Good day, ladies and gentlemen, and welcome to the Monster Beverage Corporation First Quarter 2019 Financial Results Conference Call. 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. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Rodney Sacks, Chairman and CEO. Sir, you may begin. 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, 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…

Thank you. [Operator Instructions] And our first question comes from the line of Stephen Powers with Deutsche Bank. Your line is now open.

Hey, guys. Thanks. I guess, it's worth asking about, but I guess maybe just start on your thoughts on U.S. pricing relative to the competition. And now that you've got your innovation out in the marketplace, should we expect to see incremental promotional dollars allocated to those initiatives? And I guess, how much do you think those initiatives will be allocated against Reign versus against the base Monster franchise? I guess, what I'm really asking about is, how much if at all do you think incremental promotional investment is likely to offset the list price increases you took late last year as you go forward throughout the balance of 2019?

Okay. Steve you will see that in this quarter when results that we actually improved promotional allowances in this quarter. So the promotional allowances are reducing. However in the next quarter we're planning and this is really planned, nothing to do with any sales or sales mixes, but we had already planned a BOGO which is a buy one get one ready to get Reign exuviated more intensively than it was in the -- with the launches. Part of the launching plan and you will see that happen in the second quarter. Apart from anything else, we are watching the market. We're watching Red Bull's crossing very carefully. And we'll make adjustments if we think it will have a long-term impact. However, what we see and you'll see that as well is the majority of Red Bull's growth is actually coming from innovation.

Okay. Great. So just a follow-up quickly. The big incremental innovation is tied to the launch of Reign which I think makes sense. And then now you have Ultra Paradise and some of your newer Monster SKUs in the marketplace. Any incremental promotion? It sounds like from your -- from what you just said, we should assume goes to those new innovations as opposed to -- against the base SKUs. Is that a fair way to think about it?

I'm not sure I said that. When we promote Monster, we promote the line. But what I did say was that with regard to Reign, you'll see a special promotion in the ensuing quarter which will be due to a previously planned BOGO which is buy one get one to really kickstart the launch of Reign.

Perfect. Okay.

During the quarter we will be -- we had some timing differences on our promotions last year in the first quarter where we didn't have the same depth of promotion this year. But going into the second quarter, we will be promoting Monster pretty much in accordance with the normal promotional schedule that we plan for summer.

I think Steve Kristen was -- because of the pricing the increased pricing it will be more access of coming on through this Monster.

Correct.

Yes. Okay. That's clear. Thanks guys.

Yes. Okay.

Thank you. And our next question comes from the line of Judy Hong with Goldman Sachs. Your line is now open.

Thank you. Hi, everyone.

Hi, Judy.

I guess, I wanted to ask about Reign more specifically whether or how much it contributed to 1Q sales as well as the April sales, because obviously there is a pretty big divergence in terms of the Nielsen numbers and your reported numbers? And then I guess more broadly on Reign, can maybe just talk a little bit more about the performance of the brand so far? How much do you think it take your share away from Bang versus maybe expanding the category? Or how much is sort of cannibalizing your brands? And how quickly do you think that we can to full distribution?

On the contribution of Reign, Reign contributed about $25.5 million of sales to the first quarter.

Net sales.

Net sales. Yes. We don't have the -- we're not going to go into the number in April that's just a -- we give the gross numbers as opposed to breaking that up. And I think Judy to answer the balance of your question I think it's just too early for us to tell exactly what is taking from what. You can see the numbers from Nielsen has been some affected since. Obviously, there is a new entrant and participant in the category. It's taking share from all the products. But ultimately we do believe that Reign will continue to increase itself and establish itself that is the reason why we're actually looking at the first promotion we got with Reign. It hasn't been promoted until now. And so you got to get the first promotion coming through in the second quarter on Reign. And we will continue to pull out. We did get some pretty good distribution initially from the Coke bottlers, but it will continue to hold out as we go into the second quarter.

Thank you.

Just to add to that Judy, it’s really the launch exceeded our expectation.

Thank you. And our next question comes from the line of Mark Astrachan with Stifel. Your line is now open.

Hey, afternoon guys.

Hi, Mark.

I wanted to ask a question on white space and opportunity for products. So you commented on Ultra being available in I think 38 EMEA markets. It got me thinking so, how do you think about U.S. innovation in terms of what the white space would be for existing franchises as well as just new franchises where you're putting the stuff on shelves. Meaning, it seems like Reign is getting on the new shelf. Is that fair? How do you think about the existing energy shelves? And then outside of the U.S., how do you think about taking successful innovation like Hydro, Java and taking it global. Where are you in the rollout of SKUs versus where it would be? Obviously, there is a lot of that and still maybe just kind of broader strokes of how you think about what the opportunity can be. I think that would be helpful.

I think you mentioned this Mark on previous calls, where the determination is made together with the local management about -- in each country thought which SKUs we should launch, which SKUs are appropriate to the consumer needs in that country. And there is a rollout which is dependent on opportunities and you've seen we've done that. I mean, on this call we mentioned a number of countries where we have launched additional SKUs. And we will continue to do so. But one thing we will not do is roll out all our SKUs in all our countries, because that's not a good approach to addressing the market. In China, for example, we already have three SKUs. We have the original Monster. We have Ultra. And we have Mango. So we have three SKUs now in China. And if you look at other countries we success for the -- and success we’ve done that. In EMEA, we've done that and we continuing to do that.

