Earnings Call: Q2 2021

Aug 12, 2021

Greetings, and welcome to Celsius Holdings, Inc. 2nd Quarter 2021 Financial Results. At this time, all participants are in a 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 Holdings. Thank you. You may begin. Thank you, and good morning, everyone. We appreciate you joining us today for Celsius Holdings' Q2 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 be given at that time. The company files Form 10 Q with the SEC and initiated a press release today. All materials are available on the company's website, celsiusholdingsinc.com under the Investor Relations section. As a reminder, Forward to the call will be done. An audio replay will be available later today. Please also be aware this call may contain forward looking statements, which are based on forecasts, Expectations and other information available to management as of August 12, 2021. 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 obligation and disclaims any duty to update any of these forward looking statements. We encourage you to view in full our safe public 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 comments. John? Thank you, Cameron. Good morning, everyone, and thank you for joining us today. Our record second quarter results are representative of the momentum that the Celsius brand is achieving across the board with increased sales growth, SKU expansion, distribution gains, increased brand recognition and increased organic Social support adjusts some of the drivers supporting what we feel has been a significant step up for the company. We believe these also provide leverage to drive further acceleration in market share gains. Total sales for the quarter totaled 65,100,000 up 117% from $30,000,000 in the year ago quarter. Our domestic revenue increased 157 percent to 53,700,000 Up from $20,800,000 in the year ago quarter with both of these percentage growth rates the highest in our history. 2 of the highest hardest hit channels from COVID, our fitness channel and vending channel, each had triple digit growth, which contributed approximately $4,900,000 of incremental revenue when compared to the prior quarter. International sales growth Grew 25 percent to $11,500,000 primarily from a 23% growth in Nordic sales of $10,800,000 Even with the record Q2 and 1st 6 months of 2021, we're still dealing with the impacts of COVID-nineteen, including In our international markets, increased costs of raw materials and transportation, our fitness channel and vending channels saw tremendous growth of both A year over year period and sequential basis with positive trends continuing into the Q3. Although the comparable basis from the Q2 of 2022 With the low mark for both of these channels, the growth rate and total sales for each continue to improve. Our EU, Middle East, Asia Pacific, Australia operations remain adversely affected by COVID-nineteen with varying restrictions and lockdowns in these markets. Overall, we have been seeing sequential improvements over the last several quarters with capacity restrictions as well as reopenings in the hardest hit channels, But there still remains a lot of uncertainty as there potentially could be reclosings due to new variants and cases increasing in our regions of operations, which We could force extended closures in some states and countries. The health and safety of our employees and partners remains our top priority, and the safety precautions have been implemented, which we have developed and adopted in line with guidance from public health authorities. The aluminum can shortage Driven by COVID, impacting the entire industry remains in place. But for Celsius, we believe we are well positioned from our proactive Sourcing of international cans and new relationships with top can manufacturers in the U. S, which have been initiated major expansion projects and We continue to anticipate the completion of this expansion in the back half of twenty twenty one through 2022. We implemented our contingency plans around production In which imported can production started in March of 2021, we anticipate 50% of our can supply for 2021 will be derived from imported and wrapped cans, which should decrease late in 2021 and through 2022. We expect a significant majority of cans will be sourced domestically in 2022, Improving our margins and at this point, we believe Q1 of 2021 was the low point for margins with the back half of twenty twenty one showing sequential improvements Towards our fiscal year 2020 levels. In addition, the team is expanding warehouse distribution sites to 6 Regional orbit model, we drive efficiencies, implementing plans to further secure raw materials with NIM and floor stock programs, blanket purchase orders and second and third alternatives Our suppliers, the teams continue to quickly adapt to new COVID environment and are focused on driving efficiencies and operational performance And believe we are with our significantly expanded scale, we have the opportunity to leverage this to reduce input costs as we move forward. We have also further integrated and leveraged synergistic benefits from our global operations, focused on marketing, operations, financial integrations, Implementing our