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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-03-01 · 142 added, 153 removed, 394 unchanged (43% of the section changed)

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MD&A includes the following sections:

● CANarchy Acquisition – a discussion of our acquisition of CANarchy on February 17, 2022;

● Russia-Ukraine Conflict – a discussion of the impact of the Russia-Ukraine conflict on our business and operations;

● The COVID-19 Pandemic – a discussion of the impact of the COVID-19 pandemic on our business and operations;

● Pricing Actions – a discussion of certain pricing actions implemented during 2022;

● Bang Energy Acquisition – a discussion of our acquisition of Bang Energy on July 31, 2023;

● Pricing Actions – a discussion of certain pricing actions implemented during 2022 and 2023;

● Our Business – a general description of our business, the value drivers of our business, and opportunities and risks facing our Company, stock repurchases, acquisitions and divestitures;

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(See “Forward-Looking Statements” and “Part II, Item 7A – Qualitative and Quantitative Disclosures about Market Risks”).

CANarchy Acquisition

On February 17, 2022, we completed the CANarchy Transaction.

The CANarchy Transaction facilitates our entry into the alcohol beverage sector and brings the Cigar City TM family of brands including Jai Alai® IPA and Florida Man TM IPA, the Oskar Blues TM family of brands including Dale’s Pale Ale®, Wild Basin TM Hard Seltzers, the Deep Ellum TM family of brands including Dallas Blonde® and Deep Ellum TM IPA, the Perrin Brewing Company TM family of brands including Black Ale, the Squatters® family of brands including Hop Rising® Double IPA, and the Wasatch® family of brands including Apricot Hefeweizen to our beverage portfolio.

The CANarchy Transaction did not include CANarchy’s stand-alone restaurants.

Our organizational structure for our existing energy beverage business remains unchanged.

CANarchy is functioning independently, retaining its own organizational structure and team.

Russia-Ukraine Conflict

During the year ended December 31, 2022, the Russia-Ukraine conflict did not have a material impact on our financial position, results of operations and liquidity.

Net sales in Russia and Ukraine combined were approximately 1.1% of our total net sales for the twelve months ended December 31, 2021.

We will continue to monitor future developments relative to this conflict and its potential impacts.

The COVID – 19 Pandemic

The COVID-19 pandemic has directly and indirectly impacted our business.

The duration and severity of this impact will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information regarding the COVID-19 pandemic, as well as the emergence of new variants, the actions taken to limit its spread and the economic impact on local, regional, national and international markets.

See “Part I, Item 1A – Risk Factors.”

Bang Energy Acquisition

On July 31, 2023, we completed the Bang Transaction.

The acquired assets primarily include the Bang Energy® drink business and a beverage production facility in Phoenix, AZ.

Pricing Actions

In 2022, we implemented measures to mitigate our increased costs through price increases and reductions in promotions (“Pricing Actions”).

We implemented a price increase effective September 1, 2022 in the United States and implemented price increases at various times in certain international markets, all of which positively impacted gross profit margins in the third and fourth quarters of 2022.

Distribution and Supply Chain

Since the beginning of the COVID-19 pandemic and the subsequent increased demand for our energy drinks, we prioritized ensuring product availability for our customers and consumers.

This strategic direction has remained in place throughout the global supply chain challenges and disruptions, despite adversely impacting our profitability.

We implemented pricing actions including (i) price increases effective April 1, 2022 (limited pack sizes), September 1, 2022 and April 1, 2023 (limited pack sizes) in the United States, (ii) price increases at various times in certain international markets during 2022 and 2023 and (iii) decreased promotional allowances as a percentage of net sales in certain markets during 2022 and 2023 (collectively, the “Pricing Actions”).

The Pricing Actions positively impacted gross profit margins in 2023.

Gross Profit Margins

During the year ended December 31, 2023, we experienced an improvement in our gross profit margins as compared to the year ended December 31, 2022.

This improvement was primarily attributable to (i) the Pricing Actions, (ii) our decreased reliance on imported cans and (iii) improved finished product inventory levels in closer proximity to our customers, resulting in a reduction of long-distance freight costs.

During the COVID-19 pandemic we prioritized ensuring product availability for our customers and consumers.

This strategic direction remained in place throughout the global supply chain challenges and disruptions, despite adversely impacting our profitability.

We continue to stand by our strategy to ensure product availability and solidify the continued long-term growth of our brands.

During the year ended December 31, 2022, we experienced a significant increase in cost of sales, resulting in a material decrease in both gross profit and gross profit as a percentage of net sales, relative to the comparative year ended December 31, 2021.

The increase in cost of sales was primarily due to (i) increased ingredient and other input costs, including secondary packaging materials and increased co-packing fees, (ii) increased logistical costs, (iii) increased aluminum can costs and (iv) geographical and product sales mix.

In the third and fourth quarters of 2022 we began to see an improvement in our gross profit margins as compared to the second quarter of 2022.

This improvement was primarily attributable to (i) Pricing Actions, (ii) our decreased reliance on imported cans and (iii) improved finished product inventory levels in closer proximity to our customers, resulting in a reduction of long-distance freight costs.

Furthermore, we experienced significant increases in distribution expenses, primarily the result of increased warehousing expenses, as well as increases in other logistical expenses, which adversely impacted operating costs.

We continue to address the controllable challenges in our supply chain.

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Juice Monster®

Monster Hydro® Energy Water

Monster Hydro® Super Sport

Monster Super Fuel®

Monster Dragon Tea®

Reign Total Body Fuel ®

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Play® and Power Play® (stylized)

We also develop, market, sell and distribute craft beers, FMBs and hard seltzers under a number of brands, including Jai Alai® IPA, Florida Man TM IPA, Dale’s Pale Ale®, Wild Basin TM Hard Seltzers, Dallas Blonde®, Deep Ellum TM IPA, Perrin Brewing Company TM Black Ale, Hop Rising® Double IPA, Wasatch® Apricot Hefeweizen, The Beast Unleashed TM and a host of other brands.

We also develop, market, sell and distribute still and sparkling waters under the Monster® Tour Water TM brand name.

We also develop, market, sell and distribute craft beers, FMBs and hard seltzers under a number of brands, including Jai Alai ® IPA, Florida Man TM IPA, Dale’s Pale Ale ® , Wild Basin® Hard Seltzers, Dallas Blonde ® , Deep Ellum TM IPA, Perrin Brewing Company TM Black Ale, Hop Rising ® Double IPA, Wasatch ® Apricot Hefeweizen, The Beast Unleashed®, Nasty Beast TM Hard Tea and a host of other brands.

We also develop, market, sell and distribute still and sparkling waters under the Monster Tour Water® brand name.

Our net sales of $7.14 billion for the year ended December 31, 2023 represented record annual net sales.

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Our Strategic Brands segment represented 5.3% and 5.6% of our net sales for the years ended December 31, 2023 and 2022, respectively.

Our Alcohol Brands segment represented 1.6% of our net sales for the year ended December 31, 2022.

Our Alcohol Brands segment represented 2.6% and 1.6% of our net sales for the years ended December 31, 2023 and 2022, respectively.

Our Other segment represented 0.3% and 0.4% of our net sales for the years ended December 31, 2023 and 2022, respectively.

Net changes in foreign currency exchange rates had an unfavorable impact on our net sales of the Monster Energy® Drinks segment of approximately $222.3 million for the year ended December 31, 2022.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales in the Monster Energy® Drinks segment of approximately $124.3 million for the year ended December 31, 2023.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales in the Strategic Brands segment of approximately $22.4 million for the year ended December 31, 2023.

