up 3.4 points, while Starbucks Energy share remained at 44.6%. According to Stackline, which tracks energy drink sales by Amazon, in the United States for the four-week period ending February 13th, 2021, sales in dollars in the energy category by Amazon, including energy shots increased 177.8% over the same period the previous year. Sales of Monster increased 193.7%, and its share was 34.2%, up 1.8 share points versus the same period a year ago. Red Bull sales increased 171.8%, and its share was 14.7%, down 0.1 - sorry, 0.3 points. CELSIUS’ sales increased 224.8%, and its share increased 2.1 points to 14.5%. 5-hour sales increased 56.4% and it share declined 2.7 points to 3.5%. VPX Bang sales increased 272.5% and the share increased 1.2 share points to 4.9% Reign share increased 2.3 share points to 6.4%, and Rockstar share increased 0.2 of a share point to 3.5%. According to Nielsen in all measured channels in Canada for the 12 weeks ended January 30th, 2021, the energy drink category increased 15.2% in dollars. Sales of the company's energy drink brands increased 24.9% versus a year ago. The market share of the company's energy drink brands was 41.3%, up 3.2 points. Monster sales increased 18% and its market share increased 0.8 of a point to 35.7%. Monster sales increased 3.3%, and its market share decreased 0.2 of a point to 2%. Full Throttle sales decreased 6%. Its market share decreased 0.2 of a point to 1%. Red Bull sales increased 18.4% and its market share increased 1 point to 37.6%. Rockstar sales decreased 12.7% and its market share decreased 3.4 points to 10.5%. GURU sales increased 12.6% and it share decreased 0.1 of a share point to 4.3%. Coca-Cola Energy share was 0.7 of a percent. According to Nielsen, for all outlets combined in Mexico, the energy drink category declined 2.4% for the month of January 2021. Monster sales decreased 0.2%, our market share in value increased 0.6 points to 28.1% against the comparable period the previous year. Red Bull's sales decreased 21.5%, and its market share decreased by 1.5 points to 6.1%. Vive 100 sales decreased 14.7%, and its market share decreased by 3 points to 21.1%. Volt sales increased 7.5% and its market share increased 1.8 share points to 19.3%, while Boost sales decreased 22.4% and its market share decreased 1.5 points to 5.9%. Amp’s sales increased 26.9%, and its market share increased 3.5 points to 15.3%. Coca-Cola Energy sales decreased 95.7% and its market share decreased to 12.9 - sorry, 2.9 points to 0.1 of a percent. Predator, which was launched in March 2020 achieved a market share of 2.8%. The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO Convenience chain, which dominates the market. Sales 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 brand, during a particular month. Consequently, such activities could have a significant impact on the monthly Nielsen statistics for Mexico. According to Nielsen for the month of December 2020 compared to December 2019, Monster's retail market share in value increased in Argentina from 34% to 45.5%; in Brazil from 25.2% to 32.2%; and in Chile from 40.3% to 47.2%. Since the launch of Monster Energy in Argentina in the first quarter of 2018, Monster Energy is now the leading energy brand in value in both Argentina 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 to the end of January 2021, Monster's retail market share in value as compared to the same period the previous year grew from 12.8% to 15.4% in Belgium; from 28.3% to 31.1% in France; from 22% to 27.3% in Great Britain; and from 6.1% to 7.9% in the Netherlands. According to Nielsen, in the 13-week period to the end of December 2020, Monster's retail market share in value as compared to the same period the previous year grew from 13.2% to 15.2% in the Czech Republic, from 22.9% to 26.3% in Denmark, from 34.7% to 37.7% increase, from 20.3% to 27.9% in Italy from 24.2% to 30.5% in Norway, from 14.3% to 21% in Poland, from 22.9% to 28.2% in the Republic of Ireland, from 18.1% to 21% in South Africa, from 35.5% to 37.3% in Spain, and from 12.7% to 14.4% in Sweden, and declined from 16.4% to 16% in Germany. Nielsen numbers in EMEA should only be used as a guide because the channels read by Nielsen in EMEA vary from country to country. According to IRI in Australia, Monster's market share in value for the four weeks ending January 17, 2021, increased from 9.4% to 12.1% as compared to the same period the previous year. Mother's market share in value decreased from 13% to 12.2% during the same period. Market share of the company's brands in Australia for the four weeks ended January 17, 2021, increased from 22.4% to 24.2%. According to IRI in New Zealand, Monster's market share in value for the four weeks ended January 3, 2021, increased from 9.7% to 10.8% as compared to the same period the previous year. Lift Plus market share in value decreased from 8.1% to 7%, and Mother's market share in value decreased from 6.2% to 6. 1%. Market share of the company's brands in New Zealand for the four weeks ended January 3, 2021, decreased from 24% to 23.9%. According to Nielsen in South Korea, Monster's market share in value in all outlets combined for the month of December 2020 grew from 52% to 56.5% as compared to the same period in the previous year. According to INTAGE in Japan, Monster's market share in value in the convenience store channel for the month of December 2020 decreased from 55.5% to 49.2% as compared to the same period in the previous year, primarily due to the impact of the product returns in Japan as well as initial trial sales following the launch of new products by two large competitors. Monster remains the market leader in Japan. We again point out that certain markets statistics cover single months or four week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. We are seeing some recent softness in the performance in the Energy category in the U.S., which we are reviewing. Net sales to customers outside the U.S. were $384.8 million, 32.2% of total net sales in the 2020 fourth quarter compared to $319.5 million or 31.4% of total net sales in the corresponding quarter in 2019. Net sales to customers outside the United States for the 2020 fourth quarter were negatively impacted by $15.2 million related to the product returns. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $7.1 million in the 2020 fourth quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the fourth quarter increased 25% in dollars and increased 22.8% in local currencies over the same period in 2019. Net sales adjusted for the product returns in this region, increased 30.5% in dollars and 27.4% in local currencies. Gross profit in this region as a percentage of net sales for the quarter was 30.2%, compared to 38.7% in the same quarter in 2019. Gross profit percentage for the region was negatively impacted by the product returns in this region, associated inventory provisions and other related costs, foreign exchange rates as well as geographic mix. Gross profit as a percentage of net sales, excluding the impact of the product returns in this region, associated inventory provisions and other related costs was 40.1% for the 2020 fourth quarter, compared with 38.7% in the same quarter of 2019. In local currencies, gross profit as a percentage of net sales for the quarter was 31.7%. We're also pleased that the fourth - in the fourth quarter Monster gained market share, in Belgium, Czech Republic, Denmark, France, Great Britain, Greece, Italy, the Netherlands, Norway, Poland, the Republic of Ireland, South Africa, Spain and Sweden. In Asia Pacific, net sales in the fourth quarter decreased 2.1% in dollars and 5% in local currencies over the same period in 2019. In Asia Pacific, excluding the impact of the product returns in this region, net sales in the fourth quarter increased 5.4% in dollars and 2.5% in local currency over the same period in 2019. Gross profit in this region as a percentage of net sales was 34.9% versus 40.2% over the same period in 2019. Excluding the impact of the product returns in this region, associated inventory provisions and related costs, gross profit as a percentage of net sales would have been 40.3% versus 40.2% in the comparable period in 2019. Japan net sales in the quarter decreased 16.4% in dollars and 18.4% in local currency without the impact of the product returns in Japan, net sales decreased 6.7%. In December 2020, our distributor in Japan reduced their inventories, because of the COVID-19 pandemic restrictions. Distributed depletions increased by approximately 12%, during the 2020 fourth quarter. In South Korea, net sales increased 55.8% in dollars and 52.3% in local currency, as compared to the same quarter in 2019. In China, net sales decreased 5% in dollars in the quarter and 9.6% in local currency, as compared to the same quarter in 2019. Distributor depletions increased as by approximately 29% during the 2020 fourth quarter. In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 32.6% in dollars and 25.2% in local currencies. Sales of the Monster brand in Oceania increased 32% in dollars and 24.7% in local currency, as compared to the same quarter in 2019. In Latin America, including Mexico and the Caribbean, net sales in the fourth quarter increased 52.2% in dollars and increased 79.9% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales was 38.6% compared to 42.6% and over the same period in 2019, primarily as a result of foreign exchange rates as certain raw materials and ingredients for products in this region are purchased in U.S. dollars. In Brazil, net sales in the quarter increased by 74.9% in dollars and 133.6% in local currency. Net sales in Chile increased 72.9% in dollars and 80.3% in local currency in the quarter. Since our last earnings call in November 2020, there have been no significant updates on our litigation with Vital Pharmaceuticals, Inc., the maker of Bang Energy drinks. As this litigation and other pending proceedings with VPX are sub judice, we will not be answering any questions on this matter on today's call. In early October 2020, in the United States, we launched Ultra Water Melon and Juice Monster Papillon to the trade. We also refreshed our Juice Monster Khaos SKU into the new Juice Monster Khaotic. Initial results are positive. In late January 2021 in the United States, we launched Reign Cherry Limeade and Reign White Gummy Bear as well as Reign Inferno, Watermelon Warlord to the trade. We also launched Monster Ultra Gold in singles and in a four pack. In late February 2021, we launched our core four flavors, Monster Green, Low-carb Monster, Monster Zero Ultra and Monster Ultra Paradise, in 12-ounce slim cans targeted to the convenience retail channel and foodservice. In Canada, in January 2021, we launched Monster Ultra Fiesta and Java Monster with Oat Milk. February 2021, we launched Pacific Punch in Mexico and in Honduras, and we launched Mean Green - and in Honduras, we launched Mean Green, our second flavor of fury, which is one of our affordable energy brands. We were able to introduce a number of new products across EMEA in the 2020 fourth quarter. Unfortunately, a number of EMEA markets, including some of our largest markets have recently reintroduced lockdowns, which may adversely impact these and future product introductions. Juice Monster Mango Loco was launched in Botswana in November 2020 and in Israel in January 2021 and is now available in 40 markets across EMEA. Juice Monster Pacific Punch was launched in Italy in February 2021 and is now available in 12 markets across EMEA. Monster Ultra was launched in Serbia and Ukraine in October 2020 and is now available in 44 EMEA markets. Monster Ultra Paradise was launched in the Czech Republic and Slovakia in the fourth quarter of 2020 and is now available in 22 EMEA markets. Monster Ultra Fiesta was launched in Great Britain and Sweden in January 2021 and in Poland, Portugal, the Republic of Ireland and Spain in February 2021. The Monster Ultra Black was launched in the Republic of Ireland in October 2020, it is now available in two EMEA markets. Monster “The Doctor” was launched in Kenya in December 2020 and is now available in 44 EMEA markets. Monster Mule was launched in the Republic of Ireland in October 2020 and in Great Britain and Iceland in January 2021 and in Austria, Belgium and Norway in February 2021. Monster Mule is now available in 10 EMEA markets. Burn Zero Raspberry was launched in Hungary in October 2020. Ultra Zero Raspberry was launched in Serbia in November 2020. Predator Purple Rain was launched in Namibia in December 2020 and is now available in three EMEA markets. Reign Sour Apple variant was launched in Iceland and the Republic of Ireland in October 2020. In November 2020, we launched Monster Energy Ultra Rosa in Australia and New Zealand, in addition to Bu Energy Island Punch in Papua New Guinea. China, we piloted our new non-carbonated Monster Energy Dragons Gold in a number of provinces during the fourth quarter of 2020. Initial consumer feedback has been positive and we will commence with the national rollout of Monster Energy Dragons! gold during 2021. During the 2020 fourth quarter, we saw additional distribution gains for Monster Energy Dragon team along with Monster Energy Green and Monster Energy Ultra. During the 2020 fourth quarter, we launched Monster Energy Ultra and Monster Mango Loco in Singapore, Monster Mango Loco in Vietnam and Monster Energy Ultra in the Philippines. We are planning to launch a number of additional products and/or product lines in our domestic and international markets in 2021. During the 2020 fourth quarter, no shares were repurchased under the previously authorized repurchase program. As of February 25, 2021, approximately $441.5 million remained available for repurchase under the previously authorized repurchase program. We estimate January 2021 sales to be approximately 18.2% higher than in January 2020. On a foreign currency-adjusted basis, January 2021 sales would have been approximately 17.2% higher than comparable January 2020 sales. January 2021 has had two fewer selling days in January 2020. 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 as shifts in the timing of production in some instances where our bottlers are responsible for production and UNI at redetermined their production schedules, which affects the dates in which we invoice such bottlers as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. In addition, the COVID-19 pandemic remains a serious concern. If COVID-19 pandemic and related unfavorable economic conditions continue to intensify the negative impact on our sales, including our new product innovation launches could be prolonged and may become more severe. In conclusion, I would like to summarize some recent positive points. Firstly, currently, the company's flavor manufacturing facility, its co-packers, warehouses and shipment facilities and bottlers and distributors are all operating. We are continually addressing our aluminum can requirements, given our volume growth and the current supply constraints in the aluminum can industry. Two, we are pleased with the new additions to the Monster Energy portfolio and are planning additional launches later in the year. Three, we are planning to continue additional launches of our Reign Total Body Fuel high-performance energy drinks in additional international countries. More, we are pleased with the rollout of Predator and Fury and our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in a number of international countries during the year. Despite the obstacles of the COVID-19 pandemic, we are pleased with our performance for the quarter and the year. I would like to open the floor to questions about the quarter and the year. Thank you.

Dara Mohsenian:

Hilton, I was hoping you could discuss the commodity cost outlook as you look out to 2021, particularly on the aluminum side. I know you won't get into guidance territory, but just any conceptual thoughts would be helpful. And if we do see sustained higher commodity costs, can you discuss your willingness to potentially take pricing to offset some of the higher costs? And how you think about that? Thanks.

Rodney Sacks:

And regarding your second question about take your price increase. We're not at this time we haven't been looking at taking a price increase. However, whatever rules out, take your price increase when the right opportunity presents itself. And right now, none of our competitors have been looking at price increases. I know we led the market last time. But this time, we're cautious, as indeed, we should be with our market share. And we're examining the opportunities to take price up. And we will, if we find there's an opportunity to do so.

Kevin Grundy:

Congratulations on the strong result. For me, I'd like to ask about the seltzer category. Specifically, you made some comments recently at your Analyst Day we could get some news here, either on the alcohol side or even non-alcohol side. I know it's a big decision. And certainly not one where you want to be beholden to any sort of time line that Wall Street may have set. But any updated thoughts here with respect to what you've decided to enter and what that timing may be? Thank you.

Operator:

Our next question comes from Andrea Teixeira from JPMorgan. Please go ahead with your question.

Rodney Sacks:

So where we are Andrea, is an interesting territory because you can see that our sales are growing, I think, quicker than we had expected that they would. And we are doing everything we can to service our bottlers and get product to our bottlers, so they can service the retail trade. Having said that, I'm pretty confident that there's not excess inventories in the bottlers warehouses. Because I know what - that we're doing everything we can to satisfy their demand, and they have not been terribly happy with us in terms of getting product, because cans - excess cans are tight. And we're doing everything we can to service customers in an area where the market is growing quicker than our expectations. So from that perspective, I don't believe that the distributors are carrying any excess inventory in their system. And we also know, of course, we monitor depletions and depletions are in line with our shipments.

Rodney Sacks:

That's correct. We spoke about that in China and Japan. And that is correct.

Operator:

Our next question comes from Mark Astrachan from Stifel. Please go ahead with your question.

Hilton Schlosberg:

So let me start, Mark. In terms of working with the Coca-Cola bottlers and working with the Coca-Cola system on procurement of cans, we're doing what we can to produce within the Coca-Cola network. Obviously, that's something that we like to do because it reduces shipping costs and improves efficiencies. But there are a whole bunch of products that we manufacture that cannot be manufactured at a Coca-Cola facility. We do a wide range of products from hot four to and those products cannot be manufactured at a Coca-Cola facility. So where we can, we try and work with the system. And obviously, that's our major focus. And that's been improving over the years. We've opened up a number of Coca-Cola facilities to produce Monster. On the other hand, on procurement, which is a question you asked, that's been a longer-term project, and we haven't resolved that situation yet. The Coke bottlers have their own organization, which is for the Coca-Cola bottling situation. We are not a bottler. And we don't fall within that mandate. So that's been a difficult discussion. And it's something that I'm hoping that we'll be able to progress in the future. But right now, we're doing our own procurement of all our raw materials, including aluminum and including cans. So Rodney you asked that, you answer the second question. Sure. Go ahead.

Hilton Schlosberg:

Yes. It's just an evolution. It's a question of time. We generally start one or two SKUs, and we build from there. And if you look across the various countries that we are distributed in, some have more or less depending on when we started and the appetite for taking on additional products. But as the energy category grows, there is a huge opportunity to be able to do that. And then in some countries like in China, we've actually launched unique items that are not available in the U.S. In Brazil, we have a tea product, for example, that's also not available in the U.S. So there are a bunch of products under the Monster brand that are not available in the U.S. that are distributed internationally and of course, our strategic brands are in various countries in the world, many of those - many of the flavors that we sell in other parts of the world are not available in the U.S. So it really is a mixed bag and as we see an opportunity.

Peter Galbo:

Rodney, I just wanted to ask on capital allocation. It's been a couple of quarters, I guess, since we've seen some meaningful share repurchase. You talked about the authorization outstanding. Just help us kind of think about your appetite to do more potentially in 2021 and beyond. Thanks.

Operator:

And ladies and gentlemen, this will conclude our question-and-answer session. I'd like to turn the conference call back over to Mr. Sacks and Schlosberg for any closing remarks.

Operator:

Ladies and gentlemen, with that we will conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.

Rodney Sacks:

Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President, is on the call; as is Tom Kelly, our Executive Vice President of Finance. Tom Kelly will now read the cautionary announcement.

