Celsius Holdings, Inc.

Greetings and welcome to Celsius Holdings, Inc. Second Quarter 2021 Financial Results. At this time, all participants are on a listen-only mode. A 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 Donahue, Investor Relations for Celsius Holdings. Thank you. You may begin.

Thank you and good morning, everyone. We appreciate you joining us today for Celsius Holdings' second quarter 2021 earnings conference call. Joining me on the call today are John Fieldly, President and Chief Executive Officer, and Evan Negron, Chief Financial Officer. Following the prepared remarks, we'll open the call to your questions and instructions will be given at that time. The company filed Form 10-Q with the SEC and initiated a press release today. All materials are available on the company's website, celsiusholdingsinc.com, under the investor relations section. As a reminder, before you turn the call over to John, an 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 August 12, 2021. These statements involve numerous risks and uncertainties, including many that are beyond the company's control. except to the extent, as required by 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 release and our quarterly filings with the SEC for additional information. With that, I'd like to turn the call to the President and Chief Executive Officer, John Fieldly, for his prepared comments. John?

Thank you, Cameron. Good morning, everyone, and thank you for joining us today. Our record second quarter results are representative of the momentum that the Celsius brand is achieving across the board. With increased sales growth, SKU expansion, distribution gains, increased brand recognition, and increased organic social support are just some of the drivers supporting what we feel has been a significant step up for the company. We believe these also provide leverage to drive further acceleration in market share gains. Total sales for the quarter totaled 65.1 million, up 117% from 30 million in the year-ago quarter. Our domestic revenue increased 157% to 53.7 million, up from 20.8 million in the year-ago quarter, with both of these percentage growth rates the highest in our history. Two of the highest, hardest-hit channels from COVID, our fitness channel and vending channel, each had triple-digit growth which contributed approximately $4.9 million of incremental revenue when compared to the prior quarter. International sales growth grew 25% to $11.5 million, primarily from a 23% growth in Nordic sales of $10.8 million. Even with the record second quarter and first six months of 2021, we're still dealing with the impacts of COVID-19, including in our international markets, increased costs in raw materials and transportation, Our fitness channel and vending channels saw tremendous growth of both a year-over-year period and sequential basis with positive trends continuing into the third quarter. Although the comparable basis from the second quarter of 2022 was the low mark for both of these channels, the growth rate and total sales for each continue to improve. Our EU, Middle East, Asia Pacific, Australia operations remain adversely affected by COVID-19 with varying restrictions and lockdowns in these markets. Overall, we have been seeing sequential improvements over the last several quarters with capacity restrictions as well as reopenings in the hardest hit channels. But there still remains a lot of uncertainty as there potentially could be reclosings due to new variants and cases increasing in our regions of operations which could force extended closures in some states and countries. The health and safety of our employees and partners remains our top priority. and the safety precautions have been implemented, which we have developed and adopted in line with guidance from public health authorities. The aluminum can shortage driven by COVID impacting the entire industry remains in place. But for Celsius, we believe we are well positioned from our proactive sourcing of international cans and new relationships with top can manufacturers in the U.S., which have been initiated Major expansion projects and continued to anticipate the completion of this expansion in the back half of 2021 through 2022. We implemented our contingency plans around production in which imported can production started in March of 2021. We anticipate 50% of our can supply for 2021 will be derived from imported and wrapped cans, which should decrease late in 2021 and through 2022. We expect a significant majority of cans will be sourced domestically in 2022, improving our margins. And at this point, we believe Q1 of 2021 was the low point for margins, with the back half of 2021 showing sequential improvements towards our physical year 2020 levels. In addition, the team is expanding warehouse distribution sites to six regional orbit model to drive efficiencies, implementing plans to further secure raw materials, with minimum floor stock programs, blanket purchase orders, and second and third alternatives of suppliers. The teams continue to quickly adapt to new COVID environment and are focused on driving efficiencies and operational performance and believe with our significantly