Q2 2026 Celsius Holdings Inc Earnings Call

August 6, 2026

Speaker #3: If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now hand the call over to Paul Wiseman, Investor Relations at Celsius.

Speaker #3: Please go ahead.

Speaker #4: Good morning, and thank you for joining Celsius Holdings second quarter 2026 earnings webcast. With me today are John Fieldly, Chairman and CEO, Eric Hansen, President and Chief Operating Officer, Jarrod Langhans, Chief Financial Officer, and Toby David, Chief of Staff.

Paul Wiseman: Good morning. Thank you for joining Celsius Holdings Q2 2026 earnings webcast. With me today are John Fieldly, Chairman and CEO, Eric Hanson, President and Chief Operating Officer, Jarrod Langhans, Chief Financial Officer, and Toby David, Chief of Staff. We will take questions following the prepared remarks. Our Q2 earnings press release was issued this morning with all materials available on our website, ir.celsiusholdingsinc.com, and on the SEC's website, sec.gov. An audio replay of this webcast will also be accessible later today. Today's discussion includes forward-looking statements based on our current expectations and information. These statements involve risks and uncertainties, many beyond the company's control. Celsius Holdings disclaims any duty to update forward-looking statements except as required by law.

Speaker #4: We'll take questions following the prepared remarks. Our second quarter earnings press release was issued this morning, with all materials available on our website, ir.celsiusholdingsinc.com, and on the SEC's website, sec.gov.

Speaker #4: An audio replay of this webcast will also be accessible later today. Today's discussion includes forward-looking statements based on our current expectations and information. These statements involve risks and uncertainties, many beyond the company's control.

Speaker #4: Celsius Holdings disclaims any duty to update forward-looking statements except as required by law. Please review our Safe Harbor statements and risk factors in today's press release and in our most recent filings with the SEC, which contain additional information and a description of risks that may result in actual results differing materially from those contemplated by our forward-looking statements.

Paul Wiseman: Please review our safe harbor statements and risk factors in today's press release and in our most recent filings with the SEC, which contain additional information and a description of risks that may result in actual results differing materially from those contemplated by our forward-looking statements. We will present results on both a GAAP and non-GAAP basis. Non-GAAP measures like adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, adjusted SG&A, and adjusted SG&A as a percentage of revenue and their GAAP reconciliations are detailed in our Q2 press release. Non-GAAP financial measures should not be used as a substitute for our results reported in accordance with GAAP. With that, I will turn it over to John.

Speaker #4: We will present results on both a gap and non-gap basis. Non-gap measures like adjusted EBITDA, adjusted diluted earnings per share, adjusted SG&A, and adjusted and their gap reconciliations are detailed in our second quarter press release.

Speaker #4: And non-gap financial measures should not be used results reported in accordance with GAAP. With that, I'll turn it over to John.

Speaker #5: Thank you, Paul. Good morning, everyone, and thank you for joining us today to discuss our second quarter 2026 results. We delivered second quarter revenue of $818 million.

John Fieldly: Thank you, Paul. Good morning, everyone, and thank you for joining us today to discuss our Q2 2026 results. We delivered Q2 revenue of $818 million, reflecting the execution of the plan we laid out coming into the year. We completed the Rockstar integration. We moved through the most active phase of our SKU optimization on brand Celsius. Gross margins remained consistent with Q1 despite a challenging commodity environment

Speaker #5: Reflecting the execution of the plan we laid out coming into the year, we completed the rockstar integration, we moved through the most active phase of our SKU optimization on brand Celsius, gross margins remained consistent with the first quarter despite a challenging commodity environment.

Speaker #5: And we continue to scale Alani New, all while our combined portfolio maintained a strong position at approximately $1.5 energy drinks purchased in the United States or roughly 20% dollar share in tracked channels.

John Fieldly: We continue to scale Alani Nu, all while our combined portfolio maintain a strong position at approximately one in five energy drinks purchased in the United States, or roughly 20% dollar share in track channels. Energy remains one of the strongest performing categories in beverage, and our portfolio is key to driving that growth. New consumers are entering the category through our brands, and we are winning new occasions with them. We are a key growth driver for the energy category, and we are just beginning to unlock the full potential of our expanding portfolio. Today, we have 2 billion-dollar brands and a third brand with a clear role in the portfolio, and each one reaching a differentiated consumer segment. Celsius is the performance brand. It holds up across a full range of active, health-conscious consumers. Not one sport, not one age group, but a mindset of active living.

Speaker #5: Energy remains one of the strongest-performing categories in beverage, and our portfolio is key to driving that growth. New consumers are entering the category through our brands.

Speaker #5: And we are winning new occasions with them. We are a key growth driver for the energy category, and we are just beginning to unlock the full potential of our expanding portfolio.

Speaker #5: Today, we have two billion-dollar brands and a third brand with a clear role in the portfolio and each one reaching a differentiated consumer segment.

Speaker #5: Celsius, is the performance brand. It holds up across a full range of active, health-conscious consumers, not one sport, not one age group, but a mindset of active living.

Speaker #5: That is a gym's run clubs, trainers, daily movement. Alani New wins on flavor, and self-expression. Recruiting younger, more female consumers. And for many of them, it is the first energy brand they ever try, which makes it an entry point into the category.

John Fieldly: That is the gyms, run clubs, trainers, daily movement. Alani Nu wins on flavor and self-expression, recruiting younger, more female consumers. For many of them, it is the first energy brand they ever try, which makes it an entry point into the category. Rockstar reaches a male consumer with a real affinity for gaming, action sports, and music. Occasions the other brands do not naturally reach. Their 25 years of history and heritage gives the brand permission the others do not have. Together, they give us more of ways to grow across more channels, more occasions, and more price points. That is the power of managing a portfolio, and it's showing up in how we plan, how we innovate, and how we show up at retail.

Speaker #5: And Rockstar, reaches a male consumer, with a real affinity for gaming, action sports, and music. Occasions, the other brands do not naturally reach. Their 25 years of history and heritage gives the brand permission the others do not have.

Speaker #5: Together, they give us more of ways to grow across more channels, more occasions, and more price points. That is the power of managing a portfolio and it's showing up in how we plan, how we innovate, and how we show up at retail.

Speaker #5: I want to first discuss brand Celsius. That is an important to share. What we set out to do this year, and where we are in that work.

John Fieldly: I want to first discuss brand Celsius. It is important to share what we set out to do this year and where we are in that work. When we came into 2026, we made a deliberate choice. Over the years, we've built the Celsius brand by taking decisive actions to break through lead launches, exclusive flavors for individual retailers, actions that got us on the shelf in a category that did not have a place for modern energy yet. That is how you build a challenger brand. Today, Celsius is a powerful national brand inside one of the largest distribution systems in the country, and at the forefront of better-for-you energy. We yet again took decisive action to cut items sitting at low ACVs and worked to get consistency across the country and put our weight behind the items that perform.

Speaker #5: When we came into 2026, we needed to deliberate choice over the years we built the Celsius brand by taking decisive actions to break through, lead launches, exclusive flavors for individual retailers, actions that got us on the shelf in a category that did not have a place for modern energy yet.

Speaker #5: That is how you build a challenger brand, but today, Celsius is a powerful national brand inside one of the largest distribution systems in the country, and at the forefront of better-for-you energy.

Speaker #5: We yet again took decisive action to cut items sitting at low ACVs. And worked to get consistency across the country. And put our weight behind the items that perform.

Speaker #5: We also used this as an opportunity to achieve better retail space—not just more of it, but the right kind: cold space and caps, permanent coolers in the highest-traffic parts of the stores.

John Fieldly: We also used this as an opportunity to achieve better retail space. Not just more of it, but the right kind. Cold space, end caps, permanent coolers in the highest traffic parts of the stores. We purposely delayed innovation while we brought on Alani and Rockstar into the system to minimize complexity in the distribution system at a time of significant change. However, those things moved at different speeds. The rationalization happened right away. The retail allocation took longer because the space we wanted required investment from the retailer partners, coolers and fixtures, not just a shelf tag. In some instances, these activities were pushed to later in the reset periods. Innovation, which is one of the biggest growth drivers in the category, was not there to bridge the gap.

Speaker #5: And we purposely delayed innovation while we brought on Alani and Rockstar into the system, to minimize complexity in the distribution system at a time of significant change.

Speaker #5: However, those things moved at different speeds. The rationalization happened right away. The retail allocation took longer. Because the space we wanted required investment from the retailer partners.

Speaker #5: Coolers and fixtures, not just a shelf tag, and in some instances, these activities were pushed to later in the reset periods. And innovation, which is one of the biggest growth drivers in the category, was not there to bridge the gap.

Speaker #5: But when you look at what is happening underneath, we feel good about where Celsius brand is going. Dollar per point of distribution are up 16% from the first quarter to the second.

