Monster Beverage Corp. (NASDAQ:MNST)

The quarterly financial data reveals several noteworthy trends in the company’s operational efficiency and cash flow management over the analyzed period.

Inventory Turnover

The inventory turnover ratio experienced a declining trend, starting from 4.92 in early 2020 and decreasing significantly to around 3.64 by the first quarter of 2024. This decline indicates slower inventory movement, corroborated by the increase in the average inventory processing period from 74 days to approximately 100 days over the same period, suggesting extended holding times for inventory.

Receivables Turnover

The receivables turnover ratio showed fluctuations but generally declined from about 6.44 in early 2020 to 5.36 by the first quarter of 2024. Correspondingly, the average receivable collection period increased from 57 days to around 68 days, implying that the company takes longer to collect receivables, which could impact liquidity.

Payables Turnover

The payables turnover ratio remained relatively stable but exhibited some volatility, with values ranging between approximately 5.6 and 7.1. The average payables payment period remained steady in the range of approximately 52 to 65 days, indicating consistent management of payables timing, without significant lengthening or shortening of payment cycles.

Working Capital Turnover

There was a clear decreasing trend in working capital turnover, falling from 3.2 in early 2020 to about 1.53 by the first quarter of 2024. This reduction suggests decreased efficiency in using working capital to generate sales, which aligns with slower inventory turnover and extended collection periods.

Operating Cycle

The operating cycle, which combines inventory and receivables periods, extended considerably from 131 days in early 2020 to approximately 168 days by early 2024. This increase confirms a lengthening in the overall time taken to convert raw materials and sales into cash.

Cash Conversion Cycle

The cash conversion cycle also showed a marked increase, rising from 67 days to around 111 days. This elongation indicates a longer duration between cash outflows for purchases and cash inflows from sales collection, reflecting the slower inventory turnover and receivables collection. The slight variability in the payables period had limited impact in offsetting this effect.

Overall, the data suggests a weakening in the operational efficiency regarding inventory management and receivables collection, contributing to a longer cash conversion cycle. The company’s ability to swiftly convert working capital into sales and eventually cash has diminished over the analyzed quarters, which could affect liquidity and working capital requirements. Payables management remained relatively stable, thus providing some mitigation but not sufficient to offset the overall delays in the cash cycle.

Cost of sales

The cost of sales has exhibited an overall upward trend throughout the given periods. Starting from approximately 425 million USD in the first quarter of 2020, the cost gradually increased, reaching peaks beyond 880 million USD by late 2023 and early 2024. Notably, there were fluctuations such as a decrease in late 2022, but the general direction remained positive, indicating rising production or procurement expenses over time.

Inventories

Inventory levels have shown a consistent increase over the observed timeline. Beginning at around 352 million USD in early 2020, inventories increased substantially, exceeding 900 million USD from late 2022 onward, with the highest recorded inventory nearing 971 million USD. This growth suggests accumulation of stock, possibly aligned with increasing sales or strategic stockpiling.

Inventory turnover

Inventory turnover ratios have declined notably from the beginning to the end of the period. The ratio started near 4.92 in early 2020, peaked close to 5.67 during mid-2021, and then fell steadily to a low near 3.22 by early 2022. This was followed by slight fluctuations typically ranging between 3.3 and 3.7 in subsequent quarters. The declining trend indicates reduced efficiency in converting inventory into sales, potentially reflecting slower inventory movement or increased stock levels relative to sales.

The analysis of the quarterly financial data shows distinct trends in net sales, accounts receivable, net, and receivables turnover ratios over the examined periods.

Net Sales

Net sales demonstrate a generally upward trajectory across the quarters, with an increase from approximately 1,062 million USD in the first quarter of 2020 to nearly 1,899 million USD by the first quarter of 2024. The data reveals notable growth spikes, particularly between mid-2021 to early 2023, where quarterly sales consistently hovered above 1,600 million USD, reaching peaks around 1,856 million USD and 1,869 million USD in the third quarters of 2023 and 2024, respectively.

Despite this growth, there are minor fluctuations, with several quarters experiencing slight declines compared to the preceding periods, such as the fourth quarter of 2022 and fourth quarter of 2023. Nonetheless, the overall trend underscores a strengthening revenue performance over the timeframe.