expanded scale, we have the opportunity to leverage this to reduce input costs as we move forward. We have also further integrated and leveraged synergistic benefits from our global operations focused on marketing, operations, financial integrations, implementing our strategy to build a global dominant iconic brand. The company improved our fill rates through the second quarter from the 80% level in Q1, driven by shipping delays and can shortages, gas shortages in the East Coast, and the Texas freeze, which impacted our co-packers and warehouses for several weeks. We ended the second quarter in June at approximately a 90% fill rate and expect to see this improve further in the back half as we continue to reach normalized levels of inventory. Turning to some additional financial highlights for the second quarter, our domestic sales revenue topped $53.7 million was driven by accelerated triple-digit growth in traditional channels of trade, expansion of world-class retailers, and further activation and growth from our distribution partners. Our DSD, Direct Store Delivery Network, delivered growth of 333% in our distributor revenues when compared to their prior year. Our fitness channel has discussed sales increased over 300% from the prior year, in addition to our vending growth, which sold over a 250% growth rate, which together contributed that $4.9 million of incremental revenue when compared to their prior year. As of July 1st, we have over 18,500 vending micro-market placements, and we expect that growth to continue throughout the year as we drive additional new national distribution agreements with performance food group contracts and additional several regional agreements. In addition, all major chains at our gym fitness channel expanded SKUs where we further expanded our new offering, our new flavor, our tropical vibe and our strawberry guava flavor which is now the number one selling flavor in the fitness channel. on a mass club channel continues to accelerate. We are now fully rolled out nationally in all 561 Costco locations. In addition, in Target, we have converted approximately 95% to DSD and are also in process of launching four packs. On our convenience channel side in North America, which represents the largest market in the energy drink category with over 10 billion in annual sales, the latest SPINS data shows an 86% Year-over-year increase for Celsius product portfolio in the convenience channel compared to a 9.1% overall growth in the energy category, while Celsius is only holding a 17.1% ACV, which truly shows the opportunity we have lying ahead as we continue to further expand. Through this year, we have added over 19,000 convenience stores through the last 12 months, with additional accounts expected and anticipated as fall resets take place. This is per Spin's shelf-stable energy functional beverage convenience, 52 weeks ending July 11, 2021. Industry-backed third-party data continues to show accelerated growth metrics. We are confident that Celsius will continue to drive sales even higher as we continue to increase our ACV across channels through additional launches with nationwide retailers, chains, and transforming our existing distribution to our DSD-serviced model network. Consumer demand for Celsius accelerated through the second quarter of 2021, with most recent reported Nielsen scan data as of July 3rd, 2021 showing sales of Celsius were up 193% year over year for the two weeks ending and 195% for the 12 weeks ending with a 1.6 share of the total energy drink category over the last four weeks. On Amazon, Celsius is the third largest energy drink with a 13.12% share of the energy drink category, just 1.32% share behind Red Bull at a 14.44% share and 18.13% behind Monster at a 31.25% share last 52 weeks ending July 10, 2021 stack line energy drink category total US. And for the four weeks ending July 3, 2021 category sales including shots surged 104.5% with bank sales up 216.1%, Celsius sales were up 133.1%, Red Bull sales were up 109.4%, and Monster sales were up 59.9%. According to Stackline, latest year-to-date leaderboard ranking, most popular search brands in the U.S., grocery department, Celsius is the number one fastest-growing brand, while positioned at an 18 overall for the reported period ending July 3, 2021. We continue to see acceleration and are now beginning to also see the additional lift from the conversion of our accounts to our national DSD network. This delivered a growth of 333% in our distribution revenues when compared to the prior year's second quarter. We secured additional distribution agreements with partners in the independent Anheuser-Busch network, Independent PepsiCo, Keurig Dr. Pepper, and our Miller Coors network. Further expanding availability to new regions as Celsius builds out its national distribution network, which now includes over 190 regional direct store delivery DSD partners distribution centers, now covering approximately 90% of major metropolitan markets and 85% of total U.S. counties are now covered. We also filled one of the major gaps in our DSD network is the Mid-Atlantic region. adding additional securing initially additional three new distributors in that region which