Celsius Holdings, Inc. (CELH) Q2 2025 Earnings Call Transcript

Good morning, and welcome to the Celsius Holdings' second quarter 2025 earnings webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. Thank you. I'd now like to hand the call over to Paul Wiseman, Investor Relations. Please go ahead.

Good morning, and thank you for joining Celsius Holdings' second quarter 2025 earnings webcast. With me today are John Fieldley, Chairman and CEO, Jared Langans, Chief Financial Officer, and Toby David, Chief of Staff. We'll take questions following the prepared remarks. Our second quarter earnings press release was issued this morning with all materials available on our website, ir.celsiusholdingsinc.com, and on the SEC's website, sec.gov. An audio replay of this webcast will also be accessible later today. Today's discussion includes forward-looking statements based on our current expectations and information. These statements involve risks and uncertainties, many beyond the company's control. Celsius Holdings disclaims any duty to update forward-looking statements except as required by law. Please review our safe harbor statements and risk factors in today's press release and in our most recent filings with the SEC, which contained additional information and a description of risks that may result in actual results differing materially from those contemplated by our forward-looking statements. We'll present results on both a GAAP and non-GAAP basis. Non-GAAP measures like adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and their GAAP reconciliations are detailed in our Q2 earnings release. And non-GAAP financial measures should not be used as a substitute for our results reported in accordance with GAAP. With that, I'll turn it over to John.