John Fieldly: When you look at what is happening underneath, we feel good about where Celsius brand is going. Dollar per point of distribution are up 16% from Q1 to Q2. Fizz-Free is growing, with dollar sales and track channels up over 20% in Q2 versus Q1. We're growing on Amazon, retailers are leaning in on 2027 planning earlier than they ever have before. We're also investing behind execution, moving more of our volume closer to the retailer to improve service, adding hundreds of retail merchandisers and sales representatives to get more product on the floor and keep it in stock. Where we still have work is our 16-ounce line, we have innovation coming against it in early 2027.

Speaker #5: Fizz Free is growing, with dollar sales in tracked channels up over 20% in the second quarter versus the first. We're growing on Amazon, and retailers are leaning in on 2027 planning earlier than they ever have before.

Speaker #5: We're also investing behind execution, moving more of our volume closer to the retailer to improve service. And adding hundreds of retail merchandisers and sales representatives to get more product on the floor and keep it in stock.

Speaker #5: Where we still have work is our 16-ounce line. And we have innovation coming against it in early 2027. Given that sequencing, we would expect brand Celsius in the third quarter to look a lot like the second quarter before we exit the year back into growth.

John Fieldly: Given that sequencing, we would expect brand Celsius in Q3 to look a lot like Q2 before we exit the year back into growth. In H1, Alani Nu surpassed $1 billion in retail sales and track channels, an important milestone for a brand we acquired just over a year ago. It happened in a category with more competition than ever before, with more entrants and established players alike. Track channel dollar growth was approximately 56% in the quarter. We launched Purple Cotton Candy as well during the quarter, it quickly became our top-selling new flavor in track channels, following Cherry Bomb and Lime Slush before it, reinforcing that the brand's innovation model is durable and not dependent on any one flavor. These limited time offers has become seasonal moments that Alani consumers generally look forward to.

Speaker #5: In the first half of the year, Alani New surpassed $1 billion in retail sales and tracked channels. And important milestone for a brand we acquired just over a year ago.

Speaker #5: And it happened in a category with more competition than ever before. With more entrants, and established players alike. Tracked channel dollar growth was approximately 56% in the quarter.

Speaker #5: We launched Purple Cotton Candy as well during the quarter. And it quickly became our top-selling new flavor in tracked channels. Following Cherry Bomb, and Lime Slush before it.

Speaker #5: And reinforcing that the brand's innovation model is durable and not dependent on any one flavor. These limited time offers has become seasonal moments that Alani consumers generally look forward to.

Speaker #5: But what is important is what sits underneath the growth. We are bringing new consumers into the brand and many are repeat purchasers. We are building out the permanent core: graduating top-performing flavors into everyday placements, which add stability and predictability as the brand scales.

John Fieldly: What is important is what sits underneath the growth. We are bringing new consumers into the brand, many are repeat purchasers. We are building out the permanent core, graduating top-performing flavors into everyday placements, which adds stability and predictability as the brand scales. Alani is also expanding our reach. The brand brings a differentiated, largely female consumer into the category, with flavors that are inviting, approachable, and on-trend. There is meaningful runway ahead. The brand remains under-penetrated in certain channels where our portfolio is strong, which gives us a clear roadmap for continued growth. With Rockstar, we completed the integration in June on the nine-month timeline we set, an important milestone for the organization. The brand is now fully on our platform and on the finished goods model.

Speaker #5: Alani is also expanding our reach. The brand brings a differentiated, largely, female consumer into the category, both flavors that are inviting, approachable, and on-trend.

Speaker #5: And there is meaningful runway ahead: the brand remains under-penetrated in certain channels, where our portfolio is strong. Which gives us a clear roadmap for continued growth.

Speaker #5: With Rockstar, we completed the integration in June. On the nine-month timeline we set, an important milestone for the organization. The brand is now fully on our platform and on the finished goods model.

Speaker #5: For Rockstar, it's about building stability, bringing out the Rockstar in everyone. Focusing on the core brand and its identity across motorsports, music, and lifestyle.

John Fieldly: For Rockstar, it's about building stability, bringing out the Rockstar in everyone, focusing on the core brand and its identity across motorsports, music, and lifestyle, as well as a clear product differentiation and increased velocity. We are already seeing green shoots across a number of markets, and velocity gains across the board have been significant after the rationalization program we implemented. We are tracking in line with our sales expectations, which we set upon acquiring the brand, and are well-positioned for 2027. We are also keeping Rockstar connected to its core consumer. Our motorsports program includes the partnership with 23XI Racing and the Formula Drift series, which continues to build authenticity with the traditional energy drink consumer while we strengthen the brand's foundation. We are in the early stages of refreshing the brand's look with updated packaging, revamped logo beginning to roll out.

Speaker #5: As well as a clear product differentiation and increased velocity. We are already seeing green shoots across a number of markets. And velocity gains across the board have been significant, after the rationalization program we implemented.

Speaker #5: We are tracking in line with our sales expectations, which we set, upon acquiring the brand, and are well positioned for 2027. We're also keeping Rockstar connected to its core consumer, our motorsports program includes the partnership with 2311 Racing, and the Formula Drift series, which continues to build authenticity with the traditional energy drink consumer, while we strengthen the brand's foundation.

Speaker #5: And we are in the early stages of refreshing the brand's look, with updated packaging, revamped logo beginning to roll out. We have more to share as our plans progress.

John Fieldly: We have more to share as our plans progress. Innovations remain central to how we grow. During the quarter, we activated ELECTRIC VIBE timed to the global soccer tournament here in North America, as well as Purple Cotton Candy. We just launched our summer limited time offer, Spritz Vibe Sparkling Limoncello Twist, a refreshing flavor built for peak summer occasions. Our summer programming is fully activated, including our global partnership with Aston Martin Aramco Formula One Team and our 100 Days of Summer programming, and our partnerships across music, fitness, and culture. Looking ahead in the back half, we have a strong slate of fall programming, new marketing campaigns, and an expanded lineup of athlete partnerships. These programs are designed to connect awareness to trial and trial to the register. We're excited about our innovation calendar with 2027 shaping up to be a busy year.

Speaker #5: Innovations remain central to how we grow. During the quarter, we activated electric vibe, timed to the global soccer tournament here in North America, as well as Purple Cotton Candy.

Speaker #5: And we just launched our summer limited-time offer, Spritz Vibe, Sparkling Lemoncello Twist—a refreshing flavor built for peak summer occasions. Our summer programming is fully activated, including our global partnership with the Aston Martin Aramco Formula One Team and our 100 Days of Summer programming.

Speaker #5: And our partnerships across music, fitness, and culture. And looking ahead in the back half, we have a strong slate of fall programming. New marketing campaigns and an expanded line of athlete partnerships.

Speaker #5: These programs are designed to connect awareness to trial and trial to the register. We're excited about our innovation calendar with 2027 shaping up to be a busy year.

Speaker #5: Turning the international. We want to share the long-term roadmap we have been building. International is one of the largest whitespace opportunities because both Celsius and Alani remain significantly under-penetrated outside the US.

John Fieldly: Turning to international, where I want to share the long-term roadmap we have been building. International is one of the largest white space opportunities because both Celsius and Alani Nu remain significantly under-penetrated outside the US. Over the next five years, we expect international markets outside of the US to represent more than 15% of our revenue. We are building toward that with focused market entries, strong local partnership, and disciplined launch plans. Sweden is a great example of what success looks like at maturity, and is one of our longest-standing international markets. This quarter, the team delivered the highest four-week sell-through in market history, nearly 3.5 million units purchased by consumers. That is what strong local execution and consumer loyalty built over time can deliver, and it is the playbook we're running in every market we enter. Our newer European markets continue to progress alongside our partnership with Suntory.

Speaker #5: Over the next five years, we expect international markets outside of the US to represent more than 15% of our revenue. We are building toward that with focused market entries, strong local partnership, and disciplined launch plans.

Speaker #5: Sweden is a great example of what success looks like at maturity. It is one of our longest standing international markets. And this quarter, the team delivered the highest four-week sell-through and market history, nearly 3.5 million units purchased by consumers.

Speaker #5: That is what strong local execution and consumer loyalty built over time can deliver. And it is the playbook we're running in every market we enter.

Speaker #5: Our newer European markets continue to progress alongside our partnership with Suntori. We are also at the one of finding select international markets in which to introduce Alani New in 2027.

John Fieldly: We are also identifying select international markets in which to introduce Alani Nu in 2027. With our International Center of Excellence in Dublin, we have a strong operating infrastructure in place to help execute this roadmap for years to come. With that, I'll turn it over to Jarrod to walk through the financials. Jarrod?

Speaker #5: And with our international center of excellence in Dublin, we have a strong operating infrastructure in place to help execute this roadmap for years to come.

