Celsius Holdings, Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Good morning, and thank you for joining Celsius Holdings Second 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 second 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 statements 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 second quarter 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 second quarter 2026 results. We delivered second quarter revenue of $818 million, reflecting the execution of the plan we laid out coming into the year. We completed the Rockstar integration. We moved through the most active phase of our SKU optimization on brand Celsius. Gross margins remained consistent with the first quarter despite a challenging commodity environment. We continue to scale Alani Nu, all while our combined portfolio maintain a strong position at approximately one in five energy drinks purchased in the United States, or roughly 20% dollar share in track channels. Energy remains one of the strongest performing categories in beverage, and our portfolio is key to driving that growth. New consumers are entering the category through our brands, and we are winning new occasions with them.

We are a key growth driver for the energy category, and we are just beginning to unlock the full potential of our expanding portfolio. Today, we have $2 billion brands and a third brand with a clear role in the portfolio, and each one reaching a differentiated consumer segment. Celsius is the performance brand. It holds up across a full range of active, health-conscious consumers. Not one sport, not one age group, but a mindset of active living. That is the gyms, run clubs, trainers, daily movement. Alani Nu wins on flavor and self-expression, recruiting younger, more female consumers. For many of them, it is the first energy brand they ever try, which makes it an entry point into the category. Rockstar reaches a male consumer with a real affinity for gaming, action sports, and music. Occasions the other brands do not naturally reach.

Their 25 years of history and heritage gives the brand permission the others do not have. Together, they give us more of ways to grow across more channels, more occasions, and more price points. That is the power of managing a portfolio, and it's showing up in how we plan, how we innovate, and how we show up at retail. I want to first discuss brand Celsius. That is important to share what we set out to do this year and where we are in that work. When we came into 2026, we made a deliberate choice. Over the years, we've built the Celsius brand by taking decisive actions to breakthrough lead launches, exclusive flavors for individual retailers, actions that got us on the shelf in a category that did not have a place for modern energy yet. That is how you build a challenger brand.

Today, Celsius is a powerful national brand inside one of the largest distribution systems in the country and at the forefront of better-for-you energy. We yet again took decisive action to cut items sitting at low ACVs and worked to get consistency across the country and put our weight behind the items that perform. We also used this as an opportunity to achieve better retail space. Not just more of it, but the right kind. Cold space, end caps, permanent coolers in the highest traffic parts of the stores. We purposely delayed innovation while we brought on Alani and Rockstar into the system to minimize complexity in the distribution system at a time of significant change. However, those things moved at different speeds. The rationalization happened right away.

The retail allocation took longer because the space we wanted required investment from the retailer partners. Coolers and fixtures, not just a shelf tag. In some instances, these activities were pushed to later in the reset periods. Innovation, which is one of the biggest growth drivers in the category, was not there to bridge the gap. When you look at what is happening underneath, we feel good about where Celsius brand is going. Dollar per point of distribution are up 16% from the first quarter to the second. Fizz-Free is growing with dollar sales and track channels up over 20% in the second quarter versus the first. We are growing on Amazon, and retailers are leaning in on 2027 planning earlier than they ever have before.

We are also investing behind execution, moving more of our volume closer to the retailer to improve service, and adding hundreds of retail merchandisers and sales representatives to get more product on the floor and keep it in stock. Where we still have work is our 16-ounce line, and we have innovation coming against it in early 2027. Given that sequencing, we would expect brand Celsius in the third quarter to look a lot like the second quarter before we exit the year back into growth. In the first half of the year, Alani Nu surpassed $1 billion in retail sales and track channels, an important milestone for a brand we acquired just over a year ago. It happened in a category with more competition than ever before, with more entrants and established players alike. Track channel dollar growth was approximately 56% in the quarter.

We launched Purple Cotton Candy as well during the quarter, and it quickly became our top-selling new flavor in track channels, following Cherry Bomb and Lime Slush before it, and reinforcing that the brand's innovation model is durable and not dependent on any one flavor. These limited time offers has become seasonal moments that Alani consumers generally look forward to. What is important is what sits underneath the growth. We are bringing new consumers into the brand, and many are repeat purchasers. We are building out the permanent core, graduating top-performing flavors into everyday placements, which adds stability and predictability as the brand scales. Alani is also expanding our reach. The brand brings a differentiated, largely female consumer into the category, with flavors that are inviting, approachable, and on-trend. There is meaningful runway ahead.

The brand remains under-penetrated in certain channels where our portfolio is strong, which gives us a clear roadmap for continued growth. With Rockstar, we completed the integration in June on the nine-month timeline we set, an important milestone for the organization. The brand is now fully on our platform and on the finished goods model. For Rockstar, it's about building stability, bringing out the rockstar in everyone, focusing on the core brand and its identity across motorsports, music, and lifestyle, as well as a clear product differentiation and increased velocity. We are already seeing green shoots across a number of markets, and velocity gains across the board have been significant after the rationalization program we implemented. We are tracking in line with our sales expectations, which we set upon acquiring the brand and are well-positioned for 2027. We are also keeping Rockstar connected to its core consumer.

Our motorsports program includes the partnership with 23XI Racing and the Formula DRIFT Series, which continues to build authenticity with the traditional energy drink consumer while we strengthen the brand's foundation. We are in the early stages of refreshing the brand's look with updated packaging, revamped logo beginning to roll out. We have more to share as our plans progress. Innovations remain central to how we grow. During the quarter, we activated ELECTRIC VIBE, timed to the global soccer tournament here in North America, as well as Purple Cotton Candy. We just launched our summer limited time offer, Spritz Vibe Sparkling Limoncello Twist, a refreshing flavor built for peak summer occasions. Our summer programming is fully activated, including our global partnership with Aston Martin Aramco Formula One Team and our 100 Days of Summer programming and our partnerships across music, fitness, and culture.

Looking ahead in the back half, we have a strong slate of fall programming, new marketing campaigns, and an expanded lineup of athlete partnerships. These programs are designed to connect awareness to trial and trial to the register. We're excited about our innovation calendar, with 2027 shaping up to be a busy year. Turning to international, where I want to share the long-term roadmap we have been building. International is one of the largest white space opportunities because both Celsius and Alani remain significantly under-penetrated outside the U.S. Over the next 5 years, we expect international markets outside of the U.S. to represent more than 15% of our revenue. We are building toward that with focused market entries, strong local partnership, and disciplined launch plans. Sweden is a great example of what success looks like at maturity.