Earnings Call: Q2 2019

Aug 8, 2019

Quarterly report

Greetings, and welcome to CELSIUS Holdings Q2 2019 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. I would now like to turn the conference over to your host, Cameron Donahue with Hayden IR. Please go ahead, sir. Thank you, and good morning, everyone. We appreciate you joining us today for Celsius Holdings' 2nd quarter 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 Q, which the Securities and Exchange Commission today, initiated a press release also this morning. 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, August 8, 2019. 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 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 quarterly filings with the SEC for additional information. With that, I'd like to turn the call over to our President and Chief Executive Officer, John Fielding, for his prepared comments. John? Thank you, Cameron. Good morning, everyone, and thank you for joining us today. Our first half results for 2019 are highlighted by record revenues of $30,600,000 an increase of more than 40% over the first half of last year as executed to our strategies of positioning Celsius as a global beverage leader for health mining consumers. During the quarter, we made significant progress on our North America expansion with household name retailers such as Target, CVS, Rite Aid, Food Lion and 711, where we further expanded our distribution presence. In addition, we continue to add new premier distributor distribution partners like Big Geyser New York and we are further penetrating Anheuser Busch, current Doctor Pepper and Pepsi independent bottler networks. We continue to deploy best practices with targeted marketing campaigns aimed at building our brand's awareness and trial. Once again, we have demonstrated our ability to enter new channels, onboard new distribution partners and optimize our routes to market ensuring product availability, all while continuing to focus on controlling costs, optimizing efficiencies and maximizing the returns on our investments. In Europe, we continue to drive market share with targeted marketing campaigns and innovative on trend flavor launches. And in Asia, we have completed the realignment of our China business operations. Each of these accomplishments are contributing to meaningful improvements in our financial results with revenue growth across all geographies, improving operational margins and more efficient use of our working capital. And just as important, our gross margins remain in excess of 40% as we drive growth on higher volumes. Domestically, in the second quarter, we signed a new distribution agreement with Big Geyser, New York's largest independent non alcoholic beverage distributor serving the 5 bureaus 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 area and has been instrumental in building numerous brands. Starting in the Q3, Big Geyser will be our preferred distributor to service all 711s in the territory, which will significantly increase our New York City market presence. Also on the expansion front, during the Q2, we launched placements with premier convenience store chain, QuikTrip. Under the agreement, Celsius relocated on the top shelf of the energy door with a full shelf authorized in every market except for Arizona, where we'll have a half shelf. The convenience store channel continues to represent the largest energy drink market in the country with more than $9,000,000,000 in annual sales. The latest SPINS 3rd party data as of July 14, 2019 shows Celsius is growing at a 38.6% year over year increase for our portfolio in the energy convenience channel compared to an impressive 9.4% overall growth in the energy drink category, while Celsius is holding a 10.9% ACV all accumulated volume. Industry fact, 3rd party data continues to validate our positioning as a healthy functional fitness strength that's resonating with today's health minded consumer. We are confident that Celsius will continue to drive these sales metrics even higher as we continue to increase our ACV distribution in the channel through additional launches with national retail chains and distribution partners. This third party data shows and warrant that Celsius warrants additional shelf space and our team is working hard at executing. Our pursuit towards a national distribution network now includes more than 50 regional direct store delivery DSD partners, many of which are premier distributors. Expanding to a national distribution direct store delivery network will increase our in store experience, our in store presence, the execution in the trade and it will expand our availability and will eliminate the out of stocks we are currently seeing at Target and CVS and many other retailers across the country as Celsius is outselling the retailers internal replenishment systems. We expect to achieve a full coverage across the country in the next 12 months to 15 months, if not sooner. We are rapidly leveraging our new regional distribution partners, creating significant opportunities to further build upon our core across all markets of trade, especially in the convenience channel where we are significantly outpacing many established competitors in the sales growth metrics. We continue to garner significant interest in the best distributors in the country, further supporting our momentum and broadening our retail availability and accessibility of our portfolio. We have experienced the most significant