Celsius Holdings, Inc.

Greetings and welcome to Celsius's full year 2023 earnings conference call. 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 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 Paul Wiseman, Investor Relations for Celsius. Thank you. You may begin.

Thank you and good morning, everyone. We appreciate you joining us today for Celsius Holdings' fourth quarter 2023 earnings conference call. Joining me on the call today are John Fieldley, Chairman and Chief Executive Officer, and Jared Langens, Chief Financial Officer. The call will open to questions following the prepared remarks. The company released its fourth quarter earnings press release earlier 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, an audio replay of this call will be available later today and can be accessed with the same live webcast link in our conference call announcement release. Please be aware that this call may contain forward-looking statements which are based on forecasts, expectations, and other information available to management at this time. 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 in our quarterly filings with the SEC for additional information. Additionally, management will share operating results on both a GAAP and non-GAAP basis. Descriptions of the 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 with GAAP are detailed in our earnings release for the fourth quarter of 2023. With that, I'd like to turn the call over to Chairman and Chief Executive Officer John Fieldley for his prepared remarks.

Thank you and welcome everyone to today's call. Also welcome to Paul Wiseman, who recently joined Celsius as our Senior Vice President of Communications. Celsius had a stellar 2023 fourth quarter, the best earnings year in our company's history. We have achieved nearly complete distribution coverage in the United States, topping 98% ACV, which is a major achievement, putting our products in reach of more consumers and more consumption occasions with greater flavors and size options than ever before. In 2023, Celsius set a new yearly revenue record, growing more than 102% or $664 million in sales to finish the year at just over $1.3 billion. Celsius is now truly a billion-dollar brand. Our impressive share gains in 2023 have resulted in Celsius becoming the first company to break the 10-share barrier in more than a decade. According to Cercana, IRI's recent four-week read ending February 11, 2024, in Total Energy US, Celsius held a new record of 11.5 share nationwide in MULOC. The energy drink category is now a three-team race. As of January 2024, Celsius had exceeded a 15 share in over a dozen US markets, and a few of those we are within just a few points of our next closest competitor or have already taken them. Our strong innovation pipeline continues to delight consumers whose taste for zero sugar energy drinks has nearly tripled the overall category sales to a zero sugar majority. Although this year we have launched two new core SKUs, Sparkling Raspberry Peach and Fizz Free Blue Raspberry Lemonade. In addition, two new Celsius Vibe flavors, Astro Vibe and Galaxy Vibe, which has taken our Space Odyssey trilogy even further with the launch of our Cosmic Vibe in 2023 in Circle K. Celsius also launched Celsius Essentials product line, which has proven essential performance energy with Essential Amidos. We are executing our plans to grow the business internationally, taking a methodical approach in each new market we enter. We're very pleased with our sales in Canada after two months in the country. Consumer enthusiasm and acceptance has exceeded our expectations. We're pursuing disciplined growth in our best-in-class sales and marketing organizations. And just two weeks ago, Celsius was recognized with the 7-Eleven's prestigious 2023 Supplier of the Year Award in the non-alcoholic category. This is a tremendous achievement, and I want to thank all of our dedicated team members on achieving this great top industry award. Best-in-class teams drive best-in-class results. With nearly full distribution, we're focusing on driving growth through three areas. Increasing total distribution points at each location, growing in non-track channels, and international expansion over the long-term horizon. Celsius was again the top driver of the energy category in dollars and units sold in MULOC, ending in the fourth quarter up 126.6% and up 140.2% for the full year of 2023, supporting a 30.6% of all the energy category growth for the year. Already this year, we've launched several new and exciting innovations, as