Q1 2022 Celsius Holdings Inc Earnings Call
Okay.
Greetings and welcome to Celsius Holdings first quarter 2022 financial results.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Cameron Donahue Investor Relations for Celsius Holdings. Thank you you may begin.
Thank you and good afternoon, everyone. We appreciate you joining us today for Celsius Holdings first quarter 2022 earnings Conference call. Joining me on the call today are John Buran, President and Chief Executive Officer, and Jarrod Langhans, Chief Financial Officer.
Following the prepared remarks, we'll open the call to your questions and instructions will be given at that time.
The company released their earnings press release core market close this afternoon, and all materials will be available on the company's website Celsius Holdings, Inc. Dot com under the Investor Relations section.
As a reminder, unfortunate Nicole good job an audio replay will be available later today.
Please also be aware that this call may contain forward looking statements, which are based on forecasts expectations and other information available to management as of May 10, 2022. These statements involve numerous risks and uncertainties, including many that are beyond the company's control.
Except to the extent, but above.
Above all else is holding where it takes no obligation and disclaims any duty to update any of these forward looking statements. We encourage you to review for our 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 over to President and Chief Executive Officer, John PMT Chris' prepared remarks John .
Okay.
Thank you Cameron and good afternoon, everyone and thank you for joining US today are record first quarter represented our 14th consecutive quarter of sequential growth and a 28% increase over the fourth quarter period.
According to the trailing four week IRI Moulage data as of April 17th.
2022 Celsius is the number one brand driver of growth in the energy category compared to 2021.
Last four week dataset, the energy category grew $101 million in that period Celsius added $38 million.
Both accounting for 38% of the total this is dollar share growth eclipsing monster by a one four times alani Nu by $2 two times rebel by two five times goes by three times and see four by four times. During this period Celsius increased to a $4 one dollar.
Sure and surpassed Rockstar for the number four position in the energy category.
This growth has been driven across all channels, including those non tracked with the two newest channels of club and the vending foodservice channels, leading on a percentage growth metrics and driving an incremental $25 2 million in revenue for the two channels alone compared to 2021 first quarter in March. We also began a full name.
<unk> wide rollout through Sam's club more than doubling the number of stores in the channel, adding 589 locations with the launch in the first quarter. We also expanded into additional Walmart locations now, bringing our store count total to over 4400 stores and expanded our offerings, which now totals on average about six feet.
<unk> across the country with expanded distribution as well as new cooler placements in select stores and the convenience channel. We began a nationwide rollout to over 6000 and circle K locations and in the fitness channel. We are now the official energy drink partner and provider our cycle bar nationwide. In addition, since our Q4 launch with lifetime.
Fitness, we're now the number one selling drink can have increased sales each month since our launch.
On April 18th we announced the retirement I didn't have grown and appointed Jared Lang IRR CFO I would like to formally introduce him today and share our excitement of having enjoying the Celsius team. In addition, I'd like to thank Edmund for his commitment to the company and for the contribution over the years, which will continue to provide lasting posit.
Impacts we have also recently added Grace Clark as our new head of it and welcome her to the Celsius team and in addition to the many other new team members, who have joined our team we'd like to welcome them as we continue to expand our organization to keep pace with growth and maximize the opportunities we see ahead.
Before I move to the operational highlights for the quarter in regards to our previously disclosed SEC inquiry, we continue to fully cooperate and we do not have any material updates at this time moving.
Moving to some of our financial highlights of the first quarter sales hit another record achieving first quarter revenues in the United States exceeding over $100 million in sales hitting a $123 million growing exponentially revenue growth was driven by continued new store additions flavor.
Flavor expansions additional Clos placements in the optimization and activation of our DSD network as well as growth in under represented channels as we mentioned in the convenience store, we see great expansion club and vending sales for the first quarter of 2022 totaled 133 million $4 million up 100.
67% from $50 million in the prior year quarter as.
As mentioned domestic revenues increased 214% to a record $123 5 million up from $39 million in the prior year quarter.
International sales decreased approximately 10% to $9 9 million for the quarter with Nordic sales down approximately 18% to $8 5 million as a result of timing of trade campaigns flavor launches as well as supply chain delays and other international sales grew approximate 114% to $1 4 million.
Gross profit for the quarter increased 162 million to $53 9 million up from $20 6 million in the year ago quarter, and gross margins totaled approximately 44% of net sales and excluding outbound freight totaled 42, 8% of revenues for the three months ending March 31, 2022 and from <unk> 41.
1% or 49, 5% when excluding outbound freight for the prior year quarter.
There continues to be margin pressure felt across the beverage industry and we have not been immune to these impacts with the except with the expansion of higher cost of international cans. A majority of these cost increases have been offset by efficiencies of scale through our raw materials production full load shipping reducing the miles on cases with our six orbit.