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Net sales to customers outside the United States amounted to $2.71 billion and $2.36 billion for the years ended December 31, 2023 and 2022, respectively.

Such sales were

approximately 37% of net sales for both the years ended December 31, 2022 and 2021.

Such sales were approximately 38% and 37% of net sales for the years ended December 31, 2023 and 2022, respectively.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales to customers outside of the United States of approximately $146.7 million for the year ended December 31, 2023.

Net sales to customers outside the United States, on a foreign currency adjusted basis, increased 21.2% for the year ended December 31, 2023.

On February 17, 2022, we completed the CANarchy Transaction which facilitated our entry into the alcohol beverage sector.

Our non-alcohol customers are primarily full service beverage bottlers/distributors, retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience chains, foodservice customers, value stores, e-commerce retailers and the military.

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Retail grocery, direct convenience, specialty chains and wholesalers

Alcohol, direct value stores and other

Alcohol, value stores and other

Our non-alcohol customers include Coca-Cola Canada Bottling Limited, Coca-Cola Consolidated, Inc., Coca-Cola Bottling Company United, Inc., Reyes Coca-Cola Bottling, LLC, Coca-Cola Southwest Beverages LLC, The Coca-Cola Bottling Company of Northern New England, Inc., Swire Pacific Holdings, Inc.

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(including Sam’s Club), Costco Wholesale Corporation and Amazon.com, Inc.

Our alcohol customers include J.J.

Taylor Distributing, Ben E.

Keith, Reyes Beer Division, Sheehan Family Companies, and Admiral Beverage.

Our alcohol customers include Reyes Beverage Group, Ben E.

Keith Company, J.J.

Taylor Distributing, and Sheehan Family Companies.

A decision by any large customer to decrease amounts purchased from us or to cease carrying our products could have a material adverse effect on our financial condition and consolidated results of operations.

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As of December 31, 2023, the Company had working capital of $4.43 billion compared to $3.76 billion as of December 31, 2022.

The increase in working capital was primarily the result of the increase in accounts receivable and inventories, related to the increase in net sales for the year ended December 31, 2022.

For the year ended December 31, 2022, our net cash provided by operating activities was approximately $887.7 million as compared to $1.16 billion for the year ended December 31, 2021.

Principal uses of cash flows in 2022 were purchases of investments, purchases of treasury stock, the acquisition of CANarchy, development of our brands internationally and acquisitions of real property, property and equipment.

These principal uses of cash flows are expected to be and remain our principal recurring use of cash and working capital funds in the future (See “Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”).

The increase in working capital was primarily the result of the increase in cash and cash equivalents,

related to the increase in net sales for the year ended December 31, 2023.

For the year ended December 31, 2023, our net cash provided by operating activities was approximately $1.72 billion as compared to $887.7 million for the year ended December 31, 2022.

Principal uses of cash flows in 2023 were purchases of investments, purchases of treasury stock, the acquisition of Bang Energy, development of our brands internationally and purchases of real property, property and equipment.

Except for the acquisition of Bang Energy, these principal uses of cash flows are expected to be and remain our principal recurring use of cash and working capital funds in the future (See “Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”).

Opportunities, Challenges and Risks

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In addition, legislation has been proposed and/or adopted at the U.S., state, county and/or municipal level and proposed and/or adopted in certain foreign jurisdictions to restrict the sale of energy and alcohol drinks (including prohibiting the sale of energy and/or alcohol drinks at certain establishments or pursuant to certain governmental programs), limit caffeine and/or alcohol content, require certain product labeling disclosures and/or warnings, impose taxes, limit product sizes or impose age restrictions for the sale of energy and/or alcohol drinks.

In addition, articles critical of the caffeine content in energy drinks and their perceived benefits, or alcohol drinks and their misuse or abuse, as well as articles indicating certain health risks of energy or alcohol drinks have been published.

The proposal and/or adoption of such legislation and the publication of such articles, or the future proposal and/or adoption of similar legislation or publication of similar articles, may adversely affect our Company.

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● the risks associated with the realization of benefits from our relationship with TCCC;

● profitable expansion and growth of our family of brands in the competitive market place (See “Part I, Item 1 – Business – Competition” and “Part I, Item 1 – Business – Sales and Marketing”);

● changes in consumer preferences and demand for our products;

● The emergence of new subcategories within the energy and/or alcohol beverage sectors that we fail (or are late) to successfully react to;

● economic uncertainty in the United States, Europe and other countries in which we operate;

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● increasing concern over various environmental, human rights and health matters, including obesity, caffeine and/or alcohol consumption and energy and/or alcohol drinks generally, and changes in regulation and consumer preferences in response to those concerns;

● costs of establishing and promoting our brands internationally;

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● increases in costs of raw materials used by us;

● restrictions on imports and sources of supply, duties or tariffs, changes in related government regulations and disruptions in the timely import or export of our products and/or ingredients including flavors, flavor ingredients and supplement ingredients, due to port strikes and/or port congestion, delays due to the COVID-19 pandemic, related labor issues or other importation impediments;

● restrictions on imports and sources of supply, duties or tariffs, changes in related government regulations and disruptions in the timely import or export of our products and/or ingredients including flavors, flavor ingredients and supplement ingredients, due to port strikes and/or port congestion, delays due to pandemics, related labor issues or other importation impediments;

● protection of our existing intellectual property portfolio of trademarks and copyrights and our continuous pursuit to develop and protect new and innovative trademarks and copyrights for our expanding product lines;

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● limitations on co-packing availability and in particular, consolidation in the co-packing industry;

● increases in ocean and domestic freight rates;

● the long-term impact of Brexit on our business in Europe and the United Kingdom;

● the imposition of additional regulation, including regulation restricting the sale of energy or alcohol drinks, limiting caffeine or alcohol content in beverages, requiring product labeling and/or warnings, imposing excise taxes and/or sales taxes, and/or limiting product size and/or age restrictions;

● the continuation or worsening of the COVID-19 pandemic.

● increases in ocean and domestic fuel and freight rates;

● the imposition of additional regulations, including regulations restricting the sale of energy or alcohol drinks, limiting caffeine or alcohol content in beverages, requiring product labeling and/or warnings, imposing excise taxes and/or sales taxes, and/or limiting product size and/or age restrictions.

See “Part I, Item 1A – Risk Factors” for additional information about risks and uncertainties facing our Company.

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Operating income as a percentage of net sales

Other (expense) income, net

Interest and other income (expense), net

Income before provision for income taxes 1

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1 Includes $40.0 million, $40.0 million and $41.5 million for the years ended December 31, 2023, 2022 and 2021, respectively, related to the recognition of deferred revenue.

2 Excludes case sales of the Alcohol Brands and Other segments.

*Gross profit may not be comparable to that of other entities since some entities include all costs associated with their distribution process in cost of sales, whereas others exclude certain costs and instead include such costs within another line item such as operating expenses.

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Net sales were $7.14 billion for the year ended December 31, 2023, an increase of approximately $829.0 million, or 13.1% higher than net sales of $6.31 billion for the year ended December 31, 2022.

Net sales increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand, as well as due to pricing actions and reductions in promotions in certain markets.

Net sales increased primarily due to increased worldwide sales by volume of our Monster Energy® brand energy drinks as a result of increased consumer demand as well as due to the Pricing Actions.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately $146.7 million for the year ended December 31, 2023.

Net sales on a foreign currency adjusted basis increased 15.5% for the year ended December 31, 2023.

