Q1 2021 Celsius Holdings Inc Earnings Call
[music].
Greetings and welcome to Celsius Holdings first quarter earnings 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 the conference. Please press star zero on your telephone keypad as a reminder of this conference is being recorded it is now my pleasure to introduce your host Cameron Donahue Investor Relations for of Celsius. Thank you you may begin.
Thank you and good morning, everyone. We appreciate you joining us today for Celsius Holdings first quarter, two dozen of 'twenty One earnings conference call.
On the call today are John P of Lee, President and Chief Executive Officer, and Mike and Ron.
Ron Chief Financial Officer, following the prepared remarks, well open the call to your questions and instructions will be given at that time.
The company filed its form 10-Q, with the SEC and released the press release pre market today, all materials are available on the company's website Celsius Holdings, Inc. Dot com under the Investor Relations section.
And as a reminder, before I turn the corner, John and audio replay will be available later today.
Please also be aware of that just call may contain forward looking statements, which are based on forecast expectations and other information available to management as of May 13, 2021. These statements involve numerous risks and uncertainties, including many that are beyond the company's control.
Except to the extent of the required basketball Celsius Holdings undertakes no obligations and disclaims any duty to update any of these forward looking statements. We encourage you to review and full for Safe Harbor statements contained in today's press release, and our quarterly filings with the SEC for additional information.
With that I'd like to turn the call this president and Chief Executive Officer, John for Yodlee for his prepared remarks John.
Thank you Cameron good morning, everyone and thank you for joining US today, the company achieved a record first quarter exceeding $50 million and sales, which were derived by over 100% growth and North America sales from continued strong demand for our portfolio and a 25% growth and international sales. The international sales growth was primarily derived from the 22% growth.
From our Nordic operations.
Even with the record quarter, we are still dealing with the impacts of COVID-19, and several channel international markets and experiencing increased costs of raw materials and transportation.
Channels of trade and we operate in and which we continue to see these and facts include our health and fitness vending foodservice as well as reduced foot traffic and several additional channels. However, we are starting to see improvements through the first quarter, but still not fully normalized in addition, our EU middle East Southeast Asia, and Australia operations.
[noise] remained adversely affected by COVID-19 pandemic, while we have started to see sequential improvements over the last few quarters with capacity restrictions as well as re openings and hardest hit channel. There remains uncertainty as they are potential could be re closings due to case increases and our regions of operations look at force extended closures and some states and.
The health and safety of our employees and partners remains our top priority and safety precautions have been implemented which we have developed and adopted in line with guidance from public health authorities and.
In addition to increases and transportation costs, we are experiencing another COVID-19 impact and is an aluminum can shortage, which has impacted the entire industry. The large can manufacturers and the U S and have initiated a major expansion projects, which you expect the spec to be completion time somewhere and the starting in the back half of 2020.
And one and potentially through 2020, two and 2023.
Celsius immediately implemented contingency plans last fall by sourcing cans internationally. We received our first orders in March of 2021, the company anticipate 50% of can supply for 2020, one will be derived from imported and ramp cans, which should decrease in late 2020, one and through 2022 as more of.
U S capacity comes online and the <unk>.
First quarter, we saw a higher proportion of of rap cans versus imported cans, but expect that mix the change to a higher proportion of imported cans going for Rob can type of higher cost. So that represents a slight margin improvement going forward with the change in mix. And addition, the team is expanding warehouse distribution sites implementing contingency plans to for.
Further source raw materials with minimum floor stock programs blanket purchase order of second and third supplier alternatives. The team continued to quickly adapt to the new COVID-19 environment and are focused on driving efficiencies and operational performance.
As outlined on our last call. This will impact the gross profit margins by a few points, but we remain confident that the company will run at approximately and the low 40% gross profit range through 2021, which is right in line with our first quarter results. We continue to explore additional opportunities as they may become available to shorten the duration Celsius.
Impacted by the can shortage and there's potential for improvement and the back end of this year. And addition, the company is optimizing its promotional architecture and strategies, partially mitigating these inflationary increases and raw materials and transportation.
The company remains generally available throughout the quarter, but did experienced shipping delays because of cash shortages as well as the Texas freeze, which shutdown to co Packers and one of our warehouses for over two and a half weeks during the quarter, but they have been fully back online at the end of the first quarter.
On the convenience channel side in North America, which represents the largest energy drink market and the country with over $9 billion and annual sales.