House model expansion last fall our product channel sales mix has also impacted margins as our club channel revenue has historically had lower margin levels due to the secondary repack facilities, which are required with this rapid growth in the channel, which contributed over $26 million in revenue in the first quarter and has increased over.
Margin pressure and we have initiated several changes to improve margins in this channel, including the rework working with co Packers and our partners to further drive costs out of the system.
Overall, the company still expects to cycle through the remaining of our international cans by the end of the third quarter with margins then moving back up towards the mid <unk> based on channel mix.
Our first quarter 2020 to fill rates, we're experiencing about roughly around 97% fill rate and we expect to maintain these normalized levels, even with our accelerated growth rates due to optimization of software improvements warehouse expansion to our six orbit infrastructure model put in place during the third quarter and an inventory expansion, which has been key to the <unk>.
Resets load ins with new accounts, expanding and optimization of our national distribution network as well as Sam's Club circle K and the Walmart expansion just to name a few.
Some additional highlights for the first quarter, our domestic revenues of $123 5 million was driven by accelerated triple Triple.
Triple digit growth in traditional channels of trade expansion with world class retailers and further activation and growth with our distribution partners direct store delivery. Our DSD network grew approximately 395% to our just to our and our distributor distributor revenues when compared to the prior year, our vending channel grew 200.
96% approximately in the first quarter and drove over $202 million in incremental revenue. We are now in over 12000 vending in micro markets placements since the first quarter of 2021, increasing our number of locations by 96% and expand and expect that growth to continue through the rest of the year and our fitness vital.
In specialty channel. In addition to now being the number one drink at lifetime fitness in the quarter, we officially launched with solid core at 70 locations GNC also expanded their offerings and their corporate sets and our partnership partnered with cycle bar, which is live with franchisees ordering product or.
Our mass club channel continued to accelerate following the rollout of the 561 Costco locations expanded in Q2 of 2021, Costco's first quarter established a new record in revenue growing over 11, 100% for Q1 of 2021, and we continue to gain transaction trends.
Traction in the online sales platform on Costco Dot Com, we initiated a sell in with over a full nationwide rollout with Sam's club at 100 589 locations and we also saw significant additional opportunities. We see ahead and penetrating further penetrating the club channel with Bj's in 2022.
In Walmart, we expanded our store count of flavor assortment as well as gaining front end coolers and end cap activity in select locations and in charge target. We have a chain wide end cap program, which we expanded our availabilities and also with additional cooler placements and in store placements throughout the first quarter.
In the convenience channel our convenient store locations increased by 88% from the first quarter of 'twenty 2021, and now totaled just under 64000 locations. We began our nation National Circle, K launch, which will be completed by the end by the second quarter and total over 6000, new locations upon completion second only to our.
Overall 8000 locations with 711 in term of total store size in the convenience store channel with 711 and circle K now being our two largest chains in that channel race track was fully converted to DST in the first quarter and we expanded our shelf placements through approximately between three quarters of a shelf to a full shelf in all locations the convenience store channel.
<unk> has the largest growth opportunity. In addition expansion in doors in 2021, and we expect that growth to continue in 2022.
Industry backed third party data continues to show accelerated growth metrics and we are confident that Celsius will continue to drive sales, even higher as we increase our ACB across channels through additional launches with new chains and transitioning our existing accounts to our DSD network for better optimization and <unk>.
Product placements.
Consumer demand for Celsius accelerated through the first quarter of 2022 and as of April of 2022 to record levels with the most recent reported Nielsen scan data as of April nine 2022, showing Celsius sales are up.
216% year over year for two weeks, 215% for the four weeks, 230% for the 12 weeks with a 3.4 share. According to Nielsen data of the energy category. This compares the energy category, which grew 6% on a two weeks, 11% on 12 weeks over the same period Celsius also saw average price increase of $17.
Sure over the 52 week period.
On Amazon Celsius is the second largest energy drink with 18, 3% share of the energy category.
<unk> six.
Six share ahead of Red Bull at 11, six share and 7.7 share behind Monster at a 25, 9% share approximately that's four weeks ending April 23rd 2020 twos at Stateline data energy drink category total U S. With this sales hit record quarterly revenues for Amazon, which total.
The $13 8 million up 74% from the first quarter of 2021.
We continue to see acceleration through all channels and are now beginning to see the additional lift from the conversion of accounts of our National DSD network. This delivered growth of 395% and our distributor revenues when compared to the prior year, we secured additional distribution agreements during the quarter further expanding our availability. This company now has.
<unk> nationwide network, which now services approximately 99% of the population.
Our rollout of Celsius branded coolers in the first quarter was expanded with over 700 coolers placed and now over 1900 coolest place nationwide in key retailers. We have also implemented a comprehensive tracking tool to leverage growth acceleration metrics with retailers. In addition over 400 barrel coolers were placed in key locations of premium retail.
