Q1 2023 Celsius Holdings Inc Earnings Call
Greetings and welcome to the Celsius Holdings, Inc. First quarter 2023 earnings call. At this time, all participants are in a listen only mode.
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.
Please note this conference is being recorded.
It is now my pleasure to introduce your host Cameron Donahue Investor Relations for Celsius.
Thank you Kevin you may begin.
Thank you operator, and good afternoon, everyone. We appreciate you joining us today for Celsius Holdings first quarter 2023 earnings conference call.
Joining me on the call today are John <unk>, 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 our earnings press release earlier this afternoon, and all materials will be available on the company's website Celsius horse a dotcom.
As a reminder, before I turn the call over to John an audio replay will be available later today and can be accessed with the same live webcast link in our conference call announcement and earnings press release.
Please also be aware that this call may contain forward looking statements, which are based on forecasts expectations and other information available to management as of May nine 2023.
These statements involve numerous risks and uncertainties, including many of their beyond the companys control, except to the extent as required by law Celsius Holdings undertakes no obligations and disclaims any duty to update any of these forward looking statements.
I encourage you to review in full our Safe Harbor statements contained in today's press release, and our quarterly filings with the SEC for additional information.
With that I'd like to turn the call over to President and Chief Executive Officer, John Field Lee for his prepared remarks John .
Thank you Cameron and good afternoon, everyone and thank you for joining us today.
We achieved record sales for the first quarter of approximately $260 million, an increase of 95% from last year's first quarter of $133 million exceeding the $200 million revenue threshold for the first time in company history and.
And we saw sequential increase from the fourth quarter of sales of $178 million exceeded it by $82 million or 46% growth sequentially.
Our North America revenue increased 101% for the quarter to $249 million up from $124 million in the year ago quarter.
Southeast continues to be the top driver of growth within the energy category and was the number one dollar growth brand and total U S. Moulage energy for the last 52 weeks ending as of March 26, 2023, growing approximately $552 million and increased retail sales and contributed.
23% of category growth on an overall increase of 139, 6% versus the year ago period.
<unk> IRI in the last four weeks ending as of March 26, 2023 in total Moulage energy Celsius is the number three energy drink brand in the United States, reaching a new market share record totaling seven 5%.
Doubling it's three 7% share a year ago.
Celsius and Pepsi continue to synchronize our organizations, we continue to see opportunities for future efficiencies in the first quarter, we experienced an inventory build quarter over quarter from December 31, 2022, we expect this increase was due to anticipated retailer resets and build inventory levels, we will.
We continue to work with Pepsi to make sure there is adequate inventory and update shareholders quarterly if there is any significant delta is that impact the warehouse and in center inventory levels Jarrod will provide additional details shortly.
We continue to see growth across all channels, including those non tracked with the club channel sales totaling over $47 million for the quarter ending March 31, 2023 up 77% compared to $26 million in the first quarter of 2022. We also just had a new record on Amazon.
<unk> is now the second largest energy drink brand with a 19, one share of the energy category as of the last four week period ending April 22023.
Her stateline energy drink category total U S data.
In addition, we continue to expand growth opportunities in non tracked foodservice channels and are gaining more distribution and colleges universities hospitals hotels, eateries and casinos and more.
Overall foodservice represented approximately about 10% of our Pepsico revenues and we see significant opportunities to scale and grow over time.
We have been extremely happy with our Pepsico partnership and see a long runway of growth ahead of us across a variety of channels, including expanding our retail convenience and foodservice.
As highlighted in our earnings supplement for the four week period per IRI spans total energy data ending March 26, 2023 as stated in Lula Celsius is the number three energy drink brand in the United States now has a seven 5% market share.
Doubling from it's three 7% share a year ago, reaching an all time new high.
In addition in Lula Celsius grew its ACB to a record 95, 4% versus 69 69, 5% in the year ago period, which.
Which is a tremendous achievement by both our teams and our partner Pepsi.
And a convenience Celsius has gained an additional 37 seven points of ACB growth versus the prior year to end the period at a 93, 4% compared to 55, 7% of ACD in the prior year. This.