Good morning and thank you for joining us. Q2 was a strong quarter for Celsius Holdings and for the energy category at large. Among beverages, energy is outperforming with over 15% year-over-year retail sales growth, with tailwings coming from new-to-category consumers drawn to functional zero-sugar innovation and increasingly great value among beverage choices. Celsius Holdings delivered meaningful strength across our portfolio in the second quarter, led by standout performance from the newly acquired Alani New brand and continued positive momentum from our core Celsius brand. For the 13 weeks ended June 29th, total Celsius Holdings retail sales grew 29% and volume increased 31%, reflecting broad-based consumer demand and strong execution at retail. Celsius Holdings reported revenue of $739.3 million for the second quarter ending June 30th, 2025. The 84% year-over-year increase in revenue was primarily driven by $301.2 million in revenue from the Alani new brand. The Celsius brand contributed $438.1 million of revenue in the quarter. Q2 consolidated gross margin held relatively steady at a 51.5%, down 50 basis points year over year, despite incorporating Alani News' lower margin profile beginning in the second quarter. Overall gross margin was supported by favorable material costs, improved production yields, leveraged gains through our vertical integration initiatives, and strong product and channel mix. Looking toward the back half of this year, we expect margin pressure associated with higher inputs costs, which Jared will discuss further on the call. Adjusted EBITDA was a record in excess of $200 million in Q2 of 2025. We are very pleased with the strong growth of Alani Nu and the pace of our integration with the teams and operations that Celsius Holdings acquired in the transaction, which closed on April 1st of this year. Our focus today remains on delivering excellent customer service and supporting our robust distribution growth and innovation. As we noted in our Alani Nu modeling call held in May, we expect to achieve $50 million of run rate cost synergies over two years post-closing, contributing to strong pro forma profitability and significant cash flow generation. innovation. Celsius Holdings' performance through the first half of the year was driven by strong execution across innovation, marketing, retail activations, and operational discipline. We stay close to the consumer, remain focused on building brand equity, and work hard to deliver value to our retail partners and consumers. Our team continue to operate with great focus and intention. We don't take growth for granted, and that mindset carries us through the first half of this year and positions us well for the back half of 2025 and beyond. I'll turn the call over to Jared shortly to walk through the financials in more detail, but first, I want to talk more about what drove the quarter, how we showed up in market, what we're seeing across our brands and channels, and where we're going from here. Consumers today are making more intentional beverage choices, reaching for functional, better-for-you products that fit their active and wellness lifestyles. The shift to zero-sugar functional energy drinks is fueling one of the fastest-growing segments in beverage, and Celsius Holdings is defining it. Recent industry reports pointed to double-digit category growth in 2025, with momentum coming from new-to-category consumers, namely females, Gen Z, and the growing number of consumers who are switching to functional energy drinks from other energy sources like RTD cold coffee among them. Younger, more diverse consumers are now leading the growth, and brands that resonate with Gen Z and women, like Celsius and Alani Nu, are gaining share and building loyalty. The Celsius Holdings portfolio has reached a 43% household penetration, with the Celsius brand at 34% and the Alani Nu brand at 22% household penetration, with repeat rates over 65%. And on the retail side, buyer surveys continue to rank Celsius Holdings portfolio among the most likely to gain share. Confidence were backing up with strong execution in the market. In tracked U.S. channels, the Redity Drink energy category grew 15.2% year-over-year in the second quarter, with unit growth of 13.5%. While Celsius Holdings outpaced the category across nearly every key retail metric. dollar sales grew 28.9 percent nearly double the category unit sales increased 31.2 percent total points distribution and items per store both rose roughly 23 percent velocity increased 20 percent quarter of a quarter for the last 13 weeks and in june 29th celsius holdings achieved a 17.3% dollar share in RTD Energy category, a 180 basis point increase versus the prior