well as a brand update to our line of fizz-free beverages, which have a strong and loyal consumer base. A new fizz-free multi-pack available now in Target stores brings together refreshing selection to our consumers who prefer the non-carbonated energy drinks. Sales of Celsius Essentials, our new line of performance-orientated energy, a 16-ounce beverage product launched in the fourth quarter at 7-Eleven stores across the United States, and our two new flavors, Sparkling Mango Tango and Sparkling Fruit Burst, bring the Celsius Essentials line to six unique SKUs. As of January 2024, Celsius Essentials has achieved a record 40% ECV, Year-to-date, February 18th, it's at 49% ACV, continuing to see great acceptance across retailers across the country. Also in January, our Celsius on-the-grow powders claimed the number one position in the energy powder category, according to Cercana's IRI, commanding a 23.1 share, having increased 5.6% compared to the prior period. We have several new on-the-go powder innovations planned for this year and see great opportunities with our versatile on-the-go product line. In 2024, spring resets began in January and typically run through May. We are very pleased with the incremental space we're gaining, which will be reflected across the first and second quarters of 2024. As a reminder, planograms used for most of 2023, when our dollar sales grew 140%, were created while we were holding and held approximately a 4.5 share in the category. For 2024, shelf space planning was conducted with retail partners in Q3 of 2023 when we held a double-digit share position. Celsius is also now fully integrated into PepsiCo's annual planning cycle, and we anticipate ongoing close collaboration with our primary North American distribution partner and expanded key accounts team. Our pursuit of our perfect store resulted in a 60% increase in display activity across the United States, and we placed more than over 10,000 Celsius branded coolers in 2023, and an increase of over 300% year over year. We intend to continue growing our base of branded coolers throughout this year. Non-track channels continue to be a tailwind for us as well. Club sales for the fourth quarter were 77.1 million, up 64% year-over-year. Club sales for the full year 2023 were 254.6 million, representing an 83.6% increase year-over-year. We achieved the number one energy drink position on Amazon in 2023, finishing the full year revenue at $101 million, a 72.9% increase year over year. Our refreshing, great-tasting products are ideal for the meal occasion, and today, more than 12.5% of our PepsiCo sales is to the food service channel. For example, in 2023, we gained distribution in over 2,000 Jersey Mike stores and are authorized to sell in more than 3,000 Dunkin' Donut locations nationwide. We believe there is incremental growth opportunities for Celsius and non-tracked outlets, such as vending, hospitals, corporate cafeterias, and college campuses and more. Turning to international, we began distribution and sales in Canada through Pepsi in mid-January. As we had previously signaled, after approximately one month of sales, we are very pleased with the results and even more so to delight our Canadian consumers who have embraced our products. International sales reached 14.6 million in the fourth quarter of 2023 and 54.7 million for the full year. Also in January, we announced a sales and distribution agreement with Suntory Beverage for Great Britain and Ireland. We expect sales in the United Kingdom to begin gradually starting in the fitness channel in the second quarter. We expect additional international expansion this year. And as previously stated, we're taking a methodical approach to our international growth and we will be following our international growth playbook in each new market we enter. Before I hand it over to Jared to discuss financial highlights for the quarter and the full year, we have several exciting marketing developments and achievements to be proud of. Celsius recently announced a renewed multi-year global team sponsorship with Formula One's iconic Ferrari racing team. Major League Soccer kicked off its regular season last week, and Celsius is a proud league partner, as well as key sponsor of multiple teams and players across the United States and Canada. These strategic investments place our premium brand in the forefront of consumers who share our passion to live fit. With that, I'll pass it over to our Chief Financial Officer, Jared Langans, to discuss our fourth quarter and 2023 full-year financial results. Jared?