Net sales were $2.20 billion and $1.90 billion for the years ended December 31, 2022 and 2021, respectively, in EMEA, Asia Pacific, Latin America and the Caribbean.

Net sales were $2.53 billion and $2.20 billion for the years ended December 31, 2023 and 2022, respectively, in EMEA, Asia Pacific (including Oceania), Latin America and the Caribbean.

Net sales for the Monster Energy® Drinks segment were $6.56 billion for the year ended December 31, 2023, an increase of approximately $721.9 million, or 12.4% higher than net sales of $5.83 billion for the year ended December 31, 2022.

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Net sales for the Strategic Brands segment were $376.6 million for the year ended December 31, 2023, an increase of approximately $23.1 million, or 6.5% higher than net sales of $353.5 million for the year ended December 31, 2022.

Net sales for the Strategic Brands segment increased primarily due to increased worldwide sales by volume of our Predator® and NOS® brand energy drinks as a result of increased consumer demand.

Net sales for the Strategic Brands segment increased primarily due to increased worldwide sales by volume of our NOS®, Predator® and Fury® brand energy drinks as a result of increased consumer demand.

Net changes in foreign currency exchange rates had an unfavorable impact on net sales of approximately $22.4 million for the Strategic Brands segment for the year ended December 31, 2023.

Net sales for the Strategic Brands segment on a foreign currency adjusted basis increased 12.9% for the year ended December 31, 2023.

Net sales for the Alcohol Brands segment were $101.4 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

There were no comparative 2021 net sales for the Alcohol Brands segment as the Company completed its acquisition of CANarchy on February 17, 2022.

Net sales for the Other segment were $22.9 million for the year ended December 31, 2022, a decrease of approximately $3.0 million, or 11.5% lower than net sales of $25.9 million for the year ended December 31, 2021.

Net sales for the Alcohol Brands segment were $184.9 million for the year ended December 31, 2023, an increase of approximately $83.5 million, or 82.3% higher than net sales of $101.4 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

Net sales of The Beast Unleashed® FMBs, which launched during the 2023 first quarter in the United States on a rolling state basis, were $86.7 million for the year ended December 31, 2023.

Net sales for the Other segment were $23.5 million for the year ended December 31, 2023, an increase of approximately $0.6 million, or 2.4% higher than net sales of $22.9 million for the year ended December 31, 2022.

Case sales for our energy drink products, in 192-ounce case equivalents, were 769.2 million cases for the year ended December 31, 2023, an increase of approximately 67.6 million cases or 9.6% higher than case sales of 701.7 million cases for the year ended December 31, 2022.

The overall average net sales per case for our energy drink products (excluding net sales of Alcohol Brands and Other segments) decreased to $8.82 for the year ended December 31, 2022, which was 1.9% lower than the average net sales per case of $8.99 for the year ended December 31, 2021.

The decrease in the average net sales per case was primarily the result of geographical and product sales mix.

Barrel sales for our craft beers and hard seltzers, in 31 US gallon equivalents, were 0.3 million barrels for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

The overall average net sales per case for our energy drink products (excluding net sales of Alcohol Brands and Other segments) increased to $9.01 for the year ended December 31, 2023, which was 2.2% higher than the average net sales per case of $8.82 for the year ended December 31, 2022.

The increase in the average net sales per case was primarily the result of the Pricing Actions.

Case sales for our craft beers, hard seltzers and FMBs, in 192-ounce equivalents, were 13.1 million cases for the year ended December 31, 2023, an increase of approximately 6.6 million cases or 101.3% higher than case sales of 6.5 million cases for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

Barrel sales for our craft beers, hard seltzers and FMBs, in 31 U.S.

gallon equivalents, were 0.6 million barrels for the year ended December 31, 2023, an increase of approximately 0.3 million barrels or 101.3% higher than barrel sales of 0.3 million barrels for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

Gross profit was $3.79 billion for the year ended December 31, 2023, an increase of approximately $619.6 million, or 19.5% higher than the gross profit of $3.17 billion for the year ended December 31, 2022.

Gross profit as a percentage of net sales decreased to 50.3% for the year ended December 31, 2022 from 56.1% for the year ended December 31, 2021.

The decrease for the year ended December 31, 2022 was primarily the result of increased freight rates and fuel costs, including costs relating to the importation of aluminum cans, increased ingredient and other input costs, including secondary packaging materials, increased aluminum can costs attributable to higher aluminum commodity pricing, increased co-packing fees, production inefficiencies and geographical sales mix.

Gross profit as a percentage of net sales increased to 53.1% for the year ended December 31, 2023 from 50.3% for the year ended December 31, 2022.

The increase for the year ended December 31, 2023 was primarily the result of the Pricing Actions, decreased freight-in costs as well as decreased aluminum can costs.

Operating Expenses

Total operating expenses were $1.84 billion for the year ended December 31, 2023, an increase of approximately $251.0 million, or 15.8% higher than total operating expenses of $1.59 billion for the year ended December 31, 2022.

The comparative operating expenses for the year ended December 31, 2021 included a $16.9 million reversal of amounts previously accrued in connection with an intellectual property claim.

The increase in operating expenses was primarily due to increased general and administrative expenses of $92.9 million, including travel and entertainment, professional service fees (including legal and accounting) and depreciation and amortization, increased out-bound fuel, freight and warehouse costs of $74.3 million, increased selling and marketing expenses of $59.9 million, including sponsorships and endorsements, point of sale, premiums and allocated trade development, and increased payroll expenses of $57.0 million (of which $23.1 million was related to CANarchy).

In addition, CANarchy related depreciation and amortization was $8.7 million for year ended December 31, 2022.

The increase in operating expenses was partially offset by a decrease in distributor termination expenses of $5.3 million for the year ended December 31, 2022.

The increase in operating expenses was primarily due to increased general and administrative expenses of $80.9 million, including travel and entertainment, professional service fees (including legal and accounting) and depreciation and amortization, increased selling and marketing expenses of $92.2 million, including sponsorships and endorsements, point of sale, premiums and allocated trade development, and increased payroll expenses of $82.4 million.

In addition, operating expenses for the year ended December 31, 2023 included $16.1 million of transaction costs related to the acquisition of Bang Energy and $42.7 million of impairment charges related to the Alcohol Brands segment (the “Alcohol Impairment Charges”).

The Alcohol Impairment Charges, due in part to the continuing challenges in the craft beer and hard seltzer categories, relate to certain non-amortizing intangibles as well as property and equipment, acquired as part of the CANarchy transaction (as defined below in Note 2, “Acquisitions”).

Operating expenses as a percentage of net sales for the years ended December 31, 2023 and 2022 were 25.8% and 25.2%, respectively.

Operating expenses for the year ended December 31, 2019 (pre COVID-19) were $1.12 billion, or 26.6% of net sales.

Operating Income

Operating income was $1.58 billion for the year ended December 31, 2022, a decrease of approximately $212.7 million, or 11.8% lower than operating income of $1.80 billion for the year ended December 31, 2021.

Operating income as a percentage of net sales decreased to 25.1% for the year ended December 31, 2022 from 32.4% for the year ended December 31, 2021.

Operating income for the year ended December 31, 2022 decreased primarily as a result of the increase in operating expenses as well as the decrease in the gross profit as a percentage of net sales.

Operating income was $316.3 million and $402.8 million for the years ended December 31, 2022 and 2021, respectively, for our operations in EMEA, Asia Pacific, Latin America and the Caribbean.

