Monster Beverage Corp Quarterly Report for Q1 Ended Mar 31, 2018

Summary

Monster Beverage Corporation reported a strong first quarter for 2018, with net sales increasing by 14.7% year-over-year to $850.9 million. This growth was primarily driven by the Monster Energy® brand, which saw a significant increase in both domestic and international demand. Net income also saw a substantial boost, growing by 21.4% to $216.1 million, aided by a lower effective tax rate resulting from the Tax Cuts and Jobs Act. The company continued its share repurchase program, exhausting its February 2017 authorization and initiating a new one. Despite robust top-line and bottom-line growth, investors should note a decrease in gross profit margin to 60.6% from 64.8% in the prior year. This decline was attributed to increased promotional allowances, changes in geographical and product sales mix, higher input costs, and production issues. Operating expenses also rose, largely due to increased freight, payroll, and marketing costs, although this was partially offset by a significant reduction in distributor termination costs.

Key Highlights

• 1Net sales grew 14.7% to $850.9 million in Q1 2018, driven by strong performance of the Monster Energy® brand.
• 2Net income increased by 21.4% to $216.1 million, benefiting from a lower effective tax rate due to the Tax Cuts and Jobs Act.
• 3Gross profit margin declined to 60.6% from 64.8% year-over-year, impacted by increased promotional allowances, higher input costs, and production issues.
• 4Operating expenses increased by 8.6% due to higher freight, payroll, and marketing costs, but distributor termination costs decreased significantly.
• 5The company actively engaged in share repurchases, exhausting its February 2017 program and initiating a new $250 million repurchase plan.
• 6International net sales showed strong growth, contributing 28% of total net sales in Q1 2018.

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