MNST - NASDAQ

Good day, and welcome to the Monster Beverage Corporation Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Hilton Schlosberg, Vice Chairman and Chief Executive Officer. Please go ahead, sir.

Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Hilton Schlosberg, Vice Chairman and Chief Executive Officer. Also on the call are Tom Kelly, our Chief Financial Officer; Rob Gehring, our CEO of the Americas; Guy Carling, our CEO of EMEA and OSP; and Emelie Tirre, our Chief Strategy Officer. As you saw in the press release, these are new roles and responsibilities for Rob, Guy and Emelie and I would like to congratulate each on their new position and for their contribution to Monster's ongoing success. Mark Astrachan, our SVP of Investor Relations and Corporate Development, will now read our cautionary statement.

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 in Section 21E of 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, 2025 and quarterly reports on Form 10-Q, 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. I would also like to note that an explanation of the non-GAAP measures which we refer to as adjusted or applicable mentioned during the course of this call, is provided in the notes in the condensed consolidated statements of income and other information attached to the earnings release dated February 26, 2026. A copy of this information is also available on our website, www.monsterbetcorp.com in the Financial Information section. Please note that like last quarter scanner data, which was previously provided on earnings calls, is included in the exhibit filed with our 8-K. We point out that certain market statistics that cover single months or 4-week periods may often be materially influenced positively or negatively by promotions or other trading factors during those periods. I would now like to hand the call over to Hilton Schlosberg.

Good afternoon, and thank you for joining us. We are pleased to report another quarter of strong financial results and cash generation with net sales crossing the $2 billion threshold for the first time in the company's history for a fiscal fourth quarter. We gained share in many of our global markets in the fourth quarter, reflecting the success of our core offerings as well as our product innovations. Now just giving you an energy drink category update, the global energy drink category remains healthy with continued robust growth. We believe household penetration continues to increase in the energy drink category driven by functionality and lifestyle positioning, diverse offerings that appeal to an increasingly broad and loyal consumer base and affordable value offerings in addition to premium offerings. We believe our portfolio of existing and planned energy drink offerings is well positioned to participate in the growing global energy drink category, appealing to a broad range of consumers across geographies, price points, new states and dayparts. Innovation continues to be an important contributor to category growth, and we maintain a robust innovation pipeline. Our business continues to be supported by robust marketing programs, impactful retail engagement and our strong global partnership with the Coca-Cola Company and its global bottling partners. In the United States, according to Nielsen, for the recently reported 13-week period through February 14, 2026, sales in dollars in the energy drink category, including energy shots, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, increased by 12.9% versus the same period a year ago. In EMEA, the energy drink category according to Nielsen, for our tracked markets for the recently reported 13-week period, which differs from country to country, coincidently also grew at 12.9% versus the same period last year, FX neutral. In APAC, the energy drink category according to Nielsen, Circana and INTAGE for our tracked channels for the recently reported 13-week period, which differs from country to country, grew at 16.8% versus the same period last year, FX neutral. In LatAm, the energy drink category according to Nielsen for our tracked markets, for the 3 months ended December 31, 2025, coincidently also grew at approximately 12.9% versus the same period last year, FX neutral. Our net sales to customers outside the United States were approximately 42% of total reported net sales in the 2025 fourth quarter compared to 39% in the same period last year. Turning to marketing. Our marketing messaging continues to resonate globally as we built strong momentum through the fall and into winter with marketing efforts focused on growing the core business and attracting new consumers. Highlights in the fourth quarter included the Monster Energy sponsor McLaren Formula One team, winning the Constructors' Championship for the second year in a row, while Lando Norris won his first Driver's Championship, and Oscar Piastri finished third. Our Lando Norris

[Operator Instructions] The first question will come from Dara Mohsenian with Morgan Stanley.

Just wanted to touch on your market share gains internationally. It's really accelerated in recent periods. Obviously, you've consistently gained share internationally over a long period of time. But just was more focused on what you think has driven the recent acceleration and how sustainable that is? And then also within that, maybe you can touch on the affordable energy strategy and how that's performing in emerging markets in terms of incrementality for the category and driving category development?