Thanks, John. There was another great quarter in which we continued to exceed both internal and external expectations. Not only are we continuing to benefit from Pepsi's distribution system, but we were also delivering on increased queue count, improved placement, increased displays, and continuous improvement within velocities. As we look to Q1 and beyond, we will continue to invest in our growth. Turning to our fourth quarter financial highlights, revenue for the three months ended December 31st, 2023 was approximately $347 million. an increase of 95% from $178 million for the three months ended December 31st, 2022. Driven by our North American business where fourth quarter revenues were $333 million, an increase of 97% from the same period in 2022. International revenue grew 68% to $15 million as velocity continued to increase. As it relates to days on hand with our primary distributor, our inventory turns relative to depletions was consistent with our Q3 2023 turnover. We attribute our sales volume growth for the quarter compared to 2022 to several key drivers, including successful integration into the Pepsi distribution system, which has resulted in broader availability, increased skew mix, and improved placement. We're also benefiting from robust expansion in our traditional distribution channels and club channels with skew increases in placement improvements contributing significantly. Moreover, our products are now found in several new channels within CNG and food service. Gross profit for the three months ended December 31st, 2023 increased 110% to $166 million, up from $79 million in the year-ago quarter. Gross profit margins in the fourth quarter were approximately 48% of revenues compared to approximately 44% for the prior year fourth quarter. The improvement in gross profit margins is attributed to efficiencies in raw material sourcing, product waste reduction, and benefits from improved leverage across promotional allowances. Q4 was the fifth consecutive quarter that we were operating within the Pepsi distribution system, and we expect to continue driving efficiencies while maintaining our number one goal of keeping the shelves stocked to meet strong consumer demand. Sales and marketing expenses for the quarter were approximately $80 million, a decrease of approximately 11% compared to the fourth quarter of 2022. The decrease was due to prior year costs associated with the termination of legacy distributors as part of the transition to the Pepsi network. We continue to invest behind our growth in Q4, incurring sales and marketing costs in line with historical rates. As a percentage of sales, sales and marketing was 23% compared to 29% in the prior year, adjusted for distributor termination expenses in 2022. We plan to continue investment in our sales and marketing and plan a similar spend as a percentage of sales in the first quarter of 2024. General and administrative expenses for the three months ended December 31st, 2023 were approximately $27 million, an increase of 24% relative to Q4 2022. As a percentage of sales, G&A was 8% compared to 12% in the prior year as we continue to leverage our G&A against our significant growth. In looking back at prior periods, even with our historical growth rates, we do tend to see some seasonality within the fourth quarter relative to the third quarter. We saw similar activities in the fourth quarter, whereby we are not able to capitalize on the great work from our sales and marketing teams as it relates to displays on hand and other promotional activities that we are able to take advantage of during the summer selling season. Even with this, we ended the year strong and have since well exceeded the 10 share marker as noted by John earlier in the call. Looking at the full year 2023, as you will see in the 10K issue this morning, we made great progress in our remediation efforts around our internal control environment. We were successful in remediating the prior period controls associated with IT general controls, as well as creating and delivering a much more robust COSO environment. Although we made huge strides in 2023, there are still a handful of areas where components of larger areas of the control environment need some additional time to fully remediate. With that said, I'd like to thank the entire Celsius team for the great effort and in particular our finance and IT teams for their focus and dedication to this matter in 2023. I look forward to our continued progress in 2024. Now to the results. Revenue for the 12 months ended December 31st, 2023 was approximately $1.3 billion, an increase of 102% from $654 million for the 12 months ended December 31st, 2022, driven by our North American business. North America full year 2023 revenues were $1.27 billion, an increase of 105% from the same period in 2022. International revenue grew 52% to $55 million in 2023, relative to full year 2022. Gross profit for the 12 months ended December 31st, 2023 increased 134% to $633 million up from $271 million in the prior year period. Gross profit margins in the full year of 2023 were approximately 48% of revenues compared to approximately 41% for the prior year period. The improvement in gross profit margins is attributed to lower package and raw material costs. As things stand today, we would expect 2024 gross profit margins to be fairly consistent with the Q4 and full year margin profile as we are confident in maintaining the great progress that was made in 2023. We are always shooting for the moon, but with the uncertainty around the macro environment from both an operational and promotional perspective, we believe that it is prudent to give ourselves some additional time into 2024. As a percentage of sales, sales and marketing was 20% in the 12 months of 2023 compared to 24% in the prior year same period, adjusted for distributor termination expenses. This demonstrated the leverage that we can obtain within our sales and marketing costs. We made great progress in 2023, but we are now moving to the next level and the next target beyond 10% market share. And to do that, we will need to continue to invest in our growth and our brand as seen with the multiple Super Bowl activations that we did in February, our recently announced multi-year partnership with Ferrari within Formula One, as well as our multi-year MLS partnership. G&A expense as a percentage of sales was 8% for the 12 months of 2023, versus 12% in the prior year same period. We will continue to invest in our back shop and build out a team that is value added to our operations, sales, and marketing programs. There will be opportunity to further leverage G&A in 2024 and beyond, but it will be at a thoughtful and methodical pace. Focusing now on liquidity and capital resources, as of December 31st, 2023, we had cash in excess of $755 million and networking capital in excess of $928 million. Cash flows provided by operating activities totaled in excess of $140 million for the 12 months ended December 31st, 2023, which compares to $108 million in net cash provided by operating activities for the 12 months ended December 31st, 2022. We will continue to invest in our business.