In most of these countries, we really are -- there isn't a cookie cutter sort of formula. We look at the countries. We obviously try and launch with Monster Green to establish the Monster brand, because that's what it's stands for. But from then on we look at the individual countries. They flavor preferences, and you'll find that our second or third SKU many countries differ from country-to-country. And then depending on the response we get. In some countries, we get really good response to Ultra. We then change the track and basically start to launch more of the Ultra product. And perhaps some years ago, we were launching more of the juice product. And so the order is changed a little bit. Mango has got very well received. Popcorn is being very well received. And so we really elevated those SKUs basically looking in some countries. There are some countries where we are finding directly there is a good reception to our Rehab line. Now Rehab, it may not go into that format. It may go in the form of a tea likers. Rehab has less meaning in foreign countries than it has in the U.S. because of the origin of Rehab. But there is some opportunities for tea lines in some countries and we are looking at that into non-core. And as you've been seen we have taken the step also some testing to look at coffee. In Europe we think that market is -- we're going to expand that market with Espresso. And we're also looking at some other potential coffee products into the UK market. Again looking at shelves and keeping abreast of growth and innovation. In those markets, we do see good opportunities for that. And once we look at that, and again reach the…

And Mark, to reinforce that earlier comment that certain flavor profiles that do really well overseas and don't do well in the U.S. For example, one of my favorite Monster products is the Ultra Citron. And a decision was taken that we would probably should discontinue it in favor of other Ultra products. And that Ultra Citron has been launched in the bunch of international countries Japan, Korea and a bunch of countries across Europe because of its less sweet profile. So each country will determine -- with obviously with direction from the Senate, the product that best suit the consumer needs in those countries.

Just to add, I think it hasn't been launched yet in Japan or Korea.

Thank you.

It has.

Between us they are not certain with…

I believe it has. Yes.

Okay.

And again…

Yes.

The concept that a major product that will see in other countries that we may not even launch in the U.S. or they may launch in, they just -- we discontinued in the U.S.

Yes, agreed.

Thank you. And our next question comes from the line of Amit Sharma with BMO Capital Markets. Your line is now open.

Hi. Good afternoon, everyone.

Hi.

Rodney if we take Reign out from Q1 sales and look at the rest of the US portfolio around 4.2 - growth, all right. And most of that coming from pricing? And you talked about that you will watch Red Bull price like at what point do you get worried about the volume performance of the core Monster brand in U.S. and not just price accordingly?

I think we've got a whole beverage portfolio. And you're going to take the portfolio as a whole in time. I think that we did mention I think earlier that for timing reasons they were certain promotions that we've done last year that fairly to earlier periods where we had some Nielsen updates that didn't get repeated this year. They are falling into -- probably into the second quarter now. So we – overall, we are comfortable with the brands. There is a sort of change going on in the industry at the moment. There's a change in – obviously, finding shelf space, people are trying some of these new high-performance drinks. We think a lot of that will stop. The noise will stop settling down. We think there will be growth. Overall, we're still -- we're comfortable with our innovation. Ultra Paradise is now got on to shelves and is really doing well. Innovation in coffee. The Swiss coffee is doing well. We have additional innovation planned in the months to line later in the year. And so we are comfortable that overall we will continue to grow.

Yes. Amit just remember that our launches took place February the 21st for Hydro. So there's two new flavors in seven 50. For Java the Swiss Chocolate; for Ultra Paradise, last Snapple that is all February the 21st. And in March the 21st, we had Reign and we had Dragon Tea. So the launches took place really towards the end of the quarter. And -- but as I said earlier, we will be monitoring Red Bull and we'll take whatever steps necessary to ensure that the business continues to grow.

Thank you. And our next question comes from the line of Laurent Grandet with Guggenheim Partners. Your line is now open.

Yes. Good evening Rodney and Hilton. Congrats on a strong quarter. I would try to have a second shot at Crane, because we don't have so much, I mean, Nielsen reliable numbers for now. So I think you said Reign was representing about 2.5% in the last week of April when Bang was about 8.3% I guess…

Correct.

Yes. That's correct, yes. So it seems like

The Market share yes.

Market share in convenience.

Market share, yes, in market share. So it seems like since you had those two, it feels like a 23% of the new – rain represent about 22% of the new category. That's a great result just after six-week especially as you are roughly in just half of those stores, Bang is available and why you can't? So do you have any qualitative feedback at least from retailer in terms of sales especially in stores that sell Boost, Bang and Reign that you could share with us that would be helpful? Thank you.

Well, we've got some information from some of our major convenience retail partners on SKUs – competitive SKUs. And they are trending by and large at a higher percentage than is shown in the Nielsen numbers. But because of the fact that we bought and it's not something that we generally go into and verify as carefully, we don't want to quote them on this call. But we do -- the numbers we are seeing out of the top change is showing a higher comparable number, which is positive for us and I think we just got to be a bit patient and wait for the numbers to start coming through generally. And then we'll start seeing the south point as well as the distribution overall.

Thank you. And ladies and gentlemen, this concludes today's Q&A session. I would now like to turn the call back over to Rodney for any closing remarks.

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. Any particular spend distribution of our product through the Coca-Cola Bottlers system international. We are also particularly excited about 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, Mutant, Predator and Reign. Thank you very much for your attention and attendance.

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