Q3 2024 Celsius Holdings Inc Earnings Call
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Jayle: Thank you for standing by. My name is Jayle and I will be your conference operator today. I'd this time I would like to welcome everyone to the Celsius folding 3rd quarter 2024 earnings conference call.
Jayle: All lines have been placed on mute to prevent any background noise.
Jayle: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, follow by the number one on your telephone keypad.
Jayle: If you would like to withdraw your questions, simply press star one again. I would now like to turn the conference over to Paul Wiseman, Senior Vice President of Investor Relations.
Speaker Change: Please go ahead, sir.
Paul Wiseman: Good morning and thank you for joining self-�ulting's third quarter 2020 4 earnings webcast. With me today, our John Fieldly, Chairman and CEO, Jared Langhans, Chief Financial Officer, and Toby David, Chief of Staff. We'll take questions following the prepared remarks.
Paul Wiseman: Our Q3 earnings press release was issued this morning with all materials available on our website IR. Steltisholdingsink.com and on the SEC site, SEC.gov. And I'd like to replay this webcast will also be accessible later today.
Paul Wiseman: Today's discussion includes for looking statements based on current expectations and information.
Paul Wiseman: These statements involve risks and uncertainties, many beyond the company's control.
Paul Wiseman: So, as it's holding this claim, they need duty to update forward looking statements except as required by law.
Paul Wiseman: Please review our State Harbor Statements and Risk Factors in today's press release and in our quarterly filings with the SEC for additional information which contain a description of risks that may result in actual results differing materially from those contemplated by our forward-looking statements.
Paul Wiseman: We will result on both a gap and non-gap basis.
Paul Wiseman: Non-Gap measures like adjusted EBDA and adjusted EBDA margin and their gap reconciliation are detailed and are Q3 earnings release and non-Gap financial measures should not be used as a substitute for our results reported in accordance with Gap.
Paul Wiseman: with that I'll turn it over to our CEO, John Fieldly. Thank you, Paul. Good morning, everyone. Self-sershuported. It's third quarter of financial results today. Revealing continued consumer demand growth and revenue, which was probably in line with expectations we set during the quarter.
Paul Wiseman: Celsius retail sales in the quarter and it's September 30th, increase 7.1% year on unit sales increase of 7.3%.
Paul Wiseman: Celsius, resilient growth at retail, overcame softness in the category, which grew a 2% in the same period. Once again, Celsius was a significant driver of the overall energy category, contributing more than 16% of all growth.
Paul Wiseman: Total revenue for the third quarter was $265.7 million a decrease from last year, primarily attributed to distributor inventory optimization, which Jared will discuss in greater detail on this call.
Paul Wiseman: Here today, revenue through September 30 was $1.02 billion and increased a 5% from last year.
Paul Wiseman: The cell-through data we are seeing continues to be supportive of us being the largest driver of the energy category. I want to reiterate our three key growth drivers that we are focused on for the rest of the year and beyond, attracting new consumers into the energy category, expanding a product availability.
Paul Wiseman: and Increation Consumption Frequency.
Paul Wiseman: We believe that we're making progress across each of these initiatives will help us pursue our vision of becoming the leading energy drink brand.
Paul Wiseman: Let me share more details on how we're thinking about each. First, we're continuing to bring new consumers into the energy drink category through premium marketing and innovation around better for you great tasting energy.
Paul Wiseman: Self-youtube continues to deliver innovative flavors that resonate with consumers such as our new on-the-go-patterns in our Vibeline, at RTDs, like sparkling watermelon, lemonade and cherry cola, which we're taking nationwide due to strong consumer demand.
Paul Wiseman: Two recently announced falsies of Central Flavors, Great Slush and watermelon ice. Alongside our new 2025 and core line innovation previewed at the Convenient Store Trade Show, next, keeping consumer excitement and category trial high.
Paul Wiseman: We believe that Celsius continues to outperform on taste, function, and our brand association with the live fit lifestyle. That brings new consumers into the energy drink category through our marketing.
Paul Wiseman: Second, in terms of expanding product availability based on recent industry surveys, we expect energy will continue to gain shelf space in the Beverage Coolers and Isles, but Celsius being a strong beneficiary of these gains.
Paul Wiseman: It's Validates, Positive Customer, Conversations, We Had Last Month at Next.
Paul Wiseman: The Messnicly, Celsius Market Chair has been resilient with our share in Moulo plus with convenience in the last four weeks ending October 6.
Paul Wiseman: Rising to 11.6% and increase some 10 basis points from this time last year.
Paul Wiseman: We are focused on re-accelerating our share growth, who believe that our Center Program with Pepsi featuring priority periods and a line resources should provide additional tailwinds for us going forward. Turning to other channels that are expanding our availability, ProxMe 12.3% of Celsius, total North America's sales to PepsiCo in the quarter, was to the Food Service Channel.
