Earnings Call: Q4 2019

Mar 12, 2020

Greetings. Welcome to CELSIUS Holding, Inc. 4th Quarter and Full Year 2019 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Cameron Donahue with Hayden IR. Thank you. You may begin. Thank you, and good morning, everyone. We appreciate you joining us today for Celsius Holdings' 4th quarter and full year 2019 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 filed its Form 10 ks with the SEC initiative press release 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, which are based on forecasts, expectations and other information available to management as of today, March 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, Southeast Holdings undertakes no obligation to disclaim any duty to update any of these forward looking statements. We encourage you to review in full our Safe Harbor disclosures contained in today's press release and our 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. 2019 was another outstanding year for Celsius as we further expanded our distribution network, adding new relationships with channel partners and expanded its existing accounts, extended our portfolio of products through our commitment to innovation, gained greater brand recognition and visibility and restructured our business model in China. Each of these initiatives are in support of our relentless commitment to building a solid that positions Celsius as a global beverage leader and supports long term growth and increasing returns for our shareholders. The macro trends across the industry continue to accelerate as more consumers seek healthier alternatives, less sugar, functional beverages versus conventional beverages. In the energy drink category, one of the fastest growing in the beverage category, it grew approximately 8% in North America through 2019 and is anticipated by Euromonitor to be an $85,000,000,000 category globally by 2025. In sync with each increasing demand, we are now reaching more consumers at more distribution ports than ever before. We set a new sales record in 2019 with over $75,000,000 in revenue, an increase of 43% over last year and our North America revenues grew 53% to approximately $60,000,000 in revenue. This growth was driven by higher volumes and higher retail velocity rates across all channels of trade. Throughout 2019, we set new quarterly records in top line revenue and our financial performance and finished the year with 4 quarters of sequential quarter over quarter growth with the Q4 of 2019 topping $24,000,000 in revenue. We are truly gaining considerable momentum. The energy bank market remains robust and we are well positioned to continue to gain share. Back on September 27, 2019, beverage industry analyst Bonnie Herzog of Wells Fargo at the time now at Goldman Sachs commented and The fitness performance energy subcategory is now going mainstream, suggesting there's even more potential disruption across the category than we previously expected. Anoff mentioned there's still a long runway of growth across broader energy as new consumers enter the category. She is absolutely right. We see a massive opportunity with seismic shifts taking place in the energy category for functional better for you offerings and with our proven functional health and wellness fitness position, we are gaining broad mass appeal. We have never been more optimistic about our future. Focusing in on our geographies, as I mentioned in North America, revenues increased 53% to $60,000,000 annually with growth derived from all channels of trade including health and wellness, retail, vending and online. And in Europe, European revenues increased 56% year over year as a result of strong new flavor launches, optimized in store execution and 2 full months of fully consolidated revenues post the acquisition of Funk Food Group in November December. And as expected, our revenue in Asia was down year over year due to the strategic shift in our business model in China to a royalty licensing model, which began in the beginning of 2019. Through an agreement with our long standing partner Qifeng Food Technology, we established an operating model that leverages the experienced team and established infrastructure and mitigates our risks. We have eliminated the need for future capital injections by Celsius in China and created a vehicle where we recapture our previous invested investment through a fixed repayments. Asia remains an important piece of our growth strategy and we believe the structure will accelerate our ability to capture market share in this rapidly growing China market. Shifting our approach positions us to receive nearly $7,000,000 in initial minimum royalty fees and allows us to recoup more than $12,000,000 of previously invested capital over the initial 5 years of the contract. This structure will be incremental to our cash flows throughout and financial results throughout 2020. From a strategic standpoint, we completed an acquisition of Funk Food Group, a Nordic wellness company. The acquisition which was immediate accretive provides significant opportunity. We first began a relationship with Funk Food Group in 2016 when they acquired our former distributor and assumed distribution of Celsius in the Nordics. This acquisition was an important step in strategy to build a global dominant brand as it further solidifies our position in one of the best selling fitness drinks in Sweden with an approximate 10% market share and opens a new distribution platform for the rest of Europe. Through