Q4 2024 Celsius Holdings Inc Earnings Call
Unknown Speaker 00.01.06
Jeanne Eno: Thank you for standing by. My name is Jeanne Eno, the conference operator today. At this time, I would like to welcome everyone to the Celsius Holding Inc. fourth quarter and full year 2024 earnings conference call.
Jeanne Eno: All lines have been placed on mute to prevent any background noise. 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.
Jeanne Eno: Good evening and thank you for joining Celsius Holdings' fourth quarter and full year 2024 earnings webcast. With me today are John Fieldly, Chairman and CEO, Jarrod Langhans, Chief Financial Officer, and Toby David, Chief of Staff. We'll take questions following the prepared remarks.
Jeanne Eno: Our fourth quarter and full year 2024 earnings press release was issued this afternoon, as well as a press release announcing our agreement to acquire Alani New.
Jeanne Eno: All materials are available on our website, ir.celciusholdingsinc.com, and on the SEC site, sec.gov. An audio replay of this webcast will also be accessible later tonight.
Jeanne Eno: Today's discussion includes forward-looking statements based on current expectations and information.
Jeanne Eno: These statements involve risks and uncertainties many beyond the company's control.
Jeanne Eno: Chelsea's Holdings disclaims any duty to update forward-looking statements except as required by law.
Jeanne Eno: Please review our Safe Harbor statements and risk factors in today's press release and in our annual and 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.
will present results on both a GAAP and non-GAAP basis.
Jeanne Eno: Non-GAAP measures like Adjusted EBITDA and their GAAP reconciliations are detailed in our fourth quarter earnings release and the press release announcing our acquisition of Alani New and non-GAAP financial measures should not be used as a substitute for our results reported in accordance with GAAP. With that, I'll turn it over to John.
John Fieldly: Thank you, Paul. Good evening, everyone. Earlier today, Celsius reported its fourth quarter full year 2024 financial results.
John Fieldly: and announced that it has entered into a definitive agreement to acquire Alani New, a leading brand in the U.S. energy drink category and one we greatly admire for its outstanding portfolio of functional products and a strong brand affinity among key growing consumer segments.
Speaker Change: Before providing more detail on this exciting announcement, Jarrod and I would like to discuss our recent results.
Speaker Change: Celsior has reported record 2024 revenue of $1.36 billion, which reflects the strong and growing consumer demand for premium, functional beverage alternatives.
Speaker Change: 2024 was challenging for many CPG sectors. The energy drink category was not immune to the effects. Yet Celsius delivered strong 22% volume growth year over year compared to the total energy category which grew 5%.
Speaker Change: We believe our resilience represents a bellwether for our portfolio brands and the consumer movement towards choosing zero-sugar, functional beverage options for their energy needs.
Speaker Change: Celsius has disrupted the category by innovating products that today's consumers want. We expected our competitors to respond eventually and it came with a flurry of new sugar-free products last year which supports our long-held belief that the future of functional beverages is sugar-free.
Speaker Change: Fortunately for Celsius, our portfolio is composed of the most refreshing, best-tasting, zero-sugar, functional beverage products available today.
Speaker Change: In 2024, Celsius introduced Celsius Essentials, a new line of 16-ounce performance energy drinks which expanded our presence and brought in new consumers who seek high performance and the refreshing great taste that Celsius delivers.
Speaker Change: We increased our total points of distribution in 2024 by 37% year-over-year.
Ensuring that Celsius is available in more places.
Speaker Change: to meet the immediate consumption demands, and our ACV reached new heights at 98.7 percent. Today, consumers can purchase cold, refreshing Celsius from more than 241,000 outlets in the United States.
Speaker Change: Last month, we launched a Celsius hydration, what opens up an entirely new category for our portfolio, increasing the variety of occasions when consumers can include Celsius in their daily routines.
Speaker Change: Importantly, for our retail customers, for the health of the category at large, Celsius contributed 30% of all category growth in 2024, continuing to bring in new consumers and increasing consumption.
Speaker Change: And I'm pleased to note that earlier this month, Celsius was the recipient of the 2024 7-11 Immediate Consumption Execution Award.