Speaker #5: With that, I'll turn it over to Jarrod to walk through the financials. Jarrod? Thanks, John. And good morning, everyone. I will walk through the quarter by brand, then cover profitability, operating discipline, and capital allocation.

Jarrod Langhans: Thanks, John, and good morning, everyone. I will walk through the quarter by brand, cover profitability, operating discipline, and capital allocation. We delivered Q2 revenue of $818 million, up approximately 11% year over year as a portfolio. Starting with brand Celsius, net sales were down approximately 12% year over year, while retail sales and track channels were down 2% in Q2. I'm going to discuss those two numbers separately because they are telling you two different things. The scanner number, down 2%, is the consumer. That reflects the optimization and moderation in innovation John just walked through. As he described, the rationalization landed immediately, the space came later, and we purposefully limited innovation in order to prioritize the existing portfolio and integrations.

Speaker #5: We delivered second quarter revenue of $818 million, up approximately 11% year over year as a portfolio. Starting with brand Celsius, net sales were down approximately 12% year over year, while retail sales and tracked channels were down 2% in the second quarter.

Speaker #5: I'm going to discuss those two numbers separately, because they are telling you two different things. The scanner number down 2% is the consumer. That reflects the optimization and moderation and innovation John just walked through.

Speaker #5: As he described, the rationalization landed immediately, the space came later, and we purposely limited innovation in order to prioritize the existing portfolio and integrations.

Speaker #5: The gap to reported net sales came from three things: shipment timing related to inventory rebalancing, increased trade and promotional investment, and softness in the club channel.

Jarrod Langhans: The gap to reported net sales came from three things: shipment timing related to inventory rebalancing, increased trade and promotional investment, and softness in the club channel. On shipment timing, this is the same optimization work we have discussed, showing up in a different way. As we remove SKUs from the DSD system, distributor inventory rebalanced down across H1. That was most pronounced this quarter and at quarter end in particular, when depletions versus orders accounted for roughly half of the gap between scan and reported results. Trade and promotional investment was largely tied to our variable spend, promotions, and price pack activity. During H1, we saw some negative mix and channel impact, as well as some inefficiencies in our programming. This was further complicated by fixed costs that are less efficient when volumes are down.

Speaker #5: On shipment timing, this is the same optimization work we have discussed, but showing up in a different way. As we remove SKUs from the DSD system, distributor inventory rebalanced down across the first half of the year.

Speaker #5: That was most pronounced this quarter, and at quarter end in particular, when depletions versus orders accounted for roughly half of the gap between scan and reported results.

Speaker #5: Trade and promotional investment was largely tied to our variable spend. Promotions and price pack activity. During the first half of the year, we saw some negative mix in channel impact as well as some inefficiencies in our programming.

Speaker #5: This was further complicated by fixed costs that are less efficient when volumes are down. This is the core of the revenue growth management program we are building.

Jarrod Langhans: This is the core of the revenue growth management program we are building with the team in place now that we did not have a year ago. We have begun implementing parts of the improved programming in H2, we see a significantly larger opportunity to drive better returns on trade spend in 2027 and beyond. What is most important to stress, the productivity story is intact. Dollars per point of distribution are up approximately 16% in Q2 versus Q1 on approximately 7% fewer points of distribution. Turning to Alani Nu, net sales were approximately $364 million in Q2, up approximately 21% year over year, while retail sales grew 56%. As in Q1, tracked growth and reported growth are two different numbers.

Speaker #5: With the team in place now that we did not have a year ago, we have begun implementing parts of the improved programming in the back half, and we see significantly larger opportunity to drive better returns on trade spend in 2027 and beyond.

Speaker #5: What is most important to stress, the productivity story is intact. Dollars per point of distribution are up approximately 16% in the second quarter versus the first, on approximately 7% fewer points of distribution.

Speaker #5: Turning to Alani New, net sales were approximately $364 million in the second quarter, up approximately 21% year over year, while retail sales grew 56%.

Speaker #5: As in the first quarter, tracked growth and reported growth are two different numbers. So let me walk through how to get from one to the other, and we have again included a bridge in our earnings deck posted online.

Jarrod Langhans: Let me walk through how to get from one to the other, we have again included a bridge in our earnings deck posted online. The difference reflects this continuation of certain non-ready-to-drink products, a higher mix of DSD versus direct sales, which carries higher trade investment and bill backs that reduce reported net revenue, product mix, and the timing of inventory builds, as well as a non-cash entry as a part of the distribution and captaincy agreements. Excluding Canada and our non-RTD business, all-in gross revenue growth was approximately 39%. From gross to net, we got to approximately 21% with the difference reflecting promotional allowances and channel and pack mix in the Pepsi DSD system, the same dynamics we walked through last quarter. The integration into the Pepsi DSD system is complete, it is working.

Speaker #5: The difference reflects this continuation of certain non-ready-to-drink products, a higher mix of DSD versus direct sales, which carries higher trade investment and buildbacks that reduce reported net revenue, product mix and the timing of inventory builds, as well as a non-cash entry as a part of the distribution and captaincy agreements.

Speaker #5: So, excluding Canada and our non-RTD business, all-in gross revenue growth was approximately 39%. And from gross to net, we got to approximately 21%, with the difference reflecting promotional allowances and channel impact mix in the DSD system.

Speaker #5: The same dynamics we walked through last quarter. The integration into the Pepsi DSD system is complete, and it is working. Our limited time offer program continues to elevate the brand, build the core, and drive trial, and we have strong plans for 2027.

Jarrod Langhans: Our limited time offer program continues to elevate the brand, build the core, and drive trial, and we have strong plans for 2027. New launches, new activations, and new programming, along with the market expansion John described. For Rockstar, net sales were approximately $66 million in Q2. With the integration complete and the reconfigured assortment in place, our focus is on stability, and as John said, we are encouraged by what we are seeing in the early data and by how the brand is positioned for 2027. Turning to profitability, Q2 gross margin was approximately 48%, in line with our expectations and consistent with Q1 at approximately 48% as well. Improvements in outbound freight and the continued integration of our acquisitions into our supply chain offset ongoing commodity inflation, primarily aluminum. As we look towards margin expansion, I think about it in three buckets.

Speaker #5: New launches, new activations, and new programming, along with the market expansion John described. For Rockstar, net sales were approximately 66 million dollars in the second quarter, with the integration complete and the reconfigured assortment in place, our focus is on stability and, as John said, we are encouraged by what we are seeing in the early data and by how the brand is positioned for 2027.

Speaker #5: Turning to profitability, second quarter gross margin was approximately 48%, in line with our expectations and consistent with the first quarter at approximately 48% as well.

Speaker #5: Improvements in outbound freight and the continued integration of our acquisitions into our supply chain offset ongoing commodity inflation, primarily aluminum. As we look toward margin expansion, I think about it in three buckets.

Speaker #5: The first is integration. With Alani and Rockstar both now fully in our infrastructure, our raw material purchasing, our freight lanes, and our orbit model, those benefits build to our back half.

Jarrod Langhans: The first is integration. With Alani and Rockstar both now fully in our infrastructure, our raw material purchasing, our freight lanes, and our orbit model, those benefits build to our H2. Even with the integrations complete, we still saw some carryover of higher costs this quarter because we have to work through existing inventory before the improved case costs flow through. That improvement started with Alani in Q2 and builds into Q3, with Rockstar flowing in during Q3. The second is structural cost opportunities. Our second manufacturing line in North Carolina begins producing in the H2 with the full benefit in 2027, and we are advancing vertical integration and direct sourcing beyond that. Our supply chain center of excellence in Dublin is playing an increasing role in how we procure and how we move product across the network.

Speaker #5: Even with the integrations complete, we still saw some carryover of higher costs this quarter, because we have to work through existing inventory before the improved case cost flows through.

Speaker #5: That improvement started with Alani in the second quarter and builds into the third, with Rockstar flowing in during the third quarter. The second is structural cost opportunities.

Speaker #5: Our second manufacturing line in North Carolina begins producing in the back half, with the full benefit in 2027, and we are advancing vertical integration and direct sourcing beyond that.

Speaker #5: Our supply chain center of excellence in Dublin is playing an increasing role in how we procure and how we move product across the network.

Speaker #5: The third is revenue growth management. The price pack architecture work we have referenced delivers initial impact in the back half, with a much larger opportunity as we look at 2027 and 2028.

Jarrod Langhans: The third is revenue growth management. The price pack architecture work we have referenced delivers initial impact in the H2 with a much larger opportunity as we look at 2027 and 2028. This work, as well as other programs we are launching, will help offset some of the mix impacts with more cases through DSD while supporting margin expansion. On gross margin, the initiatives we just walked through are delivering continued improvement. At current diesel and aluminum levels, margin expansion is largely offset, so based on what we see today, we would expect Q3 to be consistent with Q2 and remain in the high 40s. If fuel or aluminum moderates, you would expect to see improvement. Selling general administrative expenses were $238 million, essentially flat with the prior year in dollars and 29% of revenue compared to 32% a year ago.

