Monster Beverage Corporation

Good day, ladies and gentlemen, and thank you for your patience. You've joined Monster Beverage Corporation's 2018 Fourth Quarter and Four-Year 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 be given at that time. Should you require any additional assistance during the call, please press star, then zero on your touchtone telephone. As a reminder, this conference may be recorded. I would now like to turn the call over to your host, Chairman and CEO, Mr. Rodney Sachs. Sir, you may begin.

Hi. Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Rodney Sachs, Hilton Schlossberg, Vice Chairman and President. He's 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 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 November 8, 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-co-op 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, 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. Net sales for the 2018 fourth quarter were negatively impacted by $8.5 million due to the adoption of Accounting Standards Codification 606. Under ASE 606, commissions paid to the Coca-Cola company based on our sales to certain of the company's customers, which the Coca-Cola company accounts for under the equity method, or consolidates, are now included as a reduction to net sales, whereas prior to January 1, 2018, commissions based on sales to those customers which Coca-Cola accounts for under the equity method were included in operating expenses. Net and gross sales for the three months ended December 31, 2018, were negatively impacted by advanced purchases made by our customers in the third quarter of 2018 due to a pre-announced price increase effective November 1, 2018, on certain of our Monster Energy brand energy drinks in 2018, which affected our fourth quarter. The company estimates such impact to net and gross sales was approximately $16 and $18 million, respectively. In the fourth quarter of 2018, net sales were $924.2 million, up 14.1% from $810.4 million in the fourth quarter of 2017. Without the adoption of ASC 606, the percentage increase in net sales would have been 15.1%. Net sales in the fourth quarter were negatively impacted by approximately 14.4 million of foreign currency movements. The company recorded fourth quarter gross sales of 1.06 billion, up 13.7% from 934.8 million in the fourth quarter of 2017. Gross sales in the fourth quarter were negatively impacted by approximately $16.2 million of foreign currency movements. Gross profit as a percentage of net sales for the 2018 fourth quarter was 59.7% compared with 62.1% in the 2017 fourth quarter. The gross profit percentage as adjusted for ASC 606 would have been 60.1% for the quarter. The decrease in gross profit as a percentage of net sales was primarily attributable to increases in certain import costs such as aluminum cans, freight in, and other import costs. Geographical sales mix as a result of our international sales increasing as a percentage of total net sales. Our foreign operations generally have lower gross margins. Domestic product sales mix and the $8.5 million of commissions accounted for as a reduction to net sales due to the adoption of ASC 606. The decrease in gross profit as a percentage of net sales was partially offset by increases in domestic sales prices as well as the decrease in promotional allowances as a percentage of gross sales. Distribution costs as a percentage of net sales were 3.7% for the 2018 fourth quarter as compared to 3.6% in the 2017 fourth quarter. Selling expenses as a percentage of net sales were 11.3% for the 2018 fourth quarter as as compared to 13.6% in the same quarter in 2017. General and administrative costs as a percentage of net sales were 11.5% for the 2018 fourth quarter as compared to 11.9% in the same quarter in 2017. In the quarter, payroll expenses as a percentage of net sales was 7.2% compared to 7.7% in the same period in 2017. Payroll costs increased $4.9 million primarily due to headcount growth both domestically and internationally. Stock-based compensation, a non-cash item, was $14.7 million in the fourth quarter of 2018 compared to $13 million in the same quarter in 2017. Operating income was adversely affected by losses in China of $3.1 million in the quarter. Our effective tax rate decreased from 24.8% in the 2017 fourth quarter to 23.1% in the 2018 fourth quarter. The decrease in the effective tax rate was primarily due to the reduction in the U.S. federal statutory tax rate as a result of the Tax Cuts and Jobs Act, with the Tax Reform Act signed into law on December 22, 2017, as well as the reduction in certain foreign income that is subject to U.S. taxation. In addition, the comparative 2017 fourth quarter effective tax rate included a one-time provisional charge related to the revaluation of the company's deferred tax assets at December 31, 2017, and a one-time charge for the deemed mandatory repatriation of post-1986 earnings and profits as a result of the Tax Reform Act. The decrease in the provision for income taxes was also partially offset by a decrease in the stock-based compensation tax deduction. Net income was $239.1 million, in the 2018 fourth quarter compared to net income of $201.3 million in the 2017 fourth quarter, an increase of 18.8%. The weighted average number of diluted shares outstanding decreased from $575 million for the fourth quarter of 2017 to $556.7 million for the fourth quarter of 2018 as a result of share repurchases which I will cover later in this call. Diluted earnings per share for the 2018 fourth quarter increased 22.7% to $0.43 from $0.35 in the fourth quarter of 2017. We continue to make good progress in the implementation of our strategic alignment with Coca-Cola bottlers globally. We are also making good progress in the U.S. in non-traditional channels including food service accounts, e-commerce and home improvement stores. In the second quarter of 2019, Monster Energy will be launched in Azerbaijan and Saudi Arabia. We are planning further international launches later this year in EMEA. We launched Predator, our strategically preferred affordable energy brand, in South Africa in the fourth quarter and plan to launch in certain surrounding countries in the first quarter of 2019. We are also planning launches of Predator in selected additional markets in Eastern Europe Central Asia, the Middle East, and Africa throughout 2019. During the fourth quarter of 2018, we launched Monster in Ecuador. We are now on track to launch Monster in Bolivia in the first quarter of 2019. We are planning to launch Monster in the Dominican Republic and Paraguay in the second quarter of 2019. In China, we had a limited launch of Monster Ultra late in the fourth quarter to further appeal to Monster's primary target of young affluent consumers. Ultra's innovation has facilitated expanded shelf space in the targeted top 40 cities and key accounts. We are continuing to expand the rollout of Monster Ultra this quarter and are planning further innovation through the launch of Mangaloka in China during the second quarter of 2019. We continued the rollout of Monster across India with expansion to the top 50 cities. Monster is now selling in approximately 90% of the country with marketing initiatives now in full swing. I wanted to take a moment to address an issue previously covered on our last call, and that's our investor presentation in New York in January concerning our arbitration with the Coca-Cola Company. As we reported, our various agreements with the Coca-Cola Company restrict the Coca-Cola Company from competing in the energy drink category with certain exceptions. Coca-Cola has developed three energy products that it believes it may market under an exception relating to the Coca-Cola brand. We believe that the exception does not apply to those energy products. As a result, we have a disagreement with Coca-Cola over the interpretation of that exception. By mutual agreement to obtain tarification, the issue was submitted to arbitration at the end of October 2018 and that process is underway now. with the parties participating cooperatively. Coca-Cola has indicated that it has suspended the proposed launch of its proposed energy products until April 2019. We cannot predict with certainty when the result of the arbitration will be published, but reasonably expect a resolution of the issue in the second quarter of 2019. We reiterate that whatever the outcome of the arbitration, we will continue to cooperate and work together as partners. According to the Nielsen reports, for the 13 weeks through January 26, 2019, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, sales in dollars in the energy drink category, including energy shots, increased by 11.3% versus the same period a year ago. Sales of Monster Dew 11.1% in the 13-week period, while sales of NAS increased 5.6%, and sales of Full Throttle increased 2.8%. Sales of Red Bull increased 9.4%. Sales of Rockstar decreased by 3.8%. Sales of Five Hour decreased 2.1%. And sales of AMP decreased 31%. According to Nielsen, for the four weeks ended January 26, 2019, sales in the convenience and gas channel, including energy shots in dollars, increased 13% over the same period the previous year. Sales of Monster increased by 10.8% over the same period The previous year, while NAS was up 3.6%, and Full Throttle was up 4.9%. Sales of Red Bull were up 11.7%, Rockstar was down 4.8%, Five Hour was down 0.2%, and Amp was down 33.6%. According to Nielsen, for the four weeks ended January 26, 2019, Monster's market share of the energy drink category in the communism gas channel, including energy shots in dollars, decreased by 0.7 of a point over the same period the previous year to 37.1%. NASA's share declined 0.4 of a share point to 3.9%, and Full Throttle's share declined 0.1 of a point to 0.9%. Red Bull's share decreased 0.4 points to 33.7%, Rockstar's share was down 1.2 points to 6.4%, Five-hour share was lower by 0.8 points at 6.2%. Amps share decreased 0.4 points to 0.6%. And VPS bank's share is 4.9%, percent up 4.3 share points. According to Nielsen, in the four weeks ended January 26, 2019, sales of coffee plus energy drinks, which now includes Cafe Monster and Espresso Monster in dollars, in the convenience and gas channel, increased 21% over the same period the previous year. Sales of our Java Monster alone were 15.5% higher than in the same period the previous year. Sales of our coffee plus energy drinks were 29.2% higher, while sales of Starbucks double shot energy were 11.7% higher. Our company's 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 January 26, 2019, was 58%, up 3.7 points. Java Monster Share on its own for the four weeks ended January 26, 2019, was 50.1%, down 2.4 points, while Starbucks Double Shot Energy Share was 41.9%, down 3.5 points. According to Nielsen in the Communities of Gas Channel in Canada, For the 12 weeks ended February 2, 2019, the energy drink category increased 7% in dollars. Monster's sales increased 13% versus a year ago. Monster's market share increased 2.1 share points to 34.5%. NOS's sales increased 1%, and its market share decreased 0.1 share points to 3%. Full Throttle's sales decreased 1%, and its market share decreased 0.1 points to 1.5%. Red Bull's sales increased 7% and its market share increased 0.4 points to 36.2%. Rockstar's sales decreased 6% and its market share decreased 2.6 points to 15.4%. According to Nielsen for all outlets combined in Mexico, the energy drink category grew 12.9% during the month of January 2019. Monster's sales increased 8.3%. Our market share in value decreased 1.3 points to 30.5% against the comparable period the previous year. Sales of Byrne were down 18.6%. Byrne's market share decreased 0.5 points to 1.2%. Red Bull's sales decreased 5%. And its market share decreased by 1.9 points to 9.9%. Vive 100's sales increased 10.1%. and its market share decreased 0.8 points to 31.1%. Both sales increased 59.9%, and its market share increased 4.1 share points to 14%, while Booth's market share decreased 0.2 points to 11.6%. 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 OXO convenience chain, which dominates the market. Sales in the OXO 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. 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. According to Nielsen, in the 13-week period ending January 2019, Monster's retail market share in value, as compared to the same period the previous year, grew from 11% to 12.7% in Belgium, from 24.3% to 24.8% in France, from 18.8% to 20.3% in Great Britain, from 7.1% to 7.3% in the Netherlands, and from 28.9% to 30.3% in Spain. According to Nielsen, in the 13-week period ending December 2018, Monster's retail market share in value, as compared to the same period the previous year, grew from 10.3% to 13.7% in the Czech Republic, from 15.8% to 17.5% in Germany, from 16.6% to 18.6% in Ireland, from 13.8% to 18.1% in Italy, from 15.8% to 17.3% in Norway, from 8.3% to 10.9% in Poland, from 15.6% to 15.8% in South Africa, and from 11.1% to 14.2% in Sweden. For the 13-week period into December 2018, Monster's retail market share in value decreased from 34% to 33.6% in Greece, although value sales increased in the same competitive period. According to Nielsen, for the month of January 2019 in Chile, Monster's retail market share in value increased from 33.5% to 34.8% compared to the same period the previous year. According to Nielsen in Brazil, Monster's retail market share for the month of December 2018 increased from 15.2% to 18.9% as compared to the same period the previous year. We launched Monster Energy in Argentina in mid-February 2018. According to Nielsen, Monster achieved a 16.9% market share in value as of December 2018. According to IRI in Australia, Monster's market share in value for the last four weeks ending January 27, 2019, increased from 6.9% to 7.6% as compared to the same period the previous year. Mother's market share in value decreased from 14.6% to 13.8% during the same period. According to IRI New Zealand, Monster's market share in value for the last four weeks ending February 3, 2019, increased from 6.1% to 8.4%, as compared to the same period the previous year. Live Plus market share in value decreased from 10.3% to 8.7%, and Mother's market share in value decreased from 6.7% to 6.5%. According to Nielsen in South Korea, Monster's market share in value in all outlets combined grew from 25.2% in the 2017 fourth quarter to 37.7% in the fourth quarter of 2018. According to Intage, Monster's market-sharing value in the convenience store channel in Japan grew from 44.4% in the 2017 fourth quarter to 46.7% in the fourth quarter of 2018. We again point out that certain market statistics that cover single months may often be materially influenced positively and or negatively by promotions or other trading factors during those months. Net sales for the Monster Energy Drink segment for the fourth quarter of 2018 increased 15.9% from $736.1 million to $853.3 million from the comparable period in 2017. Net sales for the Monster Energy Drink segment in the 2018 fourth quarter were negatively impacted by $3.2 million due to the adoption of ASE 606. Without the adoption of ASE 606, The percentage increase in net sales for the Monster Energy Drink segment would have been 16.4%. Net sales for the Monster Energy Drink segment in the fourth quarter of 2018 were negatively impacted by approximately 12.4 million of foreign currency movements. Net sales for the Strategic Brand segment were 65.8 million for the fourth quarter as compared to 69.6 million in the same quarter in 2017. Net sales for the strategic brand segment for the fourth quarter of 2018 were negatively impacted by $5.3 million due to the adoption of ASC 606. Without the adoption of ASC 606, the percentage increase in sales for the strategic brand segment would have been 2.3%. Net sales for the company's strategic brand segment in the fourth quarter of 2018 were negatively impacted by approximately 2 million of foreign currency movements in the quarter. Net sales for the other segment, which includes third-party sales made by AFF, were 5.1 million in the fourth quarter, as compared to 4.7 million in the same quarter in 2017. Net sales to customers outside the U.S. were 274.3 million, in the 2018 fourth quarter compared to $210.4 million in the corresponding quarter in 2017. Foreign currency exchange rates had the effect of decreasing net sales in U.S. dollars by approximately $14.4 million. Included in reported geographic sales are our sales to the company's military customers, which are delivered in the U.S. and plant shipped to the military and their customers overseas. In EMEA, we had another challenging quarter with supply chain and production issues, although less than in the 2018 third quarter, which not only affected our sales but also resulted in a number of out-of-stocks and cancellations of orders from the retail trade in certain countries in EMEA. As mentioned earlier, our Nielsen growth rates and market share continues to be strong in the Territory. We are managing through 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 securing additional production capacity. In MEA, net sales in the fourth quarter increased 18.9% in dollars and increased 23.2% in local currencies over the same period in 2017. Without the adoption of ASC 606, the percentage increase in net sales would have been 3.8% in dollars and 28.1% in local currencies. Gross profit in this region as a percentage of net sales for the quarter was 42.1% compared to 47.5% in the same quarter in 2017. Without the adoption of ASC 606, gross profit as a percentage of net sales would have been 44.4% for the fourth quarter. Gross profit in the region was also impacted by a higher percentage of Monster sales relative to sales of concentrates of our strategic brands in the region. We are pleased with the rollout of additional SKUs in the Ultra range in EMEA markets. Various SKUs in the Ultra line are now sold in 38 EMEA markets. We are also pleased that Monster continues to perform well and gained market share in Belgium, Czech Republic, France, Germany, Great Britain Ireland, Italy, the Netherlands, Norway, Poland, South Africa, Spain and Sweden. In Asia Pacific, net sales in the fourth quarter increased 68.4% in dollars and 73.5% in local currencies over the same period in 2017. Without the adoption of ASC 606, the percentage increase in net sales would have been 70% in dollars and 75.1% in local currencies. Gross profit in this region as a percentage of net sales was 46.1% versus 32.4% over the same period in 2017. Without the adoption of ASE 606, gross profit as a percentage of net sales would have been 46.6%. In Japan, net sales in the quarter increased 55.1% in dollars and 55.8% in local currency. In South Korea, net sales increased 141.6% in dollars and 142.6% in local currency, as compared to the same quarter in 2017. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 12.1% in dollars and 21.7% in local currencies, as compared to the same quarter in 2017. In Latin America, including Mexico and the Caribbean, net sales in the fourth quarter increased 43.9% in dollars and 64.7% in local currencies over the same period in 2017. Without the adoption of ASC 606, the percentage increase in net sales would have been 45.3% in dollars and 66.1% in local currencies. Gross profit in this region as a percentage of net sales was 44.7%, versus 47.1% over the same period in 2017. Without the adoption of ASC 606, gross profit as a percentage of net sales would have been 45.3%. Net sales in Brazil in the quarter increased by 30.3% in dollars and 58.7% in local currency. Net sales in Chile increased 48.6% in dollars and 60.9% in local currency in the quarter. Turning to the balance sheet, cash and cash equivalents amounted to 637.5 million at December 31, 2018, compared to 528.6 million at December 31, 2017. Short-term investments were 320.7 million at December 31, 2018, compared to 672.9 million at December 31, 2017. Net accounts receivable increased to 484.6 million at December 31, 2018 from $449.5 million at December 31, 2017. Days outstanding for accounts receivable were 41.4 days at December 31, 2018 compared to 43.8 days at December 31, 2017. Inventories increased to $277.7 million from $255.7 million at December 31, 2017. Average days of inventory were 67.2 days at December 31, 2018, compared to 75 days at December 31, 2017. In the fourth quarter of 2018, we launched Java Swiss Chocolate, a line extension of our Java Monster family, as an exclusive launch with certain customers and are now in the process of a national launch of Java Swiss Chocolate. Initial results have been positive. We are currently in the process of launching Ultra Paradise, a line extension in our Ultra family, as well as Hydro Manic Melon and Hydro Mean Green in 25.4-ounce PET bottles. In addition, we are currently launching Noz Sonic Sour, a new flavor in the Noz family, as well as rebranding Noz Reality Punch to Noz Power Punch. In March, we are planning to launch our Rain Total Body Fuel in six flavors. We are also planning on launching two flavors in our Dragon Tea line in March, namely Green Tea and Yerba Mate. We have repositioned our Monster Rehab White Dragon Tea to be included in the new Monster Dragon Tea line as white tea. During January 2019 in Canada, we launched two additional line extensions of Monster Hydro, namely Purple Passion and Zero Sugar, as well as Monster White Dragon Tea. In March of 2019, we are planning on launching three flavors of our Cafe Monster line in the 13.7-ounce receivable glass package in Canada. In Mexico, during the fourth quarter of 2018, we launched our Lewis Hamilton energy drink. Initial results have been positive. We are planning on launching Monster Mango Loco this quarter. In the fourth quarter of 2018, we launched Monster Mango Loco in Belgium, Ireland, and South Africa. Monster Mangaloka will be widely available across Europe in the first half of 2019. Monster Mega was launched in the Adriatics. We also launched Espresso Monster and Espresso Monster Vanilla in selected accounts in Great Britain. Espresso Monster has also just launched in Germany this month. We are planning to launch our Espresso Monster line across Western Europe in the first half of 2019. In the fourth quarter of 2018, we launched Burnt Lemon Ice in Russia. BPM Orange Zero in Ireland, PowerPlay Mango in South Africa, and Burn Mango in the Baltics. In the fourth quarter of 2018, we executed a limited launch of Monster Energy Pipeline Punch with a convenience and gas retailer in Australia. In January of 2019, we distributed Monster Energy Pipeline Punch nationally. In the fourth quarter of 2018 in New Zealand, we launched Pipeline Punch and Mango Loco market-wide. We have experienced manufacturing issues relating to our Mangaloka product in Australia. We are anticipating that we will be able to resolve these issues and resume product supply to both Australia and New Zealand in the second quarter and relaunch at retail in the third quarter of 2019. As I mentioned earlier, we implemented a price increase of approximately 4% on our Monster Energy portfolio to our US customers, effective November 1, 2018. We are pleased with the initial results of the implementation of this price increase. Promotional expenses is a percentage of gross sales decreased in the quarter. We increased the prices of our concentrate for NAS and for throttle effective January 1, 2019 by approximately 1.5%. We also implemented a price increase of approximately 3% to our Canadian customers effective February 1, 2019 for Monster Energy, NAS, and Full Throttle Lions. We estimate that January 2019 gross sales would be approximately 2.7% higher than January 2018. On a foreign currency adjusted basis, January 2019 gross sales would have been approximately 4.6% higher than comparable January 2018 gross sales. In this regard, we note, and as explained on our fourth quarter 2017 call, that the increase in gross sales of 27.9% in January 2018 as compared to January 2017, Forex adjusted to 25.1%, was in part due to the increase in January 2018 sales following inventory reductions that occurred in the fourth quarter of 2017 by certain of our international distributors. Initial shipments of Cafe Monster and Muscle Monster, which were launched in January 2018. And C, moreover, innovation in 2017 had a more substantial impact on January 2018 sales than innovation in 2018 has had on our January 2019 sales. No new innovation was launched by us in the U.S. in January 2019. This year, our innovation in the U.S., namely Monster Ultra Paradise and Java Monster Swiss Chocolate, is being launched nationally this week, and rain and two additional varieties of Monster Dragon tea will be launched in March. Thus, the increase in January 2019 sales over January 2018 sales mentioned above should be evaluated in the context of the above factors that impacted January 2018 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 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 2018 fourth quarter, the company purchased approximately 9.4 million shares of common stock, and an average purchase price of 56.99 per share for a total of 536.9 million excluding broker commissions. Between January 1, 2019 and February 26, 2019, the company purchased approximately 2.6 million shares of common stock and an average purchase price of 54.18 per share for a total of 139 million excluding broker commissions. As of February 26, 2019, approximately $20.6 million remains available for repurchase under our previously authorized repurchase program. On February 26, 2019, the company's board of directors authorized a new 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. 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. 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 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 also proceeding with our plans for future launches of our affordable energy brands. I'd like to open the floor to questions about the quarter and year end. Thank you.

Thank you. Ladies and gentlemen, if you have a question at this time, please press star then one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. Please restrict yourself to one question, then recue. Our first question comes from the line of Caroline Levy of Macquarie. Your line is open.