Celsius Holdings, Inc.

Greetings and welcome to the Celsius Holdings fourth quarter fiscal year 2022 earnings call. 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 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, Investor Relations for Celsius Holdings. Thank you. You may begin.

Thank you, and good afternoon, everyone. We appreciate you joining us today for Celsius Holdings' fourth quarter 2022 earnings conference call. Joining me on the call today are John Fieldley, President and Chief Executive Officer, and Jared Langan, 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 earlier this evening, and all materials will be available on the company's website, celsiusholdingsinc.com. 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 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 March 1, 2023. 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 undertakes no obligations and disclaims any duty to update any of these poor-looking statements. We encourage you to review in full our safe harbor statements contained in today's press release and our findings with the SEC for additional information. With that, I turn the call to the President and Chief Executive Officer, John Fieldley, for his remarks. John?

Thank you, Cameron. Good afternoon, everyone. And thank you for joining us today. We achieved record sales for the fourth quarter of 178 million, an increase of 71% from last year's fourth quarter of $104 million. This revenue growth was driven despite approximately 15 to 20 million we discussed in the third quarter that was driven by the inventory pipe bill by the Pepsi system in the preparation for distribution transition that began October 1st, 2022. We believe the distributor inventory levels are now back to normalized levels as we began the first quarter of this year. For the full year, sales totaled $654 million, up 108% or $340 million growth compared to $314 million in 2021. According to the January 1st, 2023 52-week IRI Energy Category SPINS MULOC data representing the calendar year for 2022, Celsius is the number one brand driver of growth in the energy category in all of 2022, responsible for 22% of the category dollar growth, driving $474 million approximately in incremental retail sales for the category. We continue to see growth across all channels, including those non-tracked, with the club channel sales totaling over $138 million for the year ending December 31, 2022, which were up 247%. compared to $40 million last year. We also hit record sales through Amazon in 2022 with full-year sales of approximately $58 million versus full-year sales in 2021 of $32 million, up 83% approximately. In addition, according to the trailing 12 weeks IRI MULOC total energy as of January 1st, 2023, representing the majority of the fourth quarter, Celsius is now the number three energy drink brand in the category, with dollar sales growing approximately 128% versus the same period in the prior year. Our fourth quarter represented our first quarter since the commencement and distribution partnership with PepsiCo. During the fourth quarter, we had an additional $38 million in expense of sales and marketing related to termination associated expenses from prior distributors, which was recognized. Most of these distributors were transitioned by November 1st of 2022, and in conjunction with approximately $156 million of similar book charges that were recorded in the third quarter. For the full year, transition costs totaled $194 million, mainly associated with distributor termination costs. This completes our distributor transition to the PepsiCo network, and we do not anticipate any further material changes going forward. We have been extremely happy with the transition, both from our PepsiCo partner, as well as with our Celsius team. And I'd like to thank all of our previous distributors for their amazing work that they did helping us build the Celsius brand, especially through these challenging macroeconomic times over the last few years. As highlighted in our early supplement for the four weeks period, according to SPNS and IRI, total energy as of January 1st, 2023 in the MULOC, Celsius is the number three energy drink with a $6.4 share in the energy category versus 3.4 share in the year ago period, with an ACV now reaching approximately 89.7% versus 59.6% in the year ago period. In addition, in the convenience channel, Celsius has seen approximately a 96% increase in ACV growing to 89% compared to 45.3% in the year ago period. we see substantial growth opportunities and convenience on a go-forward basis. In addition, in the food service channel, we have now expanded to over 1,600 colleges and universities and over 1,600 healthcare locations in the United States. And we also continue to drive authorizations with key Pepsi customers, such as the Marriott and Hilton, as well as travel and airport segment and casinos, which are all incremental to the branch. International sales did see a 38% growth in the fourth quarter, totaling 11.5 million compared to 8.3 million in the fourth quarter of 2021. We believe there is significant opportunities for international growth going forward with PepsiCo. While we just began our distribution partnership with Pepsi and the initial focus has been on the U.S. distribution transition to their network, we have begun initial discussions and we see significant opportunities to capitalize on a global scale in the future, reflecting the changes in consumer preferences for better-for-you offerings. While the U.S. transition has taken the majority of our focus to date, we do expect to announce additional international expansion initiatives in additional countries in the future. Turning to our gross profit, gross profit for the quarter increased approximately 90% in the fourth quarter to a record for the quarter of $79 million, up $42 million in the year-ago quarter. Our gross margins for the quarter