Paul Wiseman: with strong results in workplace, restaurant, recreational, lodging and gaming sales. Lodging and restaurant points of distribution were up 46% and 27% respectively compared to last year.
Paul Wiseman: Celsius sales the Amazon increased 21% your over year to 27 million up from 22.2 million and the prior year period.
Paul Wiseman: Self-sensitive Q3 with a 24% share on Amazon, Courtney Stackline last 14-week read, ending out to over 5th, 2024.
Paul Wiseman: He calmed continues to be a great opportunity for us building brand awareness and making our product accessible to consumers whenever and wherever they want it.
Paul Wiseman: Sales of Costo in the third quarter of 2024 increased 15%. However, sales, Sand Club DJs were negatively affected due to timing of promotions and innovation load in and the year ago period.
Paul Wiseman: The Total Club Channel Sales Decrease 4% to 60.5 million in the third quarter, 2024 from 63.2 million for the prior year period.
Paul Wiseman: Our expansion is broader than just North America. In October, we launched Australia in New Zealand.
Paul Wiseman: Our third growth driver is increasing consumption frequently, selfie if expanded energy drink consumption occasions with refreshing flavors and our aspirational lived-tit lifestyle.
Paul Wiseman: Self-iscontinues to grow our presence in incremental consumption occasions like meal time through our partnerships with leading convenience stores and quick serve restaurants like Jersey Mike's.
Paul Wiseman: We're supporting our growth drivers by investing behind the brand, but also in our organizational excellence, scaling operations, advancing technology and developing our people.
Paul Wiseman: Last week, we acquired Big Beverage, a long-term self-use co-packer, which has intended to give us new innovation capabilities, greater control over supply chain and addition of financial benefits that we believe will be achieved in the near and long-term.
Paul Wiseman: We believe that vertical integration, like this co-packer acquisition is a capital, a fishing growth driver, and another way we are investing in our long-term vision to become the leading energy drink brand in the United States.
Paul Wiseman: We've also recently established a new center of excellence in Ireland, intended to drive our innovation, global procurement, supply chain and global marketing forward as we expand further across the US and into new global markets.
Paul Wiseman: Our Field Sales, Kia Count's team have begun using AI-assisted selling tools, as well as a new mobile technology that optimizes vehicle routes for further efficient selling and relationship management.
Paul Wiseman: We are also investing in new technologies to improve efficiencies in our orbit model and reduce our freight lane costs.
Paul Wiseman: Importantly, we welcome two new editions to our already strong board directors, Hans, Mellik and Israel, Connor Valsky. These professionals bring extended global experience and consumer goods, the repriar and present leadership roles at Starbucks, Johnson and Johnson and PepsiCo.
Paul Wiseman: Israel replaces Jim Lee who departed our board in conjunction with his move from Pepsi to Target. We thank Jim for his service and we wish him best of luck in his new CFO role.
Paul Wiseman: Our customers continue to believe, as we do, that Celsius is a winning brand with a long growth pathway ahead of us. We are investing for long-term sustainable growth with strategies to energize our customers in more places, more often.
Paul Wiseman: These three growth drivers are underpinned by our focus on organizational excellence across people, technology, and scale.
Paul Wiseman: With that, I'll turn the call over to our Chief Financial Officer, Jarrod Langhans to discuss our third quarter results. Jarrod?
Jarrod Langhans: Thank you, John. While the third quarter was anything but normal, Celsius generated positive net income despite a significant revenue headwind.
Paul Wiseman: Demonstrating the strength of our financial position and operations. Moreover, we continue to invest in our brand as we stay focused on driving our sales and marketing efforts, and we put a portion of our cash on hand toward vertical integration with the acquisition of big beverages. All of this to invest in our long-term growth.
Paul Wiseman: This quarter, revenue was approximately $266 million, down 31 percent from $385 million in Q3 last year, primarily due to inventory optimization by our largest distributor, impacting revenue by around $124 million.
Paul Wiseman: Promotional allowances from increased retail sales created revenue headwinds due to the imbalance that existed between the decreased selling to our distributor and increased sell-through at retail.
Paul Wiseman: Additionally, the previously announced incentive program with our largest distributor and its network of franchisees fully ramped up in the third quarter. This program further aligns our financial incentives through priority periods and other measures, but does impact our margin.
Paul Wiseman: Revenue was further impacted by reduced unit velocity and softer macroeconomic conditions.
Paul Wiseman: North American revenue for the three months ended September 30, 2024, was approximately $247 million, a decrease of 33% from $371 million in the prior year period, primarily driven by the previously mentioned inventory optimization.
Paul Wiseman: International revenue grew 37% to $18.6 million in Q3 2024 compared to the same period last year.
Paul Wiseman: Year-to-date total revenue through September 30, 2024, was approximately $1.02 billion, an increase of 5% from the prior year period.