And we anticipate additional cooler placements to continue through 2022.
Our U S store count now exceeds 140000 locations nationally growing over 49000 doors or 53% from 93000 from Q1 2021.
On a co Packer front, we continue to expand our partners and scale at existing locations improving our longtime priority.
Our total U S co Packer footprint now totals 13 that are active which will help protect for future out of stocks and support our growth. That's ahead in Europe sales totaled $8 5 million a decrease of approximately 18% as a result of trend translation costs as well as translation as well as timing of trade campaigns flavor coming a flavor launch.
As well as supply chain delays and we expect this to continue to optimize in the second and third quarter, We recently launched our.
Amazon EU, beginning with Great Britain, which launched with three flavors of Celsius in six flavors of our fast protein snack portfolio in Germany launched with three flavors of Celsius, We expect additional EU launches take place through 2022 to include France, and Italy momentarily. Additionally, revenues are small today, but we see tremendous opportunities ahead in China, we made.
Our licensing royalty model in the market with fixed royalty revenues through 2024, which then becomes a volume based model, but no lower than the minimum royalties of $2.2 million.
In our other international market locations driving growth includes Malaysia, Hong Kong, South Korea, and Singapore with initial markets penetrating as well as future opportunities.
<unk> in Japan, Australia, and Taiwan, we continue to focus on our approach in these markets to find top distributors to partner with to drive revenue profitable revenue and growth opportunities.
Now moving it into marketing front on a marketing front, we continue to activate targeting new and existing consumers, where they live work and play building meaningful emotional connections through a robust integrated marketing programs in the first quarter. We continued to activate through our Celsius live fit tour and we kicked off a Celsius essential vibes tour, which initially kicked off during the Super Bowl at shacks.
The house, which was a great event. In addition, we also partner with Shaun White around the Olympics and did a lot of activation and we also launched a great flavor, a mango passion fruit and 711 nationwide, which was a very successful launch for US just to name a few items, which we accomplished we continue to activate and connect with consumers in a meaningful way.
Bringing new consumers to the Celsius portfolio of energy category.
We are driving and leading growth in the energy category across all channels, expanding the demographics, while bringing in an industry leading percentage of consumers from outside and new to category, while accelerating our share and growing the energy category. We have committed the resources, both personnel and operational infrastructure to maximize our opportunity I'll now turn.
On the call over to Gerry Lyons, our Chief Financial Officer for his prepared remarks Jared.
Thank you John before I turn to the first quarter financial overview I wanted to thank Jon and the entire team of associates for all the support they have provided over the last few weeks as we wrapped up our 10-Q and I transitioned into the CFO role the.
The company is very well positioned and I'm excited to join the team as the business continues to accelerate and we progress on the many opportunities ahead of us.
And looking back at our last 10-K, we had noted some internal control weaknesses that we would be remediated. This year, although it has been less than two months since the issuance of our 10-K I am pleased with our progress thus far and we are confident that we will be able to remediate. These controls by the end of the year. We are building out alrighty and internal audit teams as well as adding additional financial resources to our operations.
And sales teams in support of our ongoing growth and expansion.
Turning to our first quarter financial results.
Our first quarter revenue for the three months ended March 31, 2022 was approximately $133 4 million, an increase of $83 $4 million or 167% from $50 million in the prior year.
As expected the growth was driven by our North American operations, where first quarter revenues were $123 5 million, an increase of $84 $5 million or 217% from the prior year quarter.
The balance of the revenues for the 2022 quarter were mainly attributed to European operations, which generated revenue of $8 $5 million.
Slightly below the prior year quarter, primarily due to foreign exchange rates raw material sourcing and timing.
Asian revenues, which include royalty revenues from our China, China licensee contributed an additional $1 million an increase of 80% from approximately $500000 in the prior year.
Other international markets generated approximately half a million dollars in revenues during the quarter, an increase of 256% versus the prior year quarter.
The total increase in revenue is largely attributable to increases in sales volume as opposed to increases in product pricing.
The primary factors behind the increase in North American sales volume were related to continued strong triple digit growth in traditional distribution channels.
With an increase in an optimization of our products presence and world class retailers, such as SKU additions cold placement and then cap displays.
Additionally, the continued expansion of our direct store delivery network, resulting in significant growth of 395% and distributor revenues when compared to the prior year quarter.
Gross profit for the first quarter of 2020 to increase by approximately $33 $3 million or 162% to $53 9 million.
Gross profit margins decreased slightly to 44% for the quarter from 41, 1% in the prior year quarter.
The increase in gross profit dollars is related to increases in volume while the decrease in gross profit margins is mainly related to higher raw material costs customer mix and inflation across our supply chain.