Thank you. Ladies and gentlemen, at this time we will be conducting a question and answer session. If you'd like to ask a question, you may press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Mark Asherton with Stiefel. Please proceed with your question.

Yeah. Hey, morning, guys. Two questions for me. One, just on gross margin, maybe talk a little bit about why it stepped back in 4Q relative to 3Q even after adjusting for the promotional allowance accrual last quarter, meaning I would have expected to see a little bit better. Was there some sort of one offs in that number. And how do we think about progression of that into 24? And then the second question, I appreciate the commentary on inventories from a channel standpoint with your largest customer. But if I take a look at what the sales look like in the scanner data track channels, in addition to what you disclosed in the regulatory filings on Amazon and Costco sales, I still get fairly big disconnect between what it looks like you should have sold in the quarter and what you actually did, meaning that you undershipped somewhere in the channel. So maybe you could help with that too. Thank you.

Yeah, thank you, Mark. I'll join in on the first part of the question, and we'll throw it over to Jared as well. I think when you look at the overall margins, you know, I think we're really pleased with the margins, especially for the full year, up over 660 basis points. Just a phenomenal job on behalf of the team on supply chain and our key accounts team. You know, we're maintaining a pricing promotional architecture within the category. When you look at really the fourth quarter, we did launch a new line, our Celsius Essentials line, which is a 16-ounce line, and we had a variety of innovational launches that were executed during the quarter. So I think we're pretty pleased with where the margins came in, and there's opportunities to improve going forward. But at this point in time, I think that's a – The team did a really good job for the year. And in regards to inventory by channel, we did have some seasonal impact in Q4 that we did experience. We did have good results on Amazon and within the club channel, but we did see especially impacted mainly in food and really large format. A lot of our volume, we've done a great job on half of our distribution partners as well, really keeping the amount of cases on display up. We're still gaining, we'll hope to gain additional placements and additional expansion in the upcoming sets that are being reset. But we do rely heavily, especially in large format, on display activity. And when you look at the fourth quarter, we do see a lot of display activity coming from seasonal items that we're competing with outside of you know, the summer or the rest of the year. So those are some, you know, headwinds we experienced in the fourth quarter, but I'll throw it over to Jared for any additional highlights.

No, you're right, John. It's, you know, when we're looking at kind of just more of a days on hand perspective with our largest distributor, we did have the innovations that we filled the pipe with that would offset, I would say maybe some reductions you're talking about, Mark, but on a net net basis, the days on hand in total for us was in good shape. And to John's point, the Q4 tends to be a little bit pressurized just because of the inventory on hand across our retail customers and our mass and grocery customers.

Got it. Maybe just one follow-up then. If we think about the innovation and your comments you just made about the net-net kind of equaling out, It sounds like you're saying that the innovation offsets the legacy products. Is that the case as you think about the shelf resets and incremental distribution, meaning it can't be a one-to-one, so you're going to add more space. So why wouldn't the Pepsi system take more of the products, meaning take the innovation plus the legacy because you've got to backfill the legacy sales?

Yeah, I think when we looked at our number one customer, we look at their inventory levels. They're fairly consistent with Q3 to Q4. So even though we did take some innovation on. So, you know, it's I think we look at the scan data. You know, we had really strong scan data in the fourth quarter. And, you know, it's we'll see how this continues to evolve.

Yeah, it's a good question, Mark. I think, you know, we can just tell you where we were as of 1231. And on a net basis in total, our days on hand were consistent and in good shape. And, you know, as we got to January, we started rolling out all of the innovation that you can see all across the U.S. And it's, you know, being very successful and being very good. And it has been incremental thus far.

Yep. Got it.

All right. Well, thank you, guys.

Our next question comes from the line of Peter Grom with UBS. Please proceed with your question.

Thanks, operator. Good morning, everyone. So I was hoping to get some perspective on how you're thinking about the market share trajectory from here. You know, obviously things sort of leveled out, you know, towards the latter portion of 23, but we've actually seen some nice improvement to start the year. Maybe just to start, is the improvement we've seen year to date, you know, largely a function of kind of that innovation you've touched on rather than shelf resets. And then I guess with more resets to come, you know, how do you think investors should think about the share trajectory as we look to March and into the spring? You know, Jared, you mentioned that you've now surpassed 10%. You're now focusing on a new target. So just any color on what that new target might be from a share perspective?

