Earnings Call: Q3 2020

Nov 12, 2020

Quarterly report

Greetings, and welcome to Celsion Holdings Third Quarter Earnings Call. 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. Thank you. You may begin. Thank you. Good morning, everyone. We appreciate you joining us today for Celsius Holdings' Q3 2020 earnings conference call. Joining the call today are John Fieldly, President and Chief Executive Officer and Abhin Negron, Chief Financial Officer. Following the prepared remarks, we will open the call to your questions and instructions will be given at that time. The company files Form 10 Q with the SEC and issued the earnings press release pre market today. All materials are available on the company's website at celsiusholdingsinc.com under the Investor Relations section. As a reminder, before I turn the call over to John, the audio replay will be available later today. Please also be aware that this call may contain forward looking statements that are based on forecast, expectations and other information available to management as of today, November 12, 2020. These statements involve numerous risks and uncertainties, including many that are beyond the company's control. Except to the extent as required by applicable law, Celsius Holdings undertakes no obligations and disclaims any duty to update any of these forward looking statements. We encourage you to review in full our Safe Harbor statements in today's press releases and our quarterly filings with the SEC for additional information. With that, I'd like to turn the call over to President and Chief Executive Officer, John Fieldly, for his prepared remarks. John? Thank you, Cameron. Good morning, everyone, and thank you for joining us today. Our Q3 continued to see the impacts of the COVID-nineteen pandemic, materially impacting several channels of trade for Celsius including our health and fitness, vending and food service, as well as a reduction in foot traffic in several other channels. While we did begin to see an improvement in the Q3 with capacity restrictions and reopenings in our Hardistead channels, this remains significant uncertain as there potentially could be reclosings with additional cases and increased in our regions of operation and extended closures in some states and countries. The health and safety of our employees, customers, consumers and partners remains our top priority and we continue to monitor the environment and implement contingency plans to mitigate risk to our business. In addition to the COVID disruptions in our retail channels, the entire beverage industry is now being impacted by an aluminum can shortage taking place in the United States. The impact is across the board with major bottlers recently announcing a material shortfall in cans for 2021 and many smaller brands are being turned away. We have been in continual dialogue with our suppliers and while they remain certain to fulfill our base can needs for 2021, they indicated they do not expect to be able to fill our expected growth from our internal projections. While this is a significant issue, we have also found a solution. Being an international company, we have been able to leverage our global relationships and strategic investors and we'll be securing additional cans needed as needed from Europe and Asia to support our growth. While this is great news on all these incremental cans we are able to source outside the United States, we will see an increase in our cost of goods over the short term period through 2021, which will impact our gross profit margins by a few points, but we remain confident the company will be at least at a run rate in the low 40s on a gross profit basis. We are currently expecting 2021 as being impacted for the entire year until the new plants in the United States get up and running, balancing supply and demand as we head into 2022. We will continue to explore additional opportunities as they become available to shorten the duration Celsius is impacted by this can shortage, but wanted to set an initial conservative expectation as a baseline. I assure you our team is focused on continuing to improve operational performance and the team is focused on improving efficiencies as we continue to scale and we will work to mitigate and offset this increase as much as operationally possible throughout 2021. With the only negatives for the quarter out of the way, I am extremely proud and excited with our team at Celsius and the accomplishments they've made during the quarter. The 3rd quarter results were at an all time record for the company including record revenue, gross profit, gross margins, operational income, net income, earnings per share and cash flow from operations. Overall revenue was up over 80% to approximately 36,800,000 from $20,400,000 in the year ago quarter. Domestic revenues, we saw growth of 60% to $26,900,000 up from $16,800,000 in the year ago quarter, which was driven by expansion in retail outlets where we grew over 19,000 locations from the year ago period, expanded our distribution through DSD and saw organic same store sales growth and we saw over 100% growth in our e commerce channels during the quarter. Our e com revenue was driven by Amazon, where we saw an increase of over 111% to over $5,600,000 for the quarter, which represented about 22% of our domestic revenue. Initial revenue increased 172 percent to $10,000,000 approximately from $3,700,000 a year ago quarter in which we saw our Nordic revenue increase 182 percent to 9,500,000 dollars also a quarterly record since the acquisition and sequential growth of approximately 10% from the first of the second quarter. Consumer demand for the Celsius brand has only grown stronger through 2021. And with the most recent reported United States spins data for the 52 weeks ending October 4, 2020 confirms that we have significantly outpaced the category across multiple channels. This includes a 43.9% growth in the convenience channel outpacing the category by approximately 14.8x with new store additions ramping