Accounts Receivable, Net

The net accounts receivable figures also show a rising trend, increasing from approximately 671 million USD in the first quarter of 2020 to roughly 1,370 million USD by the first quarter of 2024. The increase is steady, with occasional dips observed in the latter half of 2022 and early 2024 quarters. The peaks in receivables correlate with peak sales periods, indicating a relationship between higher sales volume and higher outstanding receivables. This rising trend suggests either increased sales on credit terms or lengthened collection periods.

Receivables Turnover Ratio

The receivables turnover ratio, calculated as sales divided by average accounts receivable, reveals a declining efficiency in collection over the period. Starting at 6.44 in the first quarter of 2020, the ratio decreases with some volatility, reaching values around the low 5s by mid-2023 before slightly recovering and then declining again to approximately 5.36 in the first quarter of 2024.

This decline suggests that the company is collecting its receivables more slowly over time, which could impact cash flow and working capital management. The downward trend in turnover ratio, despite rising net sales, implies that the accounts receivable balance is growing faster than sales, potentially indicating relaxed credit policies or challenges in collection.

In summary, the company’s net sales and accounts receivable have grown significantly over the examined periods, reflecting expanded business activity. However, the declining receivables turnover ratio highlights a deterioration in collection efficiency, which may require management attention to ensure liquidity is maintained and credit risk is controlled effectively.

Cost of Sales

The cost of sales exhibits a clear upward trend over the observed period. Beginning at approximately 425 million USD in the first quarter of 2020, it increased steadily to over 871 million USD by the first quarter of 2024. Notably, the period from early 2021 to mid-2022 showed rapid growth, peaking in mid-2022 before slightly declining and stabilizing towards the end of 2023. This pattern suggests rising expenses associated with production or procurement, aligned potentially with increased sales volume or rising input prices.

Accounts Payable

Accounts payable also follow an increasing trend, growing from around 306 million USD in March 2020 to approximately 534 million USD by March 2024. The increase is relatively consistent, with occasional accelerated growth phases, particularly evident from early 2020 through mid-2022. Slight fluctuations are observed in the latter periods, but overall, the upward movement indicates an extension of payment obligations or increased purchases on credit over time.

Payables Turnover Ratio

The payables turnover ratio fluctuates within a range of approximately 5.6 to 7.1 during the period. Initial values in 2020 show moderate turnover rates, increasing towards the end of 2022 where a peak is observed at 7.06, suggesting faster payment cycles at that time. Subsequent quarters demonstrate variability with rates generally oscillating between 5.6 and 6.5. This pattern indicates changes in the efficiency or timing of payment processes, with periods of quicker account settlements balanced by intervals of slower turnover.

The working capital of the company shows a consistent upward trend from March 31, 2020, to March 31, 2024. Starting at approximately 1.35 billion USD, it increased steadily each quarter, reaching nearly 4.81 billion USD by the end of the period. This indicates a strong accumulation of current assets relative to current liabilities, suggesting an improving liquidity position over the observed timeframe.

Net sales also demonstrate growth, though with more fluctuations compared to working capital. From about 1.06 billion USD in the first quarter of 2020, net sales generally increased, peaking at approximately 1.89 billion USD in March 2024. The sales figures exhibit seasonal variations, with some quarters (notably December 2020 and December 2022) showing slight decreases or slower growth, which may be attributed to market or operational factors affecting sales performance seasonally.

The working capital turnover ratio, which measures how efficiently the company uses its working capital to generate sales, shows a declining trend initially, dropping from 3.2 in March 2020 to a low of around 1.49 by December 2021. This suggests that despite increasing sales, the growth in working capital outpaced sales growth, reducing turnover efficiency during this period. However, from early 2022 onward, the ratio stabilizes between approximately 1.5 and 1.7, indicating some improvement or stabilization in the company's ability to utilize its working capital effectively.

Overall, the financial data reveals that the company has been increasing its working capital substantially, supporting higher net sales over time. While this expansion has temporarily reduced the working capital turnover ratio, the recent stabilization suggests management may be balancing resource allocation and operational efficiency. The sustained growth in net sales coupled with improving liquidity positions the company well in terms of operational scale and financial stability.

Working Capital

Consistently increased from 1.35 billion USD to nearly 4.81 billion USD over four years, indicating stronger liquidity.