And the latest spins data shows of 77% year over year increase for Celsius product portfolio, and the convenience channel compared to a seven 5% overall and the energy drink category, while the holding of 16, 8% ACB and we have added over 13500 convenience stores to the last 12 months with additional accounts expected through spring.
The resets and in addition, we recently achieved the second highest dollar growth and the category when compared to the top 10 energy drink competitors. According to spins shelf stable energy and functional beverages convenience 12 weeks ending March 'twenty, one 2021 on.
Our first new spring reset when began in late March with the National launch of Murphy, USA and 500 locations, which were initially these service approximately 80% of stores will be serviced by DSD with poker with six flavors authorized industry backed third party data continues to show accelerating growth and metrics.
And we are confident that the Celsius portfolio will continue to drive sales even higher as we further increase our ACB and the channel through additional launches with national chains, and transitioning existing accounts to our DSD network <unk>.
Consumer demand for Celsius has grown even stronger through 2020 one with the most recent reported Nielsen scan data as of April 24 of 2021, showing Celsius sales are up 218% year over year for the two week period of 223% for the four week period and 151 four per cent for the 12 week period as well as and 88.
6% for the 52 week period with achieving a one 2% share and the last four weeks.
The next highest com for the most recent two week data was Red Bull, which grew out of 29% and 37, 2% for the two and four week timeframe and.
And our E com channel according to the Stateline, which tracks energy drink sales on Amazon and the United States for the for weeks ending April 17th 2021 sales and dollars and the energy drink category by Amazon, including energy shocks grew at 161% growth the.
At the same period, a year ago Celsius sales increased 265% and our share increased by four five points to 15, 5% share of the category, which puts Celsius as the second largest energy drink brand on Amazon behind Monster energy at a $35 six share.
And now above Red Bull, which is out of 13 seven share.
We continue to see acceleration through all channels of trade and are now beginning to see the additional lift from the conversion of the accounts to our DSD network. Additionally, we secured additional distribution agreements with key partners further expanding availability of the new regions and Celsius builds out its national distribution network, which now includes over 100 and.
80 regional direct store delivery DSD partners and distribution centers, covering approximately 85% of major metropolitan markets.
Recent additions have predominantly been filling distribution gaps outside of the major metropolitan markets transition and DFT continues with target and Cvs Walmart race track 711, and others with additional regions and retail partners planned interest transition of DFT throughout 2021.
Today, and the United States, our total door count now exceeds 92000 locations nationally up approximately 10000 locations since the beginning of 2020. One we expect this number to grow even further in the coming quarters as retailers execute their plan and Grand resets, which were delayed due to COVID-19 pandemic on our co packing front, we continue to.
Expand our partners and scale at and exists existing locations improving one time priority. Our total U S. Co Packer footprint is now eight locations that are active which will help protect the future of out of stocks and support our massive growth and.
And Europe, we further integrated and leveraged synergistic benefits from the acquisition of <unk> food and Nordic Wellness company that was immediately accretive to earnings and is an important step and <unk>.
Strategy and building out global dominant brand Europe operations were impacted by COVID-19 and additional lockdowns and the first quarter, which were impacted largely impacted by the fast protein snack portfolio, which was partially offset by growth and sales and the sales and Celsius and the region. We continue to see great opportunities and momentum in these markets.
We continue to evaluate additional European expansion, primarily in the UK and Germany, and addition to working with Amazon and Europe to further expand our e-commerce opportunities throughout Europe, and China, we maintain of licensing royalty model and the market, where our distributor covers approximately 76 cities and serves approximately over 60000 locations of distribution.
And our other international markets has started to pick up back up Bartow off of small base, Australia sales resumed through our distribution partner and the market and in Malaysia, and we maintain of directly ship of the local distributor we maintain approximately 2000 retail locations with plans to reenter gyms vitamin specialty locations of additional retail partners out of the recover.
And he continues as with Europe, and the United States, we see significant opportunity to capitalize on a global scale, reflecting the changes and consumer preferences for better for you offerings and the enormous market of the Asia.
Now moving onto marketing on the marketing front, we continue to activate target new consumers and existing consumers, where they live work and play of P&L anything meaningful connections and emotional connections through robust integrated marketing programs, even while consumers are at home specifically during the quarter. Despite COVID-19 restrictions, we sponsored targeted events both in person.