this transaction, we gained an additional revenue stream with entirely new yet complementary product offering, Funk Foods' innovative fast sports nutrition line and a number of operational synergies that we have already begun to capture. On the North America distribution front, we remain focused on building our national distribution network, which now includes more than 100 regional direct store delivery partners, which is a 100% increase from July 2019, many of which are premier beverage distributors such as Anheuser Busch InBev, Molson Miller Coors, Kirk Doctor Pepper and Pepsi Independent Distributors. We expanded our availability to more than 65,000 locations across the United States, an increase in our store count by over 60 compared to the beginning of 2019. Through these relationships, we not only expanded availability, but it's also been a catalyst to increase our retail sales velocity, reducing our out of stock situations and improving inventory management at point of sale. We are making great progress and plan to have majority coverage in many metropolitan markets across the United States by summer, which will reinforce our platform from continued growth. In the first half of twenty nineteen, we signed a distribution agreement with Big Geyser, New York's largest independent non alcoholic distributor serving the 5 boroughs of New York City and the counties of Nassau, Suffolk, Westchester and Putnam. Big Geyser serves more than 20,000 locations in the massive New York City metropolitan market. And beginning in the 3rd quarter, we successfully transitioned 711 and Target locations over to our preferred distribution partner in the territory, significantly increasing our distribution in the New York City market. As we continue to build out our direct store delivery network, we'll continue to transition additional CAT II accounts over as we did with Big Geyser, which we believe will further increase our in store presence and velocity rates at retail where we are already seeing a 40% list of sales in existing accounts through this model. In addition, we have added a number of marquee accounts in North American network in 2019, including just to name a few, QuikTrip, Stop and Shop and expanding in many of our existing accounts, including CVS, Rite Aid, Target, 711, Dick's Sporting Goods, Kroger, Gold's Gym, 24 Hour Anytime Fitness and many, many others. More recently, we signed a national authorization agreement with Foodbuy, a business unit at Compass Group North America. Foodbuy is the largest foodservice, procurement and supply chain solution organization in North America with over 85,000 unique customer locations. Our beverages are now available nationwide across all Compass divisions in North America business units. This new channel adds incremental market opportunities for us which will include hospitals, airports, college campuses, restaurants and casinos among others. And this momentum will continue throughout 2020 with the most recent announcement, new retail partner Walmart, where we have implantogram into over 1500 locations in the beverage set throughout North America and see significant opportunity. In the grocery and mass market channel, a highlight was the expansion with Kroger, the largest grocery store chain in the United States with more than 1100 locations nationwide under that banner. Our first placements with Kroger were in the Q2 of 2019 and the product is now available across all of its stores, including both the beverage aisles and sports nutrition sets. With the expansion, Celsius is now available in more than 7,000 grocery stores nationwide. Spinz based brand performance in the grocery Moo Moo channel over the past 52 weeks through December 29, 2019 demonstrates tremendous momentum in this channel with a growth rate of over 110% in the past year. We are well positioned to drive further growth and maximize our distribution and retail partners driving increased velocity rates and availability throughout 2020. In the convenience channel in 2019, we launched placements with QuikTrip, an $11,000,000,000 enterprise with more than 800 stores in 11 states and expanded with other convenience chains including Circle K, Meyers Convenience, Flying J, Pilot, further expansion at 711, Racetrack and others. Our network of convenience stores continues to grow and will continue to grow throughout 2020 as we continue to gain interest for more convenience retail partners. We anticipate that more convenience retailers will be allocating more placements to Celsius in 2020 based on changes in consumer preferences and the momentum we are gaining in existing accounts in this channel. We see a massive opportunity in the convenience channel. In this channel, the most recent SPINS data for the prior 52 weeks ending December 29, 2019 show Celsius is growing faster than the category at a 44.5% growth rate versus the prior year with an ACV or all accumulated volume of 12.2%. This indicates we have a long runway ahead. In the vending channel and micro markets, we are now available to more than 600 vending and micro market operators covering more than 10,000 micro markets and thousands of healthy vending units throughout the United States. Through 2019, we saw an increase in the strong growth in the channel fueled by strong purchases by both Canteen and Compass Group. We see continued growth opportunities in this channel as we gain further placements at in at work locations, restaurants, hotels, hospitalities, as well as colleges