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. 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 contain 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 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 from 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 in 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 reduced foot traffic in several additional channels. However, we are starting to see improvements in the first quarter, but still not fully normalized. In addition, our EU, Middle East, Southeast Asia, and Australia operations remained adversely affected by the COVID-19 pandemic, while we have started to see sequential improvements over the last few quarters, with capacity restrictions as well as reopenings in the hardest hit channels, there remains uncertainty as there is potential for re-closings due to case increases in our regions of operations which 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: 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 completed starting in the back half of 2021 and potentially through 2022 and 2023. Celsius immediately implemented contingency plans last fall by sourcing cans internationally. We received our first orders in March of 2021. The company anticipates that 50% of can supply for 2021 will be derived from imported and wrapped cans, which should decrease in late 2021 and through 2022 as more U.S. capacity comes online. In the first quarter, we saw a higher proportion of wrapped cans versus imported cans, but expect that mix to change to a higher proportion of imported cans going forward. Wrapped cans have a higher cost, so that represents a slight margin improvement going forward with the changing mix. In addition, the team is expanding warehouse distribution sites, implementing contingency plans to further source raw materials with minimum floor stock programs, blanket purchase orders, and second and third supplier alternatives. The team continues to quickly adapt to the new COVID environment and is focused on driving efficiencies and operational performance. As outlined in our last call, this will impact the gross profit margins by a few points, but we remain confident that the company will run at approximately in the low 40% gross profit range through 2021, which is right in line with our first quarter results. We continue to explore additional opportunities as they may become available to shorten the duration Celsius is impacted by the can shortage and there's potential for improvement in the back end of this year. In addition, the company is optimizing its promotional architecture and strategies, partially mitigating these inflationary increases in raw materials and transportation. The company remained generally available throughout the quarter, but did experience shipping delays because of can shortages as well as the Texas freeze, which shut down two co-packers and one of our warehouses for over two and a half weeks during the quarter, but they have been fully back online at the end of the first quarter. On a convenience channel side in North America, which represents the largest energy drink market in the country with over $9 billion in annual sales, the latest SPINS data shows a 77% year-over-year increase for the Celsius product portfolio and the convenience channel compared to 7.5% overall in the energy drink category, while only holding a 16.8% ACV. We have added over 13,500 convenience stores in the last 12 months with additional accounts expected through spring reset. In addition, we recently achieved the second highest dollar growth in the category when compared to the top 10 energy drink competitors according to SPINs shelf stable energy and functional beverages convenience for the 12 weeks ending March 21st, 2021. Our first new spring reset win began in late March with the national launch of Murphy USA in 1,500 locations which will initially be serviced by approximately 80% of stores from DSD with six flavors authorized. Industry-backed third-party data continues to show accelerating growth and metrics and we are confident that the Celsius portfolio will continue to drive sales even higher as we further increase our ACV in the channel through additional launches with national chains and transitioning existing accounts to our DSD network. Consumer demand for Celsius has grown even stronger through 2021, with the most recent reporting Nielsen scan data as of April 24, 2021, showing Celsius sales are up 218% year-over-year for the two-week period, 220.3% for the four-week period, and 151.4% for the 12-week period, as well as an 8.6% for the 52-week period, achieving a 1.2% share in the last four weeks. The next highest comp for the most recent two-week data was Red Bull which grew at 29% and 37.2% for the two and four-week timeframe. In our e-commerce channel, according to Statline, which tracks energy drinks sales on Amazon in the United States for the four weeks ending April 17, 2021, sales in dollars in the energy drink category by Amazon including energy shocks grew at 160.1% growth compared to the same period a year ago. Celsius sales increased 265% and our share increased by 4.5 points to 15.5% share of the category, putting Celsius as the second largest energy drink brand on Amazon behind Monster Energy at a 35.6 share and now above Red Bull, which is at a 13.7 share. We continue to see acceleration through all channels of trade and are now beginning to see the additional lift from the conversion of accounts to our DSD network. Additionally, we secured additional distribution agreements with key partners further expanding availability to new regions, as Celsius builds out its national distribution network, which now includes over 180 regional direct store delivery DSD partners, and distribution centers covering approximately 85% of major metropolitan markets. Recent additions have predominantly been filling distribution gaps outside the major metropolitan markets, transitioning DSD continues with Target, CVS, Walmart, Racetracks, 7-Eleven, and others with additional regions and retail partners planned to transition to DSD throughout 2021. Today, in the United States, our total door count now exceeds 92,000 locations nationally, up approximately 10,000 locations since the beginning of 2021. We expect this number to grow even further in the coming quarters as retailers execute their planogram resets, which were delayed due to the COVID-19 pandemic. On our co-packing front, we continue to expand our partners and scale at existing locations improving line-time priority. Our total U.S. co-packer footprint is now eight locations that are active, which will help protect the future of our stocks and support our massive growth. In Europe, we further integrated and leveraged synergistic benefits from the acquisition of Func Food and Nordic Wellness Company that was immediately accretive to earnings and is an important step in our strategy in building out a global dominant brand. European operations were impacted by COVID and additional lockdowns in the first quarter which were largely impacted by the FAST protein snack portfolio, which was partially offset by growth in Celsius sales in the region. We continue to see great opportunities and momentum in these markets. We continue to evaluate additional European expansion primarily in the U.K. and Germany, in addition to working with Amazon Europe to further expand our e-commerce opportunities throughout Europe. In China, we maintain a licensing royalty model in the market where our distributor covers approximately 76 cities and serves approximately over 60,000 locations of distribution. Our other international markets have started to pick up as well, Australia sales resumed through our distribution partner in the market and in Malaysia, we maintain direct shipping with a local distributor, maintaining approximately 2,000 retail locations, with plans to reenter gyms, vitamins specialty locations, and additional retail partners as the recovery continues. As with Europe and the United States, we see significant opportunity to capitalize on a global scale, reflecting the changes in consumer preferences for Better For You offerings in the enormous market of Asia. Now, moving on to marketing. On the marketing front, we continue to activate, targeting new consumers and existing customers where they live, work, and play, establishing meaningful connections and emotional connections through robust integrated marketing programs even while consumers are at home. Specifically, during the quarter, despite COVID-19 restrictions, we sponsored targeted events both in-person and in virtual forms, sampling thousands of cans in hands during the quarter in key markets that were open. We continued to support our first responders, nurses, doctors, and COVID testing sites and reactivated the limited tour, which is an integrated experiential sampling tour. We have further leveraged and built out our brand ambassador program, influencer program, reaching more consumers in a meaningful way. Our momentum is accelerating, our brand is resonating with a diverse consumer base, expanding the category demographics. Health and wellness is beyond a trend. Functional energy is recognized throughout the industry as a driver of future growth and retailers. We hit not only a record for sales in North America, but we also achieved a record growth rate of 100% with third-party data reporting continued acceleration in the second quarter. Our national DSD network is in place and only at the forefront of recognizing the incremental growth we will drive. Our team is ready. Our infrastructure is in place to support our growth and we expect to continue to grab market share on an expedited scale. I will now turn the call over to Edwin Negron-Carballo, our Chief Financial Officer for his prepared remarks. Edwin?

