Q3 2020 Celsius Holdings Inc Earnings Call

Thank you. Good morning, everyone. We appreciate you joining us today for Celsius Holdings third quarter 2020 earnings conference call during the call today are John Findley president and chief executive officer of Grand Chief Financial Officer following the prepared remarks will open the call to your questions and instructions will be given at that time the company bonds form 10-q with the SEC and issued the earnings press release off today. All materials are available in the company's website at Celsius Holdings Inc., Under the investor relations section as a reminder before it turn the call over to John the audit replay will be available later today, please also be aware this call may contain forward-looking statements. What are based on forecasts expectations and other information available to management as of today, November 12th, 2020 these stages of numerous risks and uncertainties including many. They're beyond the company's control except the extent as required by applicable law Celsius Holdings undertakes, you know applications and disclaims any duty to update any of these forward-looking stay home.

We encourage you to review.

In full are safe harbor statements contained stays press releases 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 Findley first month marks John. Thank you Cameron. Good morning everyone and thank you for joining us today. Our third quarter continued to see the impacts of the COVID-19 pandemic materially impact of channels of trade for Celsius, including our health and fitness vending and Food Service as well as a reduction in foot traffic and several other channels while we did begin to see an improvement and the third quarter off the capacity restricting restrictions and re-openings and our hardest hit channels this remains significant uncertain as there are potentially could be re closings with additional cases and increased birth or regions of operation and extended closures in some states and countries the health and safety of our employees customers consumers and partners remains our top priority and we can log

need the monitor the environment Implement contingency plans to mitigate risk to our business in addition to the code of disruptions in our retail Channel projections while this is a significant issue have also found a solution being an international company we have been able to Leverage

Our Global relationships and strategic investors and will be securing additional cans needed as needed from Europe and Asia to support our growth while this is great news on all these incremental kids. We were able to Source outside of the United States. We will see an increase in our cost of goods over the short-term. Through 2021, which will impact of profit margins by a few points. But we remain confident the company will be at least at a run rate in the low 40s on a gross profit basis.

We are currently expecting twenty Twenty-One as being impacted for the entire year until the new plants the United States get up and running balancing supply and demand as we head into 2022. We will continue to explore additional opportunities as they become available to shorten the duration Celsius has impacted by this can shortage but wanted to set an initial conservative expectation as a base. I am sure I assure you our team is focused on continuing to improve operational performance and the team is focused on improving efficiencies as we continue to scale and we will work to mitigate and office is increase as much as operationally possible throughout twenty 21% with the with the only negatives for the quarter out of the way. I am extremely proud and excited with our team and the accomplishments they made during the quarter the third quarter results were at an all-time record for the company including record Revenue gross profit gross margins operational income wage.

Income earnings per share and cash flow from operations. Overall. Revenue was up over 80% So approximately 36.8 million from 20.4 million in the year-ago quarter home remedies, we saw growth of 60% to 26.9 million up from 16.8 million in the year-ago quarter which which driven by expansion and retail outlets where we grew over 19,000 little quotations from the year ago. Expanded our distribution through DSD and saw organic same-store sales growth and we saw over a hundred percent growth in our e-commerce channels during the quarter.

Ekhon, Revenue was driven by Amazon and where we saw an increase of over 111% over 5.6 million dollars for the quarter which represented about 22% of our domestic Revenue off initial Revenue increased 172% to 10 million approximately from 3.7 million a year ago quarter in which we saw our Nordic Revenue increase 182% 9.5 million month awesome a quarterly record since the acquisition and sequential growth of approximately tempting the convenience channel outpacing the category by approximately 14.8 times with New Jersey or additions ramping.

The upper ACV to approximately 16% and then the Mulo Channel or growth rate is over approximately 100% with an ACV currently at 36.5% outpacing the category growth by 7 a.m. For additionally third party data reflects the same Trends on Nielsen as reported all channels as of October 27th, 2020. The Celsius sales were up over 61.3% for the four weeks ending with a 6 share the next largest growth rate in the category was Red Bull with approximately growth rates of 20.5% for the most recent for week. According to stock line, which was which tracks energy drink sales on Amazon the United States for the four weeks ending October 17th, 2028 sales and dollars in the energy drink category by Amazon including energy shots grew by over 157.5% versus the same. Year ago and Celsius sales increased output.

The category by 190.3% and our share increased to 13.9% of the category which puts Celsius as a third largest energy drink brand on Amazon off just behind Monster Energy at a 31.2% share which grew 156% and Red Bull which is at a 15.8% share its crew at 179% growth rate wage being the third largest brand on Amazon demonstrates our opportunity and verify Celsius warrants additional and much better placements as we continue to scale through the third quarter track in purchasing patterns remain disrupted and online ordering patterns Pantry purchasing and curbside pickup became more prevalent in response to stay at home orders in particular markets and consumers shifting their Lifestyles during the quarter. We continue to see impacts and several of our distribution channels mainly our health club vitamin specialty and wedding channels or health club channels specialty Channel song.

