Greetings and welcome to Celsius Holdings' First Quarter Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Cameron Donahue, Investor Relations for Celsius. Thank you. You may begin.

Thank you and good morning everyone. We appreciate you joining us today for Celsius Holdings' first quarter 2021 earnings conference call. Joining me on the call today are John Fieldly, President and Chief Executive Officer; and Edwin Negron, Chief Financial Officer. Following the prepared remarks, we'll open the call to your questions and instructions will begin at that time. The company filed its Form 10-Q with the SEC and released a press release pre-market today. All materials are available on the company's website, celsiusholdingsinc.com under the Investor Relations section. As a reminder, before I turn the call over to John, an audio replay will be available later today. Please also be aware that this call may be contained forward-looking statements, which are based on forecasts, expectations, and other information available to the management as of May 13th, 2021. These statements involve numerous risks and uncertainties, including many that are beyond the company's control. Except to the extent as required by law, Celsius Holdings undertakes no obligations and disclaims any duty to update any of these forward-looking statements. We encourage you to review in full our Safe Harbor statements contained in today's press release and our quarterly filings with the SEC for additional information. With that, I'd like to turn the call over to President and Chief Executive Officer, John Fieldly, for his prepared remarks. John?

Thank you, Cameron. Good morning everyone and thank you for joining us today. The company achieved a record first quarter exceeding $50 million in sales which were derived by over 100% growth in North America sales from continued strong demand for our portfolio and a 25% growth in international sales. International sales growth is primarily derived from a 22% growth from our Nordic operations. Even with the record quarter, we are still dealing with the impacts of COVID-19 in several channels, international markets, and experiencing increased costs and raw materials and transportation. Channels of trade we operate in which we continue to see these effects include our health and fitness, vending, food service, as well as reduce foot traffic and several additional channels. However, we are starting to see improvements to the first quarter, but still not fully normalized. In addition, our EU, Middle East, Southeast Asia, and Australia operations remained adversely affected by COVID-19 pandemic, while we have started to see sequential improvements over the last few quarters, with capacity restrictions as well as reopenings in hardest hit channels, there remains uncertainty as their potential could be re-closings due to case increases in our regions of operations what could force extended closures in some states and countries. The health and safety of our employees and partners remains our top priority and safety precautions have been implemented, which we have developed and adopted in line with guidance from public health authorities. In addition to increases in transportation costs, we are experiencing another COVID impact. It is an aluminum cans shortage which has impacted the entire industry. The large can manufacturers in the U.S. have initiated major expansion projects which expect to be completion time somewhere in the -- starting in the back half of 2021 and potentially through 2022 and…

Thank you, John. Before I review the financial results, I wanted to first provide some background on the amended 10-K for fiscal year 2019 that we also filed this morning. The amendment relates to management's evaluation of internal controls, specifically disclosure controls that pertain to the October 2019 acquisition of the European business. Acquiring companies have one year post-acquisition to perform a thorough review over the effectiveness of internal controls of the acquired business. We assess performer review with the assistance of a reputable international CPA firm and found the controls to be effective. These are technical matters which were not fully addressed per SEC requirements regarding acquisition disclosures and have been updated in the amended 10-K. As it relates to Celsius, these matters are inconsequential as it relates to our financial reporting. As such, there is no impact to the reporting figures or any other footnotes or any of the additional disclosures. We wanted to provide the investment community these details of the amended 2019 10-K so that there is no misunderstanding and it's clear that there is no impact regarding the reported figures and no impact regarding our operating and standard internal controls over financial reporting. Now, to review the financial results for the first quarter. Our first quarter revenue for the three months ended March 31st, 2021 was $50 million, an increase of $21 million or 78% from $28.2 million for the three months ended March 31st, 2020. Approximately 90% of this growth was a result of increased revenues from North America where 2020 revenues were $19.4 million, which translates to an increase of $19.6 million or 101% from the prior year quarter. The balance of the increase was mainly related to a 22% growth in European revenues. As such, the first quarter 2021 European revenues amounted…

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Jeff Van Sinderen with B. Riley & Company. Please proceed with your question.