Operating income for the Monster Energy® Drinks segment, exclusive of corporate and unallocated expenses, was $1.85 billion for the year ended December 31, 2022, a decrease of approximately $140.7 million, or 7.1% lower than operating income of $1.99 billion for the year ended December 31, 2021.

The decrease in operating income for the Monster Energy® Drinks segment was primarily the result of an increase in operating expenses as well as a decrease in gross profit as a percentage of net sales.

Operating income was $1.95 billion for the year ended December 31, 2023, an increase of approximately $368.6 million, or 23.3% higher than operating income of $1.58 billion for the year ended December 31, 2022.

Operating income as a percentage of net sales increased to 27.4% for the year ended December 31, 2023 from 25.1% for the year ended December 31, 2022.

Operating income for the year ended December 31, 2023 increased primarily due to an increase of $619.6 million in gross profit partially offset by an increase in operating expenses of $368.6 million, which includes the Alcohol Impairment Charges.

Operating income was $409.3 million and $316.3 million for the years ended December 31, 2023 and 2022, respectively, for our operations in EMEA, Asia Pacific (including Oceania), Latin America and the Caribbean.

Operating income for the Monster Energy® Drinks segment, exclusive of corporate and unallocated expenses, was $2.34 billion for the year ended December 31, 2023, an increase of approximately $488.7 million, or 26.4% higher than operating income of $1.85 billion for the year ended December 31, 2022.

The increase in operating income for the Monster Energy® Drinks segment was primarily the result of a $572.5 million increase in gross profit.

Operating income for the Strategic Brands segment, exclusive of corporate and unallocated expenses, was $207.1 million for the year ended December 31, 2023, an increase of approximately $9.4 million, or 4.8% higher than operating income of $197.7 million for the year ended December 31, 2022.

The increase in operating income for the Strategic Brands segment was primarily the result of a $14.6 million increase in gross profit.

Operating loss for the Alcohol Brands segment, exclusive of corporate and unallocated expenses, was $31.5 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

The operating loss for the year ended December 31, 2022 was due in part to (i) excess depreciation and amortization as well as the fair value treatment of purchased inventory, all relating to the CANarchy Transaction, (ii) increased input costs and an underutilization

of fixed overhead and (iii) sales volume declines primarily of Wild Basin TM due in part to overall sales declines in the hard seltzer category.

The inventory acquired, which was subsequently sold, was recognized through cost of goods sold at fair value (purchased cost), resulting in no recognized profits on the associated sales.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $3.0 million for the year ended December 31, 2022, a decrease of approximately $3.9 million, or 56.2% lower than operating income of $6.9 million for the year ended December 31, 2021.

Other (Expense) Income, net

Other (expense) income, net, was ($12.8) million for the year ended December 31, 2022, as compared to other (expense) income, net, of $4.0 million for the year ended December 31, 2021.

Operating loss for the Alcohol Brands segment, exclusive of corporate and unallocated expenses, was $81.1 million for the year ended December 31, 2023, an increase of approximately $49.6 million, or 157.5% higher than operating loss of

$31.5 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

The increase in the operating loss for the Alcohol Brands segment for the year ended December 31, 2023 was primarily as a result of the Alcohol Impairment Charges of $42.7 million.

Operating income for the Other segment, exclusive of corporate and unallocated expenses, was $3.6 million for the year ended December 31, 2023, an increase of approximately $0.5 million, or 17.3% higher than operating income of $3.0 million for the year ended December 31, 2022.

Interest and Other Income (Expense), net

Interest and other income (expense), net, was $115.1 million for the year ended December 31, 2023, as compared to interest and other income (expense), net, of ($12.8) million for the year ended December 31, 2022.

Foreign currency transaction gains (losses) were ($60.2) million and ($37.9) million for the years ended December 31, 2023 and 2022, respectively.

Interest income was $130.0 million and $29.7 million for the years ended December 31, 2023 and 2022, respectively.

Interest and other income (expense), net included a gain on transaction of $45.4 million related to the acquisition of Bang Energy (“Bang Transaction Gain”) for the year ended December 31, 2023.

Provision for Income Taxes

Provision for income taxes was $380.3 million for the year ended December 31, 2022, a decrease of $43.6 million, or 10.3% lower than the provision for income taxes of $423.9 million for the year ended December 31, 2021.

Provision for income taxes was $437.5 million for the year ended December 31, 2023, an increase of $57.2 million, or 15.0% higher than the provision for income taxes of $380.3 million for the year ended December 31, 2022.

The effective combined federal, state and foreign tax rate was 21.2% and 24.2% for the years ended December 31, 2023 and 2022, respectively.

The increase in the effective tax rate was primarily attributable to the decrease in income in certain foreign jurisdictions with lower tax rates compared to the United States.

Net income was $1.19 billion for the year ended December 31, 2022, a decrease of $185.9 million, or 13.5% lower than net income of $1.38 billion for the year ended December 31, 2021.

The decrease in net income for the year ended December 31, 2022 was primarily due to the decrease in the gross profit percentage of net sales as well as the increase in operating expenses.

The decrease in the effective tax rate was primarily attributable to the increase in the stock compensation deduction for the year ended December 31, 2023.

Net income was $1.63 billion for the year ended December 31, 2023, an increase of $439.4 million, or 36.9% higher than net income of $1.19 billion for the year ended December 31, 2022.

The increase in net income for the year ended December 31, 2023 was primarily due to the increase in gross profit.

Key Business Metrics

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Net changes in foreign currency exchange rates had an unfavorable impact on gross billings in the Strategic Brands segment of approximately $22.0 million for the year ended December 31, 2023.

Gross billings for the Alcohol Brands segment were $103.0 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

There were no comparative 2021 gross billings for the Alcohol Brands segment as the Company completed its acquisition of CANarchy on February 17, 2022.

Gross billings for the Other segment were $22.9 million for the year ended December 31, 2022, a decrease of $3.0 million, or 11.5% lower than gross billings of $25.9 million for the year ended December 31, 2021.

Promotional allowances, commissions and other expenses, as described in the footnote below, were $990.6 million for the year ended December 31, 2022, an increase of $65.8 million, or 7.1% higher than promotional allowances, commissions and other expenses of $924.7 million for the year ended December 31, 2021.

Gross billings for the Alcohol Brands segment were $188.6 million for the year ended December 31, 2023, an increase of $85.6 million, or 83.0% higher than gross billings of $103.0 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

Gross billings for the Other segment were $23.5 million for the year ended December 31, 2023, an increase of $0.6 million, or 2.6% higher than gross billings of $22.9 million for the year ended December 31, 2022.

Promotional allowances, commissions and other expenses, as described in the footnote below, were $1.13 billion for the year ended December 31, 2023, an increase of $139.1 million, or 14.0% higher than promotional allowances, commissions and other expenses of $990.6 million for the year ended December 31, 2022.

Promotional allowances as a percentage of gross billings were 13.7% and 13.6% for the years ended December 31, 2023 and 2022, respectively.

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In addition, our continued growth internationally may further reduce the impact of seasonality on our business.

Quarterly fluctuations may also be affected by other factors including the introduction of new products, the opening of new markets where temperature fluctuations are more pronounced, the addition of new bottlers/distributors, changes in the sales mix of our products and changes in and/or increased advertising and promotional expenses.

COVID-19 pandemic, including new variants, may also have an impact on consumer behavior and change the seasonal fluctuation of our business.

changes in the sales mix of our products and changes in and/or increased advertising and promotional expenses.