Speaker Change: This award recognizes outstanding suppliers for excelling in driving immediate consumption sales through strong merchandising, innovation, and promotional execution that enhances purchasing behavior.
Speaker Change: As we begin 2025, we believe we have the right strategy to drive sustained, long-term growth. Innovating zero-sugar, functional lifestyle products. Building a broad portfolio of premium, growing brands, and expanding our global presence alongside strong partners.
Speaker Change: With a best-in-class team and a rapidly growing community of consumers seeking better-for-you functional product alternatives, we are well positioned to continue to drive the evolution of the modern category.
Speaker Change: We believe Pepsi, right sizing across inventories and the pursuit of efficient operations is positive for our long-term health of our supply chain.
Speaker Change: We believe our communication with one another remains strong, and we look forward to a highly productive 2025 and beyond.
Speaker Change: The last time we spoke, I discussed our three growth drivers. We pursue growth by reaching more people, in more places, more often.
Speaker Change: In the past few months, we have launched six brand-new flavors, expanded distribution of two previously lead-launched flavors, and introduced new multi-pack varieties and sizes that cater to consumers' desires for variety and value.
Speaker Change: I also mentioned Celsius hydration, which is a brand new category for us. We believe this new line will excite our consumers and grow the value of our functional products in their daily lives. You can now find our Celsius hydration on Amazon and on a growing number of retailers.
Speaker Change: Ecom and food service continue to be a strong channel for us and Celsius is regularly among the top brands on Amazon.
Speaker Change: Starting in March, Celsius will begin to be sold at certain subway restaurants, representing a total opportunity of 18,000 locations nationwide.
Speaker Change: Celsius also gained distribution in Home Depot, which is another strong, non-traditional customer.
Speaker Change: Our portfolio is strengthened even more with today's exciting news that Celsius has agreed to acquire leading female-focused, functional wellness brand, Alani Nu.
Speaker Change: Before talking more about this great opportunity, I'll hand it off to Jarrod to provide some details on our fourth quarter and full year financial results. Jarrod.
Jarrod Langhans: Thanks, John. Our fourth quarter in several ways returned us to more traditional results after a very uncharacteristic third quarter of 2024, such as our solid gross margin.
Jarrod Langhans: However, there were one-time costs related to our Big Beverage acquisition, expenses related to the creation of our new Global Center of Excellence, as well as several one-time costs including legal settlement and penalties paid to our co-packers that impacted results.
Jarrod Langhans: In addition, our top line was impacted by some promotional allowances, as well as the impact of a fully implemented incentive program with our largest distributor, as well as some timing of orders.
Jarrod Langhans: This resulted in revenue and adjusted EBITDA each declining 4% in the fourth quarter compared to a year ago.
Jarrod Langhans: With that said, our quarterly gross margin improved 240 basis points to 50.2% as a result of lower freight costs and savings on the purchase of raw material, and our adjusted EBITDA margin was flat at 18.9%, each on a year-over-year basis.
Jarrod Langhans: SG&A in the fourth quarter increased 73% to $185 million, primarily due to accrued legal expenses related to a case we have on appeal, as well as one-time restructuring and co-packer charges.
Jarrod Langhans: We recognize the net loss of approximately $18.9 million in the fourth quarter down from a net gain of $50.1 million last year due to the aforementioned costs. Adjusted diluted EPS for the fourth quarter was $0.14.
Jarrod Langhans: For the full year, revenue was approximately $1.36 billion, an increase of 3% from a year ago, seeing growth from both the North American business as well as our international business, which was supported by our expansion into Canada, the UK, Ireland, France, Australia, and New Zealand.
Jarrod Langhans: Gross profit increased 7% to $680 million and our gross profit margin increased 220 basis points to 50.2% for the full year compared to a year ago.
Jarrod Langhans: As a percentage of sales, sales and marketing was 25.9% in 2024 compared to 20% in the prior year, same period, due to additional advertising activity.
Jarrod Langhans: G&A expenses and percentage of sales was 12.8% for the full year 2024 versus 7.8% in the prior year, same period, due to expenses related to an ongoing litigation and other one-time costs.
