Going into Celsius Q2 earnings, I expected a weak quarter and mentioned that in my notes and previous ‘Celsius Deep Dive’.
Management guided to a Q2 ‘side-step’ on the Q1 call, the Alani Nu integration had only recently been completed, Rockstar was still in the middle of its rebuild, and the Company said it was reducing SKUs within the core brand.
—> The quarter was broadly in line with that.
Despite my expectations, there were some developments in the week that followed, including an activist stake and several leadership changes, which have led me to reducing my position in the short-term.
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Earnings Results
Celsius delivered revenue of $817.9M, up 10.6% YoY and a record dollar figure for the second quarter.
Alani Nu contributed $364.4M
Rockstar contributed $66.5M
Core CELSIUS brand contributed $387.0M, down (11.7%) YoY
Gross margin held roughly flat from last quarter at 48.1%. The company attributed the YoY GM decline to higher promotional and incentive activity as a percentage of revenue and channel mix.
The higher promotional spend doesn’t bother me if done well and it’s not reactive to hold up growth.
Adjusted EBITDA was $184.2M for the quarter (22.5% margin), compared with 25.0% in Q1 and 28.4% a year earlier.
Operational profitability suffered from the mix of higher promotional spend and channel mix (GM flow through), increased freight and aluminum costs and inventory rebalancing.
GAAP diluted EPS came out at $0.14, including an $80.9M distributor termination charge, while Adj. EPS was $0.36.
Separately, portfolio retail sales grew 31.0% for the 13 weeks ended June 28, reaching 20.1% dollar share of the category and contributing approximately 30% of the zero-sugar category’s $640M of growth.
