Good morning, and thank you for joining Celsius Holdings' first quarter 2026 earnings webcast. With me today are John Fieldly, Chairman and CEO, Eric Hanson, President and Chief Operating Officer, Jarrod Langhans, Chief Financial Officer, and Toby David, Chief of Staff. We'll take questions following the prepared remarks. Our first quarter earnings press release was issued this morning with all materials available on our website, ir.celsiusholdingsinc.com, and on the SEC's website, sec.gov. An audio replay of this webcast will also be accessible later today. Today's discussion includes forward-looking statements based on our current expectations and information. These statements involve risks and uncertainties, many beyond the company's control. Celsius Holdings disclaims any duty to update forward-looking statements except as required by law.
Please review our safe harbor statement and risk factors in today's press release and in our most recent filings with the SEC, which contain additional information and a description of risks that may result in actual results differing materially from those contemplated by our forward-looking statements. We will present results on both a GAAP and non-GAAP basis. Non-GAAP measures like adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, adjusted SG&A, and adjusted SG&A as a percentage of revenue and their GAAP reconciliations are detailed in our Q1 press release. Non-GAAP financial measures should not be used as a substitute for our results reported in accordance with GAAP. With that, I'll turn it over to John.
Thank you, Paul. Good morning, everyone, and thank you for joining us today to discuss our first quarter 2026 results. We delivered a record first quarter revenue of $783 million, and across the portfolio we continue to see the kind of progress that reinforces the strategy we laid out coming into the year. In Circana tracked channels, our combined portfolio continued to expand its share position over the course of the quarter. This trend has continued into April, with portfolio dollar share reaching 20.9% in the 4 weeks ending April 12. Our portfolio strategy is resonating with both consumers and retail partners. The quarter reflects what we said we would focus on, strengthening the platform, executing with discipline, and staying closely aligned with the consumer.
As we look at the progress across Celsius, Alani Nu, and Rockstar, we are confident about the position we are in as we enter Q2 and the summer beverage season. At the core, our focus remains straightforward. We stay close to the consumer, and we execute with consistency alongside PepsiCo and our retail partners, which creates the opportunity to grow in a sustainable and profitable way over time. Today, our portfolio reaches more consumers, more places, more occasions, and more price points across the category than it did a year ago, and that is increasingly showing up in the marketplace. Our combined portfolio represents approximately 1/5 of the U.S. energy drink market in tracked channels, and that share is expanding. Said another way, one out of every five energy drinks purchased in the U.S. is a Celsius portfolio product.
We have 2 billion-dollar brands. What is becoming clear is that the portfolio is giving us more ways to grow, with each brand playing a distinct role in helping us participate more fully across channels and usage occasions. Celsius continues to perform across a broad range of channels and occasions. Alani Nu is expanding our reach with a differentiated consumer base and a meaningful runway in channels where it remains under-penetrated. Over time, Rockstar gives us another point of participation in the category as we continue to integrate the brand into our platform. Even as the broader consumer staples environment remains challenging, energy continues to be 1 of the strongest performing categories in beverage, which reinforces our conviction in the long-term opportunity.
As the portfolio has scaled, we have seen equally focused on strengthening how we operate, improving alignment across the business, and building a more repeatable and scalable operating model over time. One of the most important areas of progress in the quarter was execution across our integrations. Starting with Alani Nu, we completed the integration, and we have captured the approximately $50 million in synergies we outlined at our modeling call last May. That is an important milestone. It simplifies our operating model and creates a more connected commercial structure. Want to recognize our team members across our organization and at PepsiCo for making this happen. We also made substantial progress on the Alani Nu distribution transition, with the majority of the work completed across December and January. With Rockstar, the integration remains on track for completion in the first half of 2026.
This is not just about completing an integration. It's about strengthening our growing portfolio. With the SKUs transition now substantially complete and the reset activity taking hold, we are starting to see the early signs of improved velocities on the core items we are prioritizing. We view 2026 as a stabilization year for Rockstar, we expect to have more to share on the brand's trajectory as we move through the balance of the year. Innovation remains central to how we grew in the quarter, driving trial, reinforcing the core, and keeping us aligned with consumer preferences. At Alani Nu, the Lime Slush limited time offer performed especially well. Became the brand's top-selling flavor in tracked channels. We view that as an important proof point that the brand's innovation model is durable and that it is not dependent on any one particular hero flavor.