and universities. Most recently, we gained placements through OTG and are now available in retail locations in 9 major airports in the United States, including JFK in Newark and New York as well as others. This channel continues to represent a large opportunity for energy drink sales in the country and we plan to capture a significant portion of this opportunity. On the portfolio innovation front, continuous innovation has been a cornerstone of our business from the beginning, which is driven by our cross functional teams. And in 2019, we exhibited our industry leadership with the launch of innovative flavors, which are trend forward and aligned with today's health minded consumer. Each of our trend forward innovative flavor launches have been extremely well received, affirming our connection to consumers, taste and preferences. Subsequent to year end, we unveiled our latest addition, refreshing exotic Jackfruit, the latest flavor which is available in our new Celsius heat packaging, a tropical taste with a burst of sweetness and a tangent twist. Further expanding our product portfolio, we also celebrated a successful launch of a new innovative line of beverages, our branched chain amino acid BCAA functional beverages that fuels muscle recovery. The line was initially launched in the fitness channel as a response to demand within the fitness community for healthy energy offerings that support work post workout. In addition, it further expands our usage occasions. Our BCA products are a strong complement to our existing lineup of fitness beverages. Our innovations team is diligently working on new offerings with a focus on new verticals and adjacent categories to increase the breadth of our portfolio, all while leveraging our delicious innovation flavors combinations, further building upon the premium great tasting functional portfolio. In addition, we expanded in addition to expanding distribution and the introduction of new products, we've stepped up our efforts to increase brand awareness in 2019, further building upon our brand equity and driving our premium position in the energy category. We've created meaningful and emotional connections with consumers online and offline. One of our integrated programs included the launch of our 1st national guerilla marketing tour, our LiveFit tour featuring various integrated fitness activities including outdoor classes hosted by popular local instructors and ambassadors from several nationwide fitness chains as well as competitive activities. We made our way across the United States with stocks in key cities. As a result of these efforts, we reached tens of thousands of new consumers in high energy settings, most conducted to the consumption of our products in a cost effective way. In addition, we connected with consumers where they live, work and play through a variety of programs where we expanded our community and created meaningful connections. In 2020, we will continue to drive our awareness through meaningful and emotional connections with consumers and continue to leverage today's trends to build upon our global iconic CELSIUS brand. Our strategy remains consistent, striving for consistent continuous value creation with continual focus on strengthening our core, building our communities and expanding our distribution networks through high quality partnerships, further optimizing existing accounts and leveraging our infrastructure to drive continued growth and improved profitability. It is an exciting time in our industry as seismic shifts are taking place in food and beverage continued momentum with our portfolio to capitalize on these trends to drive a premium leadership position with our Celsius portfolio. I look forward to discussing our progress throughout 2020. I will now turn the call over to Edwin Negron Cabala, our Chief Financial Officer for his prepared remarks. Edwin? Thank you, John. For the 3 months ended December 31, 2019, revenue was a record high $24,100,000 an increase of $9,400,000 or 64% compared to $14,700,000 for the same period last year. The overall increase in revenues was basically due to increases in sales volumes as opposed to increases in product pricing. Breaking the 64% increase down by geography, in North America, continued strong growth drove an increase of $6,100,000 to a record $17,100,000 mainly related to double digit growth in both existing accounts and distribution expansion. The European markets also increased by $4,700,000 compared to the Q4 of 2018. The Asian markets reflect the change in our China business model to a royalty and license fee arrangement effective January 1, 2019. Asian revenue amounted to 212 $1,000 compared to $1,600,000 in the year ago period. However, in Asia, there was also a corresponding decrease in expenses, which significantly contributed to improving our profitability in the Q4 of 2019. Revenue from all other areas was 32,000 The total increase in revenues pertains to additional sales volume as opposed to increases in product pricing. Gross profit increased by $4,600,000 or 85 percent to $10,100,000 from $5,400,000 for the same quarter in 2018. Gross profit margin for the 3 months ended December 31, 2019 was 41.9%, which compares favorably to 37.1% for the 2018 quarter. The increase in gross profit dollars is mainly related to increases in sales volume as opposed to increases in product pricing. Selling and marketing expenses for the 3 months ended December 31, 2019 were $7,000,000 an increase of $4,200,000 or 152 