Monster Beverage Corporation (MNST) Earnings Call Transcript & Summary

Good day, and welcome to the Monster Beverage Corporation Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Hilton Schlosberg, CEO. Please go ahead.

Good afternoon, ladies and gentlemen. Thank you for attending this call. I'm Hilton Schlosberg, Vice Chairman and Chief Executive Officer; also on the call are Tom Kelly, our Chief Financial Officer; Rob Gehring, our CEO of the Americas; Guy Carling, our CEO of EMEA and OSP; Mike Rodriguez, our COO; and Emelie Tirre, our Chief Strategy Officer. Mark Astrachan, our SVP of Investor Relations and Corporate Development, will now read our cautionary statement.

Before we begin, I would like to remind listeners that certain statements made during this call may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are based on currently available information regarding the expectations of management with respect to revenues, profitability, future business, future events, financial performance and trends, management cautions that these statements are based on our current knowledge and expectations and are subject to certain risks and uncertainties, many of which are outside the control of the company that may cause actual results to differ materially from forward-looking statements made during the call. Please refer to our filings with the Securities and Exchange Commission, including our most recent annual report on Form 10-K filed February 27, 2026, including the sections contained therein entitled Risk Factors and forward-looking Statements for a discussion on specific risks and uncertainties that may affect our performance. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. I would also like to note that an explanation of the non-GAAP measures, which we refer to as adjusted where applicable, mentioned during the course of this call is provided in the notes in the condensed consolidated statements of income and other information attached to the earnings release dated August 6, 2026. A copy of this information is also available on our website, www.monsterbevcorp.com in the Financial Information section. Please note, regional scanner data is included in an exhibit filed with our 8-K. We point out that certain market statistics that cover single months or 4-week periods may often be materially influenced positively or negatively by promotions or other trading factors during those periods. I would now like to hand the call over to Hilton Schlosberg.