Following the success of Cherry Bomb, Lime Slush reinforces that the flavor rotation strategy is working, and we continue to see a lot of new innovations supporting share gains and strengthening the connection between the brand and consumers. More than just product launches, Alani's limited time offers have become seasonal community moments that we believe consumers look forward to, which is a meaningful part of what makes the brand so strong. At Celsius, Fizz-Free continues to emerge as a meaningful platform. We saw encouraging expansion and distribution across multiple flavors, including Dragonfruit Lime, Pink Lemonade, and Blue Razz Lemonade. Fizz-Free is now broadly distributed, but still early in terms of item per store, which represents a meaningful opportunity to expand as the platform matures. As we look at Celsius innovation for the year, Q1 was focused on prioritizing the assortment and strengthening the foundation of the portfolio.
With that work substantially in place, we are now moving into a more active period across Q2 and the back half of the year. We just launched Electric Vibe, a limited edition flavor inspired by soccer culture, timed ahead of the global soccer tournament taking place in North America this summer. It is a great example of how we're using innovation to connect the brand to broader cultural moments and reach new consumers. That same focus and discipline is also shaping how we manage the shelf. We continue to sharpen the portfolio through disciplined SKU optimization and recent resets, putting more emphasis behind the items that perform best with consumers. That is starting to come together and show up in the data.
Across our single-serve portfolio, the items gaining distribution represent a significant majority of tracked channel dollar growth and volume, which gives us confidence that the shelf is becoming more aligned with demand. We are seeing that in the flavors such as Cherry Cola, Retro Vibe, Playa Vibe, and Grape Rush, which continues to build distribution and momentum. The resets are about quality of assortment as much as space. Heading into the summer selling season, we remain confident in the space gains we outlined at CAGNY, approximately 17% for brand CELSIUS, driven by expanding cooler placements and additional points of sale across national chains. Over 100% for Alani across all channels. For Rockstar, maintain net space alongside reconfigured items and assortments. International represents a meaningful long-term growth opportunity for us.
We took another step forward in the quarter with the launch of the brand CELSIUS in Spain through exclusive sales and distribution agreement with Suntory Beverage and Food Spain. This builds on our core existing collaboration with Suntory and other international markets and reflects our approach to focus on key markets, strong local partnerships, disciplined launch plans, and sustained marketing and distribution support. Portugal is next on the European footprint, also with our Suntory partnership. With our global headquarters in Dublin now established, we have the operating infrastructure in place to accelerate both deeper execution within existing markets and new market entries in years ahead. As we look ahead, the progress we made in Q1 positions us well for the next phase of the year.
We expect to build on the recent resets as we move through Q2, and we have additional innovation planned across both CELSIUS and Alani Nu, including a summer CELSIUS limited time offer that we are excited about. Our partnerships and activations are also part of how we support the momentum as we enter the summer beverage season. We are proud to announce a multi-year global partnership with Aston Martin Aramco Formula One Team as our official global energy drink partner. We have also kicked off a global partnership with Palm Tree Music Festival, as well as our continued partnership with Breakaway Music Festival. Building on strong preference we have established at the intersection of music, fitness, and culture. At Alani Nu, we opened our first ever slush pop-up in Fort Lauderdale, which reflects the kind of consumer-facing activations we are building and bringing to life beyond the traditional retail.
For Rockstar, we kicked off the Formula Drift season opener in April. We also announced a new partnership with 23XI Racing and Tyler Reddick, who has had one of the most remarkable starts to the NASCAR Cup Series in recent history. These partnerships continue to connect the brand with its core motorsports and action sports audience. Through these programs are designed to connect awareness to trial and then to retail activation. Taken together, Q1 was a quarter where the strategy translated into results across the portfolio, across our integrations, and at the register. With that, I'll turn it over to Jarrod to walk through the financials.
Thanks, John. Good morning, everyone. From a financial perspective, I will walk through the quarter by brand, then cover the rest of the P&L, operating discipline, and capital allocation before handing it back to John for closing remarks. We delivered record first quarter revenue of $783 million, reflecting continued strength across the portfolio and solid execution against the operating priorities we laid out coming into 2026. Starting with brand CELSIUS, we delivered net sales of $348 million in the quarter, representing growth of approximately 6% year-over-year. As we discussed last quarter, we have been focused on tightening the alignment between shipments and underlying consumer takeaway, and we saw progress on that front in Q1. As John mentioned, we undertook a SKU optimization project during the quarter, and we are seeing the velocity improvements that have resulted from that work.