expansion within the independent Anheuser Busch wholesaler network, which has increased from 6 distribution partners within the wholesale networks to 23 partners since February this year. In addition, we have expanded within the Miller Coolers, Pepsi and Doctor Pepper, Kirk Doctor Pepper affiliated wholesalers. With the accelerated Through our dedicated innovation team, we continue to expand our portfolio with on trend delicious flavors. In the quarter, we launched our newest flavor, the 9th SKU, a great tasting sparkling Fuji Apple Pear in the fitness and vitamin specialty channels within GNC with a mandatory 1800 locations and authorizations and all sets. In addition, Fuji Apple Pear is now also available at select 711s and through Amazon. Across the country in the fitness channel, national distributors Europa Sports and Muscle Foods are now carrying Celsius and the new flavor in top tier fitness retailers nationwide. At Gold's Gym, 24 Hour, Crunch Fitness, X Sport Fitness, Smoothie King, UFit, Equinox via Earth Bar, Inshape Fitness and Las Vegas Athletic Club will now be selling CELSIUS as quickly become one of the top selling flavors. In addition to great tasting line extensions, our innovation team has been working on developing offerings targeting new verticals and adjacent categories, which are posed to expand our usage occasion and further increase our portfolio's breadth. The team has been working on a planned launch in the back half of this year, which we are very excited about. And as we get closer to the launch date, we will be providing additional details. Our mission, which we are delivering on, is to become a global leader of a branded portfolio, which is proprietary, innovative, clinically proven and offers significant health benefits. And these new offerings will build upon our mission expanding our reach and portfolio breadth. In Europe and the Nordics, revenues grew nearly 70% in the second quarter as new flavor introductions earlier in the year continue to gain momentum. Our Sparkling Peach 5 and Sparkling Passion Fruit have been a great addition to the portfolio and continue to exceed expectations. In addition, we launched a new line, a Celsius Unlimited Nootropics line with a great tasting grapefruit breeze and a strawberry breeze flavor profile. This Nootropics line extension expands our usage occasion with a lower caffeinated offering and is developed with herbal mate, turmeric, vitamin D, vitamin B12 and antioxidants. In addition, the line improves mental focus. We are very encouraged by the traction of the new line and the momentum of our core portfolio in the region. In Asia, royalty licensing agreement in China at the beginning of the year provides us with a vehicle to recoup our $12,200,000 in prior years in country investment, while still reaching the critical and enormous market. As a reminder, in March, we closed the definitive agreement to establish a royalty licensing and repayment on invested capital agreement with Qifeng Food Technology, our local distributor and partner in the China market. This created a risk mitigated method to advance our business in China and grow our share in the important market. Under the agreement, Qifeng Food Technology has exclusive rights to manufacture, market and commercialize Celsius branded products in China. In exchange, we will be receiving a licensing royalty fee of $6,900,000 over the next 5 years, at which point it will transition to a volume based royalty fee structure on the 6 year. Through this agreement, we have created a strong collaborative relationship between the companies to capitalize on the considerable opportunity in consumer demand in the region. Qifeng Foods has been instrumental in our success and growth in the market. Through their experience, relationships and network of distribution partners, Celsius is now available in over 63 cities and over 65,000 locations across China. With 4 flavors raspberry acai, cola, orange and recently launched cucumber line. In Hong Kong, we continue to expand our consumer base, driving trial and awareness in the region. And during the quarter, we further expanded in Southeast Asia into Malaysia with an initial launch and distribution expansion and up to 2,00711s with our sparkling orange and peach mango green tea. And we are very excited about the opportunities in the market. Functional beverages have emerged as 1 if not the fastest growing category in the beverage industry. Busier lifestyles and a focus on health and wellness are driving the need for convenient alternatives that give consumers a way to manage their well-being while they're on the go. We are uniquely positioned at the forefront of this global health and wellness trend with a strategy that will enable us to capitalize on today's health minded consumer seeking beverages that will help them achieve their health, fitness and wellness goals. In support of our growth, we continue to develop and roll out targeted marketing initiatives that highlight and reinforce our brand recognition, emphasize the functionality of our beverages and target specific targeted markets and audiences effectively. During the quarter, we executed targeted marketing programs at key retailers and attended large consumer and trade events including the ROPA Expo in Dallas, the ROPA Games in Florida and the Arnold Classic in Ohio. During the Q2, we were named as the official Energy Drink partner to EcoFox, a premier Esports organization and media