And and virtual and sample of thousands of cans and hands during the quarter and key markets that we're open and we continue the support where the support our first responders nurses doctors COVID-19 testing sites and reactivated the live fit tour, which is an integrated experiential sampling tour and we further leverage and built out our brand Ambassador program Influencer program, reaching more consumers.
<unk> and and meaningful way.
Our momentum is accelerating our brand is resonating with a diverse consumer base expanding the category of demographics health and wellness is beyond the trend functional energy is recognized throughout the industry as a driver of future growth with retailers.
And we hit not only a record for sales in North America, but we also achieved a record growth rate of 100% with third party data reporting continued acceleration and the second quarter.
Our National DSD network is in place and only at the forefront of recognizing the incremental growth we will drive our team is ready.
Infrastructure is in place to support our growth and we expect to continue to grab market share on an expedited scale.
I'll now turn the call over the Edwin the growing Kabbalah, our chief financial Officer for his prepared remarks Edwin.
Thank you John before I review the financial results I wanted to first provide some background on the amended 10-K for fiscal year 2019 debt. We also filed this morning.
The amendment relates to management's evaluation of internal controls specifically disclosure controls that pertained to the October 2019 acquisition of the European business acquiring companies have one year post acquisition to perform a thorough review over the effectiveness of internal controls of the acquired business, we have a sense for.
Our form of review with the assistance of a reputable international CPA firm and found the controls to be effective.
These are technical matters, which were not fully address per SEC requirements regarding acquisition disclosures and have been updated and the amended 10-K as it relates to Celsius. These matters are inconsequential as it relates to our financial reporting and as such there is no impact to the reported figures or any other footnotes.
Many of the additional disclosures we wanted to provide the investment community. This details of the amended 2019 and 10-K. So that there is no misunderstanding and it's clear that there is no impact regarding the reported figures and no impact regarding our operating and standard internal controls over financial reporting.
Now to review the financial results for the first quarter are.
Our first quarter revenue for the three months ended March 31, 2021 was $50 million and increase of $21 million for 78% from $28 2 million for the three months ended March 31 2020.
Approximately 90% of this growth was the result of increased revenues from North America, where 2020 revenues were $19 $4 million, which.
Which translates to an increase of $19 $6 million or 101% from the prior year quarter.
The balance of the increase was mainly related to a 22% growth and European revenues.
As such the first quarter 2021 European revenues amounted to $10 $4 million and increase of $1 $9 million from $8 $5 million for the prior year. In addition, our European revenue reflected a sequential increase of 50% for the first quarter of 2021, when compared to $6 nine.
And the fourth quarter of 2020.
Asia and revenues, which mainly consist of royalty revenues from our China licensee amounted to $536000 for the three months ended March 31, 2021, and increase of 100% from $268000 for the prior year quarter.
Other international markets generated $128000 of revenue during the three months ended March 31, 2021, and increase of $71000 from $57000 from the prior year quarter.
The total increase in revenue was primarily attributable to increases in sales volume as opposed to increases and product pricing the primary.
Factors behind the increase in North American sales volume were related to continued strong triple digit growth of 137% and traditional channels of trade, coupled with an increase and presence and world class retailers and Additionally, the continued expansion of our DSD network delivered a growth of 172%.
<unk> and our distributor revenues when compared to the prior year quarter. Moreover, e-commerce grew 79% or $3 $7 million when compared to the prior year quarter. These results were partially offset by some shipping delays related to can shortages as well as the Texas freeze we shut down two of our cope.
<unk> and one of our warehouses for two and a half weeks.
Furthermore, we estimated that the strengthening of the euro accounted for approximately eight 4% of the increase in European revenue and the 2021 quarter when compared to the prior year quarter.
Gross profit in Q1 increased by approximately $7 $6 million or 58, 3% to $26 million from $13 million for the three months ended March 31 2020.
Gross profit margin declined to 41, one per cent for the three months ended March 31, 2021 from $46 one for the prior year quarter.
The increase in gross profit dollars is related to increases in volume.
While the decrease in gross profit margin is mainly related to increases in freight costs, and repackaging costs higher raw material costs and higher processing costs and Furthermore, the temporary can shortage has also added incremental costs related to damages and transporting and processing of our product given the added complex.
<unk> of the supply chain and procuring these items.
Based on our estimates the increase in volume and favorably impacted gross profit dollars by approximately $7 9 million and a favorable currency impact provided an additional $700000, which were partially offset by unfavorable increases and cost of approximately a million dollars.
