Celsius Holdings, Inc.

Greetings and welcome to Celsius's third quarter 2023 financial results. 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 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' third quarter 2023 earnings conference call. Joining me on the call today are John Fieldley, President and Chief Executive Officer, and Jared Langan's Chief Financial Officer. Following the prepared remarks, we'll open the call to your questions at that time. The company released its third quarter earnings press release early this morning, and all materials are available on the company's website, celsiusholdingsinc.com, as well as on the SEC's website, sec.gov. As a reminder, before turning the call over 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 November 7, 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 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. Additionally, management will share operating results on both the GAAP basis and a non-GAAP basis. Descriptions of those non-GAAP financial measures that we use, such as non-GAAP adjusted EBITDA and reconciliations of these measures to our results as reported in accordance to GAAP. Our detailed earnings press release for the third quarter of 2023. With that, I turn the call to our president and chief executive officer, John Fieldley, for some great remarks. John.

Thank you, Cameron. Good morning, everyone, and thank you for joining us today. Celsius achieved record sales in the third quarter. That totaled approximately $385 million, up 104% from $188 million for the prior year third quarter. This was driven predominantly by North America revenue, which increased 107% to $371 million, up from $180 million for the prior year third quarter. Celsius continues to be the top driver of growth in the energy category, both in dollars and units, through track channels. Celsius is the number one dollar and unit growth brand over the last 52 weeks per IRI total U.S. MULOC energy category data, ending October 8, 2023, growing approximately $950 million incremental dollars, up 144% versus a year ago, while representing 28% of all category dollar growth. In addition, our unit growth totaled 289.2 million incremental units, an increase of 114% versus a year ago, and totaled 39% of all category unit growth. Per IRI, in the four-weeks period ending October 8, 2023, Inmulox Celsius is the number three energy drink brand in the U.S. with approximately a 10.5 share market share, more than doubling its 4.4 share in the same period last year. This dollar growth on 10.5 share has not been achieved in the last decade. We continue to see growth across all channels, both tracked and non-tracked, with our club channel sales totaling approximately $63.2 million for the quarter ending September 30th, up 83.3% year-over-year compared to $34.5 million for the prior period third quarter. Per Stackline on Amazon, over the last 14 weeks, ending September 30th, 2023, Celsius is now the best-selling energy drink on Amazon, with approximately a 21.4 share in the energy category, ahead of Monster at an 18.6 share, and Red Bull at a 13 share. Our third quarter 2023 Amazon sales total approximately 22.2 million versus 15.6 million for the year ago period, an increase of approximately 42%. Celsius is now the number one energy drink brand on Instacart and continues to outpace that category growth as a largest and fastest growing brand on the platform. We continue to expand our growth opportunities and non-track food service channels and are gaining more distribution points at colleges, universities, hospitals, hotels, eateries, casinos, and more. Overall food service continues to exceed approximately 10% of our PepsiCo revenues, and we see this area as an opportunity for further growth and scale. We are extremely happy with our PepsiCo partnership, and we believe there is a long runway ahead of growth. across a variety of channels, including expanding at retail, convenience, and in food service. During the quarter in food service, I'd like to highlight that Celsius is now available in over 2,000 Jersey Mike locations across the United States, and we've now gained authorization in over 3,000 Dunkin' Donuts nationwide. This illustrates the many unique usage occasions that we are seeing and our customers are enjoying our Celsius products. As highlighted in Earnings Supplement, per IRI, for the four-week period ending October 8, 2023, we have increased our market share in MULOC by approximately 138% to a 10.5% share, which has not been achieved in the energy category over the past decade, versus a 4.4% share in the prior year period. In MULOC, Celsius grew its ACV to a 95.6% versus 72.1% year-over-year. In convenience, Celsius gained an additional 22.6% of ACV growth versus the prior year period ending and resides at approximately a 95.6% of ACV compared with a 73% of ACV in the prior year. This provides tremendous opportunities as we continue to grow customer awareness and our national