Good day, ladies and gentlemen, and welcome to the Monster Beverage Corporation First Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a Q-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Rodney Sacks, Chairman and CEO. Sir, you may begin.

Hi. 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 Senior Vice President of Finance. 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 and Exchange Act of 1934 as amended, and which 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 segments 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, 2018, including the sections contained therein entitled Risk Factors and Forward-Looking Statements for 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 consolidated statements of income and other information attached to the earnings release dated May 8, 2018. A copy of this information is also available on our website at monsterbevcorp.com in the Financial Information section. Growth in the beverage industry globally continues to be…

Thank you. Our first question comes from the line of Vivien Azer from Cowen. Your line is now open. Vivien Azer - Cowen & Co. LLC: Hi. Good afternoon.

Hi. Afternoon. Vivien Azer - Cowen & Co. LLC: So, Hilton, I know you say you don't give guidance, but you did offer some kind of personal color on the fourth quarter call around expectations for gross margin where I think – where you guys settled out in the first quarter did fall short of that and I think will prove to be disappointing to investors. So can you just help talk us through where, relative to your fourth quarter commentary, gross margin missed your personal expectations? Thank you.

Sure, sure. In the last conference call, I did give my personal views on percentage gross margins going forward. I said that while the company does not give guidance, my personal view was to use the gross margin for the 2017 fourth quarter of 62.1% going forward. There are, of course, many factors that go into gross margin, some of which are one-off costs and some of which may well be ongoing as we experienced in Q1. Looking forward, again, the company does not give guidance. But it is important to bear in mind what's happening with aluminum, which can fluctuate significantly even within a day. The Midwest, premium, freights, fuel issues, promotional allowances, geographic sales mix, domestic product sales mix, continuing investments in China and India, and so it's extremely difficult to talk about a sustainable gross profit margin percentage when there are many non-controllable factors. So we really are not in a position to give any further guidance on gross margins. On the other hand, we are continuing to progress production efficiencies and we continue to review pricing on an ongoing basis.

Thanks. And our next question comes from the line of Dara Mohsenian from Morgan Stanley. Your line is now open. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Hey. Good afternoon, gentlemen.

Hi, Dara. Dara W. Mohsenian - Morgan Stanley & Co. LLC: So, Hilton, following up on that comment on pricing, I guess we've seen price increases in this category during times of margin pressure in the past. And given the significant gross margin depression the last couple quarters and the continued commodity cost runoff, do you think you might look to take price increases in the U.S. at some point? And how do you guys think through the puts and takes of taking price increases? Thanks.

What I said was we continue to review pricing on an ongoing basis, and we do this irrespective of margin pressures. Obviously, when we do have margin pressures, it's something that surfaces again, and it's something that we are continually reviewing. And more than that, I just don't want to say at this time. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Okay. And then could you guys talk about the health of the energy drink category in the U.S.? You mentioned weak beverage growth trends in general across the sector, but seemed more positive on the energy category. So where do things stand there and any worries about the potential impact on gas, convenience from the rising gas prices?

Last year, sort of, I think the whole industry was at a bit of a loss to understand why the convenience category had been growing, which had historically grown ahead of all markets, had sort of changed and started to slow down. What we're starting to see now is that the convenience category has really come back and is now growing ahead of the all measured channels. And so I think that we are starting to see this trend, which is quite encouraging. So I think we referred to some of the numbers. I'm just trying to think. The convenience was up 4.6% in the last 13 weeks, and I think it was up a little higher in the last five weeks.

5.6%.

5.6%. So it certainly is moving in the right direction and starting to solidify and gain traction again.

And our next question comes from the line of from Andrea Teixeira from JPMorgan. Your line is now open.

Thanks. Good afternoon.

Afternoon.

Hi. So could I go to the international? Can you speak about international growth? Because if you exclude the 2% inventory benefit that you highlighted in the January sales, it seems that your underlying sales internationally could have decelerated again to the high-single digit range. Is that what we should expect for a normalized rate of growth going forward?

Well, I don't think it's gone down to the high-single digits, and I think we did explain and drew the distinction in the markets to some of the geographic sales mix which also affected sales. If you look at the figures we gave you for Strategic Brands, which was down in dollars and marginally up, that has had a drag on our sales. The Monster sales internationally are still continuing to grow on quite a healthy basis.

And our next question comes from the line of Pablo Zuanic from SIG. Your line is now open.

Thank you. Hilton and Rodney, look, I just want some big picture comments in terms of gross margins. I mean, a number of companies in the industry are facing what they call cyclical gross margin issues with aluminum lags and increasing prices. In your case, it seems to me that you face secular issues also going from single cans to pack sizes in the U.S., growing faster overseas than domestically. I mean, in China, your prices are much lower. So I don't know if it's possible, but if you could just help us understand in terms of these declining gross margins we're seeing, how much could we consider cyclical and how much will be secular? And the second question which is related to this. Other companies like, say, Buffalo, their gross margin story will be that they will bring in a lot of production in-house from third-party manufacturers. In your case, I've never really understood if there is such a story. I mean as you move distribution to the Coke system, is there an opportunity there to also shift production, or those bottlers were already producing your products? So just help us understand how much leeway or opportunity you have there in terms of structural changes that could help profitability and gross margins. And the very last one on the same topic...

Wait. Wait. Wait. You're now going on to the third question. We've lost track of the first one.

(37:19).

No, no, go on. We're supposed to have one question at a time. Okay. So let's just – let me just start with production. All of our products of Coke PET we have a finished product model that's not going to change. What will change is as we continue to align ourselves with the Coke bottlers, we will continue to increase production sites with those Coke bottlers in their countries and in their markets, which will have the effect of reducing costs, of reducing freight, reducing import duties, and so that will benefit and continue to improve. There isn't any plan to change that. In the Strategic Brands, they are already being manufactured by Coke because the model for the Strategic Brands segment is pretty much a concentrate model. Where there are some products in the Strategic Brands where the Coke bottlers can't manufacture them; for example, a 24-ounce cap can for NOS in the U.S., we then are selling that product on a finished product basis. And that accounts for a little bit lower product of gross margin for us because we're obviously in the one case selling concentrate at a higher margin and in the other case we are selling a finished product which does have a lower gross margin just because of the economics and the law of numbers. So that's on the margin side. So we will continue to achieve production efficiencies. We will lower costs by improving our production and increasing the number of plants. That is also particularly so with regard to the newer products like Hydro. As you know, we experienced some production increases in coffee product because we were having to import product. We are still importing Espresso Monster, but we are looking to convert that to local production, which will again – which will assist in costs. And as we start ramping up with Caffé Monster and others, we are looking to improve efficiencies in Hydro, which is really manufactured in the Northeast now. We're looking to – in bottles and in Carolina for the cans, we are looking to increase facilities coming on board which will reduce costs. Could you take the first question, Hilton?

I'm not...

You don't know what the first question was. Do you want to repeat your first question? Hello?

Our next question comes from the line of Judy Hong from Goldman Sachs. Your line is now open. Freda Zhuo - Goldman Sachs & Co. LLC: Hi. This is actually Freda Zhuo on for Judy. Thanks so much for taking my questions.

Hi. Freda Zhuo - Goldman Sachs & Co. LLC: So my question is actually on China. So I think if you look at some of the channel data, it seems as though category growth has kind of taken a step down in 2018 closer to the 10% range. Can you talk about what you're seeing on the ground in terms of what might be driving some of that slower category growth? And then I caught a comment that you guys were repositioning or perhaps targeting some of the younger, more affluent demographics. So is that impacting the price point that you're placing Monster at in the market? Thanks.

Okay. No, we're continuing with our price strategy, which was to remain competitive with Red Bull Gold, the Thai Red Bull. So that strategy is continuing. Our strategy is to maintain our products adjacent to Red Bull and to have what we call 3P execution, which is pricing competitive with Red Bull, point-of-sale, and position on shelf. So that is the target that we have set our bottlers, and we're moving forward in those accounts where we believe that we can achieve good sustainable sales. And our bottlers – I've just come back from China – have set themselves an objective of focusing and trying to achieve what we have succeeded and what we succeeded initially in the U.S. is to develop an energy shelf so that Chinese consumers can go to a shelf and select an energy drink. When our product is placed in a Coca-Cola cooler adjacent to a Coke and a Sprite, it doesn't help the consumer understand what the product is. So we are proceeding down our strategy, which we are supporting with a range of marketing media and social media. We've got a major computer game program that we are tying in with called Battleground, which is a significant property. We're moving forward on that strategy this year. So we always said that China would be a long-term development, and we're just staying the course.

Yeah. Just to – perhaps, if I would just add to that. Obviously, one of the challenges we're still having is the level of execution or quality of execution from the bottlers to execute the 3P that Hilton just alluded to, and that continues to be an ongoing challenge. We have seconded some of our key staff from the U.S. to really try and educate them and actually be able to really direct them and show them what we need to do. And we're confident that we will get it done, but it's a longer and harder road, and it will be achieved, and we will get there. With regard to the demographic, while we talk about the younger and more affluent, there hasn't been a change. In China, we have our product. It's carbonated. Our researchers indicated that younger consumers do prefer a carbonated product, and we've distinguished ourselves from Red Bull, which is a still product Thai Red Bull in China, and we believe that we're continuing with that strategy. The pricing is premium in that it's not as premium as our product in the rest of the world and it is aligned with Red Bull China, but that is at a premium to some of the other energy drinks and certainly soft drinks. So that just will continue and that continues to be our strategy. There's been no change in our strategy. The challenge is just again getting the recognition for Monster in China that is at a lower level because of the social media fact that you don't have as much access to – the consumer doesn't have access to Facebook and YouTube that they have around the rest of the world. And we are improving and, obviously, taking steps to start getting the consumer more familiar with us through the local social media companies that have the equivalent channels and programs in China.

And this ends the Q&A portion of the call. I would now like to turn it back to Rodney Sacks for any further remarks.

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 develop, differentiate our brand, 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 are also particularly excited about the new opportunities that we have going forward with the portfolio of energy drink products throughout the world comprised of our Monster Energy brand together with the Strategic Brands, as well as Hydro and Mutant. I hope to see you all at the Annual Stockholders Meeting in Corona on June 7, 2018, at 2:00 PM. Thank you very much for your attendance.

Ladies and gentlemen, thank you for your participation in today's conference call. This concludes today's program, and you may all disconnect. Everyone, have a great day.