Revenue decline by approximately 23% the third quarter. This was historically represented at approximately twenty to twenty-five percent of the United States revenues and this channel remains predominantly shut down there in a quarter cup did begin to see some re-openings at a limited-capacity during the quarter but expect revenues from this channel to remain materially down in the fourth quarter. We do expect continued openings throughout 2012 and a rebound as I discussed in third and the second quarter earnings call despite these two channels essentially shut down. Our consumers shifted their purchasing patterns of cell service to other channels, which did not only replace the sales in these channels, but drove record revenues and accelerated Revenue growth of over 60% a third quarter in North America for the reinforcing the opportunity. We have at Celsius. Our brand is more than just an impulse purchase. We are part of daily life style a line for today's Health mining consumer.

The Celsius consumer bring significant value to retailers not just as an expanded age bracket and a 50% female demographic. But our consumers are recurring regularly consuming. Celsius is part of the daily lifestyle further expanding the channels and category growth during the quarter. We made significant process on further building out or did you see networks on our Pursuit for a national network to service our accounts? We secured additional distribution partners and Anheuser-Busch PepsiCo, dr. Pepper and Elsa Miller Coors Network Partners took her expanding availability to new regions. We further transition Target and 7:11 over to the wholesaler. Big guys are in New York during the third quarter and have already seen volumes more than double and those locations the company initially announced last summer that were building out our national network starting with our first major account DSD partner big guys that are New York City metropolitan.

Market we have now.

Built our Network to over a hundred and forty seven Regional direct store delivery partners and we have pizza participate our DSD Network now covers approximately 75% of major Metropolitan markets in the United States. What are the initial challenges? We did have building out. Our network was really working with the retailers as you have to cover the retailer distribution and the stores in order to flip over those retailers to your distribution Partners. So this is why the percentage is store is serviced by DSD is materially lower currently than our overall coverage, which is approximately 65% of Metropolitan markets. Now that we have grown overall coverage and completed full regional coverage on geographical areas. We have now seen in over a hundred percent increase in number of stores serviced by our DSD network from our Q2 earnings call which includes our most recently announced Target DSD conversion years, we expect approximately 70% of a retail stores to be serviced by birth.

distribution and the Associated Bank

It's a doubling revenues and those accounts as we continue to transition in our Mass Channel Celsius all significant growth through a recently-announced exclusive launch of kiwi guava lime flavor of on the go Stick Over 2,700 Walmart locations, in addition to the Walmart launch of the new flavor of the company expanded or on-the-go sticks into Publix over 1200 locations with five flavors and expected our flavor offerings throughout Europe Europa Who services the gym Channel as well as Vitamin Shoppe and HEB in Texas. We also expect to transition the remaining 50% of Walmart stores that need to be in the beginning of 2021. We transitioned as stated 1200 Target stores the DSD through September and October with additional plans and regions to transition throughout the back half of twenty thousand and three twenty Twenty-One. Target is a great case study for Celsius as we have steadily grown our initial to excuse and a 200 store test to National availability would 5 flavors. Yep.

Now by DSD the company also participated in an end cap program which to support the transition in August and September which was very successful and the convenience Channel during the third call, she announced expansions that stated in Speedway to over 2,700 locations which are now serviced by DSD and grew racv in the channel in the convenience channel in the North America to approximately 16%. We also expanded and brought on extra Mark come and go and Union specific stores and the retail space are total now exceeds 79,000 locations National, which is up for more than 19,000 locations or 32% growth from the 60,000 locations. We announced in Q3 of 2019 on our earnings call. We took the number to grow even further in the coming quarters as retailers execute planogram resets, which were delayed in the summer months this year in Europe. We continue to capture incremental benefits and since birth.

Choose from Full integration of punk food a Nordic wellness company into our operations. The business was immediately accretive to earnings and important stats and our strategy to build that a global Dynamic brand as in the United States or Europe operations were impacted by COVID-19.