This provides a tremendous opportunity as we have gained greater availability across the country and the convenience channel and are now gaining more awareness with consumers.
Internationally sales grew 15% growth rate for the quarter totaled $11 4 million compared to $9 9 million in the first quarter of 2022. We believe there is significant opportunity for international growth going forward with Pepsico, while we just began our distribution partnership with Pepsi and our initial focus has been on the U S distribution.
And to their network, we have begun initial discussions and we see significant opportunities to capitalize on global scale in the future.
Selecting the changes in consumer preferences for better for you offerings.
While the U S transition has taken a majority of our focus to date, we do expect to announce additional international expansion details in the future, but that said, we look forward probably likely to early 2024 for opportunity as the rollout internationally with 2023 being the year of planning around logistics production distribution and marketing.
The company achieved a record non-GAAP adjusted EBITDA of $48 7 million in the first quarter, representing over 18% of sales for the period.
This was driven by not only a record sales, but we also saw benefits across the timing of marketing and sales programs as well as the result of gaining operational leverage across G&A.
Though we saw some very good leverage across our SG&A, we would expect our investments to increase during the summer season of Q2 and Q3 of this year as we continue to drive growth awareness profitably and are entering into a number of campaigns designed to grow brand awareness.
The company sees opportunities to drive incremental efficiencies for the back half of 2023 from expected improvements in gross profit margins as we optimize and synergize, our supply chain and gain more efficiencies. In addition, we see additional leverage opportunities as we scale to drive further efficiencies in our SG&A.
To close my prepared remarks, we achieved the highest quarterly dollar sales growth in company history in the first quarter and as previously our previous recorded highest quarterly record revenue was in Q3 of 2022, we exceeded by over $70 million.
We are gaining market share at the fastest pace in company history, while at the same time drove the highest quarterly EBITDA margin of over 18% demonstrating the leverage in our operating model.
We believe we have significant runway ahead of us and are excited about the spring resets driving additional shelf space in both new and existing customers, while optimizing our placements.
Celsius is now an established leader in the energy category driving growth in the entire category with incremental opportunities for further growth as we continue to scale and leverage our partnership.
I will now turn the call over to Gerry Lyons, our Chief Financial Officer for his prepared remarks Jerry.
Thank you John .
Turning to our first quarter financial results revenue was approximately $260 million, an increase of 95% from $133 million driven by our North American business, where first quarter revenues were $249 million, an increase of 101% from the same period in 2022.
Primary factors behind the increase in North American sales volume were related to our integration into the Pepsi distribution system, where we saw increases across the board, including continued strong growth in traditional distribution channels, including SKU increases as well as distribution across a number of new channels within CPG and foodservice. We've also seen our velocity.
Increased post our significant ACB growth during.
During the quarter, we saw an increase in the days inventory outstanding within the mixing centers relative to the end of 2022, which equated to roughly $20 million to $25 million in incremental sales. We would anticipate that this build would be sustained through the summer selling season, as we continue to see steady growth across our footprint.
Gross profit for the quarter increased 111% to $114 million up from $54 million in the year ago quarter.
Gross profit margins in the first quarter were approximately 44% of revenues compared to approximately 40% for the prior year first quarter. The improvement in gross profit margins was due to lower average can prices and leverage of our orbit model offset in part by increased freight and a few million dollars of inventory write offs.
Q1 was the second quarter that we were operating within our new distribution system, and we continue to drive efficiencies and optimization within the system, while maintaining our number one goal of keeping the shelf stocked in order to meet the consumer demand.
And looking out across the year, we continue to believe that we will operate with gross margins in the mid forty's with some pressure during the first half of the year, while we fully integrate into our new distribution system and begin to better optimize our supply chain with upside in the back half of the year.
Sales and marketing expenses for the three months ended March 31, 2023 were approximately $48 million an increase of approximately 51%. Although we saw increased marketing investment during the quarter in line with historical spend this was offset by less expense within sales due to timing of our activation.