period. The Celsius brand delivered resilient growth in the second quarter, growing unit sales 6.1% and dollar sales by 3% to achieve an 11-point share for the 13 weeks ended June 29th. And the Alani brand had a breakout quarter. Dollar sales rose 129%, with share up 3.2 points year over year, making it the largest share gainer in RTD Energy and reaching a 6.3 share for the 13 weeks ended June 29th. The Celsius Holdings portfolio also recently surpassed a key retail milestone, achieving $4 billion in the past 52-week retail sales and track channels for the period ending July 20, 2025, a major milestone. That's more than the next eight RTD Energy brands combined in the same period, a clear signal of the category momentum we're leading and the demand our brands have generated. Innovation continues to be a core driver of growth, and both brands delivered meaningful in Q2. Alani New showed extraordinary strength in innovation in the second quarter, led by Sherbert Swirl and Cotton Candy, which drove sales incrementality across the business. Alani New Cotton Candy set sales records and is debuted at Walmart by orders of magnitude. And Alani New consumers are already buzzing about the recent arrival of Alani New Witch's Brew, which this year is accompanied by another great, LTO, Pumpkin Cream. Importantly, growth wasn't limited to new items. Alani New's core SKUs are sustaining strong velocity and retention, evidence that this is a brand with staying power. Brand loyalty data across the category shows Celsius and Alani brands are clear standouts, particularly among Gen Z and female consumers. The Celsius brand delivered strong innovation in Q2, with the release of two great, refreshing, fizz-free flavors, including Pink Lemonade and Dragon Fruit Lime. Consumer insights guide our innovation, and the introduction of these two new flavors feeds into strong consumer demand for more great-tasting, zero-sugar, fizz-free energy. The Celsius brand also continues to build scale in e-com, non-track channels, and food service. The Celsius brand was the number one trademark in RTD energy on Amazon during the Summer Prime Day event with an 18.4 share for the week ending July 12th, with sales led by our variety packs and top-performing flavors. Ilani New Brand jumped to a 10.9% share on Amazon during the Prime Day event for the week ending July 12th, up from 6.5% the prior week. Celsius food service volume grew 9.8% year-over-year in the second quarter, representing approximately 12% of our North America Celsius brand sales to PepsiCo. Distribution and activation continues to expand, particularly in lodging, recreation, healthcare, and quick-serve restaurants. International revenue grew 27% year-over-year in the second quarter, with strong contributions from Australia, the UK, and France. These are still early days, but our approach is resonating. Lead with brand, invest in localized execution, and scale with discipline. Internally, we're building our capabilities to support this growth in systems, supply chain, analytics, and operations. In July, we welcome John Cole, an Executive Vice President of Technology to help us strengthen cross-functional connectivity and scale our infrastructure for a multi-brand, omni-channel future. John's 30-year career in technology spans name brands like Fanatics, Philip Morris, and Point72, among others. We continue to invest in brand awareness, touching more people in more places more often, focusing on driving trial and loyalty. In June, we launched the next wave of our Live Fit Go marketing campaign. Our most ambitious creative yet, connecting purposeful energy to real-world action. Early results are strong with rising aided awareness and positive feedback from retailers. The Celsius brand also activated at key cultural moments like F1 Miami, the CMA Fest, and the Breakaway Festival, while Alani New expanded its reach through influencer engagement and lifestyle partnerships. Looking ahead, we're excited to debut Celsius first national TV commercial during NFL broadcast this fall, a major milestone. We're also collaborating, for country music star Kelsey Bellarini on branded content that reinforces our growing connection and connectivity with female consumers. We're proud of how our team executed our growth strategy to reach more people in more places and more often in the second quarter, and how our brands continue to lead one of the most dynamic categories in beverage. The Celsius and a lot of new brands are driving growth, gaining share, staying relevant with the next generation of modern energy drinkers. With that, I'll turn the call over to Jared for more details around our financial results for the quarter and the first half of the year.