Let me say first, congratulations on amazing metrics in Q1. First question is kind of a multi-part question. So, if you can bear with me appreciate it. Just regarding the overall North American revenue increase, can you speak more about maybe how much of that sequential acceleration and growth you think was catching up with sell-in versus sell-through, given the triple-digit sell-throughs you've been experiencing in some channels and were there accounts that didn't get as much as they wanted due to production constraints around the cans shortage, is there any pent-up demand around that? And then maybe if you could give us any more color on where you stand now on getting enough cans to satisfy demand?

Excellent. Thank you, Jeff, really appreciate it. The team did an amazing job in the quarter. To answer your questions specifically in regards to the revenue sell-in, sell-through, in North America, we saw great results, up 100% -- over 100%, 101%. We were not shipping at full capacity through the quarter. So, demand was higher. As we indicated on the call, there was a lot of headwinds. [technical difficulty] In the quarter, we talked about wrapping cans, we produced a lot of wrapped cans, they were -- they run at slower velocity levels at the co-packers, we were shipping probably roughly around about an 80% fill rate. And then we also had challenges with the Texas freeze, also logistics coming out of the Texas freeze for two and a half weeks. So, in regards to sell-in and sell-out, our sell-in, has been somewhat limited in the first quarter due to some of those -- our heat line. But our sell-out seems to be very strong when we look at the inventory levels at our retailers, also at our distributors and the sell-through there. So, I think we're seeing a correlation and we're seeing some of the scan data that's out there, when you look at the scan data in regards to the Nielsen and some of the SPINS, as well as the Stackline data we referenced is showing extremely strong demand at the register and the sell-out. So, we feel strongly about that and we think we're in a good position as we head into really Q2 because the latest scan data in April is also very strong. When you look at the sales -- regards to the cans, the cans that are out there, we strategically moved back in Q4 of 2020 -- really 2020 trying to secure additional…

Okay, great. So, in terms of getting back to call it, I guess, 100% fill rate? Are you getting there -- or maybe just give us a sense of when you think you can be sort of back at 100% fill rate?

Though our growth rates at the-- on the sell-out at retail, when you look at some of the velocity levels, with the Nielsen data and the scan data is extremely strong. We're working to bring our inventory levels up right now to a sustainable level. We're able to meet all demand. And likely, probably in the back half of Q2, I think we'll be in a better position to be able to fulfill all orders. But things are changing rapidly. Right now we're going through some gas shortages with freight and transportation. So, that's a big thing this week on trying to get containers move, trucks move, logistics, we're getting feedback that truckers just don't have gas, especially in the northeast and a variety of other areas. So, those are things we're dealing with. We'll work through that. We have a great team; a very, very passionate team, dedicated team and -- who are working through this. I have full confidence in the team will be able to drive forward and we will be able to meet this demand -- full demand towards the back half of Q2 and into Q -- the back half of 2021.

Okay, great. And then if I could just squeeze in one more follow-up, just wanted to focus on Europe for a moment, any more color, you can give us there, I guess, on what you expect over the next couple of quarters, including the FAST brand and I think you had some production constraints around FAST?

Yes, that's correct. We had a good growth, roughly around a 22% growth rate in Europe, when you look at them; they are mainly derived from the Nordic operations, when you look at a quarter-over-quarter. And then sequentially from Q4 to Q1, we saw about a 51% growth rate. So, those are good numbers there. They weren't impacted with COVID pandemics and shutdowns in the first quarter, in Finland, in Norway, and in Sweden. So, there was some difficulty. We also had supply constraints not with the Southeast portfolio, but with our FAST protein snack portfolio, which impacted the quarter. Those are getting worked out, I think towards the middle -- really the back half of Q2, those will be realized and into 20 -- the back half of 2021 will get much better inventory levels. But we're working through that. They had a great new successful launch. We talked about in Q4 with a really great new innovative bar, indulgence bar that was very well received in Finland and we think we're well-positioned. Also we are bringing the FAST brand to the U.S. in Q2. So, look out for that on Amazon in the coming weeks, where we'll be working with our digital teams, gaining some traction with an exclusive launch with Amazon there. So, things are going well in Europe and we're not out of the woods in COVID restriction, a lot of things, but full faith and we have a great team over there that's executing.