up our ACV to approximately 16%. In the MULO channel, our growth rate is over approximately 100% with an ACV currently at 36.5% outpacing the category growth by 7.4. Additionally, 3rd party data reflects the same trends on Nielsen as reported all channels as of October 27, 2020, the Celsius sales were up over 61.3 percent for the 4 weeks ending with a 0.6 share. The next largest growth rate in the category was Red Bull with approximate growth rates of 20.2% for the most recent 4 week period. According to Stackline, which tracks energy drink sales on Amazon in the United States for the 4 weeks ending October 17, 2020, sales in dollars in the energy drink category by Amazon including energy shots grew by over 157.5% versus the same period a year ago and Celsius sales increased outpacing the category by 190.3% and our share increased to 13.9% of the category, which puts Celsius as the 3rd largest energy drink brand on Amazon, just behind Monster Energy at a 31.2% share which grew at 156% and Red Bull which is at a 15.8% share which which grew at 179% growth rate. Being the 3rd largest brand on Amazon demonstrates our opportunity and verifies Celsius warrants additional and much better placements as we continue to scale. Through the Q3, traffic and purchasing patterns remain disrupted and online ordering patterns, pantry purchasing and curbside pickups became more prevalent in response to the stay at home orders in particular markets and consumers shifting their lifestyles. During the quarter, we continue to see impacts in several of our distribution channels, mainly our health club, vitamin specialty and vending channels. Our health club channel, specialty channel saw revenue decline by approximately 23% in the 3rd quarter. This was historically represented approximately 20% to 25% of our United States revenues and this channel remains predominantly shut down during the quarter. We did begin to see some reopenings at a limited capacity during the quarter, but expect revenues from this channel to remain materially down in the Q4. We do expect continued openings throughout 2021 and a rebound. As I discussed in the 2nd quarter earnings call, despite these two channels essentially shut down, our consumer shifted their purchasing patterns of Celsius to other channels, which did not only replace the sales in these channels, but drove record revenues and accelerated revenue growth of over 60% in the 3rd quarter in North America, further reinforcing the opportunity we have at Celsius. Our brand is more than just an impulse purchase. We are part of daily lifestyle, aligned for today's health, mind and consumer. The Celsius consumer brings significant value to retailers, not just as an expanded age bracket and a 50% female demographic, but our consumers are recurring, regularly consuming Celsius as part of the daily lifestyle further expanding the channels and category growth. During the quarter, we made significant process on further building out our DSD distribution networks on our pursuit for a national network to service our accounts. We secured additional distribution partners in Anheuser Busch, Pexico, Keurig Doctor Pepper and Molson Miller Courier Network partners, further expanding availability to new regions. We further transitioned Target and 711 over to their wholesaler Big Geyser in New York during the Q3 and have already seen volumes more than double in those locations. The company initially announced last summer that we're building out our national DSD network starting with our 1st major account DSD partner Big Geyser in New York City Metropolitan market. We have now built our network to over 147 regional direct store delivery partners and we anticipate our DSD network now covers approximately 75% of major metropolitan markets in the United States. One of the initial challenges we did have building out our network was really working with the retailers as you have to cover the retailer distribution and the stores in order to flip over those retailers to your distribution partners. So this is why the percentage of stores serviced by DSD is materially lower currently than our overall coverage, which is approximately 75% of metropolitan markets. Now that we have grown our overall coverage and completed full regional coverage on geographical areas, we have now seen an over 100 increase in number of stores serviced by our DSD network from our Q2 earnings call, which includes our most recently announced Target DSD conversion and the 2,700 Speedway store expansion we most recently announced. The company anticipates that approximately 30% of doors will be currently covered by DSD distribution, which would be adding additional stores and locations throughout the back half of Q4 and into 2021. We anticipate that the accelerated transition will continue and include convenience as such the recently announced Speedray launch drug and grocery over the next 2 to 3 years, we expect approximately 70% of our retail stores to be serviced by DSD distribution and the associated benefits of doubling revenues in those accounts as we continue to transition. In our mass channel, Celsius saw significant growth through our recently announced exclusive launch of Kiwi Guava Lime flavor of On the Go stick powders in to over 2,700 Walmart locations. In addition to the Walmart launch of the new flavor, the company expanded our OmniGo sticks into Publix over 1200 locations with 5 flavors and expanded our flavor offerings throughout Europe, Europa, through services to gym channel as well as Vitamin Shoppe and HEB in Texas. We also expect to transition the remaining 50% of Walmart stores to DSD in the beginning of 2021. We transitioned as stated 1200 Target stores to DSD through September October with additional plans and regions to transition throughout the back half of 2020 through 2021, Target is a great case study for Celsius as we have steadily grown our initial 2 SKUs in a 200 store test to national availability with 5 flavors serviced now by DSD. The company also