Jared? Thanks, John, and good morning, everyone. We delivered strong financial results in the second quarter with meaningful contributions from both the Celsius and Alani New Brands. Let's walk through the numbers. Starting with Q2 2025 financial highlights, for the three months ended June 30, 2025, revenue totaled $739 million, up 84% from the prior year period. Growth was led by $301 million of revenue from Alani New, which delivered record results fueled by strong limited-time offer sales of their sherbet swirl and cotton candy and continued growth in the brand's core flavors. Celsius brand revenue increased 9% year-over-year, supported by velocity improvements and expanded distribution. Scanner data showed approximately 3% sales growth, as our reported results benefited from a favorable comp from the prior year inventory movements at our largest distributor. Gross profit increased to $381 million compared to $209 million for the year-ago period with consolidated gross margin of 51.5% compared to 52% last year. The margin reflects lower ingredient costs, stronger production yields, and favorable mix, partially offset by Alani New's structurally lower margin and the impact of $21.7 million in purchase accounting inventory step-up. That said, Alani knew gross margin improved sequentially, driven by cost efficiencies and product mix. For both Brands Celsius and Alani, we saw some favorable mix impacts in areas such as channel mix and product mix, but most impactful was savings across raw materials and freight. With that said, our inventory was recorded on a FIFO, or first-in, first-out basis, and as a result, we did not see a material impact from tariffs in the second quarter. We would expect tariffs to impact the overall margin profile through increased costs across our raw materials in Q3 and Q4. Moving to operating expenses and profitability, sales and marketing expenses were $152 million or 20.5% of revenue in the second quarter, benefiting from some outsized growth relative to the timing of investments made in the quarter. As we look to the back half of the year, we will continue to support the brands with increased investment relative to the second quarter, including further investments in our Live Fit Go campaign, summer promotions, and increased retail activation. As always, we'll remain agile in managing spend. We continue to build organizational capability during the quarter with new hires in field sales, brand marketing, and customer experience, all critical to executing our commercial priorities in Q2 and beyond. G&A expenses were $86 million, or 11.7% of revenue, compared to 6% last year. The increase was primarily driven by $16 million in acquisition-related costs and $13.8 million related to the contingent consideration associated with the earn-out. Let me provide a little color on the contingent consideration. In connection with the acquisition of Alani Nu, the company recorded a liability at fair value for the contingent consideration potentially payable to the sellers of Alani Nu subject to achievement of certain 2025 net sales targets with a maximum payment of $25 million. The fair value of the liability was estimated using discounted future cash flows based on a probability-weighted expected return methodology. The company evaluates the fair value of the contingent consideration quarterly and adjusts the carrying value if new information becomes available. As of June 30, 2025, the contingent consideration was re-measured to the maximum $25 million payout driven by the outperformance of Alani News revenue results for the three months end of June 30, 2025 relative to the initial financial projections as of the closing date and a resulting revised upward forecast for the remainder of the calendar year. On to net income. Net income was $99.6 million for the second quarter of 2025 as compared to $79.8 million for the second quarter of 2024. Net income attributable to common shareholders for Q2 was $85.7 million or 33 cents per diluted share compared to $66.7 million and 28 cents per share last year. Adjusted diluted EPS was 47 cents per share compared to 28 cents per share in the prior year. Adjusted EBITDA increased 109% to $210 million compared to $100 million in the prior year. Now let's take a look at year to date. For the six months of 2025, revenue totaled $1.07 billion, up 41% year over year. North American revenue reached $1.02 billion, up 41%, and international revenue grew 33% to $48 million. Gross margin for the first half was 51.8%, up from 51.6% last year, driven by lower input costs, improved production yields, and mix, partially offset by Alani's gross margin structure and inventory step-up. Sales and marketing expenses for the first half were $232 million, or 21.8% of revenue, down from 22% in the prior year. G&A totaled $125.8 million, or 11.8% of revenue, versus 6.2% last year, with the increase primarily driven by transaction-related costs and the previously mentioned earn-out adjustment. Non-GAAP adjusted EBITDA increased 49% to $280 million, compared to $188 million in the first half of 2024. GAP net income for the first half was $144 million, with net income attributable to common shareholders of $119.9 million or 48 cents per diluted share versus 55 cents last year. Adjusted diluted EPS was 65 cents per diluted share compared to 55 cents per diluted share, even with the increase in share count from the Alani new acquisition. Moving to the balance sheet and capital structure, we ended the quarter with $615 million in cash providing flexibility to support our innovation pipeline, international expansion, and other long-term growth initiatives, as well as debt reduction. As of June 30th, total debt outstanding consisted of the $900 million term loan used to fund a portion of the Alani new acquisition, and our revolver remains undrawn. Looking ahead, we remain focused on profitable growth and operational discipline. With that, I'll turn it back to the operator for questions.