As a percentage of sales sales and marketing was 18, 3% compared to 23, 7% in the prior year on a full year basis, we continue to expect our sales and marketing expenditures to remain consistent with historical run rates as noted this quarter benefited by timing as well as some inventory builds within our mixing centers.
General and administrative expenses for the three months ended March 31, 2023 were approximately $21 million an increase of 75% relative to Q1 2022. This increase was due to increased employee cost associated associated with building a back shop that can scale as we grow including stock based compensation as well as administrative fees.
Such as legal audit and other consulting fees.
G&A expense as a percentage of sales was 8% for the first quarter of 2023 versus 9% in the prior year, which is in line with expectations.
Would expect to see this area to begin to leverage against our growth during 2023.
Moving to our back office Buildout, we have significantly expanded our back office team over the last year, adding a number of team members across <unk>.
<unk> controlling legal and HR driving great improvements consistency in processes and transparency across the business. We look forward to the many successes that these team members will assist us with as we look to deliver an effective control environment for 2023 and drive further value with our operations sales and marketing teams.
From a legal perspective, we have closed on the settlement proceedings with our can label and are pleased to have that behind us.
Regard to the SEC review, we continue to cooperate with any inquiries or requests that have received but that said, we do not have any further updates at this point in time.
Focusing now on liquidity and capital resources as of March 31, 2023, we had cash of approximately $634 million and net working capital of approximately $801 million included within the first quarter cash balance was approximately $38 million, which is primarily balances due to pepsi representing excess funds provided by Pepsi.
For our distributor transition.
Cash flows used by operating activities totaled $14 million for the first quarter, which compares to $9 million and net cash provided by operating activities in Q1 last year. Overall, we saw some cash usage associated with our growth as well as the timing of working capital as we look to Q2, we would expect to return the excess funds to Pepsi will also improve.
Moving on our DSO overall, we would expect that excluding timing impacts of cash transactions associated with the Pepsi transaction, we will continue to generate cash year over year.
Looking at inventory total inventory ended at roughly $150 million down versus the prior quarter. This was driven in large part by the significant increases that we saw in our sales volume as we look to the busy summer months, we will see production increased significantly to accommodate the demand of the market.
Going forward, we look to we would look to carry additional inventory in order to make sure that we're able to keep up with the significant growth. We are experiencing at the same time, we do see opportunities to drive efficiencies in our <unk> as we move through 2023.
This includes our prepared remarks, operator, you may now open the call for questions. Thank you.
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One moment, while we poll for questions.
Our first question is coming from Mark Astrachan from Stifel.
Please proceed with your question.
Hey, Thanks afternoon, guys man I'm still writing down some of that stuff that you just breezed through additive fast transcript.
Anyway.
Okay.
I guess to start.
Maybe give us a bit of an update on how the spring resets look from a shelf space standpoint, and how much is an existing energy doors, how much is coming in or going into new doors and kind of overall expectations for incremental space for the year.
Yes, Mark Great question I think.
We had a.
We're really excited about the resets that started off this year, especially started in January we saw a good increase in the quarter.
So we're looking at it we saw a lot of great expansion kind of mentioned on the call in the convenience channel, where we saw the biggest really ACB gains. When you go from over a 37, 7% really increase in points of distribution in convenience.
Really big win for the company.
But really the last channel of expansion for us.
In tracked channels. So we're really excited about that I think we're seeing good velocities in the convenience channel as well, we're seeing that grow so.
That was a big win also in overall, new lock getting to that 95, 4% of ACD.
Most recently as of March 26 data.
Coming out of the IRI spins data. So I think we have some more expansion there, but we really grew significantly on the recess also the number of items carried an average per store increase as well so.
Right now we're looking at about an average at the last four weeks as of March 32006, really at the end of the quarter. We went from an average of about 13 six items per location and a recorded channels versus the prior year was at $8. Six so we saw really good growth in the number of units.
Got some more resets ahead of US I think the biggest opportunity we have as well as in tracked channels is really gaining better placements in locations more cold availability more cooler placements and those type of execution, so maybe not.