Jarrod Langhans: Net income for the year was approximately $145 million, a 36% decline compared to a year ago as a result of the timing of distributor orders and the previously mentioned costs.
Jarrod Langhans: Adjusted diluted EPS for the full year was 70 cents. Despite the pressure experience in the second half of 2024, we maintained a cash balance of approximately 890 million dollars even after acquiring Big Beverages and we generated positive full year operating cash flow.
Jarrod Langhans: We will continue to pursue growth with further investment in brand support and innovation. We are also focusing our efforts on further cost management and supply chain efficiencies which are expected to support margin improvement.
Jarrod Langhans: As mentioned last quarter, with the acquisition of Copacker Big Beverages, we gained new innovation capabilities and greater control of our supply chain, as well as financial benefits that we will continue to realize over the near and long term.
Jarrod Langhans: And we now look to further expand in the Better For You Functional Lifestyle category with our planned acquisition of Elani New. And with that, I'll turn it back to you, John. Thanks, Jarrod. I'm excited to talk to you today about the acquisition we believe will create significant value for our company and our shareholders.
Jarrod Langhans: We entered into a definitive agreement to acquire Lonnie New for 1.8 billion comprising the mix of cash and stock
Jarrod Langhans: Alani New is a growing female focused brand that delivers functional, great tasting wellness products for a growing community of Millennials and Gen Z consumers.
Jarrod Langhans: Alani News stands out for its authentic brand voice, bright and playful flavors, and unique connections with its community of consumers.
Jarrod Langhans: They combine functional benefits with a fun, approachable personality, making wellness aspirational yet accessible.
Jarrod Langhans: The transaction delivers several compelling strategic benefits. First, together, we create a leading, better-for-you, functional lifestyle platform at the intersections of consumer megatrends.
with the addition of Alani New.
Jarrod Langhans: The Combined Celsius Platform delivers pro forma $2 billion in sales in 2024 across a differentiated energy portfolio that is firmly aligned with the ongoing consumer shifts towards premium functional beverage options that cater to health and wellness and active lifestyles. Second,
Jarrod Langhans: This deal combines two growing, scaled energy brands with clear category tailways.
Jarrod Langhans: The transaction is expected to enhance Celsius position as an innovative leader in the large growing energy category, which is projected to grow at a 10% CAGR from 2024 to 2029.
Jarrod Langhans: Third, the deal provides complimentary brand positioning and gives us expanded access to a fast-growing, wellness-focused audience that is driving incremental category growth.
Jarrod Langhans: Fourth, our combination leverages our strengths and capabilities to drive our next phase of growth. The added breadth of the combined platform is expected to further strengthen the company's position with ample resources for ongoing growing investment.
Jarrod Langhans: Both brands will be well positioned under the Celsius platform to drive continued distribution gains, access consumers and growing adjacencies, drive innovation and brand awareness, and achieve incremental category growth and propel further global expansion.
Finally.
Jarrod Langhans: The combination enhances Celsius' top-line growth algorithm and is expected to be cash DPS secretive in year one with a meaningful synergy of opportunities. Additionally, we expect $50 million of run rate of cost synergies to be achieved over two years post-close.
Jarrod Langhans: Contributing to a strong pro forma profitability and significant cash flow generation.
Jarrod Langhans: We see opportunities to continue to grow Elani News' national distribution, included in key coastal metro markets, drive continued flavor and format innovation, and expand globally.
Jarrod Langhans: We also expect to drive continued innovation and product development to draw more consumers into the wellness lifestyle that Illini New offers.
Jarrod Langhans: Additionally, we believe that we will each benefit from our combined strengths at retail and significant resources to continue to invest in the growth opportunities.
Speaker Change: Upon closing, Alani New will operate within Celsius, and key leaders from Congo Branch, which operate Alani New, have agreed to continue as advisors to Celsius to help ensure continued business momentum.
Speaker Change: The agreement has been approved by the Celsius Board of Directors. The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second quarter of 2025.
Speaker Change: In short, this combination advances our strategies, strengthens our position, and paves the way for long-term value creation.