participated in an NCAP program, which to support the transition in August September, which was very successful. In the convenience channel during the Q3, we announced the expansions as stated in Speedway to over 2,700 locations which are now serviced by DSD and grew our ACV in the channel in the convenience channel in North America to approximately 16%. We also expanded and brought on Extra Mart, Kum and Go and Union specific stores. In the retail space, our total U. S. Store count now exceeds 79,000 locations nationally, which is up for more than 19,000 locations or 32% growth from the 60,000 locations we announced in Q3 of 2019 on our earnings call. We expect the number to grow even further in the coming quarters as retailers execute planogram resets, which were delayed in the summer months this year. In Europe, we continue to capture incremental benefits and synergies from full integration of Funk Food, a Nordic wellness company into our operations. The business was immediately accretive to earnings, an important step in our strategy to build out a global dynamic brand. As in the United States, our Europe operations were impacted by COVID and saw decreases in the fast protein snack portfolio continued through the Q3 as consumers shifted habits to confectionery products, but we do see the protein category continuing to rebound in the Q4 and expect it to continue to rebound into 2021. These decreases were more than offset by the sales increases of Celsius in the region, which we continue to see great opportunity and momentum. Some of our operational highlights in Sweden, we had a great successful launch of a new flavor, great tasting strawberry and marshmallow, which we launched in August September, And we also kicked off in the back half of the third quarter a limited edition blueberry frost, which is great tasting and was well received by consumers and retailers in the country. In Finland, we saw great very strong campaign in Kesto, one of the country's leading hypermarkets where we saw over 60 5% growth versus in the prior year quarter and the team launched a great tasting indulgence bar in August, which has been very well received by consumers. As with Europe and the United States, China and APAC were impacted as well by COVID-nineteen. Recovering continues and we saw momentum gained in the summer months. In China, we maintain a licensing royalty model in the market where distributors cover approximately 76 cities and now cover approximately 60,000 points of distribution at the end of the Q3. And in Malaysia, we maintain a direct relationship with a local distributor where we maintain approximately 2,00711s with plans to reenter the fitness channel specialty and gyms and additional retailers as the recovery continues. As with Europe and the United States, we see great opportunity to capitalize on the changes in consumer preferences for better for you offerings and we see tremendous opportunities in the enormous market of Asia. On the marketing front, we continue to innovate, target new and existing consumers where they live, work and play to prioritize meaningful and emotional connections through robust marketing programs that drive live integrated programs, competitive activities even while consumers are at home. Specifically during the quarter, despite COVID-nineteen restrictions, we sponsored over 25 events both in person and virtual, sampled thousands of cans and hands during the quarters at our key markets. We also supported our first responders with thousands of donations to doctors, nurses, police, army, firefighters and also supported the California fires. In addition, we started our lift fit tour in the Florida market where we reached out and sampled and activated gyms and also created experiential out store activities throughout the quarter and has plans to further expand throughout Q4. In addition, we further leveraged our sweat with Celsius Instagram live workout programs and further leveraged our brand ambassadors and influencers where we connected meaningfully with more consumers. In addition, we continue to partner with our core retailers and most recently we partnered in a college program where we have distributed over 100,000 on the go sticks to college students through the Walmart back to school college program. Our brand is resonating with an expanded consumer base, distribution platform and retail locations with the tailwinds and overall increased focus on health and wellness and specifically in the energy category where functional energy is recognized throughout the industry as the driver of future growth and shelf space with retailers. We remain focused on driving profitable growth in an industry that is rapidly changing. We're growing exponentially and adapting quickly, outpacing our competitors and grabbing market share. The momentum we are creating reinforces our confidence in the long term growth and profitable aspects of our business and we believe we are just getting started. Heading into the Q4 of 2020, we remain excited and are seeing sales orders through October in the United States exceed over a 50% growth rate versus the prior year. I will now turn the call over to Edwin Negron Cabala, our Chief Financial Officer for his prepared remarks. Edwin? Thank you, John. Starting with our Q3 results for the 3 months ended September 30, 2020, revenue was $36,800,000 a substantial increase of $16,400,000 or 80.4 percent from $20,400,000 for the same quarter of 2019. The revenue increase of 80.4% was attributable to continued strong growth of 60.4% in North American revenues, reflecting double digit growth from existing accounts, new distribution and expanded presence in major retailers. European revenue for the 3 months ended September 30, 2020 was $9,500,000 which translates to a robust increase of 182.3 percent from 2019 quarter revenue of $3,400,000 The 2020 figures now reflect the full financial impact of the consolidation of Funk Food Group, our European distribution partner whom we acquired in October 2019. Asia