Paul Wiseman: Sales and marketing expenses as a percentage of revenue for the third quarter were 37, 6% and 26, 1% year to date, while the sales and marketing expenditures were in line with our forecasted expectations. They were much higher as a percentage of revenue due to the optimization that took place by our largest distributor which resulted in approximately 124.
Paul Wiseman: $1 million less in sales with that said, we continue to invest and support our brand in a thoughtful manner without creating disruption to our ongoing campaign and investments.
Paul Wiseman: Q3, 2020 for general and administrative expenses rose, 11% to $25 $5 million, representing 10% of sales up from 6% last year.
Paul Wiseman: Year to date through Q3, G&A expenses were 7% of total revenue in line with expectations.
Paul Wiseman: non-GAAP adjusted EBITDA for Q3 decreased 96% to approximately $4 4 million from $103 $6 million last year with the year to date adjusted EBITDA margin of 18, 8% totaling $192 8 million.
Paul Wiseman: Q3, net income decreased 92% to approximately $6 $4 million down from $83 $9 million last year with year to date net income of $164 million.
Paul Wiseman: Despite the corners pressures, we maintain a cash balance above $900 million.
Paul Wiseman: And we are generating positive full year operating cash flow.
Paul Wiseman: This concludes our prepared remarks, operator, you may now open the lines for questions.
Speaker Change: Thank you the floor is now open for questions.
Speaker Change: Delta and I would like to ask a question simply breast star one on your telephone keypad to raise your hand and joined the queue.
Paul Wiseman: If you would like to withdraw your question simply press Star one again.
Paul Wiseman: We are called upon to ask a question and are listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question we.
Paul Wiseman: We do request for today's session that you. Please limit yourselves to one question. So we can try to accommodate our increased number of covering analysts.
Speaker Change: Your first question comes from the line of Jim <unk> of Stephens. Your line is open.
Jim Lee: Hey, guys. Good morning, Thanks for taking my question.
Paul Wiseman: Maybe drill down on the cadence as we closeout 2024 and move into 2025.
Paul Wiseman: With the combination of some of the increased promotional.
Paul Wiseman: Are you guys, having the channel the new flavor launches.
Paul Wiseman: Is it.
Paul Wiseman: Is it correct for us to assume that we should see the trends in the scan data has improved sequentially month on month as we move through <unk> and then go into 2025.
Speaker Change: Yes, Thanks, Tim for the question.
Paul Wiseman: We do have a variety of promotional activities planned for Q4 as well the category is highly promotional as we know.
Paul Wiseman: There is a lot of new innovation, that's coming out from a variety of other brands within the category.
Paul Wiseman: We're watching velocity on a weekly monthly quarterly basis, we have a lot of great plans in place for the back half and heading into 2025, where we're really focusing on our growth drivers of increasing new to category expanding occasions.
Paul Wiseman: Usage occasion, and expanding as well as increasing availability. So those are things. We're monitoring we have a lot of plans in place just coming up in the next few weeks, we have a big program with J, Paul Mike Tyson, where title sponsor. So we'll be able to get some further national reach across the country and impressions and the teams are focused on driving.
Paul Wiseman: To retail.
Paul Wiseman: Yeah.
Speaker Change: Okay great.
Speaker Change: And then maybe if I can sneak in a quick follow up.
Speaker Change: If we think about.
Speaker Change: The pressure that the category has seen obviously.
Speaker Change: Still one of the better categories across retail just any thoughts on what you would want to see out of the consumer.
Paul Wiseman: And that would kind of.
Paul Wiseman: Accelerate category growth.
Paul Wiseman: And drive energy drink category growth as we go into next year, yes.
Speaker Change: Yes, I think when you look at the third quarter that we're reporting on today.
Paul Wiseman: It was troubled with traffic you saw a lot of our major retailers talk about reduced traffic and convenience.
Paul Wiseman: We need traffic to come back we need occasions to come back.
Paul Wiseman: But the good news is when you look at the Celsius portfolio.
Paul Wiseman: Our better for you and this performance energy and fitness lifestyle as a broad position that has a lot of tailwind behind it.
Paul Wiseman: The better for you is not slowing down and I think what's really exciting for us as we sit here today is in the quarter. We saw for the first time about 50% of the category is greater greater than 50, presenting the category is now sugar free so the sugar free movement. It continues to build scheme, we have an amazing sugar free portfolio.
Paul Wiseman: We need macro economic trends to improve we expect that to improve we saw some additional growth in the category over the last several weeks from the lows and actually the negative growth. We saw in the third quarter. So we feel with our function of refreshing taste profile and our fitness position, we're well positioned when the category gets back which we're confident it will.
Speaker Change: As you said the category has been a great growth driver in LRB, and we're going to increase availability as well, which we're really excited about.