We are moving into a more active innovation period for brand CELSIUS, including activations around the global soccer tournament this summer in North America and our 100 days of summer programming. Turning to Alani Nu, the brand delivered net sales of $368 million in the quarter, representing a pro forma growth of approximately 60% year-over-year. As a reminder, we acquired Alani Nu on April 1, 2025. We continue to see strong execution as the brand builds on the distribution gains from the PepsiCo system transition. With the integration now complete, we are operating with a cleaner structure and believe we are well-positioned to continue expanding reach and solidifying execution through the balance of the year. For Rockstar, net sales were $67 million for the quarter.
With the SKU reconfiguration and reset activity substantially complete, we are focusing on stabilizing the brand as we complete the integration in the first half of 2026. The U.S. business is substantially on the finished goods model, with some remaining components still in transition. Let me spend a moment on Alani. As tracked scanner growth and reported growth are two different numbers this quarter, and I wanna walk through how to get from one to the other. We have also included a bridge in our investor deck posted online. Tracked scanner data shows Alani at approximately 100% year-over-year. The cleanest comparison number is 85%. That adjusts for Cherry Bomb, which sold in during Q4 2025 but landed in Q1 2026 scanner data.
To translate 85% scanner growth into reported revenue, the right starting point is Q1 2025 RTD U.S. energy revenue, which was $198 million after excluding the Canadian and U.S. non-energy business. From there, the 85% growth implies organic Q1 2026 RTD revenue of about $340 million when adjusting for the higher sales mix associated with the DSD system relative to our direct business, as our ACV gains have been focused in DSD channels. Adding back Canada and the remaining non-U.S. energy business, which together contributed $28 million, brings reported Alani revenue for Q1 2026 to $368 million, or approximately 60% growth year-over-year. Bottom line, the underlying business is healthy and scanner growth remains strong.
Turning to profitability, the integration-related cost headwinds we discussed in Q4 have largely rolled off, which gives us a cleaner foundation entering the year. The underlying initiatives that drive margin expansion, our orbit model, which optimizes how we move inventory across our manufacturing and distribution network, freight structure improvements, raw material alignment across Alani and Rockstar, and mix improvements through price pack architecture, continue to progress. In Q1, gross margin was approximately 48.3%. Underlying raw material COGS improved quarter-over-quarter as we continue to bring Alani and Rockstar into our purchasing structure with the COGS write-offs and transition costs from Q4 largely behind us. We did see a few discrete items in the quarter that partially offset that progress. The Midwest aluminum premium moved higher, as did the LME.
Severe winter weather in parts of the Northeast created incremental freight costs, and we incurred some additional freight expense as we rebalanced Rockstar inventory across our network. On commodity and input costs more broadly, we are watching the macro environment closely, including aluminum, freight, fuel, and resin pricing. While we have sourcing strategies in place, if the elevated costs remain across the year, we will see some impact on the timing and sequencing of our margin expansion back to the low fifties. None of these change the broader trajectory and the underlying initiatives that drive margin expansion. Our orbit model, freight structure optimization, raw material alignment, and mix improvement through price pack architecture continue to progress. At the same time, we remain disciplined on operating expenses.
Adjusted SG&A came in at approximately 26.4% of revenue, down from 31.8% in Q4, reflecting continued cost control across the business and the benefits of operating leverage as revenue scales. We also continue to make progress on the SKU optimization work I mentioned earlier, which supports a more productive operating model over time. Taken together, those efforts remain important components of how we think about margin progression and overall quality of earnings through the balance of the year. As we move through 2026, we remain focused on investing behind our brands to support growth, including additional marketing investment across the summer selling period, while continuing to improve the quality and consistency of our earnings profile. The progress in Q1 gives us additional flexibility to lean into those investments while sustaining the operating discipline we have built.
On profitability, we reported GAAP net income of $110 million in the quarter, more than double the $44 million we reported in the prior year quarter. Adjusted EBITDA was $195 million, an increase of approximately $125 million versus a year ago, and Adjusted EBITDA margin expanded to 24.9% from 21.2%, roughly 370 basis points of margin improvement year-over-year. The result reflects continued top-line momentum, the benefit of the operating model work we have been doing across the portfolio, and the benefit of the synergies captured from the Alani integration. On capital deployment, our balance sheet remains a source of strength and flexibility.