Yeah, no, thank you, Peter. I mean, we're not going to give any forward guidance on, you know, the future share, but you know, what we do look at the current, you know, trajectories and where we are currently at within, you know, different categories, within the variety of the segments and the categories. And, you know, you mentioned Amazon, we disclosed Amazon, we're close to a 20 share, you know, within the energy category on Amazon. And then if you also look at, I mentioned in my script, we have 12 key markets that we're, you know, tracking ahead of 15 share within the category and that's MULOC data. So, You know, there is a good trajectory there. I think the biggest opportunity for us when you look at it is really inconvenience. And, you know, we've we've built this brand going through the variety of channels. And the last biggest opportunity is inconvenience where you got 50, 56, 57 percent of all sales are sold. So, you know, that's where we anticipate the biggest resets to take place in the coming resets right now in the convenience channel. we are just at a 10 share. So we're really excited about the opportunities you have there versus if you just look at the food category, we're roughly around a 16 share within the energy category. So those are some recent data points that, you know, that we have that we've shared within the script as well as in the earnings release. And, you know, we've talked before we're somewhere between the average, as Jerry mentioned, we're about, we closed at about a 10 share and, you know, we're on close to a 20 share within Amazon. So I, you know, We're working hard. The team's working hard and we're executing. And that doesn't include the new 16 ounce essentials line, which is just getting started this year, which we're excited about.

No, that's really helpful. And then I guess just one follow up just on international, you know, can you maybe help us understand how we should think about the contribution from a revenue perspective? Are you exploring any additional markets for this year or would anything else kind of be more of a 25 narrative? And then just within that, you know, I'm sure a lot of people and you've gotten this question a lot, but just maybe explain why Suntory was the distributor of choice for the UK and Ireland.

Yeah, thank you, Peter. I think, number one, when we look at international expansion, we just went into Canada. We talked about that on the script. We're really excited on the consumer acceptance. We're also excited about the – we're in 7-Eleven and CouchChart. Its product's doing really well, and we're expanding. So our partner's excited. Canada should be a great market. UK, you know, we did announce Centauri for our partner there. They were looking for the best partners to align with on our go-to-market strategy. One thing that was very attractive about Centauri is their access to the gym community. And we're really focused on a methodical approach as we expand and grow, really about building awareness, trial, that foundational base of loyalty, and then scaling. So, yeah. You know, as we look to see the size and the timing and sequencing of international, I think we'll know that as we go through these markets and expand in these markets and how quickly we are accepted, we can move as fast as we can. But we want to be very cognizant on entering new markets through our methodical approach about, you know, building that loyal foundation before we go and overall scale. So those are the comments there in regards. And we're really excited about our partnership with Suntory.

Sounds good.

Thanks so much. I'll pass it on. Thank you.

Our next question comes from the line of Michael Lavery with Piper Sandler. Please proceed with your question.

Thank you. Good morning. Good morning. You touched on unmeasured channels as one of your big opportunities and gave some examples, you know, corporate cafeterias, universities, vending. There's lots of, you know, physical benefits distribution points under all that and just would love to get a sense of how we should think about how quickly, how close at hand those are, how quickly those could ramp up, you know, kind of what the trajectory might look like for momentum in those areas.

Yeah, I think everyone's really excited about how you look at our PepsiCo revenues. Over 12% is coming from really the food service. Internally here, we think there's a big opportunity there. We see that Celsius is a much broader opportunity when you look at the TAM versus, say, traditional energy. We're seeing consumer consumption increase outside of that energy need state. We're seeing the product being paired with sandwiches and smoothies and bowls and a variety of opportunities for fast casual. So I think it's a little bit too early for us to really know how big that opportunity is. We'll probably know over the next 12 to 24 months as we further expand in some additional quick service as well as expand in additional food service accounts. And then universities and hospitals as well is a huge opportunity for us. Not able to quantify that at this time, but we do see it as a big opportunity.

Okay, thanks. And just on the Canada, UK, Ireland launches, As we think about margins for 2024, obviously you'd spend ahead of really ramping those revenues. And so all else equals, should we expect a dip in EBITDA margins or EBIT margins for 2024 versus 2023? Or, you know, can you just give a sense of how to think about the spending or what's in your plans for how that looks?

Yeah, I'll throw that over to Jared for additional comments.