Good afternoon, and thank you for joining us. We are pleased to report another quarter of strong financial results and cash generation with net sales crossing the $2.5 billion threshold for the first time in the company's history in a single quarter. Sales increased by double digits compared to the prior year in all geographic regions, and we gained share in many of our global markets, including the Monster brand in the United States in the second quarter, reflecting the strength of our core offerings as well as our product innovations. Now turning to the energy drink category, specifically, the global energy drink category remains healthy with continued robust growth. We believe household penetration continues to increase in the energy drink category, driven by functionality and lifestyle positioning, diverse offerings that appeal to an increasingly broad and loyal consumer base and affordable value offerings in addition to premium offerings. We believe our portfolio of existing recently launched and planned energy drink offerings is well positioned to participate in the growing global energy drink category, appealing to a broad range of consumers across geographies, price points, need states and dayparts. Our business continues to be supported by strong marketing programs, impactful retail engagement and our solid partnership with the Coca-Cola Company and its global bottling partners. In the United States, according to Nielsen, for the recently reported 13-week period through July 25, 2026, sales in dollars in the energy drink category, including energy shots, for all outlets combined, namely convenience, grocery, drug, mass merchandisers, increased by 7.1% versus the same period a year ago. In EMEA, the energy drink category according to Nielsen for our tracked markets for the recently reported 13-week period, which differ from country to country, grew 10.4% versus the same period last year, FX neutral. In APAC, the energy drink category according to Nielsen, Circana and INTAGE for our tracked channels for the recently reported 13-week period, which differ from country to country, grew 11.7% versus the same period last year, FX neutral. In LATAM, the energy drink category according to Nielsen, for our tracked markets for the 3 months ended June 30, 2026, grew 23.8% versus the same period last year, FX neutral. Turning to marketing. Monster maintained strong momentum in the second quarter, with efforts focused on growing our core business, attracting new consumers and increasing household penetration. Monster Energy participated in America 250 celebrations via our sponsorship of UFC and the introduction of limited time offering products across the Ultra Juice Monster Reign and Bang brand families celebrating this milestone. Monster athletes were also successful in competition in the U.S. throughout the quarter with notable victories in Supercross 250, NHRA, Motocross, NASCAR and X-Games, Sacramento. Monster Energy-based riders in Motor GP won 4 races in the second quarter, including the Monster Energy Grand Prix of Catalonia. Monster Energy's long-standing presenting partnership of the Isle of Man TT was once again dominated by Michael Dunlop, who extended his outright record number of wins to 36 with 3 more victories to his name. With 2026 TT event, including Monster Energy's participation, also played host a Hollywood production that will be based around the world's famous race. The Monster Energy music program kicked off summer by sponsoring Morgan Wallen Still The Problem Tour. It also brought the tour to life at retail, allowing Monster Energy consumers to earn points redeemable for free merchandise and concert tickets connecting the brand directly to the tour experience. Monster Energy also had significant consumer activation at the Stagecoach Country Music Festival. Increased selling expenses in the second quarter were largely driven by our marketing efforts aimed at maintaining sales momentum as we execute our marketing strategy, recruiting new energy drink consumers and expanding household penetration. Our 2026 marketing strategy includes increased marketing investments across a variety of new platforms and partnerships including social and digital media to support both existing product offerings and innovation to include new energy drink consumers, increased household penetration and reach a broadening consumer base for the company. An example of this is the recently announced partnership with the Big 12 conference that includes naming rights for Monster Energy for the conferences football and basketball regular seasons and a co-branded Monster Energy and Big 12 conference logo that will appear on jersey's, courts and fields with additional integration across the Big 12 conference digital and social media channels. Now turning to tariffs. During the second quarter 2026, the impact of tariffs and the increase in the price of aluminum on our operating results was modest. Despite the modest impact on our business in the second quarter, the tariff landscape continues to be complicated and dynamic. For instance, tariffs significantly impacted the Midwest premium for aluminum, which increased the cost of our aluminum cans. We also import some raw materials into the United States, export certain raw materials for local markets and export limited quantities of finished goods. We do not believe, based on our business model that the current tariffs will have a material impact on the company's operating results. However, based on current aluminum pricing and the Midwest premium, we expect a continued modest sequential increase in our aluminum costs through at least the end of 2026. We will continue to recognize tariffs on aluminum through the higher Midwest premium and continue to implement hedging strategies across the business where possible. Turning to second quarter financial results. Net sales were $2.54 billion for the 2026 second quarter or 20.2% higher than net sales of $2.11 billion in the 2025 second quarter. Net sales, excluding the Alcohol Brands segment, increased 20.8% in the 2026 second quarter. The changes in foreign currency exchange rates had a favorable impact on net sales for the 2026 second quarter of $48.5 million. Net sales on a foreign currency adjusted basis increased 17.9% in the 2026 second quarter. Net sales, excluding the Alcohol Brands segment on a foreign currency adjusted basis, increased 18.5% in the 2026 second quarter. Excluding the Alcohol Brands segment from our reported results, is purely illustrative as it remains part of our ongoing operations. Net sales for the company's Monster Energy Drinks segment increased 21.6% to $2.36 billion for the 2026 second quarter from $1.94 billion for the 2025 second quarter. Net sales on a foreign currency adjusted basis for the Monster Energy drink segment increased 19.3% in the 2026 second quarter. Net sales for the company's Strategic Brand segment increased 10.6% to $143.7 million for the 2026 second quarter from $129.9 million in the 2025 second quarter. Net sales on a foreign currency adjusted basis for the Strategic Brands segment increased 8.1% in the 2026 second quarter. Net sales for the Alcohol Brands segment decreased 