Thank you.

At this time, i would like to remind everyone in order to ask a question press star and the number one on your telephone keypad please limit to one question only your first question comes from the line of peter grom with gbs your line is open thanks operator and good morning everyone um so obviously the top line performance was outstanding but i was hoping to get some color on gross margin both in the quarter but also just how to think about the path from here you know back in may you outlined gross margin in the range of 47 to 49%, but this came in nicely ahead of that. And after backing out, the inventory adjustment was even stronger. So can you maybe unpack the drivers of the better performance in the quarter, how it compared versus your expectations? And then just on the path forward, you mentioned the impact from tariffs was not significant in the quarter, but can you maybe give us a sense for how we should be thinking about the gross margin trajectory from here, given the increases in aluminum in the Midwest premium? Thanks.

Thanks, Peter. Yeah, we had a phenomenal quarter. Top line came in extremely strong, especially with the Alani portfolio. And as we talked about in the prepared remarks, some of the new flavor launches, the LTOs with cotton candy and the slush just did extremely well. But in regards to the gross profit margin, I'll turn it over to Jared for more color on some of those drivers. Jared?

Yeah. Again, just like John said, let me reiterate, hats off to the operations and commercial teams across Celsius, Alani, and Congo as well with the TSA that we're working with them on. It was a great quarter. I think we're pacing well ahead of, obviously, what we modeled in, and you can see very strong margins coming through. in terms of how those break down for Q2, let's start with Alani. For Alani, John did mention the LTOs. Those end up, tend to be from a COGS perspective and an overall perspective, higher margin products. So when those things take off, they do provide a benefit to the margin. They've got longer runs and you typically don't see promos or a lot of promos on those. So from a net perspective, they're accretive. We saw a good mix as well. So the RTD component of the portfolio within alani uh way outweighed anything else within the portfolio and the rtd portfolio or portion of the portfolio is a higher margin product and then we saw from an operations perspective we saw some freight savings and some raw material savings pacing ahead of expectations so great job to them to really start driving those really as soon as we kind of hit the ground so hit the ground running so all in all great job from alani's perspective for celsius we saw some savings as well across raw materials. Our scrap rates are at some of the lowest levels we've seen in years. And then we did benefit from some mix in terms of the channels that we're seeing outsized growth above that 9% that we noted in the script and the press release. So a great quarter overall and lots of good things happening. Also, we talked about FIFO. We talked about in the last quarter price locks we had for a good part of the year that helped with the aluminum so all those things benefited us in the quarter uh we had 51.5 margin obviously if you add back the inventory step up it's it's even above that it's a you know we're looking at more of a 54 or 54 plus margin from that perspective uh looking to q3 and q4 um i'll do my best to not everyone kind of get over their skis on on the results so let's kind of look at the fifo and price locks obviously first and first out we'll probably have some benefit in q3 uh still from fifo with some inventory coming in that wasn't significantly impacted by aluminum tariffs so that's a you know that'll help q3 we also have some price locks across the back half of the year that'll be helpful but we'll see some tariff lme and aluminum increases across raw materials uh it's hard to peg it with the tariffs kind of changing weekly as well as the the lme and aluminum changing on a weekly basis uh clearly we're we're up above the model that we showed uh and above the 50 that i kind of flagged for celsius last quarter uh where we'll land between kind of that 50 to 54 number i think we're we're comfortable saying we're going to be low 50s as things are today, if nothing changes. But with that said, it's up to us to do better and to drive those cost initiatives to be above that expectation.

Yeah. And I think with the systems and processes we implemented, as well as the vertical integration initiatives, we're just able to take advantage of the scale. And this was another reason to bring Alani into Celsius Holdings. So hats off and great job to the organization and team.

We're focused on discipline and execution driving additional profitability and scale and taking advantage of the organization we've built so we're going to continue to do that so thank you for your question awesome thanks so much i'll pass it on your next question comes from the line of eric serrata with morgan stanley your line is open great uh thanks for the question congratulations i'm hoping you could give some color on expectations for Alani shipments versus takeaway. Shipments were really robust in the quarter, despite presumably some sell-in for the first LTO before the deal closed. First, is that correct? And then second, how should we think about that for the balance of the year uh and then could you touch upon uh expectations for witches brew which is you know always a big uh you know lto for alani uh what you're doing to uh grow that year on year and your kind of expectations for witches brew this year thank you yeah excellent uh thank you eric um you know in regards to the shipping data you know if you look at just for the quarter and the growth we saw in Alani and the growth on the scan data, you know, it's not a perfect match, but, you know, it's relative, I guess you could say.

It is really hard to really anticipate the future. There always is going to be some deviation from sell-in to sell-out. But I will tell you, So, you know, we are in mainly an independent network with the Alani new portfolio. And, you know, there's relatively a number of days on hand there. So we expect it to be somewhat fairly close to the scans, but something if we see any outliers, you know, we'll go ahead and highlight that. But it's coming in fairly close. You always are going to have fluctuations as we as we've seen prior. So, you know, and the timing of LTOs and these launches will fluctuate on a quarter to quarter basis. We do have Witch's Brew currently has launched and is rolling into retail right now. So if you can get to a retailer, please go out and try it. It's amazing flavor. They've kicked it off on social with some great marketing and hats off to the team. And also we have a variety pack this year, but it's also in conjunction with Pumpkin Spice, which is a new flavor. And really excited about that, on how that's going to be perceived within the portfolio. So a lot of timing and sequencing. There's a lot of great innovation that's planned. We have the winter edition coming as well within the Alani portfolio. And we've been working very closely for 2006 planning and 2007. We're going to have a really robust portfolio of innovation, not only for Celsius, but also not only for Alani, but also for Celsius. And then with the Celsius portfolio, we have our first LTO, limited time offer that will be coming to market this fall that the Celsius team is excited about.