Rodney Sacks:

Thank you, Tom. Let me begin by saying that our thoughts and prayers are with all of those who have been impacted by the COVID-19 pandemic. Despite the ongoing impact of the COVID-19 pandemic, we achieved record third quarter net sales and the highest quarterly net sales in the company's history. While our performance in EMEA was solid in the third quarter, EMEA remained adversely affected by the COVID-19 pandemic. Since mid-March 2020, we have seen a shift in consumer channel preferences and package configurations, including an increase in at-home consumption and a decrease in food service on-premise consumption. Our sales in the 2020 second quarter were initially adversely affected as a result of a decrease in foot traffic in the convenience and gas channel, which is our largest channel, but improved sequentially from the latter half of the 2020 second quarter and throughout the 2020 third quarter. Now e-commerce, club store, mass merchandiser and grocery related business continued to increase in the quarter, while our food service on-premise business, which is a small channel for the company, remained challenged. Currently, we do not foresee a material impact on the ability of our co-packers to manufacture, and our bottlers and distributors to distribute our products as a result of the COVID-19 pandemic. In addition, we are not experiencing significant raw material or finished product shortages, and our supply chain remains intact. We are continually addressing our aluminum can requirements, given our volume growth and the current supply constraints in the aluminum can industry. With certain countries, particularly in EMEA, returning to lockdowns and other restrictions, consumer demand could be impacted, and we are unsure of what impact this may have, if any, on our future performance. Monster Energy Cares, our philanthropic arm, continues to be actively engaged in a number of philanthropic efforts, including donating products to individuals working on the front lines of the COVID-19 pandemic as well as those involved with the recent natural disasters in the U.S. Based on currently available information, we do not expect to COVID-19 pandemic to have a material impact on our liquidity. In the third quarter of 2020, net sales were $1.25 billion as compared with $1.13 billion in the third quarter of 2019. Adjusting for foreign currency movements, net sales for the 2020 third quarter would have been up 11.1%. Gross profit as a percentage of net sales for the 2020 third quarter was 59.1% compared with 59.4% in the 2019 third quarter. Decrease for the 2020 third quarter was primarily the result of geographical sales mix and higher allowances as a percentage of net sales, partially offset by favorable aluminum can pricing. Operating expenses for the 2020 third quarter were $277.9 million compared to $277.6 million in the 2019 third quarter. As a percentage of net sales, operating expenses for the 2020 third quarter were 22.3% compared to 24.5% in the 2019 third quarter, primarily the result of decreased expenditures for sponsorships and endorsements of $14.1 million and decreased expenditures of $9.3 million for travel and entertainment, each largely as a consequence of the COVID-19 pandemic. The costs for certain postponed or rescheduled events have been or may be deferred to future periods. Due to the uncertainty surrounding the COVID-19 pandemic, the company is unable to estimate in which future periods, if any, such deferred sponsorship and endorsement costs will be recognized. The decrease in operating expenses as a percentage of net sales was partially offset by increased payroll expenses of $14.5 million, increased expenditures of $7.4 million for social media and digital marketing and increased outbound freight and warehouse costs of $6 million. Operating income was $458.6 million up from $395.4 million in the third quarter of 2019. Net income increased 16.3% to $347.7 million as compared to $298.9 million in the 2019 comparable quarter. Diluted earnings per share for the 2020 third quarter increased 19.6% to $0.65 from $0.55 in the third quarter of 2019. According to the Nielsen report for the 13 weeks through October 24, 2020, all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 10.6% versus the same period a year ago. Sales of the company's energy brands, including Reign, were up 7.7% in the 13 week period. Sales of Monster were up 7.6%. Sales of Reign were up 18.6%. Sales of NOS increased 1.7% and sales of Full Throttle increased 2.4%. Sales of Red Bull increased 19.4%. Sales of Rockstar decreased by 10.4%. Sales of 5-Hour decreased 1.9% and sales of Amp decreased 11.1%. VPX Bang sales decreased 2%. According to Nielsen, for the 4 weeks ended October 24, 2020, sales in dollars in the energy drink category in the convenience and gas channel, including energy shots, in dollars, increased 9.3% over the same period the previous year. Sales of the company's energy brands, which include Reign, increased 7.3% in the 4-week period in the convenience and gas channel. Sales of Monster increased by 7.6% over the same period versus the previous year. Reign sales increased 14.6%. NOS was up 0.4% and Full Throttle was up 3.9%. Sales of Red Bull were up 19.4%. Rockstar was down 18.2%, 5-Hour was down 1.5%. Amp was down 12.5% and VPX Bang sales decreased 4.5%. According to Nielsen, in the 4 weeks ended October 24, 2020, the company's market share in the energy drink category in the convenience and gas channel, including energy shots, in dollars, decreased by 0.7 of a point over the same period the previous year to 38.2%. Monster share decreased 0.5 of a share point to 31.4%. Reign's increased 0.1 of a share point to 2.8%, NOS' share decreased 0.3 points to 3.2% and Full Throttle share remained at 0.8%. Red Bull share increased 3.1 points to 36.4%. Rockstar share was down 1.5 points to 4.5%, 5-Hour share was lower by 0.5 of a point at 4.7%, and Amp share decreased 0.1 of a point to 0.4%. VPX Bang share decreased 1.1 points to 7.5%. According to Nielsen, for the 4 weeks ended October 24, 2020, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line, in the convenience and gas channel increased 14.8% over the same period the previous year. Sales of Java Monster, including Java Monster 300, were 24.6% higher in the same period versus the previous year. Sales of Starbucks Energy were 17.1% higher. Java Monster share, including Java Monster 300 of the coffee plus energy category, which primarily includes Java Monster, Java Monster 300, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee for the 4 weeks ended October 24, 2020 was 49.9%, up 3.9 points, while Starbucks Energy share was 47.3%, up 0.9 of a point. According to Stackline, which tracks energy drink sales by Amazon, in the United States, for the 4-week period ending October 17, 2020, sales in dollars in the energy category by Amazon, including energy shots, increased 157.5% over the same period the previous year. Sales of Monster increased 156%, and its share was 31.2%, down 0.2 of a share point versus the same period a year ago. Red Bull sales increased 179% and its share was 15.8%, up 1.2 points. CELSIUS' sale increased 190.3%, and its share increased 1.6 points to 13.9%. 5-Hour sales increased 45% and its share declined 3.4 points to 4.4% percent. VPX Bang sales increased 101.8%, and the share declined 1.2 share points to 4.3%. Reign's share increased 3.2 share points to 5.5% and Rockstar share increased 0.8 of a share point to 4%. According to Nielsen, in all measured channels in Canada, for the 12 weeks ended October 3, 2020, the energy drink category increased 15.9% in dollars. Sales of the company's energy drink brands increased 19.7% versus a year ago. The market share of the company's energy drink brands was 39.7%, up 1.3 points. Monster's market share decreased 0.6 of a point to 34.8%. NOS' sales increased 3% and its market share decreased 0.2 of a point to 1.9%. Full Throttle sales decreased 19%, and its market share decreased 0.3 of a point to 0.7%. Red Bull sales increased 22.6%, and its market share increased 2.1 points to 38.8%. Rockstar sales decreased 9.3%, and its market share decreased 3.8 points to 13.6%. Guru's sales increased 37.2% and its share increased 0.5 of a share point to 3.4%. According to Nielsen for all outlets combined in Mexico, the energy drink category declined 3.7% for the month of September 2020. Monster sales decreased 7.4%. Our market share in value decreased 1.1 points to 28.1% against the comparable period the previous year. Red Bull sales decreased 19%, and its market share decreased by 1.2 points to 6.6%. Vive 100 sales decreased 19.2%, and its market share decreased by 4.4 points to 22.7%. Vault sales increased 0.4%, and its market share increased 0.8 of a share point to 18.5%, while Boost sales decreased 13.5% and its market share decreased 0.7 of a point to 6.2%. Amper sales increased 63.8%, and its market share increased 6.1 points to 14.8%. Coca-Cola Energy sales decreased 46.9% and its market share decreased 0.5 of a point to 0.6%. Predator, which was launched in March 2020, achieved a market share of 1.8%. The Nielsen statistics for Mexico cover single months, which is the short period, that may often be materially influenced positively and/or negatively by sales 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 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 September 2020, compared to September 2019, Monster's retail market share in value increased in Argentina from 27.9% to 44.1%, in Brazil from 26.1% to 33.3% and in Chile from 38% to 45.6%. Since the launch of Monster Energy in Argentina in the first quarter of 2018, Monster Energy is now the leading energy brand in value in both Argentina 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 to the end of September and beginning of October 2020, Monster's retail market share in value as compared to the same period the previous year grew from 12.9% to 13.4% in Belgium, from 21.5% to 25.3% in Great Britain, from 20.7% to 21.4% in Italy, from 14.9% to 20% in Poland, from 33.3% to 35.5% in Spain, but declined from 27.6% to 25.4% in France, from 15.7% to 14.1% in Germany and from 7.2% to 7.1% in the Netherlands. According to Nielsen, in the 13-week period to the end of August and the beginning of September, Monster's retail market share in value as compared to the same period the previous year grew from 23.6% to 25.2% in Denmark, from 23.9% to 28.6% in Norway, from 23% to 26.2% in the Republic of Ireland, from 17.4% to 20.2% in South Africa and from 13% to 13.3% in Sweden, while it remained flat at 36.6% in Greece and declined from 13.4% to 13% in the Czech Republic. 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. According to IRI in Australia, Monster's market share in value for the 4 weeks ending October 11, 2020, increased from 9.8% to 12.7% as compared to the same period the previous year. Mother's market share in value decreased from 12.7% to 11.9% during the same period. The market share of the company's brands in Australia for the 4 weeks ended October 11, 2020 increased from 22.5% to 24.6%. According to IRI in New Zealand, Monster's market share in value for the 4 weeks ended October 11, 2020, increased from 8.4% to 11.5% as compared to the same period the previous year. Live Plus market share in value decreased from 7.9% to 7.3%, and Mother's market share in value increased from 5.9% to 6.1%. The market share of the company's brands in New Zealand for the 4 weeks ended October 11, 2020, increased from 22.2% to 24.9%. According to Nielsen in South Korea, Monster's market share in value in all outlets combined for the third quarter of 2020 grew from 41.5% to 54.8% as compared to the same period in the previous year. According to INTAGE in Japan, Monster's market share in value in the convenience store channel for the third quarter of 2020 increased from 51.2% to 55% as compared to the same period in the previous year. We, again, point out that certain market statistics that cover single months or 4 week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during these periods. Net sales to customers outside the U.S. were $444.5 million, 35.7% of total net sales in the 2020 third quarter compared to $379.8 million or 33.5% of total net sales in the corresponding quarter in 2019. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $12.5 million in the 2020 third quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, net sales in the third quarter increased 15.8% in dollars and increased 15.7% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales for the quarter was 39.5% compared to 39.3% in the same quarter in 2019. Gross profit percentage for the region was impacted by foreign exchange rates. It would have been slightly higher at 40.1% in local currencies. We're also pleased that in the third quarter, Monster gained market share in Belgium, Denmark, Great Britain, Italy, Norway, Poland, Republic of Ireland, South Africa, Spain and Sweden. In Asia Pacific, net sales in the third quarter increased 23.1% in dollars and 22.8% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales was 43.2% versus 40.5% over the same period in 2019. In Japan, net sales in the quarter increased 4.6% in dollars and 3.9% in local currency. In South Korea, net sales increased 170.7% in dollars and 174.3% in local currency as compared to the same quarter in 2019. In China, net sales increased 20.6% in dollars in the quarter and 22.7% in local currency as compared to the same quarter in 2019. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 38.1% in dollars and 35% in local currencies. Sales of the Monster brand in Oceania increased 54.7% in dollars and 50.3% in local currency as compared to the same quarter in 2019. In Latin America, including Mexico and the Caribbean, net sales in the third quarter increased 6.1% in dollars and 31.9% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales was 42.9% compared to 44% over the same period in 2019. In Brazil, net sales in the quarter increased by 38.5% in dollars and 90.3% in local currency. Net sales in Chile decreased 21.1% in dollars and 11.8% in local currency in the quarter. I will now briefly discuss our litigation with Vital Pharmaceuticals, Inc., VPX, the maker of Bang Energy drinks. Several proceedings are currently ongoing with VPX, including claims for false advertising and trademark and trade dress infringement brought by the company against VPX and by VPX against the company. The company's lawsuit for unfair competition, false advertising and misappropriation of trade secrets is scheduled for trial in September 2021. In VPX's lawsuit against the company, returning to its allegation that Reign infringes the Bang trade risk, VPX's trade dress infringement claims were trialed in the Southern District of California in late August and early September and the company is awaiting a final judgment on these claims.

Rodney Sacks:

Of Florida, sorry, of Florida. I beg your pardon. As this litigation and other pending proceedings with VPX are sub judice, we will not be answering any questions on this matter on today's call. In the United States, we launched Reign Total Body Fuel, Lilikoi Lychee in August 2020. And in early October, we launched Ultra Watermelon, Juice Monster Papillon and Juice Monster Khaotic to the retail trade. In Canada, during the third quarter of 2020, Ultra Rosa was launched in July, followed by the launch of Reign Energy in August in 4 flavors. In El Salvador, we launched Fury Gold Strike as our first entry in the country in the affordable energy category during July, which is performing well. In August 2020, we launched Ultra Paradise in Brazil in our largest LATAM market. Additionally, in September 2020 in Brazil, we launched Reign Total Body Fuel in 2 flavors. June 2020, we launched Ultra Paradise in Argentina and in August 2020, we launched Ultra Paradise in Chile. As markets eased restrictions after lockdowns, we were able to introduce a number of new products across EMEA in the third quarter. Unfortunately, a number of EMEA markets, including some of our largest markets, have recently reintroduced lockdowns, which may adversely impact these and future product introductions. Juice Monster Pacific Punch was launched in Norway and Poland in September 2020 and is now available in 12 markets across EMEA. Juice Monster Pipeline Punch was launched in the Czech Republic and Slovakia in August 2020 and is now available in 23 markets across EMEA. We are planning to launch Juice Monster Pacific Punch in an additional 5 markets later in 2020. Juice Monster Mango Loco was launched in Namibia in July 2020 and Mozambique and Mayotte in August 2020 and is now available in 38 markets across EMEA. We are planning to launch Juice Monster Mango Loco in an additional 7 markets in 2020. Monster Ultra Paradise was launched in Iceland, Poland and South Africa in August 2020, and in Malta in September 2020 and is now available in 18 EMEA markets. We are planning to launch Monster Ultra in an additional 3 markets in 2020. The Monster Mule was launched in Poland in July 2020, and in Germany, Sweden and South Africa in September 2020. We're planning to launch Monster Mule in an additional 5 markets in 2020. Espresso Monster, mocha and vanilla variants were launched in Hungary in September and are now available in 21 markets in EMEA. Reign Total Body Fuel was launched in Norway and Iceland in September, and is now available in 8 markets in EMEA. We are planning to launch Reign Total Body Fuel in an additional 4 markets in 2020. We launched Predator, our primary affordable energy brand in Ethiopia in August 2020, and we've also introduced Predator Purple Rain in South Africa in September 2020. We launched Burn Gold Spark in Turkey in August 2020, and we launched Burn Peach Zero in Hungary and Ukraine in August 2020. In Japan, in the third quarter of 2020, we launched Ultra Paradise in approximately 90% of the country. We are continuing to build on our #1 country share position in value. In South Korea, in the third quarter of 2020, Monster Energy increased its #1 share position in value. We launched Ultra Paradise in late June. In China, in May 2020, we began distribution of our new noncarbonated Monster Energy Dragon Tea, which has received early positive consumer feedback. During the 2020 third quarter, we saw additional distribution gains for Monster Energy Dragon Tea, along with Monster Green and Ultra White. Large parts of India still remain in national lockdown due to the COVID-19 pandemic. During the 2020 third quarter, no shares were repurchased under the previously authorized repurchase program. As of November 5, 2020, approximately 441.5 million remained available for repurchase and under the previously authorized share repurchase program. We estimate October 2020 gross sales to be approximately 14.8% higher than in October 2019. On a foreign currency-adjusted basis, October 2020, gross sales would have been approximately 14.9% higher than comparable October 2019 gross sales. October 2020 had one less selling day than October 2019. 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 as shifts in the timing of production in some instances where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers as well as inventory levels maintained by our distribution partners which they alter unilaterally for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. In addition, the COVID-19 pandemic remains a serious concern. If the COVID-19 pandemic and related unfavorable economic conditions continue to intensify the negative impact on our sales, including our new product innovation launches could be prolonged and may become more severe. In conclusion, I'd like to summarize some recent positive points. The company's priority has been and remains the health and safety of our employees. Currently, the company's flavor manufacturing facilities, its co-packers, warehouses and shipment facilities and bottlers and distributors are all operating. We are continually addressing our aluminum can requirements, given our volume growth and the current supply constraints in the aluminum can industry. We are pleased with the new additions to the Monster Energy portfolio. We are encouraged by the prospects for our Reign Total Body Fuel high-performance energy drinks and Reign Inferno Thermogenic Fuel high-performance energy drinks. We are planning for future launches of our Reign Total Body Fuel high-performance energy drinks in certain countries outside of the U.S. We are pleased with the rollout of Predator and Fury and our affordable energy drink portfolio internationally. We are proceeding with plans for future launches of our affordable energy brands outside of the United States. Despite the obstacles of the COVID-19 pandemic, we are pleased with our performance for the quarter and for the 9-month period ended September 30, 2020. I would like to open the floor to questions about the quarter. Thank you.

Dara Mohsenian:

So we've seen category growth come back at pretty healthy levels looking at the U.S. and Europe. You mentioned the sequential improvement within Q2. Obviously, October seems solid. So I was just hoping you could give us a bit of your perspective on category growth here post COVID. Are you seeing more of a sustained pickup perhaps people are substituting energy drinks for coffee shop consumption? Or should we still expect sort of below pre COVID growth levels with the consumer not back to full mobility? Just really wanted to get some perspective on category growth. And I'm thinking more longer-term ex restrictions, but while you're on the subject, perhaps you could touch on the short-term risk from the second round of restrictions also?

Hilton Schlosberg:

Maybe I can just add a little color, if you wouldn't mind. So what we're seeing is that caffeine is a need state for consumers, okay? And we're also seeing that energy drinks are an affordable luxury. So even though people are at home in greater quantities than they've been before, they're drinking more energy drinks and they could very much as well drink coffee, which they're doing, which is obviously the cup is cheaper than an energy drink. So I think we're not going to go back to where we were before. We're going to go back to somewhere that's kind of in the middle of where we were and where we are now. And so my color is -- and I don't give guidance, we never give guidance. But if I'm thinking about the category and the category growth that has been sustained in this time of COVID, it's -- you can enjoy your own conclusions, but that's the kind of color that I've been thinking of.

Andrea Teixeira:

Can you help us with the sales cadence in the quarter? Was there any reason like retailers rebuilding inventory ahead of the -- any potential pricing to explain this lumpiness in a certain amount of region? I guess from the strong July that you included in the last call, implied a deceleration in August and September, to high single digits, but then sharply reaccelerated now in October. And just a follow-up commentary about EMEA. What is your view of the impact of the lockdowns now and the current mobility as well?

Hilton Schlosberg:

Yes. I think Andrea was talking about Red Bull. Is that correct?

Hilton Schlosberg:

Okay. You're talking about our cadence?

Hilton Schlosberg:

Yes. So what happened, and we can go through the history on that, but what happened was that our bottlers decreased inventories, and we spoke about that. And then there comes a time when they have to order to get to inventories back to where they should be, bearing in mind the depletions. So there's been a steady percentage growth in depletions, which were not sort of matched by orders. And so what you've seen in the quarter is a steady rebuild of inventories in the distribution system in order to support the growth at retail. And also what happened in the quarter was that many of our bottlers were back, particularly in the U.S. in more full force, so they were covering the stores in a better frequency than they had in the past. So that's where we saw that acceleration. And then your second question was about EMEA. And I would refer you to what happened in the first and second quarters in EMEA. The third quarter, particularly in EMEA, was really strong. But the EMEA guys felt there was still a lot of runway. So we know what October is and we've spoken about October. In November and December, we'll -- as again, we don't give guidance, but we don't know what the impact of the lockdowns are going to be, but we've got some sense for what happened earlier this year.

Mark Astrachan:

I guess just building on one of the earlier questions on the U.S. Not that it's not improving as pandemic lessens and mobility increases. More curious your thoughts about the still disconnect that we're seeing in the data between your business and Red Bull or even Red Bull share gains versus the category. So you mentioned that you're doing a better job. You talked about that last earnings call about the coast system being back in the market, I think, right around July or so. But Red Bull is now growing close to 20%. So what do you think is really contributing to their outperformance? And how do you think that sustains, if it does, as we go into next year, and they, in particular, have to lap that and you guys have to lap easier comparisons?

Operator:

Our next question will come from Peter Galbo with Bank of America.

Rodney Sacks:

It has shipped. It shipped at the beginning of October. And it's had a very good reception, both from our bottlers and from retailers. Very initial indications of sales per point in some of the retail chains are showing that it's really doing well. It's ahead of some of the others. I mean the Ultra Fiesta was a really good launch earlier this year and is continuing. Those are still new products, and that's continuing to grow. But this is actually starting to outpace those ones after 3 to 4 weeks, we're actually seeing a higher rate of sale. But we've launched it now. We don't -- I think that like everything, it's -- it does get affected by the winter months, but we think that being a 0-calorie product, it will help the product. And we're quite optimistic for Watermelon as a really good opportunity. It's a really good product. And the whole Ultra line is continuing to perform really well. So any color on that, Hilton?