Speaker Change: Alright, Thanks, guys I'll hop back in the queue.
Speaker Change: Thanks, Jim Your next question comes from the line of.
Speaker Change: Mill.
Speaker Change: Schedule or Wala of Jefferies. Your line is open.
Speaker Change: Hey, guys good morning.
Mill Schedule: Just a couple of things the first is <unk>.
Paul Wiseman: Specific to mentioned in your prepared remarks that the new incentive structure with Pepsi.
Speaker Change: You are positive about it can you give us maybe some more details on what's behind that and why that should drive CAD.
Speaker Change: Category acceleration from where we are now.
Speaker Change: Yes, when you look at it.
Speaker Change: The program that further alignment incentive program.
Mill Schedule: We implemented in 2000 and for US really further getting implemented into 2025 with additional focus and priority periods.
Mill Schedule: Finished knacks last month and coming off their annual operating plan meeting that was in Las Vegas that are grouped our leadership team as well as a variety of other team members attended.
Mill Schedule: We're getting great cross functional collaboration further alignment on our 2025 plans.
Speaker Change: It's we feel like we're going to have more of a cohesive approach as we're further aligned to truly drive this category getting additional availability expanding placements and getting Celsius in the hands of more consumers and disrupting that path to purchase which is so critical and Brent building, a brand and getting more trial.
Speaker Change: Thank you and I'll get to <unk>.
Speaker Change: Question is.
Speaker Change: Are they done.
Speaker Change: Inventories in the right place.
Speaker Change: Do we just move on with consumption from here.
Speaker Change: Presumably you've chatted with them and hope for.
Speaker Change: More surprises.
Speaker Change: But.
Speaker Change: I think we'd all like to know if there if they are at the place they want to be.
Speaker Change: Yes, we're watching the correlation between selling and sellout I'll throw it over to Jerry to provide some further color on that.
Speaker Change: Yeah. So we've got a handful of weeks visibility into the fourth quarter, we're definitely seeing a tighter correlation on a weekly basis between the inventory sell in in Depletions from our largest distributors warehouses into into retail when comparing to Q3, it's not fully matched yet. So there is some slight disconnect from the <unk>.
Speaker Change: Well through.
Speaker Change: Versus the sell in with retailers, but it's very slight at this point in time.
Speaker Change: Current rate, we should see alignment of sell in and sell through before Q4 and based on the trends we're seeing in the discussions we're having so our teams are definitely working together diligently to minimize any potential impact in Q4.
Speaker Change: With that said, we could see some pressure in the quarter November and December will be key drivers in this process so as things stand today.
Speaker Change: Depending upon how we end the year, we could see an impact where we see some positive benefit or potentially all the way up to maybe $15 million of pressure.
Speaker Change: Kind of our visibility into today, so that's kind of the range, we can offer and what we're seeing.
Speaker Change: From that perspective.
Speaker Change: Okay. Thank you did I hear that right another $15 million for cues that you just.
Speaker Change: I said, we could see actually see anywhere from a bit of a positive benefit from it.
Speaker Change: All the way up to around $15 million of pressure, depending upon how we kind of finish off the year, yes, we need to see out in November and December turned out.
Speaker Change: Okay got it thank you guys.
Speaker Change: Your next question comes from the line of Mark Astrachan of Stifel. Your line is open.
Mark Astrachan: Yeah. Thanks, good morning, everybody.
Mark Astrachan: Just quickly following up on that last comment.
Mark Astrachan: I guess.
Mark Astrachan: The question I was asked the question everybody keeps asking over and over again, but.
Speaker Change: Youre right Joe.
Mark Astrachan: Potentially accumulative headwind due to slightly positive I assume if we're all sitting here trying to look at this from from our desks.
Mark Astrachan: The best way to think about this would be whatever end demand for the scanner data would look like right. So if the sales trend.
Mark Astrachan: Our growing somewhere around where they are now low to mid single digits.
Mark Astrachan: How does that look from.
Mark Astrachan: Inventory.
Mark Astrachan: Destocking or restocking perspective, I guess, maybe it's something to bench market relative to current performance would be helpful. And then I've got a couple of other questions yes.
Mark Astrachan: Yes, it's a good a good perspective, Mark Saad I'd say, if you see if we start to see things pick up then we have a better opportunity to benefit from that perspective, if we see things kind of turned the other way. Then then I would expect a little bit more pressure.
Mark Astrachan: So kind of if we stay with.
Mark Astrachan: We're probably tracking to not have anything substantial but.
Mark Astrachan: You kind of a little better a little better for us a little worse as a little worse for us.
Speaker Change: Yeah that's helpful.
Speaker Change: And then an on market share.
Speaker Change: I think John you said resilient doesn't go to the word you used in the <unk>.
Speaker Change: Repaired remarks.
Speaker Change: It is hanging in there, but I suppose if you think about the share it's still down I don't know point point and a half from peak in May.
