Celsius Holdings, Inc.

Ladies and gentlemen, thank you for your patience. Please remain on the line. Your conference call will begin momentarily. Again, we do appreciate your patience. Please remain on the line. Your conference call will begin momentarily. Thank you. Let's pray. Good day, ladies and gentlemen, and welcome to the Celsius Q2 2022 earnings call. All lines have been placed on a listen-only mode, and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Cameron Donahue, Investor Relations. Sir, the floor is yours.

Thank you. Good afternoon, everyone. We appreciate you joining us today for Celsius Holdings' second quarter 2022 earnings conference call. Joining me on the call today are John Fieldley, President and Chief Executive Officer, and Jared Langans, 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 released their earnings press release upon market close this afternoon, and all materials will be available on the company's website, CelsiusHoldingsInc.com, under the investor relations section. As a reminder, before I turn the call to John, an audio replay will be available later today and can be accessed with the same live webcast link in our conference call announcement and earnings press release. 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 9, 2022. 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 obligations 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 over to President and Chief Executive Officer John Fieldley for his prepared remarks.

John? Thank you, Cameron. Good afternoon, everyone, and thank you for joining us today. Our record second quarter represented our 16th consecutive quarter of sequential growth and an 18% increase over the first quarter of 2022. According to the trailing 12 weeks IRI MULOC data, as of July 10, 2022, Celsius continues to be the top driver of the energy category growth, representing 34% of the category growth, which corresponds to the number one brand driving category growth. We were also notified last Friday that the S&P announced that Celsius will be added to the S&P Mid Cap 400 Index, graduating from the S&P Small Cap 600 Index after the close of trading today, August 9th. We continue to see growth across all channels, including those not tracked with the club channel sales increasing by approximately 24.9 million for the second quarter uh in 2002 from 2021 an additional rollout and expansion in over 175 new bj wholesale locations happened took place in the second quarter our vending and food service channels continue to see rapid expansion with over 50 growth in sales from the first quarter with approximately 4.4 million in sales in the second quarter additional uh second quarter retailer highlights include the benefits from the walmart expansion we discussed in our two on our q1 2022 earnings call sales increased over 700 percent on a year-over-year basis in accordance with spins 12-week data as of june 12 2022 and in the convenience channel sales increased overall by 227 percent compared to the second quarter in 2021 and celsius is now ranked the number five brand in the convenience channel per spins energy 12-week ending June 12, 2022. moving to the most recent highlights for celsius on monday august 1st we announced the distribution and investment agreement with pepsico this transformational partnership provides significant near-term u.s growth acceleration with an estimated 40 percent increase in incremental distribution on top of our internal projected door growth over the next 12 months we have also have begun the transition with pepsico to pepsico through our distribution and expects most of the transition to take place by the end of the fourth quarter As part of the transition, a $550 million convertible preferred investment was made by PepsiCo in Celsius, and the investment aligns incentives for both parties. The underlying investment is priced at $75 per share. It converts approximately 7.3 million shares, which equates to approximately about 8.5% ownership in Celsius on an as-converted basis. The preferred shares receive a 5% annual dividend paid quarterly in cash or in kind at Celsius option. One point of clarification we want to be clear. On a call last week, we notified and discussed the transition was cash neutral in regards to our distribution network. This was not inclusive of the 550 million investment by PepsiCo. In regards to the distribution settlement and transition cost, PepsiCo will assist with these charges as part of the distribution channel transition agreements whereby the cost will be cash neutral to Celsius. As part of the strategic alignment and agreement with PepsiCo, we want to officially welcome James Lee to our board of directors. James Lee, Mr. Lee is currently the Senior Vice President, Chief Strategy and Transformational Officer of PepsiCo Beverages North America. PepsiCo's largest operating sector. He is responsible for leading the PB&A's long-term strategy, business development, digital and value change transformation and sustainability. Mr. Lee joined PepsiCo in 1998 and has had several financial leadership and other leadership roles since that time, including Senior Vice President of PB&A, Senior Vice President and CFO of Russia and CIS region, Vice President and CFO of Southeast Europe, Senior Director and CFO of PepsiCo Australia and New Zealand, and Senior Director Strategy and Planning of China Beverages. We look forward to utilizing his significant experience in both domestic and international opportunities. For those of you that did not have a chance to join our conference call discussing the key drivers of this agreement and transition, a replay with the slide presentation can be accessed on the webcast, including the link and the press release that was released Monday, August 1st. Moving to some additional financial highlights for the second quarter, sales hit another quarterly record of $154 million and our U.S. revenue totaled $145.4 million as approximately $22 million increased sequentially from the first quarter and U.S. revenues. Revenue growth was driven by continued new store additions with C-Store additional drivers, a significant portion of the U.S. growth, FKU expansion, additional cold placements with both our branded Celsius coolers and expanding and retail coolers. International sales represented approximately 5.6% of total sales for the quarter with sales down about 2.9 million or 25% to 8.6 million from 11.5 million a year ago quarter. Driven by the Nordic, revenue decreased to 7.3 million compared to 10.8 million the prior year. This was partially offset by sales under other international markets which totaled approximately 1.3 million, was up $680,000 and included royalties from China. Gross profit for the quarter increased 110% approximately to $59.3 million, up from $28.2 million for the year-ago quarter. Gross margins were approximately 38.5% or about 44%, excluding outbound freight, compared to 40%. 