Yeah, let me jump in. I'll give some directional data. If you kind of look back to Q2 24, if you go back to the modeling call we did back in May, we were at net revenue number of 146 and today we're at 301. So call it roughly 106% quarter over quarter growth. If you look at the scanner data, and it's not perfect, but it's directionally helpful, the scanner data for Q2 was around 129%. So that gives us some confidence that we're seeing the sell-through happen as going into the distributor, the distributor going to the retailer, and the consumer pulling the product off the shelf.

Thank you both. I'll pass it on.

Your next question comes from the line of Jeff Van Cinderen with B. Riley Securities. Your line is open.

Good morning, everyone. I wonder if we could turn a little bit to international for a moment. Maybe you can touch on plans to expand further internationally during the second half of the year.

Yeah.

Thank you, Jeff.

I'm really excited about the international opportunity. As we've seen, we've started to see, we've been building out really the teams and the organization. We have a variety of additional team members that will be coming on here in the back half of the year to really further set us up for additional focus and execution and really building these brands, these new markets like the UK, Ireland, New Zealand, Australia, and Benelux. We've been working very closely with Centauri in a lot of these markets for the quarter. we had a 27% growth rate. It is at a run rate of getting close to $100 million business. So a lot of opportunity ahead. The same health and wellness trends we see in North America are global trends. And a lot of these markets are growing at a great rate within energy. So just like we're seeing energy grow here in the US, it is growing around the world. And health and wellness resonates with such a broad consumer, and this portfolio delivers on that. You're seeing more females come into the category in international markets, and health and wellness is just as strong. So we think we're well positioned. As we look for new markets, we're really focused on our existing markets right now for the back half of 2025. We're just getting started, lots of opportunities, but we really got to keep the teams focused at this point. It's timing and sequencing, but the opportunity presents itself for 26 and beyond for sure.

Thanks for taking my question.

Thank you, Jeff.

Your next question comes from the line of Gerald Pascarelli with Needham & Company. Your line is open.

Thanks very much for the question. I know it'll be out in the queue, and I apologize if I missed this in your prepared remarks, but can you give us an idea of what the Costco channel revenue was in the quarter? I'm just curious if there was a benefit from an MVM coupon program there, and then just how we should think about that channel progression going forward.

Yeah, I'll just start off, Gerald. I mean, the club channel is a big portion of our business, from Costco to Stamps to PJs. It is a growing segment. We did have a promotional activity take place, so we did see uplift at Costco. And that'll come through on our queue. And I think when you look for the back half of the year, we've adjusted some of our promotions and timing. We talked about that on our last earnings call where we saw some of the timing of promotions shift. So we're optimizing there as well as the timing of innovation and new launches. So, Jared, do you have any additional color you want to add?

Yeah, you'll be able to back into the data. Yeah, I guess it's probably only Costco, but we're we're up from a Q2 perspective as a portfolio, about 17 percent for the quarter. And that was in part driven by the MDM that John talked about with Celsius.

Perfect. Thanks very much, guys. Thank you.

Your next line comes or your next question comes from the line of Filippo Faldori with Citi. Your line is open.

Hi, good morning, everyone. I wanted to ask on the Celsius brand, obviously great to see the brand return to growth. Maybe can you discuss some of the drivers of the acceleration in the brand, including your new marketing campaign, the easier comps, and some of the innovation? And then specifically on innovation, you mentioned your first LTO on Celsius. Can you give maybe a little more color on what we should expect for the back half of the year in terms of innovation, in terms of growth or brand? Thank you.