Operator:

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Mr. Rodney Sacks for any closing remarks.

Operator:

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Rodney Sacks:

Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President is on the call as is Tom Kelly, our Executive Vice President of Finance. Tom Kelly will now read our cautionary announcement.

Rodney Sacks:

Let me begin by stating that our thoughts and prayers are with all who have been impacted by the COVID-19 pandemic. From the beginning of the COVID-19 pandemic, our top priority has been the health, safety and well being of our employees. As mentioned on our previous call in early March 2020, we implemented global travel restrictions and work from home policies for employees who are able to work remotely. For those employees who are unable to work remotely safety precautions have been instituted, which were developed and adopted in line with guidance from public health authorities and professional consultants. Our offices have partially reopened in the United States and in certain countries and our field sales teams are operating in the field with our bottlers, distributors and retailers subject to safety protocols. We are incredibly proud of the teamwork exhibited by our employees, co-packers and bottlers and distributors around the world who are ensuring the integrity of our supply chain. Our flavor manufacturing facilities are co-packers, warehouses and shipment facilities are all operating. Certain of our bottlers and distributors have implemented modifications to their coal points and service levels. But generally our products remain available to consumers. In limited countries, the operations of our bottlers and distributors have been more affected. The COVID-19 pandemic had an adverse impact on our net and gross sales for the 2020 second quarter, in part due to certain of our bottlers and distributors, reducing their inventory levels. However, we did see a sequential improvement in sales in the latter half of the quarter, as certain countries and states began to gradually reopen. Since mid-March 2020, the company has seen a shift in consumer channel preferences and package configurations, including an increase in at home consumption and a decrease in immediate consumption. Our sales in the second quarter were initially adversely affected as a result of a decrease in foot traffic in the convenience and gas channel, which is our largest channel, but improved sequentially throughout the quarter. Our ecommerce, clubs store, mass merchandiser, and grocery and related business continue to increase in the quarter while our food service on-premise business which is a small channel for us remains challenged. Currently, we do not foresee a material impact on the ability of our co-packers to manufacture and our bottlers and distributors to distribute our products as a result of the COVID-19 pandemic. In addition, we are not experiencing raw material or finished product shortages in our supply chain. Monster Energy Cares, our philanthropic arm continues to be actively engaged in a number of philanthropic efforts, including donating products to individuals working on the front lines, such as first responders, healthcare workers, hospitals and the National Guard. Based on currently available information, we do not expect the COVID-19 pandemic to have a material impact on our liquidity. In the second quarter of 2020, net sales were $1.09 billion compared with $1.1 billion in the second quarter of 2019. Adjusting for foreign currency movements in itself for the 2020 second quarter would have been up approximately 1%. The COVID-19 pandemic's impact was more pronounced in EMEA during the quarter. In particular, the reduction in revenue from our strategic brands segment was significant as our larger revenue generating countries in EMEA experienced extended lockdowns. Operating income was 407.3 million, up from 379 million in the second quarter of 2019, due in part to lower sponsorship and endorsement costs of 19.8 million, as well as lower travel and entertainment expenses of 10.1 million. The cost for certain postponed or rescheduled events have been or maybe deferred to future periods. Due to the uncertainty surrounding the COVID-19 pandemic, we are unable to estimate in which future periods if any such deferred sponsorship and endorsement costs will be recognized. Net income increased 6.5% to 311.4 million as compared to 292.5 million in the 2019 comparable quarter. Diluted earnings per share for the 2020 second quarter increased 9.9% to $0.59 from $0.53 in the second quarter of 2019. According to the Nielsen reports for the 13 weeks through July 18 2020, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots increased by 7.6% versus the same period a year ago. Sales of the company's energy brands including Reign were up 5.8% in the 13 week period. Sales of Monster were up 4.8%; sales of Reign were up 26.8%; sales of NOS increased 1.6%; and sales of Full Throttle decreased 0.9 of a percent. Sales of Red Bull increased 17.3%; sales of Rockstar decreased by 7.5%; sales a 5-Hour decreased 9.1% and sales of Amp decreased 10.8%; VPX Bang sales decreased 11.6%. According to Nielsen for the four weeks ended July 18, 2020 sales in the convenience and gas channel, including energy shots in dollars, increased 9.2% over the same period the previous year. Sales of the company's energy brands, which include Reign, increased 5% in the four week period in the convenience and gas channel. Sales of Monster increased by 5.6% over the same period versus previous year; Reign sales increased 2.5%; NOS was up 2.7%; Full Throttle was down 1.4%; sales of Red Bull were up 21.1%; Rockstar was down 6.9%; 5-Hour was down 4.1% and Amp was down 5.8%. VPX Bang sales decreased 7.2%. According to Nielsen in the four weeks ended July 18, 2020. The company's market share of the energy drink category in the convenience and gas channel including energy shots in dollars decreased by 1.5 points over the same period the previous year to 37.8%. Monster share decreased 1.1 share points to 31.1%, Reign share was 2.8%, NOS's share decreased 0.2 points to 3.3% and Full Throttle share decreased 0.1 of a point 2.7%, Red Bulls share increased 3.7 points to 37.3%, Rockstar share was down 0.8 points to 4.9%, 5-Hour share was lower by 0.6 points at 4.6% and Amp share decreased 0.1 of point to 2.4%, Bang share decreased 1.3 points to 7.2%. According to Nielsen for the four weeks ended July 18, 2020, sales in dollars in the coffee plus energy drink category, which includes our Java Monster line in the convenience and gas channel increased 10.2% over the same period the previous year. Sales of Java monster were 24.6% higher in the same period versus the previous year. Sales of Starbucks energy were 12.3% higher. Java Monster share of the coffee plus energy category which primarily includes Java Monster, Java Monster 300, Starbucks Double Shot and Triple Shot, Rockstar Roasted and Bang Keto Coffee for the four weeks ended July 18, 2020 was 51.1% up 5.9 points while Starbucks energy share was 47% up point 8 points. Cafe Monster and Espresso Monster have been discontinued in the United States. According to Stackline, which tracks energy drink sales by Amazon in the United States for the four week period ending July 18, 2020, sales in dollars in the energy category by Amazon, including energy shots increased 190% over the same period the previous year. Sales of Monster increased 269.4% and its share was 39.5% up 8.5 share points versus the same period a year ago. Red Bull sales increased 172.4% and its share was 14.5% down 0.9 of a point. Celsius sales increased 213% and its share increased 0.8 of a point to 11.3%. 5-Hour sales increased 50.5% and its share declined 3.8 points to 4.2%. VPX Bang sales increased 66.1% and its share declined 2.7 share points to 3.7%, Reign share was 5.5% and Rockstar share was 1.7%. According to Nielsen in all major channels in Canada for the 12 weeks ended June 30, 2020, the energy drink category increased 6.8% in dollars. Sales of the company's energy drink brands increased 6.9% versus a year ago. The market share of the company's energy drink brands was 37.8%, the same as in the previous year. Monster's market share increased 0.2 of a point to 34.9. NOS's sales increased 7.6% and its market share remained the same at 2.1%. Full Throttle sales decreased 21.2% and its market share decreased 0.3 of a point 2.7% Red Bull sales increased 11.1% and its market share increased 1.5 points to 38.1%. Rockstar sales decreased 5.2% and its market share decreased 2.1 points to 16%. [Group] [ph] sales increased 35.7% and its share increased 0.7 of a share point to 3.2%. According to Nielsen for all outlets combined in Mexico, the energy drink category declined 11.8% for the month of June 2020. Monster sales decreased 18.9%. Our market share in value decreased 2.4 points to 27.8% against the comparable period the previous year. Burn has been discontinued in Mexico; Red Bull sales decreased 30.3% and its market share decreased by 1.8 points to 6.8%. The Vive 100 sales decreased 32.6% and its market share decreased by 7 points to 22.5%. Volts sales increased 0.2 of a percent and its market share increased 2.2 share points to 18.8%. While Boost sales decreased 10.7% and its market share increased 0.1 of point to 7.4%. [Indiscernible] sales increased 269% and its market share increased 7.5 points to 13.6. Coca-Cola energy's market share was 0.9 of a percentage point. Predator which was launched in March 2020 achieved a market share of 1.4%. The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales 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, subjectivities could have a significant impact on the monthly Nielsen statistics for Mexico. According to Nielsen for the month of June 2020, compared to June 2019. Monsters retail market share in value increased in Argentina from 25.4% to 39.4%; in Brazil from 21.1% to 30.4%; and in Chile from 37.4% to 44.9%. Since the launch of Monster Energy in Argentina in the first quarter of 2018, Monster is now the leading energy brand in volume in Argentina. 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 ended mid-June 2020. Monster's retail market share in value as compared to the same period the previous year grew from 22.1% to 25.6% in Denmark; grew from 20.8% to 24.8% in Great Britain; grew from 24.2% to 28.4% in Norway; grew from 21.9% to 24.9% in the Republic of Ireland; grew from 32.2% to 34.8% in Spain; and grew from 12.8% to 13.8% in Sweden, but declined from 13.1% to 12.5% in Belgium; from 27% to 25.9% in France; and from 7.4% to 6.3% in the Netherlands. According to Nielsen in the 13-week period to the end of May 2020, Monster's retail market sharing value is compared to the same period the previous year grew from 34.7% to 35.2% increase, from 13.7% to 17.7% in Poland, from 16.4% to 17.7% in South Africa, while it remained flat at 13.3% in the Czech Republic, and declined from 16% to 15.1% in Germany and from 18.5% to 16.8% in Italy. The Nielsen numbers in EMEA should only be used as a guide because the channel is read by Nielsen in EMEA vary from country to country. According to IRI in Australia, Monster's market chain value for the four weeks ended July 5, 2020 increased from 9.4% to 11.9%. As compared to the same period the previous year, Mother's market share in value decreased from 13.9% to 13.3% during the same period. Market share of the company brands in Australia for the four weeks ended July 5, 2020, increased from 23.3% to 25.2%. According to IRI in New Zealand, Monster's market share in value for the four weeks ended June 21, 2020 increased from 7.8% to 10.4%. As compared to the same period the previous year, Live+ market share in value decreased from 8.3% to 7.1%. And Mother's market share in value decreased from 6.5% to 6.4%. Market share of the company's brands in New Zealand for the four weeks ended June 21, 2020 increased from 22.6% to 23.8%. According to Nielsen in South Korea, Monster's market share in value in all outlets combined for the month ending June 2020 grew from 39.4% to 53.3% as compared to the same period in the previous year. According to INTAGE in Japan, Monster's market share in value in the convenience store channel for the month of June 2020 declined from 52.5% to 51.1% as compared to the same period in the previous year. We again point out that certain market statistics that cover single months or four week periods may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods. Net sales to customers outside the U.S. were 328.3 million, 30% of total net sales in the 2020 second quarter, compared to 343.3 million or 31.1% of total net sales in the corresponding quarter in 2019. The decrease was largely due to the reduction of sales in EMEA during the quarter. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately 18.2 2 million in the 2020 second quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and trans-shipped to the military and their customers overseas. In EMEA, net sales in the second quarter decreased 20.4% in dollars and decreased 15.9% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales for the quarter was 38.1% compared to 39.5% in the same quarter in 2019. Gross profit percentage for the region was adversely impacted by foreign exchange rates, country and product mix. In local currencies gross profit as a percentage of net sales for the quarter was 39.4%. The COVID-19 pandemics adverse impact on net sales was more pronounced in EMEA for the three months ended June 30, 2020 particularly in the strategic brands segment. Net sales in EMEA will also adversely impacted by the reduction in inventories by certain of our bottlers and distributors. In addition, to a lesser extent, the trading dispute between Coca-Cola bottlers and the European buying group primarily in Western Europe resulted in the temporary delisting of some Coca-Cola and Monster products, which had an adverse impact on itself in EMEA for the three months ended June 30, 2020. We are pleased that in the second quarter Monster gained market share in Denmark, Great Britain, Greece, Norway, Poland, Republic of Ireland, South Africa, Spain and Sweden. In Asia Pacific, net sales in the second quarter increased 30.4% in dollars and 30.9% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales was 43.3% versus 43.6% over the same period in 2019. In Japan, net sales in the quarter increased 41.8% in dollars and 37.5% in local currency. In South Korea, net sales increased 46.9% in dollars and 55.7% in local currency as compared to the same quarter in 2019. In China net sales increased 66.9% in dollars in the quarter and 74.4% in local currency as compared to the same quarter in 2019. In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales decreased 32.3% in dollars and 24.9% in local currencies, sales of the Monster brand decreased 25.6% in dollars and 17.9% in local currency as compared to the same quarter in 2019, while the strategic brands in this region decreased at a faster rate. Net sales in this region were adversely affected as a result of our bottlers' distributors, reducing their inventory levels in Latin America, which includes Mexico and the Caribbean. Net sales in the second quarter decreased 9.7% in dollars and increased 10.8% in local currencies. Gross profit of the same period in 2019, gross profit in this region as a percentage of net sales was 41.2% compared to 43.3% of the same period in 2019. In Brazil, net sales in the quarter decreased by 1% in dollars, but increased 31.2% in local currency. Net sales in Chile increased 30.8% in dollars and 62.3% in local currency in the quarter. I will now briefly discuss our litigation with Vital Pharmaceuticals, Inc, VPX the maker of Bang energy drinks. Several proceedings are currently ongoing with VPX, including claims for false advertising and trademark and trade dress infringement, brought by the company against VPX and by VPX against the company. The company's lawsuit for unfair competition, false advertising and misappropriation of trade secrets, is scheduled for trial in April 2021. VPX's lawsuit against the company which VPX claims trademark infringement of the newly acquired Reign trademark and the company counter-claimed for cancellation of their trademark. The district court judge ruled in the company's favor in respect of the trademark infringement claims, finding that the company had superior rights to the Reign trademark in connection with energy drinks and cancelling the Reign trademark that VPX had purchased. VPX remains [indiscernible] from selling Reign branded energy drinks, VPX's trade dress infringement claims in these proceedings are scheduled for trial at the end of August 2020. As this litigation and other pending proceedings with VPX are subjugate, we will not be answering any questions on this matter on today's call. In the United States, our bottlers focused on relaunching our first quarter product innovation, which launch plans, were disrupted due to the COVID-19 pandemic. In Canada, we did not launch any new items within the second quarter of 2020 and continue to grow our distribution of all first quarter 2020 innovations. In Honduras, we launched Fury, Gold Strike in the affordable energy category during April 2020 and in Salvador in early July 2020, initial results have been positive. In June 2020, we launched Ultra Paradise in Argentina and Puerto Rico. Additionally, in June 2020, we launched Monster Mango Loco in Guatemala, El Salvador and Honduras. In New Zealand, we launched Monster Energy Mule and Mother Tropical Blast during April 2020. Despite a lockdown in majority of EMEA markets for most of the second quarter, we have still been able to introduce new products across EMEA. Juice Monster Pacific Punch was launched in Spain in June 2020 and is now available in 10 markets across EMEA and we plan to launch Juice Monster Pacific Punch in an additional two markets in 2020. Juice Monster Pipeline Punch was launched in Romania in May 2020 and is now available in 21 markets across EMEA and we plan to launch Juice Monster Pipeline Punch in an additional eight markets in 2020. Juice Monster Mango Loco was launched in Switzerland in June 2020 and is now available in 35 markets across EMEA. We plan to launch Juice Monster Mango Loco in an additional 10 markets in 2020. Monster Ultra Paradise was launched in Austria, the Baltics and Hungary in May 2020, in Denmark and Spain in June 2020, in Poland in July 2020, and is now available in 14 EMEA markets and we plan to launch Monster Ultra Paradise in an additional seven markets in 2020. Espresso Monster Milk and Vanilla variants are now available in 20 markets in EMEA and we plan to launch Espresso Monster Milk and Vanilla variants in an additional two markets in 2020. Monster Hydra Sport was launched in Spain in May 2020 and we plan to launch Monster Hydra Sport in an additional market in 2020. We are also pleased with the performance of Reign and we plan to launch Reign in an additional six markets in 2020. We launched Monster Mule in Poland in July 20 and plan to launch Monster Mule in an additional nine markets in 2020. We launched Predator a primary affordable energy brand in Nigeria in June 2020. Additionally, we are planning to launch Predator in Ethiopia in the third quarter of 2020. We are also planning to launch Predator in an additional six EMEA markets later in 2020, Bosnia, Croatia, Ghana, Romania, Russia and Slovenia. Currently innovation launches for all EMEA markets for the third and fourth quarters remain on track, despite the ongoing COVID-19 pandemic. However, these launches will continue to be subject to developments in relation to the COVID-19 pandemic in individual countries. In Japan, we continued with the strong rollout of Pipeline Punch to 90% of the country, and in June launched Ultra Paradise with solid consumer acceptance. With strong innovation and continued growth of our core, we have further bolt-on our number one country share position in value. In South Korea, Monster Energy retained its Number 1 share position in value and in June began shipments for the summer 2020 launch of Ultra Paradise. In April 2020, we began distribution of our new Monster Energy Dragon tea in China, which is non-carbonated. Early feedback from consumers has been positive. During this quarter we began shipments for our summer on pack promotion and we expect to further build momentum with consumers in the retail trade. India remains mostly in national lockdown due to the COVID-19 pandemic, which took effect on March 25 2020. We have prepared a strong summer on pack promotion, which will help reestablish momentum as the market aims to reopen in the third quarter of 2020. During the 2020 second quarter, we purchased approximately 0.3 million shares of our common stock at an average purchase price of 52.88 per share, for a total amount of 15.6 million excluding broker commissions. As of August 4, 2020, approximately 441.5 million remained available for repurchase under the previously authorized repurchase program. We estimate July 2020 gross sales to be approximately 15.8% higher than in July 2019. On a foreign currency adjusted basis, July 2020, gross sales would have been approximately 17.1% higher than comparable July 2019 gross sales. July 2020 had the same number of selling days as July 2019. In this regard, we cautioned 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 shifts in the timing of production. In some instances where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers, as well as inventory levels maintained by our distribution partners, which they also unilaterally for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. In addition, the COVID-19 pandemic remains a serious concern. If the COVID-19 pandemic and related and unfavorable economic conditions continue to intensify, the negative impact on ourselves including our new product innovation launches could be prolonged and may become more severe. In conclusion, I would like to summarize some recent positive points. One, the company's priority has been and remains the health and safety of our employees. Two, currently the company's flavor manufacturing facility, its co-packers, warehouses and shipping facilities and bottlers and distributors are all operating. Three, we are pleased with the new additions to the Monster Energy portfolio. Four, we're encouraged by the prospects for our Reign Total Body Fuel high performance energy drinks and Reign Inferno thermogenic fuel high performance energy drinks. We are planning for future launches of our Reign Total Body Fuel high performance energy drinks in certain countries outside of the US. Five, we are pleased with the rollout of Predator and Fury and our affordable energy drink portfolio internationally. We are proceeding with plans for future launches of our affordable energy brands outside of the United States. Six, despite the obstacles of the COVID-19 pandemic, we are pleased with our performance for the quarter and for the first half of the year. I'd like to open the floor to questions about the quarter. Thank you.

Andrea Teixeira:

Congrats on the results. So I remember you spoke to potentially answer the alcoholic segment, the last time we were there at your headquarters in June last year. And since then, we have heard you're planning to launch a Hard Seltzer. So I understand that you have postponed some of these launches. So the question is, if you are indeed looking to launch a Hard Seltzer and then if so, when are you hoping to be able to share more news with us. Thank you.

