REVENUE RECOGNITION

9 Months Ended

Sep. 30, 2023

REVENUE RECOGNITION

REVENUE RECOGNITION

3. REVENUE RECOGNITION

Revenues are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Consumers”. The Company has four operating and reportable segments: (i) Monster Energy® Drinks segment (“Monster Energy® Drinks”), which is primarily comprised of the Company’s Monster Energy® drinks, Reign Storm^TM total wellness energy drinks, Reign® Total Body Fuel high performance energy drinks, Bang Energy® drinks and Monster Tour Water® (ii) Strategic Brands segment (“Strategic Brands”), which is primarily comprised of the various energy drink brands acquired from The Coca-Cola Company (“TCCC”) in 2015 as well as the Company’s affordable energy brands, (iii) Alcohol Brands segment (“Alcohol Brands”), which is primarily comprised of the various craft beers and hard seltzers purchased as part of the acquisition of CANarchy Craft Brewery Collective LLC (“CANarchy”) on February 17, 2022 (the “CANarchy Transaction”) as well as The Beast Unleashed^TM flavored malt beverages (“FMBs”) and (iv) Other segment (“Other”), which is primarily comprised of certain products sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary of the Company, to independent third-party customers (the “AFF Third-Party Products”).

The Company’s Monster Energy® Drinks segment primarily generates net operating revenues by selling ready-to-drink packaged energy drinks primarily to bottlers and full service beverage bottlers/distributors (“bottlers/distributors”). In some cases, the Company sells ready-to-drink packaged energy drinks directly to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience and gas chains, drug stores, foodservice customers, value stores, e-commerce retailers and the military.

The Company’s Strategic Brands segment primarily generates net operating revenues by selling “concentrates” and/or “beverage bases” to authorized bottling and canning operations. Such bottlers generally combine the concentrates and/or beverage bases with sweeteners, water and other ingredients to produce ready-to-drink packaged energy drinks. The ready-to-drink packaged energy drinks are then sold by such bottlers to other bottlers/distributors and to retail grocery and specialty chains, wholesalers, club stores, mass merchandisers, convenience and gas chains, foodservice customers, drug stores, value stores, e-commerce retailers and the military. To a lesser extent, the Strategic Brands segment generates net operating revenues by selling certain ready-to-drink packaged energy drinks to bottlers/distributors.

The Company’s Alcohol Brands segment primarily generates operating revenues by selling kegged and ready-to-drink canned beers, hard seltzers and FMBs primarily to beer distributors in the United States.

The majority of the Company’s revenue is recognized when it satisfies a single performance obligation by transferring control of its products to a customer. Control is generally transferred when the Company’s products are either shipped or delivered based on the terms contained within the underlying contracts or agreements. Certain of the Company’s bottlers/distributors may also perform a separate function as a co-packer on the Company’s behalf. In such cases, control of the Company’s products passes to such bottlers/distributors when they notify the Company that they have taken possession or transferred the relevant portion of the Company’s finished goods. The Company’s general payment terms are short-term in duration. The Company does not have significant financing components or payment terms. The Company did not have any material unsatisfied performance obligations as of September 30, 2023 and December 31, 2022.

The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers.

Distribution expenses to transport the Company’s products, where applicable, and warehousing expense after manufacture are accounted for within operating expenses.

Promotional and other allowances (variable consideration) recorded as a reduction to net sales for the Company’s 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:

● discounts granted off list prices to support price promotions to end-consumers by retailers;

● reimbursements given to the Company’s bottlers/distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products;

● the Company’s agreed share of fees given to bottlers/distributors and/or directly to retailers for advertising, in-store marketing and promotional activities;

● the Company’s agreed share of slotting, shelf space allowances and other fees given directly to retailers, club stores and/or wholesalers;

● incentives given to the Company’s bottlers/distributors and/or retailers for achieving or exceeding certain predetermined sales goals;

● discounted or free products;

● contractual fees given to the Company’s bottlers/distributors related to sales made directly by the Company to certain customers that fall within the bottlers’/distributors’ sales territories; and

● commissions to TCCC based on the Company’s sales to wholly-owned subsidiaries of TCCC (the “TCCC Subsidiaries”) and/or to TCCC bottlers/distributors accounted for under the equity method by TCCC (the “TCCC Related Parties”).