revenues, which basically consists of royalty income from our China licensee were essentially $275,000 for the 3 months ended September 30, 2020, an increase of 40.8 percent from $195,000 in the 2019 quarter. Other international markets generated $145,000 of revenue during the Q3 of 2020, an increase of basically $57,000 when compared to $88,000 for the same quarter in the prior year. The total increase in revenues from the 2019 quarter to the 2020 quarter was mainly related to increases in sales volume as opposed to increases in product pricing. For the 3 months ended September 30, 2020, gross profit increased by approximately $8,900,000 or 103 percent to $17,500,000 from $8,600,000 for the same quarter in 2019. Gross profit margins for the 3 months ended September 30, 2020 were a very healthy 46.7 percent, which compared favorably to 42.2% for the same quarter in 2019. The increase in profit margins delivered an incremental $1,900,000 of profitability this quarter. The increase in gross profit is mainly related to increases in sales volume from the 2019 quarter to the 2020 quarter as opposed to increases in product pricing. Sales and marketing expenses for the 3 months ended September 30, 2020 were $8,300,000 an increase of basically $3,300,000 or 68 percent from $4,900,000 in the 2019 quarter. This increase reflects the impact of the full consolidation of the operating results of Fun Foods, thereby resulting in an increase in our marketing investments of 88% or $1,700,000 from the prior year quarter. Similarly, all other sales and marketing expenses give effect to the increases related to the consolidation of Funk Food Group's operations. Specifically, employee costs, which also includes investment in human resources to properly service our markets, increased to $2,300,000 or 71% from the prior year quarter. Moreover, due to increase in business volume from the 2019 quarter to the 2020 quarter, our support to distributors and investment in trade activities as well as our storage and distribution costs increased by $705,000 when compared to the prior year quarter. General and administrative expenses for 3 months ended September 30, 2020 were essentially $4,600,000 an increase of basically $2,400,000 or 108 percent from $2,200,000 for the 3 months ended September 30, 2019. This increase similarly reflects the impact of the consolidation of Funk Foods operations, which were not present in the results for the 2019 quarter. As such, administrative expenses for the 3 months ended September 30, 2020 were $1,300,000 an increase of essentially $866,000 or 182 percent from basically $476,000 for the prior year quarter. Employee costs for the 3 months ended September 30, 2020 reflected an increase of $360,000 or 63 percent, not only attributable to the consolidation of Funk Food Group's operations, but also reflecting additional investment and resources in order to properly support our higher business volume. All other increases for general and administrative expenses from the 2019 quarter to the 2020 quarter were approximately $1,100,000 These increases are mainly related to higher stock option expense of $1,200,000 additional depreciation and amortization of $15,000 which were partially offset by net decreases in all other administrative expenses amounting to $122,000 Total net other income for the 3 months ended September 30, 2020 was basically $45,000 which compares favorably to other expenses of $543,000 for the same period in the prior year. The 2020 quarter results reflect a total favorable impact of approximately $588,000 which includes $155,000 of lower amortization expenses, dollars 143,000 gain related to foreign currency fluctuations, $408,000 gain on the note receivable from China and net other miscellaneous expenses of $63,000 which were partially offset by higher net interest expenses of $55,000 As a result of the above, for the 3 months ended September 30, 2020, net income was $4,800,000 or $0.06 per diluted share compared to net income of $961,000 or diluted earnings of $0.03 per share in the year ago quarter. Adjusted EBITDA was $6,900,000 compared to a loss of $2,600,000 for the Q3 of 2019. We believe this information and comparisons 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 release. Now turning to the year to date results. For the 9 months ended September 30, 2020, revenue was essentially $95,100,000 an increase of $44,100,000 or a significant increase of 86% from $51,000,000 for the same period in 2019. The revenue increase was attributable in large part to continued strong growth of 57% in North American revenues, reflecting double digit growth in both existing accounts and new distribution as well as expanded presence in major retailers. European revenue was $26,800,000 for the 9 months ended September 30, 2020, an increase of 2 51 percent from $7,600,000 in revenue for the 2019 period. The 2020 figures now reflect the full financial impact of the consolidation of Front Foot Group. Asian revenues which basically consist of royalty income from our China licensee were $969,000 for the 9 months ended September 30, 2020, an increase of 38% from $629,000 for the 2019 period. Other international markets generated $309,000 of revenue during the 9 months ended September 30, 2020, an increase of basically $150,000 from $160,000 for the same period in 2019. The total increase in revenue from the 2019 period to 2020 period was mainly related to increases in sales volume as opposed to increases in product pricing. For the 9 months ended September 30, 2020, gross profit increased by approximately $22,300,000 or a robust 105 percent increase to $43,500,000 from $21,200,000 for the same period in 2019. Gross profit margins increased to 45.8% for the 9 months ended September 30, 2020 from 41.6% for the same period in 2019. The increase in gross profit dollars and gross profit margins is mainly related to increases in volume as opposed to increases in product pricing. Sales and marketing expenses for the 9 months ended September 30, 