company. EcoFox is home to some of the world's top Esports athletes and field teams across a variety of titles, including League of Legends. The organization focuses on player development, competitive achievement and effective training practices aligned directly with our mission to provide functional, healthy fitness strengths to a new generation of athletes. It is estimated that esports reaches 335,000,000 people worldwide in 2017 and is predicted to grow to over 600,000,000 consumers by 2023. This signing represents our first venture in the eSports arena. We also remain active with Tough Mudder, a series of competitive events for a targeted athletic ability. Through these relationships, we are in the process of providing samples to more than 200,000 health minded consumers in 23 cities across the U. S, reaching new markets and new consumers. And in other regions as well, we continue to target active lifestyle fitness activities and events. In addition, we are conducting guerrilla marketing sampling activities in key markets and interacting with consumers where they live, work and play. Staying the course and remaining focused on expanding our distribution relationships while going deeper with existing accounts have been our key to our success in 2019. We remain committed to this strategy and are increasingly optimistic about our prospects as our products continue to gain considerable momentum. I will now turn the call over to Edwin Negron Kapala, our Chief Financial Officer for his prepared remarks. Edwin? Thank you, John. For the 3 months ended June 30, 2019, revenue was $16,100,000 a significant increase of $6,800,000 or 73 percent when compared to $9,300,000 for the same period last year. The revenue increase of 73% was a result of increased sales across all geographies, including strong growth of 69% in North American revenue driven by double digit growth in existing accounts and new distribution expansion. Revenue in Europe grew a solid 64% year over year, primarily as a result of the launch of new flavors. Revenue growth in Asia is the net result of the traction we're gaining in the regions outside China, which was partially offset by the change in our business model to a royalty and license fee agreement in China, which was completed at the start of 2019. In line with our historical trend, the overall increase in revenues from 2018 to 2019 was mainly related to increases in sales volume as opposed to increases in product pricing. Gross profit for the 3 months ended June 30, 2019 increased by $2,800,000 or 70 percent to 6 $900,000 for the Q2 of 2019, up from $4,000,000 in the year ago quarter. Profit margins remain mostly unchanged and within our expected range at 42.6 percent for the 3 months ended June 30, 2019, compared to 42.8% for the same period in 2018. The increase in gross profit dollars is mainly related to increases in sales volume as opposed to increases in product pricing. Sales and marketing expenses for the 3 months ended June 30, 2019 were $5,600,000 an increase of $1,500,000 or 37 percent, up from $4,100,000 for the same period in 2018. The increase is mainly due to costs for trade show activities in support of our expanded distribution network as well as investment in marketing activities and employee resources, which were partially offset by no direct marketing investments being incurred in China as a result of the change in our business model. General and administrative expenses for the 3 months ended June 30, 2019 were $2,400,000 a decrease of $708,000 or 23 percent compared to $3,100,000 for the 3 months ended June 30, 2018. The decrease was primarily due to an accrual in the Q2 of 2018 of $944,000 pertaining to a settlement of a territorial dispute with a former distributor. Excluding this impact on a more comparative basis, general and administrative expenses increased by $237,000 due to increases in legal fees, insurance, rent and employee costs. Total other expense increased by $303,000 to $345,000 for the 3 months ended June 30, 2019, compared to $42,000 for the same period last year. The increase is mainly related to the amortization of discounts on notes payables of $93,000 and a loss of $220,000 related to China assets that will not be realized, partially offset by a reduction of interest expense in the amount of $10,000 The net results for the 3 months ended June 30, 2019 was a loss to common shareholders of $1,500,000 or $0.03 per basic and diluted share based on a weighted average of 57,336,117 shares outstanding. In comparison for the 3 months ended June 30, 2018, the company reported a net loss of $3,300,000 and after given effect to preferred stock dividend of $43,000 a net loss available to common shareholders of $3,400,000 or $0.07 based on a weighted average of 51,003,803 shares outstanding. Adjusted EBITDA for the Q2 of 2019 was a loss of $15,000 Our calculation of adjusted EBITDA for the 3 months ended June 30, 2019 includes favorable adjustments depreciation and amortization of $110,000 net interest expense of $31,000 stock based compensation expense of $1,100,000 and a loss of $220,000 related to China assets that will not be realized. Adjusted EBITDA for the Q2 of 2018 amounted to a loss of $2,100,000 which included the one time expense of $1,000,000 pertaining to the settlement of a territorial dispute with a former distributor and the net investment in Asia of $834,000 As such, the adjusted net non GAAP EBITDA for the Q2 of 2018 was a loss of $261,000 which is comparable to the $15,000 loss for 2019, since we did not have any one timers or Asia investment in this quarter. 