We noted early this morning how the company was chugging earnings, and shares went up even further. Overall, the interpretation was that the company is trying to be very conservative.
Here are some of the comments from the conference call (2:32PM EST)
Chairman Rodney Sachs said it will be difficult to ramp sales like last year and it sees more gradual sales increases from here. The company's accounts receivable increase and DSO's were up a bit as a large customer (Cadbury) takes longer to pay. The increase in net sales in June were much higher than in December, and that contributed to DSO's being up from end of last year. The company called its inventory only a nominal increase, particularly since its days of inventory is lower now. Accounts payable rose threefold, but it says this was in-line with growth and cost of goods was much higher as it is gearing up production this time of year. Deferred revenues almost doubled on receipts from distributors.
2:45 PM GUIDANCE: Sales into July sales are up 43% in the company, Monster are up well over 50%, but any reason for it looking under plan is that it was a short month on delivery days and it believes it will normalize. The company had some product shortages in the new java sales that are being deferred to August.
As far as the market and market share, it has increased year of year even though there was a dip from a new competing Red Bull and Rockstar releases. It thinks it has 24% of market share in its category how it measures internally. Pepsico' Inc's (NYSE: PEP) brand of specialty drink is losing market share according to the company and is cannibalizing its Mountain Dew brand. The category is still quite healthy, although the growth of the category slowdown has to be expected as size rises. It is starting to open new accounts but taking a little longer than anticipated on expansion. Canada is doing well and growing working within the Pepsi system arrangement and doing promotions there. The brand is being well-received in Baja Mexico and it is doing well and they are happy with it. Other international operations are being explored and have begun talking to partners, but the company doesn't want to rush it. Continuing to improve efficiency. Sponsorships has increased as far as marketing, but that should decrease rest of year. Merchandise displays is expensive but works well in stores.
Q&A:
GOLDMAN SACHS Andrew Sawyer: on numbers, on selling and sell-thru into food stores, elaborate on unmeasured channels (slight disappointment was comment, so negative tone)....
Company: It is a difficult exercise and they can't call it exactly. Business is channels has continued to improve. Wal-Mart and Cub etc doing well, but customers don't hold much inventory.
GOLDMAN follow-on Question 2 on new drinks.
Company: Company says it wants to be conservative and gradual, new java well received and popular. on existing listings it was accepted across country. hard to have more than two or three shelves by the coffee shop, but saw some cannibalization. Co says they started to get immediate pull and seeing repeat orders from distributors. Did bump up against production limits, but August production now double and September production will double again (actually 70% on second comment) to third shift of workers that needs to be trained. Looking for additional production at an affiliated company, but want to make sure it doesn't change the taste profile. Number of markets they can't go to yet and haven't gone into many grocery stores, partly because they didn't have production capabilities available. High cost of production, but they are ramping, also an unknown and yet undefined shorter shelf life of JavaMonster than regular Monster drinks. Launching a new small can flavor.
Greg of CITIGROUP: Did you note a 32 oz. or is it single serve? can store in fridge but not in cap can and needs to be consumed relatively quickly like a few hours. ON PREMISE, ELABORATE ON HOW IT WILL EVOLVE OVER NEXT YEAR OR TWO?
Company: Can't elaborate as it takes time and may be a little longer than it originally liked....large corporations taking time. Consumers also take time to try and get around to buying. Some markets were disappointment but pleased overall and it is a long haul. It is happening and will improve. ON COMPETITIVE ENVIRONMENT ON PRICE INCREASES...Co hasn't seen much in price increase at front line, but some promoting is more aggressive, may see some but haven't seen yet, DO YOU NEED TO SEE PRICE INCREASE?..Co. I don't think so, but it may increase price and competitors will probably follow.
Mark at Stifel Nicolaus: How easy is takeaway from distributor over last couple quarters?
Company (paused and was unsure on distributors versus retail.): Distributors buy on too short notice and don't keep inventory, but it is all selling through. Question on comparing July trends versus 2006 and then quarter by quarter? co. doesn't have numbers for August/September but can get, in prior year the July was great with $50 million in Monster sales. Will try to get figures.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
GOLDMAN SACHS Andrew Sawyer: on numbers, on selling and sell-thru into food stores, elaborate on unmeasured channels (slight disappointment was comment, so negative tone)....
Company: It is a difficult exercise and they can't call it exactly. Business is channels has continued to improve. Wal-Mart and Cub etc doing well, but customers don't hold much inventory.
GOLDMAN follow-on Question 2 on new drinks.
Company: Company says it wants to be conservative and gradual, new java well received and popular. on existing listings it was accepted across country. hard to have more than two or three shelves by the coffee shop, but saw some cannibalization. Co says they started to get immediate pull and seeing repeat orders from distributors. Did bump up against production limits, but August production now double and September production will double again (actually 70% on second comment) to third shift of workers that needs to be trained. Looking for additional production at an affiliated company, but want to make sure it doesn't change the taste profile. Number of markets they can't go to yet and haven't gone into many grocery stores, partly because they didn't have production capabilities available. High cost of production, but they are ramping, also an unknown and yet undefined shorter shelf life of JavaMonster than regular Monster drinks. Launching a new small can flavor.
Greg of CITIGROUP: Did you note a 32 oz. or is it single serve? can store in fridge but not in cap can and needs to be consumed relatively quickly like a few hours. ON PREMISE, ELABORATE ON HOW IT WILL EVOLVE OVER NEXT YEAR OR TWO?
Company: Can't elaborate as it takes time and may be a little longer than it originally liked....large corporations taking time. Consumers also take time to try and get around to buying. Some markets were disappointment but pleased overall and it is a long haul. It is happening and will improve. ON COMPETITIVE ENVIRONMENT ON PRICE INCREASES...Co hasn't seen much in price increase at front line, but some promoting is more aggressive, may see some but haven't seen yet, DO YOU NEED TO SEE PRICE INCREASE?..Co. I don't think so, but it may increase price and competitors will probably follow.
Mark at Stifel Nicolaus: How easy is takeaway from distributor over last couple quarters?
Company (paused and was unsure on distributors versus retail.): Distributors buy on too short notice and don't keep inventory, but it is all selling through. Question on comparing July trends versus 2006 and then quarter by quarter? co. doesn't have numbers for August/September but can get, in prior year the July was great with $50 million in Monster sales. Will try to get figures.
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
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