Hilton Schlosberg:

So Andrea, the only thing I would add to that is that we have a very strong innovation pipeline with our existing business. So whatever we do, in addition to that, please rest assured that the company has a very interesting and very strong innovation pipeline.

Nik Modi:

So I guess kind of one and a half question. One question is on innovation. Just given how the resets have been kind of thrown off [indiscernible] and just inactive now cancelled. I'm just curious on how you're thinking about communicating new product ideas and how you think that flow will work as we kind of work into the fall and into the spring of next year. So that's just kind of some general perspective. The real question is on CBD, what's the company's stance right now on that? I mean, is it -- you don't have enough clarity, so really don't want to enter that category? Or do you feel more comfortable now? I mean just any perspective around that would be helpful.

Operator:

Thank you. Our next question today comes from Peter Galbo of Bank of America. Please go ahead.

Rodney Sacks:

I don't think we've really had a good read yet on where the bottlers -- when they're going to sort of get their inventory levels back to previous or pre-COVID levels. If they do, I mean, people are obviously looking at managing their inventory levels as tightly as they can and by taking things down. They may end up being a little more aggressive; obviously, we would like them to take some inventory levels up so that they just have more ability to react in the market and because of the lead time reasons. I don't think that we've seen a major restocking in July. We've just, again, I think people are still cautious and they're trying to manage inventories and in some cases, they're trying to manage or reduce some of the focus on -- better way to put it on their main SKUs. And so some of the smaller SKUs have perhaps suffered a little bit as well during this period, but we think those things will get back to normalizing. But I don't believe we've seen a substantial jump back in inventory levels in July. I think that sort of reasonably normal trading for us and Hilton, if you'd like to add something on that.

Operator:

Thank you. And our next question today comes from Mark Astrachan with Stifel. Please go ahead.

Hilton Schlosberg:

So Mark, remember we coming out of 100-year pandemic. And there's been -- the bottlers have all been operating and in some cases, the bottlers have been focused on sending the faster sending items, I think Rodney mentioned that earlier in the call. And they did not focus on the innovation and the SKUs that not move as fast as the faster sending items. So, we've seen that. We've seen some of the bottlers being affected by the employees by COVID; our people remember who are out of the field until the last month so they now are back in the field with the appropriate safety protocols. And our people are working; our field people are working with the bottlers and the retailers to restore the innovation that had not been taken place. So, Red Bull, it's interesting -- we've been watching the growth of Red Bull as well. And, once it's paying, you've seen the numbers and we've spoken about the numbers today. I've heard about the numbers in Nielsen. We are growing much faster than Red Bull in for example, Amazon. They have their own sales force and the distribution network. They've been able to execute pretty well in the trade they had a really good innovation the CEO called watermelon, which is pretty popular. So, in balance I think they probably distributed us in terms of displays and other points of purchase on store shelves and on the floors of the stores. And that's something that we are working to pretty aggressively without fuel people back in the stores to regain. So that's my kind of summary on where we are and the issue with Red Bull.

Operator:

Thank you. Our next question today comes from Laurent Grandet with Guggenheim. Please go ahead.

Hilton Schlosberg:

A lot of the retailers are merchandised by the bottlers. So even though the space was allocated, they may not have got to merchandise the product at the start of the resets. So where we're at now, as I mentioned, learn that guys are back in the field. And they're working with the bottlers to ensure that all of our innovation get the space that has been contractually allocated and just getting away from where we were in the early part of the pandemic where -- it was hands off. And if you look at how the convenience channel has grown and is continuing to grow, I think it's a far cry from where we were in March and April when all of this started.

Hilton Schlosberg:

Yes. Sets are done for the most part, but it's the distribution actual physical distribution of the products on the sets on the shelves that our field teams are working on.

Rodney Sacks:

Thank you. On behalf of Monster, I'd like to thank everyone for their continued interest in the company. We continue to believe in the company and our growth strategy and remain committed to continuing to innovate, develop and differentiate our brands and to expand the company both at home and abroad. And in particular, expand distribution of our products through the Coca-Cola bottler system internationally. We believe that we will be able to navigate through the challenges ahead as a result of the COVID-19 pandemic and hope that this unfortunate situation will resolve itself in the not too distant future. We believe that we are well positioned in the energy drink category and continue to be optimistic about our total portfolio of energy drink brands. We hope that you will stay safe and healthy. Thank you very much for your attendance.

Rodney Sacks:

Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President is on the call as is Tom Kelly, our Executive Vice President of Finance. Tom Kelly will now read our cautionary statement.

Rodney Sacks:

Let me begin by stating that our thoughts and prayers are with all who have been impacted by the COVID-19 pandemic. COVID-19 has affected the health of so many individuals around the globe, including some of our team members. This includes myself. In mid-March, I began to experience flu like symptoms, tested positive for COVID-19 and thankfully made a good recovery. I'm feeling good but for an occasional cough. For this, I'm very grateful. And we are fortunate that everyone at our company who has been diagnosed with COVID-19 is doing well and has been making good progress. The company has always operated with co-leaders. And I would like to thank Hilton and the leadership team for their leadership and support during this difficult period. To everyone at Monster, my sincere thanks and appreciation for all your efforts.From the beginning of the COVID-19 pandemic, our top priority has been the health, safety and well being of our employees. Early in March 2020, we implemented global travel restrictions and work from home policies for employees who are able to work remotely. For those employees who are unable to work remotely, safety precautions have been instituted, which were developed and adopted in line with guidance from public health authorities and professional consultants. We are incredibly proud of the teamwork exhibited by our employees, co-packers and bottlers distributors around the world, who are ensuring the integrity of our supply chain. Our flavor manufacturing facilities, our co-packers, warehouses and shipment facilities are all operating.Certain of our bottlers distributors have implemented modifications to their core points and service levels, but generally our products remain available to consumers. In limited countries, which are smaller markets for us, the operations of our bottlers and distributors have been more affected. Since March 2020, while various markets have faced governmental measures, restrictions and guidance in response to the COVID-19 pandemic, the sales and merchandising activities of certain of our bottlers and distributors have been modified.The impact of the COVID-19 pandemic on our net and gross sales for the 2020 first quarter was not material. The company's April sales were materially adversely impacted by the COVID-19 pandemic. However, bottler and distributor sales of the company's product to retail in the United States were markedly less adversely impacted. Since mid-March 2020, the company has seen a shift in consumer channel preferences and package configurations, including an increase in at home consumption and a decrease in immediate consumption.To-date, our sales in the second quarter have been adversely affected as a result of a decrease in foot traffic in the convenience and gas channel, which is our largest channel and food service on premise, while our e-commerce, club store, mass merchandise and grocery and related business remain stable. Currently, we do not foresee a material impact on the ability of our co-packers to manufacture and our bottlers and distributors to distribute our products as a result of COVID-19 pandemic.In addition, we are not experiencing raw material or finished product shortages in our supply chain. Monster Energy case our philanthropic arm is actively engaged in a number of philanthropic efforts, including donating products to individuals, working on the front lines, such as first responders, healthcare workers, hospitals and the National Guard. Based on currently available information, we do not expect the COVID-19 pandemic to have material impact on our liquidity. In the first quarter of 2020, net sales were $1.06 billion, up 12.3% from $946 million in the first quarter of 2019. Adjusting for foreign currency movements, net sales for the 2020 first quarter would have been up 13.4%.Operating income was $365 million, up from $311.5 million in the first quarter of 2019. The increase in net income was 6.6%. The lower percentage increase in net income was primarily due to our higher effective tax rate in the quarter compared to the same quarter in 2019, primarily attributable to a decrease in the equity compensation deduction. Diluted earnings per share for the 2020 first quarter increased 8.2% to $0.52 a share from $0.48 in the first quarter of 2019.According to Nielsen reports for the 13 weeks through April 25, 2020, all outlets combined, namely convenience, grocery, drug, mass merchandises, sales in dollars in the energy drink category, including energy shots, decreased by 1.2% versus the same period a year ago. Sales of the company’s energy brands, including Reign were down 0.2% in the 13 week period. Sales of Monster were down 6.8%. Sales of NOS decreased 8.4%. And sales of Full Throttle decreased 12%. Sales of Red Bull decreased 1.8%. Sales of Rockstar decreased 11.5%. Sales of 5-Hour decreased 14.2%. And sales of Amp decreased 26.8%. VPX sales decreased 5.8%.Since Reign had just entered the market at the end of March last year, we have not provided comparable sales for our Reign products. According to Nielsen for the full week ended April 25, 2020, sales in the convenience and gas channel, including energy shots in dollars decreased 15.9% over the same period the previous year. Sales of the company's energy brands, which include Reign declined 14.4% in the four-week period in the convenience and gas channel. Sales of Monster decreased by 16.9% over the same period versus the previous year. NOS was down 16.2%. And Full Throttle was down 15.9%. Reign sales increased 27.4%. Sales of Red Bull were down 12.1%, Rockstar was down 21.8%, 5-Hour was down 31.9% and Amp was down 26.2%. VPX Bang sales decreased 30.3%.According to Nielsen, for the four weeks ended April 25, 2020, the compan0y's market share of energy drink category in the convenience and gas channel, including energy shots in dollars increased by 0.7 of a point over the same period the previous year to 41%, Monster share decreased 0.4 of a share point to 33.3%, Reign’s share was 3.3%, NOS’s share remained the same at 3.6% and Full Throttle share remained the same at 0.8 of a percent. Red Bull share increased 1.5 points to 34.9, Rockstar share was done 0.4 of a point to 5.2%, 5-Hour share was lower by 1.1 points at 4.6 and Amp share decreased 0.1 of a point to 0.4%. VPX Bang share decreased 1.4 point to 6.9%.According to Nielsen, for the four weeks ended April 25, 2020, sales of coffee plus energy drinks, which primarily includes Java Monster in dollars in the convenience and gas channel, decreased 13.3% over the same period the previous year. Sales of our Java Monster alone were 8.7% lower than in the same period the previous year. Sales of our coffee plus energy drinks were 12.7% lower, while sales of Starbucks Energy were 11.6% lower. Our Company’s share of the coffee plus energy category, which primarily includes Java Monster, Starbucks Doubleshot and Tripleshot, Rockstar Roasted and Bang Keto Coffee for the four weeks ended April 25, 2020 was 53.5%, up 0.4 of a point. Java Monster share on its own for the four weeks ended April 25, 2020 was 49.5%, up 2.5 points, while Starbucks Energy share was 44.6%, up the 0.9 of a point.According to Stackline, which tracks energy drink sales by Amazon in the United States, for the 13 weeks ended April 11, 2020, sales in dollars in the energy category by Amazon, including energy shots grew 80.8% versus the same period a year ago. Sales of Monster increased 88.8% to 34.8 share, up 1.5 share points versus the same period a year ago. Red Bull sales increased 86.7% and the share increased 0.5 of a point to 14.9%. Celsius sales increased 118.2% and it's share increased 2 points to 11.4%. 5-Hour sales increased 34.1% and its share decreased 2.4 points to 6.9%. VPX Bang sales declined 27.4% and its share decline five share points to 3.4%. Reign share was 4.6% and Rockstar share was 3.5%.For the four-week period ending April 11, 2020, according to Stackline in the United States, sales in dollars in the energy category by Amazon, including energy shots increased 129.6% over the same period the previous year. Sales of Monster increased 137.5% and its share was 36.7%, up 1.2 share points versus the same period a year ago. Red Bull sales increased 130.2% and its share remained at 16%. Celsius sales increased 149.9% and its share increased 0.8 of a point 10.1%. 5-Hour sales increased 95.2% but it’s share declined 1.2 points to 6.9%. VPX Bang’s sales declined 9.8% and it's share declined 4.6 share points to 3%. Reign share was 4.9% and Rockstar share was 3%.According to Nielsen in the convenience and gas channel in Canada for the 12 weeks ended March 28, 2020, the energy drink category increased 3% in dollars. Sales of the company’s energy drink brands increased 1% versus a year ago. The market share of the company’s energy drink brands was 37.9%, down 0.8 of a point. Monster's market share decreased 0.5 of a point to 33.9. NOS’s sales increased 4% and its market share remain the same at 2.9%. Full Throttle sales decreased 19% and its market share decreased 0.3 of a point to 1.1%. Red Bull sales increased 3% and its market share decreased by 0.3 of a point to 35.1%. Rockstar sales increased 3% and its market share decreased 0.2 of a point to 16.3%. Celsius sales increased 75% and its share increased 1.5 share points to 3.7%.We're verified the Nielsen that the data for Mexico for the month of March 2020 did not fully capture all of Monster sales. As a result, the Nielsen data is inaccurate and will not be covered on this call. We will resume reporting Nielsen data for Mexico once its data has been corrected. According to Nielsen for the month of March 2020 compared to March 2019, Monsters' retail market share in value increased in Argentina from 23.7% to 37.1%, in Brazil from 19.2% to 25.7% and in Chile, from 35.9% to 41.4%. I'd like to point out 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 base within the month referred to from country to country.According to Nielsen in the 13-week period ended April 17, 2020, Monster’s retail market share in value as compared to the same period the previous year grew from 31.7% to 34.4% in Spain. According to Nielsen in the 13-week period ended March 31, 2020, Monster’s retail market share in value as compared to the same period the previous year grew from 12% to 12.6% in the Czech Republic from 12.3% to 15.2% in Poland, from 19.4% and 23.8% in the Republic of Ireland and from 16.3% to 17.7% in South Africa. Monster’s retail market share in value as compared to the same period the previous year declined from 35% to 34% in Greece.According to Nielsen in the 13-week period ended March 29, 2020, Monster’s retail market share in value as compared to the same period the previous year, grew from 18% to 20% in Italy. According to Nielsen in the 13-week period ended March 28, 2020, Monster’s retail market share in value as compared to the same period the previous year, declined from 16.5% to 15.8% in Germany.According to Nielsen in the 13-week period ended March 21, 2020, Monster’s retail market share in value as compared to the same period the previous year grew from 26.4% to 27.6% in France, from 20% to 22.5% in Great Britain, from 18.8% to 25.7% in Norway, from 13.2% to 13.5% in Sweden, but declined from 13.2% to 13% in Belgium and from 7.1% to 6.1% in the Netherlands.According to IRI Greece, Ireland and Australia, Monster’s market share in value for the month ending March 2020 increased from 8.9% to 10.3% as compared to the same period the previous year. Mother's market share in value decreased from 13.4% to 13.2% during the same period. Sales of the company's brands in Australia for the month ending March 2020, increased from 22.3% to 23.4%.According to IRI in New Zealand, Monster’s market chain value for the four weeks ended March 15, 2020 increased from 7.7% to 9.7% as compared to the same period the previous year. LIVE PLUS there's market share in value decreased from 8.5% to 7.7% and Mother's market chain value decreased from 6.9% to 6.2%. Sales of the company's brands in New Zealand for the four weeks ended March 15, 2020 increased from 23.2% to 23.7%.According to Nielsen in South Korea, Monster’s market share in value in all outlets combined for the month ending February 2020, grew from 42.5% to 51.3% as compared to the same period in the previous year. According to INTAGE in Japan, Monster’s market share in value in the convenience store channel for the 13-week period ending March 2020, grew from 49.3% to 58.4% as compared to the same period in the previous year.During the latest four-week period ending March 2020, Monster’s share in Japan grew from 49.5% to 61.6% as compared to the same period in the previous year. We again point out that certain market statistics that cover single months or four-week periods may often be materially influenced positively and/or negatively by promotions and/or other trading factors during those periods.Net sales to customers outside the U.S., was 356.8 million, 33.6% of total net sales in the 2020 first quarter compared to 284.1 million, which is 30% of total net sales in the corresponding quarter in 2019. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately 10.4 million in the 2020 first quarter. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and trans-shipped to the military and their customers overseas.In EMEA, net sales in the first quarter increased 26.3% in dollars and increased 28.5% in local currencies over the same period in 2019. Gross profit in this region as a percentage of net sales for the quarter was 41.3% compared to 43.2% in the same quarter in 2019. Gross profit percentage for the region was impacted by country and product mix. We’re also plased that in the first quarter, Monster gained market share in the Czech Republic, France, Great Britain, Italy Norway, Poland, Republic of Ireland, South Africa, Spain and Sweden. In Asia-Pacific, net sales in the first quarter increased 32.8% in dollars and 33.7% in local currencies over the same period in 2019.Gross profit in this region as a percentage of net sale was 42% versus 42.2% over the same period in 2019, as a result of country and product mix. In Japan, net sales in the quarter increased 61.7% in dollars and 60.1% in local currency. In South Korea, net sales increased 40.6% in dollars and 48% in local currency as compared to the same quarter in 2019. In Oceana, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 2.6% in dollars and 7.5% in local currencies. Sales of the Monster brand increased 18.5% in dollars and 24.3% in local currency as compared to the same quarter in 2019.In Latin America, including Mexico and the Caribbean, net sales in the first quarter increased 29.1% in dollars and 45.7% in local currencies over the same period in 2019. Gross profit in this region, as a percentage of net sales, was 42.5% compared to 43.6% over the same period in 2019. In Brazil, net sales in the quarter increased by 114.7% in dollars and increased 138.1% in local currency. Net sales in Chile, decreased 16.8% in dollars and 3.2% in local currency in the quarter. This was due to timing of shipments and our retail market share depletions remained strong.In the 2020 first quarter, we transitioned to Trinidad and Tobago to the Coca Cola bottler. In addition, we began production with our bottler in Trinidad, which will allow us to supply other islands and countries in this region on a tax efficient basis. In January 2020, Monster Energy was launched by the Coca Cola bottler in Israel.I will now briefly discuss our litigation with Vital Pharmaceuticals Inc, VPX the maker of Bang Energy drinks. A number of proceedings are currently ongoing to adjudicate claims, including claims for false advertising and trademark infringement, brought by the company against VPX and by VPX against the company. These proceedings are ongoing. Our only update since our last earnings call is in relation to the lawsuit against VPX over its intention to launch its own line of Reign branded energy drinks in 16 ounce cans to be sold in convenience stores.On May 1, 2020, a district court judge granted a preliminary injunction in joining the VPX from using the Reign mark in connection with any ready to drink beverage. A motion for summary judgment has been filed by Monster in this proceeding against all of VPX's claims in the suit, with a hearing on that motion set for later in May this year. In the event that summary judgment is not granted against all claims in the suit, the matter is scheduled for trial in August 2020. As with litigation and other pending proceedings with VPX are subjudicate, we will not be answering any questions on this matter on today's call.We are working closely with our China team to follow the rules implemented by local authorities and we have reopened office in China. Monster shipments and distribution in the first quarter in China were negatively affected by the lockdowns due to the COVID-19 pandemic. This resulted in a volume decrease in the first quarter in China. But beginning in late March, early April, we have seen an increase in shipments and depletions.In April, we began distribution of our new Monster Energy Dragon Tea, which is non-carbonated and which has received early positive feedback. In addition, certain globally supplied ingredients are sourced from third party manufacturers in Wuhan and other parts of China have recommended shipping to our network of copackers. During the 2020 first quarter in the United States, we launched a number of new exciting products, including a line of Reign Inferno, Thermogenic Fuel, two new energy drinks in the Monster Ultraline, a line of Java Monster 300 and a line of Monster Hydro Super Sport, as well as NOS Turbo.These launches were negatively impacted by the COVID-19 pandemic, and we did not achieve planned distribution levels, in part due to certain retailers postponing implementation of their new plan schematics, which included our innovation products. We are developing plans with our bottlers and distributors to re-prioritize these recent innovation launches to ensure that we are able to maximize their distribution as soon as normalcy returns, particularly to the convenience and gas channel.In Canada, our Monster Energy portfolio was extended in January 2020 with the launch of Monster Ultra Paradise, Java Monster Swiss Chocolate, Monster Hydra Blue Ice, Monster Dragon Green Tea and Yerba Mate. We also added an additional flavor to our NOS energy lineup with NOS Sonic Sour.In Mexico, we launched Predator as our first entry in the country in the value segment. And in Brazil, we launched our non-carbonated Monster Energy Dragon Tea lemon tea during March 2020. In Australia, we launched Monster Energy Neo nationally and rolled up Mother Epics roll nationally in January off an exclusive with the select convenience and guest chain launch in the fourth quarter of 2019.Juice Monster Pacific Punch was launched in Germany and the Netherlands in March 2020, and in France and Sweden in April 2020 and is now available in nine EMEA markets. And is planned to be launched into a further three markets in 2020. Black Monster Manga Logo was launched in Russia in March 2020. Manga Logo is now available in 34 EMEA markets. Juice Monster Pipeline Punch was launched in Iceland, Malta and Norway in February 2020 and the Baltics, Denmark and Hungary in March 2020, and is now available in 20 markets across EMEA.Monster Ultra Paradise was launched in Germany and the Netherlands in March and in Belgium, Italy and Norway in April and is now available in eight EMEA markets. We are planning to launch Ultra Paradise into further 14 markets in 2020 in EMEA. Espresso Monster was launched in Bulgaria, Cyprus, Greece and Switzerland in March 2020, and in the Czech Republic and Slovakia in April 2020, in both milk and vanilla variants. Espresso Monster milk and vanilla variants are now available in 20 markets in EMEA.We are planning to launch two flavors of Espresso Monster into further two markets in 2020. Additionally, we launched Espresso Monster Salted Caramel in Norway in February 2020 and in Sweden in April 2020. We are planning to launch this product in the further three EMEA markets in 2020. Reign was launched in Germany in February 2020 and in Spain in April 2020. Additionally, we are planning to launch Reign into a further six markets in 2020.Once the HydroSport was launched in Norway and Sweden in February 2020, and we are planning to launch Monster HydroSport in Spain late in the second quarter. Burn Dark Energy, our new citrus burn variant was launched in Russia in March 2020. Two SKUs of the new Nalu Energy tea line, green tea and ginger and black tea and passionfruit, were launched in Belgium in April 2020.We launched Predator, our affordable energy brand in the Czech Republic and Hungry in February 2020, Afghanistan and North Macedonia in March 2020. Additionally, we are planning to launch Predator in Ethiopia, Ghana and Nigeria in the second quarter of 2020. We're also planning to launch predator into a further five EMEA markets later in 2020, Bosnia, Croatia, Romania, Russia and Slovenia.Similar to the United States in a number of markets, our recent new product launches were negatively impacted by the COVID-19 pandemic, and we are implementing plans to re-prioritize certain launches. In Japan, we successful relaunched Pipeline Punch with strong results that builds our number one country share positioning value. In South Korea, we further expanded Pipeline Punch to 90% of convenience stores with positive results that also took Monster to a number one share position in value.The Monster portfolio grew strongly in both countries. We are planning to launch Ultra Paradise in both Japan and South Korea later this year. India followed up on the December 2019 Mango Loco launch and extended distribution nationally early in the first quarter before a national lockdown due to the COVID-19 pandemic, which took effect on March 25, 2020. We estimate April 2020 gross sales to be approximately 22.2% lower than in April 2019. On a foreign currency adjusted basis, April 2020 gross sales would have been approximately 20.8% lower than comparable April 2019 gross sales. However, bottler and distributor sales of the company's products to retail in the United States were markedly less adversely impacted.April 2020 has the same number of selling days as April 2019. April sales were materially and adversely impacted by the COVID pandemic to deferring degrees from country to country. We're optimistic for improvement once the COVID-19 pandemic subsides. Indeed, a number of U. S. states have recently begun to partially reopen and certain countries internationally are starting to do likewise. 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 as shifts in the timing of production, in some instances where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers, as well as inventory levels maintained by our distribution partners, which they also unilaterally for their own business reasons. We reiterate that sales average for periods, such as a single month or even two months, should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period.In conclusion, I would like to summarize some recent positive points; one, the company's priority has been and remains the health and safety of our employees, customers, consumers and our communities; two, currently the company's flavor manufacturing facilities, its copackers, warehouses and shipping facilities and bottlers and distributors are all operating; three, we are pleased with the new additions to the Monster Energy portfolio; four, we are encouraged by the prospects for our Reign Total Body Fuel high performance energy drinks and Reign Inferno thermogenic fuel high performance energy drinks, not only within the U.S. but also internationally; five we are pleased with our growth and performance, both domestically and internationally during the first quarter. We reiterate the growth potential for us in India when the country reopens as well as in China; six, we are proceeding with planning for future launches of our affordable energy brands, as well as Reign Total Body Fuel high performance energy drinks in certain countries outside of the U.S.; seven this year in light of the public health impact of the COVID-19 pandemic, we will conduct our annual meeting on June 3, 2020 exclusively as a virtual meeting via live webcast.You will not be able to attend the annual meeting in person but during the virtual meeting, you may ask questions and we'll be able to vote your shares electronically. Additional information regarding attending the annual meeting, voting your shares and submitting questions, can be found in the company's proxy statement. I would like to open the floor to questions about the quarter. Thank you.