Speaker #5: And this work, as well as other programs we are launching, will help offset some of the mix impacts of more cases through DSD, while supporting margin expansion.

Speaker #5: On gross margin, the initiatives we just walked through are delivering continued improvement. At current, diesel and aluminum levels, margin expansion is largely offset, so based on what we see today, we would expect the third quarter to be consistent with the second, and remain in the high 40s.

Speaker #5: If fuel or aluminum moderates, you would expect to see improvement. Selling general administrative expenses were $238 million. Essentially flat with the prior year in dollars, and 29% of revenue compared to 32% a year ago.

Speaker #5: Adjusted SG&A was $28.6% of revenue. We held costs flat, while revenue grew 11%, and we did that while investing behind the summer selling season as planned.

Jarrod Langhans: Adjusted SG&A was 28.6% of revenue. We held costs flat while revenue grew 11%. We did that while investing behind the summer selling season as planned. We will continue to invest behind our brands. We would expect sales and marketing in Q3 to be broadly consistent with Q2. We continue to work to keep general administrative costs down with Q3 also consistent with Q2. Adjusted EBITDA was $184 million, or approximately 22.5% of revenue, compared to $210 million for the same quarter last year. For the H1, Adjusted EBITDA was $380 million, up 36% year-over-year at approximately 23.7% of revenue. The year-over-year comparison in the quarter reflects the gross margin pressure from commodities and the investments we are making behind the brands. On capital deployment, our balance sheet remains a source of strength and flexibility.

Speaker #5: We will continue to invest behind our brands. We would expect sales and marketing in the third quarter to be broadly consistent with the second quarter, and we continue to work to keep general administrative costs down, with third quarter also consistent with the second.

Speaker #5: Adjusted EBITDA was $184 million, or approximately 22.5% of revenue, compared to $210 million for the same quarter last year. For the first half, adjusted EBITDA was $380 million, up 36% year over year, at approximately 23.7% of revenue.

Speaker #5: The year over year comparison in the quarter reflects the gross margin pressure from commodities, and the investments we are making behind the brands. On capital deployment, our balance sheet remains a source of strength and flexibility.

Speaker #5: During the second quarter, we repurchased approximately $100 million of stock, bringing first half repurchases to approximately $124 million. We intend to continue utilizing $300 million authorization this year.

Jarrod Langhans: During Q2, we repurchased approximately $100 million of stock, bringing H1 repurchases to approximately $124 million. We intend to continue utilizing the $300 million authorization this year. We also reduced our interest rate by 25 basis points in July with the opportunity to reduce it another 25 basis points. The reason why we are leaning into repurchases is straightforward. Our cash flow return on investment is among the strongest in the beverage category, and at current levels, we view repurchasing our own stock as an attractive use of capital. Our approach continues to be grounded in the same three priorities: investing to support brand growth and execution, maintaining the strength of our balance sheet, and returning capital to shareholders. Let me close with how we are thinking about Q3.

Speaker #5: We also reduced our interest rate by 25 basis points in July, with the opportunity to reduce it another 25 basis points. The reason why we are leaning into repurchases is straightforward.

Speaker #5: Our cash flow return on investment is among the strongest in the beverage category, and at current levels, we view repurchasing our own stock as an attractive use of capital.

Speaker #5: Our approach continues to be grounded in the same three priorities: investing to support brand growth and execution, maintaining the strength of our balance sheet, and returning capital to shareholders.

Speaker #5: Let me close with how we are thinking about the third quarter. As it relates to brand Celsius, we had some rebalancing continue in July, and we are moving certain SKUs into the distribution centers to be closer to the consumers and out of the mixing centers.

Jarrod Langhans: As it relates to brand Celsius, we had some rebalancing continue in July, and we are moving certain SKUs into the distribution centers to be closer to the consumers and out of the mixing centers. This movement will have some one-time timing impacts as the distribution centers hold less inventory as it turns quicker. Reiterating what John said, given the sequencing, we would expect Q3 to look a lot like Q2 for brand Celsius. We exit the year back into growth. Our focus in Q3 is execution, improving service quality, and driving efficiency through the network, moving more volume closer to the retailer through our distribution centers from the mixing centers, and continuing the retailer conversations and partnership work that appropriately set us up for 2027. For Alani Nu, we expect our momentum will continue.

Speaker #5: This movement will have some one-time timing impacts as the distribution centers hold less inventory as it turns quicker. So reiterating what John said, given the sequencing, we would expect the third quarter to look a lot like the second for brand Celsius.

Speaker #5: And then we exit the year back into growth. Our focus in the third quarter is execution, improving service quality and driving efficiency through the network, moving more volume closer to the retailer through our distribution centers from the mixing centers, and continuing the retailer conversations and partnership work that appropriately set us up for 2027.

Speaker #5: For Alani New, we expect our momentum will continue. Service levels continue to grow, and we have a robust limited time offer calendar in the back half of this year that we believe will drive not only the brand, but also the category.

Jarrod Langhans: Service levels continue to grow, and we have a robust limited time offer calendar in H2 of this year that we believe will drive not only the brand, but also the category. For Rockstar, our focus remains on stabilizing the brand, getting Rockstar back to its roots, strengthening its core identity, and setting it up for 2027. Across the portfolio, we are adding merchandisers and sales reps to improve in-stock levels and get more product on the floor. With that, I will turn the call back to the operator to open the lines for questions.

Speaker #5: For Rockstar, our focus remains on stabilizing the brand, getting Rockstar back to its roots, strengthening its core identity, and setting it up for 2027.

Speaker #5: Across the portfolio, we are adding merchandisers and sales reps to improve in-stock levels and get more product on the floor. With that, I will turn the call back to the operator to open the lines for questions.

Speaker #1: Thank you. We will now begin the question and answer session. Please limit yourself to one question only. If you'd like to ask a question, please press star one to raise your hand, to withdraw your question, press star one again.

Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question only. If you'd like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. The first question comes from the line of Peter Grom with UBS. Your line is open. Please go ahead.

Speaker #1: We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device.

Speaker #1: Please stand by now while we compile the Q&A roster. Your first question comes from the line of Peter Grom with UBS. Your line is open.

Speaker #1: Please go ahead.

Speaker #2: Great. Thank you. Good morning, everyone. I wanted to just ask on the password for brand Celsius, and I understand there's a lot of work going on for the brand, but just given kind of the weakness we're seeing in track data, what we saw this morning, what gives you confidence that we will see improved performance exiting 2026 and into 2027?

Peter Grom: Great, thank you. Good morning, everyone. I wanted to just ask on the path forward for brand Celsius. I understand there's a lot of work going on for the brand, but just given kind of the weakness we're seeing in track data, what we saw this morning, what gives you confidence that you will see improved performance exiting 2026 and into 2027? It sounds like three two is going to be under similar pressure, but a return to growth exiting the year into 2027 is feasible. Just curious, if we were to look out the next six to nine months, what does success look like?

Speaker #2: It sounds like Q3 is going to be under similar pressure, but a return to growth exiting the year into 2027 is feasible. So just curious, if you were to look out the next six to nine months, what does success look like?

Speaker #3: Yeah. Thank you, Peter. With the Celsius brand, as we said in the prepared remarks, and discussed the rationalization, it's really producing a core portfolio of core SKUs on a national basis.

John Fieldly: Yeah, thank you, Peter. With the Celsius brand, as we said in the prepared remarks and discussed the rationalization, is really producing a core portfolio of core SKUs on a national basis. We did make strategic decisions, to not lean in as much on the brand Celsius as we were integrating Alani and Rockstar, which is now behind us. The base business within Celsius is strong. It has an extremely healthy consumer base, and we have robust innovation plans in the works for 2027. We've already been meeting key retailers. We have a variety of initiatives, from strategic investments to marketing. Brand health metrics are strong. One area of weakness, as we mentioned, is the 16-ounce. We have a new offering, which we'll be launching in a meaningful way, in 2027. I think when you look at where brand Celsius is, the rationalization is behind us.

Speaker #3: We did make strategic decisions to not lean in as much on the brand Celsius as we were integrating Alani and Rockstar, which is now behind us.

Speaker #3: The base business within Celsius is strong. It has an extremely healthy consumer base, and we have robust innovation plans in the works for 2027.

Speaker #3: We've already been meeting key retailers. We have a variety of initiatives from strategic investments through marketing. Brand health metrics are strong. And one area of weakness, as we mentioned, is the 16 ounce.

Speaker #3: And we have a new offering, which will be launching in a meaningful way in 2027. So, I think when you look at where brand Celsius is, the rationalization is behind us.