Net Sales

Overall upward trend from 1.06 billion USD to 1.89 billion USD, with observable seasonal fluctuations and periodic moderation in growth.

Working Capital Turnover Ratio

Declined sharply from 3.2 to about 1.49 between 2020 and late 2021, reflecting decreased efficiency in using working capital for sales, then stabilized near 1.5-1.7 from 2022 onward.

Inventory Turnover

The inventory turnover ratio exhibited an initial upward trend from March 2020 (4.92) reaching its peak by December 2020 (5.63). This indicates an improvement in the efficiency of inventory management during this period. Following the peak, there was a noticeable decline in turnover through December 2021, reaching a low point of 4.10. Afterward, the ratio continued to decline and stabilized at lower levels between 3.22 and 3.78 from March 2022 through March 2024, indicating a reduced rate of inventory turnover in more recent periods.

Average Inventory Processing Period

The average inventory processing period showed an inverse pattern relative to the inventory turnover ratio. Starting at 74 days in March 2020, it decreased to a low of 65 days by December 2020, indicating faster inventory processing during this timeframe. From that point onward, the period lengthened significantly, peaking at 113 days by March 2022. This shift suggests the company took longer to process inventory in subsequent quarters. While some fluctuation occurred afterward, with periods ranging mostly between 97 and 109 days, the duration remained elevated compared to earlier years through to March 2024.

Overall Observations

The data reveals a clear inverse relationship between inventory turnover and the average inventory processing period, consistent with inventory management principles. The initial improvement in performance in 2020 was followed by a deterioration starting in late 2020 and persisting through early 2024. The prolonged inventory processing times and reduced turnover ratios could reflect changes such as shifts in demand, supply chain disruptions, or strategic decisions affecting inventory levels. The continued elevated processing days toward 2024 suggest that inventory is moving slower relative to previous years, which might impact working capital efficiency and operational agility.

Receivables Turnover Ratio

The receivables turnover ratio exhibits noticeable fluctuations over the observed periods. It peaked early at 6.9 in December 2020 but subsequently declined, reaching lower points around 5.02 in June 2023. Although intermittent recoveries are visible, such as increases to 6.21 in December 2022 and 5.98 in December 2023, the overall trend from 2021 to 2024 suggests a gradual weakening in the efficiency of collecting receivables.

Average Receivable Collection Period

The average collection period inversely mirrors the receivables turnover trend, indicating the number of days needed to collect receivables has generally increased over the timeline. From a low of 53 days in December 2020, it rose sharply afterward, peaking at 73 days in June 2023. While some reductions occur thereafter, such as falling to 61 days in December 2023, the data shows a tendency towards longer collection periods in recent years.

Overall Analysis

The data reflects a deterioration in the company's credit management efficiency. The gradual decline of the receivables turnover ratio combined with the elongation of the collection period suggests slower cash inflows from receivables. This could imply challenges with customer payments or credit policy enforcement. The peaking points in each metric around late 2020 and mid-2023 highlight periods of relative strength and weakness respectively. Monitoring these ratios closely is recommended, as prolonged increases in the collection period may impact liquidity and working capital management adversely.

Average Inventory Processing Period

The average inventory processing period displayed variability over the analyzed quarters. Starting at 74 days in the first quarter of 2020, it showed a gradual decline reaching a low of 64 days in the second quarter of 2021. Afterward, the period increased significantly, peaking at 113 days in the first quarter of 2022. Subsequently, there was a slight downward adjustment, fluctuating around 100 to 106 days in the most recent quarters, with a value of 100 days by the first quarter of 2024. This suggests increased inventory holding times during 2022, with some improvement but still elevated levels compared to early 2020.

Average Receivable Collection Period

The average receivable collection period exhibited moderate fluctuations throughout the timeframe. Initially, it was 57 days in the first quarter of 2020, increasing to a peak of 64 days in the second quarter of the same year. Thereafter, the period slightly declined to around 53 days by the end of 2020, then rose again, reaching a higher peak of 73 days in the second quarter of 2023. The latest period recorded was 68 days in the first quarter of 2024. These movements indicate some variability in the efficiency of receivable collections, with a trend toward longer collection periods in the more recent years compared to the early part of the period.