Andrea Teixeira:

Thank you and good afternoon, everybody. And Rodney, I'm glad to hear you’re well and wish you good health to all on this call. So how much has traditional channels and convenience and gas impacted the 20.8% FX neutral decline globally in April? And if we can break down the U.S., I guess we’ll appreciate the figure you gave, saying that U.S. was largely impacted. It will be helpful for investors to figure out when the timing of COVID passes. And then the other thing I would like to clarify on the e-commerce performance. How much -- you gave and we appreciate that. How much would that represent now as a percentage of total sales? Thank you very much.

Operator:

And our next question will come from Mark Astrachan with Stifel. Please go ahead.

Rodney Sacks:

So as we look at the year, particularly with sponsorships and endorsement. Yes, NASCAR has fallen away and we have other sponsorships and endorsements that may not cost the same this year as they did last year, because a number of events have been canceled. So we don't give guidance. But I think as one reflects on the year, we can see a change in pattern in our spending. We've been spending a lot more on social media, which we believe is very important, particularly in this market that we're in. And we'll continue to spend in the markets as we deem appropriate.

Peter Galbo:

I guess Rodney, as you mentioned, some of the states are starting to reopen. What have you seen kind of from the core Monster consumer in a more restrictive states in New York or California where we're expecting kind of manufacturing and construction to come back online sooner. That I would think will also kind of play more in your core consumer. Just anything you're hearing on the ground as they start to reopen more. Thanks.

Operator:

Thank you. Next question will come from Laurent Grandet with Guggenheim. Please go ahead.

Rodney Sacks:

Well, I think it's difficult to comment on Coca Cola, because we've always maintained a good relationship with the Coca-Cola company even during the arbitration proceedings that we had. We know that transitions generally are very disruptive. We've been through a number and we know how disruptive they can be. So that's we believe in a short term is an opportunity for us. In the long term, it's difficult to comment, because Pepsi Cola has never really had success in the energy category historically, although, they now have brands that are a lot more powerful than they had before.Rockstar has declined 50% since the market share, since the distribution agreement began in 2009. So it's really difficult to say. I think that the short term will be disruptive and we've got plans, both for the short term and for the long term. And I think it will be inappropriate for us to disclose what those plans are. But rest assured we do have plans and we believe we've got very strong brands and that we’ve got good marketing prowess and that that advantage will prevail in the long term.

Bill Chappell:

Just following up on the -- and glad to hear you're doing well Rodney. Just following up on the Pepsi side, less from what you were seeing, be it from Rockstar or Bang, because I think you've kind of already seen that. Are you expecting anything new out of Mountain Dew or seeing anything from that front? Now that it seems that Pepsi is a little more unleashed and what it can do on the energy sector?

Rodney Sacks:

Yes, I’d just like to add that a lot of these things are not new. They have endeavour to play in that space through Kickstart and in the Mountain Dew range, and -- as an extension. And so there will be a little bit of a divergence, tweak to that. They have already been building on what Hilton said, they've been distributing Rockstar for the last 10 years. So at the end of the day, I don't think there's going to be much change. But again, we can't speculate to whatever they will put behind and for how long. But we do think that the Rockstar brand has some challenges, and we think that we're in a strong position to address that. And to address the the Bang position, I think that you've seen the market shares of Bang over the past 12 months. And we think we're in a good position to continue to compete with them, regardless of the distribution system change. There are benefits but there are also some negatives in that that come with that change.

Operator:

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Rodney Sacks and Mr. Hilton Schlosberg.

Operator:

And thank you, sir. The conference has not concluded. Thank you for attending today's presentation. You may now disconnect.

Rodney Sacks:

Hi, thank you. Good afternoon ladies and gentlemen. Thanks for attending this call. I am Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President is with me; as is Tom Kelly, our Executive Vice President of Finance.Before we begin, I'd like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, and Section 21E of the Securities Exchange Act of 1934 as amended, and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance and trends.Management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company that may cause actual results to differ materially from the forward-looking statements made during this call.Please refer to our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10-K filed on February 28, 2019, and our most recent Quarterly Report on Form 10-Q filed on November 7, 2019, including the sections contained therein entitled Risk Factors and Forward-looking Statements for a discussion on specific risks and uncertainties that may affect our performance. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.An explanation of our non-GAAP measure of gross sales and certain expenditures, which may be mentioned during the course of this call is provided in the notes and designated with asterisks in the condensed consolidated statements of income and other information attached to the earnings release dated February 27, 2020. A copy of this information is also available on our website at monsterbevcorp.com in the Financial Information section.We are planning to leave some more time for questions on today's call and on subsequent calls. With that in mind, we will not repeat many of the numbers covered in our earnings release.Consumer Beverage preferences and tastes continue to evolve at an increasing pace and we are endeavoring to address them through our ongoing innovation of new products. In the fourth quarter of 2019 net sales were at $1.02 billion, up 10.1% from $924.2 million in the fourth quarter of 2018, adjusting the 2018 fourth quarter for advanced purchases made following our November 1, 2018 cost increase in the U.S., as well as foreign currency movements. Net sales for the 2019 fourth quarter would have been up 7.5%.Diluted earnings per share for the 2019 fourth quarter increased 9.7% to $0.47 from $0.43 in the fourth quarter of 2018. According to the Nielson report for the 13 weeks through January 25, 2020, all outlets combined namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots increased by 7% versus the same period a year ago.Sales of the company’s energy brands including Reign grew 3.7% in a 13-week period; sales of Monster were down 3.9%; sale of NOS decreased 4.3% and sales of Full Throttle decreased 13%. Sales of Red Bull increased 5.5%; sales of Rockstar decreased by 7.4%; sales of 5-Hour decreased 5.5% and sales of Amp decreased 37.2%. As there were no comparable sales of our Reign products last year, we have not referenced Reign.According to Nielsen, for the four weeks ended January 25, 2020, sales in the convenience and gas channel, including energy shots in dollars increased 5.7% over the same period the previous year. Sales of the company’s energy brands which include Reign grew 4.1% in the four-week period in the convenience and gas channel. Sales of Monster decreased by 4.2% over the same period versus the previous year, NOS was down 4.9% and Full Throttle was down 13.3%. Sales of Red Bull were up 5.9%, Rockstar was down 8.6%, 5-Hour was down 5.8% and Amp was down 31%.According to Nielsen, for the four weeks ended January 25, 2020, the company’s market share of the energy drink category in the convenience and gas channel, including energy shots in dollars decreased by 0.6 of a point over the same period the previous year to 40.8%.Monster share decreased 3.4 share points to 33.2%, Reign share was 3.4%, NOS’s share declined 0.4 share points to 3.5% and Full Throttle share declined 0.2 points to 0.8%. Red Bull share increased 0.1 point to 33.4%, Rockstar share was down 0.9 points to 5.5%, 5-Hour share was lower by 0.7 points at 5.6% and Amp share decreased 0.2 points to 2.4%. VPX Bang share increased 0.2 points to 7.6%.According to Nielsen for the four weeks ended January 25, 2020, sales of coffee plus energy drinks, which includes Cafe Monster and Espresso Monster in dollars in the convenience and gas channel increased 6.3% over the same period the previous year. Sales of our Java Monster alone were 5.5% higher than in the same period the previous year. Sales of our coffee plus energy drinks were 2.7% lower, while sales of Starbucks Energy were 15.2% higher.Our company share of the coffee plus energy category, which includes Java Monster, Cafe Monster, Espresso Monster, Starbucks Double Shot and Triple Shot, Rockstar Roasted and Bang Keto Coffee for the four weeks ended January 25, 2020 was 52.6% down 4.9 points. Java Monster share on its own for the four weeks ended January 25, 2020 was 49.2%, down 0.4 of a point, while Starbucks Energy share was 45%, up 3.5 points.According to Nielsen, in the convenience and gas channel in Canada, for the 12 weeks ended January 4, 2020, the energy drink category increased 5% in dollars. Sales of the company’s energy drink brands were flat versus a year ago. The market share of the company’s energy drink brands was 37.1%, down 2.2 points. Monsters market share decreased 1.7 points to 33.2. NOS’s sales decreased 2% and its market share decreased 0.2 share points to 2.7%. Full Throttle sales decreased 10% and its market share decreased 0.3 points to 1.2%. Red Bull sales increased 7% and its market share increased 0.4 points to 36.2%. Rockstar sales increased 6% and its market share increased 0.2 points to 16%.According to Nielsen, for all outlets combined in Mexico, the energy drink category grew 20.9%. For the month of December 2019 Monster sales increased 11.9%, our market share in value decreased 2.3 points to 29.3%, against the comparable period the previous year.Sales of Burn were down 77.5%. Burn’s market share decreased 1.2 points to 0.3 of a percent. Red Bull’s sales decreased 8.1% and its market share decreased by 2.5 points to 7.8%. Vive 100 sales decreased 5.5% and its market share decreased by 6.7 points to 24%.Vault’s sales increased 47.2% and its market share increased 3 share points to 16.8%, while Boost sales decrease 5.5% and its market share decreased 2.2 points to 8%. Amp and affordable energy brand launched in March 2019 increased its market share to 9.4% in the month of December 2019. Coca-Cola energy market share was 3.5% in the month of December 2019.The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales in the OXXO convenience chain in turn can be materially influenced by promotions that maybe undertaken in that chain by one or more energy drink brands during a particular month. Consequently, such activities could have a significant impact on the monthly Nielsen statistics for Mexico.According to Nielsen, for the month of December 2019 compared to December 2018, Monster’s regional market share in value increased in Argentina from 16.9% to 33.5%; in Brazil from 19.6% to 27.4%, and in Chile from 34.9% to 39.8%.I’d 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 ended January 55, 2020, Monster’s retail market share in value as compared to the same period the previous year grew from 12.7% to 12.8% in Belgium, from 24.8% to 28.2% in France, from 16.4% to 17% in Germany, from 20.3% to 21.9% in Great Britain, from 17.8% to 24.9% in Norway, from 31.7% to 34.5% in Spain, but declined from 7.3% to 6.1% in Netherlands and from 13.8% to 12.8% in Sweden.According to Nielsen, in the 13-week period ended in December 2019, Monster’s retail market share and value as compared to the same period the previous year grew from 13.3% to 13.6% in the Czech Republic, from 33.6% to 34.7% in Greece, from 18.8% to 23% in the Republic of Ireland, from 18.1% to 20.6% in Italy, and from 10.9% to 14.5% in Poland and from 15.8% to 17.4% in South Africa.According to IRI in Australia, Monster’s market share in value for the four weeks ended December 29, 2019, increased from 7.5% to 9.3% as compared to the same period the previous year. Mother’s market share in value decreased from 13.5% to 12.5% during the same period.According to IRI New Zealand, Monsters market share in value for the four weeks ended December 29, 2019 increased from 5.6% to 6.3% as compared to the same period the previous year. Live Plus market share in value decreased from 8.5% to 8.2% and Mother’s market share in value increased from 7.8% to 9.6%.According to Nielsen in South Korea, Monsters market share in value in all outlets combined for the quarter ended December 2019 grew from 37.6% to 50.6% as compared to the same period in the previous year. Monster is now the leading energy brand by market share in value in all outlets in South Korea.According to INTAGE in Japan, Monster’s market share and value in the convenience store channel for the 13-week period ended December 30, 2019 grew from 46.7% to 54.2% as compared to the same period in the previous year. We again point out that certain market statistics that cover single months or four-week period may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods.Net sales to customers outside the U.S. were $319.6 million, 31.4% of total net sales in the 2019 fourth quarter compared with $274.3 million or 29.7% of total net sales in the corresponding quarter in 2018. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $9.1 million.Included in reported geographic sales are our sales to the company’s military customers, which are delivered in the U.S. and trans-shipped to the military and their customers overseas.In EMEA supply chain and production issues have largely been resolved. In EMEA net sales in the fourth quarter increased 8.6% in dollars and it increased 12.8% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales for the quarter was 38.7%, compared to 42.1% in the same quarter in 2018. Gross profit percentage for the region was impacted by country and product mix.We are also pleased that Monster continues to perform well and gain market share in Belgium, Czech Republic, France, Germany, Great Britain, Greece, Italy, Norway, Poland, Republic of Island, South Africa and Spain.In Asia-Pacific net sales in the fourth quarter increased 49.9% in dollars and 47.9% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was 40.2% versus 46.1% over the same period in 2018 as a result of country and product mix.In Japan net sales in the quarter increased 84.2% in dollars and 76.8% in local currency. In South Korea, net sales increased 51.5% in dollars and 58.5% in local currency as compared to the same quarter in 2018.In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales decreased 4.1% in dollars and increased 0.8 of a percent in local currencies. Although I would like to point out that sales of the Monster brand increased 18.4% in dollars and 24.5% in local currency as compared to the same quarter in 2018.In Latin America, including Mexico and the Caribbean, net sales in the fourth quarter increased 6.9% in dollars and 16.2% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was 42.6% compared to 44.7% over the same period in 2018.In Brazil, net sales in the quarter increased by 35.8% in dollars and increased 44% in local currency. Net sales in Chile decrease 14.8% in dollars and 7.6% in local current in the quarter.In January 2020 Monster Energy was launched by the Coco-Cola bottler in Israel. We continued the rollout of Monster across India and began the launch of Mango Loco in December. We also continued Ultra Violet’s expansion from Septembers launch to further provide a broad portfolio with strong taste experiences for Indian consumers.The Monster range continues to build significant active distribution increases across China in the 2019 fourth quarter versus a year ago, but the situation in China is currently challenging. I wanted to provide an updated regarding the recent coronavirus or COVID-19 outbreak.First of all, our number one priority is the safety of our employees in China. We are thinking of everyone who has been affected by coronavirus and we continue to monitor the situation closely. In addition to having employees in China, we and our suppliers currently globally source certain ingredients from third party manufacturers in Wuhan and other parts of China. We also manufacture finished goods through third party bottlers and co-packers in China.The coronavirus outbreak could adversely affect our business and cause disruptions internationally due to the closure or suspension of activities at such third party manufacturers, as well as within China at our co-packing facilities and our china office. Ingredient sourcing delay could also interfere with, and would delay production of certain of our products internationally.In addition, the outbreak tougher with the accompanying special government measures could adversely affect the growth of our business in China and affect demand for our products. However, it's too early to determine what impact it will have on our global supply chain and our operations. As I said before, our first priority is employee safety and we are continuing to monitor the situation closely.I will now briefly discuss our litigation with Vital Pharmaceuticals Inc., VPX, the maker of Bang energy drinks. Monster filed a lawsuit against VPX in September 2018 for false advertising. VPX filed a trademark lawsuit in March 2019 against Monster in relation to our Reign Total Body Fuel high-performance energy drinks and another lawsuit in August 2019 against Monster alleging a host of legal challenges, including many similar to the claims Monster alleged against VPX. These proceeding are ongoing.In October 2019, the U.S. District Court denied VPX’s motion for a preliminary injunction against our Reign Total Body Fuel high-performance energy drinks in its trademark lawsuit. In his decision, the Court ruled that VPX failed to meet any of the elements of a preliminary injunction and failed to establish that it is likely to succeed on the merits of its claims.In October 2019 VPX announced its intention to launch its own line of Reign branded energy drinks in 16 ounce cans to be sold in convenience stores. Later that month we filed an expedited motion for a preliminary injunction asking the court to stop this product launch and to prevent VPX from infringing Monster’s trademark rights in this way.In November 2019 VPX stipulated that it would refrain from launching such products until the District Judge entered the final order on the preliminary injunction motion. In January 2020 the Magistrate Judge issued a report in recommendation that an injunction be drawn in Monster favor. Motions for some rejudgment had been filled by Monster in this proceeding and which are currently pending.In the event that some rejudgment is not granted, the matter is rescheduled for trial in May 2020. As our litigation and other pending proceedings with VPX are subjugated, we will not be answering any questions on this matter on today’s call.In October we launched Java Monster Farmers Oats, which contains Oatmilk is our first plant based coffee product being non-dairy and vegan, as well as two new flavors in the Reign brand family, Strawberry Sublime and Mango Magic to supplement out Reign Orange Creamsicle line extension which was launched at the end of the third quarter. During the fourth quarter 2019 we also extended Ultra Paradise, Reign Melon Mania and Reign Razzle Berry in multipacks.In 2020 in the United States we will be discontinuing our Cafe Monster line of products and repositioning our Espresso Monster line. We launched Reign Inferno™ thermogenic fuel in Jalapeno Strawberry, Red Dragon and True Blue at the end of January 2020.We launched Mango Loco in Argentina during the fourth quarter of 2019. In Porto Rico in January 2020 we launched Reign Strawberry Sublime and Mango Magic, as well as Muscle Monster, vanilla and chocolate.We launched Monster Energy, Monster Energy Absolutely Zero and Monster Energy Valentino Rossi in Israel in January 2020. Monster Pacific Punch was launched in Belgium, Great Britain, Northern Island, the Republic of Ireland in January 2020 and is planned to be launched in to a further seven markets in 2020.Monster Pipeline Punch will be launched in the Baltics in Norway this year and will then be available in 17 markets across EMEA. Monster Ultra Paradise was launched in Great Britain, Northern Island and the Republic of Island in January in 2020 and in Sweden in February in 2020 and is planned to be launched into a further 18 markets throughout 2020.Espresso Monster was launched in Belgium, the Republic of Island and Poland in the fourth quarter of 2019, in both milk and Vanilla variance. We also launched both variances in the Baltics, the Netherland and Portugal in January 2020 and in Austria in February 2020. Espresso Monster Milk and Vanilla variance are now available in 14 markets in the EMEA. We are planning to rollout two flavors of Espresso Monster in a further nine markets throughout 2020.Additionally, we have launched Espresso Monster Salted Caramel in Germany and Great Britain in December 2019. We are planning to rollout out Salted Caramel Espresso variance in the further five EMEA markets throughout 2020.Reign was launched in Great Britain, Northern Island and the Republic of Island in the fourth quarter of 2019, and we are planning to launch Reign in Germany by the end of the first quarter of 2020. Additionally, we are planning to launch into a further seven markets throughout 2020.Monster HydroSport was launched to Germany, Great Britain, Northern Ireland and the Republic of Ireland in the fourth quarter of 2019 any in France in January 2020. We are planning to launch HydroSport in Norway and Sweden by the end of the first quarter of 2020.We launched Predator, our affordable energy brand in Kenya and Uganda in the fourth quarter of 2019. Additionally we launched Predator in Poland in January 2020 and are planning to launch Predator in Afghanistan, Czech Republic, Ghana and Hungary in the first quarter of 2020.We are also planning to launch Predator into a further 11 EMEA markets throughout 2020; Azerbaijan, Belarus, Bosnia, Croatia, Ethiopia, Iraq, Russia, Slovenia, Nigeria, the Netherlands and the UAE.We launched Mother Epic Swell in Australia during the fourth quarter of 2019, with a convenience customer before a national launch in January 2020. Monster Mule also launched in Australia in January 2020.In South Korea we further expanded Pipeline Punch to 90% of convenience stores with initial positive results. We launched Mango Loco in India during December and completed the Ultra White rolled out in India, Vietnam and Malaysia during the 2019 fourth quarter.We are planning to launch a number of products in Asia Pacific over the upcoming months, including a full country relaunch of Pipeline Punch in Japan in March 2020, and the Ultra Paradise in South Korea and Japan later this year.We estimate January 2020 gross sales to be approximately 15.3% higher than in January 2019. On a foreign currency adjusted basis, January 2020 gross sales would have been approximately 15.7% higher than comparable January 2019 gross sales. January 2020 had the same number of selling days than in January 2019.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 as shifts in the timing of production, in some instances where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers, as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons.We reiterate that sales over a short period such as a single month or even two months should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period.In conclusion, I would like to summarize some recent positive points. Retail sales statistics for many countries around the world demonstrate that the energy category is continuing to grow and that Monster is generally going ahead of the category in line with the earlier periods.New additions to the Monster family continue to add to the company’s sales. We are excited about the prospects for our brands and our new product launches this year, as well as our innovation pipeline in 2020.We are encouraged by the prospects for our Reign Total Body Fuel high-performance energy drinks, and Reign Inferno™ thermogenic fuel high performance energy drinks, not only within the U.S., but also internationally.We are pleased with our growth and performance in our international markets. Net sales in the fourth quarter in EMEA increased 12.8% in local currency, in Asia Pacific increased 47.9% in local currency and in Latin America and the Caribbean increased 16.2% in local currency.We reiterate the growth potential for us in China and India. We are proceeding with our plans for future launches of our affordable energy brands internationally. We are also proceeding with our plans for the launch of Reign Total Body Fuel, high performance energy drinks in certain countries outside of the USA.I would like to open the floor to questions about the quarter and the year.