A large increase in number of doors being at 95% at the end of the quarter, but really the breath and each retailer's massive opportunity for us.
Got it that's helpful and maybe just on the doors so.
Existing doors versus new doors do you still want to be in the legacy energy door, and then somewhat related to that I think many many folks had been surprised that the velocities being not only as strong as they've been but actually accelerating with all of the incremental points of distribution how much of that is just higher velocity C stores.
Versus just overall brand awareness and kind of how do you think about that number through the summer.
Yes, when you look at our I guess as you call them legacy doors thats, mainly in the us.
In the food when you look at the food channel.
We still maintain in the HCC section in a variety of stores, including Publix.
And Kroger in those but majority of the stores outside of those are in energy.
We do great business in the food channel will do extremely well at Publix doing extremely well at Kroger. So it is really about gaining those additional off shelf placement those additional KOL placements cooler placement.
And.
So you're.
You're not going to change that strategy within the food and our existing business at this time, but when we look at the distribution ahead.
There is opportunities for additional Skus, we see that we've got some great innovation planned for this summer I think you saw some great innovation come out in the first quarter with new flavor innovation, our lemon lime green.
Green Apple Cherry flavor at 711 was a great win for US. So there is a lot of great innovation coming this summer that will be able to add some additional breadth within the retailer.
Okay. That's great and then just on the velocity. Thank you.
Yes.
We're seeing velocity increase Mark I think there's opportunities for sure to go further north on that.
We've got some great marketing programs ahead of us and we think summer is going to be great summer for us we're watching it closely.
We don't provide any forward guidance, but something to look at and we're monitoring it closely all around especially as we'd increase such an exponential increase in ACD.
Got it thanks guys. Thank.
Thanks Mark.
Thank you. Your next question is coming from Jeff Van <unk> from B Riley Your line is live.
Hi, everyone and let me Michael.
Congratulations on the strong quarterly metrics.
I Wonder if we can kind of circle back to.
Delve a little bit more into how much of the Q1 Reacceleration of growth was initial channel fill or new stores, new doors call. It.
Added skus et cetera versus reorders derived from sell through at retail I'm, just trying to get a better sense I guess of how much the initial channel fill impacted in new doors.
In the quarter and then maybe one.
That phenomenon might have in Q2.
I think you alluded to a little bit of that our Jared did in his prepared comments, maybe just how we should think about growth acceleration from here.
Thanks, Jeff we did gains.
Confusion with the reset that's taken place.
I think as we're starting to see velocity increase that is a really good sign that we're cycling through whatever pipe sales, we had for the quarter. So the increase in distribution didn't slow.
The overall velocity of the sales are moving quicker out of the registers. So I think that puts us in a good position and we feel really confident it is hard to say exactly what the price was.
We did talk about in the quarter, how we saw Pepsi increased inventory levels, which Gerry talked about earlier in regards to approximately $20 million to $25 million, we feel that the average impact for the quarter with the increase in inventory levels, but I think seeing the velocities increase I think we're getting a really really strong feeling that we are seeing repeat purchases out there.
Okay. That's helpful.
And quantifying.
The inventory.
C.
And let me ask you this.
As youre going into some of the.
Got it great.
You are calling it.
I guess Im C stores for example that might be lower volume some other or other doors.
Various retailers that might be.
Perhaps a little bit lower volume just wondering what youre experiencing there as far as sell throughs and then.
Overall, what's your outlook or your <unk>.
Business in this channel.
Yes, I mean, that's a great question I mean, we did gain a lot of.
Tier three and tier four convenience distribution, especially with the expansion since October with the Pepsi Pepsi system, we had a lot of tier one and tier two it's really building out a further breadth within those.
Within our convenience where were seeing starting to see velocity increase.
I think when you look at the smaller tier three tier four lower velocity.
Difficult to get the true reporting on that on the velocity I think we're looking at the overall velocity is a good number an indication on how the overall health of the portfolio is performing and I think we're really confident in convenience I mean, we know this brand performs well.
We're seeing usage occasions expand outside of energy.