Well, Dara, good afternoon. Let me talk a little bit about the affordable energy category. And then we're fortunate we have Guy Carling here, who will be able to talk quite succinctly about what's happening with market shares internationally. So if you look at the affordable energy category, it's a way of positioning energy drinks to markets where the affordability of Monster is somewhat out of reach. And we've always wanted to establish Monster as our lead brand, that is at a particular price point. And we've never wanted to take that down to where the affordable category should be. So the affordable business for us is growing. The last count, our estimates for 2025 and I've never given this number before, but we'll give it now, were in the order of 100 million unit cases. So it's a business that's growing, and we're excited to have it as part of our portfolio. And also, it's important to understand that most of the world's population now lives in emerging developing markets. So it's a really big opportunity for us. And in key markets for affordable is Nigeria, Egypt, Kenya, Mexico, India, China, and we have affordable in a lot of other countries, but those really are our lead markets for affordable energy. I'm just going to pass the call now to Guy, who will talk about market shares internationally.

Thank you, Hilton. The category has seen strong double-digit growth internationally, I think, across the world. People are attracted to the category by the strong value proposition and the multi occasion usage across multiple age groups. 25% of category consumers are new to the category in the last 12 months coming from a wide range of categories. Monster has been able to outperform the category. We've seen growth from both innovation and existing SKUs. In Europe, 2/3 of our growth is coming from the existing business, and 1/3 from innovation, where the rest of the category has been much more dependent on innovation. For example, the Ultra brand platform in the fourth quarter grew by 53% in Nielsen sales headlined by Ultra White, which grew at 59%. So the existing SKUs and especially

The next question will come from Filippo Falorni with Citi.

Hilton, I'd love to get your perspective on the U.S. energy drink category for 2026. Obviously, phenomenal growth in 2025, coming off a relatively easier base in '24. But clearly, the momentum is continuing. As you mentioned, there's some long-term drivers. And in terms of distribution gains, do you expect the category to continue to gain distribution space in 2026? And any order of magnitude you're expecting would be helpful.

Sure. We don't give guidance, but what I can talk a little bit about is, what are the key drivers behind where we are today and where we really do expect to be going forward. The energy drink business presents a value proposition to consumers. Relative to CSDs and relative to coffees, there really is value in the sale of or the purchase of an energy drink by a consumer in terms of pricing, plus there is a need, there's a functional need for energy. So there's a benefit. There's a functional need. It's a product that's there. It's available and appeals to our consumer group. Increasing household penetration is another major factor innovation, which Guy touched on as well. And we spoke a little bit about it on the script earlier, the need state for energy. And what's also important is more dayparts. You're seeing energy consumed across the day, whereas historically, it was not that factor. So for Monster, pricing and innovation, I think, will remain very much a part of where we are going. And FSOP, as I mentioned earlier, is a focus for 2026 as well. So overall, we're excited about the opportunities that are open to us in the space. And looking at space and space gains in stores, obviously, retailers allocate space to the brands that are selling and they do so on a well-measured and analytical basis. So the way this category is growing relative to other categories, I think we see that space will continue to grow. And merchants will give the consumer what they want. And there's also an opportunity to gain space from alcohol, which is underperforming and other products in the beverage category, which are also underperforming. And what we've always said, and I sort of want to stress that space for innovation, we always see that as incremental. We never want to take from our existing space for our innovation SKUs.

The next question will come from Matthew Smith with Stifel.

I wanted to focus on the margin performance in the quarter, you expanded gross margin across regions, but also called out pressure from tariffs and inflation. Can you just help clarify some of the prepared remarks on margin progression? And also on G&A, that's one area where you saw some deleverage despite the top -- the strong top line performance. You listed a couple of specific items in the prepared remarks, but can you provide a little more detail on G&A and the progress from here? Are some of the investment areas ongoing or more onetime in nature?