During the first quarter, we repurchased approximately 700,000 shares for $24.1 million at a weighted average price of $35.39. At quarter end, $236.1 million remained available under the $300 million repurchase program the board authorized in November 2025. We have continued to utilize this program in the second quarter. Our approach to capital deployment continues to be grounded in three priorities: investing to support brand growth and integration execution, maintaining the strength of the balance sheet, and returning capital to shareholders. We will continue to evaluate repurchase activity based on cash generation, market conditions, and capital priorities while preserving flexibility for strategic opportunities. Overall, Q1 demonstrated the consistency of our financial plan and the operating leverage available as the business scales. We're executing against the priorities we laid out coming into the year, we are well-positioned for the balance of 2026.
I will turn the call back to the operator to open the lines for questions.
We will now begin the question-and-answer session. Please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Bonnie Herzog with Goldman Sachs. Your line is open. Please go ahead.
All right. Thank you. Good morning. I wanted to ask about the CELSIUS brand. I guess I was hoping for some more color on the growth, which, you know, has been moderating. Could you give us a sense of the drivers behind this and maybe frame or quantify the impact the brand is facing from limited innovation during Q1 versus last year, you know, the SKU rationalization, and then, you know, I assume the cannibalization it's experiencing from Alani Nu? I guess, you know, how should we think about growth on CELSIUS for the rest of the year between any kind of shelf space gains and planned innovation? Thanks.
Thank you, Bonnie. Good morning. Great question. In regards to Celsius portfolio, you've touched on a variety of initiatives that really impacted that in the quarter. One thing we did focus on in the quarter is the Fizz-Free. We see great opportunities within Fizz-Free as we're optimizing the distribution to get a broader, consistent ACV across the U.S. market. We've seen the focus on that in the first quarter, seeing a velocity in takeaways increase. We see a lot of opportunity within that really differentiated segment within the category. Within the optimization, there's a little bit of a timing sequence there as we've optimized some of the slower items.
We are trying to get, as we progress out of resets, looking to really get optimized, consistent placements across the portfolio that are driving the highest velocity in ACV. I have Eric Hanson, our President and Chief Operating Officer, with us today as well. I'm gonna have him make some comments around Celsius and the distribution gains we anticipated, coming out of NACS, where we made some comments.
Hey. Good morning, Bonnie. I think as, you know, to John's point, as we talked about coming into the year, we said we would be focused on optimizing the SKU assortment, you know, driving focus on Fizz-Free as a permanent innovation, and leveraging our LTOs and partnerships to continue to drive growth for the brand. You know, optimization generally, as John mentioned, plays out over 2 quarters, where we see the reduction faster than the ACV build. We are continuing to progress on that, and we'll continue to see that build over the next quarter or so. We do have 2 LTOs on the brand here over the next several months, Electric Vibe, which is launching now, and then another one that'll be available in summer.
We feel that will continue to drive excitement and anchor strong merchandising for the brand. We'll continue to, you know, make sure that we're managing our space appropriately. As we build out more space, we are seeing, for example, increases on dollars per total point of distribution. We'll see TDPs soften a little bit. As you think about a TDP is really about total SKUs available. While we gain space, we're getting more holding power and more ability to translate that into growth for the brand. We feel good about the plans ahead and obviously we're monitoring it closely and we'll continue to work through.
All right. I appreciate it. I'll pass it on. Thank you.
Your next question comes from the line of Peter Grom with UBS. Your line is open. Please go ahead.
Great. Thank you. Good morning, everyone. I wanted to come back to Alani Nu. Jarrod, the bridge that you provided and walked through was helpful. In the release you mentioned that there was increased orders from PepsiCo. Just trying to understand whether there was any sort of shipment benefit or inventory build that occurred in the quarter, and maybe the delta is just kind of the impact from the promo and allowances as you move into the PepsiCo system. Thanks.