Okay, good to hear. Thanks for taking my questions and best of luck.

Thank you, Jeff.

Thank you.

Our next question comes from the line of Kaumil Gajrawala with Credit Suisse. Please proceed with your question.

Thank you. Hey, everybody. A couple of questions, I guess, on the balance between accepting winning new distribution and supply. It sounds like you've already benefited from some shelf resets, but the real benefits are happening now, kind of, moving forward in terms of resets, do you have to delay any of these shelf space gains maybe even until the April 2022 shelf resets because of limitations on supply?

Thank you, Kaumil. Great question. In regards to the new distribution resets, when it's physically looking at the first quarter, we did add some additional distribution. Murphy's USA was a great win for us that gets reset, but the bulk of the distribution and new resets are taking place in that April -- that May, April timeframe. We are we are not limited to the new expansion on the resets; we have enough product as a filled demand. We're working on more inventory. I think a lot of companies were affected with the Texas freeze and the shutdowns that took place. So, that really impacted us during the quarter. We have more product coming in. We're producing more product than we ever have. We feel we'll be able to meet demand. We are roughly around -- in Q1 roughly around about an 80% fill rate that we experienced. But with a new distribution, we have more product coming on board in Q2 and we expect to meet the new distribution requirements to fill those new doors and those resets that are coming on board.

Okay, great. And then a question on the fitness channel. We're seeing some improvements; I suppose we're seeing a bit of a recovery. Can you maybe give us a read on what you expect it to look like as we come to kind of full reopening, maybe just some early indications on what you're seeing at the gyms, perhaps the behavior, if it's any different from what the world looked like in 2019? And then your strategy, obviously, within what you intend to do in the channel?

Absolutely. Great question regards. Historically, pre-COVID, the fitness channel represented about 25% approximately of our revenue, severely impacted as we all know. We have a great team -- a great dedicated team focused on fitness and that is our core. We have great partnerships throughout the industry with key chains and locations and we're working hard with those relationships and we're going to support them just like we supported them all the way through COVID. And we look to really get forge solid relationships on a go-forward basis. It right around the -- the fitness channel represented approximately 10% of our revenue in North America. We did see a good growth rate in Q1, about 33% on net revenue, so seeing continual re-openings and growth, we feel very excited talking to our operators in the chains and also our distributors that are focused on fitness. Everyone is very excited to really continue to move forward with the reopening of America, the reopening of gyms. It's really pent-up demand that we're seeing. We're seeing -- we're hearing comments about additional signups and there seems to be a lot of momentum there. They're nowhere near where they were pre pandemic, but it's coming. We're excited about the summer. We think it's going to be a great contributor to us. It is a focus of us. We have teams, like I said, that are dedicated to it and it's a great opportunity, especially, for the Southeast portfolio as well.

Okay, great. Thanks, guys.

Thank Kaumil.

[Operator Instructions] Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question.

Hi John, Edwin, and Cameron, how are you?

Excellent Jeffrey.

Very well.

Good to hear. So, when may we see Tropical Vibe coming, this summer?

It is this summer. What's your Vibe for this summer; we had such a great successful launch with our Peach Vibe. We were bringing back another Vibe; it's going to be What's Your Vibe for Summer. It's Tropical Vibe. It's actually right now you can pick it up at 7-Eleven, nationwide authorization at 7-Eleven. So, to go to your local 7-Eleven, you can pick some up and it's -- tastes amazing, great flavor profile. The team did a great job and it disappears here around the office.

Got it. Okay. Can you talk about the test portfolio, you said it was going to be coming via Amazon in Q2, can you give us an indication of a number of SKUs we'll see?

Yes, we're doing a really methodical rollout. We're seeing -- what we'll see is two SKUs that will be launched on Amazon initially as an exclusive launch in partnership with them. And then we'll continue to scale to grant from that point. So, initial feedback has been very positive on testing. We've been doing a lot of consumer testing as well as working with Amazon very closely. So, we think it's going to be a great addition to a snacking product -- the FAST growing protein snacking category, which has a lot of momentum. And we have a lot of interest from a lot of our partners.