15.2% to $32.2 million for the 2026 second quarter from $38 million in the 2025 second quarter. Gross profit as a percentage of net sales for the 2026 second quarter was 55.9% compared with 55.7% in the 2025 second quarter. Adjusted gross profit as a percentage of net sales, excluding the Alcohol Brands segment for the 2026 second quarter was 56.3% compared to 56.2% in the 2025 second quarter. The increase in gross profit as a percentage of net sales for the 2026 second quarter was primarily the result of pricing actions and product sales mix partially offset by increased aluminum can costs, geographical sales mix and increased freight-in costs. Distribution expenses for the 2026 second quarter was $118.8 million or 4.7% of net sales compared with $82 million or 3.9% of net sales in the 2025 second quarter, largely reflecting higher freight and fuel costs. Selling expenses for the 2026 second quarter were $269.2 million or 10.6% of net sales compared with $196.9 million or 9.3% of net sales in the 2025 second quarter. The increase in selling expenses for the 2026 second quarter was primarily due to increased social, digital media and other marketing expenses, including sponsorships and endorsements aimed at maintaining strong sales momentum as we execute our marketing strategy to recruit new energy drink consumers and expand household penetration. General and administrative expenses for the 2026 second quarter were $291.2 million or 11.5% of net sales compared with $265.9 million or 12.6% of net sales for the 2025 second quarter. Stock-based compensation was $35.7 million for the 2026 second quarter compared with $33.2 million in the 2025 second quarter. General and administrative expenses in the 2026 second quarter included $6.5 million of expenses related to our digital transformation initiatives. Operating expenses for the 2026 second quarter was $679.2 million compared with $544.8 million in the 2025 second quarter. Adjusted operating expenses for the 2026 second quarter were $662.7 million compared with $505.6 million in the 2025 second quarter. Operating income for the 2026 second quarter increased 17.2% to $740.4 million from $631.6 million in the 2025 comparative quarter. Adjusted operating income for the 2026 second quarter increased 13.3% to $748.1 million from $660.1 million in the 2025 second quarter. Effective tax rate for the 2026 second quarter was 23.9% compared to 24.4% in the 2025 second quarter. Net income per diluted share for the 2026 second quarter increased 19% to $0.59 from $0.50 in the second quarter of 2025. Adjusted net income per diluted share for the 2026 second quarter increased 15.2% to $0.60 from $0.52 in the second quarter of 2025. Moving to geographic results. We are pleased with our performance in the U.S. and Canada with net sales increasing 11.5% in the 2026 second quarter compared to the 2025 second quarter. According to Nielsen, the Monster brand family also gained 70 basis points of value market share in the 2026 second quarter compared to the prior year period. Our sales performance reflected healthy category growth with solid overall contribution from our core brand families complemented by innovation and disciplined execution across our organization and bottling partners. Our portfolio of zero sugar or sugar-free energy drinks remained a significant contributor to U.S. growth. According to Nielsen, the Ultra brand family grew 19% in the 2026 second quarter compared to the 2025 second quarter. We view the Ultra family as a core contributor to growth within our portfolio, and we are complementing core SKUs with innovation, enabling us to reach new consumers. We are also sharpening our executional focus to include enhanced distribution and display presence. This includes prioritizing availability of the highest performing flavors and complementary package offerings to satisfy more usage occasions. Monster's Full sugar portfolio also continued to contribute to sales growth and was led by the Juice Monster family, which increased 26% compared to the prior year. Innovation was meaningfully additive to second quarter sales growth with products launched in fall 2025 and spring 2026, complemented by special limited time product offerings celebrating America's 250th anniversary across our Ultra Juice Monster Reign and Bang brand families. During the quarter, we also accelerated our sampling and marketing efforts for Storm and FLRT. Additionally, we continue to gain traction in FSOP, which is food service on-premise. This includes a recently announced partnership between Marriott and the Coca-Cola Company, which we believe will open significant distribution opportunities for Monster. Looking ahead, we believe we have a robust innovation pipeline that we will share at the upcoming next show as we have done in prior years. Lastly, in the United States, we have initiated discussions with our partners and customers to implement selective pricing actions effective during the 2026 fourth quarter. Now turning to sales international. Net sales to customers outside the United States increased 34.6% to $1.16 billion or approximately 46% of total net sales in the 2026 second quarter compared to $864.2 million or approximately 41% of total net sales in 2025 second quarter. Net sales to customers outside the United States on a foreign currency adjusted basis increased 29% to $1.11 billion in the 2026 second quarter. Turning to EMEA. Our net sales in the region in the 2026 second quarter increased by 27.2% in dollars and increased 22.2% on a currency-neutral basis over the same period in 2025. Gross profit in this region as a percentage of net sales for the 2026 second quarter was 38.8% versus 36.1% in the same period in 2025. We implemented a price increase in certain markets in EMEA in the 2026 second quarter and are proposing price increases in certain other EMEA markets later in the year. According to Nielsen, the MEC portfolio brands gained 220 basis points of value market share across the region in the 2026 second quarter compared to the prior year quarter. According to Nielsen, the energy drink category continues to grow double digits in EMEA with our Monster brands growing at approximately twice the rate of the category. Also according to Nielsen for the last reported 13-week period, which vary by country, our portfolio delivered 46% of the value sales growth of the energy drink category in EMEA with contributions from both our core offerings and innovation across brand families. This growth reflects strong execution across markets, accelerated cooler placements and space gains enabled by a strong partnership with our Coca-Cola bottling partners. The Zero Sugar segment continues to grow ahead of the energy drink category in Europe. We are the market leader in the Zero Sugar segment of the category with a 44.5% value share according to Nielsen. Also according to Nielsen for the last 13-week period, Monster Zero Sugar products represented 38% of the value sales growth of the energy drink category in Europe. We also focused on expanding visibility for the Ultra family with retailers, which is key to bringing new consumers into the category and are continuing with the rollout