Hansen Natural (HANS, Financial), the company behind Monster Energy drinks, reported second quarter earnings on Thursday; here are some of the highlights from the press release and the conference call:
Gross sales (a measure of sales used by management which shows revenues before the effect of any promotional items) for the 2011 second quarter increased 27.0% to $527.5 million from $415.3 million in the same period last year, and market the first time that quarterly gross sales eclipsed a half a billion dollars. Net sales (in accordance with GAAP) increased 26.4% to $462.1 million from $365.7 million in Q2 2010. Net sales for the first six months of 2011 increased to $818.6 million from $603.8 million in the same period in 2010.
Personally, I’m surprised by the strength of the company’s YOY growth, especially considering that they are predominately in two tough geographies for CPG companies: the U.S. and Europe. Here is what CEO Rodney Sacks had to say about this development on the call: “Despite a difficult economic environment in our major markets, the energy drink category has continued to show growth. This is quite remarkable in the face of general consumer weakness and higher gas prices, which appear to be driving reduced traffic in key retail channels, and speaks to the resilience of the energy drink category.”
According to Nielsen, the energy drink category (excluding Wal-Mart) increased 15.8% versus the same period a year ago. Sales of Monster grew 22.3% in the 13-week period, while sales of NOS, Red Bull, Rockstar, and 5-Hour Energy increased 10.7%, 14.6%, 20.3%, and 33.4%, respectively (Amp and Full Throttle both decreased).
Gross sales to customers outside the United States increased to $102.6 million (up 54% YOY, 19% of company sales), compared to $66.6 million (16% of company sales) in the second quarter of 2010. Net sales in Europe in the second quarter of 2011 in dollars were approximately 102% higher than in the same period last year. While the company is profitable in Western Europe, they are still in the early phases in Central & Eastern Europe, launching Monster Energy in Greece, Cyprus, the Baltic States, Lithuania, Latvia and Estonia, Ukraine and Portugal during the first half of 2011.In addition, the company has plans for additional launches in South America, Central and Eastern Europe, and Asia throughout the second half of the year.
Gross profit was 52.8 percent, compared with 52.9 percent for the comparable 2010 second quarter; this was a nice surprise on the upside considering the increase in costs for certain inputs that the company faced in the quarter (for example, aluminum cans and PET containers). This was partially helped by a 2.35% year over year increase in average net sales per case.
Operating expenses (as a percentage of sales) increased 130 basis points in the quarter to 24.2%; however, it is 60 bps lower YOY, and pushed operating income up to 27% of sales (compared to 26.6% in 2010).
Operating income increased 20.8% to $132.5 million, compared to $109.7 million in 2010. Net income and diluted EPS for the 2011 second quarter increased 32.0% and 30.4%, respectively, to $84.2 million and $0.90/share. Net income for the first half of the year was $139.3 million, or $1.49 per diluted share (an increase of 44.5% and 43.3%, respectively), compared with $96.4 million, or $1.04 per diluted share, for the same period last year.
The balance sheet looks good, with a current ratio of 6.5 (nearly $420 million in cash/equivalents), along with a 14.7% increase in book value since the start of the year. In the Q&A, management was asked about dividends and buybacks, and seemed iffy on both; from my perspective, that is a plus, because I would rather see them plow money back into building brands and developing new products rather than giving shareholders million a year for a 2-3% dividend.
On Friday, HANS was more than 8% higher, back above $75/share. For another quarter, the growth story for Monster is still looking good; with 80% appreciation in the last twelve months, shareholders can only pray that it continues.
Gross sales (a measure of sales used by management which shows revenues before the effect of any promotional items) for the 2011 second quarter increased 27.0% to $527.5 million from $415.3 million in the same period last year, and market the first time that quarterly gross sales eclipsed a half a billion dollars. Net sales (in accordance with GAAP) increased 26.4% to $462.1 million from $365.7 million in Q2 2010. Net sales for the first six months of 2011 increased to $818.6 million from $603.8 million in the same period in 2010.
Personally, I’m surprised by the strength of the company’s YOY growth, especially considering that they are predominately in two tough geographies for CPG companies: the U.S. and Europe. Here is what CEO Rodney Sacks had to say about this development on the call: “Despite a difficult economic environment in our major markets, the energy drink category has continued to show growth. This is quite remarkable in the face of general consumer weakness and higher gas prices, which appear to be driving reduced traffic in key retail channels, and speaks to the resilience of the energy drink category.”
According to Nielsen, the energy drink category (excluding Wal-Mart) increased 15.8% versus the same period a year ago. Sales of Monster grew 22.3% in the 13-week period, while sales of NOS, Red Bull, Rockstar, and 5-Hour Energy increased 10.7%, 14.6%, 20.3%, and 33.4%, respectively (Amp and Full Throttle both decreased).
Gross sales to customers outside the United States increased to $102.6 million (up 54% YOY, 19% of company sales), compared to $66.6 million (16% of company sales) in the second quarter of 2010. Net sales in Europe in the second quarter of 2011 in dollars were approximately 102% higher than in the same period last year. While the company is profitable in Western Europe, they are still in the early phases in Central & Eastern Europe, launching Monster Energy in Greece, Cyprus, the Baltic States, Lithuania, Latvia and Estonia, Ukraine and Portugal during the first half of 2011.In addition, the company has plans for additional launches in South America, Central and Eastern Europe, and Asia throughout the second half of the year.
Gross profit was 52.8 percent, compared with 52.9 percent for the comparable 2010 second quarter; this was a nice surprise on the upside considering the increase in costs for certain inputs that the company faced in the quarter (for example, aluminum cans and PET containers). This was partially helped by a 2.35% year over year increase in average net sales per case.
Operating expenses (as a percentage of sales) increased 130 basis points in the quarter to 24.2%; however, it is 60 bps lower YOY, and pushed operating income up to 27% of sales (compared to 26.6% in 2010).
Operating income increased 20.8% to $132.5 million, compared to $109.7 million in 2010. Net income and diluted EPS for the 2011 second quarter increased 32.0% and 30.4%, respectively, to $84.2 million and $0.90/share. Net income for the first half of the year was $139.3 million, or $1.49 per diluted share (an increase of 44.5% and 43.3%, respectively), compared with $96.4 million, or $1.04 per diluted share, for the same period last year.
The balance sheet looks good, with a current ratio of 6.5 (nearly $420 million in cash/equivalents), along with a 14.7% increase in book value since the start of the year. In the Q&A, management was asked about dividends and buybacks, and seemed iffy on both; from my perspective, that is a plus, because I would rather see them plow money back into building brands and developing new products rather than giving shareholders million a year for a 2-3% dividend.
On Friday, HANS was more than 8% higher, back above $75/share. For another quarter, the growth story for Monster is still looking good; with 80% appreciation in the last twelve months, shareholders can only pray that it continues.