(See “Part I, Item 1 – Business – Seasonality”).

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Energy Drink Adjusted Average Net Sales Per Case

1 Excludes Alcohol Brands and Other segment net sales.

1 Excludes Alcohol Brands segment and Other segment net sales.

The following represents energy drink case sales by segment for the years ended December 31:

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Average net sales per case - Energy Drinks

1 Excludes Alcohol Brands segment (effectively from February 17, 2022 to December 31, 2022) and Other segment net sales.

1 Excludes Alcohol Brands segment and Other segment net sales.

Net changes in foreign currency exchange rates had an unfavorable impact on both net sales and the overall average net sales per case for the year ended December 31, 2023.

Unit Sales of our alcohol products are expressed in barrel equivalents (“Barrel”).

A Barrel is a unit of measurement equal to 31 U.S.

Barrel sales were 0.3 million for the year ended December 31, 2022 (effectively from February 17, 2022 to December 31, 2022).

Inflation had a negative impact on our results of operations, leading to increased cost of sales and operating expenses for the years ended December 31, 2022 and 2021.

To mitigate the impact of inflation, we implemented a price increase effective September 1, 2022 in the United States and continue to implement price increases in certain international markets where feasible.

The following represents case sales for our craft beers, hard seltzers and FMBs, in 192-ounce equivalents, for the years ended December 31:

(In thousands, except average net sales per case)

Alcohol Brands segment net sales

Average net sales per case - Alcohol Brands

1 For the year ended December 31, 2022, effectively from February 17, 2022 to December 31, 2022.

We believe inflation did not have a significant impact on our results of operations for the year ended December 31, 2023.

Inflation had a negative impact on our results of operations, leading to increased cost of sales and operating expenses for the year ended December 31, 2022.

To mitigate the impact of inflation, we implemented the Pricing Actions .

Liquidity and Capital Resources

Cash and cash equivalents, short-term and long-term investments – As of December 31, 2022, we had $1.31 billion in cash and cash equivalents, $1.36 billion in short-term investments and $61.4 million in long-term investments.

Cash and cash equivalents, short-term and long-term investments – As of December 31, 2023, we had $2.30 billion in cash and cash equivalents, $955.6 million in short-term investments and $76.4 million in long-term investments.

We maintain our investments for cash management purposes and not for purposes of speculation.

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No short-term or long-term investments were held by our foreign subsidiaries at December 31, 2023.

We believe that cash available from operations, including our cash resources and access to credit, will be sufficient for our working capital needs, including purchase commitments for raw materials and inventory, increases in accounts receivable, payments of tax liabilities, expansion and development needs, purchases of capital assets, purchases of equipment, purchases of real property and purchases of shares of our common stock, through at least the next 12 months.

equipment, purchases of real property and purchases of treasury stock, through at least the next 12 months.

Based on our current plans, capital expenditures (exclusive of common stock repurchases) are likely to be less than $500.0 million through December 31, 2024.

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Cash flows provided by operating activities.

Cash provided by operating activities was $887.7 million for the year ended December 31, 2022, as compared with cash provided by operating activities of $1.16 billion for the year ended December 31, 2021.

Cash provided by operating activities was $1.72 billion for the year ended December 31, 2023, as compared with cash provided by operating activities of $887.7 million for the year ended December 31, 2022.

For the year ended December 31, 2023, cash provided by operating activities was primarily attributable to net income earned of $1.63 billion and adjustments for certain non-cash expenses, consisting of $68.9 million of depreciation and amortization, $68.8 million of stock-based compensation, $38.7 million loss on impairment of intangibles, $9.0 million of non-cash lease expense and $4.3 million loss on impairment of property and equipment, partially offset by the $45.4 million Bang Transaction Gain.

For the year ended December 31, 2023, cash provided by operating activities also increased due to a $112.8 million increase in accounts payable, a $23.0 million increase in other liabilities, a $13.4 million increase in accrued compensation, an $8.4 million increase in accrued promotional allowances, a $7.9 million decrease in inventories and a $2.0 million decrease in deferred income taxes.

For the year ended December 31, 2023, cash used in operating activities was primarily attributable to a $163.2 million increase in accounts receivable, a $24.5 million decrease in deferred revenue, an $18.8 million increase in prepaid income taxes, a $10.4 million decrease in accrued liabilities and a $10.2 million increase in prepaid expenses and other assets.

For the year ended December 31, 2022, cash provided by operating activities was primarily attributable to net income earned of $1.19 billion and adjustments for certain non-cash expenses, consisting of $64.1 million of stock-based compensation, $61.2 million of depreciation and amortization, $7.3 million of non-cash lease expense and $2.2 million loss on impairment of intangibles.

For the year ended December 31, 2022, cash provided by operating activities also increased due to a $49.8 million increase in accounts payable, a $48.2 million decrease in deferred income taxes, a $50.8 million increase in accrued promotional allowances and a $3.7 million increase in accrued compensation.

For the year ended December 31, 2022, cash used in operating activities was primarily attributable to a $347.7 million increase in inventories, a $129.0 million increase in accounts receivable, a $38.3 million increase in prepaid expenses and other assets, a $30.4 million decrease in accrued liabilities, a $19.9 million decrease in deferred revenue, a $16.9 million decrease in income taxes payable, a $4.5 million decrease in other liabilities and $4.4 million decrease in prepaid income taxes.

For the year ended December 31, 2021, cash provided by operating activities was primarily attributable to net income earned of $1.38 billion and adjustments for certain non-cash expenses, consisting of $50.2 million of depreciation and amortization, and $70.5 million of stock-based compensation.

For the year ended December 31, 2021, cash provided by operating activities also increased due to a $114.3 million increase in accounts payable, a $71.6 million increase in accrued liabilities, a $31.5 million increase in accrued promotional allowances, a $16.4 million increase in deferred income taxes, an $8.0 million increase in accrued compensation and a $7.2 million increase in income taxes payable.

For the year ended December 31, 2021, cash used in operating activities was primarily attributable to a $277.8 million increase in inventories, a $254.2 million increase in accounts receivable, a $29.3 million increase in prepaid expenses and other assets, a $22.7 million decrease in deferred revenue and a $10.9 million increase in prepaid income taxes.

Cash flows used in investing activities.

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For both the years ended December 31, 2023 and 2022, cash used in investing activities was primarily attributable to purchases of available-for-sale investments.

For the year ended December 31, 2022, cash used in investing activities included $329.5 million (net of cash acquired), related to the CANarchy Transaction.

For the year ended December

31, 2023, cash used in investing activities included $363.4 million related to the acquisition of Bang Energy.

For the year ended December 31, 2022, cash used in investing activities included $329.5 million (net of cash acquired), related to the acquisition of Monster Brewing Company.

To a lesser extent, for both the years ended December 31, 2023 and 2022, cash used in investing activities also included the acquisition of real property, fixed assets consisting of vans and promotional vehicles, coolers and other equipment to support our marketing and promotional activities, production equipment, furniture and fixtures, office and computer equipment, computer software, equipment used for sales and administrative activities, certain leasehold improvements, improvements to real property as well as the acquisition, defense and maintenance of trademarks.

to continue to use a portion of our cash in excess of our requirements for operations for purchasing short-term and long-term investments, leasehold improvements, the acquisition of capital equipment (specifically, vans, trucks and promotional vehicles, coolers, other promotional equipment, merchandise displays, warehousing racks as well as items of production equipment required to produce certain of our existing and/or new products and to develop our brand in international markets) and for other corporate purposes.