strategy to build a global dominant iconic brand. The company improved our fill rates through the 2nd quarter From the 80% level in Q1 driving driven by shipping delays and can shortages, gas shortages in the East Coast and the Texas freeze, which impacted our We ended the Q2 in June at approximately 90% fill rate and expect to see this improve further in the back half as we continue to reach normalized levels of inventory. Turning to some additional financial highlights for the Q2. Our domestic sales revenue The top $53,700,000 was driven by accelerated triple digit growth in traditional channels of trade, expansion of world class retailers and further activation And growth from our distribution partners. Our DSD direct store delivery network delivered growth of 3 33% in Our distributor revenues when compared to the prior year. Our fitness channel, as discussed, sales increased over 300% from the prior year in addition to our vending growth, We saw over a 2 50% growth rate, which together contributed about $4,900,000 of incremental revenue when compared to the prior year. As of July 1, we have over 18,500 vending micro market placements, and we expect that growth to continue throughout the year As we drive additional new national distribution agreements with Performance Food Group contracts and additional several regional agreements. In addition, all major chains in our gym fitness channel expanded SKUs, where we further expanded our new offering, Our new flavor, our tropical vibe and our strawberry guava flavor, which is now the number one selling flavor in the fitness channel. When a mass club Channel continues to accelerate. We are now fully rolled out nationally in all 561 Costco locations. In addition, in Target, we have converted approximately 95% to DSD and are also in process of launching 4 packs. On our convenience channel side in North America, which represents the largest market in the energy drink category, Over $10,000,000,000 in annual sales, the latest spin data shows an 86% year over year increase for CELSIUS product portfolio in the convenience channel compared to a 9.1% overall growth in the energy category, While Celsius is only holding 17.1 percent ACV, which truly shows the opportunity we have lying ahead as we continue to further expand. Through this year, we have added over 19,000 convenience stores through the last 12 months with additional accounts expected, Anticipated as all resets take place. This is for spin shelf stable energy functional beverage convenience 52 weeks ending July 11, 2021. Industry backed third party data continues to show accelerated growth metrics. We are confident that Celsius will continue to drive sales even higher as we continue to increase our ACV across channels through additional launches with nationwide retailers chains and transforming our existing distribution to our DSD service model network. Consumer demand for Celsius accelerated through the Q2 of 2021 with most recent reported Nielsen scan data as of July 3, 2021, Showing sales of Celsius were up 193% year over year for the 2 weeks ending and 195% for the 12 weeks ending with a 1.6 Share of the total energy drink category over the last 4 weeks. On Amazon, Celsius is the 3rd largest energy drink with a 13 0.12% share of the energy drink category, just 1.32% share behind Red Bull at a 14.44 percent share and 18.13% behind Monster at a 31.25% share Last 52 weeks ending July 10, 2021, Stack Line, Energy Drink Category, Total U. S. And for the 4 weeks ending July 3, 2021, Category sales, including shots, surged 104.5% with Bang sales up 216.1%, Celsius sales were up 133.1%, Red Bull sales were up 109.4% and Monster sales were up 59.9%. According to Stackline latest year to date leaderboard ranking most popular search brands in the U. S. Grocery department, Celsius is the number one fastest growing brand while positioned at an 18th overall for the reported period ending July 3, 2021. We continue to see acceleration and are now beginning to also see the additional lift from the conversion of our accounts to our national DSD network. This delivered a growth of 333% in our distribution revenues when compared to the prior year Q2. We secured additional distribution agreements partners in the Anheuser Busch network independent Anheuser Busch network, independent PepsiCo, Cure Doctor Pepper and our MillerCoors network further expanding availability to new regions as Celsius Buildout is national distribution network, which now includes over 190 regional direct store delivery DSD partners Distribution centers now covering approximately 90% of major metropolitan markets and 85% Our total U. S. Counties are now covered. We also filled one of the major gaps in our DHD network in the mid Atlantic region, Adding additional securing initially additional 3 new distributors in that region, which were signed up in the second quarter. Transitioning to DSD continues with our retail partners with 45% of retail stores are now serviced by DSD. Key accounts converted with over 75% transition to DSD include Target, Walmart, Racetrack, Kroger, Circle K, Speedway, Murphy's USA, Is CBS and 711 also in the process with more being transitioned in the back half of twenty twenty