These decreases were more than offset by the sales increases of Celsius in the region, which we continue to see great opportunity and momentum some of our operational highlights and Sweden. We had a great successful launch of flavor great-tasting strawberry marshmallow, which we launched in August and September and we also kicked off in the back half of the third quarter a limited edition blueberry Frost which is great tasting and was well-received by consumers and retailers in the country in Finland. We saw great very strong campaign. And kesco one of the country's leading hypermarkets where we saw over a 65% growth versus in the prior-year quarter and a team lost a great-tasting Indulgence bar and and August which has been very well-received by consumers as with Europe and the United States China and a pack were impacted as well by COVID-19 recovery continues and we saw momentum's gain the summer months in China we maintain a licensing royalty model on the market where Distributors cover approximately 76 cities and Now cover approximately sixty-thousand. Yep.

distribution at the

End of the third quarter and a Malaysia we maintain a direct relationship with a local distributor where we maintain approximately 2007-11 with plans to re-enter. The fitness channel specialty package is an additional retailers as a recovery continues as with Europe and the United States. We see great opportunity to capitalize on the changes in consumer preferences for better-for-you offerings, and we see tremendous opportunities in the enormous Market of Asia on a marketing front. We continue to innovate Target new and existing consumers with a live work and play to prioritize meaningful and emotional connections through robust marketing of programs that drive live integrated programs competitive activities. Even while consumers are at home specifically during the quarter despite COVID-19 restrictions. We sponsored 225 Advanced both person in Virtual.

Sampled thousands of cans and hands during the quarters and our key markets. We also supported our First Responders with thousands of donations to doctors nurses police Army firefighters and not supported the California fires. In addition. We started our live fit tour in the Florida Market where we reached out and sampled and activated gyms and also create an experiential outdoor activities throughout the quarter and as plans to further expand throughout you for an addition. We further leverage a sweat with Celsius Instagram live Work Out programs and further levers are brand ambassadors and Thursday. We're we connected meaningfully would more consumers an addition. We continue to partner with our core retailers and most recently we partnered in a college program where we have distributed over 100,000 on the go sticks to college students through the Walmart back to school college program.

Our brand is resonating with an expanded consumer base distribution platform and retail locations with a tailwind and overall increase focus on health and wellness and specifically in the same category where functional energy is recognized throughout the industry as the driver or future growth and shelf space with retailers. We remain focused on driving profitable growth in an industry. That is a changing we're growing exponentially in adapting quickly outpacing our competitors and grabbing market share the momentum. We are creating reinforces our confidence in the long-term growth in profitable aspects of our business. And when we believe we are just getting started heading into the fourth quarter of 2020 remain excited and are seeing sales orders through October in the United States exceed over a 50% growth rate versus the prior-year. I will now turn the call over to Edwin the grown Kabbalah our Chief Financial Officer for his prepared remarks Edwin dead.

Thank you. John starting with our third quarter results for the 3 months ended September 30th. 2020 Revenue was 36.8 million a substantial wage increase of 16.4 million dollars or 80.4% from 20.4 million dollars for the same quarter of 2019.

the revenue

To increase of 80.4% was attributable to continued strong growth of 60.4% in North American revenues reflecting double-digit growth from existing accounts new distribution and expanded presence in major retailers European revenue for the three months ended September 30th, 2020 was nine point five billion dollars which translates to a robust increase of 182.3% from 2019 revenue of 3.4 million dollars.

The 2020 figures now reflect the full Financial impact of the consolidation of fun food group are European distributor distribution partner whom we acquired in October 2019 Asian revenues, which basically consists of royalty income from our China licensee were essentially $275,000 for the 3 months ended September 3rd, 2020 an increase of 40.8% from $195,000 in the 2019 quarter other International markets generated $100,000 of Revenue during the third quarter of 2020 and increase of basically $57,000 when compared to $88,000 for the same quarter in the prior year off.

The total increase in revenues from the 2019 quarter to the 2020 quarter was mainly related to increase in sales volume as opposed to increases in product pricing for the 3 months ended September 30th, 2020 gross profit increase by approximately 8.9 million or 103% to 17.5 dollars from eight point six million dollars for the same quarter in 2019. Gross profit margins for three months ended September 30th, 2020 were very healthy 46.7% which compared favorably to 42.2% for the same quarter in 2019 the increase in profit margins delivered and increase of one point nine million dollars of profitability disorder.

The increase in gross profit is mainly related to increases in sales volume from the 2019 quarter to the 2020 quarter as opposed to increases in product pricing sales and marketing expenses for the three months and the September 30th 2020 were eight point three million dollars an increase of basically 3.3 million dollars or 68% from that point nine million dollars in the 2019 quarter this increase reflects the impact of the full consolidation of the operating results of fun Foods dirt by resulting in an increase in our marketing Investments of 88% or 1.7 million million dollars from the prior-year quarter similarly all other sales and marketing expense. Just give it back to the increases related to the consolidation of phone food groups operations.

specifically

Employee costs which also includes investment in human resources to properly service our markets increased to two point three million dollars or 71% from the prior-year quarter off moreover do to increase in business volume from the 2019 quarter to the 2024 order our support to Distributors and investment and trade activities as well as our storage and distribution wage is increased by $705,000 when compared to the prior-year quarter.