Speaker Change: I guess the question is where do you think that that consumer has has gone and what do you think Celsius can do to regain that consumer.
Speaker Change: Yes, I think when you look at it through that going through since that peak of May.
Speaker Change: There's been a lot of challenges we've expanded into the convenience channel that was the biggest opportunity for us within and shelf space gains.
Speaker Change: And we did see some challenges there with foot traffic. We are we know from some of the data that we're getting in from sarcoma.
Speaker Change: Our shopper is potentially taking maybe that one last trip that one less occasion. So we think theres, a big opportunity to really target increase consumption occasions, and bring those consumers back as confidence returns.
Mark Astrachan: On the category gets back to growth rate I'm, bringing new consumers in an expanding that we think we have a great portfolio of better for you movements there sugar free there we've gotten a lot of there's been a lot of innovation that's come in from some of the largest players.
Mark Astrachan: Our expanded trial, maybe that could shopper purchased another product.
Mark Astrachan: One of the new flavors that came in.
Mark Astrachan: On one of the other brands, but we feel confident in our portfolio, we feel confident in some of the new innovation, that's coming out for 2025.
Speaker Change: Coming out of next we talked to many of our customers and there's a lot of excitement around the energy category expanded additional shelf space.
Mark Astrachan: And we heard positive feedback from many retailers on resets for 2025, So we'll see how that ends up but we feel confident we're going to further expand space availability and we've got some great retailer marketing programs planned.
Speaker Change: Into 'twenty five and further alignment that I was talking about answering the prior question.
Mark Astrachan: Patsy, we're getting further alignment each and every week every month or.
Mark Astrachan: We are collaborating better each and every day.
Mark Astrachan: Getting into the third year of the relationship and really looking to leverage that.
Speaker Change: Got it and just just to follow up on that so your share it sounds like youre, saying its weaker.
Speaker Change: But it would be in Bath, Amazon Costco is that the way to think about it.
Mark Astrachan: Yeah, and that's historically as it if you go back even historically as it's been.
Mark Astrachan: Our share price as a percentage has been better in food drug mass and.
Mark Astrachan: And on Amazon. So that's the big opportunity is to close the gap, we got good share in a variety of Nat and a national retailer as well as regional players, we just need to close the gap, we need to get better placements, we need to disrupt that path to purchase.
Mark Astrachan: We need to continue to drive household penetration.
Mark Astrachan: And we feel that the consumers there we know the sugar free consumers there the better for you consumer that fitness lifestyle lifestyle consumer.
Mark Astrachan: Well positioned to capture that when this category gets back to growth.
Speaker Change: Great. Thank you.
Speaker Change: Your next question comes from the line of Peter Grom of UBS. Your line is open.
Mark Astrachan: Yes.
Peter Grom: Thanks, operator, good morning, everyone. So I guess.
Peter Grom: I wanted to ask about the inventory.
Peter Grom: Maybe just to the assumption for a slight benefit versus the 15 million dollar headwind is this something that you plan to update us on as we as we move through the quarter or maybe similar to what we saw in Q and then of that $15 million headwind, what's kind of underpinning that assumption I guess I'm just trying to make sure we don't have a similar.
Mark Astrachan: Negative update if you will versus similar to what we had in September.
Mark Astrachan: Came in far worse.
Speaker Change: Yes, just building on that you mentioned better alignment several times throughout this call, but how would you compare your visibility today on the inventory dynamic versus maybe what we saw in the spring in the summer.
Mark Astrachan: Okay.
Speaker Change: Yeah, I mean, I think we have good visibility and we have been working closer and closer together I think some of the what got caught up in Q3 was.
Speaker Change: Some very good optimization that took place.
Mark Astrachan: Some very efficient optimization and I think our largest distributor actually commented on that on their call. A couple weeks ago. So they did a great job with that we kind of got caught up in that.
Mark Astrachan: In Q3 and Q4.
Mark Astrachan: Kind of just looking at trends and we're trying to build the analysis kind of some.
Mark Astrachan: If things got a little better if things got a little worse, that's kind of the range. We provided based on the trends in the data were following.
Mark Astrachan: So that's our best estimate for you guys from that perspective.
Mark Astrachan: In terms of Q4 versus Q3, Q3 was really where the optimization took place.
Mark Astrachan: Q4 is more of a product.
Mark Astrachan: Where does the category go more so than I would say any kind of significant optimization.
Speaker Change: Okay. So that's helpful. Jerry I guess February as we stand here today is the best way to think about.
Mark Astrachan: North America sales to kind of take what we see in underlying scanner data on our call at this low to mid single digits and back out some sort of assumption.
Mark Astrachan: Conservatively $15 million is that fair yes.
Mark Astrachan: Yes.
Speaker Change: Okay and then one quick follow up just maybe building on the question on market share.
