Monster Beverage Corporation

Second Predator SKU with Predator Mean Green. We also launched Monster Ultra Gold in Puerto Rico and Monster Mango Loco in Colombia. In the 2022 first quarter, we launched Monster Ultra Gold and Mother Kiwi Sublime in Australia and New Zealand. We launched our third super fuel flavor in Tropical Thunder. In EMEA in the first quarter of 2022, we launched Monster Mule, Monster Nitro, and Monster Assault in a number of countries. We also launched Ultra Fiesta, Watermelon and Gold, and Juiced Monarch, Chaotic and Pacific Punch in a number of countries during the 2022 first quarter. During the 2022 first quarter, we also launched Predator and Rain in additional countries. During the first quarter of 2022, we launched Monster Pipeline Punch in Singapore. We also introduced the Predator brand in India. In April 2022, we launched Monster Mangaloco in Japan. we are planning to introduce the Predator brand in several additional countries in APAC in the course of 2022. Our co-packing network is an integral part of the company's production model, which we intend to preserve. The owner of one of the co-packing facilities with which we contracted, located in Norwalk, California, announced earlier this year that they would be selling this facility and ceasing its operations at this facility. To maintain adequate supply of the company's products, we have acquired the associated real property, leases and equipment of this co-packing facility for a purchase price of $62.5 million. Following the purchase, the facility will be closed for a period of time before the company is able to commence production. We estimate April 2022 sales, including Kanoki, to be approximately 6.7% higher than in April 2021, and 4.8% higher than in April 2021, excluding Kanoki. On a foreign currency adjusted basis, excluding Kanoki, April 2022 sales would have been approximately 7.7% higher than the comparable April 2021 sales. April 2022 had one less selling day compared to April 2021. We mentioned that April 2022 sales had a challenging hurdle to meet over April 2021 sales. You may recall that in our 2021 first quarter conference call to shareholders, we estimated that April 2021 sales were approximately 71.3% higher than in April 2020. Please keep in mind that the comparative 2020 sales were materially adversely impacted by the COVID-19 pandemic. In our 2020 first quarter conference call to shareholders, We estimated that April 2020 sales were 22.2% lower than our April 2019 sales. April 2021, April 2020, and April 29 all had the same number of selling days. The company had sufficient can capacity and co-manufacturing filling capacity across all regions to address demand for April. 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, should not necessarily be imputed to or regarded as indicative of results for a full quarter or any future period. If the COVID-19 pandemic and related unfavorable economic conditions continue in certain regions, Our new product innovation launches in those regions could be delayed. In conclusion, I would like to summarize some recent positive points. The company continues to address challenges in its supply chain by sourcing cans and primary ingredients and blends, increasing its manufacturing capacity, and increasing finished product inventories. This should enable us to improve our service levels and lower transportation costs across North America, EMEA, and LATAM. Our AFF flavour facility in Ireland is now providing a large number of flavours to our EMEA region, enabling better service levels and lower landed costs to our EMEA region. We are pleased with the new additions to the Monster Energy portfolio. We are planning to continue additional launches of our rain, total body fuel, high performance energy drinks in additional international countries. We are pleased with the rollout of Predator and Fury, our affordable energy drink portfolio internationally. We are proceeding with plans to launch our affordable energy brands in an additional number of international countries. We are enthusiastic about the opportunities that Canarchy presents. While we believe that we will be able to address many of the supply chain challenges we have faced, we anticipate still having to face certain ongoing challenges in the future. I would now like to open the floor to questions above the quarter. Thank you.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. In the interest of time, we ask that you limit yourself to one question. At this time, we'll pause momentarily to assemble our roster. Our first question comes from Dara Monsenian from Morgan Stanley. Please go ahead.

Hey, good afternoon. Your U.S. sales continue to come in very strong again this quarter and show a sustained decoupling versus the scanner data, implying obviously very strong growth in the untracked channels. Can you just review for us what level of growth you're seeing in those untracked channels? What are the key drivers behind it? And then as we think about the U.S. going forward, can you discuss your thoughts on potential monster top-line weakness or category weakness if we do see a consumer spending slowdown, and if you think we've seen any demand impact so far from higher gas prices? Thanks.