Sales and marketing expenses for the three months ended March 31, 2021 were $12 million and increase of $4 5 million or 60% from $7 $5 million for three months ended March 31 2020. This.
And this increase was mainly related to marketing investment activities, which were augmented by $2 $5 million when compared to the prior year quarter. Additionally, employee costs increased by $650000 from the year ago quarter as we need to continue to invest in this area and in order to have the proper infrastructure to support for the commercial.
Growth.
Similarly, we experienced increases and other sales expenses and the amount of $563000 mainly related to trade marketing activities to support our conversion to the DSD network, lastly, storage and distribution expenses as well as broker costs accounted for the remainder of the increase and this area of <unk>.
$704000 when compared to the prior year quarter.
General and administrative expenses for the three months ended March 31, 2021 were $7 $8 million and increase of $3 $3 million or 73, 3% from approximately $4 $5 million for the three months ended March 31, 2020.
This increase was mainly related to stock option expense, which amounted to $3 $6 million for the three months ended March 31, 2021, or an increase of $2 $2 million, which accounts for 61, 1% of the total increase in this area when compared to the prior year quarter.
The management deems it very important to motivate employees by providing them ownership participation and the business in order to promote over performance, which translates into the continued success of the company.
Additionally, employee costs for the three months ended March 31, 2021 reflected an increase of $660000 or 72% as.
As investments in this area are also required to properly service, our higher business volume and provide support to the commercial and operational areas of the business and.
Administrative expenses amounted to $2 $1 million and increase of $460000 of 28, 8% when compared to the prior year quarter. This increase is mainly related to higher legal costs and increase and the bad debt reserve to cover any potential realization issues increases and insurance costs and office.
Right.
Depreciation and amortization and all other administrative expenses accounted for the remainder of the variance which amounted to a net reduction of $21000 when compared to the prior year quarter.
If we exclude the non cash items general and administrative expenses would amount to $15 9 million.
Or would be reduced to seven 8% of net revenues for the quarter.
Total net other expenses for the three months ended March 31, 2021 were $228000, which reflects the reduction of $194000 when compared to the total net other expenses of $422000 for the three months ended March 31, 2020.
Net other expenses of $228000 for the current quarter are composed of foreign currency exchange losses of $301000 and other miscellaneous non operational expenses of $13000, which were partially offset by interest income of $87000 related.
For the note receivable from our China distributor.
As a result of the above for the three months ended March 31, 2021, net income was $585000 or <unk> <unk> per share based on a weighted average of 72 5 million shares outstanding and dilutive earnings of <unk> <unk> per share based on a fully dilutive weighted average.
Of $76 9 million shares outstanding.
And comparison for the three months ended March 31, 2020, the company had net income of approximately $546000 or <unk> <unk> per share based on weighted average of $69 3 million shares outstanding and dilutive earnings of one per share based on a fully dilutive weighted average.
Of $70 3 million shares outstanding.
Adjusted EBITDA for the fourth quarter was basically $5 million and increase of $2 $2 million when compared to $2 $8 million in the year ago quarter. We believe this information and comparisons of adjusted EBITDA and other non-GAAP financial measures enhance the overall understanding and visibility of our true.
The business performance to that effect the reconciliation of our GAAP results and non-GAAP figures has been included in our earnings release.
Now focusing on liquidity and capital resources as of March 31, 2021, and December 31, 2020, we had cash of approximately $31 $6 million and $43 $2 million, respectively, and working capital of approximately $73 6 million and $64 nine.
$1 million, respectively, with no long term debt.
Cash flows used by operating activities total $13 3 million for the three months ended March 31 2021.
And the use of cash during the quarter is mainly related to increases and inventories and the amount of $19 2 million as well as $2 $6 million related to prepaid expenses, which mainly pertain to the inventory prepayments and inventory and transit as well as deposits to secure processing time, if we exclude these aspects.
Operations would have delivered over $8 million of cash during the quarter.
That concludes our prepared remarks, operator, you may now open the call for questions. Thank you.
Thank you, ladies and gentlemen at this time and we will begin ducking. The question and answer session. If you'd like to ask you. A question you May press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue you.
You May press Star two if you would like to remove your question from the queue.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star key.
Our first question comes from the line of Jeff Van Center, and with B Riley and company. Please proceed with your question.
And let me say first congratulations on amazing metrics and Q1.