Speaker Change: Celcius was a pioneer of the Better Few energy category over 20 years ago, and we are thrilled to expand our portfolio with the acquisition of Alani New.
Speaker Change: We believe we have the right strategy to drive sustained long-term growth, and the acquisition of Elani-Nu is expected to strengthen Celsius' position as an innovative leader in the large, growing global energy category.
Speaker Change: And now, I'll turn it over to Jarrod to talk more about the financial terms of the transaction. Jarrod.
Jarrod Langhans: Thank you. As John mentioned, we're excited to partner with Alani New to create a leading, better-for-you, functional lifestyle platform.
Jarrod Langhans: Under the terms of the agreement, Celsius will acquire Alani New from co-founders Katie and Hayden and Congo Brands co-founders Max and Trey for $1.8 billion, comprising a mix of cash and stock, including a potential $25 million earn out based on 2025 performance.
Shop Infrastructure.
Jarrod Langhans: We intend to fund the cash consideration using a combination of $900 million of fully committed debt financing and approximately $375 million of cash on hand.
Jarrod Langhans: We expect that our liquidity position will remain strong following the transaction with a pro forma net leverage of approximately one times with ample cash on the balance sheet. This allows us to continue to opportunistically pursue growth investments that drive shareholder value.
Jarrod Langhans: Stock consideration will be subject to a lock-up agreement, which will be released over a two-year period, allowing long-term interest to drive future growth and value creation. At closing, we will enter into a transition services agreement and certain consulting agreements to help retain key brand leadership and support the integration process.
Jarrod Langhans: We look forward to keeping you updated on the progress of the deal in the coming months. With that, we'll open up the line for your questions.
Transcription by CastingWords
Jarrod Langhans: Thank you. We will now begin the question and answer session.
Jarrod Langhans: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.
Jarrod Langhans: If you would like to withdraw your question, simply press star 1 again.
Jarrod Langhans: If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We do request for today's session that you please limit to one question.
Again, press star 1 to join the queue.
Speaker Change: And your first question comes from the line of Camille Cajuala of Jefferies. Please go ahead.
Camille Cajuala: Hey guys, good evening. Can you maybe talk about the positioning of the two brands and how you plan to solve for any overlaps?
Unknown Speaker, Unknown Speaker, Unknown Speaker,
Speaker Change: Great question. We're excited about the addition of Alani New into our portfolio at Celsius Holdings. The Alani New brand has a very unique consumer base, which is incremental to our overall portfolio and complimentary to Celsius.
Speaker Change: Social media, as an example, is about a 92% female following. And we look at the
Speaker Change: really any cannibalization potential. It's fairly low, we actually see a much higher trade in between brands, looking at some of the top tier brands in the category as well. So this is truly incremental. And Lonnie New has been also contributing to the category growth rate. So this positions us with two great portfolios to go after the modern energy category.
Unknown Speaker 00.25.00
Is there any involvement by PEPSI financially?
Unknown Speaker. Unknown Speaker.
Speaker Change: We're just we're just announcing today the transaction, you know, it's
Speaker Change: It's got to go through customary closing procedures and regulatory approval. We're expecting it to close sometime in the second quarter.
Speaker Change: Your next question comes from the line of Jim Salera with Stevens. Please go ahead.
Jim Salera: Yes, good afternoon. Thanks for taking our questions. Um, I'm willing to maybe drill down on how you think Alani News is going to add incrementality and maybe offering a little bit more focus on the Celsius piece of the portfolio and
Jim Salera: What I mean by that is, if we look at the overall energy drink category growth, obviously the Celsius consumption growth and the standard data has come down.
So we kind of expect the
Jim Salera: you know, legacy Celsius brand to grow in line with the category and then Alani knew
Jim Salera: to be kind of the incremental lift there? Or do you expect the the Celsius brand to get back to above trend?
Jim Salera: Growth, and then have the Alani new brand come come over the top and kind of compliment that as well.
Jim Salera: Yeah, no, absolutely, Jim. I mean, if you look at the scanner data, we got off to a slow start in Q1 with timing of promotions versus what we were cycling last year and innovation. We have a robust innovation strategy with the Celsius portfolio in 2025 and really excited about it.