Operating Cycle

The operating cycle, being the sum of inventory processing and receivable collection periods, reflected the combined trends of its components. Starting at 131 days in the first quarter of 2020, the cycle experienced fluctuations with a low of 118 days in the fourth quarter of 2020, before rising to a peak of 183 days in the second quarter of 2022. Since that peak, the operating cycle stabilized somewhat, maintaining values near the mid to high 160s in recent quarters, reaching 168 days in the first quarter of 2024. This pattern indicates an overall lengthening of the operating cycle over the period, which could signal increased working capital requirements and potential pressure on operational liquidity in recent years.

The payables turnover ratio and the average payables payment period show seasonal fluctuations over the analyzed quarterly periods. The payables turnover ratio oscillates in a range approximately between 5.6 and 7.1, indicating variability in how quickly payables are settled relative to the cost of goods sold or purchases.

Specifically, the payables turnover ratio saw peaks near or above 6.5 in several quarters, such as December 2022 at 7.06, indicating faster payment cycles during those times. In contrast, troughs appear at points like March 2020 and June 2023, with ratios closer to 5.6, suggesting slower turnover or extended payment timelines.

Correspondingly, the average payables payment period varies inversely to the turnover ratio, as expected. It generally fluctuates between roughly 52 and 65 days. Shorter payment periods correspond with higher turnover ratios, for instance, December 2022 shows a payment period of 52 days concurrent with a high turnover ratio. On the other hand, longer payment periods align with lower turnover ratios, such as June 2023 with 65 days and a lower turnover of 5.63.

Over the long term, there is no clear trend of significant increase or decrease in either metric, suggesting the company's payment behavior has remained relatively stable with some periodic variability likely linked to seasonal operational factors or changes in supplier relationships.

Payables turnover ratio

Varies between 5.6 and 7.1 with periodic fluctuations.

Higher values indicate faster payment cycles observed in some quarters (e.g., Dec 2022).

Lower values coincide with slower payables processing in other quarters.

Average payables payment period (days)

Ranges mainly between 52 and 65 days inversely related to turnover ratio.

Shorter payment periods occur when turnover is high, confirming quicker payments.

No sustained upward or downward trend observed, indicating stable payment practices.

Inventory Processing Period

The average inventory processing period demonstrated fluctuating trends over the observed quarters. Beginning at 74 days in March 2020, it decreased to a low of 64 days during mid-2021 before rising markedly to a peak of 113 days in March 2022. This increase suggests a slower inventory turnover during early 2022. Subsequently, the period showed some variability, settling around the 100-day mark in the latest quarter of March 2024. Overall, the period indicates prolonged inventory holding especially post-2021.

Receivable Collection Period

The average receivable collection period experienced moderate variability throughout the timeframe. Starting at 57 days in March 2020, it showed a tendency to fluctuate between the high 50s and low 70s. Notably, periods around mid-2022 and mid-2023 peaked at 71 and 73 days respectively, indicating a lengthening in the time taken to collect receivables during these intervals. The latest figure at 68 days in March 2024 remains elevated compared to the earliest period, suggesting a slight deterioration in receivables turnover.

Payables Payment Period

The average payables payment period showed relative stability with minor oscillations. The period began at 64 days in March 2020, dipped to a low of 52 days in December 2022, and hovered mostly between 55 and 65 days throughout the quarters. The most recent period of 57 days in March 2024 is on the lower side of the range, implying a slightly faster payment to suppliers compared to earlier periods.

Cash Conversion Cycle

The cash conversion cycle exhibited notable fluctuations, reflecting changes in inventory, receivables, and payables periods combined. Starting at 67 days in March 2020, it climbed steadily to a high of 121 days in June 2022, indicating an extended duration between cash outflows and inflows during that time. After mid-2022, the cycle decreased somewhat but remained above 100 days through March 2024. The persistence of a longer cycle suggests an increased capital tied up in operations over the examined timeline.

Summary

The overall analysis depicts an elongation of operational liquidity cycles, primarily driven by increased inventory processing and receivables collection periods from 2021 onward. Payables payment periods remained moderately stable with a slight trend toward quicker payments recently. The extended cash conversion cycle highlights potential challenges in working capital management, with more funds committed over longer durations. Continuous monitoring may be necessary to address the efficiency of inventory management and receivables collections to improve cash flow dynamics.