And we're just really excited on where the brand is and where the portfolio and where we're headed so it's something we're monitoring closely but foodservice now when you look at foodservice opportunity, which is 10% of Celsius business. It just shows you the broad brush of the portfolio and how it's resonating with a broad brush of consumers today.
It sounds like you are gaining more you feel like you're gaining more traction in foodservice and in some of the other channels as well that are not reported are not correct.
That's correct, we see great opportunity in non tracked channels as well.
Okay terrific. Thank you for taking my questions I'll take the rest offline continued success.
Thank you. Thank you Jack's question is coming from Kevin Grundy from Jefferies. Your line is live.
Hey, great good evening guys.
Good evening Kevin.
Hey, <unk>.
John for you just.
In terms of the ambition now with.
Items per store, so the ACB progress has been fantastic.
I remember a conversation you and I had.
In the fall and it was a 10% market share was kind of an ambition at that point, if we can get to 92% ECB. If we can get 50 items pursue if we can maintain current velocity.
Kind of checking all the boxes at this point so around seven 5% share.
Path to 10% is very very year.
Present, now so as you kind of take a step back.
What do you think is possible now in the Pepsi system, the 10% again it seems like.
Very attainable in near term what do you think is possible now for this for this brand as you look at the strength and the reach of the Pepsi system as well as what you guys are done with the brand.
Yes, I think.
Kevin It's a great question I think.
Just seeing at ACB and we are quite we are quite amazed with how quickly the ACD has come together at a 95%.
Internally, we thought we were going to at least taken potentially another 12 months 18 months to get to that 95% ACB. So.
Totally.
Give hats off to our sales team are key accounts team.
And also all the partner or partners that Pepsi has done just an amazing job I think they see the opportunity we have here with Celsius that is bringing in new consumers to the category and I think when you look at it we have a lot to learn over the next.
A quarter or two to see how this product this portfolio performs and the channels and expanded in especially in the convenience channel so quickly.
I think we'll have a better view of that probably the end of next quarter and especially at the end of Q3, but.
When you look at the number of items per store were $13 six.
And when you look at some of the current velocity numbers, we had on a per SKU item and you look at gaining 15 to 17 items per store by the end of the year, if thats a potential.
That gets you close to that 10%.
Opportunity up 10% share in the category. So we're really excited to hit the seven five share. Most recently at the end of the first quarter and Theres lots of opportunities ahead.
Got it thanks, and then just a follow up I feel like.
Probably be remiss, if we did not touch on some of the competitive launches in the space, including Monster Zero Sugar Rain storm, which is not lost on you for a moment kind of looks remarkably from a packaging perspective like your product.
And sports and energy so theres been a lot in a fairly short period of time and I know, it's still very early days with zero sugar and brainstorm with you kind of just hitting.
Thoughts there in terms of how worse in those competitive launches or anything youre seeing very early days.
Where there is some overlap with.
With.
<unk> is there anything you can give there in terms of market share velocity et cetera, I think would be helpful to folks. So I can pass it on thank you.
Yes.
Kevin Great question.
Theres competition everyday and energy category is about as fierce as they come.
Tons of new competition everyday and.
I think where the opportunity lies where we're looking at when you talk about.
Where Celsius can go.
Miami when you look at the Miami Fort Lauderdale market and <unk>. The last four weeks ending as of April 23rd 2023.
About a 21 seven share in the market. So there's a lot of opportunities. We're number two brand now on Amazon and <unk>.
Pete with a lot of different brands in the category I'm not going to comment on any other brand out there there is a it's a big category.
We wish every brand Mark on operating their business, we're really excited where our portfolio is where it is resonating with consumers.
Excited about.
Our partner Pepsi and just see a lot of opportunities at this time, we're really excited about moving forward.
Okay very good thanks, guys continued success.
Thank you.
Thank you. Your next question is coming from Peter Grom from UBS. Please proceed with your question.
Thanks, operator, and good evening, everyone. So Jared I just had a few questions on.
Gross margin, maybe just first can you just help us understand how much the inventory write off impacted.
This quarter.
And then second I recognize you still expect.
