Monster Beverage Announces 2020 Second Quarter Financial Results

Monster Beverage's report included a detailed update on the adverse impact of the COVID-19 pandemic on the company.  

CORONA, Calif., Aug. 04, 2020 (GLOBE NEWSWIRE) -- Monster Beverage Corporation (NASDAQ: MNST) today reported financial results for the three- and six-months ended June 30, 2020, including an update on the impact of the COVID-19 pandemic.

COVID-19 Pandemic

The Company’s top priority continues to be the health, safety and well-being of its employees. Early in March 2020, the Company implemented global travel restrictions and work-from-home policies for employees who are able to work remotely. For those employees who are unable to work remotely, safety precautions have been instituted, which were developed and adopted in line with guidance from public health authorities and professional consultants. The Company’s flavor manufacturing facilities, its co-packers, warehouses and shipment facilities, are all operating. Certain of the Company’s bottlers/distributors have implemented modifications to their call points and service levels, but generally the Company’s products remain available to consumers. In limited countries the operations of its bottlers/distributors have been more affected.  

The Company’s second quarter net and gross sales were adversely impacted by the COVID-19 pandemic, in part due to certain of the Company’s bottlers/distributors reducing their inventory levels.  However, the Company experienced a sequential improvement in sales in the latter half of the quarter as certain countries and states began to gradually re-open. Since mid-March 2020, the Company has seen a shift in consumer channel preferences and package configurations, including an increase in at-home consumption and a decrease in immediate consumption.  The Company’s sales in the second quarter of 2020 were initially adversely affected as a result of a decrease in foot traffic in the convenience and gas channel (which is the Company’s largest channel) but improved sequentially throughout the quarter. The Company’s e-commerce, club store, mass merchandiser and grocery and related business continued to increase in the quarter while its food service on-premise business, which is a small channel for the Company, remained challenged.

Currently, the Company does not foresee a material impact on the ability of its co-packers to manufacture and its bottlers/distributors to distribute its products as a result of the COVID-19 pandemic. In addition, the Company is not experiencing raw material or finished product shortages in its supply chain.

As of June 30, 2020, the Company had $921.3 million in cash and cash equivalents, $250.8 million in short-term investments and $2.1 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.

Second Quarter Results

Net sales for the 2020 second quarter were $1.09 billion compared with $1.10 billion in the same period last year.  Gross sales for the 2020 second quarter were $1.27 billion as compared to $1.29 billion in the same period last year.  The COVID-19 pandemic had an adverse impact on net and gross sales for the three-months ended June 30, 2020. The COVID-19 pandemic’s impact was more pronounced in EMEA during the 2020 second quarter, particularly in the Strategic Brands segment. Net changes in foreign currency exchange rates had an unfavorable impact on net and gross sales for the 2020 second quarter of $18.2 million and $21.6 million, respectively.

Net sales for the Company’s Monster Energy® Drinks segment, which primarily includes the Company’s Monster Energy® drinks and Reign Total Body Fuel® high performance energy drinks increased 0.8 percent to $1.03 billion for the 2020 second quarter, from $1.02 billion for the 2019 second quarter. The COVID-19 pandemic had an adverse impact on net sales of the Company’s Monster Energy® Drinks segment for the three-months ended June 30, 2020. Net changes in foreign currency exchange rates had an unfavorable impact on net sales for the Monster Energy® Drinks segment of approximately $16.8 million for the 2020 second 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, decreased 24.7 percent to $59.6 million for the 2020 second quarter, from $79.1 million in the 2019 second quarter. The COVID-19 pandemic had a material adverse impact on net sales of the Company’s Strategic Brands segment for the three-months ended June 30, 2020. The COVID-19 pandemic impact was more pronounced in the Strategic Brands segment, particularly in EMEA, as the Company’s larger revenue generating countries for this segment experienced extended lockdowns. Net changes in foreign currency exchange rates had an unfavorable impact on net sales for the Strategic Brands segment of $1.4 million for the 2020 second 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”), were $6.6 million for the 2020 second quarter, compared with $5.8 million in the 2019 second quarter.Net sales to customers outside the United States amounted to $328.3 million in the 2020 second quarter, versus $343.3 million in the 2019 second quarter. Such sales were approximately 30 percent of total net sales in the 2020 second quarter, compared with 31 percent in the 2019 second quarter. The COVID-19 pandemic had a material adverse impact on net sales to customers outside the United States, primarily in EMEA, for the 2020 second quarter.

Gross profit, as a percentage of net sales, for the 2020 second quarter was 60.3 percent, compared with 59.9 percent in the 2019 second quarter.

Operating expenses for the 2020 second quarter were $252.2 million, compared with $282.3 million in the 2019 second quarter. The decrease in operating expenses was primarily due to decreased expenditures of $19.8 million for sponsorship and endorsements and decreased expenditures of $10.1 million for travel and entertainment, each largely as a consequence of the COVID-19 pandemic. The costs for certain postponed or rescheduled events have been, or may be, deferred to future periods.  Due to the uncertainty surrounding the COVID-19 pandemic, the Company is unable to estimate in which future periods, if any, such deferred sponsorship and endorsement costs will be recognized.

Distribution costs as a percentage of net sales were 3.6 percent for the 2020 second quarter, compared with 3.4 percent in the 2019 second quarter.

Selling expenses as a percentage of net sales for the 2020 second quarter were 8.8 percent, compared with 11.2 percent in the 2019 second quarter, primarily as a result of the reduction in sponsorship and endorsement costs referred to above.

General and administrative expenses for the 2020 second quarter were $116.8 million, or 10.7 percent of net sales, compared with $120.8 million, or 10.9 percent of net sales, for the 2019 second quarter.  Stock-based compensation (a non-cash item) was $15.9 million for the second quarter of 2020, compared with $15.6 million in the 2019 second quarter. 

Operating income for the 2020 second quarter increased to $407.3 million, from $379.0 million in the 2019 second quarter.

The effective tax rate for the 2020 second quarter was 23.2 percent, compared with 23.4 percent in the 2019 second quarter. 

Net income for the 2020 second quarter increased 6.5 percent to $311.4 million, from $292.5 million in the 2019 second quarter.  Net income per diluted share for the 2020 second quarter increased 9.9 percent to $0.59, from $0.53 in the second quarter of 2019.

Rodney C. Sacks, Chairman and Chief Executive Officer, said: “We remain pleased with our performance in the second quarter. EMEA sales were more impacted in the quarter, and especially so in our Strategic Brands, but overall, we are experiencing sequential improvements each month. Our supply chain remains intact, and we are continuing to service our customers.

“According to Nielsen, the energy drinks category continues to grow in many countries, including the United States.

“Now that certain countries and states are gradually reopening, our teams are working to ensure the implementation of our 2020 product innovation launches, which were disrupted due to the COVID-19 pandemic. We have a robust innovation plan for the remainder of 2020.

“Internationally during the quarter, we added various Monster Energy® brand energy drinks, and Reign Total Body Fuel® high performance energy drinks to our portfolio in a number of countries.  Monster Energy® Dragon Tea was launched in China in April 2020.  We launched our affordable energy products, Fury® Gold Strike in Honduras and Predator® Gold Strike in Nigeria in the quarter.

 “Our thoughts and prayers are with all who have been impacted by this terrible virus and we wish them all a very speedy recovery,” Sacks added.

The full report may be viewed here.