When used in this report, unless otherwise indicated, the terms "the Company,"
"Celsius," "we," "us" and "our" refer to Celsius Holdings, Inc. and its
subsidiaries.
Note Regarding Forward Looking Statements
This report contains forward-looking statements that reflect our current views
about future events. We use the words "anticipate," "assume," "believe,"
"estimate," "expect," "will," "intend," "may," "plan," "project," "should,"
"could," "seek," "designed," "potential," "forecast," "target," "objective,"
"goal," or the negatives of such terms or other similar expressions. These
statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Business Overview
Celsius Holdings is a fast-growing company in the functional energy drink and
liquid supplement categories in the United States and internationally. We engage
in the development, processing, marketing, sale, and distribution of functional
drinks and liquid supplements to a broad range of consumers. We believe that we
provide differentiated products that offer clinically proven and innovative
formulas meant to change the lives of our consumers for the better. We also
believe that our brand is attractive to a broad range of customers including
fitness enthusiasts.
Our core offerings include pre- and post-workout functional energy drinks, as
well as protein bars. Our flagship functional energy drink and liquid supplement
brands are backed by science, being clinically proven to deliver health benefits
by six self-funded studies published in various journals including the Journal
of the International Society of Sports Nutrition, the Journal of the American
College of Nutrition, and the Journal of Strength and Conditioning Research.
These studies have concluded that a single serving of Celsius burns 100-140
calories (by increasing a consumer's resting metabolism an average of 12%, while
providing sustained energy for up to three hours).
Our flagship asset, Celsius, is a fitness supplement drink which accelerates
metabolism and burns calories and body fat while providing energy. This product
line comes in two versions, a ready-to-drink supplement format and an on-the-go
powder form. We also offer a Celsius Heat and a Branch Chain Amino Acids line,
catered to both pre- and post-workout consumer needs. Our products are currently
offered in major retail channels in the US including conventional grocery,
natural, convenience, fitness, mass market, vitamin specialty and e-commerce.
An integral part of our value proposition is our focus on the functional energy
drink and liquid supplement category, ensuring our products have clear and
proven benefits. This is why we invest in research and development from the
start and utilize our proprietary MetaPlus formulation in our portfolio, a blend
of ginger root, guarana seed extract, chromium, vitamins, and green tea extract.
Corporate Information
We were incorporated in the State of Nevada in April 2005. Our principal
executive offices are located at 2424 North Federal Highway, Suite 208, Boca
Raton, Florida 33431, and our telephone number is (561) 276-2239. Our website is
www.celsiusholdingsinc.com. Information contained on, or that can be accessed
through, our website is not incorporated by reference into this Quarterly Report
on Form 10-Q.
Celsius® and MetaPlus® are registered trademarks of the Company in the United
States. This Quarterly Report on Form 10-Q also contains other registered and
unregistered trademarks of the Company.
Results of Operations
Three months ended June 30, 2022 compared to three months ended June 30, 2021
Revenue
For the three months ended June 30, 2022, revenue was approximately $154.0
million, an increase of $88.9 million or 137% from $65.1 million for the three
months ended June 30, 2021. Approximately 103% of this growth was as a result of
increased revenues from North America, where second quarter 2022 revenues were
$145.4 million, an increase of $91.8 million or 171% from the 2021 quarter. The
balance of the revenues for the 2022 quarter were mainly attributable to
European revenues of $7.3 million, which decreased by $3.5 million from the
prior year quarter primarily due to foreign exchange rates and timing. Asian
revenues (which include royalty revenues from our China licensee) contributed an
additional approximately $0.9 million, an increase of 43% from approximately
$0.6 million for the prior year quarter, which include increases in royalties
payable under our licensing agreement. Other international markets generated
approximately $0.4 million in revenues during the 2022 quarter, an increase of
$0.4 million or 634% from $0.1 million for the prior year quarter.