Okay. Good question. So just talking about margin in the quarter, what we normally see and this quarter was no different, that the increase in our gross profit margins was primarily the result of pricing actions, supply chain optimization, and product sales mix. As we develop and sell a larger proportion of

The next question will come from Bonnie Herzog with Goldman Sachs.

All right. I had a quick follow-up question on the cost portion. Would you consider further pricing actions to offset the cost pressures? And then I did have a couple of questions on innovation. First, maybe Hilton, can you give us a sense of the phasing of your innovation this year? Is it more first half versus second half weighted? Or is it more balanced throughout the year? And then maybe talk to us a little bit about the repeat purchase rates that you've been seeing in some of the recent rollouts.

Okay. So what I said in the script, and I'll say it again, is we continue to review opportunities for price increases, both domestically and internationally. It's something that's very much in our minds. And if we think there's an opportunity, then it's something that we certainly will consider. As I've said also in previous calls that we run our own playbook and we decide what's right for us and what's right for the company and what's right for our distributors and our consumers, and act accordingly. We also -- our GM plays a very big role in our pricing decisions, and you saw what happened with the price increase that we put into effect in November 1. And we're actually quite pleased with the way that went. And I also said on the script -- in the script that it really went according to plan. And we didn't really see a fall in volumes. And now turning to your question on innovation. This year, we will be seeing innovation staggered across at least the first half of the year for the ones that have already been announced. And then there will be some fall innovation, which we haven't announced yet. But you'll see instead of previous years where we launched everything in the first couple of months, we -- what we're doing this year, what Rob is doing is a more kind of definitive approach where we're staggering our innovation. And then, of course, we have the America250 innovation, which are in selected retailers right now, but they will be opened up to coincide with those celebrations. And we've seen good progress from innovation. I think that's something that we are monitoring, and we're really excited with our innovation.

The next question will come from Carlos Laboy with HSBC.

Hilton, can you please share with us perhaps some more detail on how it's going in India? You have a new bottler there. Can you also please shed some light on how you get the governing principles and the long-range vision rate with such an important new bottler when you have a new bottling relationship, please?

Okay. Thanks, Carlos. I'm really excited about India. I was there a couple of months ago. And we work very closely with the Coca-Cola team in Atlanta and with the Coca-Cola team in India and with the bottlers to really activate and accelerate our business in India. The new bottler is very excited to be part of the journey with us. I know that and have met the Chief Executive on a number of occasions, and they are very, very excited with the opportunity for Monster and Predator in India and for the ability to compete effectively with famous competition that is in the blue can.

The next question will come from Andrea Teixeira with JPMorgan.

Hilton, would like to perhaps go deeper on the margin question. I know you don't bank margins and you bank dollars. But just wondering how we should be thinking given the hedges and what has been happening with the aluminum prices? And obviously, you had an expansion and which is remarkable, but just thinking of ahead, how we should be embedding the international expansion, the low price energy mix, geography effects, would be very helpful.

I think I spoke about aluminum that would have an impact on margin. I spoke a little bit about that earlier. So we do see some pressure in the first and second quarter of 2026. And so I'm not sure what else to what else to add to that. Internationally, you've seen what's happened with our gross margins. We've been able to increase margin in each of the territories that we have -- that we participated and reported on. There was a question earlier about affordable and affordable also assists our gross margin. So it's something that we really focused on internationally. As you know, some -- we don't enjoy the same pricing that we have here in the U.S. in many international markets, but we are focused on increasing margin. And I think you saw a little bit of that in this last quarter.

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

On behalf of Monster, I would like to thank everyone for their interest in the company. We're confident in the strength of our brands and the talent of our entire Monster family throughout the world, and I'm excited to be working with them and thank them for their contributions. I'd also like to congratulate the -- Rob, and Emelie, and Guy, for their new positions and really look forward to working with them as we go forward into 2026 and beyond. We all believe in the company and our growth strategy, and we're committed to innovating, developing and differentiating our brands and expanding the company both at home and abroad. We're proud of our relationship with the Coca-Cola system and the opportunity this presents to us. We believe that we are well positioned in the beverage category and are optimistic about the future of our company. Thank you very much for your attendance.