First question is kind of a multipart question. So if you can bear with me I appreciate it.
Just regarding the overall North American revenue increase can you speak more about maybe how much of that sequential acceleration and growth do you think was catching up with sell in versus sell through.
Given the triple digit sell throughs, you've been experiencing and some channels.
And where the where the accounts that didnt get as much as they wanted due to production constraints around the can shortage is there any pent up demand around that and then maybe if you could give us any more color on where you stand now I'm getting enough cash to satisfy demand.
Excellent. Thank you, Jeff really appreciate it and the team did an amazing job on the quarter.
Answer your question specifically in regards to the revenue sell in sell through and North America, We saw great results for one.
100, and over 100% 101%.
We were not shipping at full capacity through the quarter, So demand was higher.
As we indicated on the call, whereas a lot of headroom.
<unk>.
That'd be great quarter, including and the quarter, we talked about wrapping cans.
A lot of rock and they were they run a slower velocity levels at the co Packers.
We were shipping probably roughly around and about 80% fill rate.
And then we also had challenges with the Texas Freeze also logistics coming out of the Texas freeze for two and a half weeks so.
And <unk>.
And <unk> to sell in and sell out or sell in has been somewhat limited and the first quarter due to some of those complexities of our heat line, but our sell out seems to be wrong, and we look at the inventory levels at our retailers and also at our distributors and the sell through there. So.
I think we're seeing a correlation and.
We're seeing some of the scan data that's out there when you look at the scan data and regards to of the Nielsen and some of the the spans as well as the stack line data. We referenced is showing extremely strong demand at the register and the sell out so.
And we feel strongly about that and we think we're in a good position as we had in Q really Q2 because of the latest scan data and April was also very strong.
When you look at the.
So the regards to the can.
The the cans that are out there we strategically moved back in Q4 of 'twenty.
And really 2020 trying to secure additional cans once our main supplier of sole supplier for cans and informed asks me, we're not going to be able to achieve.
On our forecast therefore, we have source cans and from Asia from Europe from Canada, and working with all of variety of can suppliers in March we started to produce age of cans. We also have our German cans that were produced on that.
And are now coming of short so.
We have enough cash to to secure our volumes.
For the remainder of the year and planning into 2020.
And <unk> and beyond we are expecting do you have on <unk>.
Mix of imported and U S. Local can so.
Till we really debt capacity up and has much better level and the U S.
And there is potential we will be wrapping additional kansas well, depending on how these containers come in through the ports and we all know we're going through.
Really a container pandemic at the moment.
With all of the logistical challenges going through the Suez Canal and a variety of other demand component.
All of the backups at all of the ports so.
There's a lot of complexity as the teams are working through but we are producing we are producing more product and the company ever had we have plans to produce even more product and the company ever had and Q2 Q3 and beyond so we think we're in good position and the sellout seems extremely strong.
Okay, great so and in terms of getting back to call. It I guess of 100% fill rate.
Are you getting there or maybe just give us a sense of why do you think it can be sort of back of 100% fill rate.
Both of our growth rates at the on the.
The the sell out at retail when you look at some of the velocity levels when the Nielsen data and the scan data is extremely strong.
We're working to bring our inventory levels up right now.
Two two of sustainable level, we're able to meet all the math.
And likely probably in the back half of Q2, I think we'll be in a better position to be able to fulfill orders.
But things are changing rapidly right now we're going through some.
From gas shortages with the with freight and transportation. So that's a big thing this week on trying to get the containers move trucks smoothed logistics, we're getting feedback debt.
Truckers, just don't have gas, especially in the northeast and a variety of other areas. So those are things, we're doing with our work through that and have a great team.
Very very passionate team dedicated team and who are working through the full confidence of the team will be able to drive for and we will be able to meet the demand pull demand towards the back half of the Q2 and into Q.
On the back half of 2021.
Okay, Great and then if I could just squeeze in one more follow up.
And just wanted to focus on Europe for a moment any more color you can give us there I guess on what you expect over the next couple of quarters.
<unk>, the Fas brand and I think you had some production constraints around fast.
Yes, that's correct, we had a good growth roughly around 22% growth rate and Europe. When you look at the and really drive from the Nordic operations. When you look at it quarter over quarter, and then sequentially from Q4 to Q1, we saw about a 51% growth rate. So those are good numbers there.
They were impacted with true.