Speaker #3: It will flow through, through the third quarter. As we exit the year, we expect to continue to get Celsius back to growth. And category growth in 2027 and beyond.

John Fieldly: It will flow through Q3 as we exit the year. We expect to continue to get Celsius back to growth, and category growth in 2027 and beyond. The brand has a reason to believe retailers see the opportunity. It's driving incrementality in the category. When you look at Celsius and you look at the portfolio that we've established, and you look at Alani driving 50% growth in Q2, great momentum heading into 2027. We're building a base business of SKUs there on a national basis. Rockstar is stabilized. We'll have a portfolio of brands entering 2027 that we'll truly be able to capitalize on, which is driving incrementality, which retailers want. There's a lot of me-too competition out there, when you look at Celsius and Alani, these are truly iconic brands and have a reason to be there consumers love that's out there.

Speaker #3: The brand has a reason to believe, retailers are see the opportunity that's driving incrementality in the category. And then when you look at Celsius, and you look at the portfolio, that we've established, and you look at Alani driving 50% growth in Q2, great momentum heading into 2027.

Speaker #3: We're building a base business of SKUs there at a national basis. Rockstar is stabilized. We'll have a portfolio of brands entering 2027 that will truly be able to capitalize on, and which is driving incrementality, which retailers want.

Speaker #3: There's a lot of me too competition out there. But when you look at Celsius and Alani, these are truly iconic brands. They have a reason to be there.

Speaker #3: Consumers love that's out there. And then I think when you look at the overall investments as well within our we've made through operational investments, Jarrod talked about revenue management, stable further vertical integration investments.

John Fieldly: I think when you look at the overall investments as well, we've made through operational investments, Jerry talked about revenue management, further vertical integration investments. You start to walk down the P&L and the opportunities we have to continue to drive shareholder value. We're on track for that to continue to improve in 2027 and beyond. The retailer meetings have gone very successful with Celsius, with the total portfolio. We just got done with a PepsiCo annual operating meeting where we spoke with over 1,000 key Pepsi employees, working on our plans for 2027 and aligning on plans and priorities. I think we're in really great shape for the portfolio.

Speaker #3: And as you start to walk down the P&L and the opportunities we have to continue to drive shareholder value, we're on track for that—to continue to improve in 2027 and beyond.

Speaker #3: The retailer meetings have gone very successful. With Celsius, with the total portfolio. And we just got done with a PepsiCo annual operating meeting, where we spoke with over 1,000 key Pepsi employees.

Speaker #3: We're working on our plans for 2027 and aligning on plans and priorities. So I think we're in really great shape for the portfolio. And to your specific question on Celsius, we're excited about Celsius.

John Fieldly: Your specific question on Celsius, we're excited about Celsius and where it's positioned and are confident in our strategies as we're exiting 2026 into 2027, working on the strategies, optimizing, investing in retail, making sure Celsius, and aligning our portfolio are disrupting that path to purchase. Our brands show up at the right point, at the right time, and we continue to drive incrementality and category growth.

Speaker #3: And where it's positioned and our confident in our strategies as we're exiting 2026 into 2027, working on strategies, optimizing, investing in retail, making sure Celsius and Alani in our portfolio are disrupting that path to purchase, our brands show up at the right point, at the right time, and we continue to drive incrementality in category growth.

Peter Grom: Great. Thank you so much. I'll pass it on.

Speaker #3: Thank you.

John Fieldly: Thank you.

Speaker #1: Your line is open, Bonnie. Please go ahead.

Operator: Your line is open, Bonnie. Please go ahead.

Speaker #4: Oh, thank you. I didn't hear you guys call my name. Can you hear me?

[Analyst] (Goldman Sachs): Oh, thank you. I didn't hear you guys call my name. Can you hear me?

Bonnie Herzog: Oh, thank you. I didn't hear you guys call my name. Can you hear me?

Speaker #3: Yes. Good morning, Bonnie. This is John.

John Fieldly: Yes. Good morning, Bonnie. This is John.

[Analyst] (Goldman Sachs): Oh, good morning. Hi. Sorry I didn't hear my name being called, but thanks for the question.

Bonnie Herzog: Oh, good morning. Hi. Sorry I didn't hear my name being called, but thanks for the question.

Speaker #4: Oh, good morning. Hi. Sorry, I didn't hear my name being called, but thanks for the question. I actually did have a follow-up on that.

John Fieldly: Yeah.

[Analyst] (Goldman Sachs): I actually did have a follow-up on that. Just in terms of the SKU rationalization, John, as you sit here today, I'm just trying to understand, do you believe ultimately this was the right decision? Maybe, is there anything you would have done differently as you kind of look back? Could you give us a little more color on the disruption you called out that's going to continue to pressure the brand in Q3, and how much risk there is that sales for the brand won't be even more pressured? I guess I'm just trying to understand how much visibility you have. Thanks.

Bonnie Herzog: I actually did have a follow-up on that. Just in terms of the SKU rationalization, John, as you sit here today, I'm just trying to understand, do you believe ultimately this was the right decision? Maybe, is there anything you would have done differently as you kind of look back? Could you give us a little more color on the disruption you called out that's going to continue to pressure the brand in Q3, and how much risk there is that sales for the brand won't be even more pressured? I guess I'm just trying to understand how much visibility you have. Thanks.

Speaker #4: Just in terms of the SKU rationalization, John, as you sit here today, I'm just trying to understand, do you believe ultimately this was the right decision?

Speaker #4: And maybe, is there anything you would have done differently as you look back? And then, could you give us a little more color on the disruption you called out that's going to continue to pressure the brand in Q3?

Speaker #4: And how much risk is there that sales for the brand won't be even more pressured? I guess I'm just trying to understand how much visibility you have.

Speaker #4: Thanks.

Speaker #3: Yeah. No, great question, Bonnie. I think one thing, I think we did. We went too deep on the Celsius rationalization. I think when you look at we're entering the year we could have done a much lighter job on that.

John Fieldly: Great question, Bonnie. We went too deep on the Celsius rationalization. We're entering the year, we could have done a much lighter job on that. There's also puts and takes. The integration on Alani could have been further challenged and Rockstar. Looking back, I definitely would have not cut as many SKUs within the organization through those commercial plans. Taking the key learnings we have today, we've added stability within the portfolio. We see opportunity with Fizz-Free. That is now a core sub-line. We have the Vibe line, we have our core flavors, and we're leaning in with innovation for 2027. I think that's definitely something I would've done differently and the organization would've done differently. Taking those challenges, reacting, that's the most important thing.

Speaker #3: But then there's also puts and takes. The integration on Alani could have been further challenged, and Rockstar, looking back, I definitely would not have cut as many SKUs within the organization through the commercial plans.

Speaker #3: But I think taking the key learnings we have today, we've added stability within the portfolio. We see opportunity would fit free. That is now a core subline.

Speaker #3: We have the vibe line, and we have our core flavors. And we're leaning in with innovation for 2027. So I think that's definitely something we would have done I would have done different and the organization would have done differently.

Speaker #3: But taking those milestones, taking those challenges, reacting. I mean, that's the most important thing. Each and every day, you got to continue to analyze the moves, what's going on within the organization, and adapt.

John Fieldly: Each and every day, you got to continue to analyze the moves, what's going on within the organization, and adapt. That's what we're doing now. We have robust innovation plans for 2027. We're going to further leverage the opportunities we have with Alani, we're going to bring Rockstar along. There's opportunities there. I think when you look at the organization for where we are today from where we started the year, the foundation of the organization is extremely strong, and we're in extremely great place to capitalize on the growth trends in this category. More health and wellness consumers are coming into the category. More female consumers. The category is going broader. With our PepsiCo distribution, we're touching more consumers in more places, from food service, hospitals, college, universities, and programs.

Speaker #3: And that's what we're doing now. We have robust innovation plans for 2027. We're going to further leverage the opportunities we have with Alani. And we're going to bring Rockstar along.

Speaker #3: There's opportunities there. So I think when you look at the organization for where we are today, for where we started the year, the foundation of the organization is an extremely strong and we're an extremely great place to capitalize on the growth trends in this category.

Speaker #3: More health and wellness consumers are coming into the category, and more female consumers as well. The category is going broader. With our PepsiCo distribution, we're reaching more consumers in more places—from food service, hospitals, colleges, universities, and programs.

Speaker #3: So many great things are going on where we're bringing our portfolio of brands Celsius and Alani to more people in more places and more often.

John Fieldly: Many great things are going on, where we're bringing our portfolio of brands, Celsius and Alani, to more people and more places and more often. When we talk about Q3, I think when you look at the weekly run rates, we expect those to be somewhat similar within the Celsius portfolio. We are cycling prior year innovation. When we talk about kind of a look of similar from Q2 to Q3, we do expect slight increases. We don't have that robust innovation we had in the prior year. We're cycling those higher comps. That'll still continue as it did in Q2 to Q3. Hope that further explains kind of the question around the sidestep from Q2 to Q3. The brand's healthy. We're seeing strong, continual repeat purchases. There's just a massive opportunity with the Celsius portfolio.