Dara Mohsenian:

Hey guys.

Hilton Schlosberg:

Hey Dara.

Hilton Schlosberg:

So maybe I can address the gross profit issues that you referred to. So if you look at worldwide, what the positive effect is worldwide – well obviously the price increase in U.S. and Canada and then product mix, particularly with Reign, which is an alternative gross margin for some of our juice and coffee products. We also had benefits in [Inaudible] because we were manufacturing our Java Monsters domestically and we weren’t importing from the U.S. and aluminum and other raw materials were a positive factor, so that was the positives.Against that, we continued to have and you’ll see the gross margins that we referred to on this call. Against that, you'll continually see a change in the strategic brands versus the Monster products and the strategic brands, because they are concentrates and they have higher margins than the finished goods product, so that you'll continue to see that as an offset.You'll continue to see geographic mix as an issue, because obviously in the U.S. our margins are strong. They are less strong in other parts of the world for all the reasons we've spoken to in the past and you'll see the same trend with regard to product mix as we sell internationally, as we sell more juice products and more coffee products, they have a lower margin than the traditional Monster products and Reign products. So that's in a nutshell where we are with margin.

Andrea Teixeira:

Hi, thank you for taking my question. If you can comment on how the allowances in particular in Reign Inferno and how incremental it has been to your quarter-to-date update. And as a follow-up to your Coronavirus commentary, obviously safety is the most important at this point, but what is your view on the monitoring California and overall changes in mobility? Have you seen any greater impact in convenience stores so far against other channels? Thank you.

Hilton Schlosberg:

So Adex [ph] , if you look at for example what's happening in China, we are seeing obviously significant foot traffic decreasing in the biggest stores and the convenience stores, they have an all suffering, but not to the same degree.So if you translate that back to California, we haven't seen any implications yet, but you know the whole idea of this situation in China is that they limit the number of shoppers in particular stores. So that's why you'll see you know reduced foot traffic in the bigger stores and more concentrated foot traffic in the convenience stores. But we haven't seen any implications of that at this time.And then you know, if I could just talk about the Coronavirus for one second, I've been asked and I haven’t really answered it, because I was waiting to answer it on the call and we don't normally give numbers, sales in various countries. But what I can tell you is that our sales in China in 2019 were less than 1% of our consolidated net sales for the company, so that puts a little bit in perspective, because there was a little bit of nervousness, but it's less than 1%.

Steve Powers:

Yes, hey thanks. So Hilton, last month in New York your acknowledged substantial – I think – you think you framed those issues of focus as coke bottlers were taken on Coke Energy and bringing it to the market in the U.S. I guess just some update there on how you're feeling about those bottlers execution on your brand's now that we’re a couple of months into the year, but January numbers imply that you've had some good uptake of that innovation, but just any color around that and around the in-market execution that you're seeing would be great.And then just to give voice to a question Dara had asked, I think we might have lost sight of just any additional color on the cooler and shelf set redesigns as they are shaping up in the U.S. Are you getting the positioning that you thought you would? Is Coke Energy getting the position that you thought it would relative to yourselves and Red Bull and others, that too would be great? Thank you.

Hilton Schlosberg:

If I could just perhaps just add a little bit on that, on color, we've looked at some of the schematics that have come out for this year. In the U.S., which is obviously the place Coke Energy has recently been launched and if you look at the schematics, for that plus obviously the performance energy products, by and large we are getting increased shelf price, both for our general products, as well as our Reign products and Inferno, including our innovation.And perhaps if you look back on ’19, some of the innovation that we introduced didn't quite get the real estate and distribution levels that we had hoped for and that probably you know was – affected us a little bit in the 2019 year, but if you look at the new products, we have a really robust pipeline of new products.We have you know new Reign product, Inferno; we've got Ultra Fiesta and Ultra Rosa in the Ultra line that are two really good products; we have NOS Turbo, which is sort of a performance energy product to help boost the NOS line; we've got our new Hydro Sport SKUs; we have a new Java 300 line which has a higher caffeine content to compete with the Starbucks triple shot and I’m looking at the SKU’s and we’re getting a lot of good listings for the innovation.So hopefully you know the execution of our bottlers and distribution partners this year, particularly on innovation will be better and we are getting extra innovative. In many cases we are getting the performance products on to an additional separate shelf. In some cases it's simply an expansion of and within the Energy set.

Kevin Grundy:

Thanks, good evening guys.

Kevin Grundy:

Two very quick ones; first one for Hilton. The G&A in the quarter, this one 's a bit granular, but I think it needs to be asked and sort of explained. Some of the profit margin pressure in the quarter, so gross margin better, but G&A was quite a bit higher, even excluding the intellectual property claim. Can you talk a little bit about some of the drivers there and I know you don't like to guide, but should we expect sort of normalization on that line item looking out for the balance of the year.And then Hilton, just on the performance segment, understanding your comments are right in the shelf space reset, but can we get updated thoughts there. So Bang obviously made a lot of noise, but the market share on that product is down about a point sequentially from where it was around the time of the launch of Reign, and when we look at the combined market share of those two brands being Bang and Reign, it's kind of hanging around this 11% sort of area.So your updated thoughts on the outlook for performance for the balance of ‘20 and sort of beyond that; are we sort of at of place where this 11% market share is kind of the right number or you think it goes beyond that, and if so why? So thanks for all that guys.

Kevin Grundy:

Yeah, I’m sorry. It was just basically broadly outlook for performance segment, which of course has made a lot of noise in the past year or two, but Bang’s market share is now down about a point; Reign is 3, 3.5, it's in that range and when you look at the combined market share of those two brands, it's been sort of bouncing around this 11% sort of area. So where does that leave us? What’s your outlook for performance energy and what’s its role in the category going forward? Thank you guys?

Rodney Sacks:

Alright, just looking at that section. I think this section, that’s you know again, we call it the performance section, but really it’s part of the energy category and it's really energy. It’s a question of whether we can call that additional space with retailers to look at it, correcting you know increased bias into the categories.And so I think that you all – we all see some increased buyers coming into the category, and the set is sort of starting to settle down now. You're getting space allocated to banks, space allocated to Reign including Inferno. We are seeing a little bit of space being allocated to some of the competitors. You've got Rockstar with their sort of line and they’ve come out with a thermogenic line as well and then you’ve Adrenaline Shoc and then some of the smaller guys who are trying to get space, but don’t have the distribution depth, CELSIUS and C4.But we think it is panning out. So it’s sort of starting to settle down. It may grow a little bit, but we certainly don’t know. We think that there is an appetite, there is an increased consumer base through the different type of products that we've introduced now for example though Inferno.But, we don't give as I said guidance, I think you know that, and we certainly don’t have a crystal ball. But we think that there is some positive growth that will be achieved in energy generally and I think that this subset of types of products within the energy category will grow a little bit.We are launching for example HydroSport and that again is sort of an advanced hydration, but it does have BCAAs and higher caffeine. So a lot of products like that, Turbo, are starting to play into this area. It’s just really dividing up the attributes that consumers are looking for. Some consumers are looking for higher caffeine or BCAs and we think that that will help the whole category grow, as well as these specific products within the category.

Kevin Grundy:

Thanks.

Mark Astrachan:

Wow! That was a pronunciation. Hey guys, how are you?

Mark Astrachan:

I am good, I'm good other than the stock market. So Hilton, I wanted to go back to gross margin, I know I seem to ask this question a lot on calls. But international in particular, I guess how should we think about that going forward? I’m not asking guidance, but I guess it seems like the pressure on the strategic brands is having an outsized impact on that number.So as you go to the back half of ’20, you start laughing at these low double digit declines that you had in 3Q and 4Q. You are obviously launching Predator now, I guess that’s not – you are launching Predator now, it’s a concentrate model, so that should help. How should we be thinking about kind of those moving parts, meaning as you lap easier comparisons you get the benefit from Predator. Should that help stabilize international gross margins? Can they move a little bit higher if Predator works in these markets. And maybe just a bit more color there in terms of puts and takes. I’m thinking about international margins would be helpful.

Operator:

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

Operator:

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Hilton Schlosberg:

Thank you. Tom Kelly is going to ready the Safe Harbor statement before we start the call.

Hilton Schlosberg:

