Celsius Holdings, Inc.

Good morning and welcome to the Celsius Holdings second quarter 2020 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the 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 Donoghue of Hayden IR. Thank you, Mr. Donoghue. You may begin.

Thank you, and good morning, everyone. We appreciate you joining us today for Celsius Holdings' second quarter 2020 earnings conference call. Joining me on the call today are John Fieldly, President and Chief Executive Officer, and Edwin DeGrom, 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 Form 10-Q with the SEC and issued a 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, August 6, 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 statements contained in today's press releases and our quarterly filings 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 fair remarks. John?

Thank you, Cameron. Good morning, everyone, and thank you for joining us today. The second quarter was the first full quarter impacted by the COVID-19 pandemic and undoubtedly posed challenges to all of our stakeholders. While the path forward remains uncertain, we remain encouraged by our momentum and the dedication and perseverance of our employees, partners, and customers. These extraordinary times present challenges to all of us, and our condolences go out to all those who have been affected by this pandemic. The health and safety of our employees customers, consumers, and partners remain our top priority, and we continue to monitor the environment and implement contingency plans to mitigate risk through our business. Despite these disruptions, our second quarter performance again demonstrates the momentum we are building in the marketplace and the efforts from our team to reach more consumers through wider distribution, improve margins through cost and operational improvements, and increase are brand recognition globally. We set another record quarter with over $30 million in revenue, an increase of 86% over the second quarter of last year, and delivered another quarter of profitable growth of approximately $1.6 million in gap net income. Consumer demand for our functional beverages remains strong, and the most recent reported United States SPINS data for the 52 weeks ending July 12th 2020 confirms that we have significantly outpaced the category across multiple channels, which includes a 46.5% growth in the convenience channel, outpacing the category growth rate by 11.6 times. And in Moolah, our growth is at over 99%. In addition, in accordance to Stackline, which tracks energy drink sales by Amazon in the United States for the 13 weeks ended April 11, 2020, Sales in dollars in the energy drink category by Amazon, including energy shots, grew 80.8% versus the same period a year ago. And Celsius sales increased 118%, and our share increased to 11.4% of the category, which puts Celsius as the third largest energy drink brand on Amazon, just behind Monster Energy at 34.8% share at an 88.8% growth, and Red Bull share of 14.9%, growing at 86.7% growth. As we entered the second quarter, traffic and purchasing patterns were severely disrupted, and online ordering patterns, pantry purchasing and curbside pickup became more prevalent in response to the stay-at-home orders and consumer lifestyle shifts. During the second quarter, we began to see impacts in several of our distribution channels. mainly in our health club specialty vending and food service channels. Our health club vitamin specialty channels, which historically represented approximately 20 to 25% of our United States revenue, were predominantly shut down during the quarter. We have always believed that we have a different consumer base, not just an expanded age bracket, and not just a 50% female demographic, but that our consumers are reoccurring, regularly consuming Celsius as part of a daily lifestyle. With these two channels shut down, our consumers shifted their purchasing patterns of Celsius to other channels, to online and grocery, where we see the largest incremental increases, which not only replaced the sales in these channels, but also showed record growth, further reinforcing the opportunity we have at Celsius. Celsius is more than just an impulse purchase. We are part of a daily lifestyle, a line for today's health-minded consumer. During the quarter, we made significant progress on further building out our distribution network as our pursuit for a national network to service our key accounts. We secured additional distribution partners with Anheuser-Busch InBev, PepsiCo, Couric Dr. Pepper, and Molson Miller Coor Independent Network Partners, which further expanded our availability of products to new regions. Our national distribution network now includes more than 135 regional direct store delivery partners, up from just over 100 direct store delivery partners when we last spoke to you in May. And we have plans for several additional partners in the second half of 2020, where we will have the majority of major metropolitan markets covered by the DSD model in the United States. In addition, during the quarter, we further transitioned over Target