Speaker #3: And when we talk about Q3, I think when you look at the weekly run rates, we expect those to be somewhat similar. Within the Celsius portfolio, we are cycling prior year innovation.

Speaker #3: So, when we talk about kind of a look of similar from Q2 to Q3, we do expect slight increases, but we don't have that robust innovation we had in the prior year.

Speaker #3: So we're cycling some we're cycling those higher comps. So that'll still continue as it did in Q2 to Q3. So hopefully that further explains kind of the question around the sidestep from Q2 to Q3.

Speaker #3: But the brand's healthy. We're seeing strong continual repeat purchases. And there's just a massive opportunity with the Celsius portfolio.

Speaker #4: All right. Thank you. I'll pass it on.

[Analyst] (Goldman Sachs): All right. Thank you. I'll pass it on.

Bonnie Herzog: All right. Thank you. I'll pass it on.

Speaker #1: Your next question comes from the line. Of Camille Gajrawala with Jefferies. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Kaumil Gajrawala with Jefferies. Your line is open. Please go ahead.

Speaker #5: Thank you. Good morning. First, just a very quick one on Celsius. On 3Q for the Celsius brand, we can say it was 2Q. Is that dollars or is that percentage?

Kaumil Gajrawala: Thank you. Good morning. First, just a very quick one on Celsius. Q3 for the Celsius brand, we can say, was Q2. Is that dollars or is that percentage?

Speaker #3: Yeah. I think we're talking about the dollars. Looking at the scan data, you'll have some fluctuations. But when you look at the dollar level, but also on a percent level.

John Fieldly: Yeah, I think we're talking about the dollars. Looking at the scan data, you'll have some fluctuations.

Kaumil Gajrawala: Okay.

John Fieldly: When you look at the dollar level, but also on a % level.

Speaker #5: Okay, got it. Thank you. And then, when you just mentioned a little bit about cycling and innovation, that sort of thing—you've got some of that that you just laid out in Q3, and then a very big one in Q4 with the LTO on Alani.

Kaumil Gajrawala: Okay, got it. Thank you. Then when you just mentioned a little bit about cycling and innovation, that sort of thing. You've got some of that that you just laid out in Q3, and then a very big one in Q4 with the LTO on Alani. As we think about all of these moving parts, there's so many things going on which leads to a weaker net all-in number than we would've expected, I think, than you guys would've expected as well. It also feels like you're going into an area of more difficult comparisons for more than one quarter as it relates to top line. How are you planned for that? How do you sort of continue pace when sort of simultaneously a very big comp on Alani, which has been driving the overall top line, and then trying to reverse the trends of Celsius?

Speaker #5: So as we think about all of these moving parts, there's so many things going on which leads to a weaker net all-in number than we would have expected.

Speaker #5: I think, then, you guys would have expected as well. But it also feels like you're going into an area of more difficult comparisons for more than one quarter, as it relates to the top line.

Speaker #5: So how do you—how are you planning for that? How do you continue the pace when, simultaneously, you have a very big comp on Alani, which has been driving the overall top line, and then you're trying to reverse the trends of Celsius?

Speaker #3: Yeah. No, great question. And so you have the trends. We've talked about Celsius. In Q2 to Q3, we're looking at somewhat of a sidestep.

John Fieldly: Yeah. No, great question. You have the trends. We've talked about Celsius. In Q2 to Q3, we're looking at somewhat of a sidestep, as we still have the cycling of the optimization. That's going to continue to improve in Q4, and we expect to get back to growth in 2027 as we continue to have robust innovation plans in place. As it relates to Alani, you're referencing Witch's Brew, which will be launching. It's going to be the biggest LTO in history. We have a comp there. We know what that comp is. Witch's Brew will be bigger than it ever has, ever before, and we're really excited about some of the plans and marketing initiatives we have around that. Now, how do we continue to grow those comps on the Alani portfolio? That's building out that base portfolio.

Speaker #3: As we still have the cycling of the optimization. That's going to continue to improve in the fourth quarter. And we expect to get back to growth in 2027 as we continue to have robust innovation plans in place.

Speaker #3: As it relates to Alani, you're referencing, which is proved, which will be launching. It's going to be the biggest LTO in history. We have a comp there.

Speaker #3: We know what that comp is. We're going to continue to that which is brew will be bigger than it ever has ever before. We're really excited about some of the plans and marketing initiatives we have around that.

Speaker #3: Now, how do we continue to grow those comps on the Alani portfolio? That's building out that base portfolio. So over time, the LTOs become less relevant to the total top line revenue because you're building out that base business, that base SKU count, building that loyal consumer and that repeat purchase.

John Fieldly: Over time, the LTOs become less relevant to the total top-line revenue because you're building out that base business, that base SKU count, building that loyal consumer and that repeat purchase, and we're seeing that unfold as we started to do that in 2026. We'll continue to do that in 2027. We have the base business growth as well as leveraging the LTO opportunities, which are seasonal, which are connecting with consumers, which are bringing new consumers into the category more than ever before. When you take that into consideration on how we're building out, strategically, Alani and the opportunities and the strategy behind Celsius going forward, we feel we're set up for great success in 2027 to cycle those comps and drive growth, not only within our top line, but the overall category, which is expected to grow as well.

Speaker #3: And we're seeing that unfold as we started to do that in 2026. We'll continue to do that in 2027. So we have the base business growth as well as leveraging the LTO opportunities which are seasonal, which are connecting with consumers, which are bringing new consumers into the category, more than ever before.

Speaker #3: So when you take that into consideration on how we're building out, strategically, Alani, and the opportunities and the strategy behind Celsius going forward, we feel we're set up for great success in 2027 to cycle those comps and drive growth not only within our top line, but the overall category, which is expected to grow as well.

Speaker #5: Okay. I got it. Thank you very much.

Kaumil Gajrawala: Okay, got it. Thank you very much.

Operator: Your next question comes from the line of Jim Salera with Stephens. Your line is open. Please go ahead.

Speaker #1: next question comes from the line of Jim Solera. With Stevens. Your line is open. Please go ahead.

Speaker #6: Hey guys. Good morning. Thanks for taking our question. I wanted to see if we could get some more detail on the recovery in 4Q and maybe if you could help contextualize the magnitude of that.

Jim Salera: Hey, guys. Good morning. Thanks for taking our question. I wanted to see if we could get some more detail on the recovery in Q4. Maybe if you could help contextualize the magnitude of that. I think the decline in core brand Celsius in Q2, Q3 is probably greater than expectations. Should we think about that helping amplify the magnitude of the recovery in Q4? Maybe if you can offer some thoughts about kind of the run rate as we think about modeling FY2027.

Speaker #6: I think the decline in core brand Celsius in 2Q, 3Q is probably greater than expectations. And Your so should we think about that helping amplify the magnitude of the recovery in 4Q and maybe if you can offer some thoughts about kind of the run rate as we think about modeling FY27?

Speaker #3: Yeah. No. I think when you look at 4Q, you're starting to cycle some of the rationalization that has come out. So that'll be a positive on the year-over-year comps.

John Fieldly: Yeah, no, I think when you look at Q4, you're starting to cycle some of the rationalization that has come out, that'll be a positive on the year-over-year comps. As you're looking at that on the weekly data, you do have some seasonality that needs to be taken into consideration that we do see within the category every year. When you're looking at also the expanded distribution, we've talked about that with retailers or permanent fixtures, investment in cold placements. Those will be continually come through to the rest of the year as well. That should give us expanded distribution, better placement for the Celsius portfolio. Also you have the comps from the prior year when the rationalization really started to progress through. Those are some things that will benefit the Celsius portfolio.

Speaker #3: As you're looking as you're looking at that on the weekly data, you do have some seasonality that needs to be taken into consideration that we do see within the category every year.

Speaker #3: And then we'll be when you're looking at also the expanded distribution, we've talked about that with retailers with permanent fixtures, investment in cold placements, so those will be continually come through through the rest of the year as well.

Speaker #3: So that should give us expanded distribution, better placement for the Celsius portfolio, and then also you have the comps from the prior year. When the rationalization really started to progress through.

Speaker #3: So those are some things that will benefit the Celsius portfolio.

Speaker #6: So can we think about that as kind of being up into the mid-single digit range or just, again, to try to contextualize that step up and then maybe any detail on the pacing of international given some of the opportunity that you highlighted there, just trying to think about, like I said, the kind of the pace of recovery if we should expect a quick snapback or if this is more of a gradual build 4Q and then through 2027.

