Monster Beverage CorporationMNSTNASDAQ
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Operator: 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.
Hilton Schlosberg: 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.
Mark Astrachan: 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.
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 Zero Sugar Energy Drink continued its momentum following its successful introduction in certain EMEA markets in the 2025 3rd quarter. Lando Norris is now available in 38 EMEA and OSP markets. It was also well received as an LTO, which is a limited time offer in selected U.S. markets in the 2025 fourth quarter with a full U.S. rollout on track, no unintended for later in the 2026 first quarter. We continue to introduce this energy drink into new markets, including a recent successful launch in Australia with New Zealand on schedule to launch in March. Our sponsorship of the Call of Duty gaming franchise continue to provide considerable exposure with 650 million branded cans distributed in more than 40 markets globally in the 2025 fourth quarter. The Monster Energy sponsored Ducati team on the MotoGP World Championship, Marc Marquez won the Riders' Championship, his race suit and bike featured Monster branding. Other notable sponsorships in the fourth quarter included the UFC, Professional Bull riding and the Up & Up music tour in major colleges and universities featuring Monster artists. The Monster Ultra brand family continued its strong performance, enhanced by the viral social media surge of our flagship, Ultra White and further benefited from a digital media campaign centered around Zero Sugar flavors unleashed. Further enhancing the Ultra family growth was a successful introduction of Ultra Wild Passion last fall in the United States. We are also excited to be participating in America250 celebration with LTOs, Monster Energy Ultra Red, White & Blue Razz, Juice Monster, Strawberry Lemonade and Bang American Berry. Turning to tariffs. During the fourth quarter of 2025, the impact of tariffs and the increase in the price of aluminum on our operating results was modest. In general, while our flavors and concentrates are manufactured both in the U.S. and Ireland at the present time, production of our finished products takes place locally in our respective markets. Despite the modest impact on our business in the fourth quarter, the tariff landscape continues to be complicated and dynamic. For instance, tariffs significantly impacted the Midwest premium for aluminum, which increased the cost of our aluminum cans. We also import some raw materials into the United States, export certain raw materials for local markets and export limited quantities of finished goods. We do not believe, based on our business model that the current tariffs will have a material impact on the company's operating results. However, based on current aluminum pricing and the Midwest premium, we expect a further modest increase in our costs in at least the first half of 2026 as compared to the 2025 fourth quarter. We will continue to recognize tariffs on aluminum through the higher Midwest premium and continue to implement hedging strategies across the business where possible. Turning to our Q4 2025 results. Net sales were $2.13 billion for the 2025 fourth quarter, was 17.6% higher than net sales of $1.81 billion in the 2024 fourth quarter. Net sales, excluding the alcohol brand segment, increased 18.3% in the 2025 fourth quarter. Net changes in foreign currency exchange rates had a favorable impact on net sales for the 2025 fourth quarter of $27.7 million. Net sales on a foreign currency adjusted basis increased 16.1% in the 2025 fourth quarter. Net sales, excluding the Alcohol Brand segment on a foreign currency adjusted basis, increased 16.7% in the 2025 fourth quarter. Excluding Alcohol Brands segment, our reported results is purely illustrative as it remains part of our ongoing operations. Net sales for the company's Monster Energy Drinks segment increased 18.9% to $1.99 billion for the 2025 fourth quarter from $1.67 billion for the 2024 fourth quarter. Net sales on a foreign currency adjusted basis for the Monster Energy Drink segment increased 17.5% in the 2025 fourth quarter. Net sales for the company's Strategic Brands segment increased 7.8% to $110 million for the 2025 fourth quarter from $102 million in the 2024 fourth quarter. Net sales on a foreign currency adjusted basis for the Strategic Brands segment increased 4.7% in the 2025 fourth quarter. Net sales for the Alcohol Brands segment decreased 16.8% to $29 million for the 2025 fourth quarter from $34.9 million in the 2024 fourth quarter. Gross profit as a percentage of net sales for the 2025 fourth quarter was 55.5% compared with 55.3% in the 2024 fourth quarter. Adjusted gross profit as a percentage of net sales, excluding the alcohol brand segment, for the 2025 fourth quarter was 56.1% compared with 56% in the 2024 fourth quarter. The increase in gross profit as a percentage of net sales for the 2025 