Yeah. I think that comment was more to refer to that as we were going more into the PepsiCo system across Q1, that we were building ACV and therefore building, expanding the locations that the availability of the brand was in terms of average SKUs per location and in terms of just locations in general, which has helped driving the scanner growth and helped driving our internal GAAP numbers. Another question you may ask and in terms of some of this build, the DSD to direct mix, there's a couple things, a couple nuances that are different between brand Celsius and between Alani. The first is, as we were moving into the DSD system for our largest distributor when we were brand Celsius-
Our direct business was smaller than the Alani business. The Alani has had built out and we had helped build out the direct business pretty well by the time we moved into the DSD system of PepsiCo, and you can see that in the ACV that existed between Celsius and Alani at the time of moving. The other piece is we were taking pricing with brand Celsius as we were moving in. That was back in 2022. That helped as you moved in, it had a little bit of that mix shift. The third thing is there is a bit of GAAP impact in terms of roughly $5 million, where a couple things happened.
If you remember back in 2022, we had the preferred shares that we issued. We also had, going into the distribution system, we had the terminations that were paid for by PepsiCo. We had to record those expenses immediately on the P&L. We recorded the actual payments on our balance sheet and are amortizing those over. That impacted the CELSIUS brand by about $1 million a quarter. Very minor. You didn't really notice it. With Alani, because we also had a couple other things going on when we did this transaction, including the captaincy, there's about a $5 million impact in that number that's in the bridge. That's really a non-cash item. That's just the amortization from the balance sheet.
Great. I'll pass it on. Thank you so much.
Your next question comes from the line of Filippo Falorni with Citi. Your line is open. Please go ahead.
Great. Morning, everyone. I wanted to go back to the shelf space gains for both Celsius and Alani. Maybe on Celsius first. You mentioned previously 17% shelf gain including food service. Can you give us a sense of how much food service distribution you have in the figure? How much you're realizing in more track channels? Then on Alani, obviously a lot of the distribution, you mentioned over 100% in gas and convenience. How far along are you in the shelf space gains? How much have you realized so far? And when do you think we should see more of those flowing through in track channels? That would be helpful. Thank you so much.
Good morning. Appreciate the question. You know, it's really an exciting time within the energy category. When you look at the energy category overall, it's one of the fastest growing within LRB. We're seeing new consumers enter the category than ever before. Retailers are leaning in. Historically, you know, over 60% of the sales have were derived from convenience, impulse purchases, and we're seeing retailers lean in in a much bigger way than ever before. When you look at the Celsius Holdings portfolio with CELSIUS, Alani, and Rockstar, we have differentiated offerings, hitting differentiated consumer segments, and really being incremental and driving incremental growth. With that, I'll turn it over to Eric to add a little bit more color around the distribution gains we anticipate and what we're seeing in the overall environment.
Yeah. Hey, good morning. I think to John Fieldly's point, we've had a number of conversations with retailers, obviously over the last, you know, several weeks and months, and I think what we hear generally is that the category, they feel very strongly about the category and the growth trajectory. They anticipate adding more overall energy space, in some cases, you know, very significantly. While we're also talking about, you know, shelf gains, it's also about permanency on space outside of the main gondola. Cold space has been expanding rapidly across a lot of different formats, obviously within C&G, expanding overall doors. We continue to see that space opportunity, obviously, for Alani, a very strong space opportunity. A lot of that is largely in place.
You'll continue to see some resets finalize here, probably through the course of May and June. Probably before summer we'll be almost fully done. Again, we're gonna plan that space according to the best SKUs that we have available and ensure that we've got the best velocity profile and efficiency of space in those. We feel very good about the conversations that we've had. On your question around food service, you know, difficult to break that out. In some cases, food service becomes a zero-sum game. You're in or you're not.
It's really about adding new outlets that help in overall space gains and we'll continue to put a lot of focus on driving, you know, workplace, college, university, and the relevant channels, restaurants, et cetera, and continue to make progress on that front as well.
I think when you look at it as well, when you look at the first quarter, and you see that we are Really, this is the first quarter of the organization managing a portfolio of brands under the category captaincy within the energy category of PepsiCo. That has really unlocked a lot of opportunities. As Eric mentioned, food service, a variety of non-reported track channels as well. Those opportunities are gonna continue to progress throughout the year and years to come as we further leverage the capabilities of this partnership that we've forged.
Got it. Appreciate the color. Thank you, guys.
Your next question comes from the line of Gerald Pascarelli with Needham & Company LLC. Your line is open. Please go ahead.
Great. Thank you very much. Question for John. just on your LTO strategy, like Cherry Bomb and Lime Slush, they were big contributors to the underlying strength in offtake this quarter. as we move forward, just given the success of some of these new rollouts that you've had, like, how do you think about balancing new flavor innovation for these LTOs versus bringing some of these same flavors back every single year, just given how popular they are? I'd be curious of your thoughts there. Thanks.