General and administrative expenses for three months ended September 30th 2020 were essentially four point six million dollars an increase of basically 2.4 million dollars or 150% from 2.2 million dollars for the 3 months ended September 30th, 2019. This increase similarly reflects the impact of the consolidation of fun Foods operations, which were not present in the results for the 2019 quarter as such administrative expenses for the three months ended September 30th, 2020 where one point three thousand dollars an increase of essentially $866,000 or 182% from basically $476,000 for the prior quarter wage.

Employee cost for the 3 months ended September 30th 2020 reflected an increase of $360,000 or 63% not only attributable to walk to the consolidation of functional groups operations, but also reflecting additional investment and resources in order to properly support or higher business volume all other wage increases for General and administrative expenses from the 2019 quarter to the 2020 quarter were approximately one point 1 million dollars.

These increases are mainly related to higher stock option expense of 1.2 million dollars additional depreciation and amortisation of $15,000 which were actually offset by net decreases in all other administrative expenses amounting to $122,000.

Total net other income for the three months ended September 30th 2020 was basically $45,000 which compares favorably to other expenses of $553,000 for the same period in the prior year the 2020 quarter results reflect a total favorable impact of approximately $588,000 which includes $155,000 of lower amortization expenses $143,000 gain related to foreign currency fluctuations off $408,000 gain on the Note receivable from China and net other miscellaneous expenses of $63,000, which were partially offset by higher interest expenses of $55,000 as a result of the above for the 3 months ended September 30th, 2020. Net income was 4.8 million or

six cents per diluted

To share compared to net income of $961,000 or diluted earnings of $0.03 per share in the year-ago quarter. I just said ibadah was six point six million dollars compared to a loss of two point six million dollars for the third quarter of 2019. We believe this information and comparisons of adjusted ebitda and other non-gaap Financial May enhance the overall understanding and visibility of our true business performance to that effect a Reconciliation of our gaap results to non-gaap figures has been included in our earnings release.

Now turning to the year-to-date results for the nine months and the September 30th. 2020 Revenue was essentially 95.1 billion and increase of 54.1 billion dollars or a significant increase of 86% from fifty 1 million dollars for the same period in 2019 to revenue increase was attributable in large part to continue strong growth of set of 57% in North American revenues reflecting double-digit growth in both existing accounts and new distribution as well as expanded presence in major retailers.

European Revenue was 26.8 for the nine months ended September 30th, 2020 and increase of 251% from 7.6 million in revenue for the 2019. The 2020 figures now reflect the full Financial impact of the consolidation of punk Food Group.

Asian revenues which basically consists of royalty income from our China licensee were $969,000 for the nine months ended September 30th, 2028 an increase of 38% from $629,000 for the 2019. Other International markets generated $309,000 of Revenue off during the nine months ended September 30th, 2020 an increase of basically $150,000 from $160,000 for the same period in 2019 off the total increase in revenue from the 2019. To the attorney. Was mainly related to increases in sales volume as opposed to increases in product prices.

For the nine months ended September 30th 2020 gross profit increase by approximately 22.3 million dollars or a robust 105% increase about forty three point five billion dollars from 21.2 million dollars for the same period in 2019 gross profit margins increased to 45.8% off for the nine months ended September 30th 2020 from 41.6% for the same. In 2019 the increase in gross profit dollars and gross profit margins. Is May related to increases in volume as opposed to increases in product pricing.

sales and marketing

Expenses for the nine months ended September 30th 2020 were twenty three point six million dollars an increase of effectively 9.5 million dollars or 68% from forty three point 1 million dollars for the same period in 2019 this increase reflects the impact of the consolidation of funk food group following its October 2019 acquisition by the company as a result our marketing Investments increased by 77% or 4.2 million million from the 2019. Similarly all other sales and marketing expenses reflect. The increase is related to the consolidation of funk food groups operations specifically employee cost for the 2020. Which also includes investments in human resources to properly service our markets increased by three point, six million dollars or 88% from the 2019.

Moreover due to the increase in business volume our support to Distributors investment and trade activities as well as storage and distribution costs increased by one point seven million dollars from the 2019. To the 2020.

General and administrative expenses for the nine months ended September 30th 2020 were essentially 12.5 million dollars an increase of 5.3 million dollars or 72% from 7.2 million dollars for the nine months ended September 30th, 2019. This increase similarly reflects the impact of the consolidation of fun Foods operates just which were not present in the results for the 2019. As such administrative expenses reflected an increase of two point six million dollars which included an increase of $621,000 in our bad debt Reserve to cover potential collectability risks associated with the COVID-19. Demek employee cost for the six months ended September 30th, 2020 reflect an increase of one point 1 billion dollars or 59% Not only attributable to Funk Foods operations dead.