Jim Salera: You know, we feel really bullish, especially the way the portfolio is positioned with Better For You, Fitness Lifestyle, the 50-50 mix, approximately male and female. We are well positioned to capitalize on the trends and the energy category. And the category in 2024, tipping to greater than 50% of the category now is sugar-free with a Celsius portfolio. We see great tailwinds to continue to drive that business forward in that portfolio.
When we look at Iwani.
Jim Salera: and you look at where it is in its growth cycle and distribution.
Jim Salera: It's really about, you know, almost where Celsius was two years ago. There's a lot of additional ACV to unlock, especially untapped in food service and also inconvenience. So there's a lot of opportunities with both brands and both brands are going to be incremental to additional revenue growth and profitability.
Speaker Change: Okay, great. And then maybe if I could just sneak in one quick follow-up. I'm sure there'll be a lot of questions on the energy piece of Alani, but I know they also have...
Unknown Executive, Paul Wiseman
Speaker Change: Energy Centric. Well it really gives us both these brands together offer a better for you platform.
Speaker Change: There's a lot of opportunities, especially with Alani, expanding into adjacent categories. And, you know, I think that that opens up scale. Health and wellness continues to grow and become part of the daily lifestyle of all of our consumers. So it's incremental on a go-forward basis.
Unknown Executive, Paul Wiseman
Unknown Speaker
Great. Bye.
Speaker Change: Your next question comes from the line of Peter Grom with UBS. Please go ahead.
Peter Grom: Thanks, operator. Good evening, everyone. So I want to ask them just maybe, you know, what to expect as we look out through the spring here, just in terms of shelf resets.
Peter Grom: Yeah, I'd be curious, you know, can you just talk about what you're expecting for kind of the core Celsius brand, you know, particularly as velocity trends have been a bit more challenge. And then, you know, specifically, do you have any visibility at this point in time around what you were expecting for a shelf-space gain for Elani New?
Yeah, with the Celsius portfolio coming up.
Peter Grom: We expect roughly around, you know, 15 to 20% expansion in distribution within our given retail, you know, sets coming out of NACs.
Peter Grom: and expansion we're seeing in large format as well. You're seeing a lot of grocery and large format lean in even heavier in energy. So we're really excited about that, where this category is evolving.
Peter Grom: The energy category, keep in mind, is getting to be a much larger portion of total LRV and the beverage categories. And you're seeing the retailers in large format move into that space, trying to take advantage of the consumers, which are
Peter Grom: stocking up on 12 packs and variety packs, you're seeing that now more and more, the energy category has evolved from and is evolving from immediate impulse purchase.
Peter Grom: to part of a daily lifestyle and daily routine, and, you know, large formats taking advantage of that opportunity. So about 15 to 20% we expect. Also, improved placement within retailers is really key. We're working on we got to get more cold placements, we got to continue to disrupt the path to purchase with our with Celsius portfolio.
Peter Grom: and then Alani is expecting pretty sizable distribution gains as we are entering through the reset season, especially in the convenience channel.
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Speaker Change: Your next question comes from the line of Eric Serrata with Morgan Stanley. Please go ahead.
Good afternoon and congratulations on the deal.
Quick follow up on the distribution side.
Does Pepsi have any right at first?
Speaker Change: refusal for distributing other brands that you buy. And if hypothetically, Alani were to change distribution networks, who would be responsible for the distributor buyouts?
Speaker Change: and then turning to the business, what was the change in Pepsi inventories in the quarter? And, you know, I guess what are your expectations as you look to the first quarter? Thank you.
Speaker Change: Yeah, just a comment in regards to, you know, the distribution kind of answered that before right now we're focused on closing this transaction. We're focused on servicing customers and retailers and suppliers.
Jarrod Langhans: and that's our main focus right now. The companies are running separate until closing, but I'll let Jarrod comment on the inventory levels in the Q4. Yeah, so it was between eight and 10 million.
in terms of the impact.
Speaker Change: Your next question comes from the line of Jarrod Pascarelli with Needham and Company. Please go ahead.