percent from $2,800,000 in the same quarter in 2018. The increase is mainly due to higher marketing investments of $1,600,000 as the prior year amount reflected a reduction of $900,000 related to the settlement of marketing charges with our China distributor for 2019. This quarter reflects increases of $1,300,000 related to sales and marketing employee investments and $1,300,000 of incremental charges pertaining to trade, marketing activities and distribution costs. As these results now include the impact of the European business integration as of the date of the acquisition on October 25, 2019. General and administrative expenses for the 3 months ended December 31, 2019 were $4,400,000 an increase of $1,300,000 or 43 percent from $3,100,000 for the 3 months ended December 31, 2018. The increase was primarily due to acquisition costs amounting to $434,000 Additionally, stock option expense increased by $287,000 when compared to the same period last year. Employee costs increased by $196,000 and depreciation and amortization also increased $110,000 as well as all other administrative costs, which reflected an increase of $287,000 since they now reflect the European expenses incurred in these areas as of the date of the acquisition. Below the operating profit line, total other income amounted to $150,000 for the 3 months ended December 31, 2019, which represents a fluctuation of $593,000 from other expenses incurred in the amount of $443,000 for same period in 2018. The variance is mainly the result of the gain in the note receivable from China of $410,000 which is denominated in the Chinese currency. Additionally, there were lower financial amortization costs of $273,000 which were partially offset by higher net interest expense of $60,000 and an increase in other miscellaneous expenses of $30,000 As a result of the above, for the 3 months ended December 31, 2019, the company had a net loss available to common stockholders of $1,100,000 or $0.02 per basic and diluted shares compared to a net loss of $893,000 or $0.02 per basic and diluted shares in the year ago period. Adjusted EBITDA excluding the net Asia investment for the Q4 of 2019 was $607,000 compared to $136,000 in the Q4 of 2018. 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 have been included in our earnings release. Now turning to our full year results. For the year ended December 31, 2019, revenue was approximately $75,100,000 a robust increase of $22,500,000 or 43 percent from $52,600,000 for the year ended December 31, 2018. This significant revenue growth was mainly associated with the results of the North American region, which delivered an increase of $20,800,000 over last year or an increase of 53%. The European region provided $14,500,000 of revenue, an increase of $5,200,000 or 56%. Asian revenues for 2019 reflect the change in our China business model to a royalty and license fee arrangement effective January 1, 2019. Asia revenue decreased to $841,000 in 20.19 compared to $4,300,000 in 2018 as a result of this change. Revenues from all other regions amounted to $191,000 which was aligned with prior year results. The total increase in revenues from the 2018 period to the 2019 period was basically attributable to an increase in sales volumes as opposed to increases in product pricing. Gross profit increased by $10,200,000 or 49 percent to $31,300,000 from $21,100,000 for the year ended December 31, 2019. Gross profit margins totaled 42% 40% in the years ended December 31, 2019 December 31, 2018 respectively. This increase in gross margin profitability is mainly related to reductions in product repackaging costs, freight costs and the favorable impact of the consolidation of the European business. The increase in gross profit margins contributed an incremental profitability of $1,200,000 for the 2019 year. Sales and marketing expenses for the year ended December 31, 2019 were $21,100,000 a decrease of basically $100,000 or 0.5 percent from $21,200,000 for the year ended December 31, 2018. This apparent decrease is mainly due to the change in our China business model to a royalty and licensing framework effective January 1, 2019, which no longer requires direct marketing investments by Celsius. Excluding this impact, which amounted to a 7.2 $1,000,000 reduction for 2019, our investment in marketing activities actually increased by $1,300,000 or 20% when compared to the same period in 2018. These figures now include the marketing investments that are performed in our European business as of October 25, 2019. Additionally, our support to distributors and investment in trade activities were $2,300,000 higher for the 12 months ended December 31, 2019 than for the same period last year. Furthermore, investments related to sales and marketing personnel, which now include the European business as of the date of the acquisition were $1,700,000 higher for 2019 than for the same period last year. Also, broker commissions and storage and distribution costs were $1,800,000 higher during the 12 months ended December 31, 2019, than for the same period last year due to increases in our business volume and the integration of our European operations as of the date of the acquisition. General and administrative expenses for the year ended December 31, 2019 were approximately $11,600,000 an increase of $1,100,000 or 11% from $10,500,000 for the year ended December 31, 2018. The increase was mainly due to higher stock based compensation of $540,000 $580,000 related to acquisition