Speaker Change: Can you unpack some plans here in promotions innovations, but I guess a lot of your peers are kind of doing similar things. So I'd be curious what you think is actually different.
Speaker Change: Today versus maybe what you were doing over the course of the center and then within that we're kind of at a point, where if you kind of look at the sequential market shares.
Mark Astrachan: If you hold here youre going to start to see year over year declines is that something you think we should be braced for as we think about the track performance looking out over the next several weeks here.
Speaker Change: Yes, Peter.
Speaker Change: I think theres a lot of variables there within the share there.
Speaker Change: Theres a variety of things happening.
Speaker Change: Consumers from shopping pattern changes too.
Speaker Change: Innovation two.
Speaker Change: <unk> sentiment.
Speaker Change: We have a variety of different tactics and strategies in place to continue to drive new category consumption.
Speaker Change: Further activating our Gen Z or a college or University program, leveraging our better for you than the sugar free movement, increasing availability is something we're really working on.
Speaker Change: Further that's that alignment and collaboration with Pepsi to really further expand that.
Speaker Change: Cooler placements path to purchase and you look at some increased consumptions that occasions that foodservice, we've talked about in the prepared remarks, there's a lot of great opportunities ahead talking about some national reach.
Mark Astrachan: Like I just mentioned the J, Paul Tysons, Netflix supposed to be is the largest.
Mark Astrachan: Consumer Sporting event live sporting boxing event in history actually.
Mark Astrachan: So that'll be coming up in the next two weeks.
Mark Astrachan: A lot of reach a lot of eyeballs are further drive household penetration and then we got some great flavor innovation coming in.
Mark Astrachan: Further aligning that refreshing one would be the most refreshing energy drink out there. So we have a lot of great strategies, we continue to evolve contributing to maximize efforts target new consumers and build upon that so as the year goes we're working hard to continue to drive increased share and increased velocity and that's what these teams are focused on and we continue to evolve each day.
Mark Astrachan: <unk> getting better at executing and evolving.
Speaker Change: Got it thanks, so much I'll pass it on.
Speaker Change: Your next question comes from the line of Kevin Grundy of BNP Airbus. Your line is open.
Kevin Grundy: Hey, good morning, everyone.
Kevin Grundy: Couple of questions for me.
Kevin Grundy: Just kind of zooming out a bit.
Kevin Grundy: Kind of picking up on along the lines of questions around the corner.
Mark Astrachan: I was hoping consideration around introducing formal guidance, both near term and long term.
Mark Astrachan: And I ask that in the context.
Mark Astrachan: Number one.
Mark Astrachan: You pointed to monster.
Mark Astrachan: We can agree there kind of an outlier, whereas pretty much everyone else in staples issue some sort of guidance number one number two I would say the range of outcomes in the U S. Now is a heck of a lot more narrow than it was my goodness, even probably like.
Mark Astrachan: Six months ago.
Mark Astrachan: Because I think and then lastly, I think you guys would know it is not lost on you for a moment.
Mark Astrachan: I think there is.
Mark Astrachan: A strong desire in the marketplace.
Mark Astrachan: Greater visibility more sort of credibility around the results.
Mark Astrachan: And kind of where we're going both near term and long term.
Mark Astrachan: So your feedback there your thoughts there would be appreciated and then I can follow up.
Mark Astrachan: Yes, Kevin.
Kevin Grundy: There's a lot of variables in our models and our the outcome, especially over.
Mark Astrachan: Last several years.
Mark Astrachan: So theres a theres a lot of dynamics at play.
Mark Astrachan: At this time the company is not providing forward guidance, but it's not something that we can.
Mark Astrachan: Can reevaluate in the future, but at this time.
Mark Astrachan: The company is not providing forward guidance, it's something we haven't done.
Speaker Change: Okay. Thanks, Sean follow up Unrelatedly.
Speaker Change: International expansion.
Mark Astrachan: Thank you.
Mark Astrachan: In the past has been somewhat more measured agreement today for that matter any more measured sort of approach and I think the thinking was understandably.
Mark Astrachan: I was just a massive opportunity in the U S and share was just strictly sort of bumping right.
Mark Astrachan: And that's not where the company finds itself today. So is there a.
Speaker Change: Sounds school of thought if you will to expand international much more aggressively than the company is today youre well aware of where your international businesses as a percent of mix relative to monsters. So it seems like that's a potential value trigger where the company can really lean in to offset what has been a pretty market deceleration to you.
Mark Astrachan: <unk> business so.
Speaker Change: Great to get your thoughts there and then Relatedly do you think you have the right team in place the right leadership internationally in place to drive that sort of expansion.
Speaker Change: Yes, Kevin we just launched.
Speaker Change: I announced several further expansions this year partnering with Centurion for the U K Ireland.
Mark Astrachan: Australia, and New Zealand and France.