one through 2022? Our rollout of Celsius Branded Coolers in the Q2 totaled approximately 300 and now have over 500 placed in the market through the 1st 6 months of 2021. We have also implemented additional comprehensive tracking tools to leverage our growth and accelerate the metrics through the retail partners. We expect additional cooler placements in the back half of this year at similar or increased numbers as we continue to see strong velocity rates and increased same store sales. Today in the United States, our total door count now exceeds over 100,000 locations, which is a major milestone And grew over by 20,000 doors in the beginning of 2021 with additional expansion planned throughout the rest of this year as retailers resets take place. On our co packer front, we continue to expand our partners and scale at existing locations, improving our line time priority. Our total U. S. Co packer footprint now totals 9 active locations, which will help fuel our growth and limit our out stocks and support the national massive growth opportunity that lies ahead. During the Q2, we increased our inventory levels up to $63,000,000 up 27 percent from $36,000,000 at the end of the Q1 to support our growth and increase warehouse distribution centers and to better service Our customers in need demand as well as increased our inventory of raw materials. In Europe, Nordic sales increased 23% versus the prior year, Help by the growth of our Celsius portfolio and the launch of 2 new flavors of tropical flavors. In addition, our global Celsius EMEA packaging launched in Finland, Where the initial results have been extremely positive and has been further rolled out to the top main retailer, SOK, spanning to 832 locations. The fast portfolio experienced out of stocks during the quarter due to co packer delays associated with COVID, which has Started to normalize in the back half of the quarter. Celsius sales made up for the reduction in the FAST portfolio to drive positive growth in character. We also have initially a soft launch of FaaS portfolio in the U. S. Through Amazon. We continue to evaluate the timing of additional European expansion markets. We are confirmed to launch the 1st Amazon EU market of UK and Germany in the back half of twenty twenty one and expect to launch additional EU countries through 2022, including Sweden, Spain, Italy, France and several others. In China, we maintain a licensing royalty model in the market where our distributor covers approximately 76 cities and over 60,000 locations of distribution. Our other international markets have been impacted in both the in country service and our buyer co packers These countries due to COVID impacts. We anticipate that these geographies, once fully opened, will provide additional long term growth opportunities. As with Europe and the United States, we see significant opportunities to capitalize on a global scale, reflecting the changes in consumer preferences for better for you offerings in this enormous Asian market. Now moving into marketing. On the marketing front, we continue to activate targeting consumers. They live, work and play, building meaningful and emotional connections through robust Integrated marketing programs. Specifically during the quarter, despite the COVID restrictions, we sponsored targeted programs both in person and virtual. We further expanded and integrated our experiential sampling Live Fit tour in Florida, Texas and California and other markets as well. In addition, we further expanded Our brand ambassadors and influencer programs reaching more consumers in a meaningful way. In addition, on June 9, 2021, The company completed an offering, which generated net proceeds for the company of approximately $67,800,000 intended use Proceeds primarily for growth capital, including building of inventory to support our sales growth, leveraging and optimizing our warehousing, targeting Investments in targeted marketing programs as well as the expansion of the Celsius Granny Cooler program. We have reached another inflection point in our operations and growth, 1, which positions Celsius for exponential sales and market share growth. With this, we have been proactive in the building that Celsius team maximize the opportunity As well as with key partners such as Ernst and Young as our corporate auditors beginning in Q3 of 2021. Our national DSD Network is in place with our retail partners accelerating distribution, which we have only just begun to recognize the incremental growth associated with these transactions. Our team is ready and our infrastructure is in place to support the sales growth we expect on an expedited scale. I will now turn the call over to Edwin Cabala, Our Chief Financial Officer for his prepared remarks. Edwin? Thank you, John. First, I wanted to cover the June 9 public offering Led by UBS and Jefferies, the company issued and sold 1,133,953 shares of common stock, Approximately a 1.7 percent dilution and the selling stockholders sold 6,257,455 shares in the aggregate of common stock in the offering at a price of $62.50 The offering generated net Proceeds for the company of $67,800,000 with net proceeds for selling stockholders of $375,000,000 The company did not