2020 were $23,600,000 an increase of effectively $9,500,000 or 68 percent from $14,100,000 for the same period in 2019. This increase reflects the impact of the consolidation of Funk Food Group following its October 2019 acquisition by the company. As a result, our marketing investments increased by 77% or $4,200,000 from the 2019 period. Similarly, all other sales and marketing expenses reflect the increases related to the consolidation of Funk Food Group's operations. Specifically, employee costs for the 2020 period, which also includes investments in human resources to properly service our markets, increased by $3,600,000 or 88% from the 2019 period. Moreover, due to the increase in business volume, our support to distributors, investment in trade activities as well as storage and distribution costs increased by $1,700,000 from the 2019 period to the 2020 period. General and administrative expenses for the 9 months ended September 30, 2020 were essentially $12,500,000 an increase of $5,300,000 or 72% from $7,200,000 for the 9 months ended September 30, 2019. This increase similarly reflects the impact of the consolidation of Home Foods operations, which were not present in the results for the 2019 period. As such, administrative expenses reflected an increase of $2,600,000 which included an increase of $221,000 in our bad debt reserve to cover potential collectability risks associated with the COVID-nineteen pandemic. Employee costs for the 9 months ended September 30, 2020 reflect an increase of $1,100,000 or 59 percent not only attributable to Funk Foods operations, but also related to additional investments in resources in order to properly support our higher business volume. All other increases for general and administrative expenses from the 2019 period to the 2020 period were $1,400,000 These increases mostly resulted from higher stock option expense of $1,300,000 higher depreciation and amortization of $34,000 and net increases in all other administrative expenses of $59,000 Total net other expenses for the 9 months ended September 30, 2020 were $590,000 which reflect a variance of $11,900,000 when compared to total net other income of $11,300,000 for the same period in the prior year. The variance of $11,900,000 is mainly related to the recognition of a gain of $12,100,000 pertaining to a note receivable from our Chinese licensee. The note receivable is part of an agreement executed with our China distributor related to the restructuring of our business relationship to a royalty based model, which requires the repayment over a 5 year period of the investment the company made in China during the 2017 2018 years. As a result of the above, for the 9 months ended September 30, 2020, the company had net income of $6,900,000 or $0.09 per diluted share. In comparison, for the 9 months ended September 30, 2019, there was net income of $11,100,000 or $0.20 per diluted share. The net income for the 2019 period included a non recurring gain of $20,100,000 related to the note receivable from our China licensee. Adjusted EBITDA for the 1st 9 months of 2020 was $12,200,000 compared to a loss of $3,400,000 for 2019. We believe this information and comparisons 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 release. As of September 30, 2020 and December 31, 2019, the company had cash of approximately $52,200,000 $23,100,000 respectively and working capital of approximately $62,200,000 $24,800,000 respectively. Cash provided by operations during the 9 months ended September 30, 2020 was approximately $3,800,000 compared to cash used in operations of essentially $966,000 for the 9 month period ended September 30, 2019. Finally, subsequent to the end of the 3rd quarter on October 30, 2020, the company paid off the bonds payable related to the acquisition of Funk Foods in the amount of approximately $10,000,000 and is now debt free. That concludes our prepared remarks. Operator, you may now open the call for questions. Thank you. Thanks. Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer Our first question comes from the line of Jeff Van Sinderen with B. Riley and Company. Please proceed with your question. Hi, good morning, everyone. First, let me say congratulations on the strong Q3 metrics. Terrific to see. John, maybe you can just touch on I know you've ramped the DSD network quite a bit. I think you said you're at 147. But maybe you could just speak to which regions you feel are best covered at this point, maybe where you still need to fill in or add DSD partners? And then what does kind of the optimization of your DSD network look like at the next phase based on recent business trends? And kind of maybe just review the time frame of getting to that optimization. Yes. No, thank you, Jeff. Really appreciate it. The team did a great outstanding job during the quarter during these unprecedented times. So really excited about the results and the momentum where we're at. But you're absolutely right. As we stated on the call, we're at right around 147 DSD partners today. We have about 75% of the major metropolitan markets covered. So that allows us to really activate our retailers. So our team, our key accounts team is in the process really working with our retail partners and getting plans in place to transition from a direct model to the DSD model where we just see great lift, really gets us much better placement, better activation, better in store execution and so forth. And that's really what we've been saying. That's what we've been seeing as we flip over Target and CBS, 711 in New York and went out in Rouss in California as well. So lots of momentum there. When you look at the areas where we're still working on and need coverage, the team is working very closely with a variety of potential customers, is the Mid Atlantic States, Northern Cal, California, we've been working on. And also there's pockets in the middle of the country, as well as certain pockets in Texas that we're working on. So but we do have 75% of the nature of metropolitan