Mark Astrachan: So we have a lot of new markets coming onboard which the teams are working on we agree with you I think there's a lot of opportunities within an international expansion.
Mark Astrachan: Arent being very cognizant of timing and sequencing on the rollout of that.
Mark Astrachan: Temporary expectations as we continue to grow and scale we can.
Mark Astrachan: Things can turn out really well so the same health and wellness trends, we see in the U S. Our global trends.
Mark Astrachan: Still confident in our international expansion, we're going after a higher energy drink volume markets. We have great partners, we're getting great feedback from distributors and retailers in alignment with.
Mark Astrachan: With 711 in Australia, and New Zealand and Tesco in the U K and so.
Mark Astrachan: So there's a there's a lot of great things in the works and we're going to continue to move as fast as the brand gains acceptance at consumer acceptance of loyal consumer and roll forward.
Mark Astrachan: Not setting expectations at this point in time.
Speaker Change: Yeah, and just to jump in on that Kevin.
Mark Astrachan: In terms of.
Speaker Change: People are head count we are looking to stand up operations that will allow us from a global perspective to expand better or quicker at scale. So we did mention that on our prepared remarks, where we are standing up kind of a center of excellence from a supply chain perspective innovation marketing et cetera, So that will allow.
Mark Astrachan: <unk>.
Mark Astrachan: The optionality around moving quicker from that perspective.
Speaker Change: Okay. Thank you guys for the color I appreciate it and good luck.
Mark Astrachan: Okay.
Speaker Change: Your next question comes from the line of Michael luxury of Piper Sandler Your line is open.
Michael luxury: Thank you and good morning.
Michael luxury: Hey, good morning, just wanted to come back just wanted to come back to shelf space and the resets and maybe get a sense of how much of Thats already set for 2025 and kind of what updates you can give us on it.
Mark Astrachan: So I'm curious just maybe how you see the positioning competitively.
Mark Astrachan: Compare and contrast, maybe how you see yourself against goes and if it is joining forces with ADP.
Mark Astrachan: Does that change anything about the competition for shelf space, if not maybe for this round of resets maybe beyond.
Mark Astrachan: Just.
Mark Astrachan: Love to understand a little bit better how that is all set up.
Speaker Change: Yeah, Michael Great questions I think in regards to the resets like I said coming out of next there was a lot of great positive feedback around the brand.
Speaker Change: So we're confident we'll be able to gain additional shelf space better placements.
Mark Astrachan: And hopefully and gained secondary replacements as well increase that cold availability to take advantage of that as those impulse purchases. So.
Mark Astrachan: The brand is very well received by buyers were bringing in incremental consumers, which is very valuable for our retailers as well as our alignment with just one supplier of the year awards that over the last 12 months at a variety of major retailers around the country, including 711 circle, K and Casey's as well so we're being recognized by our retail.
Mark Astrachan: Partners.
Mark Astrachan: In regards to the acquisition of the most recent transaction with ADP and goes to great brands great opportunities for ADP. Just further reinforces the opportunity is that everyone's seeing within performance energy better for you fitness lifestyle, which is the lifestyle of the future and today. So.
Mark Astrachan: As I always say, where there's disruption there's opportunity. So I think that's on us on behalf of the teams.
Mark Astrachan: We're keeping a close eye there might be some transitions between distribution networks, but whenever there's disruption in any business. There's opportunity. So our teams will be on the look out we're working hard each and every day and where there's opportunity to take advantage, we will and we'll go after it.
Mark Astrachan: I think the ghost and seafood are great brands out there.
Speaker Change: That's helpful and just a follow up on the balance sheet.
Mark Astrachan: A little bit of the cash to work for the big beverage acquisition.
Speaker Change: But there is still a big pile there maybe any thoughts on.
Speaker Change: How to deploy that.
Speaker Change: Or I guess, just you touched on some of the strategic thinking on being vertically integrated should we expect more of that to come.
Speaker Change: Yes, I think when you look at our balance sheet, we have an extremely healthy balance sheet.
Speaker Change: Vertical most recent vertical integration with big beverage really allows us for additional flexibility take advantage of.
Mark Astrachan: Opportunities, we could do <unk> innovation and really helps us further optimize our orbit model, we're very focused on driving and gaining leverage with scale. So this is a major step forward as we look into 'twenty five we'll be able to gain further leverage and we're excited about that partnership. So it's a good ROI investment the cash on our balance sheet.
Mark Astrachan: Allows us to be opportunistic and have availability. So we feel we're in a good position.
Mark Astrachan: As we currently stand.
Mark Astrachan: Oh.
Speaker Change: So opportunistic, but not necessarily committed to further vertical integration.
Speaker Change: It depends.
Speaker Change: Yes.
Speaker Change: This was a plant that was predominantly Celsius, so as easy to pick it up and really bring it into our system and give us that flexibility around <unk> innovation and those kind of things.