receive any proceeds from the sale of shares by the selling stockholders. The company intends to use the proceeds for general corporate purposes such as working capital financing, expanding our Celsius branded cooler program And expanding our warehouses and distribution model to reduce miles on cans and better service our distributors. Now turning to the Q2 results. Our Q2 revenue for the 3 months ended June 30, 2021 was approximately $65,100,000 a robust increase of $35,100,000 was Translated into a significant growth of 117 percent from $30,000,000 for the 3 months ended June 30, 2020. Approximately 94% of this growth was a result of increased revenues in North America, where 2021 second quarter revenues were $53,600,000 a considerable increase of $32,800,000 or an impressive 157 percent increase from the 2020 quarter. The balance of the increase was largely attributable to a 23% growth in European revenues to $10,800,000 in the 2021 quarter from $8,800,000 in the prior year quarter. Asian revenues, which primarily consists of royalty revenues from our China licensee For the 3 months ended June 30, 2021 were $619,000 an increase of 89.9 percent From $326,000 for the prior year quarter. This increase was provided for in our licensing agreement. Other international markets generated $62,000 in revenue during the 3 months ended June 30, 2021, A decrease of $45,000 from $107,000 for the prior year quarter, mainly related to an operational restructuring in the Middle East. The total increase in revenue was mainly related 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 in traditional distribution channels, combined with an increase in and optimization of our presence in world class retailers. Additionally, the continued expansion of our DSP network resulted in significant growth in distributor revenues when compared to the prior year quarter. We also achieved Triple digit growth in our fitness and vending channels in the 2021 quarter, which contributed considerable incremental revenue when compared to the prior year quarter, during which time many fitness facilities were closed due to the COVID-nineteen pandemic. Furthermore, we estimate that the strengthening of the Europe accounted for approximately 2.3% of the increase in European revenue in the 2021 quarter from the prior year quarter. Gross profit for Q2 increased by approximately $15,200,000 or 117 percent To $28,200,000 from $13,000,000 for the 3 months ended June 30, 2020. Gross profit margins reflected a nominal increase to 43.4% for the 3 months ended June 30, 2021 from 43.3% for the 2020 quarter. Excluding freight as some of our competitors do not include this as cost of goods sold, Our adjusted gross profit for the Q2 will translate to 51.8% compared to 50.5% in the Q2 of 2020. The increase in gross profit dollars is mainly related to increases in volume, while the nominal increase in gross profit margins is mainly related to lower processing costs And repackaging costs. We estimate that the increase in gross profit dollars of approximately $15,200,000 From the 2020 quarter to the 2021 quarter, we reflected $14,400,000 related to volume increases as well as favorable cost impact of approximately $25,000 and favorable currency impact of $796,000 Sales and marketing expenses for the 3 months ended June 30, 2021 were $15,500,000 an increase of $7,600,000 or 96 2% from $7,900,000 for the 3 months ended June 30, 2020. This increase was mainly to additional marketing investment activities, which resulted in an increase of $4,200,000 when compared to the prior year quarter. Additionally, employee costs increased by $900,000 from the year ago quarter as we continue to invest in this area in order to have the proper infrastructure to support our growth. Additionally, we're now incurring in travel and business expenses as we are able to resume our in person marketing events and selling activities. Similarly, we experienced increases in other sales expenses In the amount of $795,000 mainly related to trade marketing activities to support our ongoing DSD network expansion. Lastly, storage and distribution expenses as well as broker costs accounted for the remainder of the increase in this area up $1,700,000 from the 2020 quarter. As a percentage of revenue, sales and marketing expenses amounted to 23.9 in the Q2 of 2021 compared to 26.2 in the Q2 of 2020. General and administrative expenses for the 3 months ended June 30, 2021 were $9,100,000 An increase of $5,200,000 or 133 percent from $3,900,000 for the 3 months ended June 30, 2020. This increase was primarily attributable to stock option expense, which amounted to $4,000,000 for the 3 months ended June 30, 2021, Or an increase of $2,800,000 which accounts for 51.9% 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 in the business in order to promote over performance. Additionally, employee costs for the 3 months ended June 30, 2021 reflect an increase of $670,000 or 61 percent as investments in this area are also required to properly support our higher business volume and the commercial and operational areas of the business. Additionally, travel and other similar expenses are now being incurred. Administrative expenses amounted to $2,700,000 Or