costs. Additionally, there were incremental expenses of $452,000 pertaining to employee costs, dollars 250,000 pertaining to higher professional services, $150,000 of depreciation and amortization and $130,000 pertaining to other administrative costs as these expenses also include the impact of the European business integration as of the date of the acquisition. Below the operating line, total other income increased by $11,900,000 for the year ended December 31, 2019 to $11,400,000 from a loss of $565,000 for the year ended December 31, 2018, mainly as a result of the recognition of the gain pertaining to the agreement executed with our China distributor as part of the change in the business model, which includes a reimbursement of the investment made by the company in the China market during the 2017 2018 years. This has been recorded as a corresponding note receivable from our China distributor on the balance sheet, which is payable over a 5 year period. The net result for the full year 2019 was net income to common shareholders of approximately $10,000,000 or $0.16 per basic and diluted shares compared to a net loss of $11,400,000 or $0.23 per basic and diluted shares for 2018. Adjusted EBITDA excluding the net Asia investment for the full year 2019 was $4,000,000 which compares to $2,200,000 in 2018. Again, a reconciliation of our GAAP results to these non GAAP figures has been included in our earnings release. As of December 31, 2019, the company had cash of $23,100,000 compared to $7,700,000 as of December 31, 2018. The company also had working capital of $24,800,000 as of December 31, 2019 compared to $19,600,000 as of December 31, 2018. Cash provided by operations during the year ended December 31, 2019 totaled approximately $1,000,000 reflecting the net adjusted economic profitability from operations of $3,700,000 and an increase in accounts payable of $2,600,000 which was partially offset by increases in accounts receivables, inventories, prepaid expenses as well as decreases in other liabilities for a total use of cash in these areas $5,300,000 That concludes our prepared remarks. Operator, you may now open the call for questions. Thank you. Thank you. At this time, we will be conducting a question and answer session. Our first question is from Jeffrey Cohen with Ladenburg Thalmann. Please proceed. Hi, John and Edwin. How are you? Excellent. Good morning, Jeff. Good morning. Thank you. So I'll keep it just a few questions. Talk about the DSDs a little bit and the velocities as a benefit as far as going to DSDs. You talked about 100 partners. What's left? Do you feel like you're 70% there, 80% there? What's left as far as DSD and channels and getting more efficiency there? Excellent. Thank you, Jeff. On the DSD front, direct store delivery, you're correct. We are, as I stated, we're 100 strong at the moment. As we're reporting, we do have a variety of additional a few dozen additional distributors coming on board and we're in discussions right now with many. Right now at 100, we're probably right around 35% over key markets covered in North America. We do feel we'll have most of the markets covered by summer key markets where we'll be able to start really flipping key accounts over to this preferred method. We started to do it, as I mentioned, in New York City with Big Geyser. 711 is now serviced by Big Geyser. Target is serviced by Big Geyser and CVS will be switched over momentarily. So also, we're in talks with Rite Aid to flip them over as well. So this is going to continue to happen as we get these key DMAs covered. And we already have 3 key markets covered where we're working with the key accounts right now to flip those over by summer. So the velocity rates we're seeing when we flip to a DSD model just to the great just to the better in store execution, signage, making sure we're in stock. We're seeing velocity rates increase from our current existing rate that we're seeing in existing accounts, which is the growth has been roughly around 30% to 35% in existing accounts, we're actually seeing a 40% lift in that as well. So definitely, the velocity rates will continue to increase as we move towards more direct store delivery, key accounts going over to this model. Okay. Got it. Perfect. And then second question, can you talk a little bit about Funk Foods and in particular, the Fastline out of Helsinki Fidling far as the protein bars and some of the other products coming to North America. Do you still expect that in 2020? And when will we see some placements? Yes. The FAST portfolio, which we acquired through the acquisition, we it's a great tasting innovative protein snack portfolio, which is highly complementary to our current Celsius portfolio. We do see opportunities not only further expanding within Sweden and Norway when we already have existing distribution with Celsius, but other markets as well throughout Europe. We are looking to start a very methodical launch of the FAST portfolio in 2020, with initially rolling out with online and starting to seed it in a few retail partners. Once again, we're very focused on the Celsius portfolio with the maximum momentum we have, but we do see the FAST portfolio as a complementary offering. We are going to be very methodical on that We're very cognizant of resources and limited resources as well, as well as the investments required when launching new brands within retail. So, we're very methodical on the approach. We will start to test it in 2020 as a complementary