Jarrod Pascarelli: Great. Thanks very much for the question. Congratulations on the deal. John, maybe a question just on the basis for the transaction.
Essentially, like
How do you put
the transaction in the context of the near-term slowdown.
Jarrod Pascarelli: that you've seen in your core portfolio. Like I said, another way, like did the near-term slowdown expedite the process for you to get more aggressive with M&A and buying scale? Or is this something that, you know, you've always viewed as an attractive asset, have been contemplating for a while and, you know, decided now is the right time? I guess just some color on how the deal materialized would be helpful. Thank you.
Jarrod Pascarelli: Yeah, no, great question. And we are extremely confident in the Celsius portfolio and leveraging the tailwinds we see in the energy category. We recognize we're off to a slow start. The innovation that we have planned for 2025, we're extremely excited about it.
Jarrod Pascarelli: and the portfolio continues to resonate with a broader consumer. And it's a great flavors, great innovation. The fitness lifestyle is strong and the Celsius portfolio is strong.
The opportunity came up with Alani New.
It really is incremental to our consumer base.
Jarrod Pascarelli: When you look at it, we really admire what they've built.
Jarrod Pascarelli: And when you're building scale, we are right now as a solid number three player in energy and a combination of these two.
Unknown Speaker Great brands together.
Jarrod Pascarelli: We built an amazing company here, mentioned in Q4, Jarrod talked about it in his prepared remarks about vertically integrating with our co-packers. We have synergies and opportunities. We're focused and disciplined to drive shareholder value, gain leverage through the systems and processes and infrastructure we've built, and it's a natural fit for us.
Speaker Change: Your next question comes from the line of Andrea Taclera with JP Morgan. Please go ahead.
Andrea Taclera: Thank you operator and good afternoon everyone. I just wanted to follow up on the most recent consumption trends for
Speaker Change: for Celsus in particular, and if you can comment also, Lennie.
Speaker Change: a offset from gaining distribution. And related to that, also, how has been the reception? I know you're lapping a very strong innovation, as you mentioned, but you also have, you know, a strong pipeline coming up.
Speaker Change: I understand that mainly the convenience stores were quite receptive from the fair that you're getting, you know, good reception for the new, for the innovation, but just wondering.
Speaker Change: All these dynamics of distribution with Pepsi, how we should be seeing, you know, this improvement, if any, or should we expect that to be more evident in the second quarter for both for both brands. Now, also a comment on Alani. Thank you.
Okay, excellent. A lot to unpack there.
Speaker Change: You know, in regards to the Celsius portfolio, like I said, we're confident in the Celsius portfolio. We have some weakness in Q1. We are cycling some pretty high hurdles from prior year with the launch of the essentials line and some really strong innovation in Q1. We have an innovation packed
Speaker Change: back half and into the summer beverage season. We're excited about our innovation. We have some great properties we'll be leveraging and tent pole programs.
Speaker Change: mentioned in the prepared remarks, the recent award we won at 7-Eleven. We're partnering with retailers. It's really a timing. And then the incrementality with Alani, it's going to be incremental, and they're gaining distribution. They're resonating with a unique consumer segment in the energy category, which continues to get broader. Energy has gone mainstream. It's not as niche as it used to be. Health and wellness trends are here. We're actually presenting
Speaker Change: at Cagney tomorrow, and everyone's talking, all these consumer brands are talking about health, wellness.
the growth of sugar-free.
Speaker Change: We have two of the greatest portfolios in beverage that are sugar-free and aligned with the health-minded consumer. So we're excited about where we're headed with this portfolio. It's a great combination.
Speaker Change: Your next question comes from the line of Michael Lavery with Kuiper Sandler. Please go ahead.
Unknown Speaker
Speaker Change: Thank you. Good evening. I had top of my list what you're going to do with your cash, but I think I'll skip that one now.
Speaker Change: and just maybe see if you could unpack the share trends from 24 a little bit. You obviously had sequential, some pressure, you know, some pressure sequentially over the course of the year.
Speaker Change: Not meant as an Alani question, but it certainly could be related. Any diagnosis of where SHARE was going, or how to think about what really made some of those changes, and how to best address it?
