Celsius Holdings Third Quarter 2026 Earnings Conference Call - CELSIUS HOLDINGS INC

Explicit Guidance:

• Full Year 2026: Gross margin expected to remain in the "high 40s" (specifically 46–49%), driven by elevated aluminum and diesel costs offsetting operational improvements.
• Fourth Quarter 2026: Expected reported revenue growth to be "below" the company's first-three-quarters run rate due to timing headwinds (approx. $125M shipments moved into Q3, $25M inventory build from prior year not recurring, and higher trade investment). Underlying sales growth expected to trend closer to Q1/Q2 levels.
• 2027 Revenue Outlook: Non-U.S. markets expected to grow to "more than 15%" of total revenue over the next five years; 2027 is the first year for a full-year comparison of Alani New within PepsiCo's DSD system.
• Trade Investment (SG&A): Expected to improve as a percentage of gross sales in 2027 and into 2028 as the Revenue Growth Management (RGM) program takes hold.
• Capital Allocation: $91 million remaining under the $300 million stock repurchase authorization; repurchases to continue driven by strong cash flow return on investment.

Business-Segment Outlook:

• Brand Celsius:
  • 2027: Targeted return to growth driven by the return of innovation (new flavors, lines, permanent SKUs) following 2026's rationalization. Innovation to be a "much more prominent" driver in 2027.
  • Q4 2026: Weekly run rate expected to hold within the "50 to 55 million" range; potential for slight growth or break-even in specific weeks as the brand cycles difficult prior-year comparisons and new LTOs launch.
  • Innovation Pipeline: "Spritz" and "Shirley Temple" SKUs already on shelf; two additional SKUs landing around Thanksgiving; focus on core flavors (Cranberry, Cranberry Apple) and 8oz pack configurations.
• Alani New:
  • Momentum: Core sales (excluding LTO) grew ~50% YoY in Q3; brand share in Track Channels reached 9.8% (up ~3 pts YoY).
  • 2027 Outlook: Continued acceleration expected as the brand fully integrates into PepsiCo's DSD system; new SKUs to transition from Limited Time Offers (LTO) to permanent core.
  • Q4 2026: "Winter Wonderland" LTO launching end of November; "Witch's Brew" sold through quicker than anticipated with peak single-week performance ranking as the 5th largest energy drink in Track Channels.
• Rockstar:
  • 2027 Strategy: Goal is to transition from stability to growth via distribution expansion and velocity acceleration of core SKUs; focus on "college towns" and existing platforms (music, motorsports).
  • Q4 2026: Reported growth expected to be elevated due to the full inclusion of acquired sales vs. prior year's partial inclusion, masking underlying trends.
  • Stability Metrics: Distribution is expected to stabilize as the brand cycles out rationalized SKUs; remaining SKUs within 1% of prior-year performance in Q3.

Market and Competitive Outlook:

• Category Dynamics: Energy remains a "strongest performing category" in beverage; modern energy brands drove ~28% of zero-sugar energy category growth in Q3.
• Share Positioning: Combined portfolio holds ~21% dollar share of energy Track Channels (1 in 5 drinks); Alani New underpenetrated in channels where portfolio is strong, offering a "clear roadmap for growth."
• International: Ready-to-drink energy category in key international markets exceeds $8 billion, expected to grow double digits next year.
• Distribution: Focus on "quality distribution" and rising rate of sale rather than price-driven growth; European markets showing doubled aided awareness (UK, France) and share gains across all new markets.

Macro / Industry Outlook:

• Commodities: Aluminum costs remain "elevated" on both LME and Midwest premium; diesel reached "highest level in several years." These are the primary headwinds to gross margin expansion, with no immediate relief anticipated.
• Inflation/Pricing: Company posture is to "follow the category" rather than lead pricing; maintaining premium positioning for Celsius and Alani New.
• FX/Supply Chain: No specific FX guidance, but "supply chain operations" are stable under interim leadership (Seth Nicholas) with a "deep bench" established.

Strategic Initiatives:

• Organizational Structure: Establishment of three brand-led Business Units (Celsius, Alani New, Rockstar + Emerging Growth) with dedicated brand presidents to execute strategy.
• Revenue Growth Management (RGM): 2027 program shifts from tactical to portfolio-level, involving a "clear brand ladder," consistent pack architecture, and a multi-year pricing roadmap to be finalized with retailers and DSD partners.
• Capacity/Infrastructure: Second manufacturing line in North Carolina running; full benefit expected in 2027.
• M&A/Partnerships: Deepening relationship with PepsiCo (finalizing priorities/timing); finalizing "Select International Markets" for Alani New launch in 2027.
• Marketing: Multi-year partnership with ESPN College GameDay to drive consumer connection with next-gen active consumers; "Witch's Brew" limited-time offer strategy proven successful for scale.

Risks and Headwinds to Outlook:

• Commodity Volatility: Unfavorable fluctuations in aluminum and diesel could delay gross margin recovery to the "low 50s" goal.
• Inventory Timing: Discrepancies between orders and scans (DSD transition) create volatility in reported vs. scanner data; timing items in Q4 may suppress reported revenue growth.
• Execution Risk: 2027 recovery for Celsius is contingent on the successful launch and distribution build-out of new innovation; "brand is built with the consumer not on the shelf."
• Competitive/Market: The "rationalization" of Celsius SKUs creates a difficult comparison base for 2027 growth until new SKUs gain traction.
• Regulatory/Supply: Management disclaims duty to update forward-looking statements except as required by law; risks include execution of DSD transitions and international expansion.

Management Tone on the Future:

• Confidence Level: "Highly confident" in Celsius portfolio recovery and "excited" about 2027 innovation plans; view 2027 as a "clear roadmap" for the entire portfolio.
• Hedges: Heavy qualification on timing items (shipments, inventory builds) and commodity prices affecting reported margins; explicit distinction between "reported" results (headwinds) and "scanner" data (underlying demand).
• Sentiment: Optimistic on long-term structural changes (portfolio focus, RGM, international expansion) despite short-term margin pressure from inflation.

Miscellaneous:

• Leadership Changes: Announcement of new brand presidents (Alex Zigalera for Celsius, Rishi Dang for Rockstar/Emerging Growth); appointment of Seth Nicholas as Interim Chief Supply Chain Officer following the passing of Paul Storey.
• Innovation Timing: Innovation loads into the system in November/December with balance in Q1 2027, driving 2027 growth trajectory.
• Share Count: $45M repurchased in Q3; $169M YTD; $91M remaining under $300M authorization.