Yeah, excellent. Great question. We've talked about this. We had in the Q1 call, we had a slow start with the Celsius portfolio. There's a lot of timing and promotion and innovation launches. And some of those changes have really, we started to see the progression really month over month and some week over weeks where we've seen Celsius come back to growth. So we're really focused and disciplined. We've changed a lot of our strategies internally, as well as well as our channel strategy amongst our promotional strategies. We're really excited about, you know, where we are with the Celsius portfolio, getting it back to growth, or focused on continuing that. We have embraced and launched our first really holistic campaign around Live Fit Go. If you haven't seen it, please check it out on some of our social, and you'll also see it on some of TV and a variety of other mediums that are out there. And it's really about connecting with consumers in a meaningful way. Celsius is part of a lifestyle, a daily routine to help you accomplish your goals. And this is what this program really works and delivers on. It's about increasing frequency and new trial within the portfolio. And initial feedback has been extremely promising. And we're getting a lot of excitement from retailers as well as customers. We are going to get a lot of data and analytics back here in the next few weeks because we just recently kicked it off but initial feedback has been positive and really allows us to have an ownable position within the celsius brand live fit go and really owning that live fit a lot of other brands own particular positions we've done a lot of research on it we heard anomaly a great creative agency one of the top creative agencies in the world and really putting a lot of effort behind it so more to come on that as we continue to progress through summer. As for innovation, we're really leaning into our fizz free. You haven't tried with the Celsius portfolio. We have launched a dragon fruit lime, as well as a pink lemonade, which is extremely refreshing opportunities that we're kicking off this summer. We expect to lean further into the fizz free as a big initiative. And our innovation first LTO, I'm not going to disclose exactly the name or what it is, but the teams are really excited about it. It'll be kicked off here um at the end uh in the back half of the year leading into uh the winter season so that'll be our first one we do have more planned for 2026 and beyond and we're taking some key learnings as the teams work come together leveraging the integration with alani and celsius we're taking the best the best of both brands and strategies to really deliver a holistic approach with these brands and continue to drive them forward and take advantage of the opportunities we see in the energy category in this modern energy world we're living in today and beyond.

Great. Thanks so much. I'll pass it on.

Your next question comes from the line of Michael Lavery with Piper Sandler. Your line is open.

Thank you. Good morning. I was wondering if you could just talk about your assortment optimization and what the priorities are for the shelf set. And what, if any, challenges come with having two separate distribution networks behind it. Is there a way you can still manage the portfolio as one? How do the brands interact as you think about who gets priority for placement? Just help us understand how you're thinking about that.

Yeah, absolutely. Good morning as well. Thank you, Michael. Jared mentioned some price, pack size, and channel mix for the quarter. That'll fluctuate. We had a greater single serve growth that we saw in the quarter between the brands. But we do still believe, and we spoke about this prior quarters, that variety packs and larger pack size is a trend of the future, especially as we're seeing growth continue to take place and strong growth taking place in food in large format as Celsius is becoming, as the energy category is becoming more of a take home pantry purchase, part of a daily lifestyle and daily routine, moving away from, you know, I think largely that impulse purchase and being part of a greater, even further greater part of LRB. As for the logistics and the strategy on bringing these two brands together, it's really our sales organization will own tier one and tier two accounts and account calls, and then we'll leverage the distribution. So we have field sales organizations and strategies. We're losing a lot of data and insights and analytics, but we're leveraging a lot of synergies as well as we integrate the organizations from finance and operations, key account management, strategy, revenue management, promotional management, and so on. So we're going to continue to stay focused. We have great partners that are helping us. You can see what Malani was able to deliver through their distribution network, and we're extremely pleased with the partners as well as the customers we're serving and focused to execute today, tomorrow, and beyond. Thank you.

Okay, great. Thanks so much.

Your next question comes from the line of Jim Solera with Stevens. Your line is open.

Thank you, Jared. Thanks for taking our question. I wanted to ask, Jared, you'd mentioned the year over year growth on Alani is like 106. How should we think about the pacing, you know, that through the back half of the year, especially given all these, you know, exciting LTOs and flavor innovations you have coming into the market, increasing visibility, and then if you guys could offer any commentary on household penetration data that you'd be willing to share, maybe so we can get a sense for, you know, how much of the Alani strength is coming from just increased frequency with existing households versus new consumers coming to the brand, greater awareness building?