The Company’s promotional allowance programs for its energy drink products are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, typically ranging from one week to one year. The Company’s promotional and other allowances for its energy drink products are calculated based on various programs with bottlers/distributors and retail customers, and accruals are established at the time of initial product sale for the Company’s anticipated liabilities. These accruals are based on agreed upon terms as well as the Company’s historical experience with similar programs and require management’s judgment with respect to estimating consumer participation and/or bottler/distributor and retail customer performance levels. Differences between such estimated expenses and actual expenses for promotional and other allowance costs have historically been insignificant and are recognized in earnings in the period such differences are determined. Promotional and other allowances for our Alcohol Brands segment primarily include price promotions where permitted.

Amounts received pursuant to new and/or amended distribution agreements entered into with certain bottlers/distributors relating to the costs associated with terminating the Company’s prior distributors, are accounted for as deferred revenue and recognized as revenue ratably over the anticipated life of the respective distribution agreements, generally over 20 years.

The Company also enters into license agreements that generate revenues associated with third-party sales of non-beverage products bearing the Company’s trademarks including, but not limited to, clothing, hats, t-shirts, jackets, helmets and automotive wheels.

Management believes that adequate provision has been made for cash discounts, returns and spoilage based on the Company’s historical experience.

Disaggregation of Revenue

The following tables disaggregate the Company’s revenue by geographical markets and reportable segments:

	Three-Months Ended September 30, 2023
							Latin
					Asia Pacific		America
	U.S. and				(including		and
Net Sales	Canada		EMEA1		Oceania)		Caribbean		Total
Monster Energy® Drinks	$	1,069,856	$	355,898	$	118,869	$	163,618	$	1,708,241
Strategic Brands		50,084		35,985		8,398		4,296		98,763
Alcohol Brands		42,326		—		—		—		42,326
Other		6,698		—		—		—		6,698
Total Net Sales	$	1,168,964	$	391,883	$	127,267	$	167,914	$	1,856,028

	Three-Months Ended September 30, 2022
							Latin
					Asia Pacific		America
	U.S. and				(including		and
Net Sales	Canada		EMEA1		Oceania)		Caribbean		Total
Monster Energy® Drinks	$	982,952	$	288,077	$	100,288	$	130,902	$	1,502,219
Strategic Brands		44,025		32,565		8,805		3,407		88,802
Alcohol Brands		26,818		—		—		—		26,818
Other		6,447		—		—		—		6,447
Total Net Sales	$	1,060,242	$	320,642	$	109,093	$	134,309	$	1,624,286

¹Europe, Middle East and Africa (“EMEA”)

	Nine-Months Ended September 30, 2023
							Latin
					Asia Pacific		America
	U.S. and				(including		and
Net Sales	Canada		EMEA1		Oceania)		Caribbean		Total
Monster Energy® Drinks	$	3,160,071	$	972,531	$	379,342	$	444,854	$	4,956,798
Strategic Brands		140,353		108,986		25,209		10,263		284,811
Alcohol Brands		149,692		—		—		—		149,692
Other		18,618		—		—		—		18,618
Total Net Sales	$	3,468,734	$	1,081,517	$	404,551	$	455,117	$	5,409,919

	Nine-Months Ended September 30, 2022
							Latin
					Asia Pacific		America
	U.S. and				(including		and
Net Sales	Canada		EMEA1		Oceania)		Caribbean		Total
Monster Energy® Drinks	$	2,882,306	$	857,805	$	327,632	$	377,012	$	4,444,755
Strategic Brands		135,445		91,912		22,943		10,236		260,536
Alcohol Brands2		74,472		—		—		—		74,472
Other		18,356		—		—		—		18,356
Total Net Sales	$	3,110,579	$	949,717	$	350,575	$	387,248	$	4,798,119

¹Europe, Middle East and Africa (“EMEA”)

²Effectively from February 17, 2022 to September 30, 2022

Contract Liabilities

Amounts received from certain bottlers/distributors at inception of their distribution contracts or at the inception of certain sales/marketing programs are accounted for as deferred revenue. As of September 30, 2023, the Company had $249.3 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. As of December 31, 2022, the Company had $267.1 million of deferred revenue, which is included in current and long-term deferred revenue in the Company’s condensed consolidated balance sheet. During both the three-months ended September 30, 2023 and 2022, $10.0 million of deferred revenue was recognized in net sales. See Note 11. During both the nine-months ended September 30, 2023 and 2022, $30.0 million of deferred revenue was recognized in net sales. See Note 11.