Jim Salera: Can we think about that as kind of being up into the mid-single-digit range or just as, again, to try to contextualize that step up and then maybe any detail on the pacing of international, given some of the opportunity that you highlighted there, just trying to think about, like I said, the kind of the pace of recovery? If we should expect a quick snapback or if this is more of a gradual build for Q and then through 2027.

Speaker #3: Yeah. I think like Jared comment further on some of the scans versus the revenue, that we're recognizing. But it should be more of a build as we're going through in Q4 because some the SKUs slowly come out, right?

John Fieldly: Yeah, I think, I'll let Jarrod comment further on some of the scans versus the revenue that we're recognizing, but it should be more of a build as we're going through in Q4 because the SKUs slowly come out, right? It'll be more of a slow build on the Celsius portfolio. Do we want to touch base on that, Jarrod?

Speaker #3: So it'll be a more of a slow build on the Celsius portfolio. We want to touch base on that, Jared.

Speaker #6: Yeah. We'll also have more information on our next quarterly call as we kind of set timing and sequencing of when we're going to do load-ins and different things for the 2027 innovation.

Jarrod Langhans: Yeah, we'll also have more information on our next quarterly call as we kind of set timing and sequencing of when we're going to do load-ins and different things for the 2027 innovation. If you look at just in general brand Celsius, as John talked about, you'd see the build come through the scan data. Wouldn't necessarily look for a direct snapback, but that's from a scanner. From a reported perspective, we do have a softer comp year over year that we'd be seeing in Q4. The anticipation would be with that, you have an opportunity to actually be in the opposite direction versus scans for brand Celsius. Now, for Alani, we did have an inventory build in Q4 last year, which was partly why we had some soft comps for brand Celsius.

Speaker #6: If you look at just in general, brand Celsius as John talked about, you'd see the build come through the scan data wouldn't necessarily look for a direct snapback, but that's from a scanner, from a reported perspective, we do have a softer comp.

Speaker #6: Year over year, that would be seeing in Q4. So the anticipation would be with that, you have an opportunity to actually be in the opposite direction versus scans for brand Celsius.

Speaker #6: Now, for Alani, we did have an inventory build in Q4 last year which was partly why we had some soft comps for brand Celsius.

Speaker #6: So as we kind of get to building out the timing and sequencing of the 2027 innovation, because some of that will get loaded in Q4, we'll be able to better kind of map out for everyone what we're expecting on Q4 versus Q1 because we do have a nice robust plan of innovation coming forward for 2027.

Jarrod Langhans: As we kind of get to building out the timing and sequencing of the 2027 innovation, because some of that will get loaded in Q4, we'll be able to better kind of map out for everyone what we're expecting on Q4 versus Q1, because we do have a nice, robust plan of innovation coming forward for 2027.

Speaker #3: And then just to touch on your question in regards to international, that's amazing opportunity. We've been building out the teams this year. We have a really strong foundation.

John Fieldly: Just to touch on your question in regards to international, that's amazing opportunity. We've been building out the teams this year. We have a really strong foundation building up the sales marketing teams. We're seeing green shoots in a variety of markets from Australia, Paris, and we expect to further launch Alani for the first time in a variety of international markets that we're working on. I think we're in really good shape, although it's a smaller piece of our overall top-line revenue. International can be a meaningful piece over the years, and as prepared remarks, we anticipate a 15% over time that we're looking at, and could be even higher. We'll see how the brands resonate, but health and wellness trends and what we're seeing in the category in the US and North America are the same trends globally.

Speaker #3: Building out the sales marketing teams. We're seeing green shoots in a variety of markets from Australia, Paris, and we expect to further launch Alani for the first time in a variety of international markets that we're working on.

Speaker #3: So I think we're in really good shape, although it's a smaller piece of our overall top line revenue. International can be a meaningful piece over the years.

Speaker #3: And as a prepared remarks, we anticipate a 15% over time. That we're looking at. And it could be even higher. So we'll see how the brands resonate.

Speaker #3: But health and wellness trends, and what we're seeing in the category in the US and North America, are the same trends globally. And the awareness is a lot higher than we anticipated as we further conduct an analysis and research within these markets.

John Fieldly: The awareness is a lot higher than we anticipated as we further conduct analysis and research within these markets.

Speaker #6: Thank you. I'll pass it on.

Jim Salera: Thank you. I'll pass it on.

Speaker #1: Your next question comes from the line of Eric Serrata with Morgan Stanley. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Erik Sarata with Morgan Stanley. Your line is open. Please go ahead.

Speaker #5: Thanks for the question. First, in terms of the shelf space gains that you talked about back at Cagney and earlier in the year, clearly some of these gains have been a lot slower than expected in coming.

Erik Sarata: Thanks for the question. First, in terms of the shelf space gains that you talked about back at CAGNY earlier in the year. Clearly, some of these gains have been a lot slower than expected in coming. Where are you today versus that original target? I believe over the past quarter or so, you talked about some imminent permanent space increases in the mass channel. Has that happened, and how's it performing if it has? If it hasn't happened, why not? Then a quick follow-up after that.

Eric Serotta: Thanks for the question. First, in terms of the shelf space gains that you talked about back at CAGNY earlier in the year. Clearly, some of these gains have been a lot slower than expected in coming. Where are you today versus that original target? I believe over the past quarter or so, you talked about some imminent permanent space increases in the mass channel. Has that happened, and how's it performing if it has? If it hasn't happened, why not? Then a quick follow-up after that.

Speaker #5: Where are you today versus that original target? I believe over the past quarter or so, you talked about some imminent space permanent space increases in the mass channel.

Speaker #5: Has that happened? And how is it performing if it has? And if it hasn't happened, why not? And then a quick follow-up after that.

Speaker #6: Thanks, Eric. This is Jared. In terms of space gains, one of the things that happened is I would say the timing was a bit off from our initial expectations as we were going into the year.

Jarrod Langhans: Thanks, Erik. This is Jarrod. In terms of space gains, one of the things that happened is I would say the timing was a bit off from our initial expectations as we were going into the year. With some of it being fixtures and cold, it did take a little longer, more labor intensive. I know Toby had referred to a large retailer that was in place. We put a timeline out back in June in terms of when we thought the cadence would occur. That's come to plan. That kind of as we got through July, we were able to pick up that space. We do have an opportunity to swap out some end caps with some cold space. That wouldn't really change the space equation. It's just better space as we look at September and into Q4 with another retailer.

Speaker #6: With some of it being fixtures and cold, it did take a little longer. More labor intensive. So I know Toby had referred to a large retailer that was in place.

Speaker #6: We put a timeline out back in June in terms of when we thought the cadence would occur. So that's come to plan. So that kind of as we got through July, we were able to pick up that space.

Speaker #6: We do have an opportunity to swap out some end caps with some cold space. That wouldn't really change the space equation. It's just better space as we look at September and into Q4 with another retailer.

Speaker #6: And then the same kind of new channel retailer that we talked about coming on board in Q4 is coming on board. So those are kind of the nuances of the ones that got pushed a little bit.

Jarrod Langhans: The same kind of new channel retailer that we talked about coming on board in Q4 is coming on board. Those are kind of the nuances of the ones that got pushed a little bit. The rest of them have been reset with the rest of the resets as those were just your typical shelf gains. Alani is in place as well.

Speaker #6: The rest of them have been reset with the rest of the resets as those were just your typical shelf gains. And then Alani is in place as well.

Erik Sarata: Great. Just in terms of the innovation strategy, this year you pulled back on sort of permanent extensions for brand Celsius. It sounds like you're planning on bringing that back next year. Can you just talk about some guardrails that you might have in place in terms of SKU proliferation, just to kind of make sure that we're not in the same situation in another year or two in terms of overproliferation and sort of undoing the work that you're doing of trimming the tail?

Eric Serotta: Great. Just in terms of the innovation strategy, this year you pulled back on sort of permanent extensions for brand Celsius. It sounds like you're planning on bringing that back next year. Can you just talk about some guardrails that you might have in place in terms of SKU proliferation, just to kind of make sure that we're not in the same situation in another year or two in terms of overproliferation and sort of undoing the work that you're doing of trimming the tail?

Speaker #5: Great. And then just in terms of the innovation strategy, this year you pulled back on sort of permanent extensions for brand Celsius. Sounds like you're planning on bringing that back next year.

Speaker #5: Can you just talk about some guardrails that you might have in place in terms of SKU proliferation, just to kind of make sure that we're not in the same situation in another year or two in terms of over-proliferation and sort of undoing the work that you're doing of turning the tail?

Speaker #3: Yeah, I think as you're managing a portfolio and you're managing brands, you're always going to continue to optimize the tail. But I think when you look at your base SKUs, you're always evaluating, do you have the fastest cars on the track?