of new Monster Ultra SKUs. During the quarter, we continued to expand Juice Monster Viking Berry across EMEA, accelerating the growth of the Juice Monster brand family. We launched special limited edition offerings of Oscar Piastri in both Monster Energy and Zero Sugar variants. The Gold limited edition, Monster Energy Lando Norris Zero Sugar celebrating its 2025 Formula 1 World Championship began rolling out into certain EMEA markets in July. Our affordable portfolio continued to gain momentum. And according to Nielsen, we increased share in the affordable energy drink category in Egypt, Kenya, Morocco and Nigeria. We extended the rollout of Bang Energy as an affordable offering increased in the second quarter following its launch in Spain in the 2026 first quarter. Turning to Asia Pacific. Net sales in Asia Pacific in the 2026 second quarter increased 35.7% in dollars and 36.7% on a currency-neutral basis over the same period in 2025. Gross profit in this region as a percentage of net sales for the 2026 second quarter was 41.4% versus 41% in the same period in 2025. Net sales in Japan in the 2026 second quarter increased 14.5% in dollars and increased 24.5% on a local currency basis. Our Japan results benefited from the previously announced agreement to sell Monster Energy Green in vending machines owned by Coca-Cola Bottles Japan Inc. sales commenced in June and are off to a good start. Net sales in South Korea in the 2026 second quarter decreased 3.6% in dollars and increased 0.6% on a local currency basis as compared to the same quarter in 2025. Results were impacted by bottler inventory fluctuations as depletions far exceeded our shipments in the quarter. We remain the market leader in Korea. Net sales in China in the 2026 second quarter increased 62.5% in dollars and increased 54% on a local currency basis as compared to the same quarter in 2025. Net sales in India in the 2026 second quarter increased 84% in dollars and increased 100.3% on a local currency basis as compared to the same quarter in 2025. We began selling Predator in Pakistan and Azerbaijan in the second quarter. We remain optimistic about the long-term prospects for our brands in Asia Pacific and the expansion of our affordable brands in China and India. In Oceania, net sales in the 2026 second quarter increased 57.8% in dollars and increased 44.9% on a currency-neutral basis as compared to the same quarter in 2025. Turning now to Latin America and the Caribbean. Net sales in Latin America, including Mexico and the Caribbean in the 2026 second quarter increased 56.1% in dollars and increased 40.4% on a currency-neutral basis over the same period in 2025. Gross profit in this region as a percentage of net sales was 46.2% for the 2026 second quarter versus 45.2% in the 2025 second quarter. Net sales in Brazil in the second quarter increased 82% in dollars and increased 61.6% on a local currency basis. Net sales in Mexico increased 29.5% in dollars and increased 20.5% on a local currency basis in the 2026 second quarter. Net sales in Chile in the 2026 second quarter increased 26.3% in dollars and increased 21% on a local currency basis. Net sales in Argentina in the 2026 second quarter decreased 25.6% in dollars and decreased 5.7% on a local currency basis. As discussed on previous calls, we have changed our operating model in Argentina to better manage our foreign exchange exposure. Shipment volume increased in the quarter, and we remain the market share leader in Argentina. Turning to Monster Brewing. On Alcohol Brands, net sales for the segment were $32.2 million in the 2026 second quarter, 15.2% lower than the 2025 comparable quarter. During this 2026 second quarter, no shares of the company's common stock were repurchased. As of August 5, 2026, approximately $900 million remained available for repurchase under the previously authorized repurchase program. Turning to our stock split. As previously announced, the company's Board of Directors has approved and declared a 2-for-1 split of its common stock. The company anticipates its shares will begin trading at the split adjusted price on August 11, 2026. Turning to July 2026 sales, we estimate that July 2026 sales, on a non-foreign currency adjusted business, excluding the Alcohol Brands segment were approximately 14.3% higher than the comparable July 2025 sales and 13.9% higher on a non-foreign currency adjusted basis, including the Alcohol Brands segment. We estimate that on a foreign currency adjusted basis, excluding the Alcohol Brands segment. July 2026 sales with approximately 13.9% higher than the comparable July 2025 sales and 13.5% higher on a foreign currency adjusted basis, including the Alcohol Brands segment. July 2026 had the same number of selling days as July 2025. In this regard, we caution again that sales over a short period are often disproportionately impacted by various factors such as, for example, selling days, days of the week in which holidays fall, timing of new product launches, the timing of price increases and promotions in retail stores, distributing centers as well as shifts in the timing of production. In some instances, our bottlers are responsible for production and determine their own production schedules. This affects the dates on which we invoice such bottlers. Furthermore, our bottling and distribution partners maintain inventory levels according to their own internal requirements which they may alter from time to time for their own business reasons. We reiterate that sales over a short period such as a single month should not necessarily be imputed to or regarded as indicative results for the full quarter or any future period. In conclusion, I'd like to summarize some recent positive points. We had a strong second quarter with double-digit sales growth across all of our geographic regions. We gained share in many markets globally in the second quarter, including for the Monster brand in the U.S. We remain focused on the growth of our existing core offerings as well as the continued introduction of product innovations which remains central to our long-term growth strategy. We continue to expand our sales in non-Nielsen track channels with an objective to expand our FSOP business. Energy drink category continues to grow globally and consumer demand, as measured by scanner data remains strong. We believe that household penetration continues to increase in the energy drink category due to product functionality and affordable value proposition and lifestyle positioning. We are also seeing increases in purchase frequencies as well as usage occasions expanding across dayparts. We continue to review opportunities for price increases, both domestically and internationally. We are continuing our digital transformation in order to modernize our enterprise platforms and strengthen end-to-end business capabilities across commercial, operations and supply chain, including our upgrade to SAP S/4HANA with a planned go-live date of January 1, 2028. Lastly, we are planning to host an investor meeting in New York City on December 1, 2026, and look forward to seeing many of you there. I would now like to open the floor to questions about the quarter. Thank you.