Fantastic. Could you talk about the sticks a little bit, because of the issues going on with the cans, have the sticks picked up some share from your standpoint on the growth side and the aggregate numbers?

No, as additional line extension and also expanded usage occasion, our powder products overall represent an immaterial portion of our topline revenue number. But they are growing. We're seeing a lot of growth and we're also seeing a lot of interest from retailers, mainly vitamins specialty and online, but now we're seeing interest from CVS, Publix, and Walmart and several other customers as well, where they're looking to carry the sticks as additional offerings. And so there's a lot of opportunity there. We have come out with new flavors. We got a lot of different flavors planned in the pipeline and the feedback is extremely positive on our powder products. And also looking at opportunities potentially to expand our heat portfolio and our heat offerings into a powder on-the-go option as well. So, getting interest there, but the bulk of our revenue today is those RTDs.

Got it. And then lastly, for me, if you could provide any commentary. I know we've got a fair amount of data on the ordering trends, but can you give us any flavor from what you're sensing as far as new customer, new customer acquisitions, reordering stickiness of current customers out there, that would be helpful? Thank you.

Excellent Jeffrey. The stickiness of existing customers has been extremely positive as we -- as many of us on the call know we're very passionate about Celsius, we're -- our consumers and I speak to many of you. And it's -- the sticking power of the brand is incredible. We're seeing that you go back to even -- 7-Eleven we're launching our Tropical Vibe with them as we speak. And we've been with them for over -- going on four and a half, five years now and many of our retail partners, so we continue to gain more shelf space, better placements in stores, cold availability. So, we're really excited. And in regards to the new distribution coming on, we feel we're up to 192,000 locations today. We'll be firm north of 100,000 locations by the end of this year for sure. So, lots of interest. We're also getting a lot of good new team members joining our team as we continue to scale and grow and bringing great relationships that we'll be able to further leverage.

Super. Thank you very much for taking the questions. Great quarter.

Thank you, Jeffrey.

Thank you.

Our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.

Thanks. Yes, just in terms of DSD, John, you guys have made a huge push into the DSD network understanding that not every market is amenable or not every store; every market can be a DSD, depending on where that market is. Can you give us a general idea of what is the maximum penetration you see from your current -- in your current customer base? Where could you get to and approximately where are you at in terms of the percentage penetration?

Yes, thank you, Anthony. We're very much focused on DSD, just with the velocity levels that we see at retail. And the demand for the brands, you have to build this company on a DSD national network. We just -- as we were seeing in 2019, you just can't keep it in stock, we're in too high of a velocity category. So, we've been building out our national DSD network, we’re at about 85% major metropolitan markets, we have closed additional distributors. To close those gaps to be able to transition our key accounts over to DSD and as we speak, we are expanding on the West Coast as an example, 7-Elevens -- almost 1,500 -- actually almost 2000 7-Elevens are being migrated over to DSD as we speak, and we'll be going further in division-by-division, also working with CVS for their targets, and all of our major retailers. So, we would like to see a big significant portion of our distribution service through DSD and we're committed on that. We haven't provided percentages of where that is, but over time, I would like to see a considerable percentage of our retailer service by DSDs, better placement, better in stocks, better execution, and most importantly, better velocity and better revenues.

Make sense. Okay. Good. And then just on the aluminum cans shortage, because this has come up on other conference calls for companies that are in your situation? Based -- I guess, on your earlier comments, you're expecting -- and did you say by the end of this year, for that shortage to be alleviated? I guess is it because of the ramping in U.S. production or can you just give us a little more color on your expectations there?