But also related to additional investments in resources in order to properly support our higher business volume.

All other increases for General and administrative expenses from the 2019. To the 2020. We're one point four million dollars these increases most of the resulted from higher stock option expense of 1.3 million dollars higher depreciation and amortisation of $34,000 and net increases in all other facts straight of expenses of $59,000 total net other expenses for the nine months ended September 30th, 2020 were $590,000 off select a variance of 11.9 million dollars when compared to total net other income of 11.3 million dollars for the same period in the prior year with the variance of 11.9 million dollars is mainly related to the recognition of a gain of 12.1 million pertaining to a note receivable from our Chinese licensee dead.

The note receivable is part.

Have an agreement executed with our China distributor related to the restructuring of our business relationship to a royalty base model, which requires the repayment over a five-year period of the investment the company made in China during the 2017 and 2018 years as a result of the above for the nine months ended September 30th, 2026 company had net income of 6.9 million dollars or nine cents per diluted share in comparison for the nine months ended September 30th 2019. There was net income of 11.1 million dollars or Twenty cents per diluted share the net income for the 2019. Included in non-recurring gain of 20.1 million months related to the fuel from our China licensee adjusted ebitda for the first nine months of 2020 was 12.2 million compared to a loss of three point. Yep.

Million dollars for 2019 we believe this information and comparisons of adjusted ebitda and other non-gaap Financial measures enhance the overall understanding and visibility of our true business performance to that effect a Reconciliation of our Gap results to non-gaap figures has been included in our earnings release wage as of September 30th, 2020 and December 31st, 2019. The company had cash of approximately 52.2 million and 23.1 million respectively and working capital of approximately 62.2 million dollars and twenty four point eight million dollars respectively cash provided by operations during the nine months after September 30th 2020 was approximately 3.8 million dollars compared to cash used in operations of essentially $966,000 for the nine months.

Period ended September 30th 2019 finally subsequent to the end of the third quarter on October 30th, 2020 the company paid off the bonds payable related to age restriction of Farm Foods in the amount of approximately ten million dollars and is now debt-free that concludes our prepared remarks operator. You may now open the the call for questions. Thank you. 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 one on a phone keypad a confirmation to indicate your line is in the question to you may press star to if you would like to remove your question from the Q4 participants using speakerphone now, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of gas and Center in Whitby Riley & Company, please suck.

with your question

Good morning, everyone first. Let me say congratulations on the strong Q3 metrics terrific to see John. Maybe you can just touch on. I know you took the DSG Network quite a bit. I think you said you're at $147, but maybe you can just speak to which regions you feel are best covered at this point. Maybe what you still need to fill in or add the SV Partners. Um, and then what does kind of the optimization of your DST Network look like at the next phase based on recent business Trends and and kind of like maybe just review the time frame of of getting to that optimization.

Yeah, no, thank you. Jeff, really appreciate the team did a great outstanding job during the quarter during these unprecedented times. So really excited about the results no momentum where we're at. But you know, you're absolutely right. I just stated on the call. We're at right around $147 DSD Partners. Today. We have about 75% of the major Metropolitan markets covered. So they took us to really activate our retailers. So our team our key accounts team is in the process really working with our Retail Partners and getting plans in place to transition from a direct model 2015 model where we just see great left, you know, really gets as much better placement better activation that are in store execution and so forth. That's really what we've been saying. That's what I'm seeing as we flip over Target and CVS 7-Eleven in New York and went out and Rouse in California as well. So lots of momentum there when you look at the areas where we're still working on and need coverage.

The teams working very closely with a variety of potential customers is the Mid-Atlantic States Northern Cal California. We've been working on and off. So there's pockets in the middle of the country as well as certain pockets in Texas that were working on so but we do have 75% of the major Metropolitan markets covered we can cover a good phone number in a good fit footprint of our existing distribution. So really just in the process working with our retailers. We talked about Walmart before fifty percent are currently covered by DSD. We're hoping that'll change in the really into one of twenty Twenty-One as we continue to work with those Retail Partners and flip over these key accounts. So we think we're in great position. We're in great standings wage position than we ever have been on our retail distribution footprint and just really excited. We're seeing these Distributors continually reorder products working with us. We have a game

Awesome, great team members field sales team members that are working on activating these Distributors. So we think we're in a really great position as the exit 20 20 and head into 2021.

Okay, great. And then a multi-part question here. Can you speak on on how the process of converting Target to DSP has been going maybe what sort of lift you're experiencing lately when you convert to DSD overall. I think you said something along lines at 50% And then I think you also mentioned Walmart flipping to to DSD in the first part of next year. Maybe you can just elaborate a little on that and then just curious any any more thoughts you have on the c-store channel and how business is going with Speedway.