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 assessed the 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 to $10.4 million, an increase of $1.9 million from $8.5 million for the prior year. In addition, our European revenue reflected a sequential increase of 50% for the first quarter of 2021 when compared to $6.9 million in the fourth quarter of 2020. Asian revenues, which mainly consist of royalty revenues from our China licensee amounted to $536,000 for the three months ended March 31st, 2021, an increase of 100% from $268,000 for the prior year quarter. Other international markets generated $128,000 of revenue during the three months ended March 31st, 2021, an increase of $71,000 from $57,000 from the prior year quarter. The total increase in revenue was primarily attributable to increases in sales volume as opposed to increases in product pricing. The primary factors behind the increase in North American sales volume were related to continued strong triple-digit growth of 137% in traditional channels of trade, coupled with an increase in presence in world-class retailers. Additionally, the continued expansion of our DSD network delivered a growth of 172% in our distributor revenues when compared to the prior year quarter. Moreover, e-commerce grew 79% or $3.7 million when compared to the prior year quarter. These results were partially offset by some shipping delays related to can shortages as well as a Texas freeze, which shut down two of our co-packers and one of our warehouses for two and a half weeks. Furthermore, we estimated that the strengthening of the euro accounted for approximately 8.4% of the increase in European revenue in the 2021 quarter when compared to the prior year quarter. Gross profit in Q1 increased by approximately $7.6 million or 58.3% to $20.6 million from $13 million for the three months ended March 31st, 2020. Gross profit margins decline to 41.1% for the three months ended March 31st, 2021 from 46.1% for the prior year quarter. The increase in gross profit dollars is related to increases in volume, while the decrease in gross profit margins is mainly related to increases in freight costs, repackaging costs, higher raw material costs, and higher processing costs. Furthermore, the temporary can shortage has also added incremental costs related to damages in transporting and processing our product, given the added complexities of the supply chain in procuring these items. Based on our estimates, the increase in volume favorably impacted gross profit dollars by approximately $7.9 million and unfavorable currency impact provided an additional $700,000, which were partially offset by unfavorable increases in cost of approximately $1 million. Sales and marketing expenses for the three months ended March 31st, 2021 were $12 million, an increase of $4.5 million or 60% from $7.5 million for three months ended March 31st, 2020. This increase was mainly related to marketing investment activities, which were augmented by $2.5 million compared to the prior year quarter. Additionally, employee costs increased by $650,000 from the year-ago quarter as we need to continue to invest in this area in order to have the proper infrastructure to support the commercial growth. Similarly, we experienced increases in other sales expenses in the amount of $563,000, mainly related to trade marketing activities to support our conversion to the DSD network. Lastly, storage and distribution expenses, as well as broker costs accounted for the remainder of the increase in this area of $704,000 when compared to the prior year quarter. General and administrative expenses for the three months ended March 31st, 2021 were $7.8 million, an increase of $3.3 million or 73.3%, from approximately $4.5 million for the three months ended March 31st, 2020. This increase was mainly related to stock option expense, which amounted to $3.6 million for the three months ended March 31st, 2021, or an increase of $2.2 million, which accounts for 61.1% of the total increase in this area when compared to the prior year quarter. Management deems it very important to motivate employees by providing them ownership participation in the business in order to promote overperformance which translates into the continued success of the company. Additionally, employee costs for the three months ended March 31st, 2021 reflected an increase of $660,000 or 70.2%. Investments in this area are also required to properly service our higher business volume and provide support to the commercial and operational areas of the business. Administrative expenses amounted to $2.1 million, an increase of $460,000 or 28.8% when compared to the prior year quarter. This increase is mainly related to higher legal costs and increase in the bad debt reserve to cover any potential realization issues, increases in insurance costs, and office rent. Depreciation, amortization, and all other administrative expenses accounted for the remainder of the variance, which amounted to a net reduction of $21,000 when compared to the prior year quarter. If we exclude the non-cash items, general and administrative expenses would amount to $15.9 million, or would be reduced to 7.8% of net revenues for the quarter. Total net other expenses for the three months ended March 31st, 2021 were $228,000, which reflects a reduction of $194,000 when compared to the total net other expenses of $422,000 for the three months ended March 31st, 2020. Net other expenses of $228,000 for the current quarter are composed of foreign currency exchange losses of $301,000 and other miscellaneous non-operational expenses of $13,000, which were partially offset by interest income of $87,000 related to the note receivable from our China distributor. As a result of the above, for the three months ended March 31st, 2021, net income was $585,000 or $0.01 per share based on a weighted average of 72.5 million shares outstanding and diluted earnings of $0.01 per share based on a fully diluted weighted average of 76.9 million shares outstanding. In comparison for the three months ended March 31st, 2020, the company had net income of approximately $546,000 or $0.01 per share based on a weighted average of 69.3 million shares outstanding and diluted earnings of $0.01 per share based on a fully diluted weighted average of 70.3 million shares outstanding. Adjusted EBITDA for the fourth quarter was basically $5 million, an increase of $2.2 million when compared to $2.8 million in the year ago quarter. We've released this information and comparisons of adjusted EBITDA and other non-GAAP financial measures, enhancing the overall understanding and visibility of our true business performance. To that effect, the reconciliation of our GAAP results and non-GAAP figures has been included in our earnings release. Now, focusing on liquidity and capital resources. As of March 31st, 2021 and December 31st, 2020, we had cash of approximately $31.6 million and $43.2 million, respectively, and working capital of approximately $73.6 million and $64.9 million, respectively, with no long-term debt. Cash flows used by operating activities totaled $13.3 million for the three months ended March 31st, 2021. The use of cash during the quarter is mainly related to increases in inventories in the amount of $19.2 million as well as $2.6 million related to prepaid expenses, which mainly pertain to the inventory prepayments and inventory in transit, as well as the process to secure processing time. If we exclude these aspects, operations would have delivered over $8 million of cash during the quarter. That concludes our prepared remarks. Operator, you may now open the call for questions. Thank you.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Our first question comes from Jeff Van Sinderen with B. Riley & Company. Please go ahead 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, I 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 can 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, I really appreciate it. The team did an amazing job in the quarter. To answer your questions specifically regarding the revenue sell-in and sell-through in North America, we saw great results, up over 100%, 101%. We were not shipping at full capacity through the quarter. So, demand was higher. As we indicated on the call, there were many headwinds. In the quarter, we discussed wrapping cans; we produced a lot of wrapped cans, which run at slower velocity levels at the co-packers. We were shipping at roughly about an 80% fill rate. We also had challenges with the Texas freeze and 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 those challenges. However, our sell-out seems to be very strong when we look at the inventory levels at our retailers and at our distributors. The scan data that we referenced shows extremely strong demand at the register and the sell-out is encouraging. We feel strongly about that, and we think we're in a good position as we head into Q2 because the latest scan data in April is also very strong. Regarding the cans, we strategically moved back in Q4 of 2020 to secure additional cans, once our main supplier informed us we would not be able to achieve our forecasts. Thus, we sourced cans from Asia, Europe, and Canada, working with a variety of can suppliers. In March, we started to produce Asian cans, and our German cans are now arriving. We secured enough cans to secure our volumes for the remainder of the year and are planning for 2022 and beyond. We expect to have a mix of imported and U.S. local cans until U.S. capacity is sufficiently increased. There remains potential for wrapped additional cans depending on how containers come in through the ports. The logistical challenges we face now, including the container pandemic and issues with moving trucks, will also influence this. But we are producing more product than we ever have. We have plans to produce even more product than the company ever had in Q2, Q3, and beyond. We think we're in a good position, and the sell-out seems extremely strong.

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 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. 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 in trying to get containers moved, trucks moved, 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 challenges we’re dealing with. We'll work through that. We have a great and dedicated team who are working through this. I have full confidence in my team that we will be able to drive forward and meet this demand towards the back half of Q2 and into 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 rate of roughly around 22% in Europe, derived mainly from our Nordic operations. Sequentially from Q4 to Q1, we saw about a 51% growth rate. Those are good numbers there. They weren't impacted with COVID pandemic shutdowns in the first quarter in Finland, Norway, and Sweden. There were some difficulties, we also had supply constraints not touching the Southeast portfolio, but rather our FAST protein snack portfolio, which impacted the quarter. Those issues will be resolved and I think by the middle to back half of Q2, we will see much better inventory levels. We had a great new successful launch with an innovative indulgent bar that was very well received in Finland. We think we are well-positioned. Also, we will be bringing the FAST brand to the U.S. in Q2. Look out for that on Amazon in the coming weeks, where we will be working with our digital teams, gaining traction with an exclusive launch with Amazon. So, things are going well in Europe, and while we're still facing COVID restrictions, we have full faith in our great team over there that is 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. Regarding the new distribution resets, we did add some additional distribution in the first quarter, 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 the April-May timeframe. We are not limited in new expansion on the resets; we have enough product to meet demand. We have more product coming in, and we expect to meet the new distribution requirements to fill those new doors and resets.

Okay, great. And then a question on the fitness channel. We're seeing some improvements; I suppose we see a bit of a recovery. Can you give us a read on what you expect it to look like as we come to 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. Historically, pre-COVID, the fitness channel represented about 25% approximately of our revenue, severely impacted as we all know. We have a dedicated team focused on fitness with great partnerships throughout the industry with key chains and locations, and we're working hard with those relationships, continuing to support them just like we did through COVID. We're seeing a good growth rate in Q1 at about 33% on net revenue, and continually re-openings and growth excite us. We believe there is a lot of pent-up demand. People are eager to rejoin gyms, which is a great contributor to our growth. We're focusing heavily on this area going forward.

Okay, great. Thanks, guys.

Thank you, Kaumil.

Our next question comes from Jeffrey Cohen with Ladenburg Thalmann. Please go ahead 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 are bringing back another Vibe; it's going to be What's Your Vibe for Summer: Tropical Vibe. It's actually right now you can pick it up at 7-Eleven, nationwide authorization at 7-Eleven. So, go to your local 7-Eleven, you can pick some up, and it tastes amazing with a 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. What we will see is two SKUs that will be launched on Amazon initially as an exclusive launch in partnership with them. We'll continue to scale up from that point. Initial feedback has been very positive on testing. We've been doing a lot of consumer testing as well as working closely with Amazon. We think it will be a great addition to a growing category with a lot of momentum.

