Good day, ladies and gentlemen, and welcome to the Monster Beverage Corporation's Third Quarter 2018 Financial Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to introduce your host for today's conference, Mr. Rodney Sacks, Chairman and Chief Executive Officer. You may begin.

Good afternoon, ladies and gentlemen. Thank you for attending this call. I am Rodney Sacks. Hilton Schlosberg, our last Vice Chairman and President, is with me today; as is Tom Kelly, our Senior 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 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 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, 2018, and our Form 10-Q filed on August 9, 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 condensed consolidated statements of income and other information attached to the earnings release dated November 7, 2018. A copy of this information is also available on our website at monsterbevcorp.com in the Financial Information…

Austria.

Sorry, PET bottles in Austria and Monster Mango Loco in Germany. Sorry, thank you. In Australia, in the third quarter of 2018, we launched Monster Mango Loco and are in the process of launching Monster Pipeline Punch with a major convenience and gas retailer in Australia with a national launch planned for the first quarter of 2019. In October 2018, we launched both Monster Mango Loco and Monster Pipeline Punch in New Zealand. During the quarter, and in line with our agreement with The Coca-Cola Company, we transitioned the Lift Plus strategic brand in New Zealand to LIVE+ with three SKUs and new graphics. In the third quarter of 2018, we launched Monster Ultra Citron in South Korea and Monster Ultra in Taiwan and Hong Kong. We've implemented an approximately 4% price increase to our U.S. customers, effective November 1 for Monster Energy. We will implement a price increase for NOS and Full Throttle on January 1, 2019. We're planning a price increase to our Canadian customers, effective February 1, 2019, for Monster Energy, NOS and Full Throttle. We estimate that October 2018 gross sales to be approximately 18% higher than in October 2017. Gross sales for the month ended October 2018 were impacted by advance purchases by our customers due to the price increase, effective November 1, 2018, on certain Monster Energy drinks. We estimate that October 2018 gross sales would've been approximately 12% higher than in October 2017 without these advance purchases. On a foreign currency adjusted basis, October 2018 gross sales would've been approximately 14% higher than the comparable October 2017 gross 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…

Thank you. Due to time limitations, we ask that you keep your questions to one only. Our first question comes from Amit Sharma with BMO Capital Markets. Your line is open.

Hi. Good evening, everyone.

Hi, Amit.

Hi, Amit.

Rodney, can you provide a little bit more context into the energy drink brands being developed by Coca-Cola? How far along are they or any other information on it, please?

I think that we have some information, but we don't have full information. And I think that now that an arbitration has been filed between us to try and determine our respective rights, we just believe that it isn't appropriate for us to provide additional comments at this time. Our commercial business activities and relationship is continuing as in the past, and we are looking to just get a third-party determination for the correct interpretation of our respective rights.

Thank you. Our next question comes from Judy Hong with Goldman Sachs. Your line is open. Judy Hong - Goldman Sachs & Co. LLC: Thanks. Hi, everyone.

Hi, Judy.

Hi, Judy. Judy Hong - Goldman Sachs & Co. LLC: So, Rodney, just as a follow-up, just a quick follow-up on the last question. I mean, maybe if you could take a little bit of a step back and just kind of give your perspective on the relationship that's been evolving with The Coca-Cola Company. Obviously, the Mutant situation didn't also go as well as I think that you were hoping for. So kind of how do you see this changing your relationship with the KO, as well as the bottlers? So maybe just be helpful to just get your broader perspective. And then, more specifically, my other question is just really on the EMEA supply chain issues. I'm just wondering if this is limited to certain countries or this is really a broader regional issue. And whether this is being addressed as we speak, so we get more of a bump up in sales in the fourth quarter? It seems like we've been having some of these supply chain issues in international markets time-to-time. So how do we think about really more fully addressing the issue broadly? Thank you.

That's a lot for one question, Judy. Judy Hong - Goldman Sachs & Co. LLC: A follow-up, one was a follow-up.