The total increase in revenue was largely attributable to increases in sales
volume, as opposed to increases in product pricing. The primary factors behind
the increase in North American sales volume were related to continued strong
triple-digit growth in traditional distribution channels, combined with an
increase in and optimization of our products' presence in world class retailers
(e.g., additional SKUs). Additionally, the continued expansion of our Direct
Store Delivery ("DSD") network resulted in significant growth in distributor
revenues when compared to the prior year quarter.
23
--------------------------------------------------------------------------------
The following table sets forth the amount of revenues by category and changes
therein for the three months ended June 30, 2022 and 2021 (dollars in
thousands):
Three months ended
June 30,
Revenue Source 2022 2021 Change
Total Revenue $ 154,020 $ 65,073 136.7 %
North American Revenue $ 145,409 $ 53,601 171.3 %
European Revenue $ 7,280 $ 10,792 (32.5 )%
Asian Revenue $ 883 $ 619 42.6 %
Other $ 448 $ 61 634.4 %
Gross profit
For the three months ended June 30, 2022, gross profit increased by
approximately $31.1 million or 110% to $59.3 million, from $28.2 million for the
three months ended June 30, 2021. Gross profit margins reflected a decrease to
38.5% for the three months ended June 30, 2022 from 43.4% for the 2021 quarter.
The increase in gross profit dollars is related to increases in volume, while
the decrease in gross profit margins is mainly related to higher raw material
costs (particularly aluminum cans), ocean freight costs, transportation costs
and repackaging costs.
We estimate that the increase in gross profit dollars of approximately $31.1
million from the 2021 quarter to the 2022 quarter, included $40.7 million
related to volume increases, as well as an unfavorable cost impact of
approximately $7.5 million and unfavorable currency impact of $2.1 million.
Sales and marketing expenses
Sales and marketing expenses for the three months ended June 30, 2022 were
approximately $32.5 million, an increase of approximately $16.9 million or 109%
from approximately $15.5 million for the three months ended June 30, 2021. This
increase was primarily attributable to higher marketing investment activities,
which resulted in an increase of $8.4 million when compared to the prior year
quarter. Additionally, employee costs increased by approximately $2.8 million
from the year ago quarter as we continue to invest in this area in order to have
the proper infrastructure to support our growth. Lastly, storage and
distribution expenses as well as broker costs accounted for the remainder of the
increase in this area in the amount of $5.8 million from the 2021 quarter to the
2022 quarter.
General and administrative expenses
General and administrative expenses for the three months ended June 30, 2022
were approximately $14.4 million, an increase of $2.1 million or 17%, from $12.3
million for the three months ended June 30, 2021. Employee costs for the three
months ended June 30, 2022 reflect an increase of $1.0 million as investments in
this area are also required to properly support our higher business volume and
the commercial and operational areas of the business, as well as travel expenses
are now being incurred. Administrative expenses amounted to $6.8 million or an
increase of $4.1 million when compared to the prior year quarter. Depreciation
and amortization increased by approximately $0.2 million when compared to the
prior year quarter. These increases were offset by a $3.0 million decrease in
stock-based compensation expense, which amounted to $4.2 million in the current
quarter, when compared to the prior year quarter. Management deems it very
important to motivate employees by providing them ownership in the business in
order to promote over performance which translates into the continued success of
our business based on key performance attributes. Lastly, all other
administrative expenses which were mainly composed of research, development and
quality control testing, decreased by approximately $0.2 million from to the
second quarter of 2021.
Other income/(expense)
Total net other expense for the three months ended June 30, 2022 is mainly
related to foreign currency exchange which is offset by interest and
non-operating income.
Net Income
Net income for the three months ended June 30, 2022 was $9.2 million or $0.12
per share based on a weighted average of 75,451,165 shares outstanding and
dilutive earnings per share of $0.12 based on a fully-dilutive weighted average
of 78,371,705 shares outstanding, which includes the dilutive impact share-based
awards of 2,920,540 shares. In comparison, for the three months ended June 30,
2021, the Company had net income of approximately $0.8 million or $0.01 per
share, based on a weighted average of 73,158,836 shares outstanding and a
dilutive earnings per share of $0.01 based on a fully-dilutive weighted average
of 77,238,389 shares outstanding.