We expect to continue to use a portion of our cash in excess of our requirements for operations for purchasing short-term and long-term investments, leasehold improvements, the acquisition of capital equipment (specifically, vans, trucks and promotional vehicles, coolers, other promotional equipment, merchandise displays, warehousing racks as well as items of production equipment required to produce certain of our existing and/or new products and to develop our brand in international markets) and for other corporate purposes.

From time to time, we may also use cash to purchase additional real property related to our beverage business and/or acquire compatible businesses.

Cash flows (used in) provided by financing activities.

Cash used in financing activities was $706.9 million for the year ended December 31, 2022 as compared to cash provided by financing activities of $34.8 million for the year ended December 31, 2021.

The cash flows used in financing activities for the year ended December 31, 2022 was primarily the result of the repurchases of our common stock.

The cash flows provided by financing activities for both the years ended December 31, 2022, and 2021 was primarily attributable to the issuance of our common stock related to stock-based compensation.

Cash used in financing activities was $542.6 million for the year ended December 31, 2023 as compared to cash used in financing activities of $706.9 million for the year ended December 31, 2022.

The cash flows used in financing activities for both the years ended December 31, 2023 and 2022 was primarily the result of the repurchases of our common stock.

The cash flows provided by financing activities for both the years ended December 31, 2023 and 2022 was primarily attributable to the issuance of our common stock under our stock-based compensation plans.

The following represents a summary of the Company’s contractual commitments and related scheduled maturities as of December 31, 2023:

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The Company amortizes its trademarks with finite useful lives over their respective useful lives.

For the year ended December 31, 2023, impairment charges of $38.7 million were recorded to intangibles primarily related to trademarks in our Alcohol Brands segment.

For the year ended December 31, 2022, an impairment charge of $2.2 million was recorded to intangibles.

For the year ended December 31, 2021 no impairment charges were recorded to intangibles.

For the year ended December 31, 2020, an impairment charge of $8.7 million was recorded to intangibles.

Revenue Recognition – Promotional and other allowances (variable consideration) recorded as a reduction to net sales for our energy drink products primarily include consideration given to the Company’s non-alcohol bottlers/distributors or retail customers including, but not limited to the following:

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Certain statements made in this report 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) (the “Exchange Act”)) regarding the expectations of management with respect to revenues, profitability, adequacy of funds from operations and our existing credit facility, among other things.

All statements containing a projection of revenues, income (loss), earnings (loss) per share, capital expenditures, dividends, capital structure or other financial items, a statement of management’s plans and objectives for future operations, or a statement of future economic performance contained in management’s discussion and analysis of financial condition and results of operations, including statements related to new products, volume growth and statements encompassing general optimism about future operating results and non-historical information, are forward-looking statements within the meaning of the Exchange Act.

information, are forward-looking statements within the meaning of the Exchange Act.

Without limiting the foregoing, the words “believes,” “thinks,” “anticipates,” “plans,” “expects,” “estimates” and similar expressions are intended to identify forward-looking statements.

Management cautions that these statements are qualified by their terms and/or important factors, many of which are outside our control and involve a number of risks, uncertainties and other factors, that could cause actual results and events to differ materially from the statements made including, but not limited to, the following:

● Our ability to absorb, mitigate or pass on cost increases to our bottlers/distributors and/or customers;

● The impact of rising costs, interest rates, and inflation on the discretionary income of our consumers, particularly the rising cost of energy;

● Our ability to successfully integrate the Bang Energy® business and recognize the anticipated benefits of the transaction;

● Our ability to successfully transition the acquired Bang Energy® beverages to the Company’s primary bottlers/distributors;

● Our ability to procure shelf space, retain customers and increase sales of the acquired Bang Energy® beverages;

● Our ability to consolidate operations and/or rationalize brands acquired from Monster Brewing Company and Bang Energy®;

● Our ability to achieve profitability within our Alcohol Brands segment;

● Our ability to absorb, mitigate or pass on cost increases to our bottlers/distributors and/or customers and/or consumers;

● The impact of rising costs, interest rates, and inflation on the discretionary income of our consumers;

● Uncertainties associated with an economic slowdown or recession that could negatively impact the financial condition of our customers and could result in a reduced demand for our products;

● The impact of the military conflict in Ukraine, including supply chain disruptions, volatility in commodity prices, increased economic uncertainty and escalating geopolitical tensions;

● Fluctuations in growth and/or growth rates and/or decline in sales of the domestic and international energy drink categories generally, including in the convenience and gas channel (which is our largest channel) and the impact on demand for our products resulting from deteriorating economic conditions and/or financial uncertainties;

● The impact of temporary or permanent facility closures, production slowdowns and disruptions in operations experienced by our suppliers, bottlers/distributors,/or co-packers, and/or breweries, including any material disruptions on the production and distribution of our products;

● The impact of the military conflicts in Ukraine, Israel and Gaza as well as tensions in the Middle East in general and tensions across the Taiwan Straits, including supply chain disruptions, volatility in commodity and energy prices, increased economic uncertainty and escalating geopolitical tensions;

● Fluctuations in growth and/or growth rates (positive or negative) of the domestic and international energy drink categories generally, including in the convenience and gas channel (which is our largest channel) and the impact on demand for our products resulting from deteriorating economic conditions and/or financial uncertainties;

● Lack of anticipated demand for our products in domestic and/or international markets;

● Our ability to sustain the current level of sales of and/or achieve growth for our Monster Energy®, Reign Total Body Fuel®, Reign Storm®, Bang Energy® and NOS® brand energy drinks and/or our other products, including our Strategic Brands and Alcohol Brands;

● The impact of temporary or permanent facility closures, production slowdowns and disruptions in operations experienced by our manufacturing facilities, our suppliers, bottlers/distributors, co-packers, and/or breweries, including any material disruptions on the production and distribution of our products;

● Disruption to our and/or our co-packers’ manufacturing facilities and operations due to severe weather, natural disasters, climate change, labor-related issues, production difficulties, capacity limitations, cybersecurity incidents or other causes, which could impair our ability to produce or deliver finished products, resulting in a negative impact on our operating results;

● Our ability to modify our manufacturing facilities to comply with safety, health, environmental, and other regulations;

● The consolidation of co-packers leading us to increasingly rely on fewer co-packing groups, certain of which account for a large percentage of our co-packing capacity for our Monster Energy® drinks;

● The impact of logistical issues and delays, including shortages of shipping containers and port of entry congestion;

● The human and economic consequences of a material reemergence of COVID-19, including new variants, as well as the measures that may be taken by governments and businesses (including the Company and its suppliers, bottlers/distributors, co-packers, and other service providers) and the public at large to limit the spread of COVID-19, including, but not limited to, lockdowns, labor issues, delays, and/or decreased sponsorship, endorsement, sampling, and/or innovation activities, which may have an adverse impact on our business and operations;

● We have extensive commercial arrangements with TCCC and, as a result, our future performance is substantially dependent on the success of our relationship with TCCC;

● The impact of TCCC’s bottlers/distributors distributing Coca-Cola brand energy drinks and possible reductions in the number of our SKUs carried by such bottlers/distributors and/or such bottlers/distributors imposing limitations on distributing new product SKUs;

● The consequence of TCCC’s bottlers/distributors distributing Coca-Cola brand energy drinks, possible reductions in the number of our SKUs carried by such bottlers/distributors and/or such bottlers/distributors imposing limitations on distributing new product SKUs;

● The effect of TCCC being one of our significant stockholders and the potential divergence of TCCC’s interests from those of our other stockholders;