an increase of $1,400,000 or 107.7 percent when compared to the prior year quarter. This variance is mainly related to an increase in bad debt reserve of $650,000 to properly cover any potential realization exposures. We also experienced increases in audit costs, legal expenses, insurance costs and office rent, which accounted for the majority of the remaining fluctuation of $750,000 Depreciation and amortization increased by approximately $124,000 when compared to the prior year quarter. Lastly, all other administrative expenses, which were mainly composed of research, Development and quality control testing increased by $200,000 when compared to the Q2 of 2020. Total net other income for the 3 months ended June 30, 2021 amounted to $361,500 which reflects an increase of $51,500 when compared to the total other income of $310,000 for the 3 months ended June 30, 2020. The total other net income of $361,500 It's composed of foreign currency exchange gains of $178,000 miscellaneous other non operational income of $108,000 Interest income of $77,000 related to the note receivable from our China licensee, which were partially offset By miscellaneous interest expense of $1400 pertaining to financial leases. The note receivable requires repayment by our license fee over a 5 year period. The no receivable is due from the licensee in accordance with its terms, even if the independent license arrangement is terminated. As a result of the above, the net income for the 3 months ended June 30, 2021 was $3,900,000 or $0.05 per share on a weighted average of 73,200,000 shares outstanding and diluted earnings of $0.05 per share based on a fully diluted weighted average of 77,200,000 shares outstanding. In comparison, for the 3 months ended June 30, 2020, the company had net income of approximately $1,600,000 or $0.02 per share based on a weighted average of 69,400,000 shares outstanding And a diluted earnings per share of $0.02 based on a fully diluted weighted average of 71,500,000 shares outstanding. Focusing now on liquidity and capital resources. As of June 30, 2021 December 31, 2020, we had cash of $83,800,000 $43,200,000 respectively and working capital of $151,000,000 and $66,200,000 respectively with no long term debt. Cash flows used by operating activities totaled $30,300,000 for the 6 months ended June 30, 2021, representing a $26,100,000 increase From net cash used in operating activities of $4,300,000 for the 6 months ended June 30, 2020. The use of cash was mainly related to increase in our inventory levels in order to properly service demand for our products. Our net inventory increased $45,400,000 from Q4 2020 to $63,800,000 in Q2 of 2021. Excluding this significant increase in inventory, cash flow from operations would have totaled $15,100,000 I also wanted to cover a few additional metrics we believe provide a good perspective of our operational performance using Q2 business volume as a basis. Our DSOs or daily sales outstanding were approximately 45 days. Our inventory days on hand were approximately 155 days And our payable our days payable outstanding were approximately 31 days. Given our growth, these are very good working capital metrics. Lastly, adjusted EBITDA for the 2nd quarter was $7,900,000 or 12.2 percent of revenues. We believe this information of adjusted EBITDA and other non GAAP financial measures enhance the overall understanding and visibility of our true business performance. To that effect, a reconciliation of our GAAP results to non GAAP figures has been included in our earnings press release. This concludes our prepared remarks. Operator, you may now open the call for questions. Thank you. Thank you. Our first question comes from the line of Kalmyr Jazrawala with Credit Suisse. Please proceed with your question. Thank you, operator. Hi, everybody. A couple of questions, I guess. First, there's meant to be Quite a significant amount of, I guess, catch up shelf resets this fall after some delays and all sorts of things. Obviously, you've gained quite a bit of distribution. You've had Some momentum, should we be expecting that to accelerate into those resets? Or do you think you've maybe captured a reasonable amount of which you would have captured at a reset anyways, and we should just expect things to kind of continue along its current path. Thank you, Kamal. This is John. When we look at retest, we added about 20,000 stores through the first 6 months of the year, reaching 100,000 doors is a major milestone for the company. What we're seeing, Coke Energy is getting delisted out there right now, and our team has been extremely aggressive, potentially getting some of that space for us In the back half of this year as retailers are doing some midyear cut ins. So, you'll see some of the resets are a little bit unique Given with COVID in 2020, there is some different timing on resets. So we are seeing shelf sets get We're gaining additional distribution. We expect to gain additional distribution in Q3. Also, the activation of the DSD network, Really going after small format and independence is a huge opportunity for us as we continue to activate this DSD network. We anticipate stores to continue to grow. We'll see it at the same