Celsius (CELH) – Earnings Review – February 29, 2024

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Celsius (CELH) – Earnings Review – February 29, 2024

Demand

Celsius beat revenue estimates by 4.8%. Its 113% 3-year revenue CAGR compares to 119% Q/Q & 121% 2 quarters ago.

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases

Profitability

  • Beat EBITDA estimates by 12%.
  • Met GAAP EPS estimates.
  • Beat 47.6% GAAP GPM estimates by 20 bps.

Note that Q4-22 GAAP EBIT & net income margins exclude $37.6M distributor termination fee.

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases

Balance Sheet

  • $756 million in cash & equivalents.
  • No debt.
  • Stock comp is 1% of revenue.

Guidance & Valuation

Celsius sees stable Y/Y gross margin for 2024. That’s all the forward looking guidance that it offered. Analysts wanted 90 bps of Y/Y gross margin expansion, which means this is a miss.

Celsius trades for 76x 2024 GAAP EPS and about 47x 2024 EBITDA. GAAP EPS is expected to grow by 33.4% Y/Y and EBITDA is expected to grow by 35.3% Y/Y.

Call & Release Highlights

Party in the USA:

Celsius as a U.S. brand resembles a freight train. Don’t stand in the tracks when that train is coming. It was the #1 dollar and unit grower in the U.S. multi-outlet + convenience (MULO+C) category. Its growth outpaced the category by over 10x. It’s the best-selling energy drink on Amazon with 19.7% market share vs. 19.6% for Monster and 12.3% for Red Bull. It actually had 21.4% Amazon share as of last quarter, but there’s volatility to quarterly trends; the large Y/Y gain is what to focus on here, and annually, the 19.7% share compares to 16.9% Y/Y.

Overall, it’s now the 3rd largest MULO+C energy drink brand in the U.S. with 10.5% share vs. 4.9% Y/Y. In 12 key U.S. markets, its share position is closer to 15% and actually leads Red Bull in a few of them.

All Commodity Volume (ACV) now reaches 97.8% of total tracked distribution points vs. 90.6% Y/Y. With distribution across MULO+C now complete, Celsius is focused on raising volume per location and growing non-tracked channel revenue in the U.S. These non-tracked channels include food service, vending machines, universities etc.

In convenience stores, distribution coverage rose from 89.4% to 96.9% Y/Y. Celsius was also just named 7-Eleven’s prestigious 2023 supplier of the year for non-alcoholic drinks. Finally, for the club channel, revenue rose 64% Y/Y to $77 million.

International:

Two months into its official Canadian entrance, Celsius is “very pleased with sales, consumer enthusiasm and acceptance, which are all exceeding expectations.” It also signed a new distribution agreement with Suntory Beverage in Great Britain and Ireland. It expects revenue generation there to begin this spring.

Innovation:

  • Celsius’s brand update to its line of non-carbonated drinks is off to a great start.
  • Its line of sports drinks (Celsius Essentials) launched 2 new flavors to reach 6 in total. ACV distribution coverage for this newer line of beverages crossed 49% as of February 18th vs. 40% just 6 weeks earlier. This launch is going very well and is already materially incremental to its overall results.
  • Its Celsius on-the-go-powder now has a leading market share in that category as well. Share reached 23.1% vs. 17.5% Y/Y as it gears up to launch several other flavors.
  • Its newer Astro, Galaxy and Cosmic Vibe flavors are now available in Circle K.

2024 Spring Re-Sets:

Multi-outlet inventory plan re-sets take place from January to May. Last year, when this was happening, Celsius owned 4.5% of the total market. With share more than doubling Y/Y, it’s “very pleased” with the incremental space that it’s gaining this year among large retailers. That will “be reflected in results across the first half of 2024.” Part of this improved placement is its 300% Y/Y growth in display coolers across the USA to reach 10,000 total. Growth will stay rapid in 2024.

Marketing:

Regardless of what we think of its claim to being a healthier energy drink (ingredients label is quite the adventure), Celsius continues to lean into this reputation. And it’s clearly working. It’s a new Major League Soccer sponsor and also the team sponsor for Formula One’s Ferrari team. It plans to continue ramping sales & marketing investments to build its brand.

“These strategic investments placed our premium brand in the forefront of consumers who share our passion to live fit.” — CEO John Fieldly

Costs:

  • Sales & marketing dollars fell 11% Y/Y due to the absence of distributor termination charges.
  • General & Administrative (G&A) was 8% of sales vs. 12% Y/Y due to sales leverage mainly.
  • Inventory turn rate with Pepsi is stable Q/Q. This is the firm’s 5th quarter operating within Pepsi’s distribution network. It expects all of the margin progress enjoyed from the move to be permanent.
  • Gross profit margin was helped by raw material sourcing efficiencies, less waste, better marketing efficiency and rapid revenue growth. These same factors helped all other margins too.

Take

This was a fantastic quarter. Some analysts were looking for a larger beat due to stronger alt-sales data for the quarter. Regardless, this was a remarkably positive quarter amid a sea of consistently strong Celsius execution. Anyone saying otherwise is getting too picky. Congrats to shareholders on your well deserved victory lap.

Disclaimer: Third party content is provided for informational purposes only and should not be construed as an offer to sell or a solicitation of an offer to buy or sell any security. Third party content is not intended to serve as a recommendation to buy or sell any security and is not intended to serve as investment advice. Third party content creators are not affiliated with BBAE Holdings LLC, (“BBAE”) Redbridge Securities LLC (“Redbridge Securities”) or BBAE Advisors LLC (“BBAE Advisors”). All investments involve risk, including the possibility of total loss of principal. For additional important information, please click here.

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