Yeah, so they're going to be a little different. Canada, where most of the population is, I think, within 80 miles of the U.S. border and also being so close. We actually already had a co-packer in Canada that we were using as a backup for our U.S. business. So that rollout and that growth, we think, will be at a different trajectory than the U.K., which – um you know we're kind of launching from zero so there will be investment in both markets as we build brand awareness and as we really build out the system we won't have the same scale and leverage advantages within the manufacturing as we do in the us so there is going to be some cost and some investment there but it'll be um let's call it it's not going to be a significant component of either our growth or our cost infrastructure this year. So we do believe that the numbers that we discussed on our prepared remarks will be able to handle those investments as well.

Yeah, and I'll just, in regards to when you're looking at Michael, one thing we've noticed is the brand awareness, even though we're not in the UK, there is an underlying brand awareness just associated with the world is really so small these days and one click away. So a lot of our influencers and social media activations are actually being picked up with our potential consumers in the UK. So we had a little bit, we have more brand awareness than we actually initially anticipated based on our research. So we're excited. Things can be a great market for us.

Okay, great. Thanks so much. Thank you.

Our next question comes from the line of Gerald Pasquarelli with Wedbush Securities. Please proceed with your question.

Great. Thanks very much. Morning, guys. Just one on gross margin, another quarter in the high 40s here, but in the energy category, you've already had a larger competitor take a rate increase. There's sentiment that your other larger competitor will ultimately follow suit. So, you know, in the event this happens, how do you think about managing your price gaps relative to peers? I guess just curious on your thoughts around a potential rate increase this year is that would obviously imply upside to your high 40s margin target. Any color there would be great.

Thanks. Yeah. Yeah, thank you, Gerald. You know, there's opportunities. We want to be a premium priced product. I think if you look at a per ounce basis, we feel we're very competitively priced. There's a variety of different levers than just taking frontline pricing. So you have, we have our pricing promotional strategies that we utilize as well. You know, we just were launching a new line extension as well with our Celsius Essentials 16 ounce. And then you also, you know, you have your pricing architecture by channel as well. So impact size. So, There's ways to navigate that. I think we're very pleased with the way we finished the year with margins. And we're really focused on driving share and revenue growth and continuing to drive consumer consumption and ultimately that daily consumption we're looking for. And we're just really getting started here when you look at you know just now a 10 share in the energy category inconvenience so there's a long run way ahead um but it's something we watch closely um at this point we're not going to make any comments on uh future price increases at this time understood thanks um just one more for me i i think your non-measured channel revenue

came in a little better than expected, specifically related to Amazon, at least what we were modeling for. You know, in a lower seasonal quarter, your 4Q absolute revenue is almost in line with your second quarter, which obviously benefited from Prime Day. So any incremental color on the drivers in the quarter within that channel would be helpful if you could provide any. Thank you.

Yeah, I mean, Amazon, we had a great in the quarter was a great period. And, you know, there is a lot of timing as well within shipments and how, you know, the Amazon kind of controls or feeds inventory through their warehouses based on their algorithms. So, you know, we're going to keep shipping them. We're going to we're number one energy drink right now, roughly about a 20 share in the energy category. I don't really have much color than that, but we continue to drive further revenues through that channel. It is an omni-channel world, and that's something we really focus here at Celsius. We want to deliver Celsius to consumers when they want it, how they want it.

I think it does show, too, that there's still opportunity for continued growth within the Amazon channel, so it's not – It's not necessarily slowing down suddenly just because we got to a certain spot within that. So I do see that as a continued growth opportunity for us as we look out into 2024.

Got it. Thanks very much, guys. Thank you.

Our next question comes from the line of Sean McGowan with Roth Capital Partners. Please proceed with your question.

Thank you very much. A couple of quickies here on the sales and marketing gives some good color on what to expect in the first quarter. And I think that rate, you know, 23% is a little higher than you had talked about for some periods in the past. Is that a good number to use for the full year of 24?

I think I referred to Q1 and Q4 in my prepared remarks. And if you look at our Q1 activations and activity, we've got the Super Bowl activations we did that we believe were very successful. We've actually got a Jake Paul fight this weekend. down in Puerto Rico with another number of influencers that we support. We kicked off the MLS last week or a couple weeks ago. We kicked off the F1 partnership. So we've got a number of things that are really rolling in Q1 to keep the momentum going. As we look at a full year basis, historically we've been in the 22% to 24% range. We were at 20% on a year-to-date basis in 2023. You know, I think those are kind of the data points to stick to. If we've got opportunity to invest ahead of growth, we're going to continue to invest it. We're going to spend our money wisely. John and I require an ROI on everything we do, so we're not going to spend foolishly. But if we see opportunity to push growth, we'll push growth. If we don't see it, we'll continue to lever.