markets covered. We can cover a good portion and a good footprint of our existing distribution. So really just in the process working with our retailers, we've talked about Walmart before 50% are currently covered by DSD. We're hoping that will change in the really in Q1 of 2021 as we continue to work with those retail partners and flip over these key accounts. So we think we're in great position. We're in great standing, better position than we ever have been on our retail distribution footprint. I'm just really excited. We're seeing these distributors continually reorder products, working with us. We have some great team members, field sales team members that are working on activating these distributors. So we think we're in a really great position as we exit 2020 and head into 2021. Okay, great. And then kind of a multipart question here. Can you speak on how the process of converting target to DSD has been going? Maybe what sort of lift you're experiencing lately when you convert to DSD overall? I think you said something along the lines of 50%. And then I think you also mentioned Walmart flipping to DSD in the Q1 of next year. Maybe you can just elaborate a little bit on that. And then just curious, any more thoughts you have on the fee storage channel and how business is going with Speedway? Okay. Excellent. Target, we mentioned, book press release is out. We have been working on flipping over 1200 stores. There's a whole process that gets involved there to even get to that point. So it's making sure you're covering all the stores within a given DNA, making sure that your vendor numbers have to be loaded. There's a lot of back office work that has to be done, not only on the Celsius side, but also on the retailer side. And once that's all completed, then that needs to be communicated to our distributor partners, activated at retail. We do provide support with our field sales team as well, making sure these shelves get set. I've been working on it over the last 2 months, really September October, getting those 1200 Target stores set. There is additional Target opportunities to flip, as I mentioned, as we head into 2021. In regards to Walmart, we are in about 50% of those Walmarts are currently serviced by DSD. Due to COVID and a lot of challenges as we know with these retailers with a lot of back office roles and responsibilities and physicians working from home has taken a little bit longer. So, we anticipate Walmart will get together with them and we'll continue to work on moving them over to DSD, which is the preferred method. And we anticipate that to happen sometime in Q1, early 2021. As it relates to convenience, convenience we're up to a 16% ACV, outpacing the category growth. Obviously, we're into getting into the pick of buyer season. So, really account calls for 2021, it has been extremely positive as we where we sit today and looking into 2021. We're getting a lot of excitement as we did last year at MAX. As we presented there, we did have a booth there. We got a lot of excitement. We're anticipating a lot of resets in 2020, which have been delayed. But we anticipate those to come around. We're expecting more accounts coming on board in the convenience channel in that March, April timeframe in 2021. And we'll have more announcements over the next coming quarters about expansion in existing accounts as well as new distribution coming on board within that convenience channel. As you look at Speedway, it's we're currently in the process of the first really the first phase of the relaunch. Initial feedback has been positive on the in the 2,700 stores we're in. So initial feedback has been positive. We'll continue to monitor, but I don't have anything else to really report on at this time in regards to Speedway, but things seem to be going well. Our next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Please proceed with your question. Hi, John, Edlin and Cameron. How are you? Excellent. How are you doing today, Jeff? Very well. Thank you. Just fine. So a few random questions and one more of a macro question. So could you talk about the on the go sticks, it's now up to 6 SKUs. Is that yet become a material portion of the overall business that was in North America? Yes. The On the Go 6 is a great offering for us because that expands our usage occasion. So we see a lot of we're seeing a lot of momentum with individuals making it part of their smoothie combinations, also taking it on their travel, their travels down. We've seen a lot of offers a lot more portability. And we are seeing and we expect it to be a meaningful part of our business. Obviously, the RTDs will drive the bulk of our revenues, but we do see this additional opportunity with the Omegostix. They're doing well at Publix. We just expanded into Walmart with them. With Vitamin Shoppe, we've done really well over the years in online. And HEB has had them for some time as well as Harris Teeter. So we do get a lot of excitement, a lot of interest on them. We do have some new flavors planned for 2021. And as it will be a meaningful part of our business, it is a piece of our business, and we expect it to deliver revenue and gross profits as we continue to scale, and the team does put priority on it as well. But our main focus is the RTDs. Got it. You did mention a couple of new services. Strawberry Marshmallow and Blueberry Frost. Can you tell us what the timing is on that? And is it that's the traditional line or the heat line? And where we might expect that to pop up? Yes. It's in the market now in the Nordics. Great tasting, strawberry marshmallow and the Frost is great tasting. The Blueberry Frost is a limited edition that we just launched at the end of the Q3. So locally here in the U. S, it's we don't have that slotted to arrive, but it is in the Nordics. If you're traveling over to Sweden, Finland or Norway, you will be able to find that. Okay. Got it. And then next, can you talk about now that Funk is closed. Can you talk a little bit about the vitamin channel and