Okay, excellent, you know Target we mentioned but press releases out. We have worked been working on flipping over 1,200 stores, you know, that's there's a whole process that gets involved there. I get to that point. So it's making sure you're covering all the stores within a given dma making sure that you're you know, then your numbers have to be loaded. There's a lot of back-office work wage has to be done and not only on the Celsius side, but also on the retailer side and once that's all completed then that needs to be communicated to our distributor Partners activated at retail, We do Provide support with our field sales team as well making sure these shelves getset. I've been working on it over the last two months really September and October getting those 1,200 start Target stores down. There is additional Target opportunities to flip as I mentioned as we head into 20 21 in regards to Walmart. We are in about 50% of those Walmarts are currently yep.

My DSD, do you do COVID-19 and a lot of challenges as we know with these retailers with a lot of uh back office roles and responsibilities and positions working from home has taken a little bit longer. So, you know, we anticipate Walmart we'll get together with them and we'll continue to work on moving them over to d s d which is the preferred method and we anticipate that to happen sometime in q1 early twenty Twenty-One as it relates to convenience convenience. We're up to a 16% a CD outpacing the category growth. Obviously, we're in addition to getting into the thick of Fire season. So, uh really account calls for 2021. It has been extremely positive as we as we where we sit today and looking at 5:21. We're getting a lot of excitement as we did last year at Max as we presented there. We did have a boot there. We got a lot of excitement. We were anticipating a lot of resets in 2020 which have been wage.

But we anticipate those two come around we're expecting more accounts coming on board in the convenience Channel and that March April time frame and twenty Twenty-One and we'll have more announcements over the next coming quarters about expansion and existing accounts as well as new distribution coming on board within that convenience Channel as you look at speeds way. It's you know, we're currently in the process of the first really the first phase of the relaunch initial feedback has been positive on the in the 2700 stores welcome additional feedback has been positive will continue to monitor, but I don't have anything else to really report on at this time in regards to Speedway, but things seem to be going well.

Okay, great to hear thanks for taking my questions. I'll jump back in the queue. Thank you, Jeff. Thank you.

Our next question comes from the line of Jeffrey Cohen with Lautenberg Bellman. Please proceed with your questions and Cameron. How are you? How you doing today? Geoff very well. Thank you for calling so few random questions and one more of a a macro question. So if you talk about the the on-the-go sticks it's now up to six SK. Use is that yet become a material portion of the overall business at least in North America.

Yeah.

Sticks is a great offering for us cuz that expands our usage occasion. So we see a lot of we're seeing a lot of momentum with individuals making it part of their smoothie combination box also taking it on their travel all the travels down. We have seen a lot of offers a lot more portability and we are seeing, you know, we expect it to be a meaningful part of our business obviously of our TVs or drive the bulk of our revenues, but we do see this additional opportunity with the on-the-go sticks. They're doing well at Publix. We just expanded into Walmart within uh, Vitamin Shoppe we've done really well over the years and online and HEB has had them for some time as well as Harris Teeter. So we do get a lot of excitement a lot of interest on them. We do have some new flavors plan for twenty Twenty-One and you know as it will be a meaningful business part of our business. It is a piece of our business and we expect it to deliver revenue and grass.

Pockets as we continue to scale and um, you know, the team does put Priority on it as well. But our main focus is the rtd's I did mention a couple of new flavors strawberry mark blueberry Frost. Can you tell us what the what the timing is on that and is if that's the the traditional line or the heat line and where we might expect that. Up. Yeah. It's it's in the market now in the nordics great-tasting strawberry marshmallow and the frost is great-tasting. The blueberry Frost is a limited edition. That way just launched at the end of the third quarter. So locally here in the US. It's we don't have that slotted to arrive but it is in the nordics. If you're traveling over to Sweden Finland and Norway you will be able to find that.

Okay. Got it. Next could you talk about now? The funk is closed. Could you talk a little bit about the vitamin Channel? And if you're seeing any disruptions with the the GMC situation?

Chuck chuck. Can you repeat the question? Sorry, could you talk a little bit about the vitamin Channel specific to this next quarter? Yeah. Yeah. I mean the vitamin channel has been off challenge especially supplement Channel and then in the gym business, you know, it's we started to see grade three openings in Florida. We did start to see three openings in Texas markets Jose, California where actually they were cats are outside. We have some outdoor activation to support those those local Partners. It's very key to our core. We're there to support the fitness channel regards to the vitamins. I mean, the channel has been has has struggled we talked about it was down 23% and a quarter we anticipated to come back we feel health and wellness Trends are here to stay. You know, it's Thursday. We don't see that going away anytime soon. It's more important now than ever before to stay healthy stay fit stay active. So we feel the the Sports Nutrition space is is going to continue to call.