Gross margin for the year in this mid 40% range and I may have misheard, you, but I thought you mentioned that you expect one half gross margins to be under pressure is that just relative to the mid 40% range is that year over year, just any color on that comment would be helpful.
Yes, no we were.
Been consistent with saying, we're going to be in the mid forty's.
If you looked at the run rate, we left Q4, and we did see some additional write off that inventory.
We are building out the supply chain and drive efficiencies within that channel as I mentioned on the call with a couple of million dollars.
So not a huge amount, but enough to impact the margin a little bit.
We also had a little bit higher freight costs within the quarter. So as we get to the back half of the year, we'll be looking to.
To clean up the freight lanes and make sure we got the supply chain operating as efficiently as possible and making sure we're fully optimized.
It was really just around the inventory and the great in terms of what would have driven margins really from a Q4 to a Q1 perspective, but we're still confident in the mid <unk> and we see the opportunity for upside in the back half of the year as we get fully integrated into our new distributor.
Okay Super helpful and I guess just.
Let me give some more details on kind of this international discussion and I recognize it's likely to prison, we had 24 narrative.
Can you maybe just help us understand the work you've done that informs the decision that the brand can resonate well.
Well in these markets.
Markets are you targeting initially is this going to be some broad based multimarket rollout is it going to be more gradual just any initial color you can provide would be super helpful.
Yes, I think we've talked about this.
Some of the conferences we've been in.
Back in March.
From our perspective, we look to hit markets that are obviously already.
Well defined energy markets. So we're not going into a new market that we have to train the customer on what is what is energy.
So if you look around kind of think of the APAC and Europe . The different markets that are popular energy drink markets wed look to roll into those first we're not going to do a shotgun approach. We will look to go to a handful of markets first and learn and partner in most instances with.
Pepsi or Pepsi partners, and really use that as a tool to learn and build the model and then from there we will look to roll into more markets over the coming years for kind of a 2024 loss were looking at a handful of markets to really get into understand learn.
They're going to be the bigger energy markets across Europe and APAC.
We do see some opportunities.
Some smaller markets where.
Where are we you can kind of roll in.
Because they are close to co Packers.
And they are ready.
Those liberal and move the needle so there.
So core markets more Florida.
People know those markets would be if you look at the in Europe and in APAC in terms of.
What are the big energy drink markets.
So thats really this year, it's all about planning, it's about getting aligned with the partners, it's about creating market loss plan.
And then looking to rollout in 2024.
Got it thanks, so much I'll pass it on.
<unk>, we are gaining more distribution, but.
Seeing good Reorders and strong reorders within the channel only think that can be a really meaningful growth opportunity for us as we go forward in game or distribution, we just really that as we look ahead.
Distribution opportunities as at eateries and within fast casual restaurants, we feel it is a great opportunity there and that's really has been on tap so it's.
It's definitely tells you the brand resonates with an extremely broad consumer just to see the sales mixed at the Pepsi system of approximately 10 per cent of sales today. So.
It kept us really excited.
Right just one follow up.
Looking at the the Nielsen data to support <unk>.
Question I got asked a lot last quarter, but I have one Q growth scan channels about 138%.
If we use that and sort of apply to what one key wasn't twenty-two and apply something like 290, it's about a 45 million dollar difference, whereas if you do the same math and for queue is about 50 million difference is that the same kind of like the the lag between scanned and and reported that we should kind of expect or is it gonna be is there any line is that you guys have.
Lumpiness or more or less or any kind of swings in that regard.
Yeah, I mean, I mean, there's no way you're getting outstanding is coming out of the register so when you look at it I think there's probably some lumpiness in regards to the kind of the the value chain of it's going through the Pepsi nexium centers and into their sales barns and then into the the customers and then cycling through but you know it's it's something we watch you also.
Have the mix of our Amazon business as well as our club business.
And then that's in there you know it didn't grow it goes faster rates. So I think it's a mix of all those items and probably a little bit of time.
Okay. Thank you.
Once.
Thank you once again every one of you have any questions or comments. Please press Star then one on your phone you're.