[Operator Instructions] The first question today comes from Kaumil Gajrawala with Jefferies.

Congratulations. I believe we're the end of earnings season for most of us. Great results. I would like to dig into the commentary around the pricing. It sounds like it's some global decisions. It sounds like it's maybe piece by piece. Can you just maybe give us a little more detail on where, how much? Anything you're able to provide, I think, would be helpful.

Sure, Kaumil. We're fortunate we have Rob Gehring with us, and we have Guy Carling with us here today. So Rob, I'm going to ask Rob to talk about the U.S. piece, and then Guy will talk about the EMEA piece.

You bet. Thanks for the question, and appreciate the compliment. We're proud of the results on behalf of all of our employees, our bottling partners and our retail partners. We have consistently moved over the past few quarters and years to consistent pricing year upon year, and we believe that our pricing model continues to drive volume growth. Our goal is to drive revenue ahead of volume and profit ahead of revenue, and we believe it's working for us and our retail business partners. And we also believe that modest inflation is good for the retail landscape. So we're quite pleased with our results thus far, and we will continue to do so. And I'll turn it over to Guy.

Thanks, Rob. Look, I think the approach is consistent around the world. In EMEA, we've taken aggregate low single-digits pricing. As part of an ongoing strategy, we take price on an opportunistic periodic basis in the context of the category and competitive dynamics in each country, and we'll continue to do so.

The next question comes from Kevin Grundy with BNB Paribas.