Sales and marketing expenses for the three months ended March 31, 2022 were approximately $31 $6 million, an increase of $19 6 million.
Or 164% from $12 million for the three months ended March 31 2021.
This increase was primarily attributable to higher marketing investment activities, which resulted in an increase of $9 $1 million when compared to the prior year quarter. Additionally, employee costs increased by approximately $1 $4 million from the prior year quarter. As we continued to invest in this area in order to have the proper infrastructure to support our growth.
Lastly, storage and distribution expenses as well as broker costs.
Accounted for the remainder of the increase in this area and the amount of $9 $1 million from the 2021 quarter to the 2022 quarter.
As a percentage of sales sales and marketing was 23% of revenue in the first quarter of 2022 compared to 24, 4% in the first quarter of 2021.
General and administrative expenses for the three months ended March 31, 2022 were approximately $12 $2 million, an increase of $4 4 million or 56% from $7 $8 million for the three months ended March 31 2021.
This increase was primarily attributable to other administrative expenses, which drove an increase of $2 $4 million or 116% increase when compared to the prior year quarter. The other administrative expenses are mainly related to increases in audit costs legal expenses bad debt reserves and insurance costs. Additionally, employee costs for the three months ended March.
<unk> 31, 2020 to reflect an increase of $1 $2 million or an increase of 76, 2% as investments in this area are being made to support our higher business volumes being generated by our commercial and operational teams.
We also saw a $700000 increase in stock option expense when compared to the prior year quarter management deems it very important to motivate employees by providing them ownership in the business in order to promote over performance, which translates into the continued success of our business based on key performance attributes.
Depreciation and amortization increases were minor at approximately $100000 when compared to the prior year quarter.
As a total percent of revenue G&A costs decreased to 9% of sales for the three months ended March 31, 2022 compared to 16% in the prior year as we were able to leverage G&A against our growth.
Net income for the three months ended March 31, 2022 was $6 $7 million or <unk> <unk> per share based on a weighted average of $75 2 million shares outstanding and dilutive earnings per share of <unk> based on a fully diluted weighted average of $78 3 million shares outstanding and comparison.
For the three months ended March 31, 2021, the company had net income of approximately $600000 or <unk> <unk> per share based on a weighted average of $72 5 million shares outstanding and the dilutive earnings per share of <unk> based on a fully diluted weighted average of $76 9 million shares outstanding.
Both focusing on liquidity.
As of March 31, 2022, and December 31, 2021, we had cash of approximately $25 5 million and $16 $3 million, respectively, and working capital our net current assets of approximately $186 $5 million and $169 $2 million, respectively with no long term.
Debt.
Cash flows provided by operating activities totaled approximately $9 $1 million for the three months ended March 31, 2022, which compares to $13 $3 million of net cash used in operating activities for the three months ended March 31 2021.
The approximately $22 million increase in cash generation was driven by an increase in net income and improvements in working capital.
Working capital improvements were driven primarily by the stabilization of our inventory as we've established optimal levels to service the demand of our products as well as timing of accounts payable offset in part by increases in accounts receivable driven by the significant growth in our business. Our current growing cash cash position together with the expected results from operations should.
Provide us with sufficient cash to operate our business as we continue to operate inventory levels and deliver strong growth throughout the year.
This concludes our prepared remarks, operator, you may now open the call for questions. Thank you.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.
You'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press Star two if you would like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star key in the interest of time, if you could please limit yourself to one question and one follow up so we may get to everyone's questions.
Our first question comes from the line of Kevin Grundy with Jefferies. Please proceed with your question.
Great. Thanks, Good evening, guys or good afternoon, and congratulations on a really strong result.
John why don't we start I guess with sort of the state of the consumer your businesses is obviously doing extremely well.
Given the significant expansion of distribution as well as some really nice improvement in velocity. The Nielsen data still looks very good for the category are you picking up anything from distributors there anything perhaps from your sales folks in any geographies that gives you any concern.
Around the state of the consumer and then this kind of dovetails into a broader question.
And pricing.
It's not lost on you for a moment that monster moved on that which is good news for the category, maybe just comment on that sort of two fold state of the consumer and then given the likelihood the category moves with monster pricing any pause with that given.
Given what is viewed to be perhaps increasingly fragile consumer so sorry for the long winded question John .
No no Kevin Great question.
I think when you look at it.
A lot of discussions going on right in regards to what's going to happen with the consumer what's taking place with the tumor.
Are.
Any of US were all very concerned so I mean theres talk about recession now.
Looks like the <unk>.
Inflation that we're all experiencing is not transitory.
So everyone's making adjustments on that we have.
Polk in prior calls about doing promotional strategies and.
And we've been hesitant on taking overall frontline pricing, we did initiate a frontline price increase.