Okay. On the relationship with Coke, I think our relationship is good and continues to be good. There is Coke, obviously, looking at their own portfolio and looking for where they believe they see opportunities and where their own BUs would look to expand their own portfolio. As we indicated in the call, there is an exception for certain products that are in the Coca-Cola brand and that is of itself an area that we are looking at. We have a difference of opinion on it. We don't know and at this point we don't think it's appropriate for us to speculate on if that comes to fruition, what effect that might or might not have on our brand. I mean, we continue to be partners with Coca-Cola and with the bottlers. We continue to have our full range sold by them. And we just don't think that at this point we'd be in a position or should be in a position to speculate on what effect that might happen. There will just be another product being sold by Coca-Cola bottlers, but the impact and effect on us would be something I think wouldn't be appropriate for us to deal with that. We don't believe it will have a majority impact on our relationship. We just believe we'll have to manage it in an appropriate way if and when it occurs. On the EMEA supply chain side, I think...

Sorry, Rodney. Maybe I could give a different perspective to Judy or a similar perspective.

Sure.

The relationship with The Coca-Cola Company, I believe, is good. And I'm not a lawyer, so I'm giving the response to you from a business perspective. There is an issue in an agreement, which we've agreed to go to arbitration civilly and determine what course of action is appropriate. So nothing has changed in the relationship. And the manner in which this situation will be dealt with will be conducted from both parties on a civil basis according to the agreement. So I honestly don't see any changes in the relationship with The Coca-Cola Company.

Sure. All right. On the EMEA supply chain side, it affected us through a number of plants in different areas, not obviously right through all of the – there are probably 70 or 80 countries that comprise EMEA, but there were a number of countries and a number of plants that did have supply issues for a whole host of reasons. We've taken steps to address this. We had a period of time when our previous Senior VP of Operations retired and we were looking for a successor. We have appointed a successor who is – he has got his feet on this desk and he's in the job, he's been out in Europe. We have also appointed a new VP of Operations in Europe to give us more hands on deck there. And so, we are looking at getting our hands around it. We are in the process of doing it at this point in time. Perhaps if you'd like to add some color to that?

No, I think that we've had issues. Remember, it was a very hot summer in Europe and a lot of the plants were working to capacity and beyond capacity. We've had certain issues, which are being addressed and will be addressed going forward. And the one thing is clear is that our business is growing, which is a good thing. And we have to ensure that we have sufficient capacity and sufficient plants to be able to accommodate our needs.

Thanks.

Thank you. Our next question comes from Vivien Azer with Cowen. Your line is open. Vivien Azer - Cowen & Co. LLC: Hi. Good evening.

Hi. Vivien Azer - Cowen & Co. LLC: So I was hoping to talk about your U.S. business and specifically the trends for your core Green Monster, where, at least in the Nielsen scanner data that we have, it does appear that there has been a modest softening in terms of the market share declines. So can you offer any color on whether there has been a change in your promotional strategy heading into the price increase or is this more interaction with new product offerings that are hitting the market? Any color there would be helpful. Thank you.

If I'm looking at the general market, Monster is continuing to increase its share. The category is growing and Monster is growing in excess of the market. If I look at regular Monster as such, I'm just looking, for example, at the main channel, which is convenience, there is still some growth in Monster in the original core line in its 16-ounce. And then, obviously, we have additional SKUs with the original Green Monster. So the core brand is continuing to grow. There has been the entry into the market of additional products, primarily probably in what we would maybe call or describe as a performance energy category or a workout fitness energy category or not even really maybe in that category. And there is some sales on that. There are a number of reasons that those products are all sort of starting to gain some traction. But if I look at the sales levels, they are still behind the increase in sales. So I think, overall, we are getting additional products in the category, but the category itself is continuing to grow.

So we're still seeing growth, Vivien, in Monster Green. It's continuing to grow. And remember, we've added a number of other SKUs into the portfolio on both juice products and the Ultra range, which is the no-sugar product. So while we are seeing growth in Monster Green, there has been as well the proliferation of other SKUs within our portfolio.

Yes. In that side, obviously on the coffee side, we are continuing to see growth in Java. We've just launched a line extension in Java. We have the Caffé Monster line and Espresso Monster again, that has continued to grow. On the Ultra line, which is growing, we do have plans to launch an additional Ultra in the spring, which will be launched, which is Ultra Paradise. So we are all continuing to see growth in the category. And we see additional entrants probably to some extent. We are not sure of the exact measurement at this point in time, but do see some increase in incremental sales coming into the category from these new entrants.

And Monster Green does remain a very important barometer for us.

Thank you. Our next question comes from Mark Astrachan with Stifel. Your line is open. Mark Stiefel Astrachan - Stifel, Nicolaus & Co., Inc.: Yes. Hey. Good afternoon, guys.

