Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Celsius Holdings Inc (CELH, Financial) reported record second-quarter 2024 financial results with a 23% year-over-year increase in total revenue to $402 million.
- International revenue grew by 30% in the second quarter, reaching $19.6 million.
- The company achieved significant shelf space gains, increasing average SKUs sold per store by more than 35%.
- Celsius Holdings Inc (CELH) saw a 41% year-over-year increase in sales on Amazon, reaching $39.9 million.
- Gross profit margins improved to 52% of revenues, up from 49% in the prior year period, attributed to reduced raw material and freight costs.
Negative Points
- The energy drink category experienced a slowdown, with competition and macroeconomic factors applying pressure to the business.
- Same-store sales in the convenience channel were down, with one of the largest convenience chains reporting a more than 4% decline.
- Despite strong growth, Celsius Holdings Inc (CELH) experienced market share stabilization rather than significant gains.
- The company faced inventory timing movements, impacting sales volume growth, with a noted $20 million to $30 million drag from inventory adjustments.
- Sales and marketing expenses were high, coming in at 22.6% of revenue, with expectations of increased spending in the third quarter.
Q & A Highlights
Q: I see that on August 1, there were some new employment agreements, which included an amendment related to change in control. Can you maybe just talk about what the purpose is or what's different there?
A: We did have some changes regarding change of control, which the compensation committee conducted a review to standardize the executive team in accordance with similar standards within change of control associated with the employment agreements that we have. This was more of an administrative update to align all executive agreements.
Q: Could you maybe give us some more details on July or what you're seeing specifically?
A: We saw some share loss on the weekly data standard due to increased competition and consumer challenges. Despite these pressures, we are still the category driver at 47% and are confident in our strategies. We did see further softness within the category in July, but we are optimistic about picking up growth in the fourth quarter.
Q: Why is Celsius growth meaningfully ahead of the category, yet your market share has contracted?
A: When you look at other brands within the category, especially Red Bull, they had some great launches and gained share points recently. Even though we are growing 10 times the category growth rate, the large dollar percentage of the total category from other brands impacts those figures.
Q: Does your market share stabilize or start to improve in the longer term?
A: We are confident in the long-term trajectory of the company to be a leader in the energy drink category. We are focusing on driving share and expanding our drill-deep strategy in additional markets. We are optimistic about the back half of the year and beyond.
Q: How do you think about pricing given the current market conditions?
A: We are maintaining our premium position in the category but are cautious about pricing due to consumer sensitivity. We have a variety of retail marketing programs and promotional strategies in place to drive growth and share profitably.
Q: Can you size the shipment timing drag for us in the quarter?
A: The impact of inventory movements during the middle of June was approximately $20 million to $30 million. As we closed the quarter, the impact was at the lower end of that range.
Q: Should we expect another headwind from Pepsi inventory dynamics in 3Q?
A: Time will tell as we get to Q3. It depends on how our partners manage their inventory. If it's fully optimized, we should be in good shape, but there is still some flexibility within their system.
Q: How do you see shelf space evolving given the current trends?
A: We are confident in our selling story to retailers, emphasizing that we are driving category growth and are incremental. We have a lot of great innovation planned for 2025 and are in initial discussions with key retailers, which have been positive.
Q: Any thoughts on why the overall energy drink category is starting to see some softness?
A: We are seeing pressure from various segments like juices, coffee, and tea. The energy category's growth rate has slowed, possibly due to consumer pressures from interest rates and other economic factors. However, we believe the energy category has massive upside potential.
Q: Have the newer flavored products been as incremental as expected?
A: We are driving our total portfolio, not just specific flavors. New flavors like sparkling watermelon lemonade, Kiwi strawberry, and cherry cola have performed well. Our Celsius Essentials 16-ounce offering has also performed very well since launch.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