Which we put out notices on April 1st.
Which will slowly take into effect over the next couple of quarters.
That started to be implemented as of April 1st. So those are things we're working on.
They are consumer sentiment.
Seems to be quite mix, especially with the news and whats happening in the market. Most recently, we do feel there is opportunities for <unk> to have a premium position and maintain our premium position in the category.
Due to the pricing elasticity in the testing that we've done with some of our promotional strategies. We felt that we were able to take price.
Which will offset a lot of the other.
Inflationary cost that we have been.
Experiencing in the beverage category overall so.
We're watching it closely this will give us additional leeway will weaken further adjusting our promotional strategies on a go forward basis, but we do see.
Overall, the category continues to grow we're watching it our growth is continuing we think theres a lot of opportunity ahead based on where our pricing is at.
We do think we're in a pretty good position given that we are not an uber luxury.
Position product or offering.
Got it. Thanks, a quick quick point of clarification, and then one for Jared the amount of the pricing that you took on April 1st was that across the entire portfolio and what was the amount.
Yes, we haven't.
We did take frontline price, where we haven't disclosed and we're not going to disclose the percentage of the increase.
Something we're working on it as a I mean, it has been implemented within the frontline pricing portfolio and we will continue to optimize but we're not at this point, we're not going to disclose the actual percentage that we took we are taking a sufficient amount of price in order to protect the increases that were experiencing an inflationary environment.
Okay. That's good news so quick one for Joe and then I'll pass it on.
So Jerry again, congrats again and understanding is it's really early days I think perhaps maybe just some early observation.
Or what you see as opportunity whether this is around return optimization tools. The rescue management profitability working capital et cetera, any comments, there would be helpful and I'll pass it on thanks.
Yes. Thanks.
Thanks, Kevin I think early early opportunities are really.
Really blocking and tackling the.
The company has grown significantly over the last two years, so really coming in and on the finance side looking at people processes and technology. So we don't want to be disruptive to the business, but I think theres a lot of opportunity from.
From a data analytic perspective, and from a finance perspective to really help the operations and sales teams in terms of analyzing the data.
Building out models and different things like that the team has done a great job, obviously doing that but I think there is there.
Theres different processes, we can implement.
Become more effective and efficient at what we do as well as some different tools from a technology perspective, so that we.
We can do even better than we have done so I think thats, probably the there is some low hanging fruit from that perspective.
Really it's just about building.
From a G&A perspective that can support the business as we continue to grow in itself.
Alright, good thanks, guys. Good luck thank.
Thank you.
Our next question comes from the line of Camille Garcia of Wala with Credit Suisse. Please proceed with your question.
Hey, guys first question on club stores and kind of all the incremental growth from the club stores are you also delivering DSD two clubs.
And then maybe if you can just talk a little bit about what velocity looks like there versus some of your other channels.
Yes. Thank you Bob in regards to the club channel it's been.
It's been quite surprising for us if you look over the last several quarters. There you see the growth that we delivered in Q1.
Costco has been just an extreme success for the company and we are told we are one of the top selling beverages and the energy set.
Cask, yes, so lots of opportunity to still grow in scale, especially leverage their offline online platforms, which we're working on we do have some DSD.
Finally, the business is direct so at this point.
But I think the big opportunity for us in the clubs.
To further leverage and optimize Sams club and then also through 2022 opportunities that lie ahead with Bj's. So.
It's a great general what's interesting it didn't affect our other channels, which are continue to grow when you look at the growth that we saw on Amazon as well.
All of our channels, it's Greg.
Okay.
Okay, Great and then.
I noticed your 10-Q is out already.
A little faster than last.
Last quarter.
Since it's since it's out maybe I can just ask about the freight expense, maybe as I read it all too fast, but it looked like last year. It was up it was $3 2 million in.
Only $4 2 million. This year is that given how much you grew I might have expected that to look quite different and I'm just curious.
Is this linked to something related to timing something about the orbit model.
Curious if there's just anything that might skew us a little bit yes.
Yes, no no.
Good question I'll turn it over to Gerry.
Yes.
Something that we look into really because we noticed the same thing over the last six weeks or so.
But Paul and his team has done a great job managing freight in the first quarter. We did have a few opportunities that we took advantage of during the quarter and we benefited from some of that is the mix. So Costco as an example, and also the different kinds of packaging and growth at other specific customers, where we're able to really leverage that orbit model that we've created.
So that we were able to use local freight in many instances which was much.
A pricing per loaded was significantly reduced relative to what we were paying so we did see a lot of good.
Call it or lower costs come in from a freight perspective, we're going to continue to utilize that that opportunity.
But it will vary depending upon the volume the packaging and where the growth is happening, but with the growth in stores like Costco, where we're closer to the warehousing and the production sites and where we can use local.