and 7-Eleven locations from the wholesaler direct route to market to our DSD partner, Big Geyser, and the New York Metropolitan Market, where we saw volumes more than double in these key accounts. We plan to transition over additional regions to our DSD network throughout the remainder of the back half of this year and into 2021, which will even take Celsius to more points of distribution and more than double our organic growth rate in these top accounts. We also launched our newest flavor, Peach Vibe, a refreshing exotic summer flavor, which was very well received. Upon launch, Peach Vibe was ranked as the number one new release in the energy drink category on Amazon, and we anticipate that this new flavor will be a meaningful addition to our portfolio as customers and consumers and retailer planograms resets take place in the back half of this year and into 2021. In the retail space, our U.S. door count now exceeds 75,000 locations nationally, which is up by more than 10,000 since the end of 2019. We expect this number to grow even further in the second half of 2020 as retailers execute planning and resets, which were delayed in the first half of this year. From an operational perspective, we continue to refine our contingency plans around production and remain nimble with our sales and marketing initiatives as COVID situation continues to unfold. Our teams are prepared to pivot and adapt quickly to capitalize on opportunities as consumer shopping patterns and behaviors flex with the changes in the environment. Most importantly, we have a culture that embraces flexibility in the midst of uncertainty. In Europe, we continue to capture incremental benefits and synergies from the full integration of Funk Food Group, a Nordic wellness company, into our operations. This business was immediately accreted to earnings and is an important step in our strategy to build a global dynamic brand. As in the United States, our Europe operations were impacted by COVID. and saw mainly saw decreases in the fast protein snack portfolio as consumer shopping patterns and habits change to comfort foods. This trend started to take place in the beginning of the second quarter and towards the end of the second quarter, we started to see changes going back and seeing growth in the category. We expect the category to fully rebound in the back half of this year and into 2021. These decreases were partially offset by increases in sales of Celsius in the region where we continue to see great opportunities and momentum. As with Europe and the United States, China and APAC were impacted as well with the COVID-19 recovery continues, where we are seeing and regaining momentum over the summer. In China, we maintain a licensing royalty model on the market where our distributor covers over 76 cities and now has over 60,000 points of distribution as of the end of the second quarter. And in Malaysia, where we maintain a direct relationship with a local distributor, We maintain approximately about 2,000 7-11s with plans to re-enter the gym, vitamin specialty channels, and other retailers as the recovery continues throughout the summer. As with Europe and the United States, we see great opportunity to capitalize on the changes in consumer preferences for better-for-you offerings, and we see tremendous opportunities in the enormous market of Asia. On a marketing front, we continue to prioritize with meaningful and emotional connections through robust marketing programs that drive live, integrated programs and competitive activities, even while consumers are at home. On social media, we now have more than 100,000 Instagram followers who actively engage by sharing home workouts and videos that feature our products. In addition, with gyms closed, we created a Sweat With Celsius live workout program, which takes place every Monday, Wednesday, and Friday at 12 p.m. Eastern time, and I encourage all of you to attend. We are partnering with local certified trainers to provide a variety of workouts for every fitness level, which allows us to further connect with our community in a meaningful way. In addition, we pivoted our planned sampling programs during the quarter to target first responder locations during the quarter, where we handed out and dropped off thousands of cases of Celsius to over 550 hospitals and first responder locations, supporting the front lines through this pandemic. We remain focused on driving profitable growth by expanding and increasing our distribution networks, nurturing relationships with new and existing accounts, and engaging consumers through a variety of creative mediums. In an industry that is rapidly changing, we are growing exponentially and adapting quickly to grab market share. The momentum we are creating reinforces our confidence in the long-term growth and profitability prospects of our business. Heading into the third quarter of 2020, we remain optimistic and are seeing sales orders through July in the United States exceeding over a 50% growth rate versus prior year. I will now turn the call over to Edwin Negron Caballa, our Chief Financial Officer, for his prepared remarks. Edwin?