It's a great way for a consumer to be.

Learn about Celsius for the first time in that channel as well and they bring a lifelong Celsius consumer on board.

Okay, and then lastly for me if you could talk about the the situation with the cans as I understand that you have had four or five facilities is the law limiting factor the capacity of the current facilities or is the limiting factor the raw materials and the availability of the the cam manufacturing. Yeah. We we spoke about the kids. We were notified late in October about about availability as we head into 2021. There is a massive can the physical actual body of the can shortage for 20 21. It's anticipated in 2021 the industry in the North America is short about 30 billion cans, so lots of shortfalls and that really has to do with the capacity of the manufacturing of the physical can't not the filling of the can when we talk about filling stations. That's the five filling stations or co-packers. We've been working with we have table

Capabilities to produce the cans but we to fill the cans in to finish Goods. The challenge we have is we had in the twenty Twenty-One is the physical can body. So that's the big shortfall is all the can manufacturers. Uh, the larger can manufacturers are all running over capacity and turning Brands away, unfortunately, so as I stated earlier on the opening remarks off of the call, you know, we do have contingency plans in place for that being a global company is advantage to us. We were immediately able to start sourcing cans out of Asia out of Europe as well and immediately put our teams on that task to secure cans to sustain our growth and continue to outpace the categories. So we will have sufficient ample Supply as we head into as we had through twenty Twenty-One, but it is an industry-wide issue. Everyone's going to be dealing with which also can be an opportunity for brands that have kids club.

Got it. Okay that does for me. Thanks for taking the questions.

Actually, thank you Jeff.

Our next question comes in the line of David Bain with Roth Capital. Please proceed with a question great. Thanks, and also my congratulations on results and thanks for all the data points Chicago lot. So I limit mine to to just give him the cash on the balance sheet cash flow generation. Now. I mean does this change your outlook either on potential? I'm an activity or brand extensions and I mean looking at the average for your industry leader, you know, you start to a drain body fuel to paradise dragon T. Whatever it's got to be three or four or five times yours in the same locations. So is that an opportunity potentially next year or I thinking about that the right way?

Thank you Dave for the question.

The tone of opportunity out there for us. No question about it. The key word that Celsius is focused execution. We we do we did finish the quarter with fifty two million in cash of which right off of 42 million. If you back out the ten million, you know paying off that debt, which we are debt-free. So that's been paid off. So we do have sufficient cash. We are generating cash flow positive. We will be investing in inventories to sustain growth. So we have funds earmarked for inventory investment. We also have some positive Roi targeted investments will be implementing into 2021 with Replacements if you're out in California, I know Dave you're out there if you stop into some Ross we're getting great placement with some really good cooler assets and and and the rotation and the ROI is extremely positive. So we'll be looking to invest in that area and to twenty Twenty-One opportunities arise every day. We're willing to evaluate them and if we find an opportunity that's accretive to our share of birth.

I created a revenue and gross profits will look at it. But at the strategy right now is to continue to stay focused Drive profitable growth and drive Celsius into a major player in the energy categories just takes share fantastic. Okay, and then my follow-up would be is if it's possible to kind of help us bifurcate 3Q North American Revenue growth into something like same store sale organic growth F or growth or any way we can kind of look at you know with the the main pillars a of the third quarter growth were dead.

I mean if you look at the growth in North America like we stated on the call, I mean on a year-to-date basis you're up 57% growth rate and one talked about a lot of the new distribution office and we did talk about the the you know, the store count increase their that we saw so, you know it it's an interesting year as we all know in our twenty. So, you know, it's consumer shifts being their purchasing patterns, and now they're going back. Uh-huh. There's a lot of Dynamics taking place. So I don't really want to State anything. We haven't provided guidance. Uh, uh took his momentum behind the company. I did say we had a 50% growth in North America orders in house as of the end of October. So that shows some underlying momentum there, but I would not going to provide any for guidance at this time.

No problem. Just go ahead where you going to follow up.

No, no. No, I need me the underlying if you look at it, the spins data scans data has a set about a 60% growth rate. And now it's the latest Nielsen data and in the convenience Channel were at a 43% growth rate. We had gained some new distribution as well. So I think are dynamically we've seen and we stated this publicly about a 30% growth rate in same-store sales, and the other issue is coming from new distribution.

Got it.

Okay. Thanks so much. Great quarter.

It was a reminder ladies and gentlemen, it is star one to ask a question. Our next question comes from the line of Anthony vendetti with Maxim group. Please proceed with your question.

