Monster Beverage Corp (MNST)

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Monster Beverage Reports 2021 Third Quarter Financial Results
By: Nasdaq | November 4, 2021

• -- Record Third Quarter Net Sales Rise 13.2 Percent to $1.41 Billion ---- Company Addressing Increased Costs, some of which are likely to be Transitory, through Reductions in Promotions and other Pricing Actions --

CORONA, Calif., Nov. 04, 2021 (GLOBE NEWSWIRE) -- Monster Beverage Corporation (NASDAQ: MNST) today reported financial results for the three- and nine-months ended September 30, 2021, including an update on the impact of the COVID-19 pandemic.

Despite the ongoing impact of the COVID-19 pandemic, the Company achieved record third quarter net sales.

During the 2021 third quarter, the Company procured additional quantities of aluminum cans from suppliers in the United States, South America and Asia in response to increased consumer demand. However, the Company continued to experience shortages in its aluminum can requirements in the United States and EMEA during the 2021 third quarter.

In addition, the Company continued to experience additional supply chain challenges, including, freight inefficiencies, trucking availability, shortages of shipping containers, port of entry congestion, insufficient co-packing capacity and delays in the receipt of certain ingredients, in the United States and EMEA. As a result, the Company was not able to fully satisfy increased demand for its products in these regions in the 2021 third quarter.

During the 2021 third quarter, the Company continued to experience increased aluminum can costs, attributable to higher aluminum commodity pricing as well as the costs of importing aluminum cans. In addition, the Company experienced increased ingredient and other input costs, including shipping and freight, labor, trucking, fuel, co-packing fees, secondary packaging materials and increased outbound freight costs, which resulted in increased costs of sales and increased operating costs, in the 2021 third quarter.

As of September 30, 2021, the Company had $1.71 billion in cash and cash equivalents, $1.22 billion in short-term investments and $28.3 million in long-term investments. Based on currently available information, the Company does not expect the COVID-19 pandemic to have a material impact on its liquidity.

Third Quarter Results

Net sales for the 2021 third quarter increased 13.2 percent to $1.41 billion from $1.25 billion in the same period last year. Net changes in foreign currency exchange rates had a favorable impact on net sales for the 2021 third quarter of $16.4 million.

Net sales for the Company’s Monster Energy® Drinks segment which primarily includes the Company’s Monster Energy® drinks, Reign Total Body Fuel® high performance energy drinks and True NorthTM Pure Energy Seltzers, increased 14.3 percent to $1.33 billion for the 2021 third quarter, from $1.16 billion for the 2020 third quarter. Net changes in foreign currency exchange rates had a favorable impact on net sales for the Monster Energy® Drinks segment of approximately $15.4 million for the 2021 third quarter.

Net sales for the Company’s Strategic Brands segment, which primarily includes the various energy drink brands acquired from The Coca-Cola Company, as well as the Company’s affordable energy brands, increased 0.2 percent to $74.4 million for the 2021 third quarter, from $74.3 million in the 2020 third quarter. Shortages of NOS® concentrate negatively impacted net sales for the 2021 third quarter. Net changes in foreign currency exchange rates had a favorable impact on net sales for the Strategic Brands segment of approximately $1.0 million for the 2021 third quarter.

Net sales for the Company’s Other segment, which includes certain products of American Fruits and Flavors, LLC, a wholly owned subsidiary of the Company, sold to independent third-party customers (the “AFF Third-Party Products”), decreased to $6.3 million for the 2021 third quarter, from $8.6 million in the 2020 third quarter.

Net sales to customers outside the United States increased 18.7 percent to $527.4 million in the 2021 third quarter, from $444.5 million in the 2020 third quarter. Such sales were approximately 37 percent of total net sales in the 2021 third quarter, compared with 36 percent in the 2020 third quarter.

Gross profit, as a percentage of net sales, for the 2021 third quarter was 55.9 percent, compared with 59.1 percent in the 2020 third quarter. The decrease in gross profit as a percentage of net sales for the 2021 third quarter was primarily the result of increased aluminum can costs, attributable to higher aluminum commodity pricing, as well as the cost of importing aluminum cans, logistical costs and geographical sales mix.

