Celsius Holdings, INC. 10-Q Filing

Ticker: CELH · Form: 10-Q · Filed: Aug 6, 2024 · CIK: 1341766

Sentiment: neutral

Filing Stats: 4,612 words · 18 min read · ~15 pages · Grade level 13.7 · Accepted 2024-08-05 19:30:30

Key Financial Figures

Filing Documents

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION 1 Item 1.

Financial Statements

Financial Statements 1 Consolidated Balance Sheets as of June 3 0 , 2024 and December 31, 2023 (unaudited) 1 Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 3 0 , 2024 and 2023 (unaudited) 2 Consolidated Statements of Changes in Stockholders' Equity and Mezzanine Equity for the three and six months ended June 3 0 , 2024 (unaudited) 3 Consolidated Statements of Changes in Stockholders' Equity and Mezzanine Equity for the three and six months ended June 3 0 , 2023 (unaudited) 4 Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2024 and 2023 (unaudited) 5

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 6 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 31 Item 4.

Controls and Procedures

Controls and Procedures 31

– OTHER INFORMATION

PART II – OTHER INFORMATION 32 Item 1.

Legal Proceedings

Legal Proceedings 32 Item 1A.

Risk Factors

Risk Factors 32 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 32 Item 3. Defaults Upon Senior Securities 32 Item 4. Mine Safety Disclosures 32 Item 5. Other Information 32 Item 6. Exhibits 35

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements. Celsius Holdings, Inc. Consolidated Balance Sheets (In thousands, except share and per share amounts) (Unaudited) June 30, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 903,210 $ 755,981 Accounts receivable-net 262,920 183,703 Note receivable-current-net 1,166 2,318 Inventories-net 180,669 229,275 Deferred other costs-current 14,124 14,124 Prepaid expenses and other current assets 22,900 19,503 Total current assets 1,384,989 1,204,904 Property and equipment-net 36,282 24,868 Deferred tax assets 22,727 29,518 Right of use assets-operating leases 1,507 1,957 Right of use assets-finance leases 233 208 Deferred other costs-non-current 241,276 248,338 Intangibles-net 11,491 12,139 Goodwill 13,730 14,173 Other long-term assets 6,653 291 Total Assets $ 1,718,888 $ 1,536,396 LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 47,423 $ 42,840 Accrued expenses 79,633 62,120 Income taxes payable 5,374 50,424 Accrued promotional allowance 156,479 99,787 Lease liability obligation-operating leases-current 729 980 Lease liability obligation-finance leases 61 59 Deferred revenue-current 9,513 9,513 Other current liabilities 13,772 10,890 Total current liabilities 312,984 276,613 Lease liability obligation-operating leases-non-current 762 955 Lease liability obligation-finance leases-non-current 228 193 Deferred tax liabilities 2,201 2,880 Deferred revenue-non-current 162,471 167,227 Total Liabilities 478,646 447,868 Commitments and contingencies (Note 15) Mezzanine Equity: Series A convertible preferred stock, $ 0.001 par value per share, 5 % cumulative dividends; 1,466,666 shares issued and outstanding at each of June 30, 2024 and December 31, 2023, aggregate liquidation preference of $ 550,000 as of both June 30, 2024 and December 31, 2023 824,488 824,488 Stockholders' Equity: Common stock, $ 0.001 par value per share; 300,0

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) June 30, 2024 (Tabular dollars in thousands, except per share amounts) 1. ORGANIZATION AND DESCRIPTION OF BUSINESS Business Overview Celsius Holdings, Inc. (the "Company," "Celsius Holdings" or "Celsius") was incorporated under the laws of the State of Nevada on April 26, 2005. Celsius is a fast-growing company in the functional energy drink category in the United States ("U.S.") and internationally. The Company engages in the development, processing, marketing, sale, and distribution of functional energy drinks to a broad range of consumers. Celsius provides differentiated products that offer clinically proven and innovative formulas meant to positively impact the lives of its consumers. The Company's brand has also proven to be attractive to a broad range of customers, including fitness enthusiasts. The Company's flagship asset, CELSIUS, is marketed as a premium lifestyle and energy drink formulated to power active lifestyles with ESSENTIAL ENERGY TM . This product line comes in two versions, a 12-ounce ready-to-drink form and an on-the-go powder form. The Company also offers a CELSIUS Essentials line, available in 16-ounce cans. Celsius products are currently offered in major retail channels across the U.S., including conventional grocery, natural, convenience, fitness, mass market, vitamin specialty and e-commerce. Additionally, the Company's products are currently offered in certain Canadian, European, Middle Eastern and Asia-Pacific markets. Agreements with PepsiCo Inc. On August 1, 2022, the Company entered into multiple agreements with PepsiCo Inc. ("Pepsi"), including a long-term agreement that resulted in Pepsi becoming the primary distribution supplier for Celsius products in the U.S. (the "Distribution Agreement"). Under this agreement, the Company granted Pepsi a right of first offer in the event the Company intends to manufacture, distribute or sell products in certain additional countrie

