10-KPeriod: FY2018

Monster Beverage Corp Annual Report, Year Ended Dec 31, 2018

Filed February 28, 2019For Securities:MNST

Summary

Monster Beverage Corporation's 2018 10-K filing highlights a year of record net sales, reaching $3.81 billion, driven primarily by strong performance in its core Monster Energy® Drinks segment. The company demonstrated continued growth in both domestic and international markets, with international sales representing a significant and increasing portion of overall revenue. Despite an increase in cost of sales and operating expenses, Monster Beverage managed to grow its operating income and net income year-over-year. The company also continued its commitment to returning value to shareholders through an active share repurchase program. However, investors should note the company's substantial reliance on The Coca-Cola Company (TCCC) for distribution, the ongoing arbitration with TCCC regarding potential product launches, and increasing regulatory scrutiny around energy drinks as key risks to monitor.

Financial Highlights

48 data points
Beta

Revenue

$3.81B

60.3% Gross Margin

Net Income

$993.00M

26.1% Net Margin

Total Assets

$4.53B

Cash & Equivalents

$637.51M

Free Cash Flow

$1.10B

Financial Statements
Beta
Revenue$3.81B
Cost of Revenue$1.51B
Gross Profit$2.30B
Operating Expenses$1.01B
Operating Income$1.28B
Net Income$993.00M
Shares Outstanding (Basic)1.11B
Shares Outstanding (Diluted)1.13B

Key Highlights

  • 1Record net sales of $3.81 billion for the year ended December 31, 2018, a 13.0% increase from 2017.
  • 2Monster Energy® Drinks segment remains the dominant revenue driver, accounting for 91.7% of net sales in 2018.
  • 3International net sales continued to grow, representing 31% of gross sales in 2018, up from 28% in 2017.
  • 4Operating income increased by 7.1% to $1.28 billion, while net income rose by 21.0% to $993.0 million.
  • 5The company actively engaged in share repurchases, exhausting multiple authorized programs throughout 2018.
  • 6A significant portion of sales, 61% domestically and 31% internationally, are through full-service bottlers/distributors, with a substantial portion of these being TCCC network bottlers.
  • 7The company is actively managing risks related to its significant commercial arrangements with TCCC, including an ongoing arbitration process.

Frequently Asked Questions

In 2018, Monster Beverage Corporation achieved record net sales of $3.81 billion, a 13.0% increase over 2017. The company reported operating income of $1.28 billion and net income of $993.0 million. Case sales also saw a significant increase of 14.1% year-over-year.

Key risks identified include substantial dependence on The Coca-Cola Company (TCCC) for distribution and TCCC's significant shareholding, potential competition from TCCC's own energy drink products due to ongoing arbitration, intense competition within the energy drink category, increasing government regulation related to energy drinks (e.g., taxes, labeling, age restrictions), changes in consumer preferences, and potential disruptions in supply chain and co-packing arrangements.

Monster Beverage has extensive commercial arrangements with TCCC, including distribution agreements for its products globally through TCCC's network. TCCC is also a significant shareholder. The company is currently undergoing arbitration with TCCC regarding TCCC's potential development of competing energy products and is carefully managing this relationship, recognizing TCCC's influence and potential divergence of interests.

Monster Beverage's growth strategy focuses on international expansion, driving profitable growth through innovation and targeted marketing of its diverse product portfolio, and efficient cost management. The company continues to introduce new products and flavors and expand its distribution channels both domestically and internationally.