Freight that will allow us to save some cost.
Got it. Thank you and then maybe just.
One more quick one getting getting back to club stores is there anything timing there that we should be aware of as it relates to just whether it's filling inventory or anything like that I just want make sure I don't get.
Kind of a future comp.
And I don't know Greenway.
The revenue at Costco, just seem to be standard recurring revenue now that we've been in there.
A couple of quarters now when you look at the.
So that took place in the quarter that was a tailwind but.
But we did receive a reorder as well so in the quarter. So it was a fill in any reorders. So.
We've got a lot to learn about Sam's club and the opportunity that lies there. We're just in the initial phases I think well have a better understanding once we get through the second quarter on.
Maybe.
Does that initial run rate look like keep in mind. When you go into a new retailer historically it has taken us some time to get up to ramped levels or anywhere that continual run rate, although costco it seems to be what.
Normally in some of the new retailers, we're entering now just due to the brand awareness.
Turning at a fairly good velocity levels. So.
But when they're in the club channel, we'll see how I think we'll have a better look at at the end of the second quarter with the performance.
Hello.
Okay, great. Thank you guys.
Thank you.
Our next our next question comes from the line of Jeff Van <unk> with B. Riley. Please proceed with your question.
Hi, everyone and let me add my congratulations.
Just as we're on the topic of the club stores just wonder if you could speak more about the opportunity with bj's the status of Bj's.
What kind of the next steps are there and what we should look for.
Yes.
We're in.
Some bj's currently Justin Thank you the team's worked really great on the accomplishment I mean it was.
Great quarter, all around teams working really hard and like I said on the call in my prepared remark the amount of new team members. Joining the team is just really exciting time. So we're just continuing to get better each and every quarter, but in regards to the bjs opportunity right now we're testing in some stores.
And regionally but.
We feel pretty confident we'll be able to hopefully get a larger rollout here.
Within 2000 this year it should we should definitely get reset throughout this year I think initial store tests have been positive.
But that's all to do would be dependent on the buyers.
Decisions, but.
Due to the success of Cosco and initial success at Sam's club, we feel pretty confident about that so.
Just a little bit premature on where those revenues will come in at.
We're also looking at some additional pack size configurations to try to better optimize the margins for that business.
Then we'll look at the mix as we go forward lots of opportunity.
Okay, and then just sort of I guess I'll follow up to that just thinking about your <unk>.
Overall keg on spring resets, maybe you can just touch on that.
Yes spring resets, we have an amazing key accounts team and actually add two individuals that started this week on our team as well as we further expand.
The spring resets.
Like I said, we got we got circle K about 6000 locations. They were some divisions were delayed they have about 13 divisions.
You'll start to see us in a variety of locations in the circle K divisions today.
We'll also be continuing to further roll out over the next several weeks.
Due to really.
A lot of our Theres been a lot of delays with labor shortages in some of these resets. So some of these retailers have pushed out their reset delays due to labor shortages. So.
We're working on that but we think we're going to have a great reset I talked about Walmart expansion earlier target.
We're getting a lot of interest from existing accounts, where we're going to see additional flavors on we've launched in the first quarter with the mango passion fruit was such a great success. If anyone has not tried the product. Please go to 711 and try it tastes amazing it is going to be a winner for us and we have some new flavors coming out in Q2 that we just launched so.
I think it's going to be a great summer as we head into summer beverage season, So we're well position youre starting to see that DSD.
Network really come alive at the team further activate family get better distribution better placement and most importantly, you get a cold so which we know we have a winning a winning portfolio when it is called.
Okay, great. Thanks for taking my questions and continued success.
Thank you Jeff.
Our next question comes from the line of Mark Astrachan with Stifel. Please proceed with your question.
Okay, I think you might've hung up our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.
Hi, John how are you.
Excellent Jeff.
So I think John you were referring to a strawberry lemonade in North Dakota, which.
My question it looks like 38, Skus now can you talk a little bit about the launch cadence or anticipated for the balance of the year and then.
Anything to call out specifically I'll go through sticks.
The regulators were overheats.
Yes.
Great question.
Strawberry Lemonade Im being told but that is probably the best basically energy drink out there. So those are.
Really excited about that this summer is going to be a great summer launch and the Arctic by which pulling out in the second quarter brings one of our expands our <unk> portfolio, which is performing extremely well in the convenience channel is a little bit more inviting fund we got some great.
Experiential marketing programs behind it for the summer. So we think thats going to be a great hit is a frozen berry flavor profile. So we're excited about that so we'll have about three flavors there coming Q2 retail over the next several months and when you look at our our omni go sticks, which is quite interesting we're seeing a lot of demand for the on the go sticks.