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) June 30, 2024 (Tabular dollars in thousands, except per share amounts) Significant Estimates — The preparation of consolidated financial statements and accompanying disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current events and actions that the Company may undertake in the future, actual results may differ from those estimates. Significant estimates include promotional allowance, the allowance for current expected credit losses, allowance for inventory obsolescence and sales returns, the useful lives of property and equipment, impairment of goodwill and intangibles, deferred taxes and related valuation allowance, and the valuation of stock-based compensation. Segment Reporting — Operating segments are defined as components of an enterprise that engage in business activities, maintain discrete financial information, and undergo regular review by the chief operating decision maker (the "CODM"), who is the Chief Executive Officer, to assess performance and allocate resources. Despite the Company's presence in several geographical regions, it operates as a single operating segment. The Company's operations and strategies are centrally designed and executed due to the substantial similarities among the geographical components. The CODM evaluates operating results and allocates resources primarily on a consolidated basis due to the significant economic interdependencies between the Company's geographical operations. As a result, the Company is managed as a single operating segment and has a single reportable segment. Concentrations of Risk — Substantially all of the Company's revenue is derived from the sale of Celsius functi

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) June 30, 2024 (Tabular dollars in thousands, except per share amounts) Allowances can be affected by changes in the industry, customer credit issues or customer bankruptcies when such events are reasonable and supportable. Historical information is used in addition to reasonable and supportable information for forecast periods, where applicable. Allowance for Expected Credit Losses Balance as of December 31, 2023 $ 3,137 Current period change for expected credit losses 4,044 Balance as of June 30, 2024 $ 7,181 Inventories — Inventories are valued at the lower of cost or net realizable value with costs approximating those determined under the first-in, first-out method. Changes in the allowance are included in cost of revenue. See Note 5 . Inventories for more information. Property and Equipment — Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful life of the asset, generally ranging from three to seven years . See Note 8. Property and Equipment for more information. Long-Lived Assets — In accordance with ASC Topic 360, Property, Plant, and Equipment the Company reviews the carrying value of long-lived assets, which includes property and equipment-net, right-of-use assets, and definite-lived intangibles-net, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized for a long-lived asset if its carrying amount is not recoverable and exceeds its fair value. The carrying amount is not recoverable when it exceeds the sum of the undiscounted cash flows expected to result from use of the asset over its remaining useful life and final disposition. The Company did no t record any impairment charges related to long-lived assets during the six months ended June 30, 2024 and 202

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) June 30, 2024 (Tabular dollars in thousands, except per share amounts) Revenue Recognition — The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers . Revenue is recognized when performance obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred based on the commercial terms of the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. See Note 4. Revenue for more information. Distributor Termination Fees — In the event a distributor agreement is terminated prior to the end of its term, the Company incurs termination costs which are recorded in selling, general and administrative expenses. The Company incurred only immaterial termination costs during each of the three and six months ended June 30, 2024 and during each of the three and six months ended June 30, 2023. Advertising Costs — Advertising costs are expensed as incurred and charged to selling, general and administrative expenses. The Company mainly uses targeted marketing initiatives, such as sporting events, print, radio, and television advertising, alongside direct sponsorships and endorsements. The Company incurred advertising costs of approximately $ 59.4 million and $ 36.5 million for the three months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024 and 2023, the Company incurred advertising costs of approximately $ 105.9 million and $ 67.5 million, respectively. Research and Development — Research and development costs are charged to selling, general and administrative expenses as incurred and consist primarily of consulting fees, raw material usage and test production of beverages. The Company incurred expenses of approximately $ 0.2 million for each of the three months ended June 30, 2024 and 2023, and approximately $ 0

View Full Filing

View this 10-Q filing on SEC EDGAR

View on Read The Filing