Celsius Holdings, Inc.

Greetings and welcome to the Celsius Holdings, Inc. First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cameron Donahue, with Hayden IR. Thank you, Mr. Donahue. You may begin. Thank you, and good morning, everyone.

We appreciate you joining us today for Celsius Holdings' first quarter 2020 earnings conference call. Joining me on the call today are John Fieldly, President and Chief Executive Officer, and Edward Negron, Chief Financial Officer. Following the prepared remarks, we will open the call to your questions and instructions will be given at that time. The company filed its Form 10-Q with the SEC initiative press release today. All materials are available on the company's website at CelsiusHoldingsInc.com under the Investor Relations section. As a reminder, before we turn the call to John, the audio replay will be available later today. Please also be aware that this call may contain forward-looking statements, which are based on forecasts, expectations, and other information available to management as of today, May 12, 2020. These statements involve numerous risks and uncertainties, including many that are beyond the company's control. Except to the extent as required by applicable law, Celsius Holdings undertakes no obligation and disclaims any duty to update any of these forward-looking statements. We encourage you to review in full our safe harbor disclosures contained in today's press release and our quarterly findings with the SEC for additional information. With that, I'd like to turn the call over to President and Chief Executive Officer John Fieldly for his remarks. John?

Thank you, Cameron. Good morning, everyone, and thank you for joining us today. First, our thoughts and prayers are with all of those who have been impacted by COVID-19. and I want to thank all of our Celsius team members and partners for their dedication, efforts and support. We're incredibly proud of our team who have maintained the integrity of our operations and performance. The macro environment during the first quarter of 2020 was unlike any other we have seen in recent history, challenging organizations to respond in new and creative ways to manage and grow their business. At Celsius, we rose above the challenges and set another new sales record with quarterly revenue of $28.2 million, an increase of 95% over last year. North America revenue was up 70% and Europe was up exponentially due in part to our creative acquisition of Funk Food Group late in 2019 and Asia was up as well. Consumer demand and beverage demand and the beverage industry continues to trend towards the pursuit of healthier alternatives versus conventional beverages. Although consumer traffic and purchasing patterns have been severely disrupted, traditional shopping habits gave way to tremendous increases in online ordering, curbside pickup, pantry purchasing while consumers complied with the stay-at-home orders. To meet consumer demand, we secured additional distribution agreements with partners in our primary U.S. networks, including Anheuser-Busch InBev, PepsiCo, Kirk Dr. Pepper, and Molson Miller Coors Distributors, which further expanded availability to new regions. We are continuing our quest to build a national distribution network, which now includes more than 100 regional DSD or direct store delivery partners. Our DSD partners also provide us with additional routes to market for incremental points of growth. In addition, we transitioned Target and 7-Eleven from the wholesale network to our DSD partner Big Geyser in New York metropolitan area and saw volumes more than double. Across the board in the U.S. market, stores that we have transitioned to the DSD network saw on average a 40% increase in sales volume on top of our 30% increase We're planning on more accounts transitioning to DSD partners in the DSD network throughout 2020 as we continue our pursuit of reaching more consumers at more points of distribution. With the recent news of Bang Energy transitioning to the PepsiCo distribution network, this event has further opened up additional opportunities for Celsius to gain additional distribution partners as we continue to expand to a national network. During the quarter, we launched nationwide availability of our product at more than 1,500 store locations through Walmart, the country's largest retailer. Early data from the retail channel indicates strong reception by its consumers, and we expect additional flavors to be added in the next reset. In addition, we implemented and launched within Walmart about 50% split between DSD and going direct through their warehouse. and further expect to transition over these existing Walmarts to the DSD network through the back half of 2020 as we gain additional coverage. In addition, at Target, one of our key retail partners, we expanded our product assortment to five flavors nationwide with the addition of great tasting grapefruit melon green tea. We introduced our newest flavor, Refreshing and exotic jackfruit, a tropical taste with a burst of sweetness and a tangy twist available in our new Celsius Heat packaging. The standout packaging and label redesign position the brand as highly credible and sets the stage for the next phase of growth. Its visual effects reinforces our brand structure and function claims, which are clinically proven and a clear differentiator among brands in the performance energy category while appealing to a broader audience. Clearly, our momentum continues in the first quarter, despite an extremely volatile and uncertain business environment brought to us by the COVID-19 virus. Our success in the first quarter was driven by several key factors that are unique to Celsius and give us a strong competitive advantage. We have an extremely strong brand, a diverse and growing network of retailers, distributors, and partners. and a strong balance sheet that enables us to rise above challenges that many companies are facing amidst the COVID pandemic. As early as late December, we began increasing product and raw material inventories in anticipation of resets with major retailers that were planned for the March and April timeframe. The strength of our balance sheet enabled us to continue to build inventories during the quarter despite the demand as the virus situation unfolded.