Wonderful. So first, just to kind of echo, I mean, fantastic results internationally. It's a couple of years ago, in the second and third quarter, we were kind of talking about a bit of a slowdown ex-Argentina pricing, and I mean the results really could not have come back more strongly, up 29% in the quarter. You seem to be in most regions, growing kind of 2x the category growth rate, and it's really broad-based. So a couple of questions here. Number one, maybe just comment on what you think is different about the business operational changes, better coordination with the Coke bottlers, anything you can comment there that you think is really driving sustainably stronger results internationally. And then I know you don't like to guide, but maybe just talk a little bit about how you see the sustainability of this growth, what the runway is based on your market share, et cetera. So any color there, I think, would be helpful.

Okay. I think let's start with EMEA, and then I can pick up with the rest of the world.

Thank you, Hilton, and thank you for the question. I think as with U.S. and around the world, the strong category growth in double digit is driven by an overall strong value proposition combined with brand image and category functionality, which are making the energy drink category all day, multi-occasion beverages with a wide appeal across age groups. Our portfolio is over-indexing the category across these drivers and across these occasions, which, as per the script, is leading us to be 46% of category growth across EMEA. Structurally, we're outperforming the category with growth delivered both by existing SKUs and products, which are 42% of our growth as well as innovation, which is 58% of our growth versus the category, which is reliant predominantly on innovation. I think also you mentioned our increasingly strong partnership with the Coca-Cola bottling partners across the region. It continues to contribute and drive growth, increasing our availability and our average SKU assortment. It allows scaled innovation launches. We're expanding Monster led energy zones with key retailers, and we're accelerating our branded cooler footprint, and this is contributing to higher rate of sale and consistent share gains across multiple markets. And I think then another key factor is the Zero Sugar segment that continues to accelerate. It's growing 23% in Europe, for example, versus 5% for full sugar, and it's 63% of category growth. The Monster portfolio is responsible for 61% of Zero Sugar growth, and we lead the segment as per the script with [ 44.5% ] share. The overall portfolio is balanced. We're offering consumers choice. Our full sugar range is growing at 10%, which is twice the rate of the category segment. But ultimately, the portfolio is offering, and specifically with Ultra, recruiting younger adults and females into the category and those that have a heavier drinking profile. And I think it's a combination of ingredients that's contributing to the growth story.

Thanks, Guy. Turning to LatAm. We've had very strong growth in a number of countries in LatAm. You'll see the increase in sales that we spoke about earlier and the gross profit, which has come up nicely as well. So we -- in particular, I've got to call out Brazil, we've got incredibly strong growth in Brazil. And Brazil is soon to become one of our very top countries in terms of sales. We've got great teams that are operating well and working well with the Coca-Cola bottlers. And we have major investments going forward with coolers. Innovation is playing a very big role and we're excited about the future in LatAm. Turning to Asia very quickly. That's -- most of the world's population lives in emerging and developing markets. So that's -- again, that's a big opportunity for us. We're opening a number of markets in Asia Pacific and working very closely with the Coca-Cola bottlers in that area as well. In India and China, I know there were a lot of stresses, I think, both on our side and on your side, over the years. And the achievements in India and China are also very respectable.

The next question comes from Filippo Falorni with Citi.

I wanted to ask about the innovation pipeline for this year. Obviously, a lot of different launches that you had. Can you give us a context of how this year compared to prior years? And in particular, I wanted to ask about the limited time offerings that you had around America's 250. What were the learnings around LTOs? I know this is a bit of a different innovation approach versus your prior and could we see more of this? And then the second part on the FLRT and the female-oriented energy, can you give us an update there? What are your expectation for the brand?

So just this year, we had staggered launches of our innovation versus onetime launches that we had historically. So we were staggered this year, and we were able to achieve better execution, I think, this year than in past years. Also the LTO, the LTOs were really successful, as you guys no doubt will see through your own Nielsen numbers. But we've been really pleased about our LTOs and in particular, Ultra Red, White and Blue accounted for 5% of sales in Circana since the national launch in May. So that all worked incredibly well. For 2026, we have some innovation coming in the fall. And then in '27, we have a full innovation calendar that we will be presenting and looking forward to sharing with you at NACS in October. And then turning to FLRT. So we still think FLRT is early as marketing efforts and really the spend only started in June. We feel we are reaching the right target audience. We're working on repeat, but building a base. We have an exciting LTO plan for the brand as well later this year and NPD for next year as well, which you'll see at NACS. Overall, we really do think it's too early to tell, but we remain committed to the brand.