Yes, absolutely. So, what's happening in the industry is that just due to the increase in demand for cans, the U.S. manufacturers just do not have the capacity. So, you heard to her Rodney Sacks on the Monster call most recently, he's -- every brand is running into -- every company in the can business and in beverage business is running into the same issues. There's just not enough capacity out there. All the major players are adding a capacity lines, unfortunately, it just takes time to put these lines and we expect some of the production and the capacity will come on towards the back half of 2021, we're hearing into 2022 and beyond, but it's going to take time to ramp that up. The other thing is what happens as the country continues to open, consumers go back to on-premise with fountain and demand for cans goes down. That's all to be determined. So, that's a fluctuation that could come into play here where we can source more U.S. cans and have quicker timeframe. But right now we are secured with international cans and U.S. cans, domestic cans to meet our forecast demands and our internal expectations for 2021 and into 2022 and beyond. We have secured those. So, now it's a matter of mix and how we move forward in regards to our margin profile. We talked about in Q1 41% gross profit, mainly that's derived; we had a lot of wrapped cans. We also had a lot of rework during the quarter and increases in transportation. So, we'll continue to optimize that with non-wrapped cans which are better for our margins. So, -- and then -- but we'll have that mix from international and domestic, which will optimize as we go forward.

Okay, great. And then just the last question on international sales, I know you said you're looking to expand in Europe, but can you also talk about the Middle East as well what's your expectation for that expansion by the end of this year and moving into 2022?

We're working -- potentially the U.K. and Germany, that's an area we've been focused on and exploring. We're talking to potential distributors. We don't have a timeline for that, but it is an area of opportunity for us that the team has been focused on. Also, you mentioned the Middle East; we do have a distributor locally in the Middle East and we're working with several others on an import basis. But it's all timing and sequencing at this point. And COVID has impacted a lot of that -- some of these discussions, but we are in discussions and things are moving forward. Edwin, you wanted to make comment as well?

Yes, I was just going to say, John, to me, the key is that we limit the footprint as much as possible. And we use the model going through distributors, so that we minimize the risk and current including currency risks, and so forth. And that -- to me, that's been the successful model and hopefully, we can continue to expand using that model.

Okay, great. And once again, thanks for clarifying the internal control. I think that was a good way to kick-off the call to put that to -- put that question to rest. So, appreciate that and I'll turn it back over to you. Thanks, guys.

Thank you, Anthony.

Our next question is a follow-up question for the line of Kaumil Gajrawala with Credit Suisse. Pleased to see with your question.

Thanks for taking a second one guys. On international, you think about the international rollout, can you talk a bit about the marketing and your marketing intentions, sounds like -- you're looking to get into new regions and such maybe more maybe more aggressively than you would have discussed six to 12 months ago. And obviously, there would have to have a bit of a marketing overlay on that. So, can you talk about what the plans are? And ideally, if you can, what sort of the investment would look like?

Yes, Kaumil, thank you. As we mentioned, we're going through more of a distributor model where we're importing and we allow -- it's a collaborative effort with the margins that are generated through the sales as well as our support as well that it'll be fairly limited. Initially, it is a more methodical rollout that we are strategic approach as we enter a market. We don't have plans to invest heavily ahead of revenue in any of these markets. So, we'll be sticking with our positive ROI-driven model that we that we've indicated on many calls, and over the last several years. So, we're looking for positive ROI investments as we go forward. Some of the initial relationships, there could be in regards to the margins and both contributing, there could be some investments, but it'll be generally material.

Okay, great. Thank you.

There are no further questions. I'd like to hand the call back to management for closing remarks.

Thank you. On behalf of the company, we'd like to thank everyone for their continued interest and support. Our results demonstrate our products are gaining considerable momentum. We're capitalizing on today's global health and wellness trends and the transformation taking place in today's energy drink category. Our active lifestyle position is a global position with mass appeal. We're building upon our core and leveraging opportunities and deploying best practices. We have a winning portfolio, strategy, and team, and a large rapidly growing market that consumers want. Our mission is to get Celsius to more consumers profitably. I'm very proud of our dedicated team, as without them our tremendous achievements, and the significant opportunities we see ahead would not be possible. So, believe we'll be able to navigate through the challenges ahead as a result of the COVID-19 pandemic and we are well-positioned to thrive in the transformation of today's energy drink category. In addition, I thank our investors for their continued support and confidence in our team. Thank you everyone for your interest in Celsius. Be safe, stay healthy, and have a great day.

Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.