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, the reconciliation of our GAAP results to non GAAP figures have been included in our earnings release. Now turning to our year to date results. For the first half of twenty nineteen, revenues increased by 43% to $30,600,000 up from $21,400,000 in the first half of twenty eighteen. The increase of 43% was attributable in large part to 55% growth in revenue from U. S. Domestic sales, primarily attributable to double digit growth in existing accounts and new distribution expansion. Europe delivered 30% growth in sales, which was driven in large part by the launch of new flavors. The increases in North America and Europe were marginally offset by a decline in Asia as a result of the change in our business model. Most of the year to date decline was experienced in the Q1 because as I mentioned in my earlier remarks, sales in Asia were actually up in the Q2. Gross profit increased by $3,900,000 or 44 percent to $12,600,000 in the first half of twenty nineteen compared to $8,700,000 for the 1st 6 months of 2018. Gross profit margins increased to 41.1 percent for the first half of twenty nineteen compared to 40.9% for the first half of twenty eighteen. The increase in gross profit dollars is primarily attributable to increases in sales volume. Sales and marketing expenses decreased by 6% to $9,200,000 for the 1st 6 months of 2019 when compared to $9,700,000 for the 1st 6 months of 2018. The decrease is mainly due to the change in business model in China, which does not require direct marketing investments. On a comparable basis, marketing spend was down by $2,800,000 which is partially offset by increases in other sales expenses, including incremental spending in trade show activities to support our expanded distribution network, incremental storage and distribution costs and incremental employee and broker costs. General and administrative expenses for the 1st 6 months of 2019 were $5,100,000 a slight decrease of 2% when compared to $5,200,000 for the 1st 6 months ended June 30, 2018. The decrease was mainly due to an accrual of $945,000 in the prior year period that pertain to the settlement of a territorial dispute with a former distributor. Excluding this impact, general and administrative expenses increased by $857,000 basically as a result of incremental stock option expense of $504,000 as well as modest increases in legal costs, insurance, rent and employee costs. Below the operating line, other income was up significantly to $11,900,000 for the 1st 6 months of 2019 when compared to $80,000 of other expense in the prior year period. This increase is basically the result of the gain related to the note receivable from our China distributor that was signed at the beginning of this year. As a reminder, per the licensing agreement, we will be receiving the net investment we have made in China over a 5 year period. As a result of the above, for the 1st 6 months of 2019, the company had net income of $10,200,000 or $0.18 per share based on a weighted average of 57,267,622 shares and after adding back interest expense on convertible notes of $243,000 and the amortization on discount on notes payables of $179,000 a diluted net income available to shareholders of $10,600,000 or $0.17 per share based on weighted average shares outstanding of 61,817,621. Dollars Operating expenses for the first half of twenty nineteen included non cash charges for depreciation, amortization and stock based compensation of $2,700,000 compared to $2,200,000 for the same charges for the 1st 6 months of 2018. Adjusted non GAAP EBITDA for the 1st 6 months of 2019 was a positive $863,000 since it includes the $12,000,000 gain from the note receivable from our China distributor, which compares to a loss of $120,000 in the year ago period. By excluding the one time charges of $1,100,000 incurred in the first half of twenty eighteen, which mainly pertain to the settlement of a dispute with a former distributor and the net investment in Asia of $3,000,000 the adjusted net non GAAP EBITDA for the first half of twenty eighteen was a loss of $120,000 which is also comparable to the $863,000 gain since we did not have any one timers or Asia investment in this period. As of June 30, we had cash of $4,800,000 compared to $7,700,000 as of December 31, 2018. Additionally, we had working capital of $23,200,000 as of June 30, 2019, compared to $19,600,000 as of December 31, 2018. Cash used in operations for the 1st 6 months ended June 30, 2019 was $4,500,000 compared to $5,800,000 for the 1st 6 months of 2018. The use of cash during the current period reflects investments in prepayments and deposits as well as the settlement of our crude expenses pertaining to the change in the China business model, which were partially offset by a reduction in inventories. That concludes our prepared remarks. Operator, you may now open the call for questions. Thank you. Thank you, sir. At this time, we'll be conducting a question and answer Our first question today comes from Jeffrey Cohen of Ladenburg Thalmann. Please go ahead. Hi, John and Edwin. How are you? Excellent, Jeff. Good morning. Good morning, very well. Hopefully, you can hear me okay. So I guess three questions I wanted to drill into a little bit. So can you talk about any other sizes or flavors for North America coming? Or