John Fieldly: Yeah. I think, as you're managing a portfolio and you're managing brands, you're always going to continue to optimize the tail. I think when we look at your base SKUs, you're always evaluating, do you have the fastest cars on the track? Making sure you're optimizing that to maximize the shelf space, to maximize the distribution. Those are something that you continually do through your commercial planning process, that continues to be evaluated, and replacing the tail. I think that's the most important thing. We need to continue to drive incrementality with the portfolio, make sure we continue to leverage the maximum billboard so we can disrupt that path to purchase, and versus cutting tail, replacing it with new innovation that's permanent throughout the year. I think that is something that will be a strategic change going forward.

Speaker #3: And making sure you're optimizing that to maximize the shelf space, the maximize the distribution. So those are something that you continually do through your commercial planning process.

Speaker #3: That continues to be evaluated. And replacing the tail. I think that's the most important thing. We need to continue to drive incrementality with the portfolio.

Speaker #3: Make sure we continue to leverage the maximum billboard so we can disrupt that path to purchase. And versus cutting tail, replacing it with new innovation that's permanent throughout the year.

Speaker #3: So I think that is something that will be a strategic change going forward.

Erik Sarata: Great. Thanks. I'll pass it on.

Eric Serotta: Great. Thanks. I'll pass it on.

Speaker #5: Great. Thanks. I'll pass it on.

Speaker #3: Excellent.

John Fieldly: Excellent.

Speaker #1: Your next question comes from the line of Andrea Ciaccera. With JP Morgan. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Andrea Teixeira with J.P. Morgan. Your line is open. Please go ahead.

Speaker #7: Thank you. Good morning, everyone. I was just hoping to see if you can elaborate a little bit more on Alani we clearly have seen as you mentioned about half of the gap, the 10% gap was about basically the shifts and depletes and that is set, right?

Andrea Teixeira: Thank you. Good morning, everyone. I was just hoping to see if you can elaborate a little bit more on Alani. We clearly have seen, as you mentioned, about half of the gap, the 10% gap, was about basically the ship and depletes, and that is sad, right? It seems like you're not going to have an improvement, and that's more brand Celsius, I understand that. As we think about the deceleration and disruption and the changes in distributor, you still have $8 million charge, and that's the cash charge, I'm assuming. How to think about the cadence with Alani itself? I understand all the LTO dynamics, and you're going to put Witches Brew even stronger this year.

Speaker #7: I mean, you can't it seems like you're not going to have an improvement. And that's more brand Celsius, I understand that. But then as we think about the deceleration and disruption and the changes in distributor you still have 8 million charge and that's the cash charge.

Speaker #7: I'm assuming how to think about the cadence with Alani itself? I understand all the LTO dynamics and you're going to put whichever even stronger this year.

Speaker #7: But as we think about all this dynamics that you highlighted in terms of the shipments in the fourth quarter that were strong last year as well, how we should be thinking of the improvement that you called out in the fourth quarter.

Andrea Teixeira: As we think about all the dynamics that you highlighted in terms of the shipments in Q4 that were strong last year as well, how we should be thinking of the improvement that you called out in Q4? I know it's a loaded question, but as we see Celsius in the same situation for Q3, unfortunately, you have an improvement in Q4, Alani has this kind of tough call. How we should be thinking about the Q4 for Alani? When do we see this noise of distributor charges coming out? Thank you.

Speaker #7: I know it's a loaded question, but as we see Celsius in the same situation for the third quarter, unfortunately, then you have an improvement in the fourth, but then Alani has this kind of tough call.

Speaker #7: So how we should be thinking about the fourth quarter for Alani and then when do we see this noise of distributor charges coming out?

Speaker #7: Thank you.

Speaker #8: Thanks, Andrea. I'll take this one, John. In terms of the fourth quarter, I think like I was referring to back with Jim, we need to take a look at the timing and sequencing of when we're going to bring our innovation in because that will impact the comps that we're going to be seeing.

Jarrod Langhans: Thanks, Andrea. I'll take this one, John.

John Fieldly: Sure.

Jarrod Langhans: In terms of the Q4, I think, like I was referring to back with Jim, we need to take a look at the timing and sequencing of when we're going to bring our innovation in, because that will impact the comps that we're going to be seeing. We've got a lot of good innovation we're going to be coming out with in Q1. We're going to have some of that coming in November, December. Some of that'll come in throughout Q1. We're mapping that out right now, that it's not fully baked in. We're working with our DSD partner on that. That will impact the timing and sequencing of what we're seeing from an Alani perspective, where we're going to have Alani growth, but we're also going to have the comp that we're rolling over from the pipe fill last year.

Speaker #8: We've got a lot of good innovation we're going to be coming out with in Q1. So we're going to have some of that coming in November and December, and some of that will come in throughout Q1.

Speaker #8: And so we're mapping that out right now that it's not fully baked in. And so we're working with our DSD partner on that. That will impact the timing and sequencing of what we're seeing from an Alani perspective where we're going to have Alani growth, but we're also going to have the comp that we're rolling over from the pipe fill last year.

Speaker #8: But also we have a lighter comp on brand Celsius and we've got new innovation coming in at the same time. So we've got an easier comp with brand Celsius plus new innovation.

Jarrod Langhans: We have a lighter comp on brand Celsius, and we've got new innovation coming in at the same time. We've got a easier comp with brand Celsius plus new innovation. We've got a tougher comp with Alani with new innovation. We're going through that right now with our DSD partner to see how that shakes out, and we'll be able to provide more data on that once we get to our next call after the Q3 earnings.

Speaker #8: We've got a tougher comp with Alani with new innovation. And we're going through that right now with our DSD partner to see how that shakes out and we'll be able to provide more data on that once we get to our next call after the Q3 earnings.

Speaker #3: And I'll just make a great question because there is some nuances from quarter to quarter, especially on the when the load-ins on Alani going into the PepsiCo system.

John Fieldly: I'll just make a great question, because there is some nuances from quarter to quarter, especially on the load-ins on Alani going into the PepsiCo system. That is a comp. As Jarrod mentioned, when you look at our revenue, we do have innovation going in. There is some offsets there. I think the most important thing for the long term and the long-term health of these brands is truly what's happening at the registers. That's something that continue to focus on. We have to focus on that. We'll have nuances from month to month, quarter to quarter on inventories and warehouses. At the end of the day, it's how are those scans performing?

Speaker #3: So that is a comp. And as Jared mentioned, when you look at our revenue, we do have innovation going in. So there is some offsets there.

Speaker #3: But I think the most important thing for the long term and the long-term health of these brands is truly what's happening at the registers.

Speaker #3: That's something that continue to focus on. We have to focus on that. We'll have nuances from month to month, quarter to quarter. On inventories and warehouses, but at the end of the day, it's how are those scans performing?

Speaker #3: How are consumers reacting with these brands? That are going to continue to drive this portfolio forward and to continue to create opportunities in this fast-growing energy category, which is going beyond energy is going to more day parts and occasions.

John Fieldly: How are consumers reacting with these brands that are going to continue to drive this portfolio forward and to continue to create opportunities in this fast-growing energy category, which is going beyond energy, is going to more day parts and occasions. That's truly the value behind these brands.

Speaker #3: That's truly the value behind these brands.

Speaker #1: And we've now reached the end of the Q&A session. I'd like to turn the call back to Mr. John Fieldly for closing remarks. Please go ahead.

Operator: We've now reached the end of the Q&A session. I'd like to turn the call back to Mr. John Fieldly for closing remarks. Please go ahead.

Speaker #3: Thank you for joining us today. The second quarter was a meaningful progress in advancing our scale portfolio of leading brands. We're entering the back half of the year with a clear set of priorities.

John Fieldly: Thank you for joining us today. The Q2 was a meaningful progress in advancing our scale portfolio of leading brands. We're entering the H2 of the year with a clear set of priorities. We have a strong slate of fall programming and new campaigns ahead. Alani Nu has what we believe to be the biggest launch in all history for that brand. We are on track for planning our 2027 priorities with key retailers, and we're doing it earlier than we have ever before. Want to take this opportunity to thank our employees, our partners, and all of our customers for their focus, their teamwork, and what makes this all possible. To everyone listening today, we appreciate the support. We look forward to updating you next quarter. Until then, grab a Celsius and live fit.

Speaker #3: We have a strong slate of fall programming and new campaigns ahead. Alani knew has what we believe to be the biggest launch in all of history for the brand.

Speaker #3: And we are on track for planning our 2027 priorities with key retailers. And we're doing it earlier than we have ever before. Want to take this opportunity to thank our employees, our partners, and all of our customers for their focus, their teamwork, and what makes this all possible.

Speaker #3: For everyone listening today, we appreciate the support. We look forward to updating you next quarter. Until then, grab a Celsius and live fit.

Operator: This concludes today's call. Thank you all for attending. You may now disconnect.

Q2 2026 Celsius Holdings Inc Earnings Call

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