Your next question is coming from Gerald <unk> from Wedbush Securities you're lying his life.
Hey, guys. Good evening, thanks, very much for the question.
Obviously very strong revenue growth year sounds like distributor inventory levels are going to remain elevated at least over the next few months who just.
You supply chain can you speak to your ability to continue to service. This type of demand you know maybe over the longer term in particular as it relates to your aluminum can supply, which is now back to being sourced domestically, which is obviously had a pig benefit to your margins. So just I guess any kind of high level color you can provide on your thoughts there would be helpful. Thanks.
Yeah from a raw material perspective were in great shape, we've got multiple partners in the U S. Like you mentioned for Mccain.
[noise] perspective, no issues there from our capacity perspective, we've got the ability to quickly double.
In in terms of capacity it in in terms of production. We've got our orbit model built but we've got a number of co Packer Zoe Implex too and we have capacity at our current go Packers that we can utilize as well. So we're in great shape in order to meet the demand, we're seeing or even.
Demand outside is relative to what we're seeing so from a supply chain and production perspective, we're in good shape.
Perfect. Thanks Chair I'd appreciate it.
Next one for me, it's just on the club channel. If you could just provide maybe a refresher.
Where we are kind of on the 18 pack transition I know you were in the midst of rolling out a second variety pack to your legacy stores and then finally on the Bjs rollout just where we are with that I know that that was taking place over the course of this quarter.
Yeah sure. It's John we've I'm pretty much have moved into the 18th back within all of the club channels and we started to expand.
From our core variety pack in addition, you'll see incremental placements.
Variety of clubs channels.
With our five pack that one is so and it's it's it's been doing both both have they been doing extremely well.
And I think there's opportunity to get further flavor combination annual are single flavors and that channel since the receiving great success there.
Perfect. Thanks, very much for the collar guys I'll pass it on.
Thank you.
Thank you. Your next question is coming from Michael Library from Piper Sandler Your line is life.
Thank you good afternoon.
Good afternoon.
I just wanted to come back to the 20 to 25 million inventory you mentioned for the Pepsi system that the inventory build with the ACB running ahead of your expectations and velocities as well is there a good portion of that that's really just an adjustment to faster sell through and.
Come a reset to normalized levels that are above what they would have initially expected or.
Is that really some some cushion that volume is pull forward can you kind of dissect it.
Out of that amount, if if there's a bit of both.
Yeah, So there's a bit of a bill for the summer selling season.
So to get ready for it and to meet the expected volume so to your point of a bit of that is.
As a patient of Q2 and Q3 and we've also got a number of Activations in a number of sales and marketing programs that we've got ahead of us over summer so.
I would say, it's partially well in.
A large part of the preparation of of what's to come.
Okay. That's helpful and just on the SG&A run right it's been.
In roughly the same neighborhood the last three or so quarters. Looking ahead, I know you've talked about stepping up the marketing a little bit but you also get some operating leverage benefits from the revenue growth. How do we think about just how that might look over the rest of the year.
Yeah. So you know all of our plan is or at least our expectation is if we have the opportunity to continue to drive velocity, we want to maintain our kind of historical run ready that you can.
On our last call, we talked about 22 to 24, I think historically and more like 23 24 range. So we were talking about T V.
Shave off a couple of percent this.
This year, we did just over 18% in the quarter, we did benefit with some of that.
Inventory bills, but also with the speed at which all of our revenues are growing and the ability and a marketing team has been able to really drive that philosophy and their sales team has been able to drive the HCV with Pepsi. So we have the benefits and see and leverage there. We are gonna. We've got 100 days of summer program, we got activate.
<unk> and a number of things will be doing over the summer. So we do look to increase our our marketing and sales spent.
And so at least for the summer period, where the.
The goal is to stay consistent with history.
But there is opportunities with the the rate we're seeing the revenues grow to continue to leverage in.
I think the Gulf of the year, and you're up with that kind of 22 per cent marker.
Can we do better if we had the opportunity we will but at the same time, we want to make sure that we're putting the right money.