fourth quarter is primarily due to the result of pricing actions, supply chain optimization and product sales mix, partially offset by increased can costs and geographical sales mix. Gross profit as a percentage of net sales increased year-on-year in all 4 geographic regions in the 2025 fourth quarter. Distribution expenses for the 2025 fourth quarter were $88.9 million or 4.2% of net sales compared with $77.6 million or 4.3% of net sales in the 2024 fourth quarter. Selling expenses for the 2025 fourth quarter were $219.7 million, or 10.3% of net sales compared with $193.4 million or 10.7% of net sales in the 2024 fourth quarter. General and administrative expenses for the 2025 fourth quarter were $332.1 million or 15.6% of net sales compared with $350.3 million or 19.3% of net sales for the 2024 fourth quarter. Stock-based compensation was $39 million for the 2025 fourth quarter compared with $22.2 million in the 2024 fourth quarter. The increase in stock-based compensation for the 2025 fourth quarter was primarily the result of a $12.9 million increase in the estimated payout levels for performance-based incentive compensation awards. General and administrative expenses, including $51.2 million and $130.7 million of Alcohol Brand segment impairment charges for the 2025 and 2024 fourth quarters, respectively. General and administrative expenses in the 2025 fourth quarter also included $5.1 million of professional services expenses related to our new AFF San Fernando facility as well as $6.6 million of expenses related to our digital transformation initiatives. We've launched a comprehensive digital transformation initiative in 2025 to modernize our enterprise platforms and strengthen end-to-end business capabilities across commercial, operations and supply chain. As part of this effort, we are upgrading our enterprise resource planning system, including the implementation of SAP S/4HANA with a planned go-live date of January 1, 2028, to improve operational efficiency, scalability and overall business management. Operating expenses for the 2025 fourth quarter was $640.7 million compared with $621.2 million in the 2024 fourth quarter. Adjusted operating expenses for the 2025 fourth quarter were $561.6 million compared with $462.5 million in the 2024 fourth quarter. Operating expenses as a percentage of net sales for the 2025 fourth quarter were 30.1% compared with 34.3% in the 2024 fourth quarter. Adjusted operating expenses as a percentage of net sales for the 2025 fourth quarter were 26.7% compared with 26% in the 2024 fourth quarter. Operating income for the 2025 fourth quarter increased 42.3% to $542.6 million from $381.2 million in the 2024 comparative quarter. The adjusted operating income for the 2025 fourth quarter increased 16% to $617.6 million from $532.2 million in the 2024 fourth quarter. The effective tax rate for the 2025 fourth quarter was 21% compared with 29.9% in the 2024 fourth quarter. The decrease in the effective tax rate was primarily attributable to higher stock-based compensation reductions, higher income in lower tax jurisdictions and the release of valuation allowances against certain following deferred tax assets. The effective tax rate for the 2024 fourth quarter included an adjustment to the full year effective tax rate. Net income per diluted share for the 2025 fourth quarter increased 64.9% to $0.46 from $0.28 in the fourth quarter of 2024. Adjusted net income per diluted share for the 2025 fourth quarter increased 30.4% to $0.51 from $0.39 in the fourth quarter of 2024. Turning now to the U.S. and North America. We had a strong finish to the year in the U.S. and Canada with net sales increasing 13.3% in the 2025 fourth quarter compared to the 2024 fourth quarter. Our strong performance reflected healthy category growth, share gains and disciplined execution across the organization. Our Zero Sugar portfolio remained a significant contributor to year's growth led by Monster Energy Ultra. According to Nielsen, the Ultra brand family grew 24% in the 2025 fourth quarter compared to the 2024 fourth quarter with our flagship Ultra White energy drink growing 32% over the same period. Based on Nielsen data, Monster's full sugar portfolio also delivered a meaningful contribution in this 2025 fourth quarter, representing more than 1/3 of the company's total U.S. gains and highlighting the depth of the portfolio. Growth was led by the Juice Monster family, which increased 37% compared to the prior year with Java Monster including Killer Brew, increasing 7.8% despite ongoing softness in the energy drink coffee category. In total, Monster's full sugar offerings grew 9.1% and accounted for the vast majority of full sugar category growth in the quarter. Innovation added momentum through the back half of 2025. Monster's fall innovation slate delivered strong early velocities, rapid distribution expansion and incremental volumes across channels. These launches were supported by coordinated retail activation and marketing execution, helping drive trials, secure high visibility