offering, which has a lot of synergistic benefits. Got it. And then lastly for me and I guess for Edwin. You did call out some of the onetimers as far as the G and A line and the S and M line. So could you give us a little more flavor as far as normalization as far as what we see? I know that we had the European business integration, but I'm just trying to get a sense of that sales market you talked about the 21.2% to 21.1% on an annual change. So it's something we should think about increasing toward the 20% range? Or is that more like the 40% range for the upcoming year? And the same for G and A. Thanks. Sure. Yes, very good question. Absolutely, we're still kind of evaluating and gathering our arms around the European business. But to answer your question, yes, we're seeing or we're estimating around an increase of 20% in the OpEx lines. And obviously, it's an under demand as well as it relates to the marketing investment that we'd also have on the European business side. But yes, I would think 20 to 25% would be something reasonable. Perfect. Okay, that does it for me. Thanks for taking the questions. Excellent, Jeff. Thank you. Our next question is from Jeff Van Sinderen with B. Riley FBR. Please proceed. Hi, good morning, everyone. Can you speak more about what drove the addition of Walmart? How the initial rollout will go? And what could the revenue potential be with Walmart? I know it's early, but even at just order of magnitude, you're thinking around that? Yes. Thank you, Jeff. Great question. I mean just as an example, I just want to just I think it's easy I think it's also good to talk about the mass channel, Muuto data as well and kind of did mention that we're seeing over 100% growth in the Muuto channel. And also, I think it's important to also point about what happened and transpired at Target, where we initially launched in Target in late 2018 with 2 flavors and a limited number of stores and continued that evolution for further expansion. Through every reset, we were able to add additional stores as well as additional flavors to now we're chain wide with 5 flavors. So I think you're going to see that same momentum in Walmart. The Walmart, those 1500 stores, half of those stores are currently serviced by key DSD partners in given markets. The other half is going direct through the warehouse until we build out the DMAs, we'll be flipping those over to DSD. Where, the DSD partners really serviced Walmart first before the warehouse clubs, were able to get that through their supply chain going direct to Walmart. But the initial feedback has been extremely positive where we have landed within Walmart. And there's already talks about adding additional flavors at the next reset. So we think Walmart is going to be a massive opportunity. Right now, just like in Target, we're starting off on the dry shelf in the energy set, but there is so much more additional opportunities to further expand and also leverage some of their petro state locations as well through Murphy's Oil and so forth. So we see this as a massive opportunity. It's growing with the account. It's managing your key accounts and leveraging the Celsius portfolio within those with multiple points of disruption and educating consumers were there as well. So I've always talked about raw creatures of habit and it takes time to activate these key accounts. We're in the process of doing it. And on walmart.com, we've been doing extremely well as well. We've been targeting and leveraging a lot of the Walmart pickups, their at home deliveries and really integrating into the account as we do with all of our key accounts. So we see massive opportunities to provide you a specific number. We're not in a position to do that today, but I will say the opportunity is extremely promising, and the initial momentum has been overwhelmingly positive. Okay. Great to hear. And then could you speak more about the drivers of your strong international growth and give us a little more color on how the Funk integration is going and any synergies you're seeing there? Yes. The international growth has really been driven this year really driving from that Nordic revenue with our now acquired Funkflood Group partner. And they actually are on track to exceed a 10% market share in Sweden within the energy category. They're building considerable momentum with some of their new innovative flavors that they have had excellent in store execution and really leveraging our model that we've talked about over the years. Is activating consumers online through and also leveraging them offline through an experiential marketing activity. That has been very successful on the ground and integrating everything into a 360 approach driving back to retail. So that's been extremely successful. In Finland, they further expanded in SoK and also the other key retailers there. We saw further expansion in 2019 in Norway through 711. The test was very successful. They rolled us out to all the 711s within the country. And we're also in the number 2 gaining authorization right now and the number 2 petrol retailer in country. So things are going very well, very well much embedded in health and wellness and gyms and health clubs and making further expansion into mainstream retail. Some of the synergies we already have implemented is cross really cross functional teams, leveraging key insights and leveraging best practices through our cross functional teams on sales and marketing initiatives to really leverage that. And that has