Operating expenses for the 2021 third quarter were $344.7 million, compared with $277.9 million in the 2020 third quarter. The increase in operating expenses was primarily due to increased out-bound freight and warehouse costs, increased expenditures for sponsorships and endorsements, increased expenditures for other marketing activities, including social media and digital marketing and increased payroll costs. Operating expenses for the 2021 third quarter also included increased expenditures of $5.3 million for distributor terminations.

Operating expenses as a percentage of net sales for the 2021 third quarter were 24.4 percent, compared with 22.3 percent in the 2020 third quarter. Operating expenses as a percentage of net sales for the 2019 third quarter (pre COVID-19) were 24.5 percent.

Distribution costs as a percentage of net sales were 4.6 percent for the 2021 third quarter, compared with 3.5 percent in the 2020 third quarter.

Selling expenses as a percentage of net sales for the 2021 third quarter were 9.7 percent, compared with 8.8 percent in the 2020 third quarter.

General and administrative expenses for the 2021 third quarter were $142.6 million, or 10.1 percent of net sales, compared with $125.4 million, or 10.1 percent of net sales, for the 2020 third quarter. Stock-based compensation was $16.7 million for the third quarter of 2021, compared with $19.5 million in the 2020 third quarter.

Operating income for the 2021 third quarter decreased to $444.5 million, from $458.6 million in the 2020 third quarter.

The effective tax rate for the 2021 third quarter was 23.7 percent, compared with 23.4 percent in the 2020 third quarter.

Net income for the 2021 third quarter decreased 3.0 percent to $337.2 million, from $347.7 million in the 2020 third quarter. Net income per diluted share for the 2021 third quarter decreased 3.5 percent to $0.63, from $0.65 in the third quarter of 2020.

Rodney C. Sacks, Chairman and Co-Chief Executive Officer, said: “We are pleased to report record sales for the third quarter, despite the ongoing impact of the COVID-19 pandemic.

“The energy drink category, and in particular our Monster Energy® brand, continues to demonstrate resilience and growth in most of our markets.

“In the third quarter of 2021, we expanded distribution of our brands in certain international markets. In the United States, we launched our line of True North™ Pure Energy Seltzer in August 2021 and are currently in the process of launching our Monster® (stylized) Reserve line to the retail trade,” Sacks added.

Vice Chairman and Co-Chief Executive Officer Hilton H. Schlosberg said: “We continued to face headwinds in keeping up with demand in the United States and in EMEA in the third quarter, largely as a result of a shortage in aluminum cans, the availability of co-packing capacity and procurement challenges in other inputs. Aluminum cans in excess of our contracted volumes are entering our supply chain from the United States, South America and Asia, in order to meet the increased consumer demand. The shortage of shipping containers, and global port congestion continue to impact our operations. We have entered into supply agreements with two new aluminum can suppliers in the United States, with deliveries commencing from October and December, respectively.

“We are experiencing increased costs in our operations, including aluminum, shipping, freight and other inputs, some of which are likely to be transitory. We will continue to implement measures to mitigate such increased costs through reductions in promotions and other pricing actions in the United States and in EMEA,” Schlosberg added.

2021 Nine-Months ResultsNet sales for the nine-months ended September 30, 2021 increased 21.0 percent to $4.12 billion, from $3.40 billion in the comparable period last year. Net changes in foreign currency exchange rates had a favorable impact on net sales for the nine-months ended September 30, 2021 of $64.3 million.

Gross profit, as a percentage of net sales, for the nine-months ended September 30, 2021 was 56.9 percent, compared with 59.8 percent in the comparable period last year.

Operating expenses for the nine-months ended September 30, 2021 were $956.3 million, compared with $802.3 million in the comparable period last year.

Operating income for the nine-months ended September 30, 2021 increased to $1.38 billion, from $1.23 billion in the comparable period last year.

The effective tax rate was 23.6 percent for the nine-months ended September 30, 2021, compared with 23.5 percent in the comparable period last year.

Net income for the nine-months ended September 30, 2021 increased 12.6 percent to $1.06 billion, from $937.9 million in the comparable period last year. Net income per diluted share for the nine-months ended September 30, 2021 increased 12.5 percent to $1.97, from $1.75 in the comparable period last year.

Share Repurchase Program

No shares of the Company’s common stock were repurchased during the 2021 third quarter. As of November 4, 2021, approximately $441.5 million remained available for repurchase under the previously authorized repurchase program.

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