placements and broaden household reach. The performance of late-year innovation further demonstrated the brand's ability to refresh the portfolio while sustaining strength across core franchises. From December 2025 through summer 2026, our innovation launch calendar is strategically staggered across our brand portfolio. These initiatives are designed to drive incremental consumption, expand distribution opportunities and strengthen consumer engagement across channels. We remain focused on complementing our base business with impactful innovation, delivering the excitement today's consumers demand in the energy category while reinforcing our confidence in sustained growth. From a revenue growth management standpoint, pricing actions implemented on November 1, 2025, performed in line with expectations. The approach is targeted by channel and package analytics-driven and designed to better align price architecture across channels. Early read-through indicated limited volume sensitivity consistent with Monster's brand strength and favorable value proposition of energy drinks relative to other nonalcoholic ready-to-drink categories. Turning to sales internationally now. Net sales to customers outside the U.S. increased 26.9% to $903.3 million or approximately 42% of total net sales in the 2025 fourth quarter compared to $711.5 million or approximately 39% of total net sales in the corresponding quarter in 2024. Net sales to customers outside the United States on a foreign currency adjusted basis, increased 23.1% to $875.6 million in the 2025 fourth quarter. Gross profit as a percentage of net sales increased in all 3 of our international regions, EMEA, Asia Pacific and Latin America in the 2025 fourth quarter as compared to the 2024 fourth quarter. Turning to EMEA. Our net sales in EMEA in the 2025 fourth quarter increased by 32.6% in dollars and increased 25.9% on a currency-neutral basis over the same period in 2024. Gross profit in this region as a percentage of net sales for the 2025 fourth quarter was 35.8% versus 32.7% in the same period in 2024. The quarter was driven by strong execution across markets, including accelerated cooler placements and space gains. Sales growth reflects contribution from both existing SKUs and 2025 innovation with growth from across our Monster affordable and strategic brand families, especially the Monster Energy Ultra and Juice Monster families. The energy drink category remains healthy, with Monster outperforming the category in many EMEA markets. Notably, the Monster Energy brand retained its position as the fastest-growing FMCG brand by value and value growth in the 2025 fourth quarter and for the full year 2025, according to Nielsen, in all major channels in CCEP's Western European markets. Within EMEA, we've also seen the continued growth of our affordable brands Fury in Egypt, and Predator in Kenya, Nigeria and Morocco. In fact, Predator and Fury combined to be the #1 Energy Drink brand by value in major countries in Africa. Innovation continues to drive performance in the region, driven by Juiced Monster Rio Punch, Monster Energy Lando Norris Zero Sugar and Monster Energy Ultra Strawberry Dreams. In addition, we launched Bang in Spain and 4 SKUs in the fourth quarter as an affordable proposition. Turning to Asia Pacific, net sales in Asia Pacific in the 2025 fourth quarter increased 11.5% in dollars and 13.9% on a currency-neutral basis over the same period in 2024. A systems disruption and our Japanese distributor negatively impacted APAC region sales. We believe this impact on our APAC region sales was approximately 6% to 7% in the 2025 fourth quarter. Operations have been back to normal since February 1. Gross profit in this region as a percentage of net sales for the 2025 fourth quarter was 41.4% versus 41.3% in the same period in 2024. Net sales in Japan in 2025 fourth quarter decreased 15.2% in dollars and decreased 13.4% on a currency-neutral basis with sales negatively impacted by the aforementioned system disruption at our distributor. We believe net sales in Japan would have increased by approximately 4% to 5% over the prior year quarter without the system disruption. Net sales in South Korea in the 2025 fourth quarter decreased 26.5% in dollars and decreased 23% on a currency-neutral basis as compared to the same quarter in 2024. The decline was primarily a result of bottler inventory fluctuations as depletions increased in the quarter. We remain the market leader in Korea. Net sales in China in the 2025 fourth quarter increased 78.9% in dollars and increased 78.3% on a currency-neutral basis as compared to the same quarter in 2024. Net sales in India in the 2025 fourth quarter increased 54.2% in dollars and increased 62.3% on a currency-neutral basis as compared to the same quarter in 2024. Also notable is our launch of Monster in Thailand in January, which is exceeding expectations, driven by positive rates of sale for both Monster Green and Ultra White. We remain optimistic about the long-term prospects for our brands in Asia Pacific