Although currently represents a smaller portion of our revenue we did launch our heat on the go sticks, which is now available in a variety of retailers plus Walmart and.
Nationwide, so lots of opportunities on the on the go.
A portion of the core portfolio.
And we continue to bring great innovative flavors to the category marketing team and innovation team is doing a great job. So keep your eyes out so some great new flavors.
So what's your pronounce a follow up I Wonder if you could call out anything in the.
International business outside of <unk>.
Nordics in China, any specific territories to colo, which are or could be perhaps.
Plus territories this year.
Yeah, well I mean, what is it.
Great SaaS in North America, we're getting a lot of interest from some eight top tier distributors in other markets I think it's too preliminary to really.
Talk about those markets right now, but we're getting a lot of interest with some tier one distributors and distribution partners.
Putting the right structure together should allow us to further expand and drive profitable growth as we've talked about and as we look at international and further expansion opportunities.
We see a lot of great markets, the same health and wellness trends in the U S or in Europe and in Asia. So we have a global opportunity here.
Super Okay. Thanks for taking the questions nice quarter.
Thank you.
Our next.
And coming from the line of Mark Astrachan with Stifel. Please proceed with your question.
Well, let's try that again can you guys hear me.
Excellent Mark.
Perfect.
I wanted to go back on pricing, John if you're feeling to the scanner data since April one it doesn't look like your pricing has gone up so is there some sort of lag that we should be taking into account as they are offsets of the.
Reduced promotional activity that you are doing in lieu of pricing prior to that and just might as well for related to the pricing was there any sort of sell in in the March quarter ahead of the price increase.
Yes, I think when you look at just that period in the April one what you're seeing there.
Sure.
Benchmarking it off the prior year. So during that same time timeframe youre seeing some pricing adjustments, which took place.
Have reduced a lot of our.
Promotions in regards to bite us buy one get.
Variety of strategy there.
<unk> frontline pricing, we have taken is not going to be seeing in retail for likely really impacting on the scanner data until like right around the third quarter. So we started to take frontline pricing. It is a process that we've implemented and it's going to take some times you set but we did notify the mark several of our key.
Customers and retailers, which you have to provide notice score.
As of April one so you are not starting to see that in the scanner data that youre looking at today, but we did start to initiate a price increase as of April one.
Got it so to be clear, we're going to see that in the data starting at what point in <unk>.
You will likely start to start seeing that in the data starting in the third quarter and then continuing through the fourth quarter.
Got it Okay and then.
Maybe just shifting to your comments and some of the work that we've done on the instrumentality of both you as well as performance.
Energy brands is there anything you can.
Can kind of point to in terms of how much.
<unk>, specifically, if you want in terms of incremental consumption or incremental consumers to the energy drink category versus sourcing share from more traditional players like monster and Red Bull.
Yes, I think thats the great opportunity, we have with Celsius, and Thats really the message, we're providing retailers and our key customers and what we're seeing in our key customers.
We're not cannibalizing the sales of other leading players. So what we are we are incremental and when you look at the category growth. We brought in over that time period contributed about 38% of the growth during that period. So we are bringing in a new consumer into the energy category. We are helping the category further expand.
Our demo has been 50 50 male female so very much incremental to the category. There is some cannibalization.
Slightly that youre seeing but the majority of it is all new to category is what we're really seeing some of our deck.
Great. That's helpful. Thanks, guys.
Thank you Mark.
Our next our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.
Hi, Good afternoon. This is actually Jeremy on the line for Anthony two quick questions for me I know you mentioned on the call that you said the convenience store anything Thats your greatest growth opportunity, maybe could you talk a little more so where do you see that growth coming from within the convenient stores that within current stores you're in expanding.
Expanding the growth there are expanding store.
Stores in general.
Yes, Jeremy Great question, I mean, if you look at the opportunity for us.
We've talked about this before in a variety of cost really what we're doing we're really back during the energy category. When you look at it the company has performed very well on Amazon.
The club channel grocery mass do extremely well in club at Cvs and the next frontier really is the convenience channel where 70% of energy drinks are sold so the team has done a great job, we talked about expansion at race tracks seven Aladdin you look at circle K. So by no means are we tapped out.
The number of doors to capture in the convenience channel. We're just scratching the surface and just getting really in position in many of the leading convenience change today.
Look at the.
Like love its been flying J as well, we just recently entered so lots of opportunity not only in expanding the ECB and the convenience channel, but also expanding the offerings.
When you look at the number of offerings that Celsius currently has versus some of the leading players in the leading competition. So we have a long runway ahead in that category for sure we feel.
Okay, Great and then just one more shifting to gross margins I know on the call. You also mentioned that you have a lot of initiatives to offset inflationary costs and this is I think before you even.
Price, where you mentioned that you took price is there is there any more room and those initiatives for <unk>.