what's kind of your thinking there? And can you give us also more color on the powder packs? Do you expect that you're going to see further uptake in the powder packs? Or any plans to bring more flavors or wine such as the Nutropix to North America? Excellent. Thank you, Jeff. In regards to flavor innovation, that seems to be working very nicely for us as well. It brings excitement to the retailers and some of our established accounts. We will bring we do have plans. Our innovation team does have plans for additional SKU innovation as well. We'll be conducting some rationalization. Right now, our kiwi guava has really moved to our number one position on flavor in many accounts across the country. So these flavor combinations seem to be working very well at retail. And our Fuji Apple Pear on its initial rollout has been extremely, really receptive well by not only by buyers, but also for consumers. So our goal is to continue to stay on trend with innovative flavors, and we are cognizant of the turns as well that's required, really monitoring the market and we will be first to market. In regards to the powder product, most recently, we've seen a great increase in sales online as well as through the fitness channel with our powder products. And we do have plans as well to bring innovative flavors to that line. We're very optimistic about it. We see a lot of other usage occasions. Celsius on the go with its powder offering. So it's you can take that anywhere on the plane when you travel. And also, we're noticing a lot of our influencers and brand ambassadors are taking the product and adding it to smoothies. So it's another opportunity for us to further leverage the Celsius brand into other mediums. So very excited to have that line there. And then in regards to the Eutrophic line, as I mentioned, we do have a planned launch this year in the back half, which will expand us to additional verticals and adjacencies within our categories. And the new Tropics line that we initially launched in 7 Eleven really expands our offering. It's a lower caffeinated product and allows really goes after a much wider consumer and a different additional usage occasion for the brand. So I think as we look forward, you will see additional offerings, brand innovation coming through Celsius here. That's great. Okay. And then second question, any studies or clinical work out there that you're aware of that's being conducted in any geography? We do not have any active studies currently taking place currently, but it is something that we always are exploring as well as we look at additional lines, bringing additional lines out, additional innovation to the table. It is one thing Celsius is science based, science back. We're going to continue with that trend, but we don't have any ongoing studies active today. Okay. And then thirdly, could you talk a little bit about seasonality for the upcoming quarter in the back half of the year and just kind of walk us through and remind us of 2018 Q2 into Q3 and kind of any bigger picture trends that we wouldn't anticipate? Yes. I think when you look at it, the trends for Celsius are phenomenal. When you look at our most recent, as I mentioned, our SPINS data, which is 3rd party register scan data, had Celsius continuing to build momentum each and every quarter over the last go back several years. We're maintaining our most recent data on a 52 week basis shows we're turning at the register over 38.6%. So truly outpacing the category and the category continues to expand toward healthier, better for you options. So we see a lot of opportunity. Traditionally, in the beverage industry, there is seasonality that takes place in beverage season, as it's called, during the summer months. We do we are affected by that, but it is being offset by new retailer listings that are taking place. So although our baseline business and existing accounts are affected by that seasonality in beverage season during the summer months, it is offset due to the new distribution and expansion we're receiving with many retailers. So looking at on a go forward basis, I think looking at past history and continuing to move forward with some of our growth metrics, it's something that definitely could be should be looked at. When you're looking at Q2 in 2018, we did have $1,200,000 that on our North America business, which moved from Q2 2018 to Q3 2018 due to timing of production. But that was the timing. So but we do have considerable momentum, as you can see, with our Q2 results. Perfect. Okay. Thanks for taking the questions. That does it for me. Thank you, Jeff. Thank you. The next question is from Jeff Van Sinderen of B. Riley. Please go ahead. Hi, good morning. And we say congratulations on the terrific growth and strong Q2 metrics. John, you're getting really good shelf space that you didn't have previously. Can you speak to that evolution? What's driving that and maybe some of the recent highlights? Yes. No. Thank you, Jeff, and good morning. There is considerable momentum taking place and really disruption in the energy category. The traditional better traditional energy drinks, you're seeing a transformation. If you look at a lot of the spins data, 3rd party data, a lot of these brands, Full Throttle, Nas, Rockstar, they're seeing decreases. Consumers want healthy, better for you option. And just last night on Monster's earnings call, Rodney Sachs indicated and really clarified what's happening in the energy drink