were signed up in the second quarter. Transitioning to DSD continues with our retail partners with 45% of retail stores are now serviced by DSD. Key accounts converted with over 75% transition to DSD include Target, Walmart, Racetrack, Kroger, Circle K, Speedway, Murphy's USA with CVS and 7-Eleven also in the process with more being transitioned in the back half of 2021 and through 2022. Our rollout of Celsius branding coolers in the second quarter totaled approximately 300 and now have over 500 placed in the market through the first six months of 2021. We have also implemented additional comprehensive tracking tools to leverage our growth and accelerate the metrics through the retail partners. We expect additional cooler placements through the back half of this year at similar or increased numbers as we continue to see strong velocity rates and increased same store sales. Today in the United States, our total door count now exceeds over 100,000 locations, which is a major milestone, and grew over by 20,000 doors in the beginning of 2021, with additional expansion planned throughout the rest of this year as retailers resets take place. On our co-packer front, we continue to expand our partners and scale at existing locations, improving our line time priority. Our total U.S. co-packer footprint now totals nine active locations, which will help fuel our growth and limit our out of stocks and support the national massive growth opportunity that lies ahead. During the second quarter, we increased our inventory levels up to 63 million, up 27% from 36 million at the end of the first quarter to support our growth and increase warehouse distribution centers and to better service our customers and meet demand as well as increased our inventory raw materials. In Europe, Nordic sales increased 23% versus the prior year, helped by the growth of our Celsius portfolio and the launch of two new flavors of tropical flavors. In addition, our global Celsius EMEA packaging launched in Finland, where the initial results have been extremely positive and has been further rolled out to a top main retailer, SOK, expanding to 832 locations. The fast portfolio experienced out-of-stocks during the quarter due to co-packer delays associated with COVID-19, which has started to normalize in the back half of the quarter. Celsius sales made up for the reduction in the fast portfolio to drive positive growth in territory. We also have initially a soft launch to fast portfolio in the US through Amazon. We continue to evaluate the timing of additional European expansion markets. We are confirmed to launch the first Amazon EU market of UK and Germany in the back half of 2021 and expect to launch additional EU countries through 2022 including Sweden, Spain, Italy, France and several others. In China, we maintain a licensing royalty model on the market where our distributor covers approximately 76 cities and over 60,000 locations of distribution. Our other international markets have been impacted in both the in-country service and by our co-packers supporting these countries due to COVID impacts. We anticipate that these geographies, once fully opened, will provide additional long-term growth opportunities. As with Europe and the United States, we see significant opportunities to capitalize on a global scale, reflecting the changes in consumer preferences for better-for-you offerings in this enormous Asian market. Now moving to the marketing. On the marketing front, we continue to activate targeting consumers where they live, work, and play, building meaningful and emotional connections through robust integrated marketing programs. Specifically during the quarter, despite the COVID restrictions, we sponsored targeted programs, both in-person and virtual, We further expanded and integrated our experiential sampling live fit tour in Florida, Texas, and California, and other markets as well. In addition, we further expanded our brand ambassadors and influencer programs, reaching more consumers in a meaningful way. In addition, on June 9th, 2021, the company completed an offering which generated net proceeds to the company of approximately 67.8 million, intended use of proceeds primarily for growth capital, including building of inventory to support our sales growth, Leveraging and Optimizing Our Warehousing, Investments in Targeted Marketing Programs, as well as the expansion of the Celsius Branded Cooler Program. We have reached another inflection point in our operations and growth, one which positions Celsius for exponential sales and market share growth. With this, we have been proactive in the building that Celsius teamed to maximize the opportunity, as well as with key partners such as Ernst & Young as our corporate auditors beginning in the third quarter of 2021. Our national DSD Network is in place with our retail partners accelerating distribution, which we have only just begun to recognize the incremental growth associated with these transactions. Our team is ready and our infrastructure is in place to support the sales growth we expect on an expedited scale. I will now turn the call over to Edwin Cabrón Caballa, our Chief Financial Officer, for his prepared remarks. Edwin?