Bump up the gross margins or is that all been.
Baked in.
Yes.
The challenge we have now we've talked about it as well as these imported cans the company has to cycle through so.
Good news is is that all the cans that we originally imported.
Now arriving the final the final cancer have arrived into the U S.
So now it's about flushing them or using them through this through using them up and flowing them through the system. So in Q2, we did have a good portion of international can mix in our in.
And our first quarter, we had.
Good portion of international can mix that was flowing through our cost of goods in Q2, we anticipate the percentage of international chance to increase which will further put somewhat pressure on our margins from Q1, and then we expect to use up those international cans by the end of the third quarter and get back to more of a normalized gross profit led.
So somewhere in the mid Forty's.
And by the fourth quarter and into 2023, we are working to further improve upon that but thats really kind of what we're looking at today based on the current environment, we are analyzing and optimizing the six orbit model as Jerry mentioned to seeing opportunities on local delivery savings versus the long haul rates.
And then Theres just so many other variables out there today with aluminum alloy youre seeing aluminum alloy come down in the most recent week prior to that was that's been going up substantially so lots of movement. There that we're looking at.
That's kind of what we're seeing now.
Okay, great. Thanks, a lot I'll hop back in the queue.
Thank you.
Our next question comes from the line of Sean Mcgowan with Roth. Please proceed with your question.
Thank you first John if I could ask you to clarify something you spoke to kind of quickly on the in your opening remarks, when you were talking about Europe .
The decline in some markets. There I think you said you would continue to see optimization. So can you clarify whether or not we should expect to see those revenues turnaround and be positive year over year or are you, saying continued to see some some negative pressure there.
Yes, I think we're still looking at the.
Team in Florida last week going over the strategies.
I think we're still looking at somewhere around 10% to 15% revenue growth rate for the year at this point, we have had some delays in the first quarter associated with timing. There is also a lot of logistical jeez with railways being shut down due to the activity in Europe .
And also this protein.
Julio had shortages of raw materials. So we've had a lot of things that impacted the first quarter.
<unk> closely for the second quarter, we got great programs, some new flavor launches will be working on and I think there's a lot of opportunities in the European market.
And it's been a little bit slower than initially anticipated, but we did see a long runway ahead.
Okay. Thanks.
Thanks, and then if I can ask two other quick whats the outlook for your inventory levels relative to sales I think you had said at the end of the fourth quarter that that was unusually high and you would expect to see that coming down obviously really strong sales performance, but would you expect that kind of ratio of inventory to sales.
Come down further from current levels.
Yes, I mean right now when you look at our inventory and you look at the Q I mean, we're sitting at we did we did reduce inventory levels by about $6 million. You did have additional cans of those international <unk> moved from a deposit into inventory because we physically took possession and then we finalize the purchase of the international cans, we committed.
Two.
One day, we had the can shortages that took place so we're going to be cycling through those.
Which I think is about right around $20 million or so thats on the books currently.
I think really good inventory levels.
On the.
Which is allowing us to really service customers on a 97% fill rate we have a new distribution coming on we're heading entering beverage selling season, and you are starting to hear about shortages in supply chain. So when we talk to a lot of our.
A lot of our suppliers. There is talk about shortages again that are that have been talked about so we feel we're in a good position. We have good inventory levels on rock, we're watching the markets very closely and we will take action as needed.
Okay. Thank you and then just to touch on the price increase that one of your competitors announced.
I get a kick out of them, saying.
We're taking prices up about 6% in four months.
You expected from your customers to kind of load up on a lot of monster product between now and then that could clog the channel a little bit.
I mean anytime you do a price increase.
You'll get some load ins there I would assume 6% is a good return that you could make it a couple of months.
But.
Right.
We'll have to see how that.
There is challenges each and every day and this and this and this business. So it's the street, where we got some really good distributors that will make sure warehousing our position we.
We don't feel theres going to be any slowdown in our trajectory or the opportunity. We lie ahead, you got really great team members like I said and distributors and partners.
We think we're in good position.
Great. Thank you.
That brings us to the end of our question and answer session I would like to hand, the call back over to John Kelley for closing remarks.
Thank you on behalf of the company and just like Thank you everyone for their continued support and interest our results demonstrates our products are gaining considerable momentum as we capitalize on today's global health and wellness trends and the transformation taking place in the energy category. Our active lifestyle position is a global position with mass appeal, we're building upon our core business and.
Leveraging opportunities and deploying our best practices, we have a winning portfolio strategy and team and a large rapidly growing market that consumers want we believe we'll be able to navigate through the challenges ahead, and we will continue to position and thrive in the transformation of today's energy category. In addition, I'd like to thank all of our investors for their continued support and confidence in our team.
Thank you everyone.
Have a great day stay healthy stay safe.
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.