rate, but we're early indications are we'll continue to grow doors throughout the year. And then as we anticipate, larger resets happening in 2022. Got it. And If I could ask about Europe, you mentioned that you are planning on launching in Amazon Europe in a series of markets. Can you Maybe just add a little bit more detail on maybe the market size, what your expectations are for contribution in those launches, that sort of thing? Yes. We've been talking about it for some time. We're obviously doing Extremely well on Amazon in North America and working with the European partners and divisions over there. We're looking for really in Q3 to launch in the U. Germany and other markets, early indication, it is the overall size of the energy drink market on Amazon is not as large as the U. S. We do anticipate incremental revenue, but most importantly, it gives us additional exposure as we expand into these markets. So Think of it as air cover per se as we enter the UK and Germany and opportunity as we look for partners in retail as well as distributors. So lots of opportunity as we look to further expand throughout Europe. But in regards to significant dollars to top line, We'll see how it prevails, but we anticipate it to be incremental. Okay, great. And maybe a final question on margins. You it sounds like you have quite a bit of confidence in getting your gross margins back up to where they were, Which I guess was just under 47% last year. Is that what you were indicating when you're saying by the we will sequentially get better to get back to that 40, I guess 46.6% or was that maybe longer range? Is that kind of a year figure for when you intend to Exit the year, what do you think you'll get the full year to? Yes. We feel in the back half of twenty twenty one, this year, we're going to see sequential growth Anticipated in the margins as we've seen in Q1 and in Q2. There's a lot of variables out there. Freight costs as well Have been extremely volatile as well as we will be cycling through some imported cans and raw materials. So that will put some pressure on our margins in Q2 And potentially into Q4, we do anticipate more U. S. Can manufacturing to be utilized towards the back half of twenty twenty one and into 2022. Edwin, I don't know if you want to add any additional color on that. Yes. Thank you, John. Yes, I agree there's a lot of variables and the other one that I always like to emphasize is the parity Between the U. S. Dollar and the euro, and the dollar is strengthened. So I think that's also going to come into play as well. Yes. So difficult to kind of predict where we're going to land, but I always want to make sure that that's also taken into consideration. Yes. That was a good point. But we do anticipate the Q2 results of around 43% gross profit to anticipate Being the floor as we continue to move forward, agreed. Okay, got it. Thank you, everybody. Thank you, Paul. Thank you, Paul. Our next question comes from the line of Sean King with UBS. Please proceed with your question. Hey, good morning, guys. Thanks for the question. How are you thinking about pricing in the energy bearing category? And maybe your ability to take pricing given some of the consumer loyalty metrics that you've seen. Yes. I mean consumer loyalty has been extremely high for us. That's one of a competitive advantage we had is our loyal fan base. In In regards to pricing, we do think there's opportunities on pricing as we continue to grow and scale. When we look at pricing right now, we're really watching what the other players in And also same with Monster and many players really watching our promotional Allocations, allowances and plans as we go forward to mitigate the overall frontline price increase. Great. If I could squeeze one more in. I just was curious just to how to understand the mechanics of the shift to DSD and if that does have a drag on margins going forward. Yes. No, it's a great Question, I mean, there is somewhat of a transition. We are giving up top line dollars, and we're giving up margin to move to our DSD network. But there's a lot of synergistic benefits that you receive on transitioning. So what we're seeing is it's really potentially margin neutral and Also, we see opportunities as we grow further scale to really leverage some of those efficiencies on a larger scale operations as we So at this point, as we make the transition, it has been fairly neutral. Yes. The way I would look at it as well is, from my perspective, kind of short term versus long term or in mid term. Initially, yes, there may be an impact to construction. But as John mentioned then with the synergies and the other benefits, we'll definitely be able to make that Great. I'll pass it on. Thanks a lot. Thank you. Thanks, As a reminder, it is star 1 to ask your question. Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question. Hi, John and Edwin. How are you? Good morning, Jeff. Good morning, Jeff. Excellent. Hey, just a bit of a follow-up And a couple of Camille's questions. As far as the Big 5 Plus in Western Europe, you're going to launch out on Yes, Amazon. Are there any plans for other channels to happen in the short or mid term as far as the gym channels or retail? Yes, that is a massive opportunity. We're under discussions. We're looking at that with a variety of opportunities of potential partners. So more on that in the coming quarters. But at this point, our first step is to expand with Amazon, and then we're looking for other partners In those markets where we're under discussions. Great. And then second for us, could you talk about the coolers and what we should expect for The back half and talk a little bit about some of the channels and velocity that you're getting to there and how that may roll out and some of the data In stores as far as what they're finding as far as the effect on the programs? Thank you. Yes. No, it's a great question. In regards Sitting here in 2019 2018, we had even into 2020, we really had a lot of out of stocks at retail I've just stated the philosophy of the product. So moving to DSD is one step in enhancing our availability, maintaining that in stock position. And then taking it to the next step further is getting Coolers placed strategically in locations where we really can drive a velocity and really service our customers. Historically, up until really over 12 months ago, the majority of our sales are all take home. So with the cold availability, That allows us to take part of the larger energy drink category, which is at immediate impulse purchase. And when we're seeing when we place coolers in strategic locations where our consumers are, We're seeing great returns on the investments in the Coolers, ROI and better servicing for our customers and also it's a greater partnership with our DFB partners. I want to think of it like the silent salesperson as well when you see those coolers there. They look great. We have indicated, as I stated, we have about 500 that are currently placed as of June 30. We have many more we anticipate to place in the back half of this year and into 2022. We're working on some cooler programs with some larger retailers for 2022 as well. So really in a good place as we continue to service our customers better Where they live, work and play. Got it. And then lastly, first, can you talk about the throughput rates previously 80% 90% This quarter, so where's kind of steady state? And what are the push and pulls there involved? Thank you. Yes. Thank you, Jeff. Yes, fill rates in Q1 were roughly Around 80%. We have increased those through the back half of the second quarter, mainly in June, getting to a 90% fill rate there. So We anticipate that to continue to sequentially increase over the next several months. Currently, in Q2, we're averaging right around that 94%, 93% fill rate. That should increase as we further increase our inventories. Moving to this 6 orbit model of warehousing also allows to drive some The key is to get the inventory levels at the right level, and then we'll be able to continue to improve fill rates. Thanks again. Congrats on the strong readout. Thank you. Thank you. Our next question comes from the line of Jeff Van Sinderen with B. Riley. Please proceed with your question. And thanks for taking my questions. Just any update you can give us on where we are on CVS and 711's progress on flipping to maxed out DSD. Yes. Great question, Jeff. In regards to 711, we continue to make progress each and every day. The whole West Coast division has been turned over. We're working on the Southeast division and several other regions. So, we seem to have a full support of 711, really closing the gaps now that we have about 85 And the first one of the most recent quarters of the year, we're going to be looking at the numbers that we're seeing in the second quarter Securing the final pieces of some of these counties that needed to be covered in order to flip over the zones. So really excited on 711. That's going to continue to transition there. And then CVS, we're making progress on that each and every day. More zones or more DCs are being converted. Still have a lot of work ahead to continue to move forward, mainly with the Anheuser Busch network. There's some challenges on alcohol service Alcohol distributors servicing some nuances there we're working through. But all in all, everyone is in favor of flipping over to DSD. And then the CBS, if you look at it, we have full shelves across the country. So lots of opportunity to drive volume to better service our customers. Okay, great. And then any are you anticipating any impact on the fitness and vending channel with the resurgence of COVID or do you think we're beyond that? Yes, it's a great question. I mean, we saw great growth in the 2nd quarter in our fitness and vending, between the both of them are $4,900,000 We haven't seen it slow down yet. That is definitely a concern we're having. We're taking additional protocols and safety measures throughout the whole company. Time will tell. At this point, we're seeing, especially in Florida, Tacitus, in many markets, we're seeing the gyms are coming back. So People are very cautious, but it seems to be a growing opportunity for Celsius. Time will tell. I don't have a great answer on that, but we're watching monitoring that closely and we're aggressively pursuing those markets. Okay. And then if I could just squeeze in one more, if you could touch on the launch of