Okay. Thank you. And then on the essentials line, could you give us, I mean, that's pretty rapid acceleration of ACV. Where do you think that goes? And basically more generally, what is the plan for, you know, additional SKUs and additional outlets for that line? You know, I'm seeing it in its own cooler or a separate cooler, you know, in some stores. Do you think this can, you know, double that? Can you get to a 80% plus ACV by the end of the year?

You know, that's a well, we don't we've never launched a new line with our new distribution partner, PepsiCo. So, you know, I think we have a lot to learn. We are working hard. We think it can definitely be incremental. You know, there is a lot of opportunity there. That 16 ounce Celsius essentials has been really well recepted. by consumers. What's great, it's not cannibalizing existing sales. So we are bringing in additional new consumers and converting new consumers into the Celsius portfolio. So that has us really excited. We're not trading our existing consumers. So the initial data, it's still early. When you look at it, you're only talking like eight weeks, 12 weeks of data we have at best in certain stores. So we really need to get a little bit more data underneath our belts as we you know move into q get through q1 and most importantly uh see what these resets bring uh that are coming up so i think this summer we'll have a better read on how this portfolio is going to perform uh the celsius central line within our our overall global portfolio yeah it's a great product you should get out and taste it if you haven't yet tastes great i have some in my office thank you

Our next question comes from the line of Eric Sirota with Morgan Stanley. Please proceed with your question.

Great. Thanks so much, guys. So could you give a little bit more granularity as to what drove the step up in Pepsi revenue through the food service channel? I think it had been running at 10%. Now it's at 12.5%. I think Jersey Mike's and Dunkin' are still very early days, and I'm not sure if those go through Pepsi, so maybe you could clarify that. But what specific channels are you seeing traction in food service through Pepsi? And then broader question in terms of the new SKUs that you're adding, particularly on the vibes and the core flavors, what are you seeing in terms of incrementality there? How are the legacy core and vibe flavors performing as you're introducing these new SKUs? And then what do you see as the limit for SKU count or flavor variety here? You're still a long way from Monster and Red Bull. Thanks.

I'll start with the food service one. John can have all the other ones. So food service, I look at that as just continued momentum. I mean, if you look at our club program, once we start launching with them, we've got good progress, good momentum, but then you really see the volumes and velocities growing. We're seeing the same thing across food service. We also had... The college program fully in place in Q4. So as we talked about last quarter over the summer season, it tends to die down a bit when the college campus is empty out. We're also seeing great progress in the other channels within food service that we're in. You mentioned, you know, Mike's, you mentioned Duncan. There's also hospitals. There's a variety of other facilities. food establishments. And so we're just continuing to see ongoing momentum across that channel. And we're really seeing that grow and be built out. And, you know, our distributor has really been helping significantly with that. So, you know, continued momentum and we're doing great there, but let me throw the other ones over to John.

Yeah, and just to further detail on that, I think we're also seeing great momentum. And you talk about the step up, and, Jared, you mentioned college universities as a big opportunity and seeing growth there, but also vending. Keep in mind, vending is also going through that food service. And the vending, we've expanded in vending. We're seeing great results in vending. And at-work micromarkets, we talked about those prior on several calls prior. the at-work micromarket opportunity is really good. I mean, you see a lot of opportunities at work locations. So you're seeing the product continue to scale. And I agree with you, Eric. I think seeing that go from 10% to 12% just shows you the growth opportunity we have on an overall basis in this non-track channel opportunity. Looking at new SKUs, the Vive line, we're excited about the Vive line. Talk about... The success we had, I mentioned on the comments on the call earlier, that cosmic vibe we launched at Circle K and really going intergalactic with the theme of space, you know, the space odyssey with our two new vibe flavors that have a space theme. We're really excited on rolling that out. We're going to have some events coming up at Coachella and a variety of neat things that you guys will be able to see. The vibe line is going to be a totally separate line. We're going to scale and grow that. I think there's a lot of opportunities to bring out innovative flavors and experiences with every sip. And then our core flavors, the team continues to come out with great flavors. I mean, you look at core, even expanding the core into our no fizz line as well, where there's blue raspberry lemonade that we launched at 7-Eleven. In Q1 has been phenomenal. I mean, the product tastes great and really expands this non-fizz or non-carb opportunity that could be in wholly another revenue stream and ultimately an extension of our portfolio as well. So we're monitoring the SKUs. Obviously, you need to do SKU rationalization. So that's something we talk internally at innovation meetings. We'll be doing that each year. So we want to, you know, we'll cut our, as they call it, our tail, our slow moving skews. But we do see consumers looking for new innovation and staying within our portfolio, which is great. So our new sparkling peach, raspberry peach is phenomenal. Great flavor. You know, Eric, if you haven't tried it, please go out and try it. I think you'll enjoy it as much as we do.