if you're seeing any disruptions with the GSE situation? Jeff, can you repeat the question? Sorry. Yes. Can you talk a little bit about the vitamin channel specific to this quarter next quarter? Yes. I mean, the vitamin channel has been a challenge, especially supplement channel and then the gin business. We started to see great openings in Florida. We didn't start to see reopenings in Texas markets. Out in California, we're actually the workouts are outside. We have some outdoor activation to support those local partners. It's very key to our core. We're there to support the fitness channel. In regards to the Vitamin Specialty, I mean, the channel has been has struggled. We've talked about it was down 23% in the quarter. We anticipate it to come back. We feel health and wellness trends are here to stay. We don't see that going away anytime soon. It's more important now than ever before to stay healthy, stay fit, stay active. So we feel the sports nutrition space is going to continue to grow. It's a great way for a consumer to be learning about Celsius for the first time in that channel as well and to bring a lifelong Celsius consumer on board. Okay. And then lastly for me, if you could talk about the situation with the cans. As I understand that you have had 4 or 5 facilities. Is the limiting factor the capacity of the current facilities? Or is the limiting factor the raw materials and the availability of the can manufacturer? Yes. We've spoken about the cans. We were notified late in October about availability as we head into 2021. There is a massive can, the physical actual body of the can shortage for 20 21. It's anticipated in 2021, the industry in the North America is short about 30,000,000,000 cans. So lots of shortfalls and that really has to do with the capacity of the manufacturing of the physical can, not the filling of the can. When we talk about filling stations, that's the 5 filling stations or co packers we've been working with. We have capabilities to produce the cans, but we to fill the cans and to finish goods, the challenge we have as we head into 2021 is the physical can body. So that's where the big shortfall is. All the can manufacturers, the larger can manufacturers are all running over capacity and turning brands away, unfortunately. So as I stated earlier on the opening remarks of the call, we do have contingency plans in place for that. Being a global company is an advantage to us. We were immediately able to start sourcing cans out of Asia, out of Europe as well, and immediately put our teams on that task to secure cans to sustain our growth and continue to outpace the category. So we will have sufficient ample supply as we head into as we head through 2021. But it is an industry wide issue everyone's going to be dealing with, which also can be an opportunity for brands that have cans. Got it. Okay, that does it for me. Thanks for taking the questions. Excellent. Thank you, Jeff. Our next question comes from the line of David Bain with Roth Capital. Also my congratulations on results and thanks for all the data points. You covered a lot. So I'll limit mine to 2. Just given the cash on the balance sheet, cash flow generation now, I mean, does this change your outlook either on potential M and A activity or brand extensions? And I mean, looking at the SKU average for your industry leader, you start to add RAIN, Body Fuel, Ultra Paradise, Dragon Tea, whatever. It's got to be 3, 4, 5 times yours in the same locations. So is that an opportunity potentially next year? Or am I thinking about that the right way? Thank you, Dave, for the question. There's a ton of opportunity out there for us, no question about it. The keyword at Celsius is focused execution. We did finish the quarter with $52,000,000 in cash, of which right around $42,000,000 if you back out the $10,000,000 paying off that debt, which we are debt free. So that's been paid off. So we do have sufficient cash. We are generating cash flow positive. We will be investing in inventories to sustain growth. So we have funds earmarked for inventory investment. We also have some positive ROI targeted investments we'll be implementing into 2021 with cooler placements. If you're out in California, I know, Dave, you're out there, if you stop into some routes, we're getting great placement with some really good cooler assets and the rotation in the ROI is extremely positive. So we'll be looking to invest in that area into 2021. Opportunities arise every day. We're willing to evaluate them. And if we find an opportunity that's accretive to our shareholders, accretive in revenue and gross profits, we'll look at it. But as a strategy right now is to continue to stay focused, drive profitable growth and drive Celsius into a major player in the energy category and take share. Fantastic. Okay. And then my follow-up would be, is if it's possible to kind of help us bifurcate 3Q North American revenue growth into buckets like same store sale, organic growth, SKU growth, door growth or any way we can kind of look at what the main pillars of the 3rd quarter growth were? I mean, if you look at the growth in North America, like we stated on the call, I mean, on a year to date basis, you're up we're at a 57% growth rate. Edwin talked about a lot of the new distribution coming on. We did talk about the store count increase there that we saw. So it's an interesting year, as we all know, in 2020. So it's consumer shifting their purchasing patterns and now they're going back. There's a lot of dynamics taking place. So I don't really want to state anything. We haven't provided guidance. There is momentum behind the company. I did say we had a 50% growth in North America orders in house as of the end of October. So that shows some underlying momentum there. But I would not going to provide any forward guidance at this time. No problem. Just go ahead or you're going to follow-up. No, no. I mean the underlying, if you look at it, the SPINS data, scans data, as I said, about a 60% growth rate, and