category as well. There's really a real transformation taking place and retailers are reacting now to add additional shelf space to this category of performance energy. And Rodney indicated that brands like Celsius will be gaining additional shelf spaces as retailers are updating their sets to really align with today's health minding consumers looking for some better for you choices. So we're seeing a lot of momentum ahead of us. As you you're seeing out there further expansion in existing accounts, and we have a lot of meetings taking place right now over the next several months as we're preparing for category review meetings for all of these retailers. So we are very optimistic. Our team is very optimistic for 2020 and the back half of this year as we continue to expand. And that is the prime reason really why we're seeing these DSD partners today taking us on. You're seeing Anheuser Busch, Keurig Doctor Pepper and Pepsi Distributors, these premier distributors taking on Celsius, they see the opportunity as well. So as well as Big Geyser taking us on in New York City. So there is definitely a transformation happening in the energy drink category and you're seeing that in the great growth as well. More consumers are coming to that category because it's growing at over 9.4%. So we are well positioned for the future. Good to hear. On the build out of the DSP network, which regions are left to go, kind of are left to go after, I guess? And based on your plan this year, where should we expect the biggest impact from DSPs added in the second half? Maybe you can just speak to that. Yes. Our biggest when you look at our DSD coverage, our biggest coverage right now is in the Southeast. We do have a couple of voids, which we're working on filling to have full DSD coverage. So we'll be able to cover particular zones from some of our retailers, I. E. 711, CVS and Target. Once we are able to build out and cover these warehouses that are currently servicing many of these retailers through the replenishment systems, we'll be able we're working with the buyers and we'll be able to flip these retailers over to this DSD really model, which that will allow us to gain additional ACV distribution and better execution in the trade, keeping us in stock and keeping us on the shelves. So right now, when you're seeing, you're seeing we have a good presence in the Southeast, also the Texas regions as well, Michigan, New York. We are up in the New England market. We have that covered as well. California, Vegas and but we do have considerable voids as we look to really turn over a lot of these retailers. And that's what the team is working on right now. So there's a lot of runway ahead when you're looking at additional DSD expansion. We're about 50 right now with these key premier distributors, and we're going to continue to expand on that. So really looking forward to the runway ahead and then the partnership that we're forging. We're seeing great momentum and great excitement with these new partners just servicing the independents, not activating the traditional retailers today. Okay, great. And then one more on international, if I could. The Nordic business is turning around, and it would seem that you have a major opportunity to expand in other regions of Europe. Can you touch on that potential and maybe how you're thinking about approaching growth in some of those EU regions that are newer to you? Yes. I think there's a lot of opportunity for us. We're capitalizing on these global health and wellness trends. I think the key is expanding, which we are focused on, profitable growth. So it's very key on that model. There is opportunity to further expand throughout Europe coming out of that Nordics with that with a good presence and awareness that we have. The next phase, we're still activating Finland and Norway. We're about to gain additional listings there with some of the key marquee retailers in country. And then further penetrating throughout the Nordics would be the progression. Also Spain, we're speaking with an opportunity in Spain as well as Germany as well. So there is a lot of opportunities going ahead, but we want to make sure the model is correct on the expansion. Terrific. Thanks for taking my questions and continued success. Thank you, Jeff. Thank you. Our next question is from Anthony Vendetti of Maxim Group. I just wanted to ask a little bit about the marketing spend. We expected it to tick up and it did. And I know you're sponsoring more of these tough motor type events and so forth. Is that expected to continue at that level, continue to grow as we move into the back half of the year? And then what events specifically have you increased spending on and what where have you put your marketing dollars? I think in regards to our spend, we've stated before, we're driving our goal is to drive profitable growth. We're working hard and towards that path. We're focused on driving additional gross profit dollars and EBITDA dollars into marketing to continue to drive top line revenue to capitalize what's taking place right now in the energy drink category. So we're reinvesting our additional EBITDA dollars in marketing, sales initiatives. We just hired a round of additional sales reps to help us manage key sales reps in key regions to help manage the DSD. And we also are investing in particular verticals. The foodservice business is a great opportunity. We've seen tremendous growth over the last several years there. We're