● Our ability to maintain relationships with TCCC system bottlers/distributors and manage their ongoing commitment to focus on our non-alcohol products;

● Disruption in distribution channels and/or decline in sales due to the termination and/or insolvency of existing and/or new domestic and/or international bottlers/distributors;

● Lack of anticipated demand for our products in domestic and/or international markets;

● Fluctuations in the inventory levels of our bottlers/distributors, planned or otherwise, and the resultant impact on our revenues;

● Disruptions in distribution channels and/or declines in sales due to the termination and/or insolvency of existing and/or new domestic and/or international bottlers/distributors;

● Fluctuations in our inventory levels or those of our bottlers/distributors, planned or otherwise, and the resultant impact on our revenues;

● Unfavorable regulations, including taxation, age restrictions imposed on the sale, purchase, or consumption of our products, marketing restrictions, product registration requirements, tariffs, trade restrictions, container size limitations and/or ingredient restrictions;

● The effect of inquiries from, and/or actions by, state attorneys general, the Federal Trade Commission (the “FTC”), the Food and Drug Administration (the “FDA”), the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”), municipalities, city attorneys, other government agencies, quasi-government agencies, government officials (including members of U.S.

● The effect of inquiries from, and/or actions by, state attorneys general, the Federal Trade Commission (the “FTC”), the FDA, the Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”), municipalities, city attorneys, other government agencies, quasi-government agencies, government officials (including members of the U.S.

Congress) and/or analogous central and local agencies and other authorities in the foreign countries in which our products are manufactured and/or distributed into the advertising, marketing, promotion, ingredients, sale and/or consumption of our products, including voluntary and/or required changes to our business practices;

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dollar, which will continue to increase as foreign sales increase;

● The long-term impact of the United Kingdom’s departure from the European Union (or “Brexit”);

● Changes in accounting standards may affect our reported profitability;

● Implications of the Organization for Economic Cooperation and Development’s base erosion and profit shifting project;

● Any proceedings which may be brought against us by the Securities and Exchange Commission (the “SEC”), the FDA, the FTC, the ATF or other governmental agencies or bodies;

● Any proceedings that may be brought against us by the SEC, the FDA, the FTC, the ATF or other governmental or quasi-governmental agencies or bodies;

● The outcome and/or possibility of future shareholder derivative actions or shareholder securities litigation that may be filed against us and/or against certain of our officers and directors, and the possibility of other private shareholder litigation;

● The outcome of product liability or consumer fraud litigation and/or class action litigation (or its analog in foreign jurisdictions) regarding the safety of our products and/or the ingredients in and/or claims made in connection with our products and/or alleging false advertising, marketing and/or promotion, and the possibility of future product liability and/or class action lawsuits;

● The outcome of product liability or consumer fraud litigation and/or class action litigation (or its analog in foreign jurisdictions) regarding the safety of our products and/or the ingredients in our products and/or claims made in connection with our products and/or alleging false advertising, marketing and/or promotion, and the possibility of future product liability and/or class action lawsuits;

● Exposure to significant liabilities due to litigation, legal or regulatory proceedings, including litigation directed at the energy and alcohol beverage industries generally or at the Company in particular;

● Intellectual property injunctions;

● Unfavorable resolution of tax matters;

● Unfavorable resolution of possible tax matters;

● Uncertainty and volatility in the domestic and global economies, including risk of counterparty default or failure;

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● Adverse publicity surrounding obesity, alcohol consumption, and other health concerns related to our products, product safety and quality, water usage, environmental impact and sustainability, human rights, our culture, workforce and labor and workplace laws;

● Our ability to meet or comply with sustainability-related expectations, standards, and regulations, including forthcoming rules set forth by the SEC and European Commission;

● Changes in demand that are weather or season related and/or for other reasons, including changes in product category and/or package consumption and changes in cost and availability of certain key ingredients including aluminum cans, as well as disruptions to the supply chain, as a result of climate change and poor or extreme weather conditions;

● Our ability to meet or comply with sustainability-related expectations, standards, and regulations, including rules proposed by the SEC, laws implemented by the California legislature, and directives adopted by the European Commission;

● Changes in demand that are weather or season related and/or for other reasons, including changes in product category and/or package consumption;

● Changes in cost and availability of certain key ingredients including aluminum cans, as well as disruptions to the supply chain, as a result of climate change and poor or extreme weather conditions;

● The impact of unstable political conditions, civil unrest, large scale terrorist acts, the outbreak or escalation of armed hostilities, major natural disasters and extreme weather conditions, widespread outbreaks of infectious diseases (such as the COVID-19 pandemic), or unforeseen economic and political changes and local or international catastrophic events;

● The human and economic consequences of the COVID-19 pandemic, including new variants, as well as the measures taken or that may be taken in the future by governments, and consequently, businesses (including the Company and its suppliers, bottlers/ distributors, co-packers and other service providers) and the public at large to limit the COVID-19 pandemic;

● The impact of changes to our sponsorship and endorsement activities, our sampling activities, and/or our innovation activities as a result of COVID-19 or other pandemics on our future sales and market share;

● The impact of countries being in lockdown due to the COVID-19 pandemic at various times;

● The impact on our business of competitive products and pricing pressures and our ability to gain or maintain our share of sales in the marketplace as a result of actions by competitors, including unsubstantiated and/or misleading claims, false advertising claims and tortious interference, as well as competitors selling misbranded products;

● The impact on our business of trademark and trade dress infringement proceedings brought against us relating to our brands, which could result in an injunction barring us from selling certain of our products and/or require changes to be made to our current trade dress;

● The impact on our business of competitive products and pricing pressures and our ability to increase or maintain our market share as a result of actions by competitors, including unsubstantiated and/or misleading claims, false advertising claims and tortious interference, as well as competitors selling misbranded products;

● The impact on our business of trademark and trade dress infringement proceedings brought against us relating to any of our brands, which could result in an injunction barring us from selling certain of our products and/or require changes to be made to our current trade dress;

● Our ability to implement and/or maintain price increases, including through reductions in promotional allowances;

● An inability to achieve volume growth through product and packaging initiatives;

● Our ability to sustain the current level of sales and/or achieve growth for our Monster Energy® brand energy drinks and/or our other products, including our Strategic Brands and Alcohol Brands;

● Our ability to implement our growth strategy, including expanding our business in existing and new sectors, such as the alcohol beverage sector;

● Our ability to successfully integrate CANarchy and other acquired businesses or assets;

● The inherent operational risks presented by the alcohol beverage industry that may not be adequately covered by insurance or lead to litigation relating to alcohol marketing, advertising, or distribution practices, alcohol abuse problems and other health consequences arising from excessive consumption of or other misuse of alcohol, including death;

● Our inability to transition distribution agreements in our Alcohol Brands segment and/or the impact of higher costs to change distributors for our alcohol beverages;

● The impact of criticism of our products and/or the energy drink and/or alcohol beverage markets generally and/or legislation enacted (whether as a result of such criticism or otherwise) that restricts the marketing or sale of energy drinks and/or alcohol beverages (including prohibiting the sale of energy and/or alcohol drinks at certain establishments or pursuant to certain governmental programs), limits caffeine or alcohol content in beverages, requires certain product labeling disclosures and/or warnings, imposes excise and/or sales taxes, limits product sizes and/or imposes age restrictions for the sale of energy and/or alcohol drinks;

● Our ability to comply with and/or resulting lower consumer demand and/or lower profit margins for energy drinks and/or alcohol beverages due to proposed and/or future U.S.

federal, state and local laws and regulations and/or proposed or existing laws and regulations in certain foreign jurisdictions and/or any changes therein, including changes in taxation requirements (including tax rate changes, new tax laws, new and/or increased excise, sales and/or other taxes on our products and revised tax law interpretations) and environmental laws, as well as the Federal Food, Drug, and Cosmetic Act and regulations or rules made thereunder or in connection therewith by the FDA, as well as changes in any other food, drug or similar laws in the United States and internationally, especially those changes that may restrict the sale of energy and/or alcohol drinks (including prohibiting the sale of energy and/or alcohol drinks at certain establishments or pursuant to certain governmental programs), limit caffeine or alcohol content in beverages, require certain product labeling disclosures and/or warnings, impose excise taxes, impose sugar taxes, limit product sizes, or impose age restrictions for the sale of energy and/or alcohol drinks, as well as laws and regulations or rules made or enforced by the ATF and Explosives and/or the FTC or their foreign counterparts;

Cosmetic Act and regulations or rules made thereunder or in connection therewith by the FDA.