and the expansion of our affordable brands in China and India. In Oceania, which includes Australia, New Zealand, Tahiti, French Polynesia, New Caledonia, Papua New Guinea and Guam, net sales increased 35.5% in dollars and increased 38.9% on a currency-neutral basis. Turning now to Latin America and the Caribbean. Net sales in Latin America, including Mexico and the Caribbean, in the 2025 fourth quarter increased 90.8% in dollars and increased 15.1% on a currency-neutral basis over the same period in 2024. Gross profit in this region as a percentage of net sales was 45.1% for the 2025 fourth quarter versus 42.7% in the 2024 fourth quarter. Net sales in Brazil in the fourth quarter increased 27.1% in dollars and increased 21.2% on a currency-neutral basis. Notably, we ended 2025 with solid momentum, achieving record high market shares in November and December. Net sales in Mexico increased 11.7% in dollars and increased 3.8% on a currency-neutral basis in the 2025 fourth quarter. Net sales in the quarter were impacted by bottler inventory fluctuations as depletion far exceeded our shipments in Mexico. This dynamic was further supported by Nielsen scanner data that showed growth compared to the prior year of 20.3% for Monster and 28.9% for Predator for the 3 months ended December 2025. Net sales in Chile in the 2025 fourth quarter increased 61.4% in dollars and 61.3% on a currency-neutral basis. Net sales in Argentina in the 2025 fourth quarter decreased 39.5% in dollars and 42.2% on a currency-neutral basis. The net sales decrease in Argentina was due to lower price per case revenue driven by a change to operating model implemented late in the first quarter of 2025 to better manage our foreign currency exposure. Similar to last quarter, while revenues declined, volumes increased in Argentina in the quarter. Turning to Monster Brewing. Net sales for the Alcohol Brands segment was $29 million in the 2025 fourth quarter, a decrease of approximately $5.9 million was 16.8% lower than the 2024 comparable quarter. Our recently launched Hard lemonade line Blind Lemon and Blinder Lemon continues its national rollout. The first subline of The Beast Perfect 10 began shipping in 2026 first quarter. And new national beer Stunt Double and the spirit base ready-to-drink Just Five are among the planned innovations for spring of 2026. Additional seasonal craft beer offerings are planned in 2026. Turning to our share repurchase program. During the 2025 fourth quarter, no shares of the company's common stock were repurchased against our repurchase program. As of February 25, 2026 approximately $500 million remained available for repurchase under the previously authorized repurchase program. Turning to January 2026 sales. We estimate that January 2026 sales on a non-foreign currency adjusted basis were approximately 20.5% higher than the comparable January 2025 sales and 21% higher on a non-foreign currency adjusted basis, excluding the alcohol brand segment. We estimate that on a foreign currency adjusted basis, January 2026 sales were approximately 16.7% higher than comparable January 2025 sales and 70.1% higher on a foreign currency adjusted basis, excluding the Alcohol Brands segment. January 2026 had 1 fewer selling day than January 2025. In this regard, we caution again that sales of a short period 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, the timing of price increases and promotions in retail stores, distributor incentives as well as shifts in the timing of production. In some instances, our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels according to own internal requirements which they may alter from time to time for the running 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. In conclusion, I would like to summarize some recent positive points. The energy drink category continues to grow globally and consumer demand, as measured by scanner data remained strong. We believe that household penetration continues to increase in the energy drink category due to product functionality and affordable value proposition and lifestyle positioning. We are seeing increases in purchase frequencies as well as usage occasions expanding across dayparts. We gained share in many markets globally in the fourth quarter as our core brands continue to grow and were complemented by innovation. We continue to expand ourselves in non-Nielsen tracked channels with an objective to expand our FSP foodservice on-premise business, we're excited about our innovation pipeline for 2026 and beyond. We continue to review opportunities for price increases, both domestically and internationally. Gross margins expanded in all 4 geographic regions compared to the prior year period. We are continuing our digital transformation in order to modernize our enterprise platforms and strengthen end-to-end business capabilities across commercial, operations and supply chain, including our upgrade to SAP S/4HANA with a planned go-live date of January 1, 2028. I would like to open the floor to questions about the quarter.
