Celsius Holdings Inc (CELH, Financial) released its 8-K filing on November 6, 2024, reporting its third quarter financial results. The company, a key player in the energy drink market, faced significant challenges this quarter, primarily due to supply chain optimization by its largest distributor. Despite these hurdles, Celsius Holdings continues to focus on its long-term growth strategy.
Company Overview
Celsius Holdings Inc (CELH, Financial) operates in the energy drink subsegment of the global nonalcoholic beverage market, with a strong focus on North America, which accounts for 96% of its revenue. The company's products are known for their natural ingredients and metabolism-enhancing formulation, appealing to fitness enthusiasts. Celsius Holdings has a strategic 20-year distribution agreement with PepsiCo, which holds an 8.5% stake in the company.
Performance and Challenges
For the third quarter of 2024, Celsius Holdings reported revenue of $265.7 million, a 31% decrease from the $384.8 million reported in the same period last year. This decline was primarily attributed to a $123.9 million reduction in revenue from its largest distributor, driven by inventory optimization efforts. Despite these challenges, international sales increased by 37% to $18.6 million, showcasing growth potential outside North America.
Financial Achievements
Year-to-date revenue for 2024 increased by 5% to $1.02 billion, surpassing the $970.6 million from the previous year. The company's gross profit also saw a 10% increase, reaching $513.5 million, with a gross profit margin of 50.2%, up from 48.1% in the prior year. These achievements highlight Celsius Holdings' ability to maintain profitability despite operational challenges.
Key Financial Metrics
| Metric | 3Q 2024 | 3Q 2023 | Change |
|---|---|---|---|
| Revenue | $265.7M | $384.8M | (31)% |
| Net Income | $6.4M | $83.9M | (92)% |
| Diluted EPS | $(0.00) | $0.30 | (100)% |
| Adjusted EBITDA | $4.4M | $103.6M | (96)% |
Analysis and Commentary
The significant decline in revenue and net income highlights the impact of supply chain challenges on Celsius Holdings' financial performance. The company's largest distributor's inventory optimization efforts led to reduced orders, affecting gross and operating margins. However, the acquisition of Big Beverages, a long-time co-packer, is expected to enhance innovation and manufacturing capabilities, potentially mitigating future supply chain disruptions.
John Fieldly, Chairman and CEO of Celsius Holdings, Inc., stated, "Celsius continued to drive energy drink category growth at retail in the third quarter and outpaced the category in dollar and volume sales gains despite overall category softness."
Jarrod Langhans, Chief Financial Officer, commented, "Gross and operating margins in the third quarter fell short due to significantly reduced orders because our largest distributor implemented a sizable, successful and efficient supply chain optimization program in the quarter."
Conclusion
While Celsius Holdings Inc (CELH, Financial) faced notable challenges in the third quarter of 2024, the company's strategic initiatives, including international expansion and the acquisition of Big Beverages, position it for potential recovery and growth. Investors will be keen to see how these efforts translate into financial performance in the coming quarters.
Explore the complete 8-K earnings release (here) from Celsius Holdings Inc for further details.