Great. Thanks so much.

Thank you.

Our next question comes from the line of Jim Solera with Stevens. Please proceed with your question.

Hi, guys. Good morning. Thanks for taking our question. I wanted to drill down a little bit on the coolers because I live in Cleveland, Ohio, and I was very surprised to see a Celsius-branded cooler very prominently displayed at the cash wrap of a local grocer here. And so can you just talk about kind of the channel strategy there and How you want to get those coolers placed, and then maybe as a part two to that question, just any color you can offer on incremental uplift, velocity, repeat rates, trial buys in locations that do have the branded fridges?

Yeah, Jim, it's a big, big initiative we've had over the years trying to get more cold placement. If you've been tracking the company over the years, you know, we've been historically sold warm. So we had to build a loyal consumer that would actually have to take the product home and chill it and then drink of a daily lifestyle and routine. And that really shows you the loyalty around the Celsius consumer. Cold availability is key to the success in order to compete in the energy category, especially with the impulse purchases. That is the biggest opportunity for us. And kind of mentioning it prior in a question, we look at the convenience channel, you know, that impulse purchase is key to the success of where we want to go and who we want to be in the category. So We placed about 10,000 coolers. We are investing in more coolers. We're working on placing more coolers. We want to be right at checkout. Eye level is critical. We're talking to a variety of retailers as well to gain additional checkout coolers. So I think that's a big opportunity. Most recently down in South Florida, if you look at Publix, we've gained checkout coolers and we're looking to gain additional checkout coolers on the next reset. So that's a big opportunity. We do see uplift. If you're by the register and you're cold, Kind of the saying we say internally here, if it's cold, it's sold. So the other thing is stack it high and watch it fly. Some comments we make around displays, but definitely a lift. The exact lift is hard to say because each channel and each store and each region is quite different on the velocity levels, but there is a substantial lift.

Okay, great. And maybe one follow-up on that. Are all of the actual systems use in the cooler consistent across the portfolio? Or do you guys make changes on that based on channel, you know, local geography? Like, could we see essentials lines in there or some of the other product innovations show up in the coolers?

Yeah, that's a great question. So we do have planograms and progressions we work on based on the size of the cooler. There is a little bit of regional seasonality that based on the retailer, we do exclusive flavors. So like at Circle K, we did our Cosmic Vibe. I talked about 7-Eleven, the new launch with the raspberry lemonade, so fizz-free. So you will see potentially unique flavors in given coolers, but we do have a standard national planogram that's being followed. Probably not always followed to the T, but that is something we work on as an overall organization and work with our PepsiCo partners to keep the progressions in the coolers in accordance to our planograms. The core should have its own planogram. The vibe should have a planogram, and also our fizz-free line should have a planogram, as well as our Celsius Essentials 16-ounce. So that's kind of how our go-to-market strategy.

Great. That's very helpful. Appreciate the color, guys. Thanks. Thank you.

Thank you, Jim.

That's all the time we have for questions. I'd like to hand it back to John Feedly for closing remarks.

Thank you, Doug. And thank you, everyone, for joining us today on our Celsius Holdings fourth quarter 2023 earnings call. I'd like to thank and close by thanking all of our employees. Your dedication to Celsius has helped to create the success we're enjoying today. And together, we'll continue to provide essential energy to more consumers so they can pursue their own live fit lifestyles with a cold Celsius in their hands. Celsius will be participating in several upcoming conferences, details of which will be published on our investor relations corporate website. We look forward to seeing many of you there. Thank you for your interest in Celsius. Stay healthy and live fit.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.