been some synergies. Also, we've seen some synergies within the G and A side. We've already started to implement cost savings initiatives as well through improving logistics, also cost of goods. We saw savings in insurance and audit cost and IT. So we're really looking at all aspects of this as we continue to go through to really drive the best ROI and the best benefit from this acquisition. In addition, you're also seeing just much opportunity for us for that platform for European growth. We're already talking to some new market partners and new distributors in given market where we'll be able to leverage throughout 2020 beyond. Okay, great. And then if I could just squeeze one more in, any new planned key marketing initiatives you can touch on for 2020? We have a variety of key marketing initiatives planned. We just relaunched really bringing back a continuation of the Lipstick tour we launched in 2019 with great success. We're going to continue that journey with the Lipstick tour, bring that to markets around the country and leveraging that onlineoffline experience and connecting with consumers on an emotional level. Also, some key initiatives has been with our tropical flamingo flavor launch in the Nordics. That was a great success as well. And you're also going to continue to see a lot of social digital activation, influencer marketing, really driving our community and further broadening our reach. Thanks and best of luck for 2020. Excellent. Thank you, Jeff. Thank you. Our next question is from Anthony Vendetti with Maxim Group. Please proceed. Thanks. Good morning, guys. Good morning, Anthony. Good morning. Good morning. So just I hate to ask this question, but I guess it's sort of on the top of mind of everyone. So COVID-nineteen, in terms of your production, is there any concern about that going forward? And then in terms of sales, what's the best way you can categorize as we speak now anyway, what you see as the potential impact, if any, right now? Yes. Excellent, Anthony. Anthony, we've been watching the coronavirus for since December, when it first was initially spotted in Wuhan due to our team on the ground that's based out of Hong Kong, our partner, Qifeng, with employees all through Mainland China, we've been keeping a close eye on it going back to December and pre really the Chinese New Year. And it's something that internally we have been really planning for, working closely with our suppliers all around the world. And we have increased inventories, increased raw materials. We've looked at what we do very frequently is really analyze our supply chain, making sure we're driving efficiencies, number 1, but also making sure we have backup suppliers. So we feel very confident in the position where we currently are. All our suppliers have indicated there will not be any supply disruptions momentarily as the current position is. Obviously, things are changing rapidly, so we're keeping an eye on it. But we at this point, we do not have any concerns. We are keeping inventories up and our raw materials up and feel we're in a good position to weather a storm over the next several months if needed and working closely with all suppliers. In regards to the sales impact, that's a little bit unknown at this point in our as we sit here and look ahead because the momentum we have experienced in Q1, we have not seen any slowdown. And momentum has continued in a very solid fashion as we entered 2020. So we're still seeing same store sales increase. We're seeing distribution expand, and we're set to have another record quarter for the company in Q1 2020. So we feel we're well positioned. How that transpires into Q2 and beyond is unknown. We have had a lot of our conferences and a lot of our marketing initiatives where we market at trade conferences, as we all know, have been canceled, which has the potential to have ramifications. But at this point, we have not seen any impact in our business, but that's not to say there will be an impact in the Q2 potentially. Okay. Now that's helpful, John. And then obviously Pepsi Pepsi, Pepsi purchased Rockstar Energy for about $3,900,000,000 How do you think that changes the competitive landscape for Celsius? Yes. So that's quite interesting. That's been a rumor for some time now, as well as the rumor is that maybe Bang moves to their distribution network as a distribution partner. You're hearing that in some of the trade magazines within the industry. Quite frankly, it's we see it as a great opportunity and we see it for a great opportunity for a number of reasons. On prior calls, I've talked about the partnership within 24 Hour Fitness where we actually have been authorized in the Pepsi coolers through that chain. Also, we see a lot of synergies and benefits working with their independent Pepsi distributors who were in several. They are very interested in carrying Celsius. So now that Pepsi has acquired Rockstar, this really allows us further opportunity for new distributors within the Pepsi system, because Rockstar had an exclusive agreement that they could be the only energy drink. So we feel this is an opportunity. It's going to open up more doors for us. Also in the event Bang! Does move over to the PESI bottlers or distribution system, that's going to open up further distributors for us and opportunities through additional Anheuser Busch distributors and many others. So we actually see this as a great benefit that we're going to leverage over the next several months and it's a great opportunity