Yeah. So I'll talk pacing. I think John mentioned household penetration. He can pull that up from his notes. If you look last year, we kind of went 136, 146, 166, 157 as I look at kind of 2024. So the comps are a little tougher. And also we had fantastic cotton candy and sherbet swirl LTOs, our top two LTOs ever with Alani. So we've got Witch's Brew coming through and then we've got our winter Wonderland seasonal as well. So we really need those to be as successful as they were last year. And they did a great job. Beyond that, we're seeing good growth coming out of the core portfolio as well. So we do expect to see solid growth continue. I'll be with a little tougher comps as we look at the back half of the year.

Yeah. In regards to the household penetration question, as prepared remarks, we talked about the Celsius holding portfolio has reached a 43% household penetration. And that is including not only Celsius at 43%, but also Alani at 22%. And what we're seeing there, we talked about within the Celsius portfolio, and both brands have a ton of runway with household penetration. And we think this is we're focused on continuing to progress and bring these brands to more people and more places. But when you look at the Celsius portfolio specifically, we saw one of the largest increases we've seen in the shortest time period with the kickoff of this Live Fit Go Pro campaign. So we're really pleased with that. We saw the increased household penetration increased at a much greater rate than it did in the prior six months. So really promising as we continue to progress with our Live Fit Go program and strategy. And then Alani just continues to grow there. So we have a lot of every new innovation, every limited time offer and push. We continue to attract more people into the portfolio and take advantage of their really new consumers coming in, looking for more function in beverage, looking for more energy and functionality.

So I think both these brands are continued really to grab additional household penetration and just leverage the health and wellness trends we're seeing in the in the you know food and beverage category great i appreciate your thoughts thank you your next question comes from the line of andrea texiria with jp morgan your line is open thank you good morning um i wanted to just like maybe um pass out a new comment to that before in terms of like how to think of promo but maybe give us some um idea how the third quarter is unfolding i know you spoke about the costco promo, but perhaps talk about Prime Day, anything we should be aware of in terms of like puts and takes of shipments and consumption. And also, when you think about the easy comparisons that you probably are facing, you face, I think about 20 million in the distribution issues last year. i think you have north of 120 for the quarter is that something we should be aware of is that a tailwind or it doesn't really matter you get it back just to understand the puts and takes please thank you yeah thank you i jump in on some of those questions and i'll then i'll toss it over to jared as well for further comment but um you know we really stand hold on our modern uh modeling call that we conducted with Alani.

You know, there's always going to be puts and takes along the way. There's a lot of variability. We did optimize some of our promotions moving from the, that we talked about in our last earnings call, moving from Q1 into kind of the summer season. So you have some timing and sequencing there. Within the Alani portfolio, we did move the Witch's Brew forward several weeks. Um, so if you're tracking weekly, there will be puts and takes, um, you know, all the time, but that has moved forward. Um, and within, um, you know, when you're looking at Q3 within Celsius, um, it's really about some of the promotional timing there. And you saw that, um, just, uh, the other question in regards to the club channel, there was a move within a promotional, uh, activity at one of the, at Costco, um, which moved into the third quarter. So there's timing and puts and takes there that will take place. And, you know, regards to other details in regards to how the quarter is actually going to turn out, just we're not going to provide forward looking information. It's just it's really difficult right now. We stand by the modeling call with the adjustment outside of the adjustment that Eric or Jared mentioned in regards to the gross profit margins, which are coming in slightly better on the top end than expected. So thank you.

And at this time, Mr. John Fieldley, I'll turn the call back over to you.

Thanks again for joining us today. Q2 was a strong quarter that reflects the power of our portfolio, the discipline of our team, and the strength of the category. Alani New delivered breakout growth, Celsius maintained momentum across channels, and we executed with focus across innovation, operations, and retail. I want to thank our employees and our partners and for their teamwork and dedication that enables us to deliver our growth. As we look ahead, remain committed to the long-term strategy, driving sustainable growth profitably, driving through brand leadership, discipline investment, and operational excellence. We're excited about what's ahead and in the back half of the year and beyond. Thank you for joining us today as we continue to capitalize on the modern energy era. Grab a Celsius and LibFit.

Thank you. This concludes today's conference call. You may now disconnect.