Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Celsius Holdings Inc reported a significant 37% year-over-year increase in revenue for the first quarter of 2024, reaching $355.7 million.
- The company now holds an 11.5% market share in MULOC, showing a substantial increase from previous periods.
- Celsius introduced several new flavor innovations and launched the CELSIUS Essentials line, which has achieved a 54.5% ACV since its introduction.
- International sales grew by 42% in the quarter, and the company announced expansion plans in Australia, France, Ireland, New Zealand, and the United Kingdom.
- Celsius' gross profit margins improved significantly, reaching 51.2% of revenues due to reduced freight and raw material costs.
Negative Points
- Revenue was adversely affected by inventory movements by the company's largest customer, which is beyond Celsius' control.
- Ongoing inventory fluctuations are expected in subsequent quarters, which could cause variability in quarterly revenue figures.
- The company's sales through Pepsi in the foodservice channel, while strong, showed some lumpiness and could be unpredictable.
- Despite strong revenue growth, there was a mention of potential challenges due to rising fuel costs and other commodity costs like aluminum.
- The incentive program with Pepsi, while potentially beneficial, involves costs and its impact on margins is not fully predictable.
Q & A Highlights
Q: Can you provide some context around inventory levels as we head into Q2, especially considering the ongoing shelf resets?
A: John Fieldly, CEO of Celsius, noted that while the company does not control inventory levels directly, they believe that inventory levels are being optimized moving forward. He emphasized the importance of keeping products stocked on shelves, especially during the reset season. Jarrod Langhans, CFO, added that depletion rates are solid, but it's a new normal with current inventory levels as they enter Q2.
Q: Were there any one-time factors that contributed to the substantial margin improvement reported this quarter?
A: Jarrod Langhans explained that while freight rates were favorable this quarter, which is subject to fluctuation, the company has seen benefits from leveraging business scale around raw materials. However, he cautioned that the upcoming promotional period might affect future margins, hence maintaining a conservative outlook for the remainder of the year.
Q: How are inventory levels managed, and is there a risk of further destocking that could impact future performance?
A: John Fieldly responded that while they cannot predict future inventory adjustments by their partners, current levels seem stable. He reassured that sales are strong and inventory management is aligning well with sales demands.
Q: Can you discuss the impact of the new incentive program with Pepsi on margins and overall alignment?
A: Jarrod Langhans described the incentive program as a mechanism to align priorities and drive mutual growth within the energy category, aiming to position Celsius as the top brand globally. He acknowledged that while there is a cost to the program, it is designed to enhance performance and alignment significantly.
Q: What are the expectations from the ongoing and upcoming shelf resets in terms of market share and sales growth?
A: John Fieldly highlighted that the company is on track to achieve significant space gains from these resets, which will be fully realized by July. He mentioned that these efforts are expected to substantially enhance product visibility and availability, thereby supporting continued sales growth and market share expansion.
Q: Could you provide more details on how the market share gains in specific metropolitan markets are being achieved and what strategies are proving most effective?
A: John Fieldly shared that their success in expanding market share in key metropolitan areas is largely due to enhanced collaboration with distribution partners, targeted marketing, and effective sales team efforts. He emphasized the importance of engaging consumers directly and increasing product availability, particularly in convenience channels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