Mark Astrachan: But we don't have a desire to become a co packers. So it's not something we look at.
Mark Astrachan: From a long term perspective, it was a great opportunity to pick the plant up we still believe in the orbit model and the partnerships. We've created with co Packers across the U S. As it was a co packer that we're already using as well. So it wasn't something that we certainly are going to move to them. It's definitely something we like our orbit model, we'd like to be a little asset light, but we think in.
Mark Astrachan: This instance, vertical integration the opportunity to leverage the business, a little bit and to have the optionality around <unk> and innovation.
Mark Astrachan: R&D was well worth it.
Speaker Change: Okay, great. Thanks, so much thank.
Speaker Change: Thank you.
Speaker Change: And your last question comes from the line of Eric Serrano of Morgan Stanley. Your line is open.
Eric Serrano: Great. Thanks for squeezing me in guys.
Eric Serrano: Two quick questions first how are you thinking about kind of evolving the execution playbook for next year. It seems like clearly red Bull is on the offense and going after the sugar free and flavor space. They have been since the summer winter seasonal realizing it's early.
Eric Serrano: But it seems to be off to a strong start and monster.
Eric Serrano: Having a big push this fall.
Eric Serrano: And upcoming winter and sugar free so how are you looking to evolve the playbook next year, whether it's drill deep strategy or any other.
Eric Serrano: Execution things and second.
Eric Serrano: On pricing surprised it didn't come up already.
Mark Astrachan: But.
Speaker Change: I believe that Monster is price increase was there with price increase was set for November 1st have you guys communicated anything to the trade yet and if so what's the.
Speaker Change: The timeline and magnitude.
Speaker Change: Alright excellent Eric.
Eric Serrano: The first question regards to around the execution and really what's your further identify the sugar free movement, that's taking place in the energy category with Red Bull now further leaning in as well as monster leaning in with some innovation and sugar free. This just reinforces the opportunity we have at Celsius as a strong solid number three.
Mark Astrachan: Player in the energy category. This shows the opportunities we have to further work with our retailers and bring more consumers and as this category not only growth gets back into growth mode, but further sees the sugar free energy.
Mark Astrachan: And percentage of business continue to grow at an increasing rate. So we think we're well positioned.
Mark Astrachan: The more we can talk about sugar free Greek and the opportunities that exist for better for you products Celsius is well positioned with our live fit mantra and bringing that a central energy for life. So we think the cost.
Mark Astrachan: Increased competition in this space further allows us to further expand over the next coming years and beyond.
Mark Astrachan: When you look at some of the strategies that we have for 2025 really going back to the three growth drivers we've talked about on prepared remarks, and then some of the other conversations new to category is going to come back.
Mark Astrachan: We know strongly more consumers need more energy than ever before and the consumers coming into the category for the first time today. They are well aware of energy drinks are well aware as part of a daily lifestyle, we're seeing coffee being replaced at coffee occasion, there's so many other occasions, where energy drink play with the new to category consumer that has evolved so we're going to continue to draw.
Mark Astrachan: That increased availability, we talked about that with some of our Pepsi partnership and alignment that increase in that path to purchase and then increasing consumption CMU foodservice you talked about Jersey, Mike's so many different opportunities to increase awareness have additional availability and points of disruption as we're moving through this is the third the third year and the relationships with Pepsi.
Mark Astrachan: And it's going to be a great year as we're heading heading forward in regards to pricing we have talked about that on prior calls we did roll out a price increase.
Mark Astrachan: But we have said, we're being cognizant of that and we don't expect significant benefit into 2025. So.
Mark Astrachan: We expect as promotional activities and opportunities exist, where we can gain leverage we will but we're not we have not provided that the amount nor have we provided any additional guidance that we will have additional.
Mark Astrachan: Leverage or pricing throw through flow through our financial statements and 25 are being conservative on that.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: That concludes our Q&A session I will now turn the conference back over to Chairman and CEO, John <unk> for closing remarks.
John Fieldly: Thank you operator, thank you to everyone, who joined US on our webcast. This morning Celsius continues to grow the energy category with our great tasting refreshing beverages that are on trend for todays fitness minded consumer our three growth drivers more consumers in more places more often will guide us now and into the future as we continue to grow the Celsius brand here.
Mark Astrachan: In the U S and around the World, we will share a full schedule of upcoming conferences that we'll be attending in the next quarter. Soon thank you to all of our employees, including our newest members of the Celsius family joining us from Big beverages. Thank you to all our customers investors partners, who are so supportive of Celsius on our mission to change the energy drew.
Mark Astrachan: Category, making it a great day grabber refreshing Celsius live fit.
Speaker Change: This concludes today's conference call you may now disconnect.
Mark Astrachan: It's the energy drink category, making it a great day grabber refreshing Celsius.