Of the pandemic, some shutdowns and the first quarter, and Finland, and Norway and Sweden. So there is some difficulty and we also had some supply constraints not with the Celsius portfolio, but with our SaaS protein snack portfolio, which impacted the quarter.
Getting worked out I think.
Towards the the middle of the really the back half of Q2 of those that will be realized and into 'twenty. The back half of 2021 will get much better inventory levels, but we're working through that they had a great new successful launch we talked about and Q4 with a really great new innovative bar and indulgence bar that was very well received and Finland and do we think.
And we're well positioned.
And also we are bringing the SaaS brand to the U S and Q2, so look out for that on Amazon and in the coming weeks.
And it will be working with our digital teams.
Gaining some traction and with an exclusive launch with Amazon there so.
Things are going well and Europe.
And we're not out of the woods and COVID-19 restrictions, so a lot of things, but full faith and we are of great team over there thats executing.
Okay, good to hear and thanks for taking my questions and best of luck.
Thank you Jeff Thank you.
Our next question comes from the line of Carl meal.
Waller with credit Suisse. Please proceed with your question.
Thank you everybody.
A couple of questions I guess on the balance between accepting winning new distribution and supply.
And like you've already benefited from some shelf resets, but the.
And the real benefits are all happening now kind of moving forward and in terms of resets do you have to delay any of these shelf space gains maybe even until the April 2022 shelf resets because of limitations on supply.
Thank you come on Great question with regards to the new distribution resets when it's physically looking at the first quarter. We did add some additional distribution Murphy USA was the great win for us it gets reset, but the bulk of the distribution of new resets are taking place on that.
April.
And that May April timeframe.
We are not limited to the new expansion on the resets, we have enough product to fulfill demand.
Working on more of inventory I think of lot of companies were affected with the with Texas free.
And the shutdowns that took place so that really impacted us during the quarter, we have more product coming in we're producing more product than we ever have.
We feel we'll be able to meet demand, we are roughly around and Q1 roughly around about an 80% fill rate.
And that we experienced but with the new distribution, we have more product coming on board in Q2, and we expect to meet the new distribution requirements to fill those new doors and those resets that are coming on board.
Okay, Great and then a question on the fitness channel, we're seeing some improvements I suppose we're seeing a bit of a recovery can you maybe give us a read on what you expect it to look like.
As we come to kind of full reopening maybe just some early indications on what youre seeing at the gym and perhaps the behavior. If it's any different from what the world looked like in 2019, and then your strategy obviously within.
And what you intend to do and the channel.
Absolutely.
Great question regards historically pre COVID-19.
And this channel represented about 25% of approximately of our revenue.
It was severely impacted as we all know we have a great team of great dedicated team focused on fitness and that is our core we have great partnerships throughout the industry with key.
<unk> and locations and.
We're working hard with those relationships and we're going to support them just like we supported them all the way through COVID-19.
And we look for there really get forged solid relationships on a go forward basis.
Right around the the fitness channel represented approximately 10% of our revenue and North America.
Did see a good growth rate in Q1 of about 33% on net revenue so seeing concern.
The continual.
Reopening and growth.
Feel very excited talking to our operators and the change and also our distributors that are focused on fitness everyone is very excited to really continue to move forward with the reopening of America and the reopening of James.
Really pent up demand that we're seeing we're seeing.
Hearing comments about additional sign ups and.
And there seems to be a lot of momentum there, they're nowhere near where they were pre pandemic, but.
It's coming we were excited about the summer.
We think it is going to be of great contributor to us. It is a focus of US we have teams like I said that are dedicated to it and.
And it's a great opportunity, especially.
For the Celsius portfolio as well.
Okay, great. Thanks, guys.
Thanks Mark.
As a reminder, ladies and gentlemen, it is star one to ask a question.
Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.
Oh, Hi, John Edwin and camera and how are you.
Ooh excellent Jeffrey.
Good to hear so.
And when May we see tropical vibe coming this summer.
It is this summer it's what's your buy for this summer you had such a great successful launch with our Peach vibe.
Bringing back another buy and it's going to be what's your buy for summer. It's tropical vibe of its actually right. Now you can pick it up at 711 nationwide authorization at 711, and so go to your local 711, you can pick some up.
And it's a taste amazing and great flavor profile of the team did a great job and it disappears here around the office.
Got it Okay can you talk about the for.
Cash portfolio, you said it was going to becoming the Amazon and in Q2 can you give us an indication of a number of Skus, we will see.