the 4 packs? Yes. The launch of the 4 packs, Jeff, you've been with us some time as well. And when When you look at where we've been, it's the company transitioned to a single strategy to drive trial and awareness. And now due to our velocity Has increased exponentially, especially in grocery and mass. There's opportunities for further pack size. And I think everyone's been talking about multipacks. So what we've been doing strategically is further expanding the multipack offerings, and the 4 packs going into Target is a great win for the company. It just Shows you the velocity. We started off with 3 singles, 3 flavors, 4 flavors, 5 flavors, expanded stores. Now we're taking that partnership to the next level with 4 packs and soon to be a multipack we're working on as well as we look at 2022. So Lots of opportunities there, but definitely take home, larger take home is going to increase our over velocity as well versus people buying 1 or 2 cans. You can pick up multiple packs. It's worked really well for us at Publix as an example where we have singles and 4 packs. So expect more 4 packs and multi packs coming The back half of twenty twenty one and into 2022. Thanks and best of luck. Thank you, Jeff. Thank you. Our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question. Thanks. Good morning, guys. Good morning, Randy. So in terms of the branded coolers, that seems to be going well. Can you give a little more Color around the metrics. When you put in a brand of cooler and end cap or at the checkout, What do you see in terms of velocity or sell through for that versus before you had the branded cooler in there? It's all about retail execution for us. I mean, we're working on our teams are expanding we're expanding our DSD Four teams, our field marketing teams, we have great merchandisers and sales support teams we're building across the country. And it's all about now that our brand awareness continues to grow, our velocity grows. We need to have additional placements in store. Our goal is to have 3 placements in every store. We want to be 3 points of disruption, we call it, as well as the importance of cold in an end cap. So That's a big initiative that drives. I mean, it's important that we have that. Also additional stock on the floor in these retailers. But what we're seeing is the end capital drive additional incremental volume and velocity and then the cold equipment, Once it's in, we get cold placement at the proper location, it grows even further exponentially there. So there's a lot of opportunity placing cold equipment In the right location in these our given retailers in our given markets, and we're just at the beginning of that. Okay, great. And then in terms of being able to meet the demand out there, I think right now you have around 9 non co packers, if that's correct. Is that based on your 6 to 12 month plan right now from what you could see, is that sufficient? Or are you looking to add some more co packers at this point? We're always talking and looking for great partners, Great partners, Bill, great brands and great company. So constantly talking with new co packers and potential partners. We do feel we have The 9 co factors now that are active will solidify our growth for the next 12 months depending on how things go. We're looking for further partners as well. We have Paul Storey that joined the company. So he has been incremental building out our operations team as our EVP of Operations. So comes with a great wealth of knowledge and also potential partners. So lots of opportunity there. I mean, if you look at The velocity or production levels that we've been producing over the last 2 months, we've produced more product than we did in all of 2020. So We are really well positioned as we continue to fulfill the demand that's out there for Celsius. Okay, great. Thanks very much. I'll hop back in the queue. Thank you, Anthony. Thank you. This concludes our question and answer session. 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 joining us today and their continued interest. 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 drinks 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 an award winning portfolio, strategy and team in a large rapidly growing market that consumers want. We believe we'll be able to continue to navigate through Challenge ahead of us as a result of COVID-nineteen, and we are well positioned to thrive in the transformation taking place in the category today. In addition, I'd like to thank all our investors for their continued support and confidence in our team. Next week, we'll be hosting our Annual Shareholder Meeting, August 19 at 2 p. M. In Boca Raton, notices have been sent out to all shareholders with a record date as of June 30, 2021. Additional information is available on our corporate website. Also, upcoming conferencing, we will be attending Wells Fargo 4th Annual Consumer Conference Being held September 23 to 24. Also, the Jefferies West Coast Consumer Conference is being held November 16 to 17. Look forward to seeing many of you there. Thank you, everyone, for your interest in Celsius. Be safe, stay healthy, and have a great day. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.