that was the latest Nielsen data. In the convenience channel, we're at a 43% growth rate. We have gained some new distribution as well. So I think organically, we've seen, and we stated this publicly, about a 30% growth rate in same store sales, and the other growth is coming from new distribution. Our next question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question. Thanks. Good morning, Edwin. Good morning, John. How are you doing? Good morning. Good morning. Excellent. So just on because there's a lot of talk about the can shortage across the industry, not just obviously what you're dealing with, but it's just it's obviously a big issue. And it's excellent that you're able to source this outside. You said it's going to impact margins a little bit. Is it going to start to impact margins right now? Do you need to start sourcing from Europe and Asia now? Or is that a 2021 issue? Yes, it's an industry wide issue. We anticipate sourcing in Q4. So that will start in Q4. Okay. But in terms of being able to get the cans that you need based on the fact that you seem like you're ahead of this curve, you don't see it being an issue in terms of being able to meet the forecast you have for the demand, correct? Yes, correct. We already have purchase orders in place. We've already or far along on the processing order procurement process to have sufficient cans as we head into 2021. Okay, great. And then as we as you mentioned on Amazon, you're the 3rd after Monster and Red Bull. Just in terms of the corporate gross margin, Is that in line or is it a little bit lower margin when you go on Amazon? And just remind me, John, what or Edwin, what's the percent of revenue that comes from e commerce or Amazon at this point? Yes. I'll just Anthony, it's roughly around 22% of our revenue for the Q3, North America. So if you're looking at the segment there. In regards to gross profit margins, we don't disclose particular accounts, but overall margins were very good for the quarter. And like we said, going forward, due to the can importing of cans, we're looking at the low 40s on a go forward basis as we go through 2021. Okay, great. And on the DSD network, Anheuser Busch, big guys are those are the big ones, but you have DSD agreements with PepsiCo, Keurig Doctor. Pepper and Millicore's network. Are there any others and I know you said that right now your DSD network you believe can cover 75% of your major metropolitan areas. Are there other DSD partners that you believe you need to increase debt penetration or at some point maybe 75%, 80% is about as far as you can go in terms of DSD coverage? Great question. And keep in mind, the Pepsi and Anheuser Busch and Keurig Doctor Pepper, we're dealing with the independents. So they're not corporate owned. So this is independents. Bulk of our distribution is with Anheuser Busch independent wholesalers. A lot of brands can't even get to 75% major metropolitan coverage. So it is a great achievement where we're at today, but we are looking for full coverage and we'll continue to drive that through. We will they were talking to a variety of additional distributors to help fill some of those buoys, mainly in the Mid Atlantic, Northern Cal, Texas, certain parts of Texas. And then there's certain regions within the middle of the country that we are looking for additional coverage on. But I think we're in a really good position right now with 75% major metropolitan is covered. It's the opportunity to activate these distributors. We just picked up thousands of new potential sales reps that can be out there helping build the brand for Celsius. And we're looking to partner with them in a big way in 2021. And we've never been in a better position to have the opportunity we have at hand. Okay, great. And then just lastly, a few years ago, you came out with the Heat line, which was it's a a different packaging, different product, more caffeine than your standard Celsius line. Is there any other lines that you're looking at launching in 2021 or is it more going to be just an extension of what you have and additional flavors? Yes. We have a great cross functional innovation team. We have a lot of innovation planned for 2021 and beyond, some great line extensions, innovative flavors coming to market. And one opportunity we've had, which we've talked about with the Funk Food acquisition is leveraging that FAST brand portfolio. So we're looking to partner with them. We've been partnering and bringing that FAST protein snack portfolio to North America in Q1, starting to test it and seed it. And but there's a lot of opportunities in that category. We do see massive opportunities in the RTD category, and that's where we're mainly focused. But look for some great tasting flavor innovation, some line extensions as we head into and through 2021 and beyond. All right. Great quarter, guys. Thanks. Appreciate it. Thank you. Excellent. Thank you. There are no further questions in the queue. I'd like to hand the call back to John Feeley for closing remarks. Thank you, Doug. Thank you, everyone. On behalf of the company, I'd like to thank everyone for their continued interest and support. Our results demonstrates the products are gaining considerable momentum. We're capitalizing on today's global health and wellness trends and the changes taking place in the transformation of today's energy drink category. Our active healthy lifestyle position is a global position with mass appeal. We're building upon our core and leveraging opportunities and deploying best practices. We have a winning portfolio, strategy and team in a rapidly growing market that consumers want. Our mission is to get Celsius to more consumers profitably. I'm very proud of our dedicated team as without them our tremendous achievements and significant opportunities we see ahead would not be possible. In addition, I thank our investors for their continued support and confidence in our team. And I thank everyone for their 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.