Thank you, Tom. We again to turn out to the quarter and we will move on from there. Consumer beverage preferences and tastes continue to evolve at an increasing pace. And we are endeavoring to address them through our ongoing innovation of new products.In the third quarter of 2019 net sales were $1.13 billion up 11.6% from $1.02 billion in the third quarter of 2018. Net sales for the third quarter were negatively impacted by approximately $12.2 million of foreign currency movements. Without these foreign currency movements, net sales for the quarter would have been up 12.8%.The comparative net sales in the 2018 third quarter included approximately $16 million in net sales of advanced purchases as a result of the price increase in the United States in of our products effective November 1, 2018. Adjusting for these advanced purchases and foreign currency movements, net sales for the 2019 third quarter would have been up 14.6%.Turning now to gross profit, gross profit as a percentage of sales for the 2019 third quarter was 59.4%, compared with 59.8% in the 2018 third quarter. The decrease in gross profit as a percentage of net sales for the 2019 third quarter was primarily the result of geographical and product sales mix. Such decrease was partially offset by price increases, as well as reduced input costs.Distribution costs as a percentage of net sales were 3.3% for the 2019 third quarter, as compared to 4.1% in the 2018 third quarter.Selling and marketing expenses as a percentage of net sales were 11.1% for the 2019 third quarter, as compared to 11.2% in the same quarter in 2018.General and administrative costs as a percentage of net sales were 10.1% for the 2019 third quarter, as compared to 11.1% in the same quarter in 2018.In the quarter, payroll expenses as a percentage of net sales was 6.5%, compared to 6.2% in the same period in 2018. Payroll costs increased $10.4 million, primarily due to headcount growth, both domestically and internationally. Stock-based compensation and non-cash item were $16 million in the third quarter of 2019, compared to $14.1 million in the same quarter in 2018.Our effective tax rate increased from 21.8% in 2018 third quarter to 25% in the 2019 third quarter. The increase in the effective tax rate was primarily due to increased income taxes in certain foreign jurisdictions, as well as the decrease in the equity compensation deduction. In addition, the comparative effective tax rate for the 2018 third quarter included a non-recurring tax benefit.Net income was $298.9 million in the 2019 third quarter, compared to net income of $267.7 million in the 2018 third quarter, an increase of 11.6%.Diluted earnings per share for the 2019 third quarter increased 14% to $0.55 from $0.48 in the third quarter of 2018.Now we turn to The Coca-Cola Company transition update. In the third quarter of 2019 Monster Energy was launched by or transition to coke bottlers in the Dominican Republic, El Salvador and Honduras. We are planning further international launches later this year.We launched Predator, our affordable energy brand in the third quarter of 2019 in Botswana and in Slovakia. We are planning to launch Predator in selected additional markets in Eastern Europe and Africa in the fourth quarter of 2019.In China, we completed the rollout of both Monster Ultra Violet and Monster Mango in the third quarter. We have significantly expanded our shelf space for Monster with these three SKUs in our targeted top 40 cities and key accounts.We continue to roll out a Monster across India and began the launch of Ultra Violet into approximately 20% of our accounts in September. We will continue Ultra’s expansion into the fourth quarter, as well as commencing the launch Mango Loco to leverage consumer taste preferences in India.I will now briefly discuss a litigation with Vital Pharmaceuticals, VPX, the maker of Bang energy drinks. Monster filed a lawsuit against VPX in September 2018 for false advertising and VPX filed a trademark lawsuit against Monster in relation to our Reign Total Body Fuel high-performance energy drinks in March 2019. Both proceedings are ongoing.In August 2019, VPX filed another lawsuit in the Southern District of Florida, alleging a host of legal challenges, including many similar to the claims Monster alleged against VPX. Monster will seek the dismissal of VPX’s most recent lawsuit.In October 2019, U.S. Court, the US District Court for the Southern District denied VPX’s motion for preliminary injunction against Reign Total Body Fuel high-performance energy drinks in its trademark lawsuit. In his decision, the Court ruled that VPX fail to meet any of the elements of a preliminary injunction and failed to establish that it is likely to succeed on the merits of its claims.The VPX recently announced an intention to launch its own Reign -- own line of Reign branded energy drinks in 16 ounce cans to be sold in convenience stores. We recently filed an expedited motion for preliminary injunction asking the court to stop this product launch and to prevent VPX from infringing Monster’s trademark rights in this way.In one of the Court findings in May 2019, we stated that sales of Reign beverages from June to December 2019 were projected to exceed $235 million. Our sales of Reign through October was solid, as illustrated by the Nielsen numbers were lower than our initial expectations.As with any new product launches, sales may be affected by many factors, including retail authorizations, the dates on which listings are secured for products with major retailers and introductions of new flavors. The company has not changed its practice with respect to projections and will not be providing projections with respect to Reign or any other products.As our litigation with VPX is subjugated, we will not be answering questions on this matter on today’s call.Now we are going to turn to the Nielsen reports in North America. According to the Nielsen reports for the 13 weeks through October 26, 2019 all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots increased by 9.1% versus the same period a year ago.Sales of the company’s energy brands including Reign grew 4.6% in a 13-week period. Sales of Monster were down 2.4%. Sale of NOS decreased 1.8% and sales of Full Throttle decreased 12.8%. Sales of Red Bull increased 6.4%. Sales of Rockstar decreased by 10.8%. Sales of 5-Hour decreased 9% and sales of Amp decreased 42.4%. A there were no comparable sales of our Reign products last year, we have not referenced Reign.According to Nielsen for the four weeks ended October 26, 2019, sales in the convenience and gas channel, including energy shots in dollars increased 6.5% over the same period of the previous year.Sales of the company’s energy brands which include Reign grew 2.5% in the four-week period in the convenience and gas channel. Sales in Monster decreased by 5% over the same period versus the previous year, NOS was down 3.3% and Full Throttle was down 11.6%. Sales of Red Bull were up 4.8%, Rockstar was down 11.2%, 5-Hour was down 7.9% and Amp was down 35.1%.According to Nielsen for the four weeks ended October 26, 2019. The company’s market share of the energy drink category in the convenience and gas channel including energy shots in dollars decreased by 1.6 points over the same period of the previous year to 40.7%.Monster share decreased 4.1 share points to 33.5%, Reign share was 3%, NOS share declined 0.4 share points to 3.6% and Full Throttle share declined 0.2 of a point to 2.7%, Red Bull share decrease 0.5 points to 33.2%, Rockstar share was down 1.1 points to 5.4%, 5-Hour share was lower by 0.9 points at 5.5% and Amp share decreased by 0.2 points to 2.4%. The VPX Bang share increased 4.2 points to 8.2%.According to Nielsen for the four weeks ended October 26, 2019, sales of coffee plus energy drinks, which includes Cafe Monster and Espresso Monster in dollars for the convenience and gas channel increased 7.4% over the same period the previous year. Sales of our Monster -- of Java Monster alone were 9.6% higher than in the same period the previous year. Sales of our coffee plus energy drinks were 5.9% lower, while sales of Starbucks Energy were 18.1% higher.Our company share of the coffee plus energy category, which includes Java Monster, Cafe Monster, Espresso Monster, Starbucks, Double Shot and Rockstar Roasted for the four weeks ended October 26, 2019, was 49.3% down 7points. Java Monster share on its own for the four weeks ended October 26, 2019 was 44.7%, down 2.6 points, while Starbucks Energy share was 47.9%, up 4.3 points.According to Nielsen in the convenience and gas channel in Canada for the 12 weeks ended September 14, 2019, the energy drink category increase 6% in dollars. Sales of the company’s energy drink brands increased 5% versus a year ago.The market share of the company’s energy drink brands was 37.6%, down 0.7 points. Monsters market share remained the same at 33.9 share points. Monsters sales decreased 7% and its market share decreased 0.4 share points to 2.6%. Full Throttle sales decreased 15% and its market share decreased 0.3 points to 1.1%. Red Bull sales increased 6% and its market share decrease 0.2 points to 37.5%. Rockstar sales increased 12% and its market share increased 0.8 points to 15.7%.Turning to Mexico, according to Nielsen, for all outlets combined in Mexico, the energy drink category grew 14% for the month of September 2019. Monster sales increased 10.5%. Our market share in value decreased 0.9 points to 29.3%, against the comparable period the previous year. Sales of Burn were down 48.0%. Burn’s market share decreased 1 point to 0.8%. Red Bull’s sales decreased 5.1% and its market share decreased by 1.6 points to 7.8%. Vive 100 sales decreased 11.3% and its market share decreased by 7.7 points to 27.1%. Vault’s sales increased 33.5% and its market share increased 4.5 share points to 17.5%. While Boost’s sales decrease 3.5% and its market share decreased 1.3 points to 6.9%. Amp and affordable energy brand launched in March increased its market share to 8.7% in the month of September 2019.The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales in the OXXO convenience chain in turn can be materially influenced by promotions that maybe 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.Now I would turn to EMEA, I would like to point out that the Nielsen numbers in EMEA should only be use 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 the 13 weeks ended October 5, 2019, Monster’s retail market share in value as compared to the same period of previous year grew from 12.3% to 12.9% in Belgium, from 23.3% to 27.6% in France, from 20.9% to 21.5% in Great Britain, from 7.1% to 7.2% in the Netherlands, from 18.0% to 23.7% in Norway, and from 30.3% to 33.4% in Spain. In the same period, Monster’s retail market share in value as compared to the same period the previous year declined from 13.7% to 13.1% in Sweden.According to Nielsen in the 13-week period ended in September 2019, Monster’s retail market share in value as compared to the same period the previous year grew from 15.6% to 15.8% in Germany and from 10.7% to 15% in Poland.According to Nielsen, the 13-week period ended in August 2019, Monster’s retail market share in value as compared to the same period the previous year grew from 13.8% to 13.9% in the Czech Republic, from 34.1% to 36.6% in Greece, from 15.8 to 19.3% in Ireland, from 16.7% to 20.4% in Italy, and from 18 -- and from 14.8% to 17.4% in South Africa.Turning to Nielsen in South America, according to Nielsen for the month of September 2019 in Chile, Monster’s retail market share in value increased from 34.5% to 38%, compared to the same month the previous year. According to Nielsen in Brazil, Monster’s retail market share for the month of September 2019 increased from 17.7% to 26.2% as compared to the same month the previous year. According to Nielsen in Argentina for the month of September 2019, Monster’s retail market chain in value increased from 13.9% to 27.9% compared to the same month the previous year.Turning to Asia-Pacific, according to IRI in Australia, Monster’s market share in value for the four weeks ended September 29, 2019, increased from 9.1% to 9.6%, as compared to the same period the previous year, Monster’s market share in value decreased from 13.7% to 12.9% during the same period.According to IRI in New Zealand, Monsters’ market share in value for the four weeks ended September 29, 2019 increased from 5.7% to 6.2% as compared to the same period the previous year. Lift Plus market share in value decreased from 8.8% to 8.3% and Mother’s market share in value increased from 6.8% to 8%.According to Nielsen in South Korea, Monsters’ market share in value in all outlets combined for the quarter ended September the 2019 grew from 38.3% to 40.5% as compared to the same period in the previous year. Monster is now the leading energy brand by market share in value in all measured outlets in South Korea.According to INTAGE in Japan, Monster’s market share in value in the convenience store channel for the 13-week period ended September 30, 2019, grew from 48.9% to 51.2% as compared to the same period in the previous year. We again point out that certain market statistics that cover single months or four-week period may often be materially influenced positively and/or negatively by promotions or other trading factors during those periods.So, now we are going to turn to sales and the segments. Net sales for the Monster Energy Drinks segment for the third quarter of 2019, which include Reign increased 13.5% from $935.1 million to $1.06 billion from the comparable period in 2018.Net sales for the Monster Energy Drinks segment in the third quarter of 2019 were negatively impacted by approximately $10.8 million of foreign currency movements. Without these foreign currency movements net sales for the Monster Energy Drinks segment for the quarter would have been up 14.7%.The comparative net sales in the 2018 third quarter included approximately $16 million in net sales with advanced purchases as a result of the price increase in the United States by uncertain about products effective November 1, 2018. Adjusting for these advanced purchases and foreign currency movement net sales for the Monster Energy Drinks segment for the 2019 third quarter would have been up 16.6%.Net sales for the Strategic Brands segment which includes Predator Affordable Energy brand was $66.3 million for the third quarter as compared to $74.4 million in the same quarter in 2018. Net sales for the company’s Strategic Brands segment in the third quarter of 2019 were negatively impacted by approximately $1.4 million of foreign currency movement.Net sales for the Other segments, which includes third-party sales made by AFF were $5.9 million in the third quarter, as compared to $6.6 million in the same quarter in 2018.Net sales to customers outside the United States were $379.8 million, that’s 32.5% of total net sales in the 2019 third quarter, compared to $283 million or 28.6% of total net sales in the corresponding quarter in 2018. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $12.2 million. Included in reported geographic sales are our sales to the company’s military customers, which are delivered in the U.S. and trans-shipped to the military and their customers overseas.Now, we turn to sales in EMEA, in EMEA supply chain and production issues have largely been resolved. In EMEA net sales in the third quarter increased 34.1% in dollars and increased 40.1% in local currencies over the same period in 2018.Gross profit in this region as a percentage of net sales for the quarter was 39.3%, compared to 41.3% in the same quarter in 2018. Gross profit percentage for the region was impacted by country and product mix, as well as increases in manufacturing costs.We are also pleased that Monster continues to perform well and gain market share in Belgium, the Czech Republic, France, Germany, Great Britain, Greece, Ireland, Italy, the Netherlands, Norway, Poland, South Africa and Spain.Now turning to Asia-Pacific, in Asia-Pacific net sales in the third quarter increased 43.6% in dollars and 43.4%in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was 40.5% versus 44.1% over the same period in 2018 as a result of country and product mix. In Japan net sales in the quarter increased 60% in dollars and 55.5% in local currency. In South Korea, net sales increased 15.9% in dollars and 23.5% in local currency as compared to the same quarter in 2018.In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam net sales decreased 12.8% in dollars and 7.2% in local currencies, although, I would like to point out that Monster increased 4.5% in dollars and 10.7% in local currency as compared to the same quarter in 2018.Now turning to sales in Latin America and the Caribbean, in Latin America, including Mexico and the Caribbean, net sales in the third quarter increased 41.5% in dollars and 51% in local currencies over the same period in 2018.Gross profit in this region as a percentage of net sales was 44.0% for both periods. In Brazil net sales in the quarter increased by 80.2% in dollars and increased 82.3% in local currency. Net sales in Chile increased 70.9% in dollars and increased 84.2% in local currency in the quarter.So now turning to new products in North America, in United States, we launched Monster Mule Ginger Brew nationally, Reign Orange Creamsicle, Monster MAXX, Mango Magic and Monster MAXX Red-Red extra strength with zero sugar at the end of September. In October, we launched Java Monster Farmers Oats, which contains Oatmilk and is non-dairy and vegan, as well as two new flavors in the Reign brand family, Strawberry Sublime and Mango Magic. In 2020 in United States we will be discontinuing our Cafe Monster line of products and repositioning our Espresso Monster line.In Canada in the third quarter of 2019 we launched Monster Pacific Punch nationally in July, as well as Monster Mule nationally in September. During the third quarter of 2019 in Mexico we launched Pipeline Punch. During the third quarter of 2019 in Brazil, we launched Absolutely Zero, Ultra Violet, as well as Mango Loco,Now turning to new products in EMEA, Monster Pipeline Punch was launched in Bosnia, Bulgaria, Cyprus, Croatia, Greece, Poland and Slovenia in the third quarter of 2019, and is now available in 15 markets across EMEA. Espresso Monster was made available in six markets in EMEA, France, Great Britain, Germany, Norway, Spain and Sweden in both milk and vanilla variants during the 2019 third quarter. We also recently launched both variants in Belgium and Ireland in October 2019 and will launch both in Poland this month. We are pleased with the performance of Espresso Monster in EMEA.We are planning to rollout two flavors of Espresso Monster into further 12 markets in the fourth quarter of 2019 and throughout 2020. Additionally, we are looking to launch our new Salted Caramel Espresso variant in eight EMEA markets over the course of the fourth quarter of 2019 and 2020.Reign has launched in Sweden in the third quarter of 2019 and we are planning to launch Reign in the further two markets by the end of 2019. We are planning to launch Monster in Israel in the fourth quarter of 2019. We are planning to launch Predator, our affordable energy brand in Ethiopia, Kenya, Poland, Uganda and Zambia in the 2019 fourth quarter.Turning to new products in Asia-Pacific, we launched Monster Green in 500 milliliter resealable aluminum bottles in Japan during the 2019 third quarter. In Korea, we launched Pipeline Punch with initial positive results. We launched Ultra White in India and competed its rollout in Vietnam during the 2019 quarter. Ultra Paradise launched in Australia in July and in New Zealand in September, and Mango Loco was successfully relaunched in July after resolution of local production capabilities. We are planning to launch a number of products in Asia-Pacific over the upcoming months, including a full relaunch of Pipeline Punch in Japan in the spring of 2020.Now turning to balance sheet, cash and cash equivalents amounted to $717.6 million at September 30, 2019, compared to $637.5 million at December 31, 2018. Short-term investments were $597.4 million at September 30, 2019, compared to $320.7 million at December 31, 2018. Net accounts receivable increased to $648 million at September 30, 2019 from $484.6 million at December 31, 2018.Days outstanding for accounts receivable were 44.6 days at September 30, 2019, compared to 41.4 days at December 31, 2018. Inventories increased to $317.7 million at September 30, 2019 from $277.7 million at December 31, 2018. Average days of inventory were 62.1 days at September 30, 2019, compared to 67.2 days at December 31, 2018.Now we can talk a little about October 2019 gross sales. We estimate October 2019 gross sales to be approximately 7.3% higher than in October 2018. On a foreign currency adjusted basis, October 2019 gross sales would have been approximately 8.6% higher than comparable October 2018 gross sales.The comparative gross sales in October 2018 included advanced purchases as a result of the price increase in the United States on certain of our products effective November 1, 2018. Adjusting for these advanced purchases and foreign currency movements, we estimate gross sales for the month of October 2019 would have been approximately 14.6% higher than in October 2018.In this regard, we caution again that sales over a short period, 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, distribute incentives, as well as shifts in the timing of production in some instances, where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers, as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons.We reiterate that sales over a short period such as a single month or even two months should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period.Share repurchase programs, during the 2019 third quarter the company purchased approximately 4.3 million shares of common stock at an average purchase price of $58.60 per share, for a total of $254.3 million excluding broker commissions.As of November 6, 2019, approximately $36.6 million remains available for -- US$36.6 million remains available for repurchase under the previously authorized repurchase program. On November 6, 2019, the company’s Board of Directors authorize a new repurchase program for the repurchase of up to an additional $500 million of the company’s outstanding common stock.In conclusion, I’d like to summarize some recent positive points. Retail sales statistics for many countries around the world demonstrate that the energy category is continuing to grow and then Monster is generally going ahead of the category in line with the earlier periods.Number two, the new additions to the Monster family continue to add the company’s sales.Number three, we are excited about the prospects for our brands and our new product launches this year, as well as our innovation pipeline in 2024.Fourthly, we are encouraged by the prospects for Reign Total Body Fuel high-performance energy drinks, not only within the U.S. but looking further abroad.Number five, we are pleased with our growth and performance in our international markets. Net sales in the third quarter in EMEA increased 40.1% in local currency, in Asia-Pacific increased 43.4% in local currency and in Latin America and the Caribbean increased 51% in local currency. We reiterated the growth potential for us in China and India.And lastly, we are proceeding with our plans for future launches of Affordable Energy Drink brands internationally. We also proceeding with our plans for the launch of Reign Total Body Fuel high-performance energy drinks in certain countries outside of the U.S.I’d like to open the floor to questions about the quarter. Thank you.

Andrea Teixeira:

Thank you all, and Rodney, I wish you a fast recovery. And so you can help us with the positioning of the core Monster, which I understand correct, if I understand correctly was down 2.4% in all outlets and declined 5% in convenience. Do you believe that is related to the promotional environment of your main competitor or just a function of Reign gaining more shelf space? And how are you planning to react to that? Will you feel the need for more promotion for to become more promotion as well or you are just happy with the total performance? Thank you.

Hilton Schlosberg:

So just to add to what Rodney is saying, if you asked, if we are happy with the way things are, and obviously, we are not. We want to see the Monster brand growing. What we have evidence of is that the price increase has stuck. And when you will get our Q tomorrow and you can even see it, I think, in the release, that the promotional allowances are very much in line with where they should be and we are not over promoting.Having said that, I just want to reiterate that the category if you look back 52 weeks, the energy category has shown incremental growth per Nielsen of $1.3 billion. So this is a growing category and it’s a category that now has a new segment, which is performance energy and performance energy is growing within that category.And, as I look at some of our other competitors, and this is no defense, but as we look for example, even at Red Bull, which is growing and we mentioned on the call that it’s growing. The Red Bull core brands also not showing growth. The diet SKUs are and their additions are, but in general the Red Bull core brands are also not showing growth and are in decline. Having said that, we have got plans with our distribution, which has been a challenge to dramatically improve distribution and distribution on shelf and in the coolers.

Hilton Schlosberg:

And then one thing we really should -- turning back a few years for a moment, sorry. The one thing we really should not forget about is the unmeasured channels, which we have been absolutely emphatic about, our Food Service is unmeasured, Amazon is unmeasured, Costco is unmeasured, and a slew of other Home Depot and Lowes all of those channels are unmeasured. And the amount of sales that are going through those channels is really -- is a significant number.

Andrea Teixeira:

Thank you both.

Steve Powers:

Yes. Thank you. Maybe a little bit more on the U.S. Can you talk about growth in the quarter coming in a touch below 3% versus the Nielsen data over the course of the quarter pointing closer to 6%? I think we all know you had tough comparisons in the year ago quarter, but at the same time, there was an extra selling day this quarter. And so just how do you think about that 3% number in light of those factors, building on Andrea’s question? And then if I could related question, building on what you just said, but in the context of Coke Energy, and I think, that we all appreciate what you and Coke have each said about the intended interplay between Monster and really Monster and Reign and Coke energy and that they are targeted different consumers and designed to minimize cannibalization risk, but given that they will be going through common distributors, just how confident are you that those new Coke SKUs won’t take away from some of your smaller SKU use whether Monster Reign, NOS, Full Throttle or otherwise, rather than having them successfully fine incremental space in the cooler or take away from competition distributed by others? Thanks.

Rodney Sacks:

Now as regards to Coke Energy. I think that most of the analysts are very up-to-date and astute on analyzing Nielsen well. They should be looking and analyzing Nielsen around the world and that would give everybody their own view on what’s been happening with the rollout of Coke Energy around the world.We have seen the brand rollout and we have also seen the rate of sale, not keeping pace with initial sales, the percentage market share has been small and hasn’t really had an impact on us. The main impact that I think we will repeatedly said is that we did have concerns or is the sort of noise and in the market and focus from divergence of focus. But ultimately, in Europe, things are settling down, our growth rates of our brands are on track and have continued.And I think that by and large, the Coke system has pretty much focused on not trying to cannibalize our existing products and take pricing from us and it has worked reasonably well. There have been a few countries where there have been some challenges and we have addressed them.So, again, we don’t know, we can’t tell what Coke Energy will be in the United States. It’s formulated little differently. It’s a little different in sizes. There are two variants. But, ultimately, we think that, we just need to manage the lack of focus or conflict of focusing from to bottlers. Ultimately, we don’t think it will have a major impact on our brand and we will manage it and going forward how you feel.

Rodney Sacks:

We don’t know what the U.S. will be, it’s own market. And so we will see how things go and we will manage it.

Mark Astrachan:

Thanks. Good afternoon, everyone. And Tom, good to hear from you on the call today.

Mark Astrachan:

There it is again. So, I guess, I wanted to ask about gross margin. International continues to be a bit of a sore spot there. U.S. again continued to be pretty good. So you touched on some of the supply chain issues and EMEA having been resolved and kind of talking directionally to stabilization or at least that’s maybe my interpretation of it. LatAm was obviously flat in gross margin. So is the worst behind you at this point. You have anymore visibility on that, I am not asking for guidance. I love a personal point of view, kind of how we should all think about that since I think it’s one of those areas that is a bit more of a black box than others. So any help there would be a appreciate it?

Rodney Sacks:

I think that the only thing I would like to add to that is -- very briefly is that, in the international market, there are a lot of markets that we have had to traditionally shipped into many markets, so many countries from other countries.We have -- and as we continue to expand and have sufficient volumes in countries, we are all switching to local production in those countries. We have opened up quite a number of additional production facilities in Europe this year and have got a number -- a large number going forward, and as we go forward, we think that will certainly help our margins internationally as well. But, at this point we just don’t think there is any numbers we can point you to.