Speaker Change: And then maybe if you could also just give it if I could ask a quick follow-up on the subway news you said
Speaker Change: that it'll go to some of those outlets. Is it each franchisee's option or decision? How do we think about how that might unfold?
Speaker Change: No, great questions. I, you know, when you look at, you know, we really hit.
Speaker Change: We started to see some challenges and the whole category was under challenge in Q3. We were impacted when the category went negative for the early first time in many years within growth.
We also saw.
Speaker Change: Really steep competition come in in the sugar-free category from some of the top players
that are getting trial.
but with a refreshing Celsius portfolio.
Speaker Change: and a strength of a great ingredients and our positioning. And the better for you healthy halo, we feel we are well positioned for this category of all. Getting trial on new flavors, consumers are trying new flavors that are out there. And you saw that with two of the top major players leaning heavily in sugar-free.
Speaker Change: But we have a sustained, long-term, loyal consumer. We have strategies to build upon that. And it's going to come to fruition in 2025 with a great innovation portfolio that we have planned, and some of our targeted marketing initiatives, and also broadening our reach.
Speaker Change: Your next question comes from the line of Sean McGowan with Roth Capital Partners. Please go ahead.
Thank you. I was wondering if you could
Sean McGowan: tell us how much the promotional allowances that you talked about in the past impacted both revenue and gross margin in the quarter. And then more generally, do you think this is a level of gross margin that could be sustained, particularly with the aluminum in the background?
Sean McGowan: Yeah, in terms of the leverage of the promotional activity with some of the the noise around timing from a from distributor orders We did see a little bit elevated call it contra revenue across 2024 versus 2023 and even 2022 We look to get that back on track Next year, we will have the incentive plan fully in place
Sean McGowan: in Q1, Q2, Q3, Q4 was already baked in, but you'll see a little bit of extra incentive in Q1 and Q2, because it was a phased in approach, but we will also be benefiting from the full implementation of the program around things like inventory on display, priority periods, those kinds of things like that. So we look to that to get back kind of to the more normalized basis. As it relates to.
Sean McGowan: gross profit. We are evaluating, you know, all the various things, you know, the tariffs are in, the tariffs are out, those kind of things. We think we're somewhat
Sean McGowan: You were in good shape as it relates to a lot of the the pieces We don't think the aluminum from up north coming in would significantly impact us. Although there could be there could have some impact
Sean McGowan: Could that pull the margin back a little bit? Definitely. I think we've shown this year that we're pretty resilient in order to get that 50% on a full year basis.
Sean McGowan: Although I prefer to be conservative and say, you know, could it be high 40s with the tariffs?
Sean McGowan: I think 50% is a solid number from that perspective. And then as it relates to Alani New, we'll look to talk more about kind of their margin profile when we get, you know, after we close. I think right now it's too early to really bake that in. There is some data on the investor deck that you can see kind of
Sean McGowan: their profile leads from an EBITDA margin perspective and a revenue perspective. And when we're fully synergized, we'll look to be leveraging the business and look for it to be incremental from a margin perspective.
Speaker Change: Your next question comes from the line of Kevin Grundy with BNP Paribas. Please go ahead.
Kevin Grundy: Great, thanks. Good evening guys and congrats on the deal. Jarrod, I wanted to pick up on that line of questioning around margins.
Kevin Grundy: Two part question. So just on the 50 million cost synergies, maybe just identify key areas, how much visibility you have. Is there any potential upside there? And then understanding you may want to be a little bit hesitant. Is there any reason, at least in principle, why the combined business, your EBITDA margins should not look something like Monster's EBITDA margins?
Kevin Grundy: in the U.S. So your thoughts there would be helpful. And then I have a quick follow-up for John. Thanks.
you know, not just kind of
Kevin Grundy: Picking a percentage of revenue or anything. So we're looking at cogs
Kevin Grundy: We're looking at different, you know, using our scale and some of
our competitive purchasing power, and then also
Kevin Grundy: Specific to looking at our Salesforce, which we were 500 strong and really leveraging that our global supply chain where we have our global HQ, where we have kind of a supply chain of procurement program, etc. That will really be able to drive savings. So between those areas and then some back shop, of course, as well.