totaled 44.4% and increased approximately 445 basis points from the prior year. As discussed on our last earnings call, we reiterate our expectations for continued sequential margin percentage improvements as we further gain efficiencies through our supply chain. And as stated on our last call, our goal was to achieve a mid-40 gross profit margin upon our exit of 2022, which we have achieved. The improvement was made despite the significant growth we saw on the club channel, as this channel has historically had lower margins due to secondary repacking facilities, which is required for the pack size. We continue to initiate production efficiencies to improve margins in this channel, including working with our co-packers to transition to inline packing so the product doesn't have to be moved to a secondary location and facility. In addition, we are working to increase our pack size from a 15-pack to an 18-pack size through this transition, which started in the fourth quarter. We did launch a second SKU, a Vibe multi-pack, in the fourth quarter at Costco and will continue through the first quarter of 2023. And we launched a second SKU also at a club pack at Sam's Club. And in the first quarter of 2023, we are fully rolling out through BJ's nationally. The company does see opportunities to drive incremental efficiencies in 2023 and beyond from both the expected improvements in the club channel, in addition to with our transition from a significant number of independent distributors to PepsiCo's distribution. This will allow our team to consolidate sales, marketing, and distribution efforts which will have associated cost benefits, which we expect to recognize and leverage in the future. International third-party backed 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 through additional launches with new national retailers and independent chains, and further leveraging our new partnership with PepsiCo. Consumer demand for Celsius on a dollar basis re-accelerated through the fourth quarter of 2022, and into the first quarter of 2023 from the initial distribution shift, which started October 1st of 2022. The most recent period Nielsen scan data and energy reported as of January 28th, 2023, so Chelsea's sales were up as of the four weeks, 136% year over year, 129.8% for the 12 weeks ending, 127.5% for the fourth quarter. This compares to the energy category, which grew approximately 17.1% for the four-week period ending, 18.8 for the 12-week period ending, and 10.8 for the fourth quarter over the same period. On Amazon, Celsius is the second largest energy drink brand with a 16.94% share in the category, ahead of Red Bull, which is at 11.71% share, and just behind Monster, which is at a 26.38% share Year-over-year periods as of February 11, 2023, per stack line, total energy, total U.S. Amazon full-year 2022 sales hit a record for us of $58 million versus the prior year, which totaled $32 million, which, as stated earlier, was up 83%. We see great opportunities as we continue to leverage consumers in the omni-channel world. The company has plans to acquire place an additional 15,000 dedicated branded Celsius coolers in 2023 which will bring our total dedicated Celsius coolers in the US to over 20,000 by the end of this year of 2023. This will be the incremental to the additional cold placements we expect to gain as we discussed before, and the PepsiCo energy dedicated coolers would provide an additional incremental up to 50,000 additional placement opportunities. Our US store count now exceeds over 210,000 locations nationally, growing approximately 20% from the third quarter, with additional expansions planned through 2023, accelerated by the PepsiCo distribution agreement. Before I turn the call over to Jared, I want to outline some key pillars the company is focusing on to drive further shareholder value. The first pillar is top line growth, which includes increasing the number of stores and channels that carry Celsius. New retailers, national expansions within existing channels, such as our recent national expansion, as mentioned earlier, with BJ's. And also a national rollout, which starts this quarter, the first quarter of 2023 with Aldi. In addition, leveraging and expanding new channels, such as food service and college universities. Also increasing the number of items carried per location. Focusing on key drivers to drive velocity rates. And the opportunities to leverage with international growth. Our second pillar is the operational excellence. These drivers include a focus on gross margin. Our focus on gross margin will be driving efficiencies and leverage as we scale. Leveraging our orbit model, our distribution orbit model to drive more efficiencies. As an example, shipping from co-packers straight to distributor, optimizing freight warehousing costs, vertically integrating and improving our scrap and waste efficiencies. Also focusing on sales and marketing initiatives to gain further leverage, optimizing our PepsiCo partnership. And in the G&A, optimizing our revenue per employee, leveraging software optimizations, and focusing on building our internal and expertise internally to drive scale. The driver of the final pillar is cash generation and EBITDA leverage. The goal of driving increased EBITDA as we scale. To close my prepared remarks, with the PepsiCo transition now complete, Celsius is positioned for the next phase of growth with further opportunities as we begin to expand international markets to further capitalize on our future and optimize our leverage, driving further value for our shareholders. Celsius is now established as a leader in the energy category in the United States, driving growth for the entire category in all of 2022 with incremental opportunities to further drive growth to 2023 and beyond. I will now turn the call over to Jared Langens, our Chief Financial Officer, for his prepared remarks. Jared?