Rodney Sacks:

Yeah. We will also address some of the challenges we had last year and a little bit this year even in out of stocks and where we have increased demand for particular products, we had very long lead times in order to ship ingredients to pack us to try increased volumes this will obviously improve those efficiencies and will help us going forward. So that’s been a -- we think we are very excited about the fact that that will help us in the whole of the EMEA and Middle East and Africa.

Hilton Schlosberg:

So thank you. You got my name right. We tested them before that, so well done on that. Thank you. On behalf of Monster, I’d like to thank everyone for their continued interest in the company. We continue to believe in what we are doing in the company and our growth strategy and remain committed to continue to innovate, develop and differentiate our brands and expand the company both at home and abroad, and in particularly expand distribution of our products to the Coca-Cola bottler system internationally. We always excited by the new opportunities that we have going forward with a portfolio of energy drink products throughout the world, comprised of our Monster Energy brand together with our strategic brands as well as Hydro, Predator and Reign and the new innovation plan for 2020. Thank you very much for your attendance.

Rodney Sacks:

Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sacks. Hilton Schlosberg, our Vice Chairman and President, is with me today; as is Tom Kelly, our Executive Vice President of Finance.Before we begin, I'd like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance, and trends.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 forward-looking statements made during this call.Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed on February 28, 2019, and our most recent quarterly report on Form 10-Q filed on May 3, 2019 including the sections contained therein entitled Risk Factors and Forward-looking Statements, for a discussion on specific risks and uncertainties that may affect our performance. The Company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.An explanation of the non-GAAP measure of gross sales and certain expenditures, which may be mentioned during the course of this call, is provided in the notes and designated with asterisks in the condensed consolidated statements of income and other information attached to the earnings release dated August 7, 2019.A copy of this information is also available on our website at monsterbevcorp.com in the Financial Information section. Consumer beverage preferences and tastes are continuing to evolve, and we are endeavoring to address them through our ongoing innovation of new products.In the second quarter of 2019, net sales were $1.1 billion, up 8.7% from $1.02 billion in the second quarter of 2018. Net sales in the second quarter were negatively impacted by approximately $25.9 million of foreign currency movements. Without these foreign currency movements, net sales for the quarter would have been up 11.2%.Gross profit as a percentage of net sales for the 2019 second quarter was 59.9% compared with 61.1% in the 2018 second quarter. For the quarter ended June 30, 2019, gross profit as a percentage of net sales was positively affected by increased sales prices of our products sold in the United States and Canada, as well as by reduced aluminum costs. Gross profit as a percentage of net sales were primarily negatively affected by geographical and product sales mix and increases in certain input costs.Distribution costs as a percentage of net sales were 3.4% for the 2019 second quarter as compared to 3.7% in the 2018 second quarter. Selling expenses as a percentage of net sales were 11.2% for the 2019 second quarter as compared to 11.4% in the same quarter in 2018. General and administrative costs as a percentage of net sales were 10.9% for the 2019 second quarter as compared to 10.7% in the same quarter in 2018. In the quarter, payroll expenses as a percentage of net sales were 6.6% compared to 6.5% in the same period in 2018.Payroll costs increased $7.4 million in dollars, primarily due to headcount growth, both domestically and internationally as well as an increase in payroll taxes. Stock-based compensation, which is a non-cash item, was $15.6 million in the second quarter of 2019 compared to $14.9 million in the same quarter in 2018.Our effective tax rate decreased from 24.6% in the 2018 second quarter to 23.4% in the 2019 second quarter. The decrease in the effective tax rate was primarily due to the increase in profits earned by certain foreign subsidiaries in lower tax jurisdictions than the United States.Net income was $292.5 million in the 2019 second quarter, compared to the net income of $270.1 million in the 2018 second quarter and increase of 8.3%. Diluted earnings per share for the 2019 second quarter increased 11.9% to $0.53 from $0.48 in the second quarter of 2018.We continue to make good progress in the implementation of our strategic alignment with Coca-Cola Bottlers globally. We transitioned the distribution of Monster Energy drinks from Big Geyser's territory, which is located in New York metro markets to Liberty Coca-Cola in early April 2019. As of April 6, 2019, the United States has fully transitioned to Coca-Cola network bottlers. In the second quarter of 2019, Monster Energy was launched by Coke Bottlers in Azerbaijan, Paraguay, and Saudi Arabia.We are planning further international launches later this year. We launched Predator, our affordable energy brand in the second quarter of 2019 in certain markets in Europe, namely Greece, Bulgaria, and Cyprus. We are planning to launch prototype connected additional markets in Eastern Europe, Central Asia, the Middle East and Africa throughout the second half of 2019.In China, we completed the rollout of Monster Ultra in the second quarter and also launched Monster Mango. We have significantly expanded our shelf space for Monster with three SKUs in our targeted top 40 cities and key accounts. We continued the rollout of Monster across India, and are planning additional SKU launches in India later in 2019.I will now briefly discuss arbitration with the Coca-Cola Company and litigation with Vital Pharmaceuticals, Inc., VPX, the maker of Bang energy drinks. As we have previously disclosed, in October 2018, Monster Beverage Corporation and the Coca-Cola Company mutually agreed to submit to arbitration the issue of where that Coca-Cola is permitted to manufacture, market, sell, or distribute energy drink products, it had developed under the Coca-Cola brand.On June 28, 2019, the arbitration panel issued a final awarding in favor of Coca-Cola. Regardless of this outcome, Monster and Coca-Cola value the relationship and look forward to continuing their partnership.I've also previously addressed the lawsuit filed against VPX in September 2018 for false advertising and VPX’s trademark lawsuit against Monster filed in March, 2019, but proceedings are ongoing. In one of the court filings in May, 2019, we stated that sales of Reign beverages from June through December 2019 were projected to exceed $235 million.Our sales of Reign [ph] for June and July was solid as illustrated by the Nielsen numbers were lower than our initial expectations. As any new product launches, sales may be affected by many factors, including authorizations, the date or dates on which listings are secured for products with major retailers and introductions of new flavors. The Company has not changed its practice with respect to projections and will not be providing projections with respect to Reign or any other products.As our litigation with VPX is subjugated, we will not be answering questions on this matter on today's call. According to the Nielsen reports, for the 13 weeks through July 27, 2019, all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category including energy shots, increased by 9.9% versus the same period a year-ago.Sales of the Company’s energy brands including Reign grew 5.6% in the 13-week period. Sales of Monster were down 1.4%; sales of NOS decreased 0.6%; and sales of Full Throttle decreased 12.7%; sales of Red Bull increased 4.6%; sales of Rockstar decreased by 14.4%; sales of 5-Hour decreased 8.1%; and sales of Amp decreased 48.1%.A there were no comparable sales of our Reign products last year, we have not included Reign in the about statistics. According to Nielsen, in the four weeks ended July 27, 2019, sales in the convenience and gas channel, including energy shots, in dollars increased 8.1% over the same period the previous year. Sales of the Company’s energy brands, which include Reign grew 4.7% in the four-week period in the convenience and gas channel.Sales of Monster decreased by 3.9% over the same period versus the previous year, NOS was down 1.5%, and Full Throttle was down 11.4%. Sales of Red Bull were up 3.3%, Rockstar was down 18%, 5-Hour was down 10%, and Amp was down 40.9%.According to Nielsen, for the four weeks ended July 27, 2019, the Company’s market share of the energy drink category in the convenience and gas channel, including energy shots, in dollars decreased by 1.3 points over the same period the previous year to 41.1%. Monster share decreased 4.2 share points to 33.5%, Reign’s share was 3.4%, NOS' share declined 0.3 share points to 3.5%, and Full Throttle's share declined 0.2 points to 0.7%.Red Bull's share decreased 1.6 points to 33.7%, Rockstar share was down 1.6 points to 4.9%, 5-Hour share was lower by 1.1 points at 5.4%, and Amp share decreased 0.3 of a point to 0.4%. VPX Bang's share was 8.1%. According to Nielsen, for the four weeks ended July 27, 2019, sales of coffee plus energy drinks, which includes Caffe Monster and Espresso Monster, in dollars in the convenience and gas channel increased 9.8% over the same period the previous year.Sales of our Java Monster alone were 6.6% higher than in the same period the previous year. Sales of our other coffee plus energy drinks were 3% lower, while sales of Starbucks Energy were 18.3% higher. Our Company's share of the coffee plus energy category, which includes Java Monster, Caffe Monster, Espresso Monster, Starbucks Double Shot and Rockstar Roasted, for the four weeks ended July 20, 2019, was 49.1%, down 6.5 points.Java Monster's share on its own for the four weeks ended July 27, 2019, was 43.9%, down 1.3 points, while Starbucks Energy share was 47.7%, up 3.4 points. According to Nielsen, in the community and gas channel in Canada, for the 12 weeks ended June 22, 2019, the energy drink category increased 4% in dollars. Monster brands sales increased 9% versus a year ago.Monster's market share increased 1.3 share points to 33.6%. NOS' sales decreased 4% and its market share decreased 0.1 of a share point to 2.6%. Full Throttle's sales decreased 17% and its market share decreased 0.3 of a point to 1.2%. Red Bull's sales increased 2% and its market share decreased 0.6 points to 36.9%. Rockstar's sales increased 2% and its market share decreased 0.6 points to 16.6%. According to Nielsen, for all outlets combined in Mexico, the energy drink category grew 12.6% during the month of June 2019. Monster sales increased 11%.Our market share in value decreased 0.4 of a point to 28.6% against the comparable period in previous year. Sales of Burn were down 33.8%. Burn's market share decreased 0.6 points to 1.9%. Red Bull's sales decreased 2.9% as market share decreased by 1.3 points to 8.2%.Vive 100 sales increased 12.5% and its market share remained the same at 38.2%. Vault's sales increased 56.2% and its market share increased 4.5 share points to 16.1%, while Boost's sales increased 4.7% and its market share decreased 0.5 of a point to 7.2%. Amp and affordable energy brand launch in March increased its market share to 6.2% in June 2019.The Nielsen statistics for Mexico cover single months, which is a short period that may often be materially influenced positively and/or negatively by sales in the OXXO convenience chain, which dominates the market. Sales in the OXXO convenience chain in turn can be materially influenced by promotions that maybe 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.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 also are reported on varying dates within the month referred to from country-to-country.According to Nielsen, in the 13-week period ended July 2019, Monster's retail market share in value as compared to the same period the previous year grew from 12.2% to 12.7% in Belgium, from 22.1% to 27.4% in France, from 19.5% to 20.9% in Great Britain, and from 7.2% to 7.3% in the Netherlands, from 17.8% to 24.5% in Norway, and from 30.3% to 32.5% in Spain.According to Nielsen, in the 13-week period ending June 2019, Monster's retail market share in value, as compared to the same period the previous year grew from 16% to 16.1% in Germany, from 11.2% to 14.3% in Poland, from 14.8% to 16.5% in South Africa, and from 12.6% to 12.8% in Sweden.According to Nielsen, in the 13-week period ending May 2019, Monster's retail market share in value as compared to the same period the previous year grew from 12.6% to 13.4% in the Czech Republic, from 31.8% to 34.7% in Greece, from 14.6% to 17.8% in Ireland, and from 14.3% to 18.5% in Italy.According to Nielsen, for the month of June 2019 in Chile, Monster's retail market share in value increased from 34.2% to 37.4% compared to the same period the previous year. According to Nielsen in Brazil, Monster's retail market share for the month of June 2019 increased from 17.9% to 22.6% as compared to the same period the previous year. We launched Monster Energy in Argentina in mid-February 2018.According to Nielsen, for the month of June 2019, Monster's retail market share in value increased from 12% to 25.4% compared to the same period the previous year. According to IRI in Australia, Monster's market share in value for the four weeks ending June 30, 2019, increased from 7.7% to 9.3% as compared to the same period the previous year.Mother's market share in value increased from 14.3% to 14.5% during the same period. According to IRI in New Zealand, Monster's market share in value for the four weeks ending June 30, 2019, increased from 6% to 7.7% as compared to the same period the previous year.Lift Plus market share in value decreased from 10.6% to 8.4% and Mother's market share in value increased from 6.2% to 6.6%. According to Nielsen in South Korea, Monster's market share in value in all outlets combined for the 13-week period ended June 30, 2019 grew from 34.8% to 38.6% as compared to the same period the previous year.According to INTAGE in Japan, Monster's market share in value in the convenience store channel for the 13-week period ended June 30, 2019 grew from 48.7% to 53.3% as compared to the same period in the previous year. We again point out that in certain market statistics that cover single month may often be materially influenced positively and/or negatively by promotions or other trading factors during those months.Net sales for the Monster Energy Drinks segment for the second quarter of 2019 which includes Reign increased 9.6% from $929 million to $1.02 billion from the comparable period in 2018. Net sales for the Monster Energy Drinks segment in the second quarter of 2019 were negatively impacted by approximately $22.1 million of foreign currency movements.A net sale for the Strategic Brands segment, which includes Predator, our affordable energy brand was $79.1 million for the second quarter as compared to $79.8 million in the same quarter in 2018. Net sales for the Company's Strategic Brands segment in the second quarter of 2019 were negatively impacted by approximately $3.8 million of foreign currency movements.Net sales for the other segment, which includes third-party sales made by AFF were $5.8 million in the second quarter as compared to $6.6 million in the same quarter in 2018. Net sales to customers outside the U.S. were $343.3 million or 31% of total net sales in the 2019 second quarter, compared to $293.8 million, which is 28.9% of total net sales in the corresponding quarter in 2018. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $25.9 million.Included in reported geographic sales are our sales to the Company's military customers, which are delivered in the U.S. and transshipped to the military and their customers overseas. In EMEA, supply chain and production issues were considerably reduced versus previous quarters, but still continue to effect performance in the second quarter. As mentioned earlier, our Nielsen growth rates and market share continues to be strong in the territory.We are continuing to managing through and reduce these supply chain and production issues. Certain of our co-packers that contributed in part to these issues are back on track. Furthermore, we have secured and are continuing to securing additional production capacity.In EMEA, net sales in the second quarter increased 10.9% in dollars and increased 21.1% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales for the quarter was 39.5% compared to 43.8% in the same quarter in 2018.Gross profit percentage for the region was impacted by country and product mix, as well as increases in manufacturing costs. We are also pleased that Monster continues to perform well and gained market share in Belgium, Czech Republic, France, Germany, Great Britain, Greece, Ireland, Italy, the Netherlands, Norway, Poland, South Africa, Spain and Sweden.In Asia Pacific, net sales in the second quarter increased 35.1% in dollars and 41.5% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was 43.6% versus 49% over the same period in 2018, as a result of country and product mix.In Japan, net sales in the quarter increased 33.5% in dollars and 37.8% in local currency. In South Korea, net sales increased 38.8% in dollars and 48.6% in local currency as compared to the same quarter in 2018.In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 5.1% in dollars and 13.4% in local currencies.In Latin America, including Mexico and the Caribbean, net sales in the second quarter increased 22.9% in dollars and 34.7% in local currencies over the same period in 2018. Gross profit in this region as a percentage of net sales was 43.3% versus 47.4% over the same period in 2018, largely due to increases in cost of goods affected by adverse foreign exchange rates and country mix.In Brazil, net sales in the quarter increased by 97.7% in dollars and increased 126.8% in local currency. Net sales in Chile decreased 2.4% in dollars, but increased 8% in local currency in the quarter.Our new product launches in the U.S. largely took place in the first quarter of 2019. We plan to launch a number of products in the United States later this year, namely Monster Mule, Reign Orange Creamsicle, Reign Strawberry Sublime and Reign Mango magic as well as Monster MAXX Mango magic and Monster MAXX Red-Red extra strength with zero sugar. As well as a new innovative Java Monster Line extension. The details of which will be revealed at a later date.We launched Monster Pacific Punch in May with the convenience chain customers as a first to market exclusive in Canada with a national launch in July 2019 and also launching Monster Mule later into 2019 in Canada. In Mexico, we launched Monster Mango Loco in April 2019. During the second quarter of 2019 we launched Monster Pacific Punch in the Caribbean and extended our range in Puerto Rica. We also launched Predator in Trinidad in May 20, 2019.In the second quarter of 2019, we launched Monster Mango Loco in several countries across the EMEA. Monster Mango Loco is now available in 31 EMEA markets. We continue to launch different Monster Line extensions and our strategic brands in several countries across EMEA markets.Monster Pipeline Punch was launched in South Africa in the second quarter of 2019 and it will be launched in a further six markets in the second half of 2019. We also launched Espresso Monster and Espresso Monster Vanilla in France, Norway and Sweden. We are planning to expand the rollout of our Espresso Monster Line in Europe and we anticipate that Espresso Monster will be available in 29 countries in EMEA by the end of 2019.We are planning to launch Monster in Israel in the fourth quarter of 2019. We're also planning to launch Predator, our affordable energy brand in additional markets in EMEA and Predator should be available in 19 EMEA countries by the end of 2019. We launched Pipeline Punch in Japan in May for a limited period. We also want Mango Loco in Hong Kong, Macau and Taiwan and Ultra launched in Malaysia and Vietnam in the second quarter. We plan to launch a number of products in Asia Pacific later this year, including a full country launch of Pipeline Punch in Japan in the spring of 2020.Turning to the balance sheet. Cash and cash equivalents amounted to $888.3 million at June 30, 2019, compared to $637.5 million at December 31, 2018. Short-term investments were $358 million at June 30, 2019, compared to $320.7 million at December 31, 2018.Net accounts receivable increased to $688.2 million at June 30, 2019, from $484.6 million at December 31, 2018. Days outstanding for accounts receivable were 48.5 days at June 30, 2019, compared to 41.4 days at December 31, 2018. Inventories increased to $299.5 million at June 30, 2019, from $277.7 million at December 31, 2018.Average days of inventory were 60.9 days at June 30, 2019, compared to 67 days at December 31, 2018. We estimate July 2019 gross sales to be approximately 16.1% higher than in July 2018. On a foreign currency-adjusted basis, July 2019 gross sales would have been approximately 17.4% higher than comparable July 2018 gross sales. There was one more selling day in July 2019 than in July 2018.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 as shifts in the timing of production, in some instances, where our bottlers are responsible for production and unilaterally determine their production schedules, which affects the dates on which we invoice such bottlers as well as inventory levels maintained by our distribution partners, which they alter unilaterally for their own business reasons.We reiterate that sales over a short period such as a single month or even two months should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. During the 2019 second quarter, no shares repurchased under the previously authorized share repurchase program. As of August 7, 2019 approximately $520.6 million remained available for repurchase under our previously authorized repurchase programs.In conclusion, I'd like to summarize some recent positive points. Retail sales statistics from many countries around the world demonstrate that the energy category is continuing to grow, and that Monster is generally growing ahead of the category, in line with earlier periods.The new additions to the Monster family continue to add to the company's sales. We are excited about the prospects for our brands and our new product launches. We are encouraged by the prospects for our Reign Total Body Fuel high-performance energy drinks, and note that Reign launched at Wal-Mart last week. We are pleased with our performance in our international markets and reiterate the growth potential for us in China and India.We are continuing with our plans to launch Monster Energy drinks with Coca-Cola Bottlers in certain new markets. We are proceeding with our plans for future launches of our affordable energy brands internationally. We are also proceeding with our plans for the launch of Reign Total Body Fuel high-performance energy drinks in certain countries outside of the USA.I would like to open the floor to questions about the quarter. Thank you.

Caroline Levy:

Thanks and good afternoon.