Thanks. Good morning, Edwin. Good morning, John. How are you doing? Good morning. Good morning. Excellent. So just you know, cuz there's there's a lot of talk about a shortage across across the industry. Not not just obviously, you know what you're dealing with but it's just it it's it's obviously a big issue and I think it's excellent that you're able to to Source this outside. You said it's going to impact Morgan's a little bit. Uh, is it going to start to impact margins right now or you may do you need to start sourcing sourcing from from Europe and Asia now or is that a twenty one issue?

Yeah, it's a it's an industry-wide issue. We anticipate sourcing in Q4. So that'll start in Q4.

Okay, okay, but but in terms of being able to get the canned that you need based on on the fact that you seem like you're ahead of this curve. You don't you don't see being an issue in terms of being able to meet the the forecast you have for for the demand, correct? That's correct. We already have purchased in place. We've already or far along on the on the processing order procurement process to have sufficient cans as we head into twenty Twenty-One years and then as we if you mentioned an Amazon, you're the third after Monster and Red Bull it just in terms of the corporate gross margin dead.

Is that is that is that in line or is it a little bit lower? Margin when you go and Amazon and just remind me John what or Edwin what's the percent of Revenue that comes from e-commerce or Amazon at this point?

Yeah, just Anthony roughly around 22% of our revenue for the third quarter North America. So if you're looking at the segment there in regards to gross profit margin don't disclose, um, you know, particular accounts, um, but uh, you know overall margins were were very good for the quarter and like we said going forward due to the can walk in porting a chance. We're looking at you know, the low 40s on a on a go-forward basis as we go through 2021.

Okay, great and on the DSD Network?

Anheuser-Busch big guys are those are the big ones but you have DSD agreements with PepsiCo Keurig. Dr. Pepper Mill net worth are there any others and I I said that right now your DSD Network you believe can cover 75% of your major metropolitan areas or there are other DSD partners that you believe you need to increase that penetration or or at some point maybe 75% 80% is is is about as far as you can go in terms of wage.

a great question and keep

Find the Pepsi and and as a bush Doctor Pepper, we're dealing with the independence. So they're not corporate-owned. So this is Independence. Both of our distribution is with an advisor Bush independent wholesalers. You know, a lot of Brands can't even get to 75% major Metropolitan coverage. So, you know, it is a great achievement where we're at today, but we are looking for full coverage and will continue to drive that through we will you know, there were talking to a variety of additional Distributors to help fill some of those boys mainly in the Mid-Atlantic North Texas certain parts of Texas and then there's certain regions with in the middle of the country that we are looking for additional coverage on but I think we're in a really good position right now. It's 75% major Metropolitan discovered. It's the opportunity to activate these Distributors. We just picked up thousands of new potential sales reps that can be out there helping cells helping build the Brand, New Jersey.

Celsius and we're looking to partner with them in a big way in 2021 and um, we've never been in a better position to have the opportunity we have on hand.

Okay, great. And then just lastly, you know a few years ago. You came out with the heat line, which was you know, it's different different packaging different product wage more more caffeine than this than your standard Celsius line. Is there any other lines that you're looking at launching in in 21, or is it more going to be just an extension of what you have and an additional flavors? We have a great cross-functional Innovation team. We have a lot of investment plan for 2021 and Beyond some great line extensions Innovative flavors coming to Market and one opportunity we've had which we've talked about with the funk food acquisition is leveraging that fast brand portfolio Thursday. So we're looking to partner with them. We've been partnering and bringing that fast protein snack portfolio to North America and q1 starting to test it and seated and birth.

But there's a lot of opportunities in that category. We do see massive opportunities in the RTD category and that's where we're mainly focused. But look for some great tasting flavor Innovation some line extensions. I had into and through 2021 and beyond. All right, great quarter guys. Thanks appreciated.

Thank you. Excellent. Thank you.

There are no further questions in the queue. I'd like to hand the call back to John Feeley for closing remarks. Thank you. Thank you everyone on behalf of the company like to thank everyone for their continued interest and support our results demonstrates. The products are gaining considerable momentum or capitalizing on today's Global health and wellness Trends and the changes taking place in the transformation of today's energy. Drink category are a healthy lifestyle position is a global position with Mass Appeal. We're building Upon Our core leveraging opportunities and deploying best practices. We have a winning portfolio strategy and team and a rapidly growing Market that consumers want our mission is to get Celsius to more consumers. Probably I am very proud of our dedicated team as without them are tremendous achievements and suck opportunities. We see ahead would not be possible in addition. I thank our investors for their continued support and confidence in our team. And I thank everyone for your interest and say Celsius. Yep.

Stay healthy and have a great day.

Participation you may disconnect your lines at this time and have a wonderful day.

Good evening. Gentlemen, this does conclude today's teleconference. Thank you for your