availability. international sales grew approximately 56 percent in the third quarter totaling 13.6 million compared to 8.7 million in the third quarter of 2022 driven in large part by successful innovation launches increased velocity and brand awareness the The first major international market in which we plan to expand to under the PepsiCo umbrella is Canada, expected to launch in the first quarter of 2024. We believe there are significant opportunities for incremental growth over the next three to five years as we execute our international expansion blueprint in a handful of countries in 2024. with opportunities for further expansion in 25, 26 and beyond. We expect to provide additional details as we get closer to these dates. Beyond new markets, we are very excited about a number of our innovative launches that our team has created and been working through, including our recent launch of our newest vibe flavor, Cosmic Vibe, a great tasting, sparkling fruit punch flavor, which is out of this world and is now available at Circle K. In addition, just recently in November, we launched a new 16-ounce line, Celsius Essentials, which is exclusively available initially at 7-Eleven through the remainder of 2023, with a nationwide rollout planned in 2024. Celsius Essentials is formulated for fitness enthusiasts looking to elevate their performance. Each can of Celsius Essentials contains 270 mg of caffeine, our essential aminos, as well as our proprietary blend. providing you with the combination of enhanced physical performance and cognitive benefits. This new line comes in four great tasting flavors, Blue Crush, Cherry Linemate, Dragonberry, and Orange Sickle. Net income attributed to common shareholders totaled $70.5 million in the quarter, or $0.89 per diluted share, compared to a net loss of $186.5 million, or a net loss of $2.46 per diluted share. The prior year losses were preliminary driven by termination expenses as we move from our prior distribution network to the PepsiCo distribution system. Non-gap adjusted EBITDA increased 318% to approximately $104 million in the quarter, compared to $25 million in the prior year period. driven substantially by revenue growth and increased margins and our continued leverage across our SG&A. Our record non-gap adjusted EBITDA in the third quarter represented approximately 27% of sales. This was driven by gross margin improvements of 860 basis points from the prior year ago to approximately 50.4% gross profit versus 41.8%. In addition, we saw a combination of leverage across our sales and marketing, totaling approximately 19.1% of sales in the third quarter compared to 23%, adjusted for distributor termination expenses in the prior year period. G&A general administrative expenses totaled approximately 6% in the third quarter compared to 14.6% of sales in the prior year period. Jared will cover these items in more detail shortly. Our distribution partner, PepsiCo, continues to facilitate ACV expansion, supporting new customer acquisitions across broad demographics and new usage occasions. Going forward, we expect that our key incremental growth drivers are expected to be increasing our SKUs, our flavors and facings at retail improving shelf placements more placements in stores secondary placements and celsius branded cooler placements as well as expanded the independent convenience expansion initiatives as well as food service and increasing our velocities at shelf In recent calls, I've also cited South Florida as an example of what a more developed, mature market can look like. Over the last four weeks, as of October 8, 2023, per IRI, Celsius in South Florida market share was approximately 24.1%. At the beginning of January of 2023, our market share was 17.7. This shows the strong market share and growth that Celsius Brand has achieved in the South Florida market, as well as the opportunities that we see in a broader market as we look for national U.S. availability as we continue to roll out into further locations and improve our placements at retail, as well as our velocities. To conclude my prepared remarks, Celsius continues to lead both on a dollar and unit growth basis in the energy category. The leverage in our operating model is becoming more apparent with incremental growth, highlighted by our 104% sales growth in the third quarter, delivering over a 300% adjusted EBITDA growth. Our customers have been growing the category, both in demographics and usage occasions, increasing their dollars spent on Celsius. I also want to highlight the Celsius team and the amazing job they're doing. We have added over 200 new full-time and part-time employees during the third quarter. Developing our world-class team continues to position Celsius to execute against our growth opportunities that we see in front of us while driving operational leverage to unlock greater shareholder value. I'll now turn off call over to Jared Langens, our Chief Financial Officer, for his prepared remarks.