And then what was the second part, Kevin?
Kevin Grundy: As it pertains to this deal, what are you most concerned about? What would you share with investors in terms of managing that to ensure that this goes smoothly and there's no bumps in the road?
Kevin Grundy: The founders are working with us on the integration and we'll be, as Jarrod mentioned, we'll be working on a transition agreement for two years, making sure the brands are fully integrated. We're driving the synergies and getting the success and maintaining these brands. So we feel very confident in the integration.
Speaker Change: Your next question comes from Mark Sarton with Stiefel. Please go ahead.
Mark Sarton: Yeah, hey, thanks, everyone. I guess, you know, the one question that
Mark Sarton: I've been getting that I'm trying to figure out is how do you maintain the momentum that Alani has had? If you take a look at their market share gains, you know, they've kind of doubled where
They were at the start of the year.
and maybe talk a bit about
Mark Sarton: What has driven those share gains from a consumer perspective? You know, it seems from the outside in, maybe a little bit of those share gains would come at Celsius' expense. And so, you know, maybe talk about how you think about
Mark Sarton: Sustaining that consumer and what gives you confidence that you're spending what you are on this deal that you can keep those consumers kind of over the next several to many years. Thank you.
Mark Sarton: Well, as we mentioned on the prepared remarks and the prior questions,
Mark Sarton: We are confident that the two portfolios combined will add strength in the category and that the Alani consumer is incremental to our total portfolio.
Mark Sarton: As we know, the consumers in the energy category are loyal.
The brand and Alani has a true identity and it's
Mark Sarton: It's connecting in an emotional level with consumers and this consumer segment of
Gen Z, female Millennials.
Mark Sarton: is real. And it's demonstrated that over the years, there's a massive growth opportunity as the energy during consumer continues to broaden. The category is gone mainstream.
Mark Sarton: and it's not just a male dominant category. It is going after all consumers, all ages, and it's the modern day for the energy category, and we've built a modern portfolio to take advantage of the opportunities and the tailwinds we see.
Speaker Change: Your next question comes from the line of Jeff Van Sinderen with B. Riley Securities. Please go ahead.
Hi everyone, let me add my congratulations.
Speaker Change: John, I wonder if you can tell us what the ACV of Alani is today. And also, do they have any international penetration? And then if we can just switch to marketing for a minute this year, thinking about the Celsius brand, how you plan to broaden your reach with marketing, and then how might that change with Alani?
Speaker Change: Yeah, in regards to Jeff, in regards to the international opportunity, you know, that's massive. You know, they have a small amount of international distribution. And when you're looking at, you know, the opportunities, even with Celsius, we just expanded internationally into UK, Ireland, Australia, New Zealand, and France, and we're just getting started in the first inning. So both brands have a tremendous opportunities to capitalize on
Speaker Change: growing health and wellness trends in the energy category, which in 2024 was approximately $90 billion.
Speaker Change: and growing at an expected CAGR from 2024 to 2029 at 10%. So it's a really great category to be in, in both these brands positioned to attract new consumers coming in and broaden the energy category overall. As I mentioned, it's gone mainstream.
Unknown Executive, Paul Wiseman
Speaker Change: Due to time constraints, that concludes our Q&A session. I will now turn the conference back over to CELCIA's Chairman and CEO, John Fieldly, for closing remarks.
John Fieldly: Thank you, Operator. Thank you to everyone who joined us today on the webcast this afternoon. Celsius continues to grow the energy category with our great tasting, refreshing beverage that is on trend for today's consumers, shifting towards premium functional beverage and options and health and wellness and active lifestyles.
John Fieldly: Over a third of growth drivers driving more people in more places more often will guide us to the future. And we now see further expansion with the opportunities of Elaninu to double down in the category that we see leveraging the tailwinds. Make it a great day.
John Fieldly: Go grab a refreshing Celsius and Elaninu, and let's live fit.
Speaker Change: This concludes today's call. Thank you for joining. You may now disconnect.