No, I think it's a great question. It really gives us a lot of optionality when you're looking at leveraging the portfolio and planning within our forecasting and strategies for the coming year. If you look at, you know, the LTO strategy allows us to do a lot of surprise and delight Especially with the Alani portfolio, as well as leverage the seasonal trends.
When you see the opportunities with the success of Cherry Bomb and Lime Slush, and with just the CELSIUS portfolio, Electric Vibe, we have a lot of great opportunities ahead. We get trial, we get feedback, and then we can bring that into the, as a permanent SKU, mid-year resets or even into the new selling season as we're entering the new year. I think it gives, as you look at brand managers, it gives them optionality, trial, gets to learn, and we get the leverage and learn the capabilities of the PepsiCo distribution network and really maximize that to our capabilities. When you look at really Cherry Bomb was really the first LTO launch within the PepsiCo system.
Number 2 is Lime Slush. Now we have a Electric Vibe coming in. We're gonna have a variety of others throughout the back half of this year. We're learning our collaboration, we're learning the partnerships and flavor. When you look at the LTO strategy and flavors, it's driving. It's driving trial, it's driving awareness, it's driving new incremental consumers into the category. We have a 21 share in the U.S. with the portfolio today. It's an exciting time within the opportunities you have here managing the Celsius portfolio. Our brand teams are super excited about what's to come.
Super helpful. Thank you.
Your next question comes from the line of Peter Galbo with Bank of America. Your line is open. Please go ahead.
Hey, guys. Good morning. Thank you for taking the question. John, Jared, just wanted to come back on the margin piece, obviously with Midwest premium and LME moving up. Maybe you can just kind of help us think about, you know, if there is a resolution to the conflict, kind of what you're starting to hear or starting to see in terms of potential downside for aluminum. I know that that may, you know, stall or hinder the ability to get back to low fifties by the back half of this year. Maybe you can help us think about the trajectory over the next, call it 18 months. Thanks very much.
Yeah, no, I mean, we're not unique to any other consumer products company out there. Those are real costs we're looking at. Turn it over to Jarrod for more comments around that, on the operation, where the environment we're operating under, and some of the opportunities we see ahead of us and some of the disciplined approach we've taken and strategies in the past that we're able gonna be able to leverage today and into the future, especially as we further optimize and integrate this portfolio. Jarrod?
Probably have a little bit of a long drawn out response. Kind of as we discussed in our prepared remarks, gross margin in Q1 was roughly 48.3%, which represented an improvement of around 90 basis points from Q4. We are moving in the right direction. We saw a few discrete items partially offset that partially offset that progress. We had severe winter weather in parts of the Northeast, creating incremental freight and freeze protection costs in February. We incurred some additional long haul freight as we continued to rebalance Rockstar Energy inventory across our network during integration. To your point, we saw both the LME and the Midwest aluminum premium move higher through the quarter. As John mentioned, that's best described as an industry-wide packaging dynamic, not a company specific issue.
The first two of these are largely behind us as we move through the second quarter, with the latter being more impactful in Q2 versus Q1 as it really started to spike in March. With that said, as we noted in our prepared remarks, we are watching the macro environment closely, aluminum freight, fuel, resin pricing. We do have sourcing strategies in place across the major input categories. We're fully locked on aluminum conversion. We've also got price locks on a variety of other ingredients and vitamins. We're working actively to extend coverage into 2027 and 2028 across the back half of this year. If the elevated costs do remain across the year, we may see some impact on the timing and sequencing of our ramp back to the low 50s.
The broader trajectory and the structural margin algorithm are intact. The underlying initiatives that drive our margin expansion continue to progress. We mentioned those in the prepared remarks, the orbit model, freight structure optimization, raw material alignment as we bring Alani and Rockstar fully into our structure, mix improvements through price pack architecture. We do have a clear plan and a clear path back to the low 50s. We also have another opportunities as you, as you mentioned, going out 12-18 months that we're working through. Something a little sooner, back half of the year, we'll see our 2nd manufacturing line in North Carolina begin producing. We'll start to see some benefit in the back half of the year with full benefit in 2027.