Six months ended June 30, 2022 compared to six months ended June 30, 2021
Revenue
24
--------------------------------------------------------------------------------
For the six months ended June 30, 2022, revenue was approximately $287.4
million, an increase of $172.3 million or 150% from $115.1 million for the six
months ended June 30, 2021. Approximately 102% of this growth was as a result of
increased revenues from North America, where first six months of 2022 revenues
were $268.9 million, an increase of $176.3 million or 190% from the 2021 first
six months. The balance of the revenues for the six months ended June 30, 2022
were mainly attributable to European revenues of $15.8 million, which decreased
by $5.4 million from the prior year six months primarily due to foreign exchange
rates and timing. Asian revenues (which include royalty revenues from our China
licensee) contributed an additional approximately $1.8 million, an increase of
60% from approximately $1.2 million for the prior year, which include increases
in royalties payable under our licensing agreement. Other international markets
generated approximately $0.9 million in revenues during the six months ended
June 30, 2022, an increase of $0.7 million or 377.2% from $0.2 million for the
prior year.
The total increase in revenue was largely attributable to increases in sales
volume, as opposed to increases in product pricing. The primary factors behind
the increase in North American sales volume were related to continued strong
triple-digit growth in traditional distribution channels, combined with an
increase in and optimization of our products' presence in world class retailers
(e.g., additional SKUs). Additionally, the continued expansion of our Direct
Store Delivery ("DSD") network resulted in significant growth in distributor
revenues when compared to the prior year quarter.
The following table sets forth the amount of revenues by category and changes
therein for the six months ended June 30, 2022 and 2021 (dollars in thousands):
Six months ended
June 30,
Revenue Source 2022 2021 Change
Total Revenue $ 287,408 $ 115,108 149.7 %
North American Revenue $ 268,882 $ 92,604 190.4 %
European Revenue $ 15,775 $ 21,160 (25.4 )%
Asian Revenue $ 1,849 $ 1,155 60.1 %
Other $ 902 $ 189 377.2 %
Gross profit
For the six months ended June 30, 2022, gross profit increased by approximately
$64.4 million or 132% to $113.2 million, from $48.8 million for the six months
ended June 30, 2021. Gross profit margins reflected a decrease to 39.4% for the
six months ended June 30, 2022 from 42.4% for the six months ended June 30,
2021. The increase in gross profit dollars is related to increases in volume,
while the decrease in gross profit margins is mainly related to higher raw
material costs (particularly aluminum cans), ocean freight costs, transportation
costs and repackaging costs.
We estimate that the increase in gross profit dollars of approximately $64.4
million from the six months ended June 30, 2021, included $75.4 million related
to volume increases, as well as an unfavorable cost impact of approximately $8.7
million and unfavorable currency impact of $2.3 million.
Sales and marketing expenses
Sales and marketing expenses for the six months ended June 30, 2022 were
approximately $64.1 million, an increase of approximately $36.6 million or 133%
from approximately $27.5 million for the six months ended June 30, 2021. This
increase was primarily attributable to higher marketing investment activities,
which resulted in an increase of $17.5 million when compared to the prior year.
Additionally, employee costs increased by approximately $4.1 million from the
prior year as we continue to invest in this area in order to have the proper
infrastructure to support our growth. Lastly, storage and distribution expenses
as well as broker costs accounted for the remainder of the increase in this area
in the amount of $14.9 million from the six months ended June 30, 2021.