expanding in that area. So in regards to direct marketing, we did have a lot of Tough Mudder activation. We also did a lot of Gorilla and demo sampling, which drove off additional costs and also online targeted advertising. So those type of activities will continue. But so I think we are in line. Q3 is going to be an active quarter as well, But we're very cognizant on continuing to grow at close to breakeven level reinvesting our dollars. Okay. And then just on the distribution expansion, obviously, you announced a number of agreements. Can you tell us a little bit about what the end customer what in terms of the pipeline, what's the opportunity as you expand your distribution? What are some of the new customers you think are in the pipeline for this year or next year that could really move the needle for you? Yes. I mean, we have a great roster currently of existing account existing retailers when you look at where we are. One thing that the company has been very good at through our through this process is really optimizing those retailers. So just on our existing retailer list, we have so much opportunity still available to maximize these partners. As an example, when we first went into Sprouts, we started on the dry shelf. We continued to show results. We went to the cold cooler. The cold cooler starts you have more velocity, higher velocity rates where we are able to expand and really grow that account to the point where they moved us to the front checkout coolers, further increasing the velocity numbers. So as an example, when you look at some of really our national accounts like Target, we currently have 3 SKUs in the energy set on the dry shelf. There's further opportunities to add additional SKUs and also gain cold availability and then a checkout front checkout cooler. So we're working on that same trajectory and really grooming and really activating our retail partners. Also in the convenience store channel, we talked about CVS with the 500 store cap, nationwide rollout, for better in the energy door with 3 SKUs in all locations. That rollout has been completed. We have additional opportunities to expand our portfolio to 4, 5, 6 and full shelf execution where we know when we increase additional SKUs, the velocity numbers not just increase by 1 SKU, they increase on a multiplier effect, which is great. So a lot of opportunity to further let our CVS and gain also from checkout and really maximize that. The other opportunity we have is in Rite Aid, where we just received notification that we have been one of the top selling beverages in the GNC cooler set that they have for better for you beverages. We just received the green light that we will now be adding to the energy door. So that will further expand the opportunity at Rite Aid and then we can go and further expand with SKUs and optimize that retailer. So some new retailers that we see a lot of opportunity that we're targeting is Walgreens and Duane Reade in New York City. There's a lot of opportunity there. Also, the convenience channel dominates the energy drink category. So we're working very hard to continue to increase our ACV in the energy drink category. We're only at 10.9 today. So there's a lot of runway ahead of us. Speedway is a great account we're talking to. And there's so many others that we're actively talking to as well. Okay, great. Just lastly, obviously, there's a lot of misinformation out there and a lot of noise about CBD. You're an energy company, but is there an opportunity to maybe have a recovery drink based on CBD? And if so, what would that look like in terms of timeline, in terms of planning for your portfolio going forward? Absolutely. Our innovation team are looking at adjacent categories, additional verticals. CBD is definitely something we've been working on for some time. We do have a CBD product in our portfolio ready. We are watching the regulations. And as the government goes through the process on the legalities on being able to sell the CBDs and our existing routes to market. Whatever we bring to market, we want to be able to drive efficiencies and leverage our sales organization and our routes to market. So we do have our product ready, but we need to make sure that when we bring it to market, we're able to maximize the opportunity in our relationships and routes to market. So we are watching closely. We don't have a definitive timeline today, but we will be ready. Okay. Excellent, guys. Thanks. Appreciate it. Thank you. Thank you, Anthony. There are no additional questions at this time. I'd like to turn the call back over to John Fieldly for closing remarks. Thank you. On behalf of the company, we'd like to thank everyone for their continued interest. Our Q2 results demonstrates our products are gaining considerable momentum. We are capitalizing on today's global health and wellness trends and the transformation taking place in today's energy drink category. Our active healthy lifestyle position is a global position with Mass Appeal. We are building upon our core and leveraging opportunities and deploying best practices. We have a winning portfolio and strategy and a large 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. On a final note, our management team will be presenting at the upcoming B. Riley FBR Consumer Conference in New York City on October 3, and we look forward to seeing many of you at this upcoming conference. Thank you everyone for your interest in Celsius and have a great day.