Operator: [Operator Instructions] The first question will come from Dara Mohsenian with Morgan Stanley.
Dara Mohsenian: 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?
Hilton Schlosberg: 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.
Guy Carling: 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 Zero Sugar SKUs are driving growth. And then innovation, such as Lando Norris Zero Sugar grew usage with existing consumers, but also in itself, 25% of Lando sales were new to the category and 25% of Lando sales were new to consumers. So across multiple occasions, sugar and nonsugar innovation and existing SKUs, we're seeing growth ahead of the category.
Operator: The next question will come from Filippo Falorni with Citi.
Filippo Falorni: 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.
Hilton Schlosberg: 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.
Operator: The next question will come from Matthew Smith with Stifel.
Matthew Smith: 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?
Hilton Schlosberg: 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 Zero Sugar SKUs. On the other hand, we have these aluminum can costs from -- largely driven by the aluminum pricing and the Midwest Premium. And then again, we also have this geographical sales mix as we sell more product overseas. I mean, it's no secret. You guys know what our margins are internationally versus what they are in the U.S. So also, my comment normally is we don't bank gross profit percentages. We bank gross profit dollars, and I want to go back to that as well. So the impact on -- in the quarter on the tariffs and the increase in the LME and the similar premiums that you have in other parts of the world, including the Rotterdam premium. The impact on our margin was modest and I'm not going to give a specific number, but it was largely offset by the increase that we achieved in -- the increase in our selling price. Going forward, we do, as I've mentioned on previous calls, have an active hedging program, and we'll continue to process aluminum on -- with our hedging program. So whatever I talk about our business, talking net of hedging program. And if you look at what happened in the fourth quarter, it's actually quite interesting to aluminum and LME, you'll see that from Q4 to Q5, the LME increased by -- including Midwest premium, including increased by -- in excess of 50%. So that's -- those are the percentage numbers that you're dealing with, and we expect that they'll continue to increase going forward into 2026. I think they'll still be modest. I think Q1 will probably be a little bit higher than what we saw in this quarter, and Q2 will be a little bit higher than that, and then we start overlapping and the rest of the year is overlapping on high aluminum prices in 2025. So I see some impact on in Q1, in Q2, but after that, it will just lap previous increases in aluminum. On G&A, we mentioned in the script a couple of things. We said that we had this $12.9 million increase in estimated payout levels for performance-based incentive compensation. We spoke about the professional services expenses relating to the start-up of a new AFF San Fernando facility, which we booked in the fourth quarter as well as $6.6 million of expenses related to our digital transformation initiatives. So as we go forward on the digital transformation initiatives, some of them will be in -- capitalized, of course. And -- but there will be a chunk in G&A. So if you adjust and you take those numbers into consideration and you adjust the G&A numbers that are in our release and in the script and you'll see in the K, you'll see that we -- the leverage is actually the percentage of G&A as a percentage of sales is actually coming down rather than going up as you possibly suggested.
Operator: The next question will come from Bonnie Herzog with Goldman Sachs.
Bonnie Herzog: 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.
Hilton Schlosberg: 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.
Operator: The next question will come from Carlos Laboy with HSBC.
Carlos Alberto Laboy: 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?
Hilton Schlosberg: 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.
Operator: The next question will come from Andrea Teixeira with JPMorgan.
Andrea Teixeira: 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.
Hilton Schlosberg: 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.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Hilton Schlosberg for any closing remarks.
Hilton Schlosberg: 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.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.