We've got some other vertical integration opportunities that we're in the middle of securing that'll benefit us in 2027 and beyond. We also have some direct sourcing opportunities that we're working through that will benefit us. Then the price pack architecture programming that we're working on is really a, you know, we'll see some initial impacts in the back half of the year, but we'll see a lot more when we look at 2027 and 2028. We do have good visibility to get to the fifties. Depending upon where commodities fall, whether they stay where they are for the whole year or whether they subside, can impact a little bit of that timing.
We do see, we do have visibility into the low 50s and beyond with the initiatives and the programs that we have in place. I think one more thing just for modeling purposes while we're at it, probably as we look at 2026 in particular, Q2 is probably more of a sidestep type activity. Q3 and Q4 where you're gonna see the stairstep and then continue on to 2027 with further stairsteps.
Great. Thanks very much.
Your next question comes from the line of Andrea Teixeira with JPMorgan. Your line is open. Please go ahead.
Thank you. Good morning. If we step back and analyze the CELSIUS brand as you exit the quarter and some of the puts and takes you mentioned, right, and rationalization of the SKUs, can you help us understand, on a more comparable basis, if the places where you had the sets perfectly fine in the new planogram you wanted, how is that performed relative to what we calculated being the North America performance for CELSIUS? In terms of the intersection between Alani and CELSIUS, that has an intersection of consumer, have you seen kind of that cannibalization kind of phase off or you think that's the way we should be thinking and take the company as a portfolio and go from there?
A clarification of the margin commentary that you just gave. Should we be thinking so sidestep meaning on a sequential basis you're probably flattish I guess for quarter, or is there any improvement? As you said, you don't, you obviously have higher aluminum, higher Midwest premium, you don't have those freight, one-timers that you had in the first quarter. How we should be thinking sequentially as you said, like, in the second half above 50%, already in the third quarter? Just wanna make sure that we understood it correctly. Thank you.
Excellent questions, Andrea, appreciate that. You know, like we made some prepared remarks as well as some comments earlier, the CELSIUS brand. We're really bullish on the CELSIUS portfolio. It has a unique consumer segment. When you look at the rational optimization that we've done with some of the slower items, as we're getting consistency across the portfolio, we're seeing those SKUs increase velocity with the optimization of larger ACV gains and consistency across the U.S. One thing we know is that we need to have consistent flavors and consistent SKUs amongst all of the retailers. That's something we've been working on over a variety of years. We're really leaning in to get that really optimized.
When you come in and you see Watermelon, you see Grape Rush, you see, you know, a lot of our great flavors and Peach Vibe, it is consistent. Consistency drives repeat purchase, and that's one thing we're really leaning on. Where we saw great success is in the quarter, the organization leaned in on Fizz-Free. We saw those SKUs optimize at higher velocity rates as it was scaling ACV, which is really promising. We think Fizz-Free is a great opportunity as a sub-line for CELSIUS we're gonna build upon. When you look at the cost of aluminum and Midwest aluminum premium, it is at a high level. You know, we're watching that extremely closely. As Jarrod mentioned, on the prior question, you know, if those stay at sustained higher levels, it could provide further impact.
When you're looking at Q1 to Q2, we're anticipating for modeling purposes, a sidestep in overall margin with additional opportunities for further enhancements leading into Q3 and Q4 as we progress closer to that low 50% gross profit target. As the optimizations and investments we're making into vertical integration, that will further help that margin profile, as well as the revenue management opportunities and pack size strategies that we have in place.
Thank you.
We have reached the end of the question and answer session. I will now turn the call back to John Fieldly, Chairman and CEO, for closing remarks.
Thank you again for joining us today. We believe Q1 was a strong start of the year. We delivered record revenue of $783 million, expanded our portfolio share and track channels, completed a major integration milestone with Alani Nu, continued to advance the Rockstar integration, expanded our international footprint with the launch in Spain through Suntory, and saw encouraging consumer responses and innovation across both Celsius and Alani. We're also entering Q2 with a clear set of priorities. We expect to build upon the recent resets, layer in additional innovation across Celsius and Alani Nu, and activate the brands across the summer cultural moments, including Formula One, the global soccer event, music, fitness, and motorsports. We are heading into the most important selling season for the category with a winning portfolio that reaches more consumers in more places and during more occasions.
I wanna thank everyone for this opportunity. I wanna thank our employees and our partners and all of our customers for their focus and their teamwork in making this all possible. To everyone listening today, we appreciate your support and look forward to updating you next quarter. Until then, grab a CELSIUS and live fit.
This concludes today's call. Thank you for attending. You may now disconnect.