Into the right investment, making sure that velocity to continue to grow.
Okay, great. Thanks, so much.
Thank you. Your next question is coming from Thomas Mcgovern from Maxim Group. Your line is life.
Hey, guys. Thanks for taking my question.
So just to start I just have a question on the back office spilled out so given your summer launches, which you guys have mentioned quite a few times and then.
Presume transition into the international markets just want to get an idea of how you guys are looking at do you think it's a sufficient build out for the near term or do you expect to continue to build on your back office throughout 2023.
Well I think we're near my stomach for the question I think when you look at the back office is Jared was talking about we've been building it out really on our finance.
That he is referencing as well as our G. L Ts.
Well as our legal team. So when you look at backdrop office there.
We built a great team will probably have a few more higher here that we're working on it but we've been really investing as well in addition to.
The purpose of it is referencing on specific finance H R legal areas, the author and investing in operation Department as well. So we'll have some additional hires there as we scale and gain more.
Really I'd open up additional co packers or and have greater runs taking place to drive more efficiencies with logistics and so on but we have also been investing and continue to plan to invest and grow our sales teams and marketing teams is the bill about I think there you're gonna start you're gonna see leverage opportunities, especially when you look at building out the.
The human resources.
And I think we're gonna get better leverage on our marketing investment, especially now that we have much broader distribution on hand and have reached at 95%.
A C D in the U S. Now when we build out internationally and those plans were working on we will be we will be investing in these new markets I'll have more details on that as we continue to get further.
Back half of 23, and 24, but there will be initial investments that will be required to enter new markets and on and go forward basis.
Great Thanks for that color.
And then just my last question real quick because of you guys are.
Still providing these metrics so I'd be curious to know how many branded coolers. There are at the end of the quarter, how many coolers you're in total and then just kind of where you guys right in terms of penetrating pepsi's I believe it was 50000 pet's noon energy coolers and you guys mentioned on one of the last call just kind of want an update on there if you could provide it.
Yeah.
<unk> was eliminated some of those are specific details that.
That we were get a competitive and Ah Ah competition coming on the category vigorously. So we still have a big presents and a big push for coolers and that's a big opportunity for us gaining more cold placements, we see that opportunity now the number of the coolers were investing we made a decision not to disclose that that specific number.
<unk> on a go forward basis, but we are investing coolers were investing additional placements off shop racks and those types.
And you think there's a lot of opportunities and then pass on the last call. We said we were working towards and planning to have placed by the end of the year of approximately 20000 southeast branded coolers, but that's not gonna provide any additional color on that.
Alright understood I appreciate you taking the time to answer my questions and congrats on the great quarter.
Excellent. Thank you.
Thank you. Your next question is coming from Sean Mcgowan from Ross.
Your line is life.
Thank you Yeah I had a couple of questions. One on free are you have you seen.
And is there any of the higher cost of <unk>.
Hello.
Shiny there.
The signal.
I must be.
A problem with the signal I'll I'll just start to you guys later goodbye.
Okay. Okay.
Thank you that concludes today's conference.
We have reached the end of our question and answer session I'll now turn the call with the management for closing remarks. Please go ahead.
Thank you, Matt and thank you everyone on behalf of the company like to thank everyone for their continued interest and support Ah resorts are results demonstrate our products are gaining considered momentum we're capitalizing on today's global health and wellness trends and the transformation taking place in today's energy drink category.
Active lifestyle position as a global position with mass appeal rebuilding upon our core business leveraging opportunities and deploying best packages.
We have a winning portfolio strategy team and a rapidly growing market that consumers want like to thank our investors for their continued support and confidence in our team. The company will be attending several upcoming investor conferences. The week of May 22nd, including Goldman Sachs and D. Riley and in June we will be attending Stipo.
[noise] Evercore Jeffries investor conferences, and we look forward to meeting and seeing many of you. There. Thank you everyone for your interest in Celsius stay healthy and live set.
Thank you everyone. This concludes today's conference and you make a disconnect your lines at this time.
Thank you for your participation.
Yeah.