In addition, our business may be adversely impacted by changes in other food, drug or similar laws in the United States and internationally as well as laws and regulations or rules made or enforced by the ATF and/or the FTC or their foreign counterparts;

● Disruptions in the timely import or export of our products and/or ingredients including flavors, flavor ingredients and supplement ingredients due to port congestion, strikes and related labor issues or otherwise;

● Our ability to satisfy all criteria set forth in any model energy and/or alcohol drink guidelines, including, without limitation, those adopted by the American Beverage Association, of which we are a member, and/or any international beverage associations and the impact of our failure to satisfy such guidelines may have on our business;

● Our ability to satisfy all criteria set forth in any model energy and/or alcohol drink guidelines, including, without limitation, those adopted by the American Beverage Association, of which we are a member, and/or any international beverage associations and the impact that our failure to satisfy such guidelines may have on our business;

● The effect of unfavorable or adverse public relations, press, articles, comments and/or media attention;

● Changes in the cost, quality and availability of containers, packaging materials, aluminum cans or kegs, the Midwest and other premiums, raw materials, including flavors and flavor ingredients, and other ingredients and juice concentrates, and our ability to obtain and/or maintain favorable supply arrangements and relationships and procure timely and/or sufficient production of all or any of our products to meet customer demand;

● Any shortages that may be experienced in the procurement of containers and/or other raw materials including, without limitation, water, flavors, flavor ingredients, supplement ingredients, aluminum cans generally, PET containers used for our Monster Hydro® energy drinks, 24-ounce aluminum cap cans and 550ml BRE aluminum cans with resealable ends;

● Changes in the cost, quality and availability of containers, packaging materials, aluminum cans or kegs, the Midwest and other premiums, raw materials, including flavors and flavor ingredients, and other ingredients and juice concentrates, co-packing fees, and our ability to obtain and/or maintain favorable supply arrangements and relationships and procure timely and/or sufficient production of all or any of our products to meet customer demand;

● Any shortages that may be experienced in the procurement of containers and/or other raw materials including, without limitation, water, flavors, flavor ingredients, supplement ingredients, aluminum cans generally, to a limited extent PET containers, 24-ounce aluminum cap cans, 19.2-ounce cans and 550ml BRE aluminum cans with resealable ends;

● Our ability to access, secure and purify sufficient supplies of quality water;

● Limitations in procuring sufficient quantities of aluminum cans;

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● Our ability to pass on to our customers all or a portion of any increases in the costs of raw materials, ingredients, commodities and/or other cost inputs affecting our business;

● Our ability to achieve both internal domestic and international forecasts, which may be based on projected volumes and sales of many product types and/or new products, certain of which are more profitable than others;

there can be no assurance that we will achieve projected levels of sales as well as forecasted product and/or geographic mixes;

● Our ability to penetrate new domestic and/or international markets and/or gain approval or mitigate the delay in securing approval for the sale of our products in various countries;

● The effectiveness of sales and/or marketing efforts by us and/or by the bottlers/distributors of our products, most of whom distribute products that may be regarded as competitive with our products;

● Unilateral decisions by bottlers/distributors, buying groups, convenience chains, grocery chains, mass merchandisers, specialty chain stores, e-commerce retailers, e-commerce websites, club stores and other customers to discontinue carrying all or any of our products that they are carrying at any time, restrict the range of our products they carry, impose restrictions or limitations on the sale of our products and/or the sizes of containers of our products and/or devote less resources to the sale of our products;

● Unilateral decisions by bottlers/distributors, buying groups, convenience and gas chains, grocery chains, mass merchandisers, specialty chain stores, e-commerce retailers, e-commerce websites, club stores and other customers to discontinue carrying all or any of our products that they are carrying at any time, restrict the range of our products they carry, impose restrictions or limitations on the sale of our products and/or the sizes of containers of our products and/or devote less resources to the sale of our products;

● The impact of certain activities by competitors and others to persuade regulators and/or retailers and/or customers in certain countries to reduce the permitted or maximum container sizes for our products from those currently being sold and marketed by us;

● The impact of possible trading disputes between our bottler/distributors and their customers and/or one or more buying groups which may result in the delisting of certain of the Company products, temporarily or otherwise;

● The effects of retailer consolidation on our business and our ability to successfully adapt to the rapidly changing retail landscape, including, but not limited to, substantial competition in the alcohol beverage market from new entrants, consolidations by competitors and retailers, and other competitive activities;

● The impact of possible trading disputes between our bottler/distributors and their customers and/or one or more buying groups which may result in the delisting of certain of our products, temporarily or otherwise;

● The effects of retailer consolidation on our business and our ability to successfully adapt to the rapidly changing retail landscape, including, but not limited to, competition from new entrants, consolidations by competitors and retailers, and other competitive activities;

● Our ability to adapt to the changing retail landscape with the rapid growth in e-commerce retailers;

● The effects of bottler/distributor consolidation on our business;

● The costs and/or effectiveness, now or in the future, of our advertising, marketing and promotional strategies;

● The costs and/or effectiveness, now or in the future, of our sponsorships and endorsements, marketing and promotional strategies;

● The success of our sports marketing, social media and other general marketing endeavors both domestically and internationally;

● Possible product recalls and/or reformulations of certain of our products and/or market withdrawals of certain of our products due to defective and/or non-compliant formulas or production in one or more jurisdictions;

● Possible product recalls and/or reformulations of certain of our products and/or market withdrawals of certain of our products due to defective packaging and/or non-compliant formulas or production in one or more jurisdictions;

● The failure of our bottlers and/or co-packers to manufacture our products on a timely basis or at all;

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● Provisions in our organizational documents and/or control by insiders which may prevent changes in control even if such changes would be beneficial to other stockholders;

● Any disruption in and/or lack of effectiveness of our information technology systems, including a breach of cyber security, that disrupts our business or negatively impacts customer relationships, as well as cybersecurity incidents involving data shared with third parties;

● Recruitment and retention of senior management, other key employees and our employee base in general.

● Succession plans for and/or the recruitment and retention of senior management, other key employees and our employee base in general.

The foregoing list of important factors and other risks detailed from time to time in our reports filed with the SEC is not exhaustive.

See “Part I, Item 1A – Risk Factors” for a more complete discussion of these risks and uncertainties and for other risks and uncertainties.

Those factors and the other risk factors described therein are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our

forward-looking statements.

Other unknown or unpredictable factors also could harm our results.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis