Good day, ladies and gentlemen, and welcome to the Celsius Quarter Three 2022 Earnings Call. All lines are in a listen-only mode. And the floor will be opened for questions and comments following the presentation. At this time, it is my pleasure to turn the floor over to your host, Cameron Donahue. Sir, the floor is yours.

Thank you. Good afternoon, everyone. We appreciate you joining us today for Celsius Holdings third quarter 2022 earnings conference call. Joining me on the call today are John Fieldly, President and Chief Executive Officer; and Jarrod Langhans, Chief Financial Officer. Following the prepared remarks, we'll open the call to your questions and instructions will be given at that time. The company released their earnings press release upon market close this afternoon, and all materials will be available on the company's website. As a reminder, before I turn the call to John, an audio replay will be available later today and can be accessed with the same live webcast link in our conference call announcement release. Please also be aware that this call may contain forward-looking statements, which are based on forecasts, expectations, and other information available to management as of November 9, 2022. 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 to 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.

Thank you, Cameron. Good afternoon, everyone, and thank you for joining us today. The company achieved a record quarter in the third quarter of 2022 with sales over $188 million, delivering revenue growth of over 98%. According to their most recent scan data at retail, per IRI MULOC total energy, for the week ending October 23, 2022, Celsius is now the third largest energy drink in the United States. In addition, according to the trailing 12-week IRI MULOC total energy as of October 2, 2022, Celsius was again the number one brand driver of growth in the energy category in the United States, responsible for 29% of the category growth, driving approximately $123 million in incremental sales for the category. This marks the third consecutive quarter at the number one spot, prior to the transition to the PepsiCo distribution network, which started October 1, 2022, and will be reflected in our fourth quarter numbers. We continue to see growth across all channels, including the non-tracked with our club channel sales in the third quarter totaling over $34 million, increasing by approximately $20 million from the third quarter of 2021. Amazon sales, another non-tracked channel for the third quarter, hit a new quarterly record of approximately $16 million and year-to-date in 2022 totaled approximately $43 million, up 108% compared to approximately $21 million in the nine months ending 2021. Third quarter retailer highlights include the benefits from our Walmart expansions announced in the first quarter of this year. On a year-to-date basis, continuing to hit new revenue records in the convenience channel where we see significant opportunity, Celsius continues to perform extremely well. According to the convenience and gas IRI as of the 12 weeks ending October 2, 2022, total U.S. energy, Celsius sales increased 158% in the channel, setting a new sales record. In the grocery channel, both Kroger and Publix lead the incremental revenue growth in the third quarter of 2022 with both retailers setting new records in sales and share gains in the energy category. We officially commenced our distribution partnership with PepsiCo subsequently to the third quarter, with the distribution to most of our retail accounts transitioning as of October 1, 2022, while early initial track data on both ACV and items carried per store growth indicate impressive gains and exceed our actual expectations on both these tangible metrics. As highlighted in the earnings supplement for the one week ending October 23, 2022, IRI data reported in MULOC, total energy, Celsius has surpassed Bang to become the number three energy drink in the United States with a 4.9% market share compared to Bang’s 4.4%. In addition, Celsius has seen an approximately 11% increase in ACV since October 1, 2022, and with the initial launch with the PepsiCo distribution network, the average items carried per store increased from an average of 7.7 to 8.3 over the same three-week timeframe. In the convenience store channel, Celsius has seen the largest gain with approximately a 23% increase in ACV since October 1 of this year. Our third quarter sales hit another approximate $188 million, with U.S. sales totaling about $179.5 million, reflecting approximately a $34 million sequential increase from the second quarter of this year. Revenue growth was driven by over a 60,000 increase in door count from the prior quarter, with convenience store additions representing 37,000 of the 60,000 increase. Club channel expansion, as well as increased items carried at locations, alongside increased placements at retailers, which includes both branded coolers at retail locations. International sales represented approximately 4.6% of total sales for the quarter, totaling approximately $8.7 million, compared to $10.4 million in the prior year quarter. Our European revenues represented $7.5 million of international revenue, compared to $9.5 million in the year-ago quarter, a decrease of approximately 21%, with around a third of the revenue decrease associated with foreign exchange impacts, and timing of innovation and supply chain disruptions. Revenue for other international markets totaled $1.1 million, up approximately 30% from $883,000, which included royalties from China. We believe there is significant opportunity for international growth going forward with PepsiCo as part of our distribution agreement. Both Pepsi and Celsius are committed to expand internationally utilizing Pepsi's best-in-class international distribution system. While we just began our distribution partnership with Pepsi, our initial focus will be on U.S. distribution and transitioning our distribution to the PepsiCo U.S. distribution network. However, we see significant opportunity to capitalize on a global scale, reflecting the changes in consumer preferences for better-for-you products, low and no sugar, and the increasing demand for energy. Despite the U.S. transition taking most of our focus so far, we expect to have additional international rollouts detailed through future calls and quarterly updates going into 2023. Gross profit for the quarter increased 109% to approximately $79 million, up from approximately $38 million in the year-ago quarter. Gross profit margins were at 41.8% and 49.6% excluding outbound freight for the three months ending September 30, 2022, compared to 39.7% and 48.8%, excluding outbound freight in the prior year quarter. This represents a 330 basis point increase from the second quarter gross margin percent, consistent with our expectations discussed in the previous second quarter earnings conference call. We reiterate our expectations for continued sequential gross margin percent improvements through the fourth quarter, with gross margin percent expected to be in the mid-40s by year-end. Our product channel mix, and sales mix, have also impacted margins as the club channel revenues have historically had lower margin levels due to the secondary repack nature of the product. The rapid growth of the channel, which contributed to approximately $34 million in revenue in the third quarter, has increased our overall margin pressure. We continue to initiate production efficiencies to improve margins in this channel, including working with our co-packers, who have the capabilities to produce inline, and so we can limit the number of secondary production facilities. Even with higher sales than originally forecasted in sales mix in the club channel, our margin guidance has stayed consistent for 2022, as we continue to optimize our supply chain and gain incremental efficiencies against rising inflation pressures. In addition, our transition from a significant number of independent distribution partners to the PepsiCo distribution network will allow our team to consolidate sales, marketing, and distribution efforts, with planned associated cost benefits, which we anticipate recognizing and leveraging through 2023 and beyond. We will also provide additional clarity on both gross and operating leverage and targets as we move through the transition, but expect to see additional leverage as we look to drive efficiencies post-transition. Some additional highlights for the third quarter include that 92% of our reported MULOC retail store locations are now serviced through our DSD network, up from 72% in the third quarter of 2021. Our mass channel is now nearly 100% DSD service and 99% of our convenience channel is serviced by DSD. Industry-backed third-party data continues to show accelerating growth metrics, and we are confident that Celsius will continue to drive sales even higher as we increase our ACV across channels through additional launches with nationwide retailers, independent chains, and through our new partnership with the PepsiCo distribution network. Consumer demand for Celsius on a dollar basis accelerated in the third quarter of 2022 and has re-accelerated after the initial distribution shift on October 1 this year to the PepsiCo distribution network. The most recent reported Nielsen data as of October 22, 2022 shows Celsius sales were up 118% year-over-year for the two weeks, 120% for the 12-week period, and 126% for the third quarter. This compares to the total energy category, which grew by 10% for the two-week period, 10% for the 12-week period, and 10% in the third quarter over the same time period. On Amazon, Celsius is the second largest energy drink with an 18.5% share of the energy drink category, ahead of Red Bull at a 12.01% share, and trailing Monster at a 26.2% share on a year-to-date basis ending October 22, 2022, according to Stackline total U.S. energy on Amazon. Celsius reported sales year-over-year grew 79%, compared to Amazon Energy Drinks sales business, which grew at 39%, outpacing the category. The company placed an additional 550 coolers in the third quarter of 2022 and over 3,500 since the beginning of 2021. The company anticipates a continued acceleration of cooler placements through 2022 and into 2023, in addition to the incremental placements in Pepsi Energy Coolers, providing approximately over 50,000 additional placements that are rolling out right now. The U.S. store count now totals 174,000 locations nationwide in the U.S., growing over 60,000 doors or 54% from 114,000 doors as reported in the third quarter of 2021, with additional expansion planned throughout the rest of the year and into 2023, accelerated by the PepsiCo distribution agreement. Convenience store locations increased by the largest by 77%, or approximately 37,000 locations, to 86,000 locations at the end of the third quarter of 2022, compared to 49,000 locations at the end of the third quarter in 2021. On our co-packer front, we continue to expand our partners and scale at existing locations, improving line time priority. Our total U.S. co-packer footprint now totals 13 active locations, which will help keep our product in-stock and support our massive growth. Before I turn the call over to Jarrod, I want to close my prepared comments by recognizing the amazing job the entire team and our partners have done in establishing Celsius as a leading brand, driving growth in the entire energy drink category in the U.S. Our consumer demand remains robust, our portfolio resonates with a broad consumer base, and our teams are positioned to leverage opportunities for growth going forward with our new partner PepsiCo. I will now turn the call over to Jarrod Langhans, our Chief Financial Officer, for his prepared remarks.

Thank you, John. Before jumping into the financial results for the quarter, I'll cover a few administrative items, including transaction-related items stemming from our PepsiCo distribution agreement. It was a very exciting and busy quarter. The announcement of the partnership with Pepsi through a distribution agreement and investment is a significant step in our growth and key to our ability to not only continue to grow the category but to grow market share. Although Pepsi did not start distributing our product until October 1, we worked in conjunction with their operations team to ensure that Celsius is added in all of their key locations across the U.S. As John mentioned, the transition has gone very well, and we are excited to see the early results of this long-term partnership. So let's walk through some accounting highlights associated with this transaction. Let's start with the termination expenses. Included within our quarterly results, we recorded $155.4 million of termination expenses associated with termination notices issued during the quarter, enabling the transfer of distribution to Pepsi. We had an additional $50 million of termination expenses agreed upon in the fourth quarter, which will also be recorded in our Q4 results. We've already transitioned most of our distribution footprint over to Pepsi, but there will be some activity in Q4 and through early Q1 2023. These expenditures were funded by Pepsi, and as a result, we have recorded the funding as deferred revenue that will be amortized over the 20-year period of the associated distribution agreement. Regarding the preferred share investment, we received $550 million in cash from Pepsi during the quarter as a payment for the Series A preferred shares. As part of Generally Accepted Accounting Principles, we valued this instrument at $832.5 million and recorded this valuation net of issuance costs within the mezzanine section of our balance sheet. The difference in cash proceeds and the valuation was recorded as an other asset and we will amortize this balance over the 20-year period associated with the distribution agreement as a contra revenue. Let's talk taxes as well. Our effective tax rate for the nine months ended September 30, 2022, was negative 33.5%, deferred from the statutory federal income tax rate of 21%, primarily due to the tax impact of the $282.5 million Series A preferred stock value adjustment, which will be expensed over 20 years for book purposes. As this expense is non-deductible for tax purposes, we recorded $71.4 million in deferred tax liabilities in the third quarter as a discrete item. The effective income tax rate for the nine months ended September 30 was also impacted by disallowed stock-based compensation expense, state and local income taxes, and the release of certain state income tax reserves. I believe that covers the unique items from the agreements with Pepsi. Turning to our third quarter financial results. Our third quarter ended September 30, 2022, with revenue of approximately $188.2 million, an increase of $93.3 million, or 98%, from $94.9 million for the three months ended September 30, 2021. Approximately 102% of this growth was a result of increased revenues from North America, where third quarter 2022 revenues were $179.5 million, an increase of $95.1 million or 112% from the same period in 2021. The balance of the revenues for the three months ended September 30, 2022 quarter were mainly attributable to European revenues of $7.5 million, which increased by $2 million from the same period in 2021, due to foreign exchange rates, timing of new product launches, and ongoing supply chain challenges. Asian revenues, which include royalty revenues from our China licensee, contributed an additional $1 million, an increase of 37% from approximately $700,000 for the same period in 2021. Other international markets generated approximately $200,000 in revenues during the three months ended September 30, 2022, an increase of 3%. The total increase in revenue is largely attributable to increased sales volume rather than increases in product pricing. The primary factors behind the increase in North American sales volume were related to continued strong triple-digit growth in traditional distribution channels combined with an increase in and optimization of our product's presence in world-class retailers. Additionally, revenues were increased due to building inventories at Pepsi warehouses and distribution centers in anticipation of the transition to the Pepsi distribution network. These revenues were offset by the prior distribution network, which reduced their inventory balances as a majority of the previous distribution system was terminated as of September 30, 2022. Gross profit for the three months ended September 30, 2022, gross profit increased by approximately $41 million or 109% to $78.7 million. Gross profit margin reflected an increase to 41.8%, 49.6% excluding outbound freight of revenues for the three months ended September 30, 2022, relative to 39.7% or 48.8% excluding outbound freight for the prior year quarter. The improvement in gross profit dollars was due in part to the improved average can prices within our inventory, as well as improved freight costs relative to the third quarter of last year. Sales and marketing expenses for the three months ended September 30, 2022 were approximately $198.8 million, an increase of approximately $176.1 million or 779% relative to September 30, 2021. This increase was primarily attributable to termination expenses of prior distributors, which resulted in an increase of $155.4 million compared to the prior year quarter. As a percentage of sales, sales and marketing represented approximately 23% of revenue. In the third quarter of 2022, after backing out the $155.4 million of termination fees, compared to 24% for the third quarter of 2021. General and administrative expenses for the three months ended September 30, 2022 were approximately $27.5 million, an increase of $4.2 million or 18% from $23.3 million for the three months ended September 30, 2021. Employee costs for the three months ended September 30, 2022 reflect an increase of $900,000, as investments in this area are required to properly support our higher business volume in the commercial and operational areas. Impairment expenses increased by approximately $2.4 million compared to the prior year quarter. These increases were offset by an $11.7 million decrease in stock-based compensation, which amounted to $6.3 million in the current quarter compared to the prior year quarter. Management deems it essential to motivate employees by providing them ownership in the business in order to promote overperformance, which translates into the continued success of our business based on key performance attributes. Administrative expenses also increased by $12.3 million, primarily due to a litigation settlement in the amount of $7.8 million, as well as increased costs associated with third-party service providers, including internal control and SOX compliance, audit fees, and other litigation. Lastly, all other administrative expenses, which were mainly composed of research, development, and quality control testing, increased by approximately $300,000. As a total percent of revenue, G&A costs decreased to 15% of sales for the three months ended September 30, 2022, compared to 25% in the prior year. When you take some of the outliers out of the equation and exclude items such as the $7.8 million for the litigation settlement agreement, $2.4 million related to the brand impairment charge, and stock-based compensation of $6.3 million, G&A expense as a percentage of sales was 6% for the third quarter of 2022. Focusing now on liquidity and capital resources, as of September 30, 2022, we had cash of approximately $727 million and working capital of approximately $755.7 million. Included within the Q3 2022 cash balance was about $135 million of cash that will be utilized for termination payments. Cash flows provided by operating activities totaled $171 million for the nine months ended September 30, 2022, which compares to $52.1 million in net cash used in operating activities for the nine months ended September 30, 2021. The approximately $223 million increase in cash generation was driven by the timing of transactional costs associated with the Pepsi distribution system, as well as continued growth in the operations of the company. Regarding inventory, total Q3 inventory ended at $154 million, down relative to the $191 million at the end of December 2021. As we benefited from growth in our business as well as a pipe fill in advance of Pepsi beginning to distribute our product. We would expect some increases as we continue to grow and as we prepare to launch a number of new flavors in the first quarter of 2023. We will continue to carry some additional inventory to ensure that we are able to keep up with the significant growth we are experiencing, but we expect to start to drive some efficiencies as we move through 2023. With the latest injection of funds from our PepsiCo transaction, we have sufficient firepower to take our business to the next level as we transition into the Pepsi distribution network across the U.S. and then internationally. This concludes our prepared remarks. Operator, you may now open the call for questions.

Thank you. The floor is now open for questions. Our first question comes from Mark Astrachan from Stifel. Go ahead, Mark.

Yes, thanks and good afternoon, everyone. I guess, I wanted to start on the distribution gains and the shelf space. So obviously, we all know the challenges that Bang is dealing with, you're obviously also transitioning into basically the same shelves that they had. So is it simply a one-to-one trade-off there? How do you think about what your shelf space is going to look like as you go forward over the next kind of three to six months as the changeover is completed heading into the spring set? Do you think you can end up with more space? How do you think about the number of SKUs you can put on shelves relative to where you are and where Bang is today? Maybe that's just a good starting point? Thanks.

Yes. Thank you, Mark. We appreciate it. Great question. We've got some audio difficulty, the team down in South Florida is currently experiencing a bit of hurricane weather, but we're managing through it. Great question, Mark. I mean, what we're seeing is a lot of opportunities out there. Especially with the gains we're realizing as of October 1, as referenced in the prepared remarks, we've seen an increase in SKUs just over the three-week period, with the largest gain coming from convenience. There is obviously disruption out there with Bang and the distribution network that they have exited, creating opportunities for us. We're also leveraging resets that the team is vigorously working to take advantage of, just as many brands in the energy category are doing. When we were able to capture more space with Coke Energy when they were being delisted from many retailers, it demonstrates that we can seize these opportunities and gain incremental shelf space as we move forward and capitalize on our position as a top choice when retailers are looking to fill slots in energy drink categories. As we look ahead to the spring resets, we believe we’re in a great position. We recognize our brand’s growth potential and working with Pepsi will allow us to leverage their distribution strengths.

That's great. And maybe just one related follow-up: if you could talk a bit about the velocity in terms of sales per point of distribution, or however you’d like to measure that metric as you transition into convenience stores where you're selling single-serve items. How should we frame where current trends are and how we should think about that going forward?

Yes, that's something we monitor very closely. Now keep in mind that as we're entering multiple new distribution points, we are also venturing into new markets where brand awareness is lower compared to the regions we've been building out over the past few years. Our P&L shows an increase in our investment and expansion efforts as we keep a close eye on this. We're entering many Tier 3 and Tier 4 accounts, which may not perform as strongly as our Tier 1 and Tier 2 accounts. Currently, we’re seeing level sales trends, which we are watching closely. The brand's performance has been good overall, but a definitive answer on future performance is difficult to provide at this moment.

Got it. All right. Well, thanks a lot.

Have a great day, Mark.

Thank you. And our next question comes from Kevin Grundy from Jefferies. Go ahead, Kevin.

Hey, everyone. This is Noah on for Kevin. I was looking to dig a little further into your PepsiCo distribution transition. First off, can you provide a little more context on how much business has already been transitioned, early observations in areas that haven't shifted yet, and what your expectations are for the remainder of the year? Thanks.

Yes, I mean, if you listen to the Pepsi call that happened about a month ago, they reported that within the first two weeks of October, we were already in excess of 80% transitioned with our distributor business. We've continued to expand in that arena. While I don’t have total numbers to share right now, I feel confident that by early Q1 we will be in great shape. There are still a few distributors that we have not transitioned, but ultimately, we anticipate transitioning most of our distribution partnerships.

Yes, just to add some color to that, Noah, referring to the data points we've shared in our earnings release, we’ve gained tremendous momentum since October 1. This transition is progressing very nicely, including the establishment of 50,000 incremental cooler placements and our presence in food service locations, particularly at universities. Overall, we're seeing positive early results from the partnership.

Great. That's really helpful. And just one more if I may. Regarding potential international expansion, could you share your thoughts on how and when that might happen?

Currently, we are focused heavily on our U.S. transition. However, we see significant international opportunities together with Pepsi's distribution in over 126 markets. It’s a matter of timing and sequencing for us. We intend to proceed cautiously and methodically as we scale up and properly enter those international markets with a comprehensive strategy.

Great. Thanks, guys.

Thank you.

And our next question comes from Peter Grom from UBS. Go ahead, Peter.

Thanks, operator, and good evening, everyone. To start, can you help me understand the impact of sales to Pepsi in the quarter? I believe the 10-Q states that Pepsi accounted for about 12.4% of sales, which is substantial. Can you quantify what was one-time versus recurring? I'm really trying to gauge how to think about fourth quarter revenue growth in North America amidst the noise from this transition.

Yes, Peter, good to hear from you. As we previously indicated, this quarter and next are projected to be noisy due to the transition. We did experience a pipe fill, making it tough to isolate specific dollar contributions. If I had to peg potential shifts, perhaps around $15 million to $20 million is what could have moved from one quarter to the next. The transition and the performance of our new space with Pepsi indicate there is still a considerable opportunity for Q4 and into Q1.

Got it. That's really helpful. May I ask another on the gross margin trajectory? Have we cycled through the higher cost cans? And when you said mid-40s by year-end, does that reference the exit rate or should we still expect fourth quarter gross margins in that same ballpark?

Yes, Peter, great question. We anticipated cycling through most of our international cans by the end of Q3; however, some remain, primarily on the West Coast. As for our gross margin aspirations in the mid-40% range, that's what we're targeting as we move forward, aiming for a range of 43.5% to 47.5%. Recent trends in gas prices and aluminum pricing could affect this, but we remain committed to achieving that mid-40% goal.

Thank you. Our next question comes from Jeff Van Sinderen from B. Riley. Go ahead, Jeff.

Hi, everyone. Just wanted to circle back on the Pepsi DSP ramp-up. It sounds like it's going extremely well. What are the next steps looking into Q1? What milestones should we be tracking in terms of your progress after the Q4 and Q1 reports?

Yes, Jeff, great question. You’ll observe key milestones regarding our expansion in the convenience channel. We've just started to see positive movement within a few weeks. I believe our biggest leverage will come from ramping up ACV in convenience stores, while maintaining strong velocity at retail. Those metrics will be critical. We know how crucial convenience is as a market for us, and we are particularly excited about PepsiCo’s loyalty metals program ready to roll out with over 150 independent retailers.

Okay, that's helpful. Switching to the club channel, just curious about what’s left to do in that area. I know you’ve mentioned Walmart, but what about Sam's Club? Are there other retailers on your radar in the club channel?

In the club channel, we just began working with Sam's Club at the end of Q1. With Costco, we experienced a ramp-up of two to three quarters, and we anticipate Sam's Club to follow a similar trajectory. We see significant growth remaining with Sam's. BJ's is also on our radar, and we’re currently in stores but see potential for broader expansion across their network.

That makes sense. Just one housekeeping question, how many coolers is Pepsi placing at this point?

At this point, we don’t have an exact number, but we estimate around 50,000 Pepsi-owned energy coolers for immediate placement. Additionally, there are more opportunities through Pepsi’s other coolers, which we will also access.

I’ve seen some new cooler placements during my visits. We are rapidly expanding across various locations.

Okay, excellent. Best of luck with the remainder of the transition with Pepsi. Thanks.

Thank you. And our next question comes from Jeffrey Cohen from Ladenburg Thalmann. Go ahead, Jeffrey.

Hi, John and Jarrod. How are you?

Excellent, Jeff.

I have a couple of questions. Jarrod, you previously discussed termination expenses paid. Was that compensated by Pepsi? And is that correctly reflected as deferred revenue?

Yes, it was compensated by Pepsi. We received $174.7 million of which $155.4 million was accrued as termination expenses. Any unspent amount would be returned. We also expect settlements in Q4 as well.

Understood. Additionally, could you discuss SKUs from two perspectives? Firstly, what’s the right number for certain retailers with SKUs? Secondly, what’s the total number of SKUs currently, and will flavors be phased out as new flavors are introduced in ‘23?

Yes. Our initial offerings had limited flavors; we now offer well over 15 SKUs in retail, particularly at places like Publix. Nationwide, we average around 8.6 items, whereas competitors often exceed 20 or 30. The potential for growth is excellent! Now that we are the number three energy drink, based on the latest data, we are set to unlock further opportunities, particularly with upcoming reset opportunities that will broaden our energy product offerings.

Excellent. Is 13 a good number in terms of co-packers, or will that fluctuate with volumes?

We're at 13 co-packers now, but we've got additional back-up options beyond that. Our multiple locations allow us flexibility, so we are well-positioned for future growth.

Thank you for your insights.

Thank you. And our next question comes from Anthony Vendetti from Maxim Group. Go ahead.

Yes, thanks. Most of my questions have been answered, but on the marketing front, is Pepsi spending any direct dollars, besides working on the distribution side and putting your SKUs in their coolers? Are they spending actual marketing dollars or is all of it under Celsius?

Yes, it’s still early in our relationship with Pepsi. There are significant opportunities for partnership on various initiatives, such as potential college sponsorships. We are discussing how we can collaborate on pricing and promotions. The energy drink category is quite promotional, opening avenues for joint initiatives.

I appreciate that. Regarding the coolers, will you still pursue Celsius-branded coolers?

Yes, we are focused on all available opportunities. Celsius-branded coolers will be solely dedicated to Celsius products, serving as a strong silent salesperson for our brand. We see a great ROI on both Pepsi's coolers and our own branding coolers, and we have a significant number on order.

Thank you. And our final question comes from Sean McGowan from ROTH Capital. Go ahead, Sean.

Thank you. Jarrod, could you repeat your comments on the tax implications for this quarter, as the recording got a bit muddled?

Certainly. The noise this quarter pertains to the valuation of the preferred shares, which we placed on the books at $832.5 million. That includes a $282.5 million total premium that we'll amortize as contra revenue over the 20-year distribution agreement. Since this expense is not tax-deductible, we recorded a corresponding deferred tax liability this quarter.

What’s the effective tax rate we should be expecting moving forward?

We generally consider a 21% federal rate and around 5-6% for state tax.

Absolutely.

Thank you for that. Did you implement any price increases during the third quarter that might relate to the lower than expected accounts receivable or lower inventory?

No, we’ve largely maintained our pricing from earlier in the year, so nothing changed significantly in that respect. We recorded a nice margin improvement mostly due to favorable conditions in our orbit model, and we're benefiting from better average can costs as we cycle through our various product inventories.

At this time, I would like to turn it back to management for any closing remarks.

Thank you. On behalf of the company, I'd like to thank everyone for their continued interest and support. Our results demonstrate that our products are gaining considerable momentum as we capitalize on today’s global health and wellness trends transforming the energy drink category. We are building on our incredible position in a rapidly growing market. We have a winning portfolio, strategy, and team. In addition, I’d like to thank all investors for their continued confidence in our team and for all your interest in Celsius. Stay healthy and stay fit.

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time and have a wonderful day.