for us. And then lastly, John, just on pricing. It seems that this category is able to continue to be able to garner premium pricing. Has that changed at all or is that still the case as you come out with new brand new flavors, new versions of your product and then sort of talk about the plan going forward in terms of brand extensions. Okay. Excellent. In regards to pricing architecture, you're absolutely right. There's a great opportunity in the new age performance energy category for premiumization to develop. Celsius is that premium offering. When Bang and Reign were initially back in August when RAIN launched, they were doing significant buy one get one freeze, if you recall, with steep discounts. Celsius maintained a really a premium pricing. We did not discount at that same level and we saw existing stores sales continue to grow. So that really shows you the price elasticity on the Celsius portfolio, really being able to build a premium position in the category. So we are very excited about that, being a premium player in the category. We think that's we feel that's going to continue to grow. You are going to see a value brand come into the we feel pricing remains strong and there's additional opportunities to take pricing up in the future as well. As for our plans on innovative flavors and really line expenses into adjacent categories, we have a cross functional innovation team on a global platform. You will see additional really line extensions from us. We're going to continue to leverage our DCA recovery offering. You're also going to see a lot of innovative flavors coming from Celsius. We are on the forefront of connecting with consumers. Our last several flavor launches has been spot on to exactly what the consumer wants and demands, and we have a variety of innovative flavors coming to market in 2020 and beyond and we'll continue to drive that momentum into the category. And we're very excited where we'll stand in the position. Thanks, John. Appreciate it. Excellent. Thank you, Anthony. Thank you. We now have a follow-up question from Jeffrey Cohen with Ladenburg Thalmann. Please proceed. All right. Just a couple more I want to circle around with. Any commentary as far as placement growth and overall growth for the BCAA line out there? Thank you, Jeff. In relation to the Celsius branched chain amino acid recovery line, it launched in late really September 2019. We're keeping it at this point in Vitamin Specialty. We're keeping Vitamin Specialty special with this line. We're building more brand awareness around the line before we bring it to mass retail. We see massive opportunities right now with our core line as we continue to grow and scale with that. We will bring our lines to 2 mainstream and 2 mass, but at the right time. As you all know, this space is very competitive, especially in the energy category, and we want to make sure when we're moving our products out, has the right velocity, the right brand awareness to be successful, making sure we already have generated trial and have brand awareness to truly leverage the power of retail. Got it. And then for the Q4, the top line was very much higher than what we had, extremely strong. Is the demand outstripping the seasonality or at least did it in the Q4? Because it seems like historically you've had more of a seasonality through Q3 and then probably secondary Q2. Yes. It does seem when you look at our sales, 4 quarters over quarter over quarter growth, we are building momentum. And historically, the business is very seasonal. I think as we continue to grow, we will see that, but the brand is really gaining momentum. We're seeing velocities continue to increase and new distribution coming on board. And then also, you also have the European consolidated revenue impact as well. We had November and December of fully consolidated revenues. If you just look at North America, we did have quarter over quarter growth, 4 consecutive quarters in North America. But it's and I think that's going to continue as we move into 2020. We're just seeing really solid momentum. But the underlying business, it does have the opportunity to be seasonal, although we're currently not seeing that due to the growth of the brand and the brand momentum. Okay. And when you talk about the momentum and previously mentioned that you're set for a record Q1, you're referring to Q1 year over year over Q1 2019 or related to Q4 of 2019 into Q1 of 2019? Yes. Q4 was the biggest our Q4 2019 was the largest quarter in company history, and we anticipate to have another largest quarter in company history in Q1 2020. I got it. That's tremendous. Okay, thanks for taking the follow-up. You got it. Thank you, Anthony. Thank you. Thank you. I would now like to turn the conference back over to management for closing remarks. Thank you, Sherry. Thank you, everyone. On behalf of the company, I'd like to thank everyone for their interest today. Our 2019 results demonstrates our products are gaining considerable momentum. We're capitalizing on today's global health and wellness trends and to the changes taking place in 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 and strategy in a rapidly growing market that consumers want. Our mission at Celsius is to continue to grow Celsius and bring it to new customers profitably. I'm proud to 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. Thank you everyone for your interest in Celsius and have a great day. Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.