3.4% and 51.8% excluding outbound freight in the prior year quarter. This represented approximately 190% basis point decline from the first quarter margins and is consistent with our expectations that we discussed on our Q1 earnings call. We expect Q2 as came in as expected where we saw our margins under pressure due to the large percentage of international cans flushing through during the quarter. We reiterate and expect expectations of sequential gross margin improvements throughout 2022, with fourth quarter gross profit margins expected to be in the mid 40s. With the exception of higher costs with international cans, a majority of our other COGS increases have been offset by scale efficiencies to raw materials production, full truck shipments, and reducing the miles on cases, as well as optimizing our six orbit warehouse expansion, which we announced last fall. Our product channel mix has also been impacted margins as well in regards to the club channel revenue, which has historically been lower margins due to the secondary repacking facilities that is required and needed. With this rapid growth in the channel, which represented approximately $30.9 million in revenue in the second quarter, it has increased the overall margin pressure. We continue to take initiatives through production initiatives to improve margins in this channel including working with our co-packers who are working on capabilities to basically conduct the multi-packing in-line versus hand-packing. So this will improve our margins on a go-forward basis, which we expect to implement sometime in the fourth quarter. or early Q1 of 2023. Overall, we see continue to expect cycling through the majority of remaining international cans in the third quarter. In conjunction with the price increase rollout, we expect our margins to move back to that mid-40 range in the fourth quarter, even with a higher mix of club business. In addition, we are transitioning from a significant number of our independent distributors to the PepsiCo distribution. This will allow our team to consolidate sales, marketing, distribution efforts with associated cost benefits, which we expect to recognize and leverage once the transition is complete. We will provide additional clarity on both margins and operational leverage and targets as we move through the transition, but expect additional net benefits on both of these metrics. Some additional highlights for the second quarter, our DSD network sales delivered growth of 208% in the second quarter when compared to the prior year, totaling approximately 61.9 million with over 41.8 million approximately in incremental revenue generated during the quarter. On our fitness and vitamin specialty channels, we launched a co-branded displays with Cyclebar and we expanded into Lifetime Fitness. We are now the number one selling SKU brand in fitness and sold record revenues in June. On our mass club channel, continues to accelerate. The club channel now totals 1,337 locations with approximately the expansion of 175 BJ locations as discussed, we expanded in the second quarter. In the convenience channel, our stores continue to increase, our store locations increased by 97% or over 40,000 locations to 82,000 locations at the end of the second quarter of this year. This compares the 42,000 locations at the end of the second quarter of last year. the convenience store channel accounted for on retail on on sales according to iri spins about 87 million dollars in the second quarter and our sales were up 227 compared to the second quarter and 2021 according to iri spins 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 increase our ACV across channels and launch additional nationwide and expand our independent chains through our new distribution agreement with PepsiCo. Consumer demand for Celsius on a dollar base accelerated through the second quarter of 2022 and through July of 2022 to record levels. Their most recent reported Nielsen scan data as July 16, 2022 shows Celsius sales are up 143% year-over-year for four weeks, 194% for the 12 weeks, and 185% for the second quarter. This compares to the overall energy category, which grew 8% for the four weeks, 8% for the 12 weeks, and approximately 8% for the second quarter over the same period. On Amazon, Celsius continues to maintain the second largest energy drink spot with a 22.6% approximately share in the energy category, ahead of Red Bull that has a share of approximately 10.6%, and just behind Monster at a 24.7% approximately, and this is as of the latest four weeks ending, July 30th, 2022, Stackline Energy Category Data Total U.S. Celsius year-over-year sales is up 185% compared to Amazon energy category, which is up 79%. Celsius is outpacing the category growth on the platform by approximately 2.5% on a year-over-year basis. And that is the four weeks ending July 30th, 2022 stack line, total energy, total US. The company placed an additional 800 coolers in the second quarter of 2022 and over 2,700 since the beginning of this year. The company anticipates the continued acceleration of cooler placements throughout 2022. Our total U.S. store count now totals approximately 196,000 locations nationally, growing over 59,000 doors and locations or 54% growth from 109,000 stores reported as of the end of the second quarter of 2021, with additional expansion planned throughout 2022 and acceleration anticipated with the new partnership with PepsiCo. On our co-packer front, we continue to expand our co-packer partners and scale at existing locations, improving our line priority time. Our total U.S. co-packer footprint totals 13 that are active, which will help protect future out-of-stocks and support our massive growth. Internationally, Nordic's revenue totaled at $7.3 million. It decreased from the prior quarter primarily due to foreign exchange rates. and timing of orders and both timing of new launches with end consumers, as well as supply chain delays in the market. Revenue from other markets totaled at 1.3 million. It was up 957% from 680,000, which included revenues from China. As we have publicly stated on past several calls, we continue to explore discussions with large-scale international distribution partners which can facilitate material worldwide expansion. I'm excited to say we have now found that partner. As part of the PepsiCo distribution agreement, Celsius is now the preferred global energy partner with PepsiCo, which holds the number two position in beverage distribution globally. While we just began our distribution partnership with PepsiCo, and the initial focus will be on U.S. distribution transition to their networks, we see significant opportunities to capitalize on global scale, reflecting the changes in consumer preferences for better for you offering, which will now include the distribution partnership to accomplish our international expansion goals. Before I turn the call over to Jared, I want to close my prepared remarks recognizing the amazing job of our entire team and all of our partners, which they have done. establishing Celsius as the leading driver of brand growth in the energy category over the first half of 2022, and the incremental opportunities for growth going forward with our new partner, PepsiCo. I'd like to turn the call now over to Jared Langens, our Chief Financial Officer, for his prepared remarks. Jared?