General and administrative expenses
General and administrative expenses for the six months ended June 30, 2022 were
approximately $26.6 million, an increase of $6.5 million or 32%, from $20.1
million for the six months ended June 30, 2021. This increase was primarily
attributable to employee costs for the six months ended June 30, 2022 which
reflect an increase of $2.2 million, as investments in this area are also
required to properly support our higher business volume and the commercial and
operational areas of the business, as well as travel expenses are now being
incurred. Administrative expenses amounted to $11.4 million, an increase of $6.6
million, when compared to the prior year quarter. Depreciation and amortization
increased by approximately $0.3 million when compared to the prior year quarter.
These increases were offset by a decrease in stock-based compensation expense
which amounted to $8.5 million for the six months ended June 30, 2022, compared
to $10.8 million in the prior year quarter. Management deems it very important
to motivate employees by providing them ownership in the business in order to
promote over performance which translates into the continued success of our
business based on key performance attributes. Lastly, all other administrative
expenses which were mainly composed of research, development and quality control
testing, decreased by approximately $0.3 million from to the first six months of
2021.
Other income/(expense)
25
--------------------------------------------------------------------------------
Total net other expense for the six months ended June 30, 2022 is mainly related
to foreign currency exchange which is offset by interest and non-operating
income.
Net Income
Net income for the six months ended June 30, 2022 was $15.8 million or $0.21 per
share based on a weighted average of 75,472,158 shares outstanding and dilutive
earnings per share of $0.20 based on a fully-dilutive weighted average of
78,396,950 shares outstanding, which includes the dilutive impact share-based
awards of 2,924,792 shares. In comparison, for the six months ended June 30,
2021, the Company had net income of approximately $1.4 million or $0.02 per
share, based on a weighted average of 73,655,125 shares outstanding and a
dilutive earnings per share of $0.02 based on a fully-dilutive weighted average
of 77,658,318 shares outstanding.
Liquidity and Capital Resources
As of June 30, 2022, and December 31, 2021, we had cash of approximately $60.0
million and $16.3 million, respectively, and working capital of approximately
$197.9 million and $169.2 million, respectively.
In addition to cash flow from operations, our primary sources of working capital
have been private placements and public offerings of our securities, including
an underwritten public offering of 1,133,953 shares at an offering price of
$62.50 per share completed on June 14, 2021 and a private placement of 1,437,909
shares at a price of $15.30 completed on August 25, 2020.
Our current operating plan for the next twelve (12) months reflects sufficient
financial resources, notwithstanding the potential effects of the COVID-19
pandemic.
Cash flows used in operating activities
Cash flows provided by operating activities totaled approximately $42.3 million
for the six months ended June 30, 2022, which compares to $30.3 million net cash
used in operating activities for the six months ended June 30, 2021. The
approximately $72.6 million increase in cash generation was driven by an
increase in net income and improvements in working capital. Working capital
improvements were driven primarily by the stabilization of our inventory as we
have established optimal levels to service the demand of our product as well as
timing of accounts payable, offset in part by increases of accounts receivable
driven by the significant growth in our business.
Cash flows used in investing activities
Cash flows provided by investing activities totaled approximately $0.1 million
for the six months ended June 30, 2022, which compares to cash provided by
investing activities of $0.7 million for the six months ended June 30, 2021. The
decrease in the cash used in investing activities when compared to the 2021
period was primarily due to an increase of capital expenditures to $2.5 million
offset by payment on our note receivable, as we received payment on our note
receivable of approximately $2.6 million in April 2022.
Cash flows provided by financing activities
Cash flows provided by financing activities totaled approximately $1.2 million
for the six months ended June 30, 2022, which compares to cash provided by
financing activities of $70.2 million for the six months ended June 30, 2021.
Cash provided by financing activities is mainly related to the net proceeds of
$1.3 million from stock exercises. Net proceeds were received from a public
offering in June 2021 for approximately $67.8 million.
Off Balance Sheet Arrangements
As of June 30, 2022 and December 31, 2021, we had no off-balance sheet
arrangements.
© Edgar Online, source Glimpses
CELSIUS HOLDINGS, INC. 