Yes, we're doing a.
We're doing a really and methodical rollout.
And we're seeing what we will see as two skus that will be launched on Amazon initially as an exclusive launch and partnership with them.
And then we'll continue to scale of the grant.
From that point so.
The initial feedback has been very positive on testing.
And doing a lot of consumer testing as well as.
And we're working with Amazon very closely so we think it's going to be of Great addition to a snacking on the fast growing protein snacking category, which has a lot of momentum and we are.
A lot of interest from a lot of our partners.
Fantastic could you could you talk about the.
The sticks, a little bit because of the the issues going on with the cans of the strict picked up.
Some share from your standpoint, and in the grocery and the B.
The aggregate numbers.
Yes.
And from a line extension and and also expanded usage occasion the.
Powder products overall represent and.
The immaterial portion of our topline revenue number but they are growing and we're seeing a lot of growth and we're also seeing a lot of interest from retailers, mainly vitamin specialty and online, but now we're seeing interest from CBS, Publix, and Walmart and several other customers as well where theyre looking to carry the sticks as additional offerings and.
So there's a lot of opportunity there we have come out with new flavors, we've got a lot of it from flavors plant and the pipeline.
And on the feedback is extremely positive on our on our powder products and also looking at opportunities potentially to expand our heat portfolio and our heat offerings and to a powder on the go option as well so.
Getting interest there, but the bulk of our revenue today is those RTD.
Got it and then lastly for me if you could provide any commentary and <unk>.
And a fair amount of debt on the order of insurance, but could you give us any flavor for what you're sensing as far as new customer new customer acquisitions, and reordering stickiness of current customers out there that would be helpful. Thank you.
Excellent.
And the stickiness of existing customers has been extremely positive as we.
Many of US on the call know, we're very passionate about Celsius.
Our consumers and I speak to and many of you and.
The.
The sticking power of the brand is incredible and we're seeing that you go back to you and 711, and we're launching our tropical vibe with them as we speak and.
We've been with them for over going on for five years now and <unk>.
<unk> of our retail partners. So we continue to gain more shelf space better placements and stores called availability. So we're really excited and in regards to the new distribution coming on we feel we're up to a 192000 locations today.
For north of 100000 locations by the.
The end of this year for sure. So lots of interest. We're also getting a lot of good new team members joining our team as we continue to scale and grow and bringing great relationships that we'll be able to further leverage.
Sure.
Thank you very much for taking the questions great quarter.
Thank you Geoffrey Thank you.
Our next question comes from the line of the Anthony Vendetti with Maxim Group. Please proceed with your question.
Thanks, Yes, just and.
Terms of DSD, John you guys of minutes.
The huge push into the DSD network understanding that not every.
Market is.
Amenable or not.
Store every market can be of DSD, depending on where that market is.
Can you give us a general idea of what is the maximum penetration you see from your current and your current customer base, where it could you get two and approximately where are you at in terms of the percentage penetration.
Yes. Thank you. Thank you Anthony.
We are very much focused on DSD, just with the velocity levels that we see at retail and.
The demand for the brands you have to build this company on the DSD National network.
As we were seeing and 2019, you just can't keep it and stock where and too high of a block the category. So we've been building on our National DSD network and about 85 per cent major metropolitan markets. We have closed additional distributors to close those gaps to be able to transition our key accounts over to DSD and <unk>.
As we speak we are expanding on the West coast as an example.
Seven elevens, almost 507 of them actually almost 2007 elevens are being migrated over to DSD as we speak and we will be doing further and division by Division also working with Cvs further targets and all of our major reach.
Retailer, so we would like to see.
A big significant portion of our distribution and service through DSD and we're committed on that we haven't provided percentages of where that is but over time I would like to see a considerable percentage of our retailers serviced by DSD, it's better placement better in stocks better execution, and most importantly, better velocity and better.
Revenues.
Makes sense, okay, good and then.
Just on the aluminum can shortage because this has come up on other conference calls for for <unk>.
Companies that are and your situation.
And based on your earlier comments.
Youre expecting did you say by the end of this year for that for that shortage to be.
Alleviated I guess.
Is it because of the ramp and in U S production or can you just give us a little more color on on your expectations there.
Yes, absolutely so what's happening and the industry is that.
Just due to the increase and demand for cans the.
The us manufacturers just do not have the capacity so.