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 an 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 interest from retailers, mainly vitamins specialty and online, but now we're garnering interest from CVS, Publix, Walmart, and several other customers as well, who are looking to carry the sticks as additional offerings. There is a lot of opportunity there. We have new flavors planned, and feedback is extremely positive on our powder products. We're also looking at opportunities potentially to expand our heat portfolio into a powder on-the-go option. So, getting interest there, but the bulk of our revenue today is from 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 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 are very passionate about Celsius. Our consumers and I speak to many of you. The sticking power of the brand is incredible. We're seeing a positive trend; you go back to even with 7-Eleven we are launching our Tropical Vibe with them as we speak. We've been with them for over almost four and a half, five years now and many of our retail partners, so we're continuing to gain more shelf space and better placements in stores, making cold availability happen. We are really excited. In regards to the new distribution coming on, we feel we're up to 192,000 locations today and will be firm north of 100,000 locations by the end of this year for sure. We're seeing lots of interest and we're also getting good new team members joining us as we scale and grow, bringing great relationships that we will 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, regarding DSD, you have made a significant effort in the DSD network, recognizing that not every market or store is suitable for DSD depending on its location. Can you provide an estimate of the maximum penetration you expect from your current customer base? Where do you think you can reach, and what is your current 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. As we were seeing in 2019, you just can’t keep it in stock— we're in too high of a velocity category. We've been building out our national DSD network, we’re currently at about 85% in major metropolitan markets, and we have closed additional distributors to fill those gaps to transition our key accounts over to DSD. As we speak, we are expanding on the West Coast; almost 1,500 7-Elevens are being migrated over to DSD. We would like to see a significant portion of our distribution serviced through DSD to improve placement, in-stocks, execution, and most importantly, velocity and revenues.

Make sense. Okay, good. Regarding the aluminum cans shortage, which has been a topic in other conference calls for companies like yours, can you clarify if you're expecting this shortage to be resolved by the end of this year? Is this expectation based on the increase in U.S. production, or could you provide more details on your outlook?

Yes, absolutely. What's happening in the industry is that due to the increased demand for cans, the U.S. manufacturers just do not have the capacity. You heard Rodney Sacks on the Monster call most recently; every brand is running into the same issues. There’s just not enough capacity out there. All the major players are adding capacity lines, but unfortunately, it takes time to install these lines. We expect some of the production capacity will come on towards the back half of 2021, and we are hearing into 2022 and beyond, but it's going to take time to ramp that up. The other factor is that as the country continues to open, consumers return to on-premise fountain drinks and demand for cans may go down. That's all to be determined. Right now, we have secured international cans and U.S. cans to meet our forecasted demands for 2021 and beyond. We've secured those; now it's about the mix and how we move forward with our margin profile. We talked about in Q1 a 41% gross profit, mainly that's derived from a lot of wrapped cans. We also had a lot of rework during the quarter and transportation increases. We'll continue to optimize with non-wrapped cans which are better for our margins. We'll have a mix from international and domestic suppliers, which we 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 on potential expansions in the U.K. and Germany, primarily in addition to working with Amazon Europe to further expand our e-commerce opportunities throughout Europe. We have a distributor locally in the Middle East and we're working with others on an import basis. Timing and sequencing are key here, and COVID has impacted some of these discussions, but we are making progress and things are moving forward.

Yes, 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 risk, including currency risks and so forth. That has been our successful model, and we hope to continue expanding using that framework.

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 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. Please proceed with your question.

Thanks for taking a second one, guys. On international, as you think about the rollout, can you talk a bit about the marketing and your marketing intentions? It sounds like you're looking to get into new regions more aggressively than you would have discussed six to twelve months ago, and obviously, that 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 are entering each market through a distributor model where we minimize risks and allow collaborative efforts on generated margins. Initially, there will be a methodical rollout, and we will avoid investing heavily ahead of revenue in any of these markets. Focus will be on positive ROI-driven model as mentioned in previous calls over the last several years. We are looking for positive ROI investments as we go forward. Some initial relationships may have margin contributions and investments, but again, these investments will remain generally material.

Okay, great. Thank you.

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 are 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, 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. Without them, our tremendous achievements and significant opportunities we see ahead would not be possible. I believe we'll 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. 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.