Hi, Mark. Mark Stiefel Astrachan - Stifel, Nicolaus & Co., Inc.: So I'm going to try the Coke thing again. You can answer or not, I guess. My understanding of the exceptions relate to the specific products or specific ingredients which is in there. So are we talking about a product in similarity to, say, a Kickstart from the Pepsi system, where it's effectively sort of a competitor, but not really? Are they adding some sort of caffeine component to some other beverage, which is a non-carbonated soft drink? I mean, any sort of color you can give on that, that would be helpful.

Mark, there isn't a limitation on them just adding caffeine. They could have a higher caffeine product, there's no limitation on that. There is, if you look at the agreement, which is filed, there are certain ingredients that are, if used in combination, obviously then create a definition. And there is a definition of what an energy drink is. The exception goes back to the Coca-Cola brand, not Sprite, not Kickstart, not any other brand, it's the Coca-Cola brand. And there are certain exceptions about what – because the Coke brand has certain – otherwise there would be certain limitations. And there is an exception for that brand. But I think that it's a long explanation. There are different analyses of what that means and what that entitles Coke to do under that brand. Again, if it was just a question of adding vitamins, well, then Coke would obviously add vitamins. There isn't an issue with that. But where the brand transcends into a product that we see positioned as an energy drink, that's where we have a difference of view on the exception and under the Coke brand. That is really where we are. I think there is not much more we could really add or more color we could give at this point in time. There is a section in the agreement that you guys could look up if you really had that interest. But we are dealing with it with Coke. And we think we will come to a resolution reasonably quickly as to what that exception means and how it should be implemented.

And just to add on that, Mark, what I said earlier, the discussions are very civil and very business-like, very civil. And it's a question of difference of opinion, which will be resolved in per the agreement.

Thank you. Our next question comes from Bill Chappell with SunTrust. Your line is open.

Thanks. Good afternoon.

Afternoon, Bill.

Just a little bit further on the gross margin, but for kind of the quarter and then going forward with pricing. Trying to understand, as we look, will this more than offset – I mean, can you hold gross margins relatively flat going forward? And when I say that, have we seen the full impact of costs in the third quarter? Or do you still have another kind of layer or step-up of cost input inflation that kicks in fourth quarter and 2019?

Well, what's interesting looking at aluminum and the tariffs and the imposition of tariffs were announced way after we had our discussion on this call about gross margins. So we've had this increase in tariff, which has resulted in increase of aluminum, which is slowly coming off, right? It's a very slow process. So we've also had extreme increases in freight-in in costs that we account for cost of sales, where product is moved to our co-packers or moved to our warehouses. That's all included in cost of sales. So we have had significant cost increases in that regard as well. So we have these cost increases. I think that the quarter that we've just experienced, I'm not seeing further increases in aluminum and I'm not seeing further increases in freight either, but anything is possible. Having said that, we will have price increase from November 1. And the other thing for sure is we will continue to have this ASC 606 adjustment, which we didn't have when we first spoke about the gross margin issue earlier this year. So it's kind of a mixed bag, with increases and cost increases, which is exactly why we were forced into having a price increase. So – but I hope that answers your question.

Yeah. I think I understand, but I guess it's more of, do you see any need for further price increases from here?

Well, we've announced a price increase in NOS and Full Throttle, which we spoke about on the call. We are proposing a price increase in Canada, which we discussed on the call. And where we are now with regard to price increases, I'm not sure we will – having implementing a price increase in November 1, I'm not sure there is runway to do it again within a short period of time unless costs dramatically and significantly increase from where they are today.

Yeah. At this point, we haven't sort of envisaged price increases in other places around the world, but I think that is something we will be evaluating and looking at the markets, the elasticity where we – if we can justify pricing. We'll evaluate that going early in the new year.

See, in the United States, we really are now the market leader. In the various countries around the world, we really price ourselves after Red Bull in most cases. And we don't want the difference between our pricing and Red Bull's pricing to be significantly out of whack.

Yes. Thanks. Next question?

Thank you. Thank you. That ends our Q&A session for today's call. I would now like to turn the call back over to Mr. Sacks for any further remarks.

Thank you. On behalf of the company, we'd like to thank everyone for their continued interest. We continue to believe in the company and our 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 to expand distribution of our products through the Coca-Cola bottling system internationally. We also particularly excited by the new opportunities 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, Mutant and, in particular, Predator. Thank you very much for your attendance.

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