You heard Rodney sacks on the Monster call most recently.
And every brand is running into every company and the can business and the beverage business is running into the same issues theres just not enough capacity out there all of the major players are adding of capacity lines. Unfortunately, it just takes time to put these lines and we expect some of the production and the capacity will come on towards the back half.
2021, we're hearing and into 2022 and beyond but it's going to take time to ramp that up the.
The other thing is what happens as the country continues to open do consumers go back to on premise, which mountain and demand for cans goes down that's all to be determined so thats the fluctuation that could come into play here, where we can source more U S cans and Ah.
And of quicker.
Frame, but right now we are secured with.
International cans and use cash domestic cash to meet our forecast demands and.
Our internal expectations for 2021 and into 2020, two and beyond we have secured those so now it's a matter of mix on how we move forward and regards to our margin profile, we talked about and Q1 of 41% gross profit mainly that's the right. We had a lot of rock cans and we also had a lot of rework.
Work.
During the quarter and increases in transportation. So we will continue to optimize that with.
Non rab cans, which are which are better for our margin. So and then but we'll have that mix from international and the Max the domestic which will optimize as we go for it.
Okay, Great and then just the last question on the International sales I know you said you are looking to expand.
And Europe, but can you also talk about.
The middle East as well.
What's your expectation.
For that expansion by the end of the share and moving into 2022.
We're working.
Essentially the UK and Germany, that's an area we've been focused on and exploring we're talking to potential distributors and we don't have a timeline for that but it is an area of opportunity for us.
And that the team has been focused on also you mentioned and the Middle East we do have the distributor locally and the middle East and we're working with several others on and import basis.
But it's all timing and sequencing at this point and COVID-19 has impacted a lot of that.
Some of these discussions, but we are in discussions and things are moving forward and when.
And wanted to make comment on book.
I would just kind of say John to me the key is that.
We limit the footprint and as much as possible and we use the model of going through distributors. So that we minimize the risk and Kurt including currency risks and so forth.
And that to me that's been the successful model and hopefully we can continue to expand and using that model.
Okay, great and once again.
Thanks for clarifying the internal control I think that was a good way to.
Off the call to put that to put that question to <unk>.
Breast.
And I appreciate that and I'll turn it back over the queue. Thanks guys.
Thank you Andy.
Our next question and there's a follow up question from the line of Kumar of garage of all out with credit Suisse. Please proceed with your question.
And thanks for taking a second one guys on them on international and you're thinking about the international rollout can you talk a bit about the marketing and.
And marketing intentions, it sounds like Youre looking into go and Youre looking to get into new regions and such maybe more maybe more aggressively than you would have discussed six to 12 months ago and obviously they don't have to have a bit of a marketing overlay on that so can you talk about what the plans are and.
And ideally if you can what sort of investment the investment of would look like.
Yes.
As we mentioned, we're going through more of a distributor model, where we're importing and we allow the <unk>.
Collaborative effort with the margins that are generated.
Through the sales as well as.
Our support as well the it'll be fairly limited initially it is a more of a methodical rollout.
We our strategic approach as we enter a market. We don't have plans to invest heavily ahead of revenue and any of these markets. So we will be sticking with our positive.
Positive ROI driven model.
And that we've indicated.
And on many calls and on over the last several years so.
We're looking for positive and the ROI investments as we go for some of the initial relationships there could be and.
In regards to the margins and both contributing there could be.
Some investments, but it will be generally immaterial.
Okay, great. Thank you.
There are no further questions I'd like to hand, the call back to management for closing remarks.
Thank you on.
And behalf of the company, we'd like to thank everyone for their continued interest and support our results demonstrate our products are gaining considerable momentum we are capitalizing on today's global health and wellness trends and the transformation, taking place and today's energy drink category, our active lifestyle position as the global position with mass appeal for building upon our core and leveraging.
Opportunities and deploying best practices, we have a winning portfolio strategy and team and a large rapidly growing market that consumers want our ambition is to get Celsius to more consumers profitably I am very proud of our dedicated team and without them, our tremendous achievements and the significant opportunities. We see ahead would not be passed.
We believe we will be able to navigate through the challenges ahead as the result of the COVID-19, pandemic and we are well positioned to thrive and the transformation of today's energy drink